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suit.

There was a general understanding among all the creditors present on the
HUMAN RELATIONS desirability of consummating the sale in favor of the Philippine Air Lines Inc.
G.R. No. L-7817. October 31, 1956. Then followed a discussion on the payment of claims of creditors and the
ALFREDO M. VELAYO, in his capacity as Assignee of the insolvent preferences claimed for the accounts due to the employees, the Government and
COMMERCIAL AIR LINES, INC. (CALI), Plaintiff-Appellant, vs. SHELL the National Airports Corporation. No understanding was reached on this point
COMPANY OF THE PHILIPPINE ISLANDS, LTD., Defendant-Appellee, YEK and it was then generally agreed that the matter of preference be further studied
HUA TRADING CORPORATION, PAUL SYCIP and MABASA & CO., by a working committee to be formed.
intervenors. To this working committee, Mr. Desmond Fitzgerald, Credit Manager, of
the Defendant, Atty. Agcaoili of the National Airports Corporation and Atty.
Alexander Sycip were appointed. Mr. Fitzgerald did not decline the nomination
Facts: to form part of said working committee.
The Commercial Air Lines, Inc., which will be hereinafter referred to as CALI, is a On that very day of the meeting of the working committee, which Mr. Fitzgerald
corporation duly organized and existing in accordance with the Philippines laws, attended, Defendant effected a telegraphic transfer of its credit against the CALI
previously engaged in air transportation business. The Shell Company of the P. I., to the American corporation Shell Oil Company, Inc., assigning its credit,
Ltd., (Defendant) is on the other hand, a corporation organized under the laws of amounting to $79,440.00, which was subsequently followed by a deed of
England and duly licensed to do business in the Philippines. assignment of credit.
Since the start of CALI’s operations, its fuel needs were all supplied by The American corporation Shell Oil Company, Inc., filed a complaint against the
the Defendant. Mr. Desmond Fitzgerald, its Credit Manager who extended credit CALI in the Superior Court of the State of California, U.S.A. for the collection of an
to CALI, was in charge of the collection thereof. assigned credit of $79,440.00 and a writ of attachment was applied for and issued
Defendant had reasons to believe that the financial condition of the CALI was far on the same date against a C-54 plane.
from being satisfactory. As a matter of fact, according to Mr. Fitzgerald, CALI’s Unaware of Defendant’s assignments of credit and attachment suit, the
Douglas C-54 plane, then in California, was offered to him by Mr. Alfonso Sycip, stockholders of CALI resolved to approve the memorandum agreement of sale to
CALI’s President of the Board of Directors, in partial settlement of their accounts, the Philippine Air Lines, Inc.
which offer was, however, declined. The management of Defendant probably
assumed that the assets of the CALI could very well meet said liabilities and were The National Airports Corporation learned of Defendant’s action in the United
not included to take charge of the sale of CALI’s said Douglas C-54 plane to collect States and hastened to file its own complaint with attachment against the CALI in
its credit. the Court of First Instance of Manila. The CALI, also prompted by Defendant’s
action in getting the alleged undue preference over the other creditors by
The management of CALI informally convened its principal creditors who were attaching the C-54 plane in the United States, beyond the jurisdiction of the
invited to a luncheon and informed them that CALI was in a state of insolvency Philippines, filed a petition for voluntary insolvency. An order of insolvency was
and had to stop operation. issued by the court which necessarily stayed the National Airports Corporation’s
The persons present, including Mr. Desmond Fitzgerald, signed their names and action against the CALI and dissolved its attachment, thus compelling the
the names of the companies they represented on a memorandum pad of the law National Airports Corporation to file its claims with the insolvency court.
firm Quisumbing, Sycip, and Quisumbing. The Court confirmed the appointment of Mr. Alfredo M. Velayo, who was
Mr. Alexander Sycip, Secretary of the Board of Directors of the CALI, informed the unanimously elected by the creditors as Assignee in the proceedings. Alfredo M.
creditors present that this corporation was insolvent and had to stop operations. Velayo instituted this case against the Shell Company of P. I., Ltd., for the purpose
He explained the memorandum agreement executed by the CALI with the of securing from the Court a writ of injunction restraining Defendant, from
Philippine Air Lines, Inc., regarding the proposed sale to the latter of the aviation prosecuting the case against the insolvent CALI.
equipments of the former. Mr. Alexander Sycip was assisted in the explanation by The Court denied the same because the Philippine court would not be in position
CPA Alfredo Velayo, Auditors of the CALI, who discussed the balance sheets and to enforce its orders as against the American corporation Shell Oil Company, Inc.,
distributed copies thereof to the creditors present. The said balance sheet made which is outside of the jurisdiction of the Philippines.
mention of a C-54 plane in the United States, the property now involved in this
Plaintiff having failed to restrain the progress of the attachment suit, confines his all, and much less from a foreign corporation to the detriment of our Government
action to the recovery of damages against the Defendant. and local business.
Defendant filed its answer to the complaint, alleged that the assignment of its To justify its actions, Defendant may also claim that Mr. Fitzgerald, based on his
credit in favor of the Shell Oil Company, Inc., in the United States was for a feeling of distrust and apprehension, entertained the conviction that intervenors
valuable consideration and made in accordance with the established commercial Alfonso Sycip and Yek Hua Trading Corporation tried to take undue advantage by
practices, there being no law prohibiting a creditor from assigning his credit to infiltrating their credits. But even assuming for the sake of argument, that these
another; that Mr. Fitzgerald, Defendant’s Credit Manager could not have officially intervenors really resorted to such strategem or fraudulent device,
represented the Defendant at that time because such authority resides on Mr. yet Defendant’s act finds not justification for no misdeed on the part of a person
Stephen Crawfurd. is cured by any misdeed of another.
The Court rendered decision dismissing the complaint. In view of this (2) Yes. We see that Plaintiff, as Assignee of the Insolvent CALI, had personality
outcome, Plaintiff comes to us praying that the judgment of the lower court be and authority to institute this case for damages, and the only question that
reversed and that the Defendant be ordered to pay him damages in the sum of remains determination is whether the payment of damages sought to be
P660,000. recovered from Defendant may be ordered under the Law and the evidence of
record.
Issues:
The writer of this decision does not entertain any doubt that
(1) Whether or not under the facts of the case, the Defendant , taking advantage
the Defendant schemed and effected the transfer of its sister corporation in the
of its knowledge of the existence of CALI’s airplane C-54 at the Ontario
United States, where CALI’s plane C-54 was by that swift and unsuspected
International Airport within the Country of San Bernardino, State of California, U.
operation efficaciously disposed of said insolvent’s property depriving the latter
S. A., acted in bad faith and betrayed the confidence and trust of the other
and the Assignee that was latter appointed, of the opportunity to recover said
creditors of CALI present in said meeting by affecting a hasty telegraphic transfer
plane. Chapter 2 of the PRELIMINARY TITLE of the Civil Code, dealing on
of its credit to the American corporation Shell Oil Company, Inc., thus depriving
Human Relations, provides the following:
the Plaintiff, as its Assignee, of the means of obtaining said C-54 plane
“Art 19. Any person must, in the exercise of his rights and in the performances of
(2) Whether or not by reason of said betrayal of confidence and
his duties, act with justice, give everyone his due and observe honesty and good
trust, Defendant may be made under the law to answer for the damages prayed
faith”.
by the Plaintiff; and if so, what should be the amount of such damages.
It maybe said that this article only contains a mere declarations of principles and
Ruling:
while such statement may be is essentially correct, yet We find that such
(1) Yes. The mere enunciation of the first proposition can lead to no other declaration is implemented by Article 21 and sequence of the same Chapter
conclusion than that Defendant, upon learning the precarious economic situation which prescribe the following:
of CALI and that with all probability, it could not get much of its outstanding
“Art. 21. Any person who wilfully causes loss or injury to another in a manner
credit because of the preferred claims of certain other creditors, forgot that “Man
that is contrary to morals, good customs or public policy shall compensate the
does not live by bread alone” and entirely disregarded all moral inhibitory tenets.
latter for the damage”.
So, on the very day its Credit Manager attended the meeting of the Working
Committee, it hastily made a telegraphic assignment of its credit against the CALI The Code Commission commenting on this article, says the following:
to its sister American Corporation, the Shell Oil Company, Inc., and by what is
“Thus at one stroke, the legislator, if the forgoing rule is approved (as it was
stated in the preceding pages hereof, We know that were the damaging effects of
approved), would vouchsafe adequate legal remedy for that untold numbers of
said assignment upon the right of other creditors of the CALI to participate in the
moral wrongs which is impossible for human foresight to provide for specifically
proceeds of said CALI’s plane C-54.
in the statutes.
Defendants’ defenses are entirely immaterial and have no bearing on the main
“But, it may be asked, would this proposed article obliterate the boundary line
question at issue in this appeal. The telegraphic transfer made without
between morality and law? The answer is that, in the last analysis, every good
knowledge and at the back of the other creditors of CALI may be a shrewd and
law draws its breath of life from morals, from those principles which are written
surprise move that enabled Defendant to collect almost all if not the entire
with words of fire in the conscience of man.”
amount of its credit, but the Court of Justice cannot countenance such attitude at
“Furthermore, there is no belief of more baneful consequence upon the social have been done or may have occurred under the prior legislation, provided said
order than that a person may with impunity cause damage to his fellow-men so new right does not prejudice or impair any vested or acquired right, of the same
long as he does not break any law of the State, though he may be defying the most origin.”
sacred postulates of morality. What is more, the victim loses faith in the ability of
and according to Article 2254, “no vested or acquired right can arise from acts or
the government to afford him protection or relief.
omissions which are against the law or which infringe upon the right of others.”
“Another rule is expressed in Article 24 which compels the return of a thing
Articles 2229, 2232, 2234, 2142, and 2143 of the Civil Code read as follows:
acquired ‘without just or legal grounds’. This provision embodies the doctrine
that no person should unjustly enrich himself at the expense of another, which “Art. 2229. Exemplary or corrective damages are imposed, by way of example or
has been one of the mainstays of every legal system for centuries. It is most correction for the public good, in addition to the moral, temperate, liquidated or
needful that this ancient principles be clearly and specifically consecrated in the compensatory damages.”
proposed Civil Code to the end that in cases not foreseen by the lawmaker, no one
“Art. 2232. In contracts quasi-contracts, the Court may award exemplary
may unjustly benefit himself to the prejudice of another.
damages if the Defendant acted in a wanton, fraudulent, reckless, oppressive, or
From the Civil Code Annotated by Ambrosio Padilla, Vol. I, p. 51, 1956 edition, We malevolent manner.”
also copy the following:
“Art. 2234. While the amount of the exemplary damages need not be proved,
“A moral wrong or injury, even if it does not constitute a violation of a statute law, the Plaintiff must show that he is entitled to moral, temperate, or compensatory
should be compensated by damages. Moral damages (Art. 2217) may be damages before the court may consider the question of whether or not exemplary
recovered (Art. 2219). In Article 20, the liability for damages arises from a willful damages should be awarded. In case liquidated damages should be upon,
or negligent act contrary to law. In this article, the act is contrary to morals, good although no proof of loss is necessary in order that such liquidated damages be
customs or public policy.” recovered, nevertheless, before the court may consider the question of granting
exemplary in addition to the liquidated damages, the Plaintiff must show that he
Now, if Article 23 of the Civil Code goes as far as to provide that:
would be entitled to moral, temperate or compensatory damages were it not for
“Even if an act or event causing damage to another’s property was not due to the the stipulation for liquidated damages.”
fault or negligence of the Defendant, the latter shall be liable for indemnity if
“Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical
through the act or event he was benefited.”
relation of quasi-contract to the end that no one shall be unjustly enriched or
with mere much more reason the Defendant should be liable for indemnity for benefited at the expense of another.”
acts it committed in bad faith and with betrayal of confidence.
“Art, 2143. The provisions for quasi-contracts in this Chapter do not exclude
It may be argued that the aforequoted provisions of the Civil Code only came into other quasi-contracts which may come within the purview of the preceding
effect on August 30, 1950, and that they cannot be applicable to acts that took article.”
place in 1948, prior to its effectivity. But Article 2252 of the Civil Code, though
In accordance with these quoted provisions of the Civil Code, We
providing that:
hold Defendant liable to pay to the Plaintiff, for the benefit of the insolvent CALI
“Changes made and new provisions and rules laid down by this Code which may and its creditors, as compensatory damages a sum equivalent to the value of the
be prejudice or impair vested or acquired rights in accordance with the old plane at the time aforementioned and another equal sum as exemplary damages.
legislation, shall have no retroactive effect .”
implies that when the new provisions of the Code does nor prejudice or impair
vested or acquired rights in accordance with the old legislation — and it cannot G.R. No. 50173 September 21, 1993
be alleged that in the case at bar Defendant had any vested or acquired right to
betray the confidence of the insolvent CALI or of its creditors — said new HANIEL R. CASTRO and PIO C. CASTRO vs. HON. RAFAEL T. MENDOZA,
provisions, like those on Human Relations, can be given retroactive effect. Judge of the Court of First Instance of Cebu, Branch VI, and THE PEOPLE OF
Moreover, Article 2253 of the Civil Code further provides: THE PHILIPPINES
“ But if a right should be declared for the first time in this Code, it shall be
effective at once, even though the act or event which may give rise thereto may
The facts of the case that led to the filing of the criminal information arose prior Evidently, the law penalizes the issuance of a check only if it were itself the
to the enactment of Batas Pambansa Blg. 22. immediate consideration for the reciprocal receipt of benefits. In other words,
the check must be issued concurrently with, and in exchange for, a to make it a
Facts: punishable offense under Article 315, paragraph 2(d) of material gain the
Revised Penal Code. In the issuance of a check to pay a pre-existing obligation,
A chance meeting between Pio Castro and Victor Elipe on board a boat bound as in the instant case, the drawer derives no such contemporary gain in return
for Surigao from Cebu City got them to converse. Castro learned that Elipe had since the obligation sought to be settled is already incurred and outstanding
just opened in Cebu City a hardware store. Castro, on the other hand, needed to before the check is issued.
procure materials for the construction of his apartment house at Tagbilaran
City. He proposed to buy, and Elipe agreed to sell, the items that the latter could Elipe by continuing to still effect sales and deliveries to the petitioners even
supply on cash basis. without promptly getting paid, for all intents and purposes, had sold on credit,
the amounts due thus turning into simple money obligations. Batas Pambansa
As orders were placed on different dates by Pio Castro, so also were deliveries Blg. 22 which now penalizes the mere issuance of a check by a drawer knowing
made by Elipe. Each time, no payment was made; deliveries, however, that it will not be honored cannot obviously apply retroactively to the
continued until the total unpaid account reached P18,081.15. Elipe kept on petitioners.
making demands for payment but Castro, on every such occasion, would ask for
an extension of time within which to pay. WHEREFORE, the judgment appealed from is REVERSED and SET ASIDE. The
petitioners are ACQUITTED of the crime charged.
Finally, Haniel Castro, a son of Pio Castro, went to see Elipe in Cebu City. The
young Castro issued an Insular Bank of Asia and America check for the entire G.R. No. L-44748 August 29, 1986
amount due from his father. When presented for encashment, the check was
dishonored because the bank account had by then already been closed. RADIO COMMUNICATIONS OF THE PHILS., INC. (RCPI). vs.
COURT OF APPEALS and LORETO DIONELA
Demands for payment of the due obligation were again made by Elipe. In return,
he got either excuses or promises from the two Castros. Exasperated, Elipe filed
his complaint that led to the filing of the estafa case against both Pio and Haniel Facts:
Castro. The basis of the complaint against the defendant corporation is a telegram sent
through its Manila Office to the offended party, Loreto Dionela, reading as
The court a quo, after due hearing, rendered judgment, found the two accused follows: SA IYO WALANG PAKINABANG DUMATING KA DIYAN-WALA-KANG
guilty of estafa as charged. PADALA DITO KAHIT BULBUL MO

In this petition, the conviction by the court a quo is questioned basically on the Plaintiff-respondent Loreto Dionela alleges that the defamatory words on the
ground that the factual settings gave rise to a civil, not criminal, liability. telegram sent to him not only wounded his feelings but also caused him undue
embarrassment and affected adversely his business as well because other
people have come to know of said defamatory words. Defendant corporation as
Issue: Whether the factual settings gave rise to a civil, not criminal, liability a defense, alleges that the additional words in Tagalog was a private joke
between the sending and receiving operators and that they were not addressed
Ruling: Yes. The Solicitor General himself recommends for acquittal. to or intended for plaintiff and therefore did not form part of the telegram and
that the Tagalog words are not defamatory. The telegram sent through its
The essential requirements of the above offense are that (1) a check is drawn or facilities was received in its station at Legaspi City. Nobody other than the
postdated in payment of an obligation contracted at the time the check was operator manned the teletype machine which automatically receives telegrams
issued; (2) there are no funds sufficient to cover the check; and (3) the payee being transmitted. The said telegram was detached from the machine and
sustains damage thereby. placed inside a sealed envelope and delivered to plaintiff, obviously as is. The
additional words in Tagalog were never noticed and were included in the
telegram when delivered.
The trial court in finding for the plaintiff ruled that the additional words in
Tagalog are libelous. They clearly impute a vice or defect of the plaintiff.
Whether or not they were intended for the plaintiff, the effect on the plaintiff is G.R. No. 96126 August 10, 1992
the same. Any person reading the additional words in Tagalog will naturally
think that they refer to the addressee, the plaintiff. The liability of the defendant ESTERIA F. GARCIANO vs. CA, EMERITO LABAJO, LUNISITA MARODA,
is predicated not only on Article 33 of the Civil Code of the Philippines but on LALIANA DIONES, CANONISA PANINSORO, DIONISIO ROSAL, REMEDIOS
articles 19 and 20 of said Code. GALUSO, FLORDELUNA PETALCORIN, MELCHIZEDECH LOON, NORBERTA
MARODA and JOSEPH WIERTZ
The respondent appellate court in its assailed decision confirming the
aforegoing findings of the lower court stated that the proximate cause, Facts:
therefore, resulting in injury to appellee, was the failure of the appellant to take
the necessary or precautionary steps to avoid the occurrence of the humiliating
incident now complained of. The petitioner was hired to teach during the 1981-82 school year in the
Immaculate Concepcion Institute in the Island of Camotes. Before the school
year ended, she applied for an indefinite leave of absence because her daughter
Issue: Whether the Court of Appeals erred in holding that the liability of was taking her to Austria where her daughter was employed. The application
petitioner-company-employer is predicated on Articles 19 and 20 of the Civil was recommended for approval by the school principal, Emerito O. Labajo, and
Code, Articles on Human Relations. approved by the President of the school's Board of Directors.

Ruling: No. Petitioner's contentions do not merit our consideration. The cause On June 1, 1982, Emerito Labajo addressed a letter to the petitioner through her
of action of the private respondent is based on Arts. 19 and 20 of the New Civil husband, Sotero Garciano (for she was still abroad), informing her of the
Code. As well as on respondent's breach of contract thru the negligence of its decision of Fr. Joseph Wiertz, the school's founder, concurred in by the
own employees. president of the Parent-Teachers Association and the school faculty, to
terminate her services as a member of the teaching staff because of: (1) the
Petitioner is a domestic corporation engaged in the business of receiving and absence of any written contract of employment between her and the school due
transmitting messages. Everytime a person transmits a message through the to her refusal to sign one; and (2) the difficulty of getting a substitute for her on
facilities of the petitioner, a contract is entered into. Upon receipt of the rate or a temporary basis as no one would accept the position without a written
fee fixed, the petitioner undertakes to transmit the message accurately. There is contract. Upon her return from Austria in the later part of June, 1982, she
no question that in the case at bar, libelous matters were included in the received the letter informing her that her services at the Immaculate
message transmitted, without the consent or knowledge of the sender. There is Concepcion Institute had been terminated. She made inquiries from the school
a clear case of breach of contract by the petitioner in adding extraneous and about the matter and, on July 7, 1982, the members of the Board of Directors of
libelous matters in the message sent to the private respondent. As a the school, with the exception of Fr. Joseph Wiertz, signed a letter notifying her
corporation, the petitioner can act only through its employees. Hence the acts of that she was "reinstated to report and do your usual duties as Classroom
its employees in receiving and transmitting messages are the acts of the Teacher . . . effective July 5, 1982," and that "any letter or notice of termination
petitioner. To hold that the petitioner is not liable directly for the acts of its received by you before this date has no sanction or authority by the Board of
employees in the pursuit of petitioner's business is to deprive the general public Directors of this Institution, therefore it is declared null and void.
availing of the services of the petitioner of an effective and adequate remedy. In
most cases, negligence must be proved in order that plaintiff may recover. Petitioner filed a complaint for damages in the RTC Cebu against Fr. Wiertz,
However, since negligence may be hard to substantiate in some cases, we may Emerito Labajo, and some members of the faculty of the school for
apply the doctrine of RES IPSA LOQUITUR (the thing speaks for itself), by discrimination and unjust and illegal dismissal.
considering the presence of facts or circumstances surrounding the injury.
The lower court rendered a decision ordering the defendants jointly and
WHEREFORE, premises considered, the judgment of the appellate court is severally to pay her P200,000 as moral damages, P50,000 exemplary damages,
hereby AFFIRMED. P32,400 as lost earnings for nine years, and P10,000 as litigation expenses and
attorney's fees.
The defendants (now private respondents) appealed to the Court of Appeals ordered to report for work on July 5, 1982, but she did not comply with that
which reversed the trial court's decision. order. Consequently, whatever loss she may have incurred in the form of lost
earnings was self-inflicted. Volenti non fit injuria.
The plaintiff-appellee (now petitioner) filed a motion for reconsideration which
the Court of Appeals denied. Hence, this petition for review. With respect to petitioner's claim for moral damages, the right to recover them
under Article 21 is based on equity, and he who comes to court to demand
Issue: Whether Court of Appeals gravely erred in absolving the private equity, must come with clean hands. Article 21 should be construed as granting
respondents from liability by faulting the petitioner for her failure to report the right to recover damages to injured persons who are not themselves at fault.
back to her work. Moral damages are recoverable only if the case falls under Article 2219 in
relation to Article 21. In the case at bar, petitioners is not without fault. Firstly,
Ruling: No. The Court resolved to deny the petition for lack of merit. she went on an indefinite leave of absence and failed to report back in time for
the regular opening of classes. Secondly, for reasons known to herself alone, she
refused to sign a written contract of employment. Lastly, she ignored the Board
The board of directors of the Immaculate Concepcion Institute, which alone of Directors' order for her to report for duty.
possesses the authority to hire and fire teachers and other employees of the
school, did not dismiss the petitioner. It in fact directed her to report for work.
While the private respondents sent her a letter of termination through her The trial court's award of exemplary damages to her was not justified for she is
husband, they admittedly had no authority to do so. not entitled to moral, temperate or compensatory damages. (Art. 2234, Civil
Code).
Liability for damages under Articles 19, 20 and 21 of the Civil Code arises only
from unlawful, willful or negligent acts that are contrary to law, or morals, good In sum, the Court of Appeals correctly set aside the damages awarded by the
customs or public policy. trial court to the petitioner for they did not have any legal or factual basis.

Art. 19. Every person must, in the exercise of his rights and in G.R. No. 76487 November 9, 1990
the performance of his duties, act with justice, give everyone
his due, and observe honesty and good faith. HEIRS OF JOHN Z. SYCIP NAMELY NATIVIDAD D. SYCIP, JOSE SYCIP, JOHN
SYCIP, JR., ALFONSO SYCIP ROSE II, MARIE NATIVIDAD D. SYCIP
Art. 20. Every person who, contrary to law, willfully or vs.
negligently causes damage to another, shall indemnify the COURT OF APPEALS, MELENCIO YU AND TALINANAP MATUALAGA
latter for the same.
Facts:
Art. 21. Any person who willfully causes loss or injury to
another in a manner that is contrary to morals, good customs The plaintiffs-spouses are native muslims. Prior to 1952, Talinanap Matualaga
or public policy shall compensate the latter for the damage. bought a parcel of land from vendors Cosin Bentaib and Hadji Abdaua
Mohamad. The land was, however, surveyed in the name of Bangon Yu (father of
The Court of Appeals was correct in finding that petitioner's discontinuance plaintiff Melencio Yu). The land was subdivided into five (5) lots. The
from teaching was her own choice. While the respondents admittedly wanted subdivision was as follows: Lot No. 1 for Bengon Yu; Lot No. 2 for Melencio Yu;
her service terminated, they actually did nothing to physically prevent her from Lot No. 3 for Dominga Pinagawang; Lot No. 4 for Talinanap Matualaga and Lot
reassuming her post, as ordered by the school's Board of Directors. That the No. 5 for Ison Yu (the brother of plaintiff Melencio Yu).
school principal and Fr. Wiertz disagreed with the Board's decision to retain
her, and some teachers allegedly threatened to resign en masse, even if true, did Melencio Yu, together with his wife, Talinanap Matualaga filed their respective
not make them liable to her for damages. They were simply exercising their Free Patent Application for both Lot Nos. 4 and 2 which were approved. Upon
right of free speech or their right to dissent from the Board's decision. Their acts transmittal to the Register of Deeds, the latter issued to Melencio Yu, married to
were not contrary to law, morals, good customs or public policy. They did not Talinanap Matualaga, OCT (C-14496) (P-523). The owner's copy of said title,
"illegally dismiss" her for the Board's decision to retain her prevailed. She was
however, was not received by the patentee Melencio Yu because the same was Meanwhile, private respondents filed another complaint in the Court of First
given to defendant John Z. Sycip (now deceased). Instance of Cotabato Branch I for the Declaration of Nullity of Documents and
Recovery of Possession of Real Property with a prayer for a Writ of Preliminary
In 1958, on account of jealousy, Talinanap Matualaga left her husband and lived Mandatory Injunction and Damages, this time it was Lot No. 2 Psu-135740-Amd
with her parents. They reconciled, however, in 1963 and since then lived as the subject matter of the aforesaid case.
together.
The trial court issued its order dismissing the case on the ground of
Upon their reconciliation, however, Melencio Yu asked his wife if a certain prescription.
Alfonso Non had approached her regarding the sale of their land to John Sycip.
Talinanap Matualaga answered in the negative and further said that she never On appeal, the Court of Appeals, Special Eighth Division, rendered its decision in
executed any instrument conveying her property to anyone. Melencio Yu then favor of private respondents thereby setting aside the order of dismissal of the
explained that while they were separated, Alfonso Non approached him and trial court.
told him that there was a buyer interested in their land at a price of P200.00 per
hectare. Melencio told Non that the land belonged to his wife as her paraphernal Issue: Whether or not the sale of lot No. 2 Psu-135740-Amd is null and void ab
property, hence, he did not have authority to sell the same. Alfonso Non, initio.
however, convinced Melencio that if he would only sign the documents which
Non had prepared then Non will secure the signature of Talinanap in Buluan, Ruling: Yes. The petition is devoid of merit.
and if Non fails to get Talinanap's signature, then Melencio's signature will be
null and void. With such understanding, Melencio signed the "Agreement of
Transfer of Rights and Deed of Sale and the "Quitclaim Deed" without receiving It is not disputed that the private respondents are Muslims who belong to the
any consideration therefor. It turned out that the deeds involved the sale of the cultural minority or non-Christian Filipinos as members of the Maguindanao
whole parcel of land consisting of more than 54 hectares in favor of John Sycip Tribe. Any transaction, involving real property with them is governed by the
for a consideration of P9,500.00. provisions of Sections 145 and 146 of the Revised Administrative Code of
Mindanao and Sulu, Section 120 of the Public Land Act (Commonwealth Act No.
141), as amended, and Republic Act No. 3872, further amending the Public Land
By reason of these information, the spouses sought the assistance of the Act.
Commission on National Integration of Southern Mindanao office which
informed them that their original certificate of titles were taken and delivered
to John Sycip by virtue of the sale documents in question. Section 145 of the Revised Administrative Code of Mindanao and Sulu provides
that any transaction involving real property with said non-Christian tribes shall
bear the approval of the provincial governor wherein the same was executed or
Plaintiffs demanded the return of their land to them and the declaration of of his representative duly authorized in writing for such purpose, indorsed
nullity of the documents in question. upon it. Section 146 of the same code considers every contract or agreement made
in violation of Section 145 as null and void. (Emphasis supplied)
Private respondents filed a complaint against John Z. Sycip, (later substituted by
his heirs upon his death) petitioners herein, before the trial court for the Section 120 of the Public Land Act (Commonwealth Act No. 141) provides that
Declaration of Nullity of Document and Recovery of Possession of Real Property conveyances and encumbrances made by persons belonging to the so-called
with a prayer for a writ of Preliminary Mandatory Injunction and Damages. "non-Christian tribes" shall be valid if the person making the conveyance or
encumbrance is able to read and can understand the language in which the
The trial court upheld the right of the private respondents to be restored to the instrument of conveyance or encumbrance is written. Conveyances and
possession of the aforesaid parcel of land by declaring null and void ab initio or encumbrances made by illiterate non-Christians shall not be valid unless duly
inexistent all documents of conveyance of sale by the petitioners. approved by the Commissioner of Mindanao and Sulu.

On appeal, the appellate court affirmed in toto the decision of the trial court. Republic Act No. 3872 provides that conveyances and encumbrances made by
Said decision became final and executory and the private respondents were illiterate non-Christian or literate non-Christians where the instrument of
restored to the possession. conveyance or encumbrance is in a language not understood by said literate
non-Christians shall not be valid unless duly approved by the Chairman of the Ruling: Yes. We have heretofore defined a prejudicial question as that which
Commission on National Integration. arises in a case, the resolution of which is a logical antecedent of the issue
involved therein, and the cognizance of which pertains to another tribunal. The
All the documents declared null and void or inexistent by the trial court and prejudicial question — we further said — must be determinative of the case
affirmed by the Court of Appeals were found to have been falsified in Civil Case before the court, and jurisdiction to try the same must be lodged in another
No. 969; without consideration and more importantly without approval by any court. These requisites are present in the case at bar. Should the question for
of the following officials: the Provincial Governor of Cotabato, Commissioner of annulment of the second marriage pending in the Court of First Instance of
Mindanao and Sulu, or the Chairman of the Commission on National Integration Pampanga prosper on the ground that, according to the evidence, petitioner's
and therefore nun and void. consent thereto was obtained by means of duress, force and intimidation, it is
obvious that his act was involuntary and cannot be the basis of his conviction
With the resolution of this issue there appears to be no necessity to dwell on the for the crime of bigamy with which he was charged in the Court of First Instance
other issues of this case. of Bulacan. Thus, the issue involved in the action for the annulment of the
second marriage is determinative of petitioner's guilt or innocence of the crime
of bigamy. On the other hand, there can be no question that the annulment of
petitioner's marriage with respondent Yco on the grounds relied upon in the
complaint filed in the Court of First Instance of Pampanga is within the
G.R. No. L-14534 February 28, 1962 jurisdiction of said court.

MERARDO L. ZAPANTA vs. THE HON. AGUSTIN P. MONTESA, ETC., ET AL. In the Aragon case already mentioned (supra) we held that if the defendant in a
case for bigamy claims that the first marriage is void and the right to decide
Facts: such validity is vested in another court, the civil action for annulment must first
be decided before the action for bigamy can proceed. There is no reason not to
Upon complaint filed by respondent Olimpia A. Yco on May 20, 1958, an apply the same rule when the contention of the accused is that the second
information for Bigamy was filed by respondent Provincial Fiscal against marriage is void on the ground that he entered into it because of duress, force
petitioner in the Court of First Instance of Bulacan, alleging that the latter, and intimidation.
having previously married one Estrella Guarin, and without said marriage
having been dissolved, contracted a second marriage with said complainant. WHEREFORE, the writ prayed for in the petition is hereby granted. Without
costs.
On June 16, 1958, petitioner filed in the Court of First Instance of Pampanga
Civil Case No. 1446 against respondent Olimpia A. Yco for the annulment of
their marriage on the ground of duress, force and intimidation. On the 30th of
the same month respondent Yco, as defendant in said case, filed a motion to DAMAGES
dismiss the complaint upon the ground that it stated no cause of action, but the
same was denied.
G.R. No. L-50911 March 12, 1986
Petitioner, in turn, filed a motion in Criminal Case to suspend proceedings
therein, on the ground that the determination of the issue involved in Civil Case MIGUEL PEREZ RUBIO vs. COURT OF APPEALS, ROBERT O. PHILLIPS &
of the Court of First Instance of Pampanga was a prejudicial question. SONS, INC., MAGDALENA YSMAEL PHILLIPS, MANUFACTURERS BANK &
Respondent judge denied the motion on as well as petitioner's motion for TRUST COMPANY, INC., HACIENDA BENITO, INC., VICTORIA VALLEY
reconsideration, and ordered his arraignment. After entering a plea of not DEVELOPMENT CORPORATION and ROBERT O. PHILLIPS
guilty, petitioner filed the present action.
Facts:
Issue: Whether the civil action for annulment must first be decided before the Miguel Perez Rubio alleges that Robert O. Phillips & Sons, Inc. (ROPSI), Magdalena
action for bigamy can proceed Ysmael Phillips, Manufacturers Bank & Trust Co., Inc. (MBTC), Hacienda Benito,
Inc. (collectively, ROPSI et al.) conspired among themselves to put the properties
of Hacienda Benito, Inc. (HBI) beyond his reach. "Every person who, contrary to law, wilfully or negligently causes
damage to another shall indemnify the latter for the same."
HBI represented by Robert O. Phillips, president, and Victoria Valley
Development Corporation (VVDC) executed a Memorandum Agreement the Parenthetically, these respondents did not observe honesty and good faith in
thrust of which is that VVDC will acquire 134.1668 hectares of land including dealing with the rightful claim of the petitioner to the still unpaid P4,250,000.00
account receivables belonging to HBI and the 78 hectares mortgaged to collectibles from ROPSI. The respondents' acts are tortious pursuant to Articles
Manufacturers Bank & Trust Co., Inc. (MBTC). It was further provided that HBI 19 and 20 of the New Civil Code. Hence, these respondents are obliged to pay for
will convey all the 78 hectares in favor of MBTC after which VVDC will purchase the damage done to the petitioner.
from MBTC the same parcels of land together with the receivables. This (See Article 2176, New Civil Code).
agreement, however, was executed when Robert O. Phillips & Sons, Inc. (ROPSI)
had still to pay its outstanding P4,250,000.00 debt to Miguel Perez Rubio as the In the case at bar, the tortious and fraudulent scheme of the private respondents
result of Rubio’s sale of his shares of stock of HBI. Thus, Rubio restates his made it impossible for the petitioner to collect the P4,250,000.00 still unpaid
position that the ROPSI, including HBI, VVDC and MBTC, had conspired amongst purchase price of his shares of stock in Hacienda Benito. All the respondents are,
themselves to put the properties of HBI beyond his reach and thus make it therefore, solidarily liable for these actual damages suffered by the petitioner.
impossible for him to collect the sum of P4,250,000.00 still unpaid on the (See Article 2194 of the New Civil Code).
purchase price of his shares of stock in HBI. Rubio asks for a reconsideration of
the decision of the court insofar as it makes no finding against Phillips for moral Consequently, we rule that Hacienda Benito, VVDC and MBTC together with
and exemplary damages as well as attorney’s fees (Note: Because it appears from ROPSI and the Phillips spouses are solidarily liable to the petitioner for the
the beginning of the case that the court had already adjudged Phillips to pay the outstanding debt of ROPSI in the amount of P4,250,000.00 with interest at the
amount of P4,250,000.00, only that there was no pronouncement with regard to rate of eight (8%) per cent per annum from April 30, 1964 until fully paid as
damages). provided for in the parties' agreement dated August 13,1963.

Issue: Whether Rubio is entitled to an award for damages Also, an award for moral damages in favor of the petitioner is in order against
respondents Hacienda Benito, VVDC and MBTC. The planned transfer of all the
Ruling: Yes. assets of Hacienda Benito to VVDC which the respondents sought to accomplish
through the Memorandum Agreement created further aguish and anxiety on the
RATIO DECIDENDI: The scheme provided for in the Memorandum Agreement part of the petitioner who at that time was still trying to collect the P4,250,000.00
wherein all the properties of Hacienda Benito will be ultimately transferred to full payment of his shares of stock in Hacienda Benito. Considering the
VVDC without any mention at all and completely ignoring the petitioner's interest circumstances under which the respondents executed the Memorandum
in said Hacienda placed the petitioner's rightful claim to the payment of his Agreement and the social status of the parties herein, the amount of P100,000.00
shares of stock in clear jeopardy. as moral damages in favor of the petitioner is awarded.

The fact that the Memorandum Agreement was not fully implemented is
immaterial. The intent to defraud the petitioner and the damage which led to the G.R. No. L-11037 December 29, 1960
filing of this case was present in the execution of the Memorandum Agreement.
Therefore, an award for damages in favor of the petitioner is in order against EDGARDO CARIAGA, ET AL., vs.
respondents Hacienda Benito, VVDC and MBTC. LAGUNA TAYABAS BUS COMPANY, MANILA RAILROAD COMPANY
Article 19 of the New Civil Code provides that:
Facts:
"Every person must, in the exercise of his rights and in the performance
of his duties, act with justice, give everyone his due, and observe honesty At about 1:00 p.m. on June 18, 1952, Bus of the Laguna Tayabas Bus
and good faith. " Co. — hereinafter referred to as the LTB — driven by Alfredo Moncada, left its
station at Azcarraga St., Manila, for Lilio, Laguna, with Edgardo Cariaga, a
while Article 20 thereof provides that: fourth-year medical student of the University of Santo Tomas, as one of its
passengers. At about 3:00 p.m., as the bus reached that part of the poblacion of holding the Manila Railroad Company liable upon the cross-claim filed against
Bay, Laguna, where the national highway crossed a railroad track, it bumped it.
against the engine of a train then passing by with such terrific force that the first
six wheels of the latter were derailed, the engine and the front part of the body Issues:
of the bus was wrecked, the driver of the bus died instantly, while many of its
passengers, Edgardo among them, were severely injured. Edgardo was (1) Whether the collision was due to the fault of both the locomotive driver and
unconscious during the first 35 days after the accident; at the De los Santos the bus driver
Clinic Dr. Gustilo removed the fractured bones which lacerated the right frontal
lobe of his brain and at the University of Santo Tomas Hospital Dr. Gustilo
performed another operation to cover a big hole on the right frontal part of the (2) Whether the Cariagas shall also be awarded actual and moral damages, and
head with a tantalum plate. attorney's fees

The LTB paid for all the hospital, medical and miscellaneous expenses incurred Ruling:
from June 18, 1952 to April, 1953. From January 15, 1953 up to April of the
same year Edgardo stayed in a private house in Quezon, City, the LTB having (1) No. We have no other alternative but to accept the findings of the trial court
agreed to give him a subsistence allowance of P10.00 daily during his to the effect, firstly, that the whistle of locomotive was sounded four times —
convalescence, having spent in this connection the total sum of P775.30 in two long and two short — "as the train was approximately 300 meters from the
addition to the amount already referred to. crossing"; secondly, that another LTB bus which arrived at the crossing ahead of
the one where Edgardo Cariaga was a passenger, paid heed to the warning and
The present action was filed to recover for Edgardo Cariaga, from the LTB and stopped before the "crossing", while — as the LTB itself now admits— the
the MRR Co., and total sum of P312,000.00 as actual, compensatory, moral and driver of the bus in question totally disregarded the warning.
exemplary damages, and for his parents, the sum of P18,00.00 in the same
concepts. The LTB disclaimed liability claiming that the accident was due to the But to charge the MRR Co. with contributory negligence, the LTB claims that the
negligence of its co-defendant, the Manila Railroad Company, for not providing a engineer of the locomotive failed to ring the bell altogether, in violation of the
crossing bar at the point where the national highway crossed the railway track, section 91 of Article 1459, incorporated in the charter of the said MRR Co. This
and for this reason filed the corresponding cross-claim against the latter contention — as is obvious — is the very foundation of the cross-claim
company. The Manila Railroad Company, in turn, denied liability upon the interposed by the LTB against its co-defendant. The former, therefore, had the
complaint and cross-claim alleging that it was the reckless negligence of the bus burden of proving it affirmatively because a violation of law is never presumed.
driver that caused the accident. The record discloses that this burden has not been satisfactorily discharged.

The lower court held that it was the negligence of the bus driver that caused the (2) Yes. The Cariagas, as appellants, claim that the award of P10,000.00
accident and, as a result, rendered judgment sentencing the LTB to pay Edgardo compensatory damages to Eduardo is inadequate considering the nature and
Cariaga the sum of P10,490.00 as compensatory damages, with interest at the the after effects of the physical injuries suffered by him. After a careful
legal rate from the filing of the complaint, and dismissing the cross-claim consideration of the evidence on this point we find their contentions to be well-
against the Manila Railroad Company. From this decision the Cariagas and the founded.
LTB appealed.
Upon the whole evidence on the matter, the lower court found that the removal
The Cariagas claim that the trial court erred: in awarding only P10,490.00 as of the right frontal lobe of the brain of Edgardo reduced his intelligence by
compensatory damages to Edgardo; in not awarding them actual and moral about 50%; that due to the replacement of the right frontal bone of his head
damages, and in not sentencing appellant LTB to pay attorney's fees. with a tantalum plate Edgardo has to lead a quite and retired life because "if the
tantalum plate is pressed in or dented it would cause his death.
On the other hand, the LTB's principal contention in this appeal is that the trial
court should have held that the collision was due to the fault of both the The impression one gathers from this evidence is that, as a result of the physical
locomotive driver and the bus driver and erred, as a consequence, in not injuries suffered by Edgardo Cariaga, he is now in a helpless condition, virtually
an invalid, both physically and mentally.
Appellant LTB admits that under Art. 2201 of the Civil Code the damages for The plaintiff Edgardo Cariaga is also not entitled to recover for
which the obligor, guilty of a breach of contract but who acted in good faith, is attorney's fees, because this case does not fall under any of the
liable shall be those that are the natural and probable consequences of the instances enumerated in Article 2208 of the Civil Code.
breach and which the parties had foreseen or could have reasonably foreseen at
the time the obligation was constituted, provided such damages, according to We agree with the trial court and, to the reason given above, we add those given
Art. 2199 of the same Code, have been duly proved. Upon this premise it claims by this Court in Cachero vs. Manila Yellow Taxicab Co., Inc.(101 Phil., 523, 530,
that only the actual damages suffered by Edgardo Cariaga consisting of medical, 533):
hospital and other expenses in the total sum of P17,719.75 are within this
category. We are of the opinion, however, that the income which Edgardo A mere perusal of plaintiff's complaint will show that this action against
Cariaga could earn if he should finish the medical course and pass the the defendant is predicated on an alleged breach of contract of carriage,
corresponding board examinations must be deemed to be within the same i.e., the failure of the defendants to bring him "safely and without
category because they could have reasonably been foreseen by the parties at the mishaps" to his destination, and it is to be noted that the chauffeur of
time he boarded the bus No. 133 owned and operated by the LTB. At that time defendant's taxicab that plaintiff used when he received the injuries
he was already a fourth-year student in medicine in a reputable university. involved herein, Gregorio Mira, has not even made a party defendant to
While his scholastic may not be first rate (Exhibits 4, 4-A to 4-C), it is, this case.
nevertheless, sufficient to justify the assumption that he could have passed the
board test in due time. As regards the income that he could possibly earn as a
medical practitioner, it appears that, according to Dr. Amado Doria, a witness Considering, therefore, the nature of plaintiff's action in this case, is he
for the LTB, the amount of P300.00 could easily be expected as the minimum entitled to compensation for moral damages? Article 2219 of the Civil
monthly income of Edgardo had he finished his studies. Code says the following:

Upon consideration of all the facts mentioned heretofore this Court is of the Art. 2219. Moral damages may be recovered in the following and
opinion, and so holds, that the compensatory damages awarded to Edgardo analogous cases:
Cariaga should be increased to P25,000.00.
(1) A criminal offense resulting in physical injuries;
Edgardo Cariaga's claim for moral damages and attorney's fees was denied by
the trial court, the pertinent portion of its decision reading as follows: (2) Quasi-delicts causing physical injuries;

Plaintiffs' claim for moral damages cannot also be granted. Article 2219 (3) Seduction, abduction, rape, or other lascivious acts;
of the Civil Code enumerates the instances when moral damages may
be covered and the case under consideration does not fall under any (4) Adultery or concubinage;
one of them. The present action cannot come under paragraph 2 of said
article because it is not one of the quasi-delict and cannot be (5) Illegal or arbitrary detention or arrest;
considered as such because of the pre-existing contractual relation
between the Laguna Tayabas Bus Company and Edgardo Cariaga. (6) Illegal search;
Neither could defendant Laguna Tayabas Bus Company be held liable to
pay moral damages to Edgardo Cariaga under Article 2220 of the Civil
(7) Libel, slander or any other form of defamation;
Code on account of breach of its contract of carriage because said
defendant did not act fraudulently or in bad faith in connection
therewith. Defendant Laguna Tayabas Bus Company had exercised due (8) Malicious prosecution;
diligence in the selection and supervision of its employees like the
drivers of its buses in connection with the discharge of their duties and (9) Acts mentioned in Article 309;
so it must be considered an obligor in good faith.
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32,
34, and 35.
xxx xxx xxx includes not only negligence, but also intentional criminal act, such as
assault and battery, false imprisonment and deceit. In the general plan
Of course enumerated in the just quoted Article 2219 only the first two of the Philippine legal system, intentional and malicious acts are
may have any bearing on the case at bar. We find, however, with regard governed by the Penal Code, although certain exceptions are made in
to the first that the defendant herein has not committed in connection the Project. (Report of the Code Commission, pp. 161-162).
with this case any "criminal offense resulting in physical injuries". The
one that committed the offense against the plaintiff is Gregorio Mira, In the case of Cangco, vs. Manila Railroad, 38 Phil. 768, We established
and that is why he has been already prosecuted and punished therefor. the distinction between obligation derived from negligence and
Altho (a) owners and managers of an establishment and enterprise are obligation as a result of a breach of contract. Thus, we said:
responsible for damages caused by their employees in the service of the
branches in which the latter are employed or on the occasion of their It is important to note that the foundation of the legal liability of the
functions; (b) employers are likewise liable for damages caused by defendant is the contract of carriage, and that the obligation to respond
their employees and household helpers acting within the scope of their for the damage which plaintiff has suffered arises, if at all, from the
assigned task (Article 218 of the Civil Code); and (c) employers and breach of that contract by reason of the failure of defendant to exercise
corporations engaged in any kind of industry are subsidiary civilly due care in its performance. That is to say, its liability is direct and
liable for felonies committed by their employees in the discharge of immediate, differing essentially in the legal viewpoint from the
their duties (Art. 103, Revised Penal Code), plaintiff herein does not presumptive responsibility for the negligence of its servants, imposed by
maintain this action under the provisions of any of the articles of the Article 1903 of the Civil Code (Art. 2180 of the new), which can be
codes just mentioned and against all the persons who might be liable rebutted by proof of the exercise of due care in their selection of
for the damages caused, but as a result of an admitted breach of supervision. Article 1903 is not applicable to obligations arising EX
contract of carriage and against the defendant employer alone. We, CONTRACTU, but only to extra-contractual obligations — or to use the
therefore, hold that the case at bar does not come within the exception technical form of expression, that article relates only to CULPA
of paragraph 1, Article 2219 of the Civil Code. AQUILIANA' and not to CULPA CONTRACTUAL.lawphil.net

The present complaint is not based either on a "quasi-delict causing The decisions in the cases of Castro vs. Acro Taxicab Co., (82 Phil., 359;
physical injuries" (Art. 2219, par. 2 of the Civil Code). From the report 46 Off. Gaz., No. 5, p. 2023); Lilius, et al. vs. Manila Railroad, 59 Phil.,
of the Code Commission on the new Civil Code. We copy the following: 758) and others, wherein moral damages were awarded to the
plaintiffs, are not applicable to the case at bar because said decision
A question of nomenclature confronted the Commission. After a careful were rendered before the effectivity of the new Civil Code (August 30,
deliberation, it was agreed to use the term "quasi-delict" for those 1950) and for the further reason that the complaints filed therein were
obligations which do not arise from law, contracts, quasi-contracts, or based on different causes of action.
criminal offenses. They are known in Spanish legal treaties as "culpa
aquiliana", "culpa-extra-contractual" or "cuasi-delitos". The phrase In view of the foregoing the sum of P2,000 was awarded as moral
"culpa-extra-contractual" or its translation "extra-contractual-fault" damages by the trial court has to be eliminated, for under the law it is
was eliminated because it did not exclude quasi-contractual or penal not a compensation awardable in a case like the one at bar.
obligations. "Aquilian fault" might have been selected, but it was
thought inadvisable to refer to so ancient a law as the "Lex Aquilia". So What has been said heretofore relative to the moral damages claimed by
"quasi-delict" was chosen, which more nearly corresponds to the Edgardo Cariaga obviously applies with greater force to a similar claim (4th
Roman Law classification of the obligations and is in harmony with the assignment of error) made by his parents.
nature of this kind of liability.
The claim made by said spouses for actual and compensatory damages is
The Commission also thought of the possibility of adopting the word likewise without merits. As held by the trial court, in so far as the LTB is
"tort" from Anglo-American law. But "tort" under that system is much concerned, the present action is based upon a breach of contract of carriage to
broader than the Spanish-Philippine concept of obligations arising from which said spouses were not a party, and neither can they premise their claim
non-contractual negligence. "Tort" in Anglo-American jurisprudence
upon the negligence or quasi-delict of the LTB for the simple reason that they In its defense, appellant interposed prescription of the action, denied the
were not themselves injured as a result of the collision between the LTB bus imputation of misrepresentation, and disputed the propriety and amount of
and train owned by the Manila Railroad Company. damages claimed.

Wherefore, modified as above indicated, the appealed judgement is hereby The trial court ruled in favor of plaintiff Yaptinchay ordering the defendant, G. A.
affirmed in all other respects, with costs against appellant LTB. Machineries, Inc., to pay the plaintiff actual damages sustained in the sum of
P54,000.48; to reimburse the purchase price of the Fordson diesel engine in the
amount of P7,590.00; and to pay attorney’s fees to plaintiff’s counsel on the sum
G.R. No. L-30965. November 29, 1983. of P2,000.00 and costs.

G.A MACHINERIES, INC., v. HORACIO YAPTINCHAY, doing business under The decision was affirmed by the Appellate Court. A motion for reconsideration
the name and style "HI-WAY EXPRESS" and THE COURT OF APPEALS, was denied. Hence, the instant petition.

Issues:
Appellant GAMI, thru a duly authorized agent, offered to sell a brand-new
Fordson Diesel Engine to appellee Horacio Yaptinchay, owner of the freight (1) Whether or not the respondent’s cause of action against the petitioner had
hauling business styled ‘Hi-Way Express’. Relying on the representations of already prescribed at the time the complaint was filed in the trial court
appellant’s representative that the engine offered for sale was brand new,
appellee agreed to purchase the same at the price of P7,590.00. (2) Whether the CA erred in awarding actual damages in the form of unrealized
profits (lucrum cessante)
"Within the week after its delivery, however, the engine in question started to
have a series of malfunctions which necessitated successive trips to appellant’s Ruling:
repair shop. Thus, it first sprang an oil leak. Thereafter, the malfunctioning
persisted and, on inspection, appellee’s mechanic noticed a worn out screw (1) No. The first issue is premised on the petitioner’s proposition that the
which made appellee suspicious about the age of the engine. This prompted respondent’s cause of action was for breach of warranty against hidden defects
appellee, thru his lawyer, to write appellant a letter, protesting that the engine as provided under Articles 1561 and 1566 of the Civil Code. Article 1571 of the
was not brand-new as represented. Because of the recurring defects, the engine Civil Code provides for a six-month prescriptive period from the delivery of the
was again submitted to appellant’s shop. Instead of improving, the engine’s thing sold for the filing of an action for breach of warranty against hidden
condition became worse as it developed engine knock and appellee had to stop defects.
its operation altogether due to its unserviceability.
The main thrust of the complaint is the contention that the Fordson diesel
He then sought the assistance of the PC Criminal Investigation Service to check engine delivered by the petitioner to the respondent was not brand-new
on the authenticity of the serial number of the engine, with due notice to contrary to the representations of the former and the expectations of the latter.
appellant. Scientific examination and verification tests revealed that the original The complaint was couched in a manner which shows that instead of the brand-
motor number of the engine aforesaid was tampered. Further inquiries by new Fordson diesel engine which was bought by the respondent from the
appellee from the Manila Trading Company, which also handles the importation petitioner, another engine which was not brand new was delivered resulting in
and distribution of similar engines, also disclosed that, unlike the engine the damages sought to be recovered. It is evident therefore, that the complaint
delivered to appellee whose engine body and injection pump were painted with was for a breach of a contract of sale rather than a breach of warranty against
two different colors, brand-new engines are painted with only one color all hidden defects. This is so because an action for breach of warranty against
over. hidden defects presupposes that the thing sold is the same thing delivered but
with hidden defects. Consequently, the six-month prescriptive period under
"Thus convinced that a fraudulent misrepresentation as to the character of the Article 1571 of the Civil Code is not applicable.
engine had been perpetrated upon him, appellee made demands from appellant
for indemnification for damages and eventually instituted the present suit. (2) Yes. The next question refers to the award of actual damages in the amount
of P54,000.48. This amount covers the probable income which the respondent
failed to realize because of the breach of contract. Is the award of damages in
the form of lucro cessante justified? : actual damages, it would have been easy to present the average actual profits
realized by the other freight trucks plying the Manila-Baguio route. With the
The law on the matter is spelled out in Raagas v. Traya (22 SCRA 839), where presentation of such actual income the court could have arrived with
we stated. reasonable certainty at the amount of actual damages suffered by
the Respondent. We rule that the award of actual damages in the amount of
". . . even if the allegations regarding the amount of damages in the complaint P54,000.08 is not warranted by the evidence on record.
are not specifically denied in the answer, such damages are not deemed
admitted. In Tomassi v. Villa-Abrille, we declared in no uncertain terms that WHEREFORE, the decision appealed from is hereby modified. The award of
actual damages must be proved, and that a court cannot rely on ‘speculation, actual damages in the amount of P54,000.48 is deleted. The petitioner shall also
conjecture or guesswork’ as to the fact and amount of damages, but must pay six (6%) percent interest per annum on the P7,590.00 purchase price from
depend on actual proof that damages had been suffered and on evidence of the January 27, 1962 to July 29, 1974 and twelve (12%) percent interest per annum
actual amount. . . ." from July 30, 1974 until the purchase price is reimbursed. In all other respects,
the appealed decision is affirmed.
The fact that the defendant does not dispute the amount of this kind of damages
does not necessarily imply that the other party outright is entitled to the award
of damages.
G.R. No. L-58028 April 18, 1989
Article 2200 of the Civil Code entitles the respondent to recover as
compensatory damages not only the value of the loss suffered but also CHIANG KAI SHEK SCHOOL vs.
prospective profits while Article 2201 entitles the respondent to recover all COURT OF APPEALS and FAUSTINA FRANCO OH
damages which may be attributed to the non-performance of the obligation.
However, in order to recover this kind of damages, the plaintiff must prove his
case — Facts:

"‘When the existence of a loss is established, absolute certainty as to its amount An unpleasant surprise awaited Fausta F. Oh when she reported for work at the
is not required. The benefit to be derived from a contract which one of the Chiang Kai Shek School in Sorsogon on the first week of July, 1968. She was told
parties has absolutely failed to perform is of necessity to some extent, a matter she had no assignment for the next semester. Oh was shocked. She had been
of speculation, but the injured party is not to be denied all remedy for that teaching in the school since 1932 for a continuous period of almost 33 years.
reason alone. He must produce the best evidence of which his case is And now, out of the blue, and for no apparent or given reason, this abrupt
susceptible and if that evidence warrants the inference that he has been dismissal.
damaged by the loss of profits which he might with reasonable certainty have
anticipated but for the defendant’s wrongful act, he is entitled to recover." Oh sued. She demanded separation pay, social security benefits, salary
(Cerreno v. Tan Chuco, 28 Phil. 312 quoted in Central Bank of the Philippines v. differentials, maternity benefits and moral and exemplary damages.
Court of Appeals, 63 SCRA 431, 457).
The Court of First Instance of Sorsogon dismissed the complaint. On appeal, its
Applying the foregoing test to the instant case, we find the evidence of the decision was set aside by the respondent court, which held the school suable
respondent insufficient to be considered within the purview of "best evidence." and liable while absolving the other defendants. The motion for reconsideration
The bare assertion of the respondent that he lost about P54,000.00 and the having been denied, the school then came to this Court in this petition for
accompanying documentary evidence presented to prove the amount lost are review on certiorari.
inadequate if not speculative. The document itself merely shows that everytime
a truck travels, Mr. Yaptinchay earns P369.88. This amount is then multiplied by Issue: Whether or not the awards made by the respondent court were
the number of trips which the truck was allegedly unable to make. The warranted.
estimates were prepared by a certain Dionisio M. Macasieb whose identity was
not even revealed by the Respondent. Mr. Yaptinchay was in the freight truck
Ruling: Yes.
business. He had several freight trucks among them the truck with the subject
Fordson diesel engine, covering the route from Manila to Baguio. To prove
. announced, they had to walk again in the rain without head covers. In
Barcelona, Mrs. Fule's luggage was missing. She went to Sabena office but found
It is easy to imagine the astonishment and hurt she felt when she was flatly and it closed. She then went to Iberia Airlines Office where she was asked to prepare
without warning told she was dismissed. There was not even the amenity of a a reclaimation letter and advised to go to her hotel and wait for a call.
formal notice of her replacement, with perhaps a graceful expression of thanks
for her past services. She was simply informed she was no longer in the teaching Plaintiff-appellees checked in at Hotel Dante. As Mrs. Fule wanted to change her
staff. To put it bluntly, she was fired. clothes, she bought a dress and a nightgown at a department store, El Cortes
Ingles, for which she paid 5,000 pesetas. Afterwards, she made an overseas call
For the wrongful act of the petitioner, the private respondent is entitled to to her daughter in Manila, who was working at Air France, to find out whether
moral damages. As a proximate result of her illegal dismissal, she suffered her luggage had not been left in Manila. For the Telephone call she paid 2,775
mental anguish, serious anxiety, wounded feelings and even besmirched pesetas.
reputation as an experienced teacher for more than three decades. We also find
that the respondent court did not err in awarding her exemplary damages Then at 10:30 in the evening, Iberia Airlines called and informed her that her
because the petitioner acted in a wanton and oppressive manner when it luggage had arrived. She, therefore, took a cab to the airport and the round trip
dismissed her. taxi fare amounted to 920 pesetas.

WHEREFORE, the petition is DENIED. The appealed decision is AFFIRMED At the hotel, Mrs. Fule asked for a doctor because she felt sick. Her children
except for the award of separation pay, which is reduced to P2,880.00. All the developed fever due to colds, attributed to the rainy weather condition upon
other awards are approved. Costs against the petitioner. their arrived and departure from Brussels. Plaintiff-appellees incurred medical
expenses amounting to 3,000 pesetas. Plaintiff- appellees also incurred hotel
expenses amounting to 14,320 pesetas.

G.R. No. 82068 March 31, 1989 After reaching Madrid, Mrs. Fule made a letter-complaint to the Sabena office
which she gave to Angel Yancha. The total claim for actual damages was 26,015
pesetas.
SABENA BELGIAN WORLD AIRLINES vs.
HONORABLE COURT OF APPEALS (SEVENTH DIVISION) CONCEPCION,
OCTAVIO, ESTRELLA and GEMMA, all surnamed FULE, A few weeks later, Yancha informed her that the Madrid office would pay about
half of what she was asking, and the balance would be paid in Manila. She
received a check amounting to 8,620 pesetas and signed a document written in
Facts:
French, a language she did not understand. Yancha did not explain the contents
of the document to her and it was only upon her return to Manila that she
The plaintiff-appellee Concepcion F. Fule purchased three round trip tickets for learned that the document was a quitclaim. The plaintiff-appellee made a
herself and two children, Estrella and Gemma, from the defendant-appellant demand on the Manila office of Sabena for the balance of their claim for 26,015
Sabena World Airlines for the routes covering Manila-Brussels-Barcelona- pesetas and P 200,000.00 as moral damages.
Madrid. She and her children took the Sabena flight No. 274, arriving in
Brussels, Belgium at 6:00 o'clock in the morning. When the plane arrived there
During the trial, the defendant-appellant airline company presented Angel
was a slight drizzle. Before disembarking, Mrs. Fule thought there would be a
Yancha as its witness. Yancha confirmed that Mrs. Fule had talked to him about
shuttle bus or a ground steward with umbrella to bring them to the terminal
the problem. Yancha said he did not ask Mrs. Fule whether she understood
building. However, there was none and the plaintiff-appellees had to walk
French. The letter was not translated to her. He also told Mrs. Fule to contact the
towards the terminal building which was about 20 to 30 meters from the plane.
Manila Office for information about the difference in her claim.
As a result, their winter coats got wet, as did the front portion of Mrs. Fule's
dress.
On the basis of these facts, the lower court found the defendant-appellant liable
and awarded actual, moral, exemplary damages and attorney’s fees to plaintiff-
The plaintiff-appellees waited for about 5 hours in the transit area of the airport
appellees.
terminal for their connecting flight to Barcelona, Spain. When their flight was
On appeal to the respondent Court of Appeals, the decision was modified. The Facts:
appellate court reduced the amount of moral and exemplary damages from P
50,000.00 to P 25,000.00 each. In all other respects, the appealed decision was Plaintiff Rene V. Pangan, president and general manager of the plaintiffs Sotang
affirmed. Bastos and Archer Production while in San Francisco, Califonia and Primo
Quesada of Prime Films, San Francisco, California, entered into an agreement
Issue: Whether or not the CA erred in reducing the amount of moral and whereby the former, bound himself to supply the latter with three films for
exemplary damages awarded to the plaintiff-appellees exhibition in the United States. It was also their agreement that plaintiffs would
provide the necessary promotional and advertising materials for said films.
Ruling: No. We affirm the appealed decision.
On his way home to the Philippines, plaintiff Pangan visited Guam where he
The issue, however, is not what was written in French in the document but what likewise entered into a verbal agreement with Slutchnick for the exhibition of
Yancha represented to Mrs. Fule when he induced her to sign it. As stated by the two of the films at the Hafa Adai Theater in Guam. Plaintiff Pangan undertook to
Court of Appeals, citing Air France v. Carrascoso (18 SCRA 155 [1966]), the provide the necessary promotional and advertising materials for said films on
misconduct on the part of the carrier's employees toward a passenger gives the or before the exhibition date on May 30,1978.
latter an action for damages against the carrier.
By virtue of the above agreements, plaintiff Pangan caused the preparation of
The appellate court's finding that the negligence in this case does not amount to the requisite promotional handbills and still pictures. Likewise in preparation
bad faith finds support in a recent decision of this Court. In the case of China for his trip abroad to comply with his contracts, plaintiff Pangan purchased
Airlines, Ltd. v. Intermediate Appellate Court, et al. (G.R. No. 73835, January 17, fourteen clutch bags, four capiz lamps and four barong tagalog.
1989), this Court passed upon the issue of damages brought about by the
airlines' failure to carry out a promised immediate flight connection from San Plaintiff Pangan obtained from defendant Pan Am's Manila Office, an economy
Francisco, U.S.A to Los Angeles, U.S.A due to inefficient means of class airplane ticket. Two hours before departure time plaintiff Pangan was at
communication. The Court ruled that "while petitioner may have been remiss in the defendant's ticket counter at the Manila International Airport and presented
its total reliance upon the telex communications and therefore considered his ticket and checked in his two luggages. The two luggages contained the
negligent in view of the degree of diligence required of it as a common carrier, promotional and advertising materials, the clutch bags, barong tagalog and his
such negligence cannot under the circumstances be said to be so gross as to personal belongings. Subsequently, Pangan was informed that his name was not
amount to bad faith." (Ibid, at p. 10) In the same case, however, the Court ruled in the manifest and so he could not take Flight No. 842 in the economy class.
that "[W]ith respect to moral damages, the rule is that the same are recoverable Since there was no space in the economy class, plaintiff Pangan took the first
in a damage suit predicated upon a breach of contract of carriage only where (1) class because he wanted to be on time in Guam to comply with his commitment.
the mishap results in the death a of passenger and (2) it is proved that the
carrier was guilty of fraud and bad faith, even if death does not result." (Ibid, at When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two
p. 13) As the appellate court found the petitioner guilty of bad faith in letting the luggages did not arrive with his flight, as a consequence of which his
respondent sign a quitclaim without her knowledge or understanding and agreements with Slutchnick and Quesada for the exhibition of the films in Guam
contrary to what she was planning to do, the reduced award of moral and and in the United States were cancelled. Thereafter, he filed a written claim for
exemplary damages is proper and legal. his missing luggages.

WHEREFORE, IN VIEW OF ALL FOREGOING, the petition is hereby DISMISSED Upon arrival in the Philippines, Pangan made the necessary representations to
protest as to the treatment which he received from the employees of the
G.R. No. 70462 August 11, 1988 defendant and the loss of his two luggages. Due to the defendant's failure to
communicate with Pangan about the action taken on his protests, the present
PAN AMERICAN WORLD AIRWAYS, INC., vs. complaint was filed by the plaintiff.
INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG BASTOS
PRODUCTIONS and ARCHER PRODUCTIONS,
On the basis of these facts, the Court of First Instance found petitioner liable and privy to respondents' contracts nor was its attention called to the condition
ordered defendant Pan American World Airways, Inc. to pay all the plaintiffs therein requiring delivery of the promotional and advertising materials on or
actual damages, plus attorney's fees; before a certain date.

On appeal, the then Intermediate Appellate Court affirmed the trial court With the Court's holding that petitioner's liability is limited to the amount
decision. Hence, the instant recourse to this Court by petitioner. stated in the ticket, the award of attorney's fees, which is grounded on the
alleged unjustified refusal of petitioner to satisfy private respondent's just and
Issue: Whether the award of damages as and for lost profits to plaintiff is valid claim, loses support and must be set aside.
proper
WHEREFORE, the Petition is hereby GRANTED and the Decision of the
Ruling: No. Intermediate Appellate Court is SET ASIDE and a new judgment is rendered
ordering petitioner to pay private respondents damages in the amount of US
The Court finds itself unable to agree with the decision of the trial court, and $600.00 or its equivalent in Philippine currency at the time of actual payment.
affirmed by the Court of Appeals, awarding private respondents damages as and
for lost profits when their contracts to show the films in Guam and San
Francisco, California were cancelled.
G.R. No. 82146 January 22, 1990
The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836 (1952)]
cannot be any clearer: EULOGIO OCCENA vs.
HON. PEDRO M. ICAMINA, Presiding Judge, Branch X of the Regional Trial
...Under Art.1107 of the Civil Code, a debtor in good faith like the Court Sixth Judicial Region, San Jose, Antique; THE PEOPLE OF THE
defendant herein, may be held liable only for damages that were PHILIPPINES, represented by the Honorable Provincial Fiscal of Antique;
foreseen or might have been foreseen at the time the contract of and CRISTINA VEGAFRIA
transportation was entered into. The trial court correctly found
that the defendant company could not have foreseen the Facts:
damages that would be suffered by Mendoza upon failure to
deliver the can of film on the 17th of September, 1948 for the Petitioner Eulogio Occena instituted before the MCTC of Sibalom, Province of
reason that the plans of Mendoza to exhibit that film during the Antique, a criminal complaint for Grave Oral Defamation against herein private
town fiesta and his preparations, specially the announcement respondent Cristina Vegafria for allegedly openly, publicly and maliciously
of said exhibition by posters and advertisement in the uttering the following insulting words and statements: "Gago ikaw nga
newspaper, were not called to the defendant's attention. Barangay Captain, montisco, traidor, malugus, Hudas," Which, freely translated,
mean: "You are a foolish Barangay Captain, ignoramus, traitor, tyrant, Judas"
Thus, applying the foregoing ruling to the facts of the instant case, in the and other words and statements of similar import which caused great and
absence of a showing that petitioner's attention was called to the special irreparable damage and injury to his person and honor.
circumstances requiring prompt delivery of private respondent Pangan's
luggages, petitioner cannot be held liable for the cancellation of private Private respondent as accused therein entered a plea of not guilty. Trial
respondents' contracts as it could not have foreseen such an eventuality when it thereafter ensued, at which petitioner, without reserving his right to file a
accepted the luggages for transit. separate civil action for damages actively intervened thru a private prosecutor.

The evidence reveals that the proximate cause of the cancellation of the After trial, private respondent was convicted of the offense of Slight Oral
contracts was private respondent Pangan's failure to deliver the promotional Defamation. No damages were awarded to petitioner in view of the trial court's
and advertising materials on the dates agreed upon. For this petitioner cannot opinion that "the facts and circumstances of the case as adduced by the
be held liable. Private respondent Pangan had not declared the value of the two evidence do not warrant the awarding of moral damages."
luggages he had checked in and paid additional charges. Neither was petitioner
Disagreeing, petitioner sought relief from the Regional Trial Court, which was adjudged. This is erroneous. As a general rule, a person who is found to be
denied for lack of merit. criminally liable offends two (2) entities: the state or society in which he lives
and the individual member of the society or private person who was injured or
Petitioner is now before us by way of a petition for review on certiorari seeking damaged by the punishable act or omission. The offense of which private
to annul the RTC decision for being contrary to Article 100 of the Revised Penal respondent was found guilty is not one of those felonies where no civil liability
Code providing that every person criminally liable for a felony is also civilly results because either there is no offended party or no damage was caused to a
liable, and Article 2219 of the New Civil Code providing that moral damages private person. There is here an offended party, whose main contention
may be recovered in libel, slander or any other form of defamation. precisely is that he suffered damages in view of the defamatory words and
statements uttered by private respondent, in the amount of Ten Thousand
Private respondent for her part argues that the decision of the trial court carries Pesos (P10,000.00) as moral damages and the further sum of Ten Thousand
with it the final adjudication of her civil liability. Since petitioner chose to Pesos (P10,000) as exemplary damages.
actively intervene in the criminal action without reserving his right to file a
separate civil action for damages, he assumed the risk that in the event he failed Article 2219, par. (7) of the Civil Code allows the recovery of moral damages in
to recover damages he cannot appeal from the decision of the lower court. case of libel, slander or any other form of defamation This provision of law
establishes the right of an offended party in a case for oral defamation to
Issue: Whether or not petitioner is entitled to an award of damages arising recover from the guilty party damages for injury to his feelings and reputation.
from the defamatory remarks uttered by private respondent The offended party is likewise allowed to recover punitive or exemplary
damages.
Ruling: Yes.
It must be remembered that every defamatory imputation is presumed to be
malicious, even if it be true, if no good intention and justifiable motive for
We find merit in the petition. making it is shown. And malice may be inferred from the style and tone of
publication subject to certain exceptions which are not present in the case at
The decision of the Municipal Circuit Trial Court as affirmed by the Regional bar.
Trial Court in Criminal Case No. 1709 cannot be considered as a final
adjudication on the civil liability of private respondent simply because said Calling petitioner who was a barangay captain an ignoramus, traitor, tyrant and
decision has not yet become final due to the timely appeal filed by petitioner Judas is clearly an imputation of defects in petitioner's character sufficient to
with respect to the civil liability of the accused in said case. It was only the cause him embarrassment and social humiliation. Petitioner testified to the
unappealed criminal aspect of the case which has become final. feelings of shame and anguish he suffered as a result of the incident complained
of. It is patently error for the trial court to overlook this vital piece of evidence
Thus, private respondent's theory that in actively intervening in the criminal and to conclude that the "facts and circumstances of the case as adduced by the
action, petitioner waived his right to appeal from the decision that may be evidence do not warrant the awarding of moral damages." Having
rendered therein, is incorrect and inaccurate. Petitioner may, as he did, appeal misapprehended the facts, the trial court's findings with respect thereto is not
from the decision on the civil aspect which is deemed instituted with the conclusive upon us.
criminal action and such appeal, timely taken, prevents the decision on the civil
liability from attaining finality. From the evidence presented, we rule that for the injury to his feelings and
reputation, being a barangay captain, petitioner is entitled to moral damages in
In the ultimate analysis, what gives rise to the civil liability is really the the sum of P5,000.00 and a further sum of P5,000.00 as exemplary damages.
obligation of everyone to repair or to make whole the damage caused to another
by reason of his act or omission, whether done intentional or negligently and WHEREFORE, the petition is hereby GRANTED. The decision of the Regional
whether or not punishable by law. Trial Court is hereby MODIFIED and private respondent is ordered to pay
petitioner the amount of P5,000.00 as moral damages and another P5,000.00 as
In the case at bar, private respondent was found guilty of slight oral defamation exemplary damages. Costs against private respondent.
and sentenced to a fine of P50.00 with subsidiary imprisonment in case of
insolvency, but no civil liability arising from the felonious act of the accused was
Issue: Whether the CA erred in reducing petitioner's award of attorney's fees to
p50, 000.00 instead of 20% of the total indebtedness as found by the trial court.
G.R. No. 79552 November 29, 1988
Ruling: No.
EVELYN J. SANGRADOR, joined by her husband RODRIGO SANGRADOR,
SR., vs. The pivotal issue to be resolved in this case is whether or not the loan obtained
SPOUSES FRANCISCO VALDERRAMA and TERESITA M. VALDERRAMA by private respondents from petitioners was in the amount of P1,400,000.00 or
P1,000,000.00 only.
Facts:
We agree with the finding of the Court of Appeals that the disputed amount of
Defendants-spouses Francisco and Teresita Valderrama obtained a P500,000 P400,000.00 was a hidden interest that the petitioners had required the
loan from Manuel Asencio and secured by a real estate mortgage on their house respondents to pay at the maturity of the loan, but said amount of P400,000.00
and lot. Foreseeing that they would not be able to pay the loan and redeem their was not received by or delivered to the respondents. This conclusion is
property upon maturity of the loan, the defendants obtain on a P1,000,000 loan strengthened by the fact that the promissory note and the deed of real estate
from the plaintiff Teresita Sangrador, who is an aunt of Jesena, on the security of mortgage (Exhs. B and A), strangely enough, do not contain any express
the same property which they redeemed from Asencio. stipulation on interest, or rate of interest, when the loan involved therein is in
the substantial amount of allegedly P1,400,000.00.
The debtors allege that the amount actually received by them was only
P1,000,000. When the defendants failed to pay the sum of P1,400,000 stated in Finally, the Court of Appeals did not commit any error in reducing the award of
the promissory note despite the plaintiffs' written demands, a complaint for attorney's fees to P50,000.00. The contractual provision for attorney's fees may
judicial foreclosure of the real estate mortgage was filed against them. be modified by the courts in the exercise of their sound judicial discretion.

The defendants in their answer denied that the loan was P1,400,000. They WHEREFORE, the petition is DENIED. The decision of the Court of Appeals
alleged that it was only P1,000,000.00 and that the additional P400,000 dated 12 August 1987 is AFFIRMED. With costs against petitioners.
represented usurious interest.
G.R. No. L-66274 September 30, 1984
At the trial, the plaintiff testified that the sum of P1,400,000 was received by the
defendants. On the other hand Francisco Valderrama testified that he thought BAGUMBAYAN CORPORATION vs.
all along that the promissory note and deed of real estate mortgage provided for INTERMEDIATE APPELLATE COURT, LELISA SEÑA and ARTURO SEÑA
a loan of only P1 million since that was the amount which they borrowed and
received from the plaintiffs. He allegedly did not notice that both documents Facts:
provided for a loan of P1,400,000.
The spouses Lelisa Seña and Arturo Seña and their four children went to the
After the trial, the court rendered judgment binding the debtors to the terms of Tropical Palace Hotel, Parañaque, to see the Reycard Duet Show they occupied a
the promissory note and mortgage deed. table and ordered drinks before the show the hall was crowded and as anyone
who attended such show can attest, excitement and confusion prevailed `
Private respondents, defendants in the trial court, appealed to the Court of
Appeals. Respondent Court of Appeals promulgated its decision modifying the Lelisa's version was that when a waiter named Baez was going to serve the tray
decision of the trial court, and awarding P50,000 as attorney's fees, and the containing the drinks was overturned and fell on her. She was drenched. Later,
costs of this suit. she felt some chill. The drinks and the splinters from the broken glasses
allegedly destroyed her dress which, with her handbag and shoes, cost one
Hence, the present petition for review on certiorari of the decision of the Court thousand pesos.
of Appeals.
She was shocked. She sensed that some persons were laughing at or pitying her. The instant case is not specifically mentioned in article 2219 which refers to
A waitress took Lelisa to the ladies' room. She had to remove her dress and quasi-delicts causing physical injuries. Generally, there can be no recovery of
underwear which were wet She was not given any towel to cover herself. She moral damages if the case is not mentioned in articles 2219 and 2220 (Malonzo
remained standing as there was no chair. Two of her daughters followed her to vs. Galang, 109 Phil. 16; Ventanilla vs. Centeno, 110 Phil. 811).
the ladies' room. She returned to the hag after about thirty minutes later when
the show had started. What we call moral damages are treated in American jurisprudence
as compensatory damages awarded for mental pain and suffering or mental
Lelisa testified that she was claiming moral damages of P100,000 for herself and anguish resulting from a wrong.
her husband due to embarrassment and the fact that the management did not
even offer any apology on that night. She was claiming exemplary damages in "Damages for mental anguish and suffering have been held recoverable where
the same amount to teach the management a lesson. The husband, Arturo Seta, the act complained of was done with such gross carelessness or recklessness as
testified that the incident infuriated him. There was no apology from the to show an utter indifference to the consequences".
management.
In Chicago, R.I. & P. Ry Co. vs. Caple, 179 S.W. 2nd 151, it was held that where the
In open court, Rudy Tanchanco, the food and beverage manager, apologized to act is wanton or willful there may be a recovery for humiliation and mental
the plaintiffs in behalf of the management for the inconvenience caused to them. suffering without any physical injury. It was further held that in negligence
The Señas sued the corporation, as employer of the waiter, for actual damages cases, where there is no willful or wanton wrong, there can be no recovery for
of P200,000 plus attorney's fees of P10,000 and such moral and exemplary mental suffering unless there is also physical injury.
damages as might be fixed by the court. The action involves a quasi-delict. It was
based on articles 2176 and 2180 of the Civil Code. We hold that the "embarrassment" to which Mrs. Seña was exposed by the
incident is not the mental anguish contemplated in article 2217 for which moral
The corporation in its answer labelled the incident as a fortuitous event. It damages can be recovered.
alleged that it observed diligentissimi patris-familias to prevent the damage. It
reiterated that it was sorry for what had happened. It manifested its desire to In this case, it would not be just and proper to include moral damages in the
make the proper amends in any reasonable manner or form. corporation's vicarious liability as employer. The award of P5,000 as exemplary
or corrective damages cannot also be sustained because there was no gross
After hearing, the trial court awarded the Señas P1,540 as actual damages negligence in this case.
consisting of the value of Mrs. Seña's outfit and P540, the cost of the six tickets
used by the Seña family which was considered a loss because of their alleged WHEREFORE, the decision of the Appellate Court is modified. The petitioner is
failure to enjoy the show. It also awarded the Señas P50,000 as moral damages, ordered to pay Lelisa Seña the sum of P5,000 to cover her actual damages,
P10,000 as exemplary damages and P5,000 as attorney's fees. litigation expenses and attorney's fees. The award of moral and exemplary
damages is eliminated. No costs.
The corporation appealed. The Intermediate Appellate Court affirmed the
judgment with the modification that the moral and exemplary damages were
reduced to P15,000 and P5,000, respectively. Hence, this appeal.
G.R. No. 108555 December 20, 1994
Issue: Whether herein private respondent is entitled to recover moral damages
RAMON TAN vs.
Ruling: No.
THE HONORABLE COURT OF APPEALS and RIZAL COMMERCIAL BANKING
CORPORATION
While the award for actual damages has some basis, the grant of moral and
exemplary damages is devoid of legal justification because it was not predicated
upon any of the cases enumerated in the Civil Code (Ventanina vs. Centeno, 110
Phil. 811, 816).
Facts: included in the areas required to be cleared by the Central Bank, a fact known to
the banking world and surely to the respondent bank;7
Petitioner Ramon Tan, a trader-businessman and community leader in Puerto
Princesa, had maintained since 1976 Current Account No. 109058068 with Third, that RCBC upon knowing of its error in "missending" the cashier's check
respondent bank's Binondo branch. To avoid carrying cash while enroute to to the Central Bank did not attempt to rectify its "misclearing" error by clearing
Manila, he secured a Cashier's Check No. L 406000126 from the Philippine it seasonably with PCIB, Puerto Princesa, thru its own RCBC Puerto Princesa
Commercial Industrial Bank (PCIB), Puerto Princesa branch, in the amount of Branch with whom it had direct radio contact;8
Thirty Thousand (P30,000.00) Pesos, payable to his order. He deposited the
check in his account with RCBC Binondo on March 15. On the same day, RCBC Fourth, that as an old client, with twelve (12) years of good standing then, RCBC
erroneously sent the same cashier's check for clearing to the Central Bank should have given him more consideration by exerting greater diligence in
which was returned for having been "missent" or "misrouted."1 The next day, clearing the check with PCIB, Puerto Princesa, to protect its client's interest;9
March 16, RCBC debited the amount covered by the same cashier's check from
the account of the petitioner. Respondent bank at this time had not informed Fifth, that RCBC failed to inform petitioner promptly that the check had not
the petitioner of its action which the latter claims he learned of only 42 days been cleared, despite its debiting without delay the amount covered by the
after, specifically on March 16, when he received the bank's debit check from the account of the petitioner and hastily charging the latter service
memo.2 Relying on the common knowledge that a cashier's check was as good fees immediately after the return of the "missent checks"; 10 and
as cash, that the usual banking practice that local checks are cleared within
three (3) working days and regional checks within seven (7) working days, and
the fact that the cashier's check was accepted, petitioner issued two (2) Finally, that the bounced checks resulting from RCBC's "misclearing" had put in
personal checks both dated March 18. Check No. 040719 in the name of Go Lac doubt his credibility among his business peers and sullied his reputation as a
for Five Thousand Five Hundred (P5,5000.00) Pesos was presented on April community leader which he had painstakingly cultivated for years. His
25,3more than 30 days from petitioner's deposit date of the cashier's check. community standing as a business-socio-civic leader was a source of pride for
Check him in his old age of 70. He cited being Chairman of Palawan Boy Scout Council,
No. 040718 in the name of MS Development Trading Corporation for Six 2-term President of the Rotary Club of Puerto Princesa, member of Palawan
Thousand Fifty-Three Pesos and Seventy Centavos (P6,053.70) was Chamber of Commerce and Industry, member of the Monitoring Team of the
returned twice on March 24, nine (9) days from his deposit date and again on Palawan Integrated Area Development Project, member of Lion's Club,
April 26, twenty-two days after the day the cashier's check was deposited for Philippine Rifle Pistol Association and the Saturday Health Club to justify his
insufficiency of funds.4 claim for moral damages.11

Petitioner, alleging to have suffered humiliation and loss of face in the business In its defense, RCBC disowning any negligence, put the blame for the
sector due to the bounced checks, filed a complaint against RCBC for damages in "misrouting" on the petitioner for using the wrong check deposit slip. It insisted
the Regional Trial Court of Palawan and Puerto Princesa, Branch 47, docketed that the misuse of a local check deposit slip, instead of a regional check deposit
as Civil Case No. 2101.5 slip, triggered the "misrouting" by RCBC of the cashier's check to the Central
Bank and it was petitioner's negligent "misuse" of a local deposit slip which was
the proximate cause of the "misrouting," thus he should bear the consequence.12
During the trial, petitioner sought to prove:
RCBC alleged that it complied strictly with accepted banking practice when it
First, that it was RCBC's responsibility to call his attention there and then that debited the amount of P30,000.00 against petitioner's account since under
he had erroneously filled the wrong deposit slip at the time he deposited the Resolution No. 2202 dated December 21, 1979 of the Monetary Board, it is a
cashier's check with the respondent bank's teller and it was negligence on matter of policy to prohibit the drawing against uncollected deposits (DAUDS)
RCBC's part not to have done so;6 except when the drawings are made against uncollected deposits representing
bank manager's/cashier's/treasurer's checks, treasury warrants, postal money
Second, that RCBC had been remiss in the performance of its obligation to the orders and duly funded "on us" checks which may be permitted at the discretion
petitioner when it "missent" the cashier's check to the Central Bank knowing, as of each bank. 13 Without crediting the P30,000.00 deposit, petitioner's balance
it should, that the source of the check, PCIB, Puerto Princesa Branch, is not before and after was Two Thousand Seven Hundred
Ninety-Two Pesos and the (P2,792.88) Eighty-Eight Centavos.14 Thus, it RCBC appealed to the Court of Appeals contending that the trial court erred in
dishonored the two (2) checks amounting to P11,553.70 since they were drawn holding RCBC liable to petitioner on account of its alleged negligence and in
against insufficient funds. RCBC added that petitioner had no bills purchase awarding petitioner moral and exemplary damages and attorney's fees.
(BP) line which allows a depositor to receive or draw from proceeds of a check
without waiting it to be cleared. Besides, RCBC maintained, had it forwarded the The Court of Appeals on January 12, 1993 rendered a decision 20 with the
Cashier's Check to PCIB Puerto Princesa, Palawan, it would take at least twenty following decretal portion:
(20) working days for the cashier's check to be cleared and it would take the
same length of time to clear the two (2) personal checks of Tan.15 WHEREFORE, and upon all the foregoing, the decision of the
court below is REVERSED and this complaint is DISMISSED
RCBC further asseverated it was merely acting as petitioner's collecting agent without pronouncement as to cost.
and it assumed no responsibilitybeyond care in selecting correspondents under
the theory that where a check is deposited with a collecting bank the The Court of Appeals' decision is based on the following findings: 21
relationship created is that of agency and not creditor-debtor, thus it cannot be
liable.16
What appeared to have caused the unfortunate incident was
that the plaintiff filled up the wrong deposit slip which led to
Finally, respondent claimed that serious attempts were made to contact the sending of the check to the Central Bank when the clearing
petitioner through the telephone numbers in the signature specimen card of should have been made elsewhere.
petitioner but to no avail.17 The Assistant Branch Accountant of RCBC Binondo
Branch testified that the first telephone number in the card had been deleted
from the phone company's list and that when RCBC tried to contact petitioner's But the claim of the plaintiff that he was not advised that the
daughter Evelyn Tan-Banzon thru a certain telephone number and when they Cashier's check was missent does not seem to be correct. The
asked for Evelyn Tan, they were told there was no such person.18 evidence indicated that the defendant bank thru its personnel
had called him up thru telephone in the number (No. 60-45-23)
which he gave in his specimen signature card. But it came out,
The trial court rendered a decision on December 28, 1990 in petitioner's favor, that said telephone number was no longer active or was
the dispositive portion 19 of which reads: already deleted from the list of telephone numbers.

WHEREFORE, premises considered, plaintiff having proven the There was an instruction on the part of the plaintiff for the
allegations of his verified complaint by preponderance of bank to contact his daughter, Mrs. Evelyn Tan Banzon and
evidence, the court hereby renders judgment ordering according to the plaintiff, she too, was not contacted as per his
defendant bank, Binondo Branch, Manila, to pay him damages instruction. The evidence, however, indicated that Ms. Evelyn
and attorney's fees in the total amount of P1,035,000.00 Tan also could not be contacted at the number supposed to
Philippine Currency, broken down as follows: P700,000.00 as pertain to her as appeared in the specimen signature card. In
moral damages, P200,000.00 as exemplary damages; other words while there was compliance with the instructions
P135,000.00 which is 15% of the sum herein awarded to given by the plaintiff but said instructions were faulty. The
plaintiff, as attorney's fees and to pay costs of suit. plaintiff as a customer of the bank is under obligation to inform
the defendant of any changes in the telephone numbers to be
For having failed to prove by any receipt or writing to contacted in the event of any exigency.
underpin it, plaintiff's claim for actual damage is denied for
lack of merit. All in all, the facts indicate that the refusal of RCBC to credit the
amount of P30,000.00 to the plaintiff's current account is
IT IS SO ORDERED. consistent with the accepted banking practice. As the
defendant bank had claimed, under Resolution No. 2202 dated
December 21, 1979 of the Monetary Board, it had been
emphatically declared as a matter of policy that no drawings
should be made against uncollected deposits except when the In a most recent case decided by this Court, City Trust Corporation v. The
drawings are made against uncollected deposits representing Intermediate Appellate Court, 22 involving damages against City Trust Banking
bank manager's/cashier's/treasurer's checks, treasury Corporation, the depositor, instead of stating her correct account number
warrants, postal money orders, and duly funded "on-us" checks 29000823 inaccurately wrote 2900823. Because of this error, six postdated
as may be permitted at the discretion of each bank. checks amounting to P20,209.00 she issued were dishonored for insufficiency of
funds. The Regional Trial Court dismissed the complaint for lack of merit. The
It is clear that immediate payment without awaiting clearance Court of Appeals, however, found the appeal meritorious and ordered the bank
of a cashier's check is discretionary with the bank to whom the to pay nominal damages of P2,000.00, temperate and moderate damages of
check is presented and such being the case, the refusal to allow P5,000.00 and attorney's fees of P4,000.00. Upon review, this Court quoted with
it as in this case is not to be equated with negligence in the favor the disquisition of the appellate court:
basic perception that discretion is not demandable as a right.
In the instant case, prior to the deposit of P30,000.00, the We cannot uphold the position of defendant. For, even if it be
plaintiff's account appeared to be only in the amount of true that there was error on the part of the plaintiff in omitting
P2,792.98. So the two (2) checks issued by the plaintiff a zero in her account number, yet, it is a fact that her name,
amounting to P11,553.70 had to be dishonored since they were Emma E. Herrero, is clearly written on said deposit slip (Exh.
drawn against insufficient funds. B). This is controlling in determining in whose account the
deposit is made or should be posted. This is so because it is not
What the plaintiff should have done, before issuing the two (2) likely to commit an error in one's name that merely relying on
checks, was to await the clearance of the Cashier's check and numbers which are difficult to remember, especially a number
his failure to do so is a fault not ascribable to the defendant with eight (8) digits as the account numbers of defendant's
who appeared under the circumstance merely to have followed depositors. We view the use of numbers as simply for the
the usual banking practice. convenience of the bank but was never intended to disregard
the real name of its depositors. The bank is engaged in
Petitioner now seeks to reverse the decision of the Court of Appeals and affirm business impressed with public interests, and it is its duty to
that of the lower court. He raises the following errors: protect in return its many clients and depositors who transact
business with it. It should not be a matter of the bank alone
receiving deposits, lending out money and collecting interests.
1. THE HONORABLE COURT OF APPEALS COMMITTED GROSS It is also its obligation to see to it that all funds invested with it
AND MANIFEST ERROR IN CONCLUDING THAT THE are properly accounted for and duly posted in its ledgers.
NEGLIGENCE WAS ASCRIBABLE TO HEREIN PETITIONER.
In the case before Us, we are not persuaded that defendant
2. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED bank was not free from blame for the fiasco. In the first place,
ITS DISCRETION IN FINDING THAT THE RESPONDENT BANK the teller should not have accepted plaintiff's deposit without
HAD NOT BEEN REMISS IN THE PERFORMANCE OF ITS correcting the account number on the deposit slip which,
OBLIGATIONS TO HEREIN PETITIONER. obviously, was erroneous because, as pointed out by
defendant, it contained only seven (7) digits instead of eight
3. THE HONORABLE COURT OF APPEALS COMMITTED GROSS (8). Second, the complete name of plaintiff depositor appears
AND MANIFEST ERROR AND GRAVE ABUSE OF DISCRETION in bold letters on the deposit slip (Exh. B). There could be no
IN REVERSING THE AWARD OF MORAL AND EXEMPLARY mistaking in her name, and that the deposit was made in her
DAMAGES TO THE PETITIONER. name, Emma E. Herrero. In fact, defendant's teller should not
have fed her deposit slip to the computer knowing that her
4. THE HONORABLE COURT OF APPEALS COMMITTED GROSS account number written thereon was wrong as it contained
AND MANIFEST ERROR AND GRAVE ABUSE OF DISCRETION only seven (7) digits. As it happened, according to defendant,
IN NOT AWARDING ATTORNEY'S FEES TO PETITIONER. plaintiff's deposit had to be consigned to the suspense accounts
pending verification. This, indeed, could have been avoided at
the first instance had the teller of defendant bank performed her We do not subscribe to RCBC's assertion that petitioner's use of the wrong
duties efficiently and well. For then she could have readily deposit slip was the proximate cause of the clearing fiasco and so, petitioner
detected that the account number in the name of Emma E. must bear the consequence. In Pilipinas Bank, v. CA, 23 this Court said:
Herrero was erroneous and would be rejected by the
computer. That is, or should be, part of the training and The bank is not expected to be infallible but, as correctly
standard operating procedure of the bank's employees. On the observed by respondent Appellate Court, in this instance, it
other hand, the depositors are not concerned with banking must bear the blame for not discovering the mistake of its
procedure. That is the responsibility of the bank and its teller despite the established procedure requiring the papers
employees. Depositors are only concerned with the facility of and bank books to pass through a battery of bank personnel
depositing their money, earning interest thereon, if any, and whose duty it is to check and countercheck them for possible
withdrawing therefrom, particularly businessmen, like plaintiff, errors. Apparently, the officials and employees tasked to do
who are supposed to be always on-the-go. Plaintiff's account is a that did not perform their duties with due care, . . .
current account which should immediately be posted. After all,
it does not earn interest. At least, the forbearance should be So it is in the instance case, where the conclusion is inevitable that respondent
commensurated with prompt, efficient and satisfactory service. RCBC had been remiss in the performance of its duty and obligation to its client,
as well as to itself. We draw attention to the fact that the two dishonored checks
Bank clients are supposed to rely on the services extended by the issued by petitioner, Check No. 040719 and Check
bank, including the assurance that their deposits will be duly No. 040718 were presented for payment 24 more than 45 days from the day the
credited them as soon as they are made. For, any delay in cashier's check was deposited. This gave RCBC more than ample time to have
crediting their account can be embarrassing to them as in the cleared the cashier's check had it corrected its "missending" the same upon
case of plaintiff. return from Central Bank using the correct slip this time so it can be cleared
properly. Instead, RCBC promptly debited the amount of P30,000.00 against
The point is that as a business affected with public interest and petitioner's account and left it at that.
because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with meticulous We observe, likewise, that RCBC inquired about an Evelyn Tan but no Evelyn
care, always having in mind the fiduciary nature of their Tan-Banzon as specifically instructed in the same signature card. (Emphasis
relationship. (Emphasis supplied). supplied) 25

In the light of the above-cited case, the respondent bank cannot exculpate itself RCBC insists that immediate payment without awaiting clearance of a cashier's
from liability by claiming that its depositor "impliedly instructed" the bank to check is discretionary with the bank to whom the check is presented and such
clear his check with the Central Bank by filling a local check deposit slip. Such being the case, its refusal to immediately pay the cashier's check in this case is
posture is disingenuous, to say the least. First, why would RCBC follow a not to be equated with negligence on its part. We find this disturbing and
patently erroneous act born of ignorance or inattention or both. Second, bank unfortunate.
transactions pass through a succession of bank personnel whose duty is to
check and countercheck transactions for possible errors. In the instant case, the An ordinary check is not a mere undertaking to pay an amount of money. There
teller should not have accepted the local deposit slip with the cashier's check is an element of certainty or assurance that it will be paid upon presentation
that on its face was clearly a regional check without calling the depositor's that is why it is perceived as a convenient substitute for currency in commercial
attention to the mistake at the very moment this was presented to her. Neither and financial transactions. The basis of the perception being confidence. Any
should everyone else down the line who processed the same check for clearing practice that destroys that confidence will impair the usefulness of the check as
have allowed the check to be sent to Central Bank. Depositors do not pretend to a currency substitute and create havoc in trade circles and the banking
be past master of banking technicalities, much more of clearing procedures. As community. 26
soon as their deposits are accepted by the bank teller, they wholly repose trust
in the bank personnel's mastery of banking, their and the bank's sworn
profession of diligence and meticulousness in giving irreproachable service. Now, what was presented for deposit in the instant cases was not just an
ordinary check but a cashier's check payable to the account of the depositor
himself. A cashier's check is a primary obligation of the issuing bank In Zenith Insurance Corporation v. CA, 30 we also said that moral damages are not
and accepted in advance by its mere issuance. 27 By its very nature, a cashier's meant to enrich a complainant at the expense of defendant. It is only intended
check is the bank's order to pay drawn upon itself, committing in effect its total to alleviate the moral suffering he has undergone. In the instant case, we find
resources, integrity and honor behind the check. A cashier's check by its the award of P700,000.00 as moral damages excessive and, accordingly, reduce
peculiar character and general use in the commercial world is regarded it to one hundred thousand (P100,000.00) pesos. We find the award of
substantially to be as good as the money which it represents.28 In this case, exemplary damages of P200,000.00 unjustified in the absence of malice, bad
therefore, PCIB by issuing the check created an unconditional credit in favor of faith or gross negligence.31 The award of reasonable attorney's fees is proper for
any collecting bank. the petitioner was compelled to litigate to protect his interest.32

All these considered, petitioner's reliance on the layman's perception that a IN VIEW WHEREOF, we REVERSE the decision of respondent Court of Appeals
cashier's check is as good as cash is not entirely misplaced, as it is rooted in and hereby order private respondent RCBC, Binondo Branch, to pay petitioner
practice, tradition, and principle. We see no reason thus why this so-called the amount of one hundred thousand (P100,000.00) pesos as moral damages
discretion was not exercised in favor of petitioner, specially since PCIB and and the sum of fifty thousand (P50,000.00) pesos as attorney's fees, plus costs.
RCBC are members of the same clearing house group relying on each other's
solvency. RCBC could surely rely on the solvency of PCIB when the latter issued SO ORDERED.
its cashier's check.

On the third and fourth issue, RCBC contends that moral damages cannot be
recovered in an action for breach of contract since under Article 2219 of the
G.R. No. L-61418 September 24, 1987
New Civil Code, the instant case is not among those enumerated. For an award
of moral damages in a breach of contract, it is imperative that the party acted in
bad faith or fraudulently as provided for in Art. 2220 of the Civil Code, to wit: KOREAN AIRLINES CO., LTD., petitioner,
vs.
HON. COURT OF APPEALS, THE HON. EDUARDO C. TUTAAN, Presiding
Art. 2220. Willful injury to property may be a legal ground for
Judge, Court of First Instance of Rizal, Branch V. Quezon City, AZUCENA
awarding moral damages if the court should find that, under
and JANUARIO TOMAS, respondents.
the circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted
fraudulently or in bad faith.

In the absence of moral damages, RCBC argues, exemplary damages cannot be CRUZ, J.:
awarded under Art. 2225 of the same Code which states:
This is one of the many cases that have unnecessarily clogged the dockets of this
Exemplary damages or corrective damages are imposed, by Court because they should not have been brought to us in the first place.
way of example or correction for the public good, in addition to
the moral, temperate, liquidated or compensatory damages. The issues are mainly factual. They have been resolved by the trial court, which
has been affirmed by the respondent court, except as to the award of damages,
We hold that petitioner has the right to recover moral damages even if the which has been reduced. We see no reason why the decision had to be elevated
bank's negligence may not have been attended with malice and bad faith. to us.
In American Express International, Inc. v. IAC, 29 we held:
Time and again we have stressed that this Court is not a trier of facts. 1 We
While petitioner was not in bad faith, its negligence caused the leave these matters to the lower courts, which have more opportunity and
private respondent to suffer mental anguish, serious anxiety, facilities to examine these matters. We have no jurisdiction as a rule to reverse
embarrassment and humiliation, for which he is entitled to their findings. 2 The exception invoked is that there is a clear showing of a grave
recover, reasonable moral damages (Art. 2217, Civil Code). abuse of discretion on their part, but we do not see it here.
We are satisfied from the findings of the respondent court (and of the trial her seat to a chance passenger. That person certainly had less right to prior
court) that the private respondent was, in the language of the airline industry, accommodation than the private respondent herself.
"bumped off." She had a confirmed ticket. She arrived at the airport on time.
However, she was not allowed to board because her seat had already been given The claim that the real party in interest is the Gold N. Apparel Manufacturing
to another passenger. As a result, she suffered damages for which the petitioner Corporation and not the private respondent 9 is also untenable. Counsel for
should be held liable. Azucena Tomas declared at the trial that she was suing in her personal
capacity. 10 In testifying about her participation in the said corporation, she
Specifically, petitioner Korean Airlines (hereinafter called KAL) issued to was only stressing her status as a respected and well-connected
Azucena Tomas a plane ticket to Los Angeles, California, U.S.A., on Flight No. KE businesswoman to show the extent of the prejudice caused to her interests by
612 departing from the Manila International Airport on July 29, 1977, at 2:20 the unjustified acts of the petitioner.
p.m. She paid the fare of P2,587.88 3 She and her husband arrived at the KAL
check-in counter at 1.:50 p.m. of that date 4 and presented her ticket to Augusto It is clear that the petitioner acted in bad faith in violating the private
Torres, Jr., who was in charge. Torres refused to check her in, saying that the respondent's rights under their contract of carriage and is therefore liable for
Immigration Office was already closed. 5 Januario Tomas, her husband, rushed the injuries she has sustained as a result. We agree with the Court of Appeals,
to the said office, which was still open, and was told by the immigration officer however, that the award should be reduced to P50,000.00 for actual and
on duty that his wife could still be cleared for departure. Januario rushed back compensatory damages, P30,000.00 for moral damages, and P20,000.00 for
to Torres to convey this information and asked that his wife be checked in. attorney's fees, the exemplary damages to be eliminated altogether.
Torres said this was no longer possible because her seat had already been given
to another passenger. His reason was that Azucena had arrived late and had not WHEREFORE, the appealed decision of the respondent court is AFFIRMED in
checked in within forty minutes before departure time. 6 toto, with costs against the petitioner.

There is no evidence in the record of any rule requiring passengers to check in SO ORDERED.
at least forty minutes before departure time, as invoked by Torres. KAL admits
that it has not been able to cite any statutory or administrative requirement to
this effect. 7 In fact, the alleged rule is not even a condition of the plane ticket
purchased by Azucena.

At the same time, KAL invokes the memorandum-circular of February 24, 1975, G.R. No. 128690 January 21, 1999
issued by the Commission on Immigration and Deportation which says that "all
passengers authorized to leave for abroad shall be required to check in with the
Immigration Departure Control Officer at least thirty minutes before the ABS-CBN BROADCASTING CORPORATION, petitioner,
scheduled departure." The record shows that Azucena was ready to comply. vs.
HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP, VIVA
PRODUCTION, INC., and VICENTE DEL ROSARIO, respondents.
If, as Torres said, he gave Azucena's seat to a chance passenger thirty-eight
minutes before departure time 8instead of waiting for Azucena, then he was
intentionally violating the said circular. Significantly, it was proved he was not
telling the truth when he said the Immigration Office was already closed
although it was in fact still open at the time the private respondents arrived. DAVIDE, JR., CJ.:
Moreover, the immigration officer on duty expressed his willingness to clear
Azucena Tomas for departure, thus indicating that she was well within the In this petition for review on certiorari, petitioner ABS-CBN Broadcasting Corp.
provisions of the memorandum-circular. Torres' refusal to check her in was (hereafter ABS-CBN) seeks to reverse and set aside the decision 1 of 31 October
clearly unjustified. 1996 and the resolution 2 of 10 March 1997 of the Court of Appeals in CA-G.R.
CV No. 44125. The former affirmed with modification the decision 3 of 28 April
As it appeared later, the real reason why she could not be checked in was not 1993 of the Regional Trial Court (RTC) of Quezon City, Branch 80, in Civil Case
her supposed tardiness but the circumstance that Torres had prematurely given
No. Q-92-12309. The latter denied the motion to reconsider the decision of 31 with this I wish to mention that I have not scheduled for
October 1996. telecast several action pictures in out very first contract
because of the cheap production value of these movies as well
The antecedents, as found by the RTC and adopted by the Court of Appeals, are as the lack of big action stars. As a film producer, I am sure you
as follows: understand what I am trying to say as Viva produces only big
action pictures.
In 1990, ABS-CBN and Viva executed a Film Exhibition
Agreement (Exh. "A") whereby Viva gave ABS-CBN an exclusive In fact, I would like to request two (2) additional runs for these
right to exhibit some Viva films. Sometime in December 1991, movies as I can only schedule them in our non-primetime slots.
in accordance with paragraph 2.4 [sic] of said agreement We have to cover the amount that was paid for these movies
stating that —. because as you very well know that non-primetime advertising
rates are very low. These are the unaired titles in the first
1.4 ABS-CBN shall have the right of first refusal to the next contract.
twenty-four (24) Viva films for TV telecast under such terms as
may be agreed upon by the parties hereto, provided, however, 1. Kontra Persa [sic].
that such right shall be exercised by ABS-CBN from the actual
offer in writing. 2. Raider Platoon.

Viva, through defendant Del Rosario, offered ABS-CBN, through 3. Underground guerillas
its vice-president Charo Santos-Concio, a list of three(3) film
packages (36 title) from which ABS-CBN may exercise its right 4. Tiger Command
of first refusal under the afore-said agreement (Exhs. "1" par, 2,
"2," "2-A'' and "2-B"-Viva). ABS-CBN, however through Mrs. 5. Boy de Sabog
Concio, "can tick off only ten (10) titles" (from the list) "we can
purchase" (Exh. "3" - Viva) and therefore did not accept said
list (TSN, June 8, 1992, pp. 9-10). The titles ticked off by Mrs. 6. Lady Commando
Concio are not the subject of the case at bar except the film
''Maging Sino Ka Man." 7. Batang Matadero

For further enlightenment, this rejection letter dated January 8. Rebelyon


06, 1992 (Exh "3" - Viva) is hereby quoted:
I hope you will consider this request of mine.
6 January 1992
The other dramatic films have been offered to us before and
Dear Vic, have been rejected because of the ruling of MTRCB to have
them aired at 9:00 p.m. due to their very adult themes.
This is not a very formal business letter I am writing to you as I
would like to express my difficulty in recommending the As for the 10 titles I have choosen [sic] from the 3 packages
purchase of the three film packages you are offering ABS-CBN. please consider including all the other Viva movies produced
last year. I have quite an attractive offer to make.
From among the three packages I can only tick off 10 titles we
can purchase. Please see attached. I hope you will understand Thanking you and with my warmest regards.
my position. Most of the action pictures in the list do not have
big action stars in the cast. They are not for primetime. In line
( film rights to fourteen (14) films for a total consideration of
S P36 million; that he allegedly put this agreement as to the price
i and number of films in a "napkin'' and signed it and gave it to
g Mr. Del Rosario (Exh. D; TSN, pp. 24-26, 77-78, June 8, 1992).
n On the other hand, Del Rosario denied having made any
e agreement with Lopez regarding the 14 Viva films; denied the
d existence of a napkin in which Lopez wrote something; and
) insisted that what he and Lopez discussed at the lunch meeting
was Viva's film package offer of 104 films (52 originals and 52
C re-runs) for a total price of P60 million. Mr. Lopez promising
h [sic]to make a counter proposal which came in the form of a
a proposal contract Annex "C" of the complaint (Exh. "1"·- Viva;
r Exh. "C" - ABS-CBN).
o
S On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS
a Senior vice-president for Finance discussed the terms and
n conditions of Viva's offer to sell the 104 films, after the
t rejection of the same package by ABS-CBN.
o
s On April 07, 1992, defendant Del Rosario received through his
- secretary, a handwritten note from Ms. Concio, (Exh. "5" -
C Viva), which reads: "Here's the draft of the contract. I hope you
o find everything in order," to which was attached a draft
n exhibition agreement (Exh. "C''- ABS-CBN; Exh. "9" - Viva, p. 3)
c a counter-proposal covering 53 films, 52 of which came from
i the list sent by defendant Del Rosario and one film was added
o by Ms. Concio, for a consideration of P35 million. Exhibit "C"
provides that ABS-CBN is granted films right to 53 films and
On February 27, 1992, defendant Del Rosario approached ABS- contains a right of first refusal to "1992 Viva Films." The said
CBN's Ms. Concio, with a list consisting of 52 original movie counter proposal was however rejected by Viva's Board of
titles (i.e. not yet aired on television) including the 14 titles Directors [in the] evening of the same day, April 7, 1992, as
subject of the present case, as well as 104 re-runs (previously Viva would not sell anything less than the package of 104 films
aired on television) from which ABS-CBN may choose another for P60 million pesos (Exh. "9" - Viva), and such rejection was
52 titles, as a total of 156 titles, proposing to sell to ABS-CBN relayed to Ms. Concio.
airing rights over this package of 52 originals and 52 re-runs
for P60,000,000.00 of which P30,000,000.00 will be in cash On April 29, 1992, after the rejection of ABS-CBN and following
and P30,000,000.00 worth of television spots (Exh. "4" to "4-C" several negotiations and meetings defendant Del Rosario and
Viva; "9" -Viva). Viva's President Teresita Cruz, in consideration of P60 million,
signed a letter of agreement dated April 24, 1992. granting RBS
On April 2, 1992, defendant Del Rosario and ABS-CBN general the exclusive right to air 104 Viva-produced and/or acquired
manager, Eugenio Lopez III, met at the Tamarind Grill films (Exh. "7-A" - RBS; Exh. "4" - RBS) including the fourteen
Restaurant in Quezon City to discuss the package proposal of (14) films subject of the present case. 4
Viva. What transpired in that lunch meeting is the subject of
conflicting versions. Mr. Lopez testified that he and Mr. Del On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific
Rosario allegedly agreed that ABS-CRN was granted exclusive performance with a prayer for a writ of preliminary injunction and/or
temporary restraining order against private respondents Republic Broadcasting enjoin the RTC from enforcing said orders. The case was docketed as CA-G.R. SP
Corporation 5 (hereafter RBS ), Viva Production (hereafter VIVA), and Vicente No. 29300.
Del Rosario. The complaint was docketed as Civil Case No. Q-92-12309.
On 3 November 1992, the Court of Appeals issued a temporary restraining
On 27 May 1992, RTC issued a temporary restraining order 6 enjoining private order18 to enjoin the airing, broadcasting, and televising of any or all of the films
respondents from proceeding with the airing, broadcasting, and televising of the involved in the controversy.
fourteen VIVA films subject of the controversy, starting with the film Maging
Sino Ka Man, which was scheduled to be shown on private respondents RBS' On 18 December 1992, the Court of Appeals promulgated a
channel 7 at seven o'clock in the evening of said date. decision 19 dismissing the petition in CA -G.R. No. 29300 for being premature.
ABS-CBN challenged the dismissal in a petition for review filed with this Court
On 17 June 1992, after appropriate proceedings, the RTC issued an on 19 January 1993, which was docketed as G.R. No. 108363.
order 7 directing the issuance of a writ of preliminary injunction upon ABS-
CBN's posting of P35 million bond. ABS-CBN moved for the reduction of the In the meantime the RTC received the evidence for the parties in Civil Case No.
bond, 8 while private respondents moved for reconsideration of the order and Q-192-1209. Thereafter, on 28 April 1993, it rendered a decision 20 in favor of
offered to put up a counterbound. 9 RBS and VIVA and against ABS-CBN disposing as follows:

In the meantime, private respondents filed separate answers with WHEREFORE, under cool reflection and prescinding from the
counterclaim. 10 RBS also set up a cross-claim against VIVA.. foregoing, judgments is rendered in favor of defendants and
against the plaintiff.
On 3 August 1992, the RTC issued an order 11 dissolving the writ of preliminary
injunction upon the posting by RBS of a P30 million counterbond to answer for (1) The complaint is hereby dismissed;
whatever damages ABS-CBN might suffer by virtue of such dissolution.
However, it reduced petitioner's injunction bond to P15 million as a condition (2) Plaintiff ABS-CBN is ordered to pay
precedent for the reinstatement of the writ of preliminary injunction should defendant RBS the following:
private respondents be unable to post a counterbond.
a) P107,727.00, the amount
At the pre-trial 12 on 6 August 1992, the parties, upon suggestion of the court, of premium paid by RBS to
agreed to explore the possibility of an amicable settlement. In the meantime, the surety which issued
RBS prayed for and was granted reasonable time within which to put up a P30 defendant RBS's bond to lift
million counterbond in the event that no settlement would be reached. the injunction;

As the parties failed to enter into an amicable settlement RBS posted on 1 b) P191,843.00 for the
October 1992 a counterbond, which the RTC approved in its Order of 15 amount of print
October 1992.13 advertisement for "Maging
Sino Ka Man" in various
On 19 October 1992, ABS-CBN filed a motion for reconsideration 14 of the 3 newspapers;
August and 15 October 1992 Orders, which RBS opposed. 15
c) Attorney's fees in the
On 29 October 1992, the RTC conducted a pre-trial. 16 amount of P1 million;

Pending resolution of its motion for reconsideration, ABS-CBN filed with the d) P5 million as and by way
Court of Appeals a petition17challenging the RTC's Orders of 3 August and 15 of moral damages;
October 1992 and praying for the issuance of a writ of preliminary injunction to
e) P5 million as and by way Appellant ABS-CBN and appellant VIVA under Exhibit "A" in
of exemplary damages; 1990, and that parag. 1.4 thereof provides:

(3) For defendant VIVA, plaintiff ABS-CBN is 1.4 ABS-CBN shall have the right of first
ordered to pay P212,000.00 by way of refusal to the next twenty-four (24) VIVA
reasonable attorney's fees. films for TV telecast under such terms as may
be agreed upon by the parties hereto,
(4) The cross-claim of defendant RBS against provided, however, that such right shall be
defendant VIVA is dismissed. exercised by ABS-CBN within a period of
fifteen (15) days from the actual offer in
(5) Plaintiff to pay the costs. writing (Records, p. 14).

According to the RTC, there was no meeting of minds on the price and terms of [H]owever, it is very clear that said right of first refusal in favor
the offer. The alleged agreement between Lopez III and Del Rosario was subject of ABS-CBN shall still be subject to such terms as may be
to the approval of the VIVA Board of Directors, and said agreement was agreed upon by the parties thereto, and that the said right shall
disapproved during the meeting of the Board on 7 April 1992. Hence, there was be exercised by ABS-CBN within fifteen (15) days from the
no basis for ABS-CBN's demand that VIVA signed the 1992 Film Exhibition actual offer in writing.
Agreement. Furthermore, the right of first refusal under the 1990 Film
Exhibition Agreement had previously been exercised per Ms. Concio's letter to Said parag. 1.4 of the agreement Exhibit "A" on the right of first
Del Rosario ticking off ten titles acceptable to them, which would have made the refusal did not fix the price of the film right to the twenty-four
1992 agreement an entirely new contract. (24) films, nor did it specify the terms thereof. The same are
still left to be agreed upon by the parties.
On 21 June 1993, this Court denied21 ABS-CBN's petition for review in G.R. No.
108363, as no reversible error was committed by the Court of Appeals in its In the instant case, ABS-CBN's letter of rejection Exhibit 3
challenged decision and the case had "become moot and academic in view of the (Records, p. 89) stated that it can only tick off ten (10) films,
dismissal of the main action by the court a quo in its decision" of 28 April 1993. and the draft contract Exhibit "C" accepted only fourteen (14)
films, while parag. 1.4 of Exhibit "A'' speaks of the next twenty-
Aggrieved by the RTC's decision, ABS-CBN appealed to the Court of Appeals four (24) films.
claiming that there was a perfected contract between ABS-CBN and VIVA
granting ABS-CBN the exclusive right to exhibit the subject films. Private The offer of V1VA was sometime in December 1991 (Exhibits
respondents VIVA and Del Rosario also appealed seeking moral and exemplary 2, 2-A. 2-B; Records, pp. 86-88; Decision, p. 11, Records, p.
damages and additional attorney's fees. 1150), when the first list of VIVA films was sent by Mr. Del
Rosario to ABS-CBN. The Vice President of ABS-CBN, Ms. Charo
In its decision of 31 October 1996, the Court of Appeals agreed with the RTC Santos-Concio, sent a letter dated January 6, 1992 (Exhibit 3,
that the contract between ABS-CBN and VIVA had not been perfected, absent Records, p. 89) where ABS-CBN exercised its right of refusal by
the approval by the VIVA Board of Directors of whatever Del Rosario, it's agent, rejecting the offer of VIVA.. As aptly observed by the trial court,
might have agreed with Lopez III. The appellate court did not even believe ABS- with the said letter of Mrs. Concio of January 6, 1992, ABS-CBN
CBN's evidence that Lopez III actually wrote down such an agreement on a had lost its right of first refusal. And even if We reckon the
"napkin," as the same was never produced in court. It likewise rejected ABS- fifteen (15) day period from February 27, 1992 (Exhibit 4 to 4-
CBN's insistence on its right of first refusal and ratiocinated as follows: C) when another list was sent to ABS-CBN after the letter of
Mrs. Concio, still the fifteen (15) day period within which ABS-
CBN shall exercise its right of first refusal has already
As regards the matter of right of first refusal, it may be true expired.22
that a Film Exhibition Agreement was entered into between
Accordingly, respondent court sustained the award of actual damages ABS-CBN claims that it had yet to fully exercise its right of first refusal over
consisting in the cost of print advertisements and the premium payments for twenty-four titles under the 1990 Film Exhibition Agreement, as it had chosen
the counterbond, there being adequate proof of the pecuniary loss which RBS only ten titles from the first list. It insists that we give credence to Lopez's
had suffered as a result of the filing of the complaint by ABS-CBN. As to the testimony that he and Del Rosario met at the Tamarind Grill Restaurant,
award of moral damages, the Court of Appeals found reasonable basis therefor, discussed the terms and conditions of the second list (the 1992 Film Exhibition
holding that RBS's reputation was debased by the filing of the complaint in Civil Agreement) and upon agreement thereon, wrote the same on a paper napkin. It
Case No. Q-92-12309 and by the non-showing of the film "Maging Sino Ka Man." also asserts that the contract has already been effective, as the elements thereof,
Respondent court also held that exemplary damages were correctly imposed by namely, consent, object, and consideration were established. It then concludes
way of example or correction for the public good in view of the filing of the that the Court of Appeals' pronouncements were not supported by law and
complaint despite petitioner's knowledge that the contract with VIVA had not jurisprudence, as per our decision of 1 December 1995 in Limketkai Sons
been perfected, It also upheld the award of attorney's fees, reasoning that with Milling, Inc. v. Court of Appeals, 23 which cited Toyota Shaw, Inc. v. Court of
ABS-CBN's act of instituting Civil Case No, Q-92-1209, RBS was "unnecessarily Appeals, 24 Ang Yu Asuncion v. Court of Appeals, 25 and Villonco Realty Company v.
forced to litigate." The appellate court, however, reduced the awards of moral Bormaheco. Inc.26
damages to P2 million, exemplary damages to P2 million, and attorney's fees to
P500, 000.00. Anent the actual damages awarded to RBS, ABS-CBN disavows liability therefor.
RBS spent for the premium on the counterbond of its own volition in order to
On the other hand, respondent Court of Appeals denied VIVA and Del Rosario's negate the injunction issued by the trial court after the parties had ventilated
appeal because it was "RBS and not VIVA which was actually prejudiced when their respective positions during the hearings for the purpose. The filing of the
the complaint was filed by ABS-CBN." counterbond was an option available to RBS, but it can hardly be argued that
ABS-CBN compelled RBS to incur such expense. Besides, RBS had another
Its motion for reconsideration having been denied, ABS-CBN filed the petition in available option, i.e., move for the dissolution or the injunction; or if it was
this case, contending that the Court of Appeals gravely erred in determined to put up a counterbond, it could have presented a cash bond.
Furthermore under Article 2203 of the Civil Code, the party suffering loss or
I injury is also required to exercise the diligence of a good father of a family to
minimize the damages resulting from the act or omission. As regards the cost of
print advertisements, RBS had not convincingly established that this was a loss
. . . RULING THAT THERE WAS NO PERFECTED CONTRACT attributable to the non showing "Maging Sino Ka Man"; on the contrary, it was
BETWEEN PETITIONER AND PRIVATE RESPONDENT VIVA brought out during trial that with or without the case or the injunction, RBS
NOTWITHSTANDING PREPONDERANCE OF EVIDENCE would have spent such an amount to generate interest in the film.
ADDUCED BY PETITIONER TO THE CONTRARY.
ABS-CBN further contends that there was no clear basis for the awards of moral
II and exemplary damages. The controversy involving ABS-CBN and RBS did not in
any way originate from business transaction between them. The claims for such
. . . IN AWARDING ACTUAL AND COMPENSATORY DAMAGES damages did not arise from any contractual dealings or from specific acts
IN FAVOR OF PRIVATE RESPONDENT RBS. committed by ABS-CBN against RBS that may be characterized as wanton,
fraudulent, or reckless; they arose by virtue only of the filing of the complaint,
III An award of moral and exemplary damages is not warranted where the record
is bereft of any proof that a party acted maliciously or in bad faith in filing an
. . . IN AWARDING MORAL AND EXEMPLARY DAMAGES IN action. 27 In any case, free resort to courts for redress of wrongs is a matter of
FAVOR OF PRIVATE RESPONDENT RBS. public policy. The law recognizes the right of every one to sue for that which he
honestly believes to be his right without fear of standing trial for damages
IV where by lack of sufficient evidence, legal technicalities, or a different
interpretation of the laws on the matter, the case would lose ground. 28 One who
makes use of his own legal right does no injury. 29 If damage results front the
. . . IN AWARDING ATTORNEY'S FEES IN FAVOR OF RBS.
filing of the complaint, it is damnum absque injuria. 30 Besides, moral damages
are generally not awarded in favor of a juridical person, unless it enjoys a good In support of its stand that a juridical entity can recover moral and exemplary
reputation that was debased by the offending party resulting in social damages, private respondents RBS cited People v. Manero,35 where it was stated
humiliation.31 that such entity may recover moral and exemplary damages if it has a good
reputation that is debased resulting in social humiliation. it then ratiocinates;
As regards the award of attorney's fees, ABS-CBN maintains that the same had thus:
no factual, legal, or equitable justification. In sustaining the trial court's award,
the Court of Appeals acted in clear disregard of the doctrines laid down in Buan There can be no doubt that RBS' reputation has been debased
v. Camaganacan 32 that the text of the decision should state the reason why by ABS-CBN's acts in this case. When RBS was not able to fulfill
attorney's fees are being awarded; otherwise, the award should be disallowed. its commitment to the viewing public to show the film "Maging
Besides, no bad faith has been imputed on, much less proved as having been Sino Ka Man" on the scheduled dates and times (and on two
committed by, ABS-CBN. It has been held that "where no sufficient showing of occasions that RBS advertised), it suffered serious
bad faith would be reflected in a party' s persistence in a case other than an embarrassment and social humiliation. When the showing was
erroneous conviction of the righteousness of his cause, attorney's fees shall not canceled, late viewers called up RBS' offices and subjected RBS
be recovered as cost." 33 to verbal abuse ("Announce kayo nang announce, hindi ninyo
naman ilalabas," "nanloloko yata kayo") (Exh. 3-RBS, par. 3).
On the other hand, RBS asserts that there was no perfected contract between This alone was not something RBS brought upon itself. it was
ABS-CBN and VIVA absent any meeting of minds between them regarding the exactly what ABS-CBN had planned to happen.
object and consideration of the alleged contract. It affirms that the ABS-CBN's
claim of a right of first refusal was correctly rejected by the trial court. RBS The amount of moral and exemplary damages cannot be said to
insist the premium it had paid for the counterbond constituted a pecuniary loss be excessive. Two reasons justify the amount of the award.
upon which it may recover. It was obliged to put up the counterbound due to
the injunction procured by ABS-CBN. Since the trial court found that ABS-CBN The first is that the humiliation suffered by RBS is national
had no cause of action or valid claim against RBS and, therefore not entitled to extent. RBS operations as a broadcasting company is [sic]
the writ of injunction, RBS could recover from ABS-CBN the premium paid on nationwide. Its clientele, like that of ABS-CBN, consists of those
the counterbond. Contrary to the claim of ABS-CBN, the cash bond would prove who own and watch television. It is not an exaggeration to
to be more expensive, as the loss would be equivalent to the cost of money RBS state, and it is a matter of judicial notice that almost every
would forego in case the P30 million came from its funds or was borrowed from other person in the country watches television. The
banks. humiliation suffered by RBS is multiplied by the number of
televiewers who had anticipated the showing of the film
RBS likewise asserts that it was entitled to the cost of advertisements for the "Maging Sino Ka Man" on May 28 and November 3, 1992 but
cancelled showing of the film "Maging Sino Ka Man" because the print did not see it owing to the cancellation. Added to this are the
advertisements were put out to announce the showing on a particular day and advertisers who had placed commercial spots for the telecast
hour on Channel 7, i.e., in its entirety at one time, not a series to be shown on a and to whom RBS had a commitment in consideration of the
periodic basis. Hence, the print advertisement were good and relevant for the placement to show the film in the dates and times specified.
particular date showing, and since the film could not be shown on that
particular date and hour because of the injunction, the expenses for the The second is that it is a competitor that caused RBS to suffer
advertisements had gone to waste. the humiliation. The humiliation and injury are far greater in
degree when caused by an entity whose ultimate business
As regards moral and exemplary damages, RBS asserts that ABS-CBN filed the objective is to lure customers (viewers in this case) away from
case and secured injunctions purely for the purpose of harassing and the competition. 36
prejudicing RBS. Pursuant then to Article 19 and 21 of the Civil Code, ABS-CBN
must be held liable for such damages. Citing Tolentino,34 damages may be For their part, VIVA and Vicente del Rosario contend that the findings of fact of
awarded in cases of abuse of rights even if the act done is not illicit and there is the trial court and the Court of Appeals do not support ABS-CBN's claim that
abuse of rights were plaintiff institutes and action purely for the purpose of there was a perfected contract. Such factual findings can no longer be disturbed
harassing or prejudicing the defendant. in this petition for review under Rule 45, as only questions of law can be raised,
not questions of fact. On the issue of damages and attorneys fees, they adopted form of a draft contract proposing exhibition of 53 films for a consideration of
the arguments of RBS. P35 million. This counter-proposal could be nothing less than the counter-offer
of Mr. Lopez during his conference with Del Rosario at Tamarind Grill
The key issues for our consideration are (1) whether there was a perfected Restaurant. Clearly, there was no acceptance of VIVA's offer, for it was met by a
contract between VIVA and ABS-CBN, and (2) whether RBS is entitled to counter-offer which substantially varied the terms of the offer.
damages and attorney's fees. It may be noted that the award of attorney's fees
of P212,000 in favor of VIVA is not assigned as another error. ABS-CBN's reliance in Limketkai Sons Milling, Inc. v. Court of
Appeals 41 and Villonco Realty Company v. Bormaheco, Inc., 42 is misplaced. In
I. these cases, it was held that an acceptance may contain a request for certain
changes in the terms of the offer and yet be a binding acceptance as long as "it is
The first issue should be resolved against ABS-CBN. A contract is a meeting of clear that the meaning of the acceptance is positively and unequivocally to
minds between two persons whereby one binds himself to give something or to accept the offer, whether such request is granted or not." This ruling was,
render some service to another 37 for a consideration. there is no contract however, reversed in the resolution of 29 March 1996, 43 which ruled that the
unless the following requisites concur: (1) consent of the contracting parties; acceptance of all offer must be unqualified and absolute, i.e., it "must be
(2) object certain which is the subject of the contract; and (3) cause of the identical in all respects with that of the offer so as to produce consent or
obligation, which is established.38 A contract undergoes three stages: meeting of the minds."

(a) preparation, conception, or generation, which is the period On the other hand, in Villonco, cited in Limketkai, the alleged changes in the
of negotiation and bargaining, ending at the moment of revised counter-offer were not material but merely clarificatory of what had
agreement of the parties; previously been agreed upon. It cited the statement in Stuart v. Franklin Life
Insurance Co.44 that "a vendor's change in a phrase of the offer to purchase,
which change does not essentially change the terms of the offer, does not
(b) perfection or birth of the contract, which is the moment amount to a rejection of the offer and the tender of a counter-offer." 45However,
when the parties come to agree on the terms of the contract; when any of the elements of the contract is modified upon acceptance, such
and alteration amounts to a counter-offer.

(c) consummation or death, which is the fulfillment or In the case at bar, ABS-CBN made no unqualified acceptance of VIVA's offer.
performance of the terms agreed upon in the contract. 39 Hence, they underwent a period of bargaining. ABS-CBN then formalized its
counter-proposals or counter-offer in a draft contract, VIVA through its Board of
Contracts that are consensual in nature are perfected upon mere meeting of the Directors, rejected such counter-offer, Even if it be conceded arguendo that Del
minds, Once there is concurrence between the offer and the acceptance upon Rosario had accepted the counter-offer, the acceptance did not bind VIVA, as
the subject matter, consideration, and terms of payment a contract is produced. there was no proof whatsoever that Del Rosario had the specific authority to do
The offer must be certain. To convert the offer into a contract, the acceptance so.
must be absolute and must not qualify the terms of the offer; it must be plain,
unequivocal, unconditional, and without variance of any sort from the proposal. Under Corporation Code,46 unless otherwise provided by said Code, corporate
A qualified acceptance, or one that involves a new proposal, constitutes a powers, such as the power; to enter into contracts; are exercised by the Board of
counter-offer and is a rejection of the original offer. Consequently, when Directors. However, the Board may delegate such powers to either an executive
something is desired which is not exactly what is proposed in the offer, such committee or officials or contracted managers. The delegation, except for the
acceptance is not sufficient to generate consent because any modification or executive committee, must be for specific purposes, 47 Delegation to officers
variation from the terms of the offer annuls the offer.40 makes the latter agents of the corporation; accordingly, the general rules of
agency as to the bindings effects of their acts would
When Mr. Del Rosario of VIVA met with Mr. Lopez of ABS-CBN at the Tamarind apply. 48 For such officers to be deemed fully clothed by the corporation to
Grill on 2 April 1992 to discuss the package of films, said package of 104 VIVA exercise a power of the Board, the latter must specially authorize them to do so.
films was VIVA's offer to ABS-CBN to enter into a new Film Exhibition That Del Rosario did not have the authority to accept ABS-CBN's counter-offer
Agreement. But ABS-CBN, sent, through Ms. Concio, a counter-proposal in the was best evidenced by his submission of the draft contract to VIVA's Board of
Directors for the latter's approval. In any event, there was between Del Rosario which gives a total consideration of P36 million
and Lopez III no meeting of minds. The following findings of the trial court are (P19,950,000.00 plus P16,050,000.00. equals P36,000,000.00).
instructive:
On cross-examination Mr. Lopez testified:
A number of considerations militate against ABS-CBN's claim
that a contract was perfected at that lunch meeting on April 02, Q. What was written in this napkin?
1992 at the Tamarind Grill.
A. The total price, the breakdown the known
FIRST, Mr. Lopez claimed that what was agreed upon at the Viva movies, the 7 blockbuster movies and the
Tamarind Grill referred to the price and the number of films, other 7 Viva movies because the price was
which he wrote on a napkin. However, Exhibit "C" broken down accordingly. The none [sic] Viva
contains numerous provisions which, were not discussed at the and the seven other Viva movies and the
Tamarind Grill, if Lopez testimony was to be believed nor could sharing between the cash portion and the
they have been physically written on a napkin. There was even concerned spot portion in the total amount of
doubt as to whether it was a paper napkin or a cloth napkin. In P35 million pesos.
short what were written in Exhibit "C'' were not discussed, and
therefore could not have been agreed upon, by the parties. Now, which is which? P36 million or P35 million? This
How then could this court compel the parties to sign Exhibit weakens ABS-CBN's claim.
"C" when the provisions thereof were not previously agreed
upon?
FOURTH. Mrs. Concio, testifying for ABS-CBN stated that she
transmitted Exhibit "C" to Mr. Del Rosario with a handwritten
SECOND, Mr. Lopez claimed that what was agreed upon as the note, describing said Exhibit "C" as a "draft." (Exh. "5" - Viva;
subject matter of the contract was 14 films. The complaint in tsn pp. 23-24 June 08, 1992). The said draft has a well defined
fact prays for delivery of 14 films. But Exhibit "C" mentions 53 meaning.
films as its subject matter. Which is which If Exhibits "C"
reflected the true intent of the parties, then ABS-CBN's claim
for 14 films in its complaint is false or if what it alleged in the Since Exhibit "C" is only a draft, or a tentative, provisional or
complaint is true, then Exhibit "C" did not reflect what was preparatory writing prepared for discussion, the terms and
agreed upon by the parties. This underscores the fact that conditions thereof could not have been previously agreed upon
there was no meeting of the minds as to the subject matter of by ABS-CBN and Viva Exhibit "C'' could not therefore legally
the contracts, so as to preclude perfection thereof. For settled bind Viva, not having agreed thereto. In fact, Ms. Concio
is the rule that there can be no contract where there is no admitted that the terms and conditions embodied in Exhibit
object which is its subject matter (Art. 1318, NCC). "C" were prepared by ABS-CBN's lawyers and there was no
discussion on said terms and conditions. . . .
THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit
testimony (Exh. "D") states: As the parties had not yet discussed the proposed terms and
conditions in Exhibit "C," and there was no evidence
whatsoever that Viva agreed to the terms and conditions
We were able to reach an agreement. VIVA thereof, said document cannot be a binding contract. The fact
gave us the exclusive license to show these that Viva refused to sign Exhibit "C" reveals only two [sic] well
fourteen (14) films, and we agreed to pay Viva that it did not agree on its terms and conditions, and this court
the amount of P16,050,000.00 as well as grant has no authority to compel Viva to agree thereto.
Viva commercial slots worth P19,950,000.00.
We had already earmarked this P16,
050,000.00. FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del
Rosario agreed upon at the Tamarind Grill was only
provisional, in the sense that it was subject to approval by the The testimony of Mr. Lopez and the allegations in the
Board of Directors of Viva. He testified: complaint are clear admissions that what was supposed to
have been agreed upon at the Tamarind Grill between Mr.
Q. Now, Mr. Witness, and after that Tamarind Lopez and Del Rosario was not a binding agreement. It is as it
meeting ... the second meeting wherein you should be because corporate power to enter into a contract is
claimed that you have the meeting of the lodged in the Board of Directors. (Sec. 23, Corporation Code).
minds between you and Mr. Vic del Rosario, Without such board approval by the Viva board, whatever
what happened? agreement Lopez and Del Rosario arrived at could not ripen
into a valid contract binding upon Viva (Yao Ka Sin Trading
A. Vic Del Rosario was supposed to call us up vs. Court of Appeals, 209 SCRA 763). The evidence adduced
and tell us specifically the result of the shows that the Board of Directors of Viva rejected Exhibit "C"
discussion with the Board of Directors. and insisted that the film package for 140 films be maintained
(Exh. "7-1" - Viva ). 49
Q. And you are referring to the so-called
agreement which you wrote in [sic] a piece of The contention that ABS-CBN had yet to fully exercise its right of first refusal
paper? over twenty-four films under the 1990 Film Exhibition Agreement and that the
meeting between Lopez and Del Rosario was a continuation of said previous
contract is untenable. As observed by the trial court, ABS-CBN right of first
A. Yes, sir. refusal had already been exercised when Ms. Concio wrote to VIVA ticking off
ten films, Thus:
Q. So, he was going to forward that to the
board of Directors for approval? [T]he subsequent negotiation with ABS-CBN two (2) months
after this letter was sent, was for an entirely different package.
A. Yes, sir. (Tsn, pp. 42-43, June 8, 1992) Ms. Concio herself admitted on cross-examination to having
used or exercised the right of first refusal. She stated that the
Q. Did Mr. Del Rosario tell you that he will list was not acceptable and was indeed not accepted by ABS-
submit it to his Board for approval? CBN, (TSN, June 8, 1992, pp. 8-10). Even Mr. Lopez himself
admitted that the right of the first refusal may have been
A. Yes, sir. (Tsn, p. 69, June 8, 1992). already exercised by Ms. Concio (as she had). (TSN, June 8,
1992, pp. 71-75). Del Rosario himself knew and understand
The above testimony of Mr. Lopez shows beyond doubt that he [sic] that ABS-CBN has lost its rights of the first refusal when
knew Mr. Del Rosario had no authority to bind Viva to a his list of 36 titles were rejected (Tsn, June 9, 1992, pp. 10-
contract with ABS-CBN until and unless its Board of Directors 11) 50
approved it. The complaint, in fact, alleges that Mr. Del Rosario
"is the Executive Producer of defendant Viva" which "is a II
corporation." (par. 2, complaint). As a mere agent of Viva, Del
Rosario could not bind Viva unless what he did is ratified by its However, we find for ABS-CBN on the issue of damages. We shall first take up
Board of Directors. (Vicente vs. Geraldez, 52 SCRA 210; Arnold actual damages. Chapter 2, Title XVIII, Book IV of the Civil Code is the specific
vs. Willetsand Paterson, 44 Phil. 634). As a mere agent, law on actual or compensatory damages. Except as provided by law or by
recognized as such by plaintiff, Del Rosario could not be held stipulation, one is entitled to compensation for actual damages only for such
liable jointly and severally with Viva and his inclusion as party pecuniary loss suffered by him as he has duly proved. 51 The indemnification
defendant has no legal basis. (Salonga vs. Warner Barner [sic] , shall comprehend not only the value of the loss suffered, but also that of the
COLTA , 88 Phil. 125; Salmon vs. Tan, 36 Phil. 556). profits that the obligee failed to obtain. 52 In contracts and quasi-contracts the
damages which may be awarded are dependent on whether the obligor acted
with good faith or otherwise, It case of good faith, the damages recoverable are
those which are the natural and probable consequences of the breach of the even went to the Court of Appeals to challenge the order on the matter, Clearly
obligation and which the parties have foreseen or could have reasonably then, it was not necessary for RBS to file a counterbond. Hence, ABS-CBN cannot
foreseen at the time of the constitution of the obligation. If the obligor acted be held responsible for the premium RBS paid for the counterbond.
with fraud, bad faith, malice, or wanton attitude, he shall be responsible for all
damages which may be reasonably attributed to the non-performance of the Neither could ABS-CBN be liable for the print advertisements for "Maging Sino
obligation. 53 In crimes and quasi-delicts, the defendant shall be liable for all Ka Man" for lack of sufficient legal basis. The RTC issued a temporary
damages which are the natural and probable consequences of the act or restraining order and later, a writ of preliminary injunction on the basis of its
omission complained of, whether or not such damages has been foreseen or determination that there existed sufficient ground for the issuance thereof.
could have reasonably been foreseen by the defendant.54 Notably, the RTC did not dissolve the injunction on the ground of lack of legal
and factual basis, but because of the plea of RBS that it be allowed to put up a
Actual damages may likewise be recovered for loss or impairment of earning counterbond.
capacity in cases of temporary or permanent personal injury, or for injury to the
plaintiff's business standing or commercial credit.55 As regards attorney's fees, the law is clear that in the absence of stipulation,
attorney's fees may be recovered as actual or compensatory damages under any
The claim of RBS for actual damages did not arise from contract, quasi-contract, of the circumstances provided for in Article 2208 of the Civil Code. 58
delict, or quasi-delict. It arose from the fact of filing of the complaint despite
ABS-CBN's alleged knowledge of lack of cause of action. Thus paragraph 12 of The general rule is that attorney's fees cannot be recovered as part of damages
RBS's Answer with Counterclaim and Cross-claim under the heading because of the policy that no premium should be placed on the right to
COUNTERCLAIM specifically alleges: litigate.59 They are not to be awarded every time a party wins a suit. The power
of the court to award attorney's fees under Article 2208 demands factual, legal,
12. ABS-CBN filed the complaint knowing fully well that it has and equitable justification.60Even when claimant is compelled to litigate with
no cause of action RBS. As a result thereof, RBS suffered actual third persons or to incur expenses to protect his rights, still attorney's fees may
damages in the amount of P6,621,195.32. 56 not be awarded where no sufficient showing of bad faith could be reflected in a
party's persistence in a case other than erroneous conviction of the
Needless to state the award of actual damages cannot be comprehended under righteousness of his cause. 61
the above law on actual damages. RBS could only probably take refuge under
Articles 19, 20, and 21 of the Civil Code, which read as follows: As to moral damages the law is Section 1, Chapter 3, Title XVIII, Book IV of the
Civil Code. Article 2217 thereof defines what are included in moral damages,
Art. 19. Every person must, in the exercise of his rights and in while Article 2219 enumerates the cases where they may be recovered, Article
the performance of his duties, act with justice, give everyone 2220 provides that moral damages may be recovered in breaches of contract
his due, and observe honesty and good faith. where the defendant acted fraudulently or in bad faith. RBS's claim for moral
damages could possibly fall only under item (10) of Article 2219, thereof which
Art. 20. Every person who, contrary to law, wilfully or reads:
negligently causes damage to another, shall indemnify the
latter for tile same. (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29,
30, 32, 34, and 35.
Art. 21. Any person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs Moral damages are in the category of an award designed to compensate the
or public policy shall compensate the latter for the damage. claimant for actual injury suffered. and not to impose a penalty on the
wrongdoer.62 The award is not meant to enrich the complainant at the expense
It may further be observed that in cases where a writ of preliminary injunction of the defendant, but to enable the injured party to obtain means, diversion, or
is issued, the damages which the defendant may suffer by reason of the writ are amusements that will serve to obviate then moral suffering he has undergone. It
recoverable from the injunctive bond. 57 In this case, ABS-CBN had not yet filed is aimed at the restoration, within the limits of the possible, of the
the required bond; as a matter of fact, it asked for reduction of the bond and spiritual status quo ante, and should be proportionate to the suffering
inflicted.63 Trial courts must then guard against the award of exorbitant There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It
damages; they should exercise balanced restrained and measured objectivity to was honestly convinced of the merits of its cause after it had undergone serious
avoid suspicion that it was due to passion, prejudice, or corruption on the part negotiations culminating in its formal submission of a draft contract. Settled is
of the trial court. 64 the rule that the adverse result of an action does not per se make the action
wrongful and subject the actor to damages, for the law could not have meant to
The award of moral damages cannot be granted in favor of a corporation impose a penalty on the right to litigate. If damages result from a person's
because, being an artificial person and having existence only in legal exercise of a right, it is damnum absque injuria.75
contemplation, it has no feelings, no emotions, no senses, It cannot, therefore,
experience physical suffering and mental anguish, which call be experienced WHEREFORE, the instant petition is GRANTED. The challenged decision of the
only by one having a nervous system. 65 The statement in People Court of Appeals in CA-G.R. CV No, 44125 is hereby REVERSED except as to
v. Manero 66 and Mambulao Lumber Co. v. PNB 67 that a corporation may recover unappealed award of attorney's fees in favor of VIVA Productions,
moral damages if it "has a good reputation that is debased, resulting in social Inc.1âwphi1.nêt
humiliation" is an obiter dictum. On this score alone the award for damages
must be set aside, since RBS is a corporation.

The basic law on exemplary damages is Section 5, Chapter 3, Title XVIII, Book IV
of the Civil Code. These are imposed by way of example or correction for the
public good, in addition to moral, temperate, liquidated or compensatory
damages. 68 They are recoverable in criminal cases as part of the civil liability
when the crime was committed with one or more aggravating G.R. No. 70403 July 7, 1989
circumstances; 69 in quasi-contracts, if the defendant acted with gross
negligence; 70 and in contracts and quasi-contracts, if the defendant acted in a SANTIAGO SYJUCO, INC., petitioner,
wanton, fraudulent, reckless, oppressive, or malevolent manner.71 vs.
HON. JOSE P. CASTRO, AS PRESIDING JUDGE OF THE REGIONAL TRIAL
It may be reiterated that the claim of RBS against ABS-CBN is not based on COURT OF THE NATIONAL CAPITAL JUDICIAL REGION, BRANCH LXXXV,
contract, quasi-contract, delict, or quasi-delict, Hence, the claims for moral and QUEZON CITY, THE CITY SHERIFF OF THE CITY OF MANILA, THE CITY
exemplary damages can only be based on Articles 19, 20, and 21 of the Civil REGISTER OF DEEDS OF THE CITY OF MANILA, EUGENIO LIM, ARAMIS LIM,
Code. MARIO LIM, PAULINO LIM, LORENZO LIM, NILA LIM and/ or THE
PARTNERSHIP OF THE HEIRS OF HUGO LIM and ATTORNEY PATERNO P.
The elements of abuse of right under Article 19 are the following: (1) the CANLAS, respondents.
existence of a legal right or duty, (2) which is exercised in bad faith, and (3) for
the sole intent of prejudicing or injuring another. Article 20 speaks of the Doroteo B. Daguna and Felix D. Carao for petitioner.
general sanction for all other provisions of law which do not especially provide
for their own sanction; while Article 21 deals with acts contra bonus mores, and Paterno Canlas for private respondents.
has the following elements; (1) there is an act which is legal, (2) but which is
contrary to morals, good custom, public order, or public policy, and (3) and it is
done with intent to injure. 72
NARVASA, J.:
Verily then, malice or bad faith is at the core of Articles 19, 20, and 21. Malice or
bad faith implies a conscious and intentional design to do a wrongful act for a This case may well serve as a textbook example of how judicial processes,
dishonest purpose or moral obliquity. 73 Such must be substantiated by designed to promote the swift and efficient disposition of disputes at law, can be
evidence. 74 so grossly abused and manipulated as to produce precisely the opposite result;
how they can be utilized by parties with small scruples to forestall for an
unconscionably long time so essentially simple a matter as making the security notice and re-publication of the notice of sale which may be conducted at some
given for a just debt answer for its payment. future date." 5

The records of the present proceedings and of two other cases already decided On November 25,1970, the Court of First Instance (then presided over by Judge
by this Court expose how indeed the routine procedure of an extrajudicial Conrado M. Vasquez 6 rendered judgment finding that usury tained the
foreclosure came by dint of brazen forum shopping and other devious mortgage without, however, rendering it void, declaring the amount due to be
maneuvering to grow into a veritable thicket of litigation from which the only Pl,136,235.00 and allowing the foreclosure to proceed for satisfaction of
mortgagee has been trying to extricate itself for the last twenty years. the obligation reckoned at only said amount .7

Back in November 1964, Eugenio Lim, for and in his own behalf and as attorney- Syjuco moved for new trial to enable it to present additional evidence to
in-fact of his mother, the widow Maria Moreno (now deceased) and of his overthrow the finding of usury, and the Court ordered the case reopened for
brother Lorenzo, together with his other brothers, Aramis, Mario and Paulino, that purpose. The Lims tried to negate that order of reopening in the Court of
and his sister, Nila, all hereinafter collectively called the Lims, borrowed from Appeals, the proceedings being docketed as CA-G.R. No. 00242-R. They failed.
petitioner Santiago Syjuco, Inc. (hereinafter, Syjuco only) the sum of The Court of Appeals upheld the Trial Court. The Lims then sought to nullify this
P800,000.00. The loan was given on the security of a first mortgage on property action of the Appellate Court; towards that end, they filed with this Court a
registered in the names of said borrowers as owners in common under Transfer petition for certiorari and prohibition, docketed as G.R. No. L-34683. But here,
Certificates of Title Numbered 75413 and 75415 of the Registry of Deeds of too, they failed; their petition was dismissed.8
Manila. Thereafter additional loans on the same security were obtained by the
Lims from Syjuco, so that as of May 8, 1967, the aggregate of the loans stood at Thereafter, and on the basis of the additional evidence adduced by Syjuco on
P2,460,000.00, exclusive of interest, and the security had been augmented by remand of the case from this Court, the Trial Court promulgated an amended
bringing into the mortgage other property, also registered as owned pro decision on August 16, 1972, reversing its previous holding that usury had
indiviso by the Lims under two titles: TCT Nos. 75416 and 75418 of the Manila flawed the Lims' loan obligation. It declared that the principal of said obligation
Registry. indeed amounted to P2,460,000.00, exclusive of interest at the rate of 12% per
annum from November 8, 1967, and, that obligation being already due, the
There is no dispute about these facts, nor about the additional circumstance defendants (Syjuco and the Sheriff of Manila) could proceed with the
that as stipulated in the mortgage deed the obligation matured on November 8, extrajudicial foreclosure of the mortgage given to secure its satisfaction.9
1967; that the Lims failed to pay it despite demands therefor; that Syjuco
consequently caused extra-judicial proceedings for the foreclosure of the 2. APPEAL FROM CIVIL CASE NO. 75180; CA-
mortgage to be commenced by the Sheriff of Manila; and that the latter G.R. NO. 51752; G.R. NO. L-45752
scheduled the auction sale of the mortgaged property on December 27,
1968. 1 The attempt to foreclose triggered off a legal battle that has dragged on On September 9, 1972, Atty. Paterno R. Canlas entered his appearance in Civil
for more than twenty years now, fought through five (5) cases in the trial Case No. 75180 as counsel for the Lims in collaboration with Atty. Raul Correa,
courts, 2 two (2) in the Court of Appeals, 3 and three (3) more in this and on the same date appealed to the Court of Appeals from the amended
Court, 4 with the end only now in sight. decision of August 16, 1972. 10 In that appeal, which was docketed as CA G.R. No.
51752, Messrs. Canlas and Correa prayed that the loans be declared usurious;
1. CIVIL CASE NO. 75180, CFI MANILA, BR.5; that the principal of the loans be found to be in the total amount of
CA-G.R. NO. 00242-R; G.R. NO. L-34683 Pl,269,505.00 only, and the interest thereon fixed at only 6% per annum from
the filing of the complaint; and that the mortgage be also pronounced
To stop the foreclosure, the Lims — through Atty. Marcial G. Mendiola, who was void ab initio. 11
later joined by Atty. Raul Correa — filed Civil Case No. 75180 on December
24,1968 in the Court of First Instance of Manila (Branch 5). In their complaint The appeal met with no success. In a decision promulgated on October 25,1976,
they alleged that their mortgage was void, being usurious for stipulating the Court of Appeals affirmed in toto the Trial Court's amended decision. 12
interest of 23% on top of 11 % that they had been required to pay as "kickback."
An order restraining the auction sale was issued two days later, on December
26,1968, premised inter alia on the Lims' express waiver of "their rights to the
The Lims came to this Court seeking reversal of the appellate Court's decision. in January, 1978 in an effort to end all dispute about the matter, and despite
However, their petition for review-filed in their behalf by Canlas, and Atty. Pio Judge Tecson's having been made aware of Civil Case No. 112762. It should have
R. Marcos, and docketed as G.R. No. L-45752-was denied for lack of merit in a been apparent to Judge Tecson that there was nothing more to be done in Civil
minute resolution dated August 5, 1977. The Lims' motion for reconsideration Case No. 75180 except to enforce the judgment, already final and executory,
was denied and entry of judgment was made on September 24,1977. 13 Here the authorizing the extrajudicial foreclosure of the mortgage, a judgment
matter should have ended; it marked only the beginning of Syjuco's travails. sanctioned, to repeat, by both the Court of Appeals and the Supreme Court; that
there was in truth no need for another publication of the notice since the Lims
3. CIVIL CASE NO.112762, CFI MANILA had precisely waived such republication, this waiver having been the condition
BRANCH 9 under which they had earlier obtained an order restraining the first scheduled
sale; that, in any event, the republication effected by Syjuco had removed the
Syjuco then resumed its efforts to proceed with the foreclosure. It caused the only asserted impediment to the holding of the same; and that, finally, the Lims
auction sale of the mortgaged property to be scheduled on December 20, 1977, were acting in bad faith: they were maintaining proceedings in two (2) different
only to be frustrated again by another action filed by the Lims on December 19, courts for essentially the same relief. 18 Incredibly, not only did Judge Tecson
1977, docketed as Civil Case No. 112762 of the Court of First Instance of refuse to allow the holding of the auction sale, as was the only just and lawful
Manila. 14 The action sought to stop the sale on the ground that the notice of course indicated by the circumstances, 19 he authorized the Lims to sell the
foreclosure had not been republished; this, notwithstanding that as earlier mortgaged property in a private sale,20 with the evident intention that the
stressed, the restraining order of December 26, 1968 issued in Civil Case No proceeds of the sale, which he directed to be deposited in court, would be
75180 explicitly declared itself to be predicated on the Lims' waiver of "their divided between Syjuco and the Lims; this, in line with the patently specious
rights to the notice and republication of the notice of sale which may be theory advocated by the Lims' counsel that the bond flied by them for the
conducted at some future date." 15 An order restraining the sale issued in the postponement of the sale, set at P6 million by the Court (later increased by P 3
case, although the petition for preliminary injunction was subsequently denied. million) had superseded and caused novation of the mortgage. 21 The case lay
A supplemental complaint was also filed by the Lims seeking recovery of some fallow for a year, certain other, incidents arising and remaining unresolved on
Pl million in damages allegedly suffered by reason of said lack of account of numerous postponements.
republication. 16
5. G.R. No. L-56014
4. CIVIL CASE NO. 75180
Finally, on January 28, 1981, Syjuco betook itself to this Court, presumably no
That very same claim — that there had been no republication of the notice of longer disposed to await Judge Tecson's pleasure or the Lims' convenience. It
sale, which was the foundation of the Lims' action in Civil Case No. 112762 as filed a petition for certiorari and prohibition, docketed as G.R. No. L-56014,
aforesaid — was made by the Lims the basis of an urgent motion filed on alleging that in Civil Case No. 75180, Judge Tecson had gravely abused
December 15, 1977 in Civil Case No. 75180, in which, as earlier narrated, the discretion in:
judgement authorizing the foreclosure had been affirmed by both the Court of
Appeals and this Court, and had become final and executory. And that motion (1) unreasonably delaying the foreclosure of the mortgage;
sought exactly the same remedy prayed for in Civil Case No. 112762 (filed by
the Lims four [4] days later, on December 19, 1977), i.e., the prevention of the (2) entertaining the Lims' motion to discharge said mortgage
auction sale. The Court -- Branch 5, then presided over by Judge Jose H. Tecson grounded on the theory that it had been superseded and
— granted the restraining order on December 19, 1977, 17 the very same day novated by the Lims' act of filing the bond required by Judge
that the Lims commenced Civil Case No. 112762 in the same Court and in which Tecson in connection with the postponement of the foreclosure
subsequent action they asked for and obtained a similar restraining order. sale, and unreasonably delaying resolution of the issue; and

The Lims' counsel thus brought about the anomalous situation of two (2) (3) authorizing the Lims to negotiate and consummate the
restraining orders directed against the same auction sale, based on the same private sale of the mortgaged property and motu proprio
ground, issued by different courts having cognizance of two (2) separate extending the period granted the Lims for the purpose, in
proceedings instituted for identical objectives. This situation lasted for all of disregard of the final and executory judgment rendered in the
three (3) years, despite the republication of the notice of sale caused by Syjuco case.
By judgment rendered on September 21, 1982, after due amended during the period from 1964 to 1967) over lands standing in their
proceedings, this Court 22 issued the writ prayed for and names in the Property Registry as owners pro indiviso, in fact no longer
nullified the orders and actuations of Judge Tecson in Civil Case belonged to them at that time, having been earlier deeded over by them to the
No. 75180. The judgment declared that: partnership, "Heirs of Hugo Lim", more precisely, on March 30, 1959, hence,
said mortgage was void because executed by them without authority from the
(1) the republication by Syjuco of the notice of foreclosure sale partnership.
rendered the complaint in Civil Case No. 112762 moot and
academic; hence, said case could not operate to bar the sale; The complaint was signed by a lawyer other than Atty. Canlas, but the records
disclose that Atty. Canlas took over as counsel as of November 4,1982. The case,
(2) the Lims' bonds (of P 6 million and P 3 million), having by docketed as Civil Case No. Q-39295, was assigned to Branch 35 of the Quezon
the terms thereof been given to guarantee payment of damages City Regional Trial Court, then presided over by Judge Jose P. Castro.
to Syjuco and the Sheriff of Manila resulting from the
suspension of the auction sale, could not in any sense and from Judge Castro issued a restraining order on October 15, 1982. Then, Sheriff
any aspect have the effect of superseding the mortgage or Perfecto G. Dalangin submitted a return of summons to the effect that on
novating it; December 6, 1982 he —

(3) in fact, the bonds had become worthless when, as shown by .. served personally and left a copy of summons together with a
the record, the bondsman's authority to transact non-life copy of Complaint and its annexes x x upon defendant's office
insurance business in the Philippines was not renewed, for formerly at 313 Quirino Ave., Paranaque, Metro-Manila and
cause, as of July 1, 1981. now at 407 Dona Felisa Syjuco Building, Remedios St., corner
Taft Avenue, Manila, through the Manager, a person of
The decision consequently decreed that the Sheriff of Manila should proceed sufficient age and discretion duly authorized to receive service
with the mortgage sale, there being no further impediment thereto.23 of such nature, but who refused to accept service and signed
receipt thereof.26
Notice of the decision was served on the Lims, through Atty. Canlas, on October
2, 1982. A motion for reconsideration was filed, 24 but the same was denied with A vaguer return will be hard to find. It is impossible to discern from it where
finality for lack of merit and entry of final judgment was made on March precisely the summons was served, whether at Quirino Avenue, Paranaque, or
22,1983. 25 Taft Avenue, Manila; and it is inexplicable that the name of the person that the
sheriff had been able to identify as the manager is not stated, the latter being
6. THE SECRET ACTION CIVIL CASE NO. Q- described merely as "a person of sufficient age and discretion." In any event, as
36845 OF THE REGIONAL TRIAL COURT, it was to claim later, Syjuco asserts that it was never so served with summons,
QUEZON CITY, JUDGE JOSE P. CASTRO, or with any other notice, pleading, or motion relative to the case, for that
PRESIDING matter.

Twelve (12) days after the Lims were served, as above mentioned, with notice On February 10, 1983, Atty. Canlas filed an ex-parte motion to declare Syjuco in
of this Court's judgment in G.R. No. 56014, or on October 14,1982, they caused default. The order of default issued the next day, also directing the plaintiff
the filing with the Regional Trial Court of Quezon City of still another action, the partnership to present evidence ex parte within three (3) days. On February 22,
third, also designed, like the first two, to preclude enforcement of the mortgage 1983, judgment by default was rendered, declaring void the mortgage in
held by Syjuco. question because executed by the Lims without authority from the partnership
which was and had been since March 30,1959 the exclusive owner of the
mortgaged property, and making permanent an injunction against the
This time the complaint was presented, not in their individual names, but in the foreclosure sale that had issued on January 14,1983. 27 Service of notice of the
name of a partnership of which they themselves were the only partners: "Heirs default judgment was, according to the return of the same Sheriff Perfecto
of Hugo Lim." The complaint advocated the theory that the mortgage which Dalangin, effected on the following day, February 23, 1983. His return is a
they, together with their mother, had individually constituted (and thereafter virtual copy of his earlier one regarding service of summons: it also states the
place of service as the defendant's office, either at its former location, 313 No other salient details about these two (2) cases are available in the
Quirino Avenue, Paranaque, or at the later address, 407 Dona Felisa, Syjuco voluminous records before the Court, except that it was Atty. Canlas who had
Building, Taft Avenue, Manila; and it also fails to identify the person on whom filed them. He admits having done so unequivocally: "Thus, the undersigned
service was made, describing him only as "the clerk or person in charge" of the counsel filed injunction cases in Civil Case No. 83-19018 and Civil Case No.
office. 28 39294, Regional Trial Courts of Manila and Quezon City. ... " 31

Unaccountably, and contrary to what might be expected from the rapidity with 7. RE-ACTIVATION OF CIVIL CASE NO. Q-
which it was decided-twelve (12) days from February 10, 1983, when the 36485, RTC, Q QUEZON CITY, BRANCH XXXV
motion to declare defendant Syjuco in default was filed-the case was afterwards
allowed by Atty. Canlas to remain dormant for seventeen (17) months. He made Upon the dismissal of Civil Case No. 39294, Syjuco once more resumed its
no effort to have the judgment executed, or to avail of it in other actions efforts to effect the mortgage sale which had already been stymied for more
instituted by him against Syjuco. The judgment was not to be invoked until than fifteen (15) years. At its instance, the sheriff once again set a date for the
sometime in or after July, 1984, again to stop the extrajudicial mortgage sale auction sale. But on the date of the sale, a letter of Atty. Canlas was handed to
scheduled at or about that time at the instance of Syjuco, as shall presently be the sheriff drawing attention to the permanent injunction of the sale embodied
recounted. in the judgment by default rendered by Judge Castro in Civil Case No. Q-
36485. 32 Syjuco lost no time in inquiring about Civil Case No. Q-36485, and was
7. Other Actions in the Interim: very quickly made aware of the judgment by default therein promulgated and
the antecedent events leading thereto. It was also made known that on July 9,
a. CIVIL CASE No. 83-19018, RTC MANILA 1984, Judge Castro had ordered execution of the judgment; that Judge Castro
had on July 16, 1984 granted Atty. Canlas' motion to declare cancelled the titles
While the Lims, through their partnership ("Heirs of Hugo Lim"), were to the Lims' mortgaged properties and as nun and void the annotation of the
prosecuting their action in the sala of Judge Castro, as above narrated, Syjuco mortgage and its amendments on said titles, and to direct the Register of Deeds
once again tried to proceed with the foreclosure after entry of judgment had of Manila to issue new titles, in lieu of the old, in the name of the partnership,
been made in G.R. No. 56014 on March 22, 1983. It scheduled the auction sale "Heirs of Hugo Lim." 33
on July 30, 1983. But once again it was frustrated. Another obstacle was put up
by the Lims and their counsel, Atty. Canlas. This was Civil Case No. 83-19018 of On July 17,1984, Syjuco filed in said Civil Case No. Q-36485 a motion for
the Manila Regional Trial Court. The case was filed to stop the sale on the theory reconsideration of the decision and for dismissal of the action, alleging that it
that what was sought to be realized from the sale was much in excess of the had never been served with summons; that granting arguendo that service had
judgment in Civil Case No. 75180, and that there was absence of the requisite somehow been made, it had never received notice of the decision and therefore
notice. It is significant that the judgment by default rendered by Judge Castro in the same had not and could not have become final; and that the action should be
Civil Case No. Q-36485 was not asserted as additional ground to support the dismissed on the ground of bar by prior judgment premised on the final
cause of action. Be this as it may, a restraining order was issued on July 20,1983 decisions of the Supreme Court in G.R. No. L-45752 and G.R. No. 56014.
in said Civil Case No. 83-9018. 29
Two other motions by Syjuco quickly followed. The first, dated July 20, 1984,
b. CIVIL CASE NO. Q-32924, RTC QUEZON CITY prayed for abatement of Judge Castro's order decreeing the issuance of new
certificates of title over the mortgaged lands in the name of the plaintiff
What the outcome of this case, No. 83-19018, is not clear. What is certain is (1) partnership. 34 The second, filed on July 24, 1984, was a supplement to the
that the auction sale was re-scheduled for September 20, 1983, (2) that it was motion to dismiss earlier filed, asserting another ground for the dismissal of the
aborted because the Lims managed to obtain still another restraining order in action, i.e., failure to state a cause of action, it appearing that the mortgaged
another case commenced by their lawyer, Atty. Canlas: Civil Case No. Q-32924 property remained registered in the names of the individual members of the
of the Court of First Instance of Quezon City, grounded on the proposition that Lim family notwithstanding that the property had supposedly been conveyed to
the publication of the notice of sale was defective; and (3) that the action was the plaintiff partnership long before the execution of the mortgage and its
dismissed by the Regional Trial Court on February 3, 1984. 30 amendments,-and that even assuming ownership of the property by the
partnership, the mortgage executed by all the partners was valid and binding
under Articles 1811 and 1819 of the Civil Code.35
The motions having been opposed in due course by the plaintiff partnership, Syjuco, having been counsel for the former only since 1977, not for the last
they remained pending until January 31, 1985 when Syjuco moved for their seventeen years as claimed by Syjuco; and that he had no duty to inform
immediate resolution. Syjuco now claims that Judge Castro never acted on the opposing counsel of the pendency of Civil Case No. Q-36485. 37
motions. The latter however states that that he did issue an order on February
22, 1985 declaring that he had lost jurisdiction to act thereon because, petitio Respondent Judge Castro also filed a comment 38 disclaiming knowledge of
principii, his decision had already become final and executory. previous controversies regarding the mortgaged property. He asserted that
Syjuco had been properly declared in default for having failed to answer the
8. G.R.NO.L-70403; THE PROCEEDING AT BAR complaint despite service of summons upon it, and that his decision in said case
which was also properly served on Syjuco became final when it was not timely
For the third time Syjuco is now before this Court on the same matter. It filed on appealed, after which he lost jurisdiction to entertain the motion for
April 3, 1985 the instant petition for certiorari, prohibition and mandamus. It reconsideration and motion to dismiss. He also denied having failed to act on
prays in its petition that the default judgment rendered against it by Judge said motions, adverting to an alleged order of February 22, 1985 where he
Castro in said Civil Case No. Q-36485 be annulled on the ground of lack of declared his lack of jurisdiction to act thereon.
service of summons, res judicata and laches, and failure of the complaint to state
a cause of action; that the sheriff be commanded to proceed with the foreclosure The respondent Register of Deeds for his part presented a comment wherein he
of the mortgage on the property covered by Transfer Certificates of Title stated that by virtue of an order of execution in Civil Case No. Q-36485, he had
Numbered 75413, 75415, 75416 and 75418 of the Manila Registry; and that the cancelled TCTs Nos. 75413, 75415, 75416 and 75418 of his Registry and
respondents the Lims, Judge Castro, the Sheriff and the Register of Deeds of prepared new certificates of title in lieu thereof, but that cancellation had been
Manila, the partnership known as "Heirs of Hugo Lim," and Atty. Paterno R. held in abeyance for lack of certain registration requirements and by reason
Canlas, counsel for-the Lims and their partnership-be perpetually enjoined from also of the motion of Syjuco's Atty. Formoso to hold in abeyance enforcement of
taking any further steps to prevent the foreclosure. the trial court's order of July 16, 1984 as well as of the temporary restraining
order subsequently issued by the Court. 39
The comment filed for the respondents by Atty. Canlas in substance alleged that
(a) Syjuco was validly served with summons in Civil Case No. Q-36485, hence, It is time to write finis to this unedifying narrative which is notable chiefly for
that the decision rendered by default therein was also valid and, having been the deception, deviousness and trickery which have marked the private
also duly served on said petitioner, became final by operation of law after the respondents' thus far successful attempts to avoid the payment of a just
lapse of the reglementary appeal period; (b) finality of said decision removed obligation. The record of the present proceeding and the other records already
the case from the jurisdiction of the trial court, which was powerless to referred to, which the Court has examined at length, make it clear that the
entertain and act on the motion for reconsideration and motion to dismiss; (c) dispute should have been laid to rest more than eleven years ago, with entry of
the petition was in effect an action to annul a judgment, a proceeding within the judgment of this Court (on September 24, 1977) in G.R. No. L-45752 sealing the
original jurisdiction of the Court of Appeals; (d) the plea of res judicata came too fate of the Lims' appeal against the amended decision in Civil Case No. 75180
late because raised after the decision had already become final; moreover, no where they had originally questioned the validity of the mortgage and its
Identity of parties existed between the cases invoked, on the one hand, and Civil foreclosure. That result, the records also show, had itself been nine (9) years in
Case No. Q-36485, on the other, the parties in the former being the Lims in their coming, Civil Case No. 75180 having been instituted in December 1968 and,
personal capacities and in the latter, the Lim Partnership, a separate and after trial and judgment, gone through the Court of Appeals (in CA-G.R. No.
distinct juridical entity; and the pleaded causes of action being different, usury 00242-R) and this Court (in G.R. No. 34683), both at the instance of the Lims, on
in the earlier cases and authority of the parties to encumber partnership the question of reopening before the amended decision could be issued.
property in the case under review; (e) the plea of laches also came too late, not
having been invoked in the lower court; and (f) the property involved Unwilling, however, to concede defeat, the Lims moved (in Civil Case No. 75180)
constituted assets of the Lim partnership, being registered as such with the to stop the foreclosure sale on the ground of lack of republication. On December
Securities and Exchange Commission. 36 19,1977 they obtained a restraining order in said case, but this notwithstanding,
on the very same date they filed another action (Civil Case No. 117262) in a
On his own behalf Atty. Canlas submitted that he had no knowledge of the different branch of the same Court of First Instance of Manila to enjoin the
institution of Civil Case No. Q-36485 (though he admitted being collaborating foreclosure sale on the same ground of alleged lack of republication. At about
counsel in said case); that he did not represent the Lims in all their cases against
this time, Syjuco republished the notice of sale in order, as it was later to No. 83-19018, Regional Trial Court of Manila in July 1983, and Civil Case No. Q-
manifest, to end all further dispute. 32924, Regional Trial Court of Quezon City in September of the same year) after
said sale had already been permanently enjoined by default judgment in Civil
That move met with no success. The Lims managed to persuade the judge in Case No. Q-36485, appears in retrospect to be nothing but a brace of feints
Civil Case No. 75180, notwithstanding his conviction that the amended decision calculated to keep Syjuco in that state of ignorance and to lull any
in said case had already become final, not only to halt the foreclosure sale but apprehensions it mat may have harbored about encountering further surprises
also to authorize said respondents to dispose of the mortgaged property at a from any other quarter.
private sale upon posting a bond of P6,000,000.00 (later increased by
P3,000,000.00) to guarantee payment of Syjuco's mortgage credit. This gave the Further credence is lent to this appraisal by the unusually rapid movement of
Lims a convenient excuse for further suspension of the foreclosure sale by Civil Case No. Q-36485 itself in its earlier stages, which saw the motion to
introducing a new wrinkle into their contentions-that the bond superseded the declare Syjuco in default filed, an order of default issued, evidence ex partefor
mortgage which should, they claimed, therefore be discharged instead of the plaintiffs received and judgment by default rendered, all within the brief
foreclosed. span of twelve days, February 10-22, 1983. Notice of said judgment was
"served" on February 23, 1983, the day after it was handed down, only to be
Thus from the final months of 1977 until the end of 1980, a period of three followed by an unaccountable lull of well over a year before it was ordered
years, Syjuco found itself fighting a legal battle on two fronts: in the already executed on July 9, 1984 — unaccountable, considering that previous flurry of
finally decided Civil Case No. 75180 and in Civil Case No. 117262, upon the activity, except in the context of a plan to rush the case to judgment and then
single issue of alleged lack of republication, an issue already mooted by the divert Syjuco's attention to the Lims' moves in other directions so as to prevent
Lims' earlier waiver of republication as a condition for the issuance of the discovery of the existence of the case until it was too late.
original restraining order of December 26,1968 in Civil Case No. 75180, not to
mention the fact that said petitioner had also tried to put an end to it by actually The Court cannot but condemn in the strongest terms this trifling with the
republishing the notice of sale. judicial process which degrades the administration of justice, mocks, subverts
and misuses that process for purely dilatory purposes, thus tending to bring it
With the advent of 1981, its pleas for early resolution having apparently fallen into disrepute, and seriously erodes public confidence in the will and
on deaf ears, Syjuco went to this Court (in G.R. No. L-56014) from which, on competence of the courts to dispense swift justice.
September 21, 1982, it obtained the decision already referred to holding, in fine,
that there existed no further impediment to the foreclosure sale and that the Upon the facts, the only defense to the foreclosure that could possibly have
sheriff could proceed with the same. merited the full-blown trial and appeal proceedings it actually went through
was that of alleged usury pleaded in Civil Case No. 75180 and finally decided
Said decision, instead of deterring further attempts to derail the foreclosure, against the respondent Lims in G.R. No. L-45752 in September 1977. The other
apparently gave the signal for the clandestine filing this time — by the issues of failure to republish and discharge of mortgage by guarantee set up in
Partnership of the Heirs of Hugo Lim -on October 14,1982 of Civil Case No. Q- succeeding actions were sham issues, questions without substance raised only
36485, the subject of the present petition, which for the first time asserted the for purposes of delay by the private respondents, in which they succeeded only
claim that the mortgaged property had been contributed to the plaintiff too well. The claim urged in this latest case: that the mortgaged property had
partnership long before the execution of the Syjuco's mortgage in order to been contributed to the respondent partnership and was already property of
defeat the foreclosure. said partnership when the individual Lims unauthorizedly mortgaged it to
Syjuco, is of no better stripe, and this, too, is clear from the undisputed facts and
Syjuco now maintains that it had no actual knowledge of the existence and the legal conclusions to be drawn therefrom.
pendency of Civil Case No. Q-36485 until confronted, in the manner already
adverted to, with the fait accompli of a "final" judgment with permanent The record shows that the respondent partnership is composed exclusively of
injunction therein, and nothing in the record disabuses the Court about the the individual Lims in whose name all the cases herein referred to, with the sole
truth of this disclaimer. Indeed, considering what had transpired up to that exception of Civil Case No. Q-36485, were brought and prosecuted, their
denouement, it becomes quite evident that actuations of the Lims and their contribution to the partnership consisting chiefly, if not solely, of the property
lawyer had been geared to keeping Syjuco in the dark about said case. Their subject of the Syjuco mortgage. It is also a fact that despite its having been
filing of two other cases also seeking to enjoin the foreclosure sale (Civil Case contributed to the partnership, allegedly on March 30, 1959, the property was
never registered with the Register of Deeds in the name of the partnership, but And more to the point:
to this date remains registered in the names of the Lims as owners in common.
The original mortgage deed of November 14,1964 was executed by the Lims as A property owner who knowingly permits another to sell or
such owners, as were all subsequent amendments of the mortgage. There can be encumber the property, without disclosing his title or objecting
no dispute that in those circumstances, the respondent partnership was to the transaction, is estopped to set up his title or interest as
chargeable with knowledge of the mortgage from the moment of its execution. against a person who has been thereby misled to his injury.
The legal fiction of a separate juridical personality and existence will not shield
it from the conclusion of having such knowledge which naturally and xxx
irresistibly flows from the undenied facts. It would violate all precepts of
reason, ordinary experience and common sense to propose that a partnership,
as commonly known to all the partners or of acts in which all of the latter, An owner of real property who stands by and sees a third
without exception, have taken part, where such matters or acts affect property person selling or mortgaging it under claim of title without
claimed as its own by said partnership. asserting his own title or giving the purchaser or mortgagee
any notice thereof is estopped, as against such purchaser or
mortgagee, afterward to assert his title; and, although title
If, therefore, the respondent partnership was inescapably chargeable with does not pass under these circumstances, a conveyance will be
knowledge of the mortgage executed by all the partners thereof, its silence and decreed by a court of equity. Especially is the rule applicable
failure to impugn said mortgage within a reasonable time, let alone a space of where the party against whom the estoppel is claimed, in
more than seventeen years, brought into play the doctrine of estoppel to addition to standing by, takes part in malting the sale or
preclude any attempt to avoid the mortgage as allegedly unauthorized. mortgage. 41

The principles of equitable estoppel, sometimes called estoppel in pais, are More specifically, the concept to which that species of estoppel
made part of our law by Art. 1432 of the Civil Code. Coming under this class is which results from the non-disclosure of an estate or interest
estoppel by silence, which obtains here and as to which it has been held that: in real property has ordinarily been referred is fraud, actual or
constructive. ... Although fraud is not an essential element of
... an estoppel may arise from silence as well as from words. the original conduct working the estoppel, it may with perfect
'Estoppel by silence' arises where a person, who by force of property be said that it would be fraudulent for the party to
circumstances is under a duty to another to speak, refrains repudiate his conduct, and to assert a right or claim in
from doing so and thereby leads the other to believe in the contravention thereof. 42
existence of a state of facts in reliance on which he acts to his
prejudice. Silence may support an estoppel whether the failure Equally or even more preclusive of the respondent partnership's claim to the
to speak is intentional or negligent. mortgaged property is the last paragraph of Article 1819 of the Civil Code,
which contemplates a situation duplicating the circumstances that attended the
Inaction or silence may under some circumstances amount to a execution of the mortgage in favor of Syjuco and therefore applies foursquare
misrepresentation and concealment of the facts, so as to raise thereto:
an equitable estoppel. When the silence is of such a character
and under such circumstances that it would become a fraud on Where the title to real property is in the names of all the
the other party to permit the party who has kept silent to deny partners a conveyance executed by all the partners passes all
what his silence has induced the other to believe and act on, it their rights in such property.
will operate as an estoppel. This doctrine rests on the principle
that if one maintains silence, when in conscience he ought to
speak, equity will debar him from speaking when in conscience The term "conveyance" used in said provision, which is taken from Section 10 of
he ought to remain silent. He who remains silent when he the American Uniform Partnership Act, includes a mortgage.
ought to speak cannot be heard to speak when he should be
silent. 40 Interpreting Sec. 10 of the Uniform Partnership Act, it has been
held that the right to mortgage is included in the right to
convey. This is different from the rule in agency that a special The first judgment-rendered in Civil Case No. 75180 and affirmed by both the
power to sell excludes the power to mortgage (Art. 1879). 43 Court of Appeals (CA-G.R. No. 51752) and this Court (G.R. No. L-45752) should
therefore have barred all the others, all the requisites of res judicata being
As indisputable as the propositions and principles just stated is that the cause of present. The judgment was a final and executory judgment; it had been
action in Civil Case No. Q-36485 is barred by prior judgment. The right rendered by a competent court; and there was, between the first and
subsumed in that cause is the negation of the mortgage, postulated on the claim subsequent cases, not only identity of subject-matter and of cause of action, but
that the parcels of land mortgaged by the Lims to Syjuco did not in truth belong also of parties. As already pointed out, the plaintiffs in the first four (4) actions,
to them but to the partnership. Assuming this to be so, the right could have been the Lims, were representing exactly the same claims as those of the partnership,
asserted at the time that the Lims instituted their first action on December 24, the plaintiff in the fifth and last action, of which partnership they were the only
1968 in the Manila Court of First Instance, Civil Case No. 75180, or when they members, and there was hence no substantial difference as regards the parties
filed their subsequent actions: Civil Case No. 112762, on December 19, 1977; plaintiff in all the actions. Under the doctrine of res judicata, the judgment in the
Civil Case No. 83-19018, in 1983, and Civil Case No. Q-39294, also in 1983. The first was and should have been regarded as conclusive in all other, actions not
claim could have been set up by the Lims, as members composing the only "with respect to the matter directly adjudged," but also "as to any other
partnership, "Heirs of Hugo Lim." It could very well have been put forth by the matter that could have been raised in relation thereto. " 46 It being indisputable
partnership itself, as co-plaintiff in the corresponding complaints, considering that the matter of the partnership's being the owner of the mortgaged
that the actions involved property supposedly belonging to it and were being properties "could have been raised in relation" to those expressly made issuable
prosecuted by the entire membership of the partnership, and therefore, the in the first action, it follows that that matter could not be re-litigated in the last
partnership was in actuality, the real party in interest. In fact, consistently with action, the fifth.
the Lims' theory, they should be regarded, in all the actions presented by them,
as having sued for vindication, not of their individual rights over the property Though confronted with the facts thus precluding the respondent partnership's
mortgaged, but those of the partnership. There is thus no reason to distinguish claim to the property under both the principle of estoppel and the provisions of
between the Lims, as individuals, and the partnership itself, since the former Article 1819, last paragraph, of the Civil Code, as well as the familiar doctrine of
constituted the entire membership of the latter. In other words, despite the res judicata, the respondent Judge refused to act on Syjuco's motions on the
concealment of the existence of the partnership, for all intents and purposes and ground that he no longer had jurisdiction to do so because they were filed after
consistently with the Lims' own theory, it was that partnership which was the judgment by default against Syjuco, which failed to answer the complaint
real party in interest in all the actions; it was actually represented in said despite valid service of summons, had been rendered and become final. The
actions by all the individual members thereof, and consequently, those sheriffs return, however, creates grave doubts about the correctness of the
members' acts, declarations and omissions cannot be deemed to be simply the Judge's basic premise that summons had been validly served on Syjuco. For one
individual acts of said members, but in fact and in law, those of the partnership. thing, the return 47 is unspecific about where service was effected. No safe
conclusion about the place of service can be made from its reference to a former
What was done by the Lims — or by the partnership of which they were the and a present office of Syjuco in widely separate locations, with nothing to
only members-was to split their cause of action in violation of the well known indicate whether service was effected at one address or the other, or even at
rule that only one suit may be instituted for a single cause of action. 44 The right both. A more serious defect is the failure to name the person served who is, with
sought to be enforced by them in all their actions was, at bottom, to strike down equal ambiguity, identified only as "the Manager" of the defendant corporation
the mortgage constituted in favor of Syjuco, a right which, in their view, resulted (petitioner herein). Since the sheriffs return constitutes primary evidence of the
from several circumstances, namely that the mortgage was constituted over manner and incidents of personal service of a summons, the Rules are quite
property belonging to the partnership without the latter's authority; that the specific about what such a document should contain:
principal obligation thereby secured was usurious; that the publication of the
notice of foreclosure sale was fatally defective, circumstances which had already SEC. 20. Proof of service. — The proof of service of a summons
taken place at the time of the institution of the actions. They instituted four (4) shall be made in writing by the server and shall set forth the
actions for the same purpose on one ground or the other, making each ground manner, place and date of service; shall specify any papers
the subject of a separate action. Upon these premises, application of the which have been served with the process and the name of the
sanction indicated by law is caned for, i.e., the judgment on the merits in any person who received the same; and shall be sworn to when
one is available as a bar in the others. 45 made by a person other than a sheriff or his deputy. 48
In the case of Delta Motor Sales Corporation vs. Mangosing 49 it was held that:" The respondents' contention that the petition is in effect an action to annul a
judgment which is within the exclusive original jurisdiction of the Court of
(a) strict compliance with the mode of service is necessary to confer jurisdiction Appeals52 has already been answered in Matanguihan vs. Tengco 53 where, by
of the court over a corporation. The officer upon whom service is made must be declaring that an action for annulment of judgment is not a plain, speedy and
one who is named in the statute; otherwise the service is insufficient. So, where adequate remedy, this Court in effect affirmed that certiorari is an appropriate
the statute requires that in the case of a domestic corporation summons should remedy against judgments or proceedings alleged to have been rendered or had
be served on 'the president or head of the corporation, secretary, treasurer, without valid service of summons. 54
cashier or managing agent thereof, service of summons on the secretary's wife
did not confer jurisdiction over the corporation in the foreclosure proceeding Respondent Judge Castro begged the question when, instead of resolving on the
against it. Hence, the decree of foreclosure and the deficiency judgment were merits the issue of the invalidity of his default judgment and of the proceedings
void and should be vacated (Reader vs. District Court, 94 Pacific 2nd 858). leading thereto because of absence of valid service of summons on the
defendant, which had been expressly raised in the defendant's motion for
The purpose is to render it reasonably certain that the reconsideration, he simply refused to do so on the excuse that he had lost
corporation will receive prompt and proper notice in an action jurisdiction over the case. This refusal was, in the premises, a grave abuse of
against it or to insure that the summons be served on a judicial discretion which must be rectified.
representative so integrated with the corporation that such
person will know what to do with the legal papers served on What has been said makes unnecessary any further proceedings in the Court
him. In other words, 'to bring home to the corporation notice of below, which might otherwise be indicated by the consideration that two of the
the filing of the action'. (35 A C.J.S. 288 citing Jenkins vs. Lykes postulates of petitioner's unresolved motions which the Court considers equally
Bros. S.S. Co., 48 F. Supp. 848; MacCarthy vs. Langston, D.C. Fla., as decisive as res judicata, to wit: estoppel by silence and Article 1819, last
23 F.R.D. 249). paragraph, of the Civil Code, do not constitute grounds for a motion to dismiss
under rule 16, of the Rules of Court. Such a step would only cause further delay.
The liberal construction rule cannot be invoked and utilized as And delay has been the bane of petitioner's cause, defying through all these
a substitute for the plain legal requirements as to the manner years all its efforts to collect on a just debt.
in which summons should be served on a domestic corporation
(U.S. vs. Mollenhauer Laboratories, Inc., 267 Fed. Rep. 2nd The undenied and undisputable facts make it perfectly clear that the claim to
260).' the mortgaged property belatedly and in apparent bad faith pressed by the
respondent partnership is foreclosed by both law and equity. Further
The rule cannot be any less exacting as regards adherence to the requirements proceedings will not make this any clearer than it already is. The Court is
of proof of service, it being usually by such proof that sufficiency of compliance clothed with ample authority, in such a case, to call a halt to all further
with the prescribed mode of service is measured. Here the only proof of service proceedings and pronounce judgment on the basis of what is already manifestly
of summons is the questioned sheriff's return which, as already pointed out, is of record.
not only vague and unspecific as to the place of service, but also neglects to
Identify by name the recipient of the summons as required by Rule 20, Section So much for the merits; the consequences that should attend the inexcusable
14, of the Rules of Court. Where the sheriffs return is defective the presumption and indefensible conduct of the respondents Lims, the respondent partnership
of regularity in the performance of official functions will not lie. 50 The defective and their counsel, Atty. Paterno R. Canlas, should now be addressed. That the
sheriffs return thus being insufficient and incompetent to prove that summons Lims and their partnership acted in bad faith and with intent to defraud is
was served in the manner prescribed for service upon corporations, there is no manifest in the record of their actuations, presenting as they did, piecemeal and
alternative to affirming the petitioner's claim that it had not been validly in one case after another, defenses to the foreclosure or claims in derogation
summoned in Civil Case No. Q-36485. It goes without saying that lacking such thereof that were available to them from the very beginning — actuations that
valid service, the Trial Court did not acquire jurisdiction over the petitioner were to stave off the liquidation of an undenied debt for more than twenty years
Syjuco, rendering null and void all subsequent proceedings and issuances in the and culminated in the clandestine filing and prosecution of the action subject of
action from the order of default up to and including the judgment by default and the present petition.
the order for its execution. 51
What has happened here, it bears repeating, is nothing less than an abuse of of mandamus-in which the payment of "damages sustained by the petitioner by
process, a trifling with the courts and with the rights of access thereto, for which reason of the wrongful acts of the defendant' is expressly authorized. 59
Atty. Canlas must share responsibility equally with his clients. The latter could
not have succeeded so well in obstructing the course of justice without his aid There is no question in the Court's mind that such interests as may have
and advice and his tireless espousal of their claims and pretensions made in the accumulated on the mortgage loan will not offset the prejudice visited upon the
various cases chronicled here. That the cause to which he lent his advocacy was petitioner by the excruciatingly long delay in the satisfaction of said debt that
less than just or worthy could not have escaped him, if not at the start of his the private respondents have engineered and fomented.
engagement, in the years that followed when with his willing assistance, if not
instigation, it was shuttled from one forum to another after each setback. This These very same considerations dictate the imposition of exemplary damages in
Court merely stated what is obvious and cannot be gainsaid when, in Surigao accordance with Art. 2229 of the Civil Code.
Mineral Reservation Board vs. Cloribel, 55 it held that a party's lawyer of record
has control of the proceedings and that '(w)hatever steps his client takes should
be within his knowledge and responsibility." WHEREFORE, so that complete justice may be dispensed here and, as far as
consistent with that end, all the matters and incidents with which these
proceedings are concerned may be brought to a swift conclusion:
In Prudential Bank vs. Castro, 56 strikingly similar actuations in a case, which are
described in the following paragraph taken from this Court's decision therein:
(1) the assailed judgment by default in Civil Case No.Q-36485,
the writ of execution and all other orders issued in
Respondents' foregoing actuations reveal an 'unholy alliance' implementation thereof, and all proceedings in the case leading
between them and a clear indication of partiality for the party to said judgment after the filing of the complaint are
represented by the other to the detriment of the objective DECLARED null and void and are hereby SET ASIDE; and the
dispensation of justice. Writs of Attachment and Execution complaint in said case is DISMISSED for being barred by prior
were issued and implemented with lightning speed; the case judgment and estoppel, and for lack of merit;
itself was railroaded to a swift conclusion through a similar
judgment; astronomical sums were awarded as damages and
attorney's fees; and topping it all, the right to appeal was (2) the City Sheriff of Manila is ORDERED, upon receipt of this
foreclosed by clever maneuvers," and which, the Court found, Decision, to schedule forthwith and thereafter conduct with all
followed a pattern of conduct in other cases of which judicial due dispatch the sale at public auction of the mortgaged
notice was taken, were deemed sufficient cause for property in question for the satisfaction of the mortgage debt
disbarment. of the respondents Lims to petitioner, in the principal amount
of P2,460,000.00 as found in the amended decision in Civil
Case No. 75180 of the Court of First Instance of Manila,
Atty. Canlas even tried to mislead this Court by claiming that he became the interests thereon at the rate of twelve (12%) percent per
Lims' lawyer only in 1977, 57 when the record indubitably shows that he has annum from November 8, 1967 until the date of sale, plus such
represented them since September 9, 1972 when he first appeared for them to other and additional sums for commissions, expenses, fees, etc.
prosecute their appeal in Civil Case No. 75180. 58 He has also quite impenitently as may be lawfully chargeable in extrajudicial foreclosure and
disclaimed a duty to inform opposing counsel in Civil Case No. Q-39294 of the sale proceedings;
existence of Civil Case No. Q-36485, as plaintiffs' counsel in both actions, even
while the former, which involved the same mortgage, was already being
litigated when the latter was filed, although in the circumstances such (3) the private respondents, their successors and assigns, are
disclosure was required by the ethics of his profession, if not indeed by his PERPETUALLY ENJOINED from taking any action whatsoever
lawyer's oath. to obstruct, delay or prevent said auction sale;

A clear case also exists for awarding at least nominal damages to petitioner, (4) the private respondents (the Lims, the Partnership of the
though damages are not expressly prayed for, under the general prayer of the Heirs of Hugo Lim and Atty. Paterno R. Canlas) are sentenced,
petition for "such other reliefs as may be just and equitable under the jointly and severally, to pay the petitioner P25,000.00 as
premises," and the action being not only of certiorari and prohibition, but also
nominal damages and P100,000.00 as exemplary damages, as  April 06, 1992: Del Rosario and Mr. Graciano Gozon of RBS Senior vice-
well as treble costs; and
president for Finance discussed the terms and conditions of Viva's offer to
(5) let this matter be referred to the Integrated Bar of the sell the 104 films, after the rejection of the same package by ABS-CBN
Philippines for investigation, report, and recommendation
 April 07, 1992: Ms. Concio sent the proposal draft of 53 films for P35M
insofar as the conduct of Atty. Canlas as counsel in this case
and in the other cases hereinabove referred to is concerned. which Viva's Board rejected since they will not accept anything less than
P60M
SO ORDERED.
 April 29, 1992: Viva granted RBS exclusive grants for P60M
 RTC: Issued TRO against RBS in showing 14 films as filed by ABS-CBN.
Torts And Damages Case Digest: ABS-CBN V. CA (1999)  RBS also set up a cross-claim against VIVA
 RTC: ordered ABS-CBN to pay RBS P107,727 premium paid by RBS to the
surety which issued their bond to lift the injunction, P191,843.00 for the
G.R. No. 128690 January 21, 1999 amount of print advertisement for "Maging Sino Ka Man" in various
newspapers, P1M attorney's fees, P5M moral damages, P5M exemplary
Lessons Applicable: Who may recover (Torts and Damages) damages and costs. Cross-claim to VIVA was dismissed.
Laws Applicable: Articles 19, 20, and 21 of the Civil Code  ABS-CBN appealed. VIVA and Del Rosario also appealed seeking moral and
exemplary damages and additional attorney's fees.
 CA: reduced the awards of moral damages to P2M, exemplary damages to
FACTS: P2M and attorney's fees to P500,000. Denied VIVA and Del Rosario's
appeal because it was RBS and not VIVA which was actually prejudiced
 Viva, through Del Rosario, offered ABS-CBN through its vice-president
when the complaint was filed by ABS-CBN
Charo Santos-Concio, a list of 3 film packages or 36 titles from which ABS-
ISSUE:
CBN may exercise its right of first refusal
1. W/N RBS is entitled to damages. -YES
 Mrs. Concio informed Vic through a letter that they can only purchase 10
2. W/N VIVA is entitled to damages. - NO
titles to be schedules on non-primetime slots because they were very adult
themes which the ruling of the MTRCB advises to be aired at 9:00 p.m
 February 27, 1992: Del Rosario approached ABS-CBN's Ms. Concio with a
HELD: REVERSED except as to unappealed award of attorney's fees in favor of
list consisting of 52 original movie titles as well as 104 re-runs proposing to
VIVA Productions, Inc.
sell to ABS-CBN airing rights for P60M (P30M cash and P30M worth of
television spots)
1. YES.
 April 2, 1992: Del Rosario and ABS-CBN general manager, Eugenio Lopez III
met wherein Del Rosario allegedly agreed to grant rights for 14 films  One is entitled to compensation for actual damages only for such pecuniary
for P30M loss suffered by him as he has duly proved. The indemnification shall
comprehend not only the value of the loss suffered, but also that of the
profits that the obligee failed to obtain. In contracts and quasi-contracts the contract where the defendant acted fraudulently or in bad faith. RBS's claim
damages which may be awarded are dependent on whether the obligor for moral damages could possibly fall only under item (10) of Article 2219
acted with good faith or otherwise, It case of good faith, the damages  (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34,
recoverable are those which are the natural and probable consequences of and 35.
the breach of the obligation and which the parties have foreseen or could  The award of moral damages cannot be granted in favor of a corporation
have reasonably foreseen at the time of the constitution of the obligation. If because, being an artificial person and having existence only in legal
the obligor acted with fraud, bad faith, malice, or wanton attitude, he shall contemplation, it has no feelings, no emotions, no senses, It cannot,
be responsible for all damages which may be reasonably attributed to the therefore, experience physical suffering and mental anguish, which call be
non-performance of the obligation. In crimes and quasi-delicts, the experienced only by one having a nervous system. A corporation may
defendant shall be liable for all damages which are the natural and recover moral damages if it "has a good reputation that is debased,
probable consequences of the act or omission complained of, whether or resulting in social humiliation" is an obiter dictum. On this score alone the
not such damages has been foreseen or could have reasonably been award for damages must be set aside, since RBS is a corporation.
foreseen by the defendant. Actual damages may likewise be recovered for  exemplary damages are imposed by way of example or correction for the
loss or impairment of earning capacity in cases of temporary or permanent public good, in addition to moral, temperate, liquidated or compensatory
personal injury, or for injury to the plaintiff's business standing or damages. They are recoverable in criminal cases as part of the civil liability
commercial credit. when the crime was committed with one or more aggravating
 The claim of RBS for actual damages did not arise from contract, quasi- circumstances in quasi-contracts, if the defendant acted with gross
contract, delict, or quasi-delict. It arose from the fact of filing of the negligence and in contracts and quasi-contracts, if the defendant acted in a
complaint despite ABS-CBN's alleged knowledge of lack of cause of wanton, fraudulent, reckless, oppressive, or malevolent manner
action. Needless to state the award of actual damages cannot be  It may be reiterated that the claim of RBS against ABS-CBN is not based on
comprehended under the above law on actual damages. RBS could only contract, quasi-contract, delict, or quasi-delict, Hence, the claims for moral
probably take refuge under Articles 19, 20, and 21 of the Civil Code. and exemplary damages can only be based on Articles 19, 20, and 21 of the
 In this case, ABS-CBN had not yet filed the required bond; as a matter of Civil Code.
fact, it asked for reduction of the bond and even went to the Court of  There is no adequate proof that ABS-CBN was inspired by malice or bad
Appeals to challenge the order on the matter, Clearly then, it was not faith. If damages result from a person's exercise of a right, it is damnum
necessary for RBS to file a counterbond. Hence, ABS-CBN cannot be held absque injuria.
responsible for the premium RBS paid for the counterbond
 Neither could ABS-CBN be liable for the print advertisements for "Maging
Sino Ka Man" for lack of sufficient legal basis. SANTIAGO SYJUCO, INC v. CASTRO
 Article 2217 thereof defines what are included in moral damages, while
SANTIAGO SYJUCO, INC v. CASTRO
Article 2219 enumerates the cases where they may be recovered, Article
2220 provides that moral damages may be recovered in breaches of G.R. No. 70403; July 7, 1989
Ponente: J. Narvasa precisely, on March 30, 1959, hence, said mortgage was void because
executed by them without authority from the partnership.

ISSUE:
FACTS:
Whether the mortgage executed by the Lims be attributable to their
partnership
Back in November 1964, the Lims, borrowed from petitioner Santiago
Syjuco, Inc., the sum of P800,000.00. The loan was given on the security of a
first mortgage on property registered in the names of said borrowers as HELD:
owners in common under Transfer Certificates of Title Numbered 75413
and 75415 of the Registry of Deeds of Manila. Thereafter additional loans
on the same security were obtained by the Lims from Syjuco, so that as of Yes, the mortgage executed by the Lims is attributable to their
May 8, 1967, the aggregate of the loans stood at P2,460,000.00, exclusive of partnership.
interest, and the security had been augmented by bringing into the
mortgage other property, also registered as owned pro indiviso by the Lims
under two titles: TCT Nos. 75416 and 75418 of the Manila Registry.
The Supreme Court held that the legal fiction of a separate juridical
personality and existence will not shield it from the conclusion of having
such knowledge which naturally and irresistibly flows from the undenied
On November 8, 1967, the Lims failed to pay it despite demands facts. It would violate all precepts of reason, ordinary experience and
therefore; that Syjuco consequently caused extra-judicial proceedings for common sense to propose that a partnership, as such, cannot be held
the foreclosure of the mortgage to be commenced by the Sheriff of Manila; accountable with knowledge of matters commonly known to all the
and that the latter scheduled the auction sale of the mortgaged property on partners or of acts in which all of the latter, without exception, have taken
December 27, 1968. part, where such matters or acts affect property claimed as its own by said
partnership.

The attempt to foreclose triggered off a legal battle that has dragged on for
more than twenty years now, fought through five (5) cases in the trial The silence and failure of the partnership to impugn said mortgage within
courts, two (2) in the Court of Appeals, and three (3) more in the Supreme a reasonable time, let alone a space of more than seventeen years, brought
Court. into play the doctrine of estoppel to preclude any attempt to avoid the
mortgage as allegedly unauthorized.

One of the complaints filed by the Lims was filed not in their individual
names, but in the name of a partnership of which they themselves were the There is no reason to distinguish between the Lims, as individuals, and the
only partners: "Heirs of Hugo Lim." The complaint advocated the theory partnership itself, since the former constituted the entire membership of
that the mortgage which they, together with their mother, had individually the latter. In other words, despite the concealment of the existence of the
constituted (and thereafter amended during the period from 1964 to 1967) partnership, for all intents and purposes and consistently with the Lims'
over lands standing in their names in the Property Registry as owners pro own theory, it was that partnership which was the real party in interest in
indiviso, in fact no longer belonged to them at that time, having been earlier all the actions; it was actually represented in said actions by all the
deeded over by them to the partnership, "Heirs of Hugo Lim," more individual members thereof, and consequently, those members' acts,
declarations and omissions cannot be deemed to be simply the individual
acts of said members, but in fact and in law, those of the partnership.