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G.R. No.

L-16513 January 18, 1921 Some legal minds, perhaps more academic than practical, have entertained doubt
upon the question whether gas can be the subject of larceny; but no judicial decision
THE UNITED STATES, plaintiff-appellee, has been called to our attention wherein any respectable court has refused to treat it
vs. as such. In U.S. vs. Genato (15 Phil., 170, 175), this court, speaking through Mr.
MANUEL TAMBUNTING, defendant-appellant. Justice Torres, said ". . . the right of the ownership of electric current is secured by
article 517 and 518 of the Penal Code; the application of these articles in cases of
subtraction of gas, a fluid used for lighting, and in some respects resembling
Manuel Garcia Goyena for appellant. electricity, is confirmed by the rule laid down in the decisions of the supreme court of
Acting Attorney-General Feria for appellee. Spain of January 20, 1887, and April 1, 1897, construing and enforcing the provisions
of articles 530 and 531 of the Penal Code of that country, articles identical with
STREET, J.: articles 517 and 518 of the code in force in these Islands." These expressions were
used in a case which involved the subtraction and appropriation of electrical energy
This appeal was instituted for the purpose of reversing a judgment of the Court of and the court held, in accordance with the analogy of the case involving the theft of
First Instance of the city of Manila, finding the accused, Manuel Tambunting, guilty of gas, that electrical energy could also be the subject of theft. The same conclusion
stealing a quantity of gas belonging to the Manila Gas Corporation, and sentencing was reached in U.S. vs. Carlos (21 Phil., 553), which was also a case of prosecution
him to undergo imprisonment for two months and one day, of arresto mayor, with the for stealing electricity.
accessories prescribed by law; to indemnify the said corporation in the sum of P2,
with subsidiary imprisonment in case of insolvency; and to pay the costs. The precise point whether the taking of gas may constitute larceny has never before,
so far as the present writer is aware, been the subject of adjudication in this court, but
The evidence submitted in behalf of the prosecution shows that in January of the year the decisions of Spanish, English, and American courts all answer the question in the
affirmative. (See U.S. vs. Carlos, 21 Phil., 553, 560.)
1918, the accused and his wife became occupants of the upper floor of the house
situated at No. 443, Calle Evangelista, in the city of Manila. In this house the Manila
Gas Corporation had previously installed apparatus for the delivery of gas on both the In this connection it will suffice to quote the following from the topic "Larceny," at page
upper and lower floors, consisting of the necessary piping and a gas meter, which last 34, Vol. 17, of Ruling Case Law:
mentioned apparatus was installed below. When the occupants at whose request this
installation had been made vacated the premises, the gas company disconnected the There is nothing in the nature of gas used for illuminating purposes which renders it
gas pipe and removed the meter, thus cutting off the supply of gas from said incapable of being feloniously taken and carried away. It is a valuable article of
premises. merchandise, bought and sold like other personal property, susceptible of being
severed from a mass or larger quantity and of being transported from place to place.
Upon June 2, 1919, one of the inspectors of the gas company visited the house in Likewise water which is confined in pipes and electricity which is conveyed by wires
question and found that gas was being used, without the knowledge and consent of are subjects of larceny."
the gas company, for cooking in the quarters occupied by the defendant and his wife:
to effect which a short piece of iron pipe had been inserted in the gap where the gas As to the amount and value of the gas appropriated by the accused in the period
meter had formerly been placed, and piece of rubber tubing had been used to during which he admits having used it, the proof is not entirely satisfactory.
connect the gas pipe of rubber tubing had been used to connect the gas pipe in Nevertheless we think the trial court was justified in fixing the value of the gas at P2
kitchen with the gas stove, or plate, used for cooking. per month, which is the minimum charge for gas made by the gas company, however
small the amount consumed. That is to say, no person desiring to use gas at all for
At the time this discovery was made, the accused, Manuel Tambunting, was not at domestic purposes can purchase the commodity at a lower rate per month than P2.
home, but he presently arrived and admitted to the agent to the gas company that he There was evidence before the court showing that the general average of the monthly
had made the connection with the rubber tubing between the gas pipe and the stove, bills paid by consumers throughout the city for the use of gas in a kitchen equipped
though he denied making the connection below. He also admitted that he knew he like that used by the accused is from P18 to 20, while the average minimum is about
was using gas without the knowledge of the company and that he had been so using P8 per month. We think that the facts above stated are competent evidence; and the
it for probably two or three months. conclusion is inevitable that the accused is at least liable to the extent of the minimum
charge of P2 per month. The market value of the property at the time and place of the
The clandestine use of gas by the accused in the manner stated is thus established in theft is of court the proper value to be proven (17 R.C.L., p. 66); and when it is found
our opinion beyond a doubt; and inasmuch as the animo lucrandi is obvious, it only that the least amount that a consumer can take costs P2 per months, this affords
remains to consider, first, whether gas can be the subject to larceny and, secondly, proof that the amount which the accused took was certainly worth that much.
whether the quantity of gas appropriated in the two months, during which the accused Absolute certainty as to the full amount taken is of course impossible, because no
admitted having used the same, has been established with sufficient certainty to meter wad used; but absolute certainty upon this point is not necessary, when it is
enable the court to fix an appropriate penalty.
certain that the minimum that could have been taken was worth a determinable Necessity (CPCN) duly issued by the National Telecommunications Commission
amount. (NTC), and operates and maintains an International Gateway Facility (IGF). The
PLDT network is thus principally composed of the Public Switch Telephone Network
It appears that before the present prosecution was instituted, the accused had been (PSTN), telephone handsets and/or telecommunications equipment used by its
unsuccessfully prosecuted for an infraction of section 504 of the Revised Ordinances subscribers, the wires and cables linking said telephone handsets and/or
of the city of Manila, under a complaint charging that the accused, not being a telecommunications equipment, antenna, the IGF, and other telecommunications
registered installer of gas equipment had placed a gas installation in the house at No. equipment which provide interconnections.3 1avvphil.net
443, Calle Evangelista. Upon this it is argued for the accused that, having been
acquitted of that charge, he is not now subject to prosecution for the offense of theft, PLDT alleges that one of the alternative calling patterns that constitute network fraud
having been acquitted of the former charge. The contention is evidently not well- and violate its network integrity is that which is known as International Simple Resale
founded, since the two offenses are of totally distinct nature. Furthermore, a (ISR). ISR is a method of routing and completing international long distance calls
prosecution for violation of a city ordinance is not ordinarily a bar to a subsequent using International Private Leased Lines (IPL), cables, antenna or air wave or
prosecution for the same offense under the general law of the land. (U.S. vs. Garcia frequency, which connect directly to the local or domestic exchange facilities of the
Gavieres, 10 Phil., 694.) terminating country (the country where the call is destined). The IPL is linked to
switching equipment which is connected to a PLDT telephone line/number. In the
The conclusion is that the accused is properly subject to punishment, under No. 5 of process, the calls bypass the IGF found at the terminating country, or in some
article 518 of the Penal Code, for the gas taken in the course of two months a the rate instances, even those from the originating country.4
of P2 per month. There being no aggravating or attenuating circumstance to be
estimated, it results that the proper penalty is two months and one day of arresto One such alternative calling service is that offered by Baynet Co., Ltd. (Baynet) which
mayor, as fixed by the trial court. The judgment will therefore be affirmed, with costs sells "Bay Super Orient Card" phone cards to people who call their friends and
against the appellant, it being understood that the amount of the indemnity which the relatives in the Philippines. With said card, one is entitled to a 27-minute call to the
accused shall pay to the gas company is P4, instead of P2, with subsidiary Philippines for about ¥37.03 per minute. After dialing the ISR access number
imprisonment for one day in case of insolvency. So ordered. indicated in the phone card, the ISR operator requests the subscriber to give the PIN
number also indicated in the phone card. Once the caller’s identity (as purchaser of
the phone card) is confirmed, the ISR operator will then provide a Philippine local line
G.R. No. 155076 February 27, 2006
to the requesting caller via the IPL. According to PLDT, calls made through the IPL
never pass the toll center of IGF operators in the Philippines. Using the local line, the
LUIS MARCOS P. LAUREL, Petitioner, Baynet card user is able to place a call to any point in the Philippines, provided the
vs. local line is National Direct Dial (NDD) capable.5
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court, Makati
City, Branch 150, PEOPLE OF THE PHILIPPINES& PHILIPPINE LONG DISTANCE
PLDT asserts that Baynet conducts its ISR activities by utilizing an IPL to course its
TELEPHONE COMPANY, Respondents.
incoming international long distance calls from Japan. The IPL is linked to switching
equipment, which is then connected to PLDT telephone lines/numbers and
DECISION equipment, with Baynet as subscriber. Through the use of the telephone lines and
other auxiliary equipment, Baynet is able to connect an international long distance call
CALLEJO, SR., J.: from Japan to any part of the Philippines, and make it appear as a call originating
from Metro Manila. Consequently, the operator of an ISR is able to evade payment of
access, termination or bypass charges and accounting rates, as well as compliance
Before us is a Petition for Review on Certiorari of the Decision 1 of the Court of with the regulatory requirements of the NTC. Thus, the ISR operator offers
Appeals (CA) in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus C. international telecommunication services at a lower rate, to the damage and prejudice
Abrogar, Regional Trial Court (RTC), Makati City, Branch 150, which denied the of legitimate operators like PLDT.6
"Motion to Quash (With Motion to Defer Arraignment)" in Criminal Case No. 99-2425
for theft.
PLDT pointed out that Baynet utilized the following equipment for its ISR activities:
lines, cables, and antennas or equipment or device capable of transmitting air waves
Philippine Long Distance Telephone Company (PLDT) is the holder of a legislative or frequency, such as an IPL and telephone lines and equipment; computers or any
franchise to render local and international telecommunication services under Republic equipment or device capable of accepting information applying the prescribed
Act No. 7082.2 Under said law, PLDT is authorized to establish, operate, manage, process of the information and supplying the result of this process; modems or any
lease, maintain and purchase telecommunication systems, including transmitting, equipment or device that enables a data terminal equipment such as computers to
receiving and switching stations, for both domestic and international calls. For this communicate with other data terminal equipment via a telephone line; multiplexers or
purpose, it has installed an estimated 1.7 million telephone lines nationwide. PLDT any equipment or device that enables two or more signals from different sources to
also offers other services as authorized by Certificates of Public Convenience and
pass through a common cable or transmission line; switching equipment, or to the local or domestic exchange facilities of the country where the call is destined,
equipment or device capable of connecting telephone lines; and software, diskettes, effectively stealing this business from PLDT while using its facilities in the estimated
tapes or equipment or device used for recording and storing information. 7 amount of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount.

PLDT also discovered that Baynet subscribed to a total of 123 PLDT telephone CONTRARY TO LAW.13
lines/numbers.8 Based on the Traffic Study conducted on the volume of calls passing
through Baynet’s ISR network which bypass the IGF toll center, PLDT incurred an Accused Laurel filed a "Motion to Quash (with Motion to Defer Arraignment)" on the
estimated monthly loss of P10,185,325.96.9 Records at the Securities and Exchange ground that the factual allegations in the Amended Information do not constitute the
Commission (SEC) also revealed that Baynet was not authorized to provide felony of theft under Article 308 of the Revised Penal Code. He averred that the
international or domestic long distance telephone service in the country. The following Revised Penal Code, or any other special penal law for that matter, does not prohibit
are its officers: Yuji Hijioka, a Japanese national (chairman of the board of directors); ISR operations. He claimed that telephone calls with the use of PLDT telephone lines,
Gina C. Mukaida, a Filipina (board member and president); Luis Marcos P. Laurel, a whether domestic or international, belong to the persons making the call, not to PLDT.
Filipino (board member and corporate secretary); Ricky Chan Pe, a Filipino (board He argued that the caller merely uses the facilities of PLDT, and what the latter owns
member and treasurer); and Yasushi Ueshima, also a Japanese national (board are the telecommunication infrastructures or facilities through which the call is made.
member). He also asserted that PLDT is compensated for the caller’s use of its facilities by way
of rental; for an outgoing overseas call, PLDT charges the caller per minute, based on
Upon complaint of PLDT against Baynet for network fraud, and on the strength of two the duration of the call. Thus, no personal property was stolen from PLDT. According
search warrants10 issued by the RTC of Makati, Branch 147, National Bureau of to Laurel, the P20,370,651.92 stated in the Information, if anything, represents the
Investigation (NBI) agents searched its office at the 7th Floor, SJG Building, Kalayaan rental for the use of PLDT facilities, and not the value of anything owned by it. Finally,
Avenue, Makati City on November 8, 1999. Atsushi Matsuura, Nobuyoshi Miyake, he averred that the allegations in the Amended Information are already subsumed
Edourd D. Lacson and Rolando J. Villegas were arrested by NBI agents while in the under the Information for violation of Presidential Decree (P.D.) No. 401 filed and
act of manning the operations of Baynet. Seized in the premises during the search pending in the Metropolitan Trial Court of Makati City, docketed as Criminal Case No.
were numerous equipment and devices used in its ISR activities, such as 276766.
multiplexers, modems, computer monitors, CPUs, antenna, assorted computer
peripheral cords and microprocessors, cables/wires, assorted PLDT statement of The prosecution, through private complainant PLDT, opposed the
accounts, parabolic antennae and voltage regulators. motion,14 contending that the movant unlawfully took personal property belonging to
it, as follows: 1) intangible telephone services that are being offered by PLDT and
State Prosecutor Ofelia L. Calo conducted an inquest investigation and issued a other telecommunication companies, i.e., the connection and interconnection to their
Resolution11 on January 28, 2000, finding probable cause for theft under Article 308 telephone lines/facilities; 2) the use of those facilities over a period of time; and 3) the
of the Revised Penal Code and Presidential Decree No. 40112against the revenues derived in connection with the rendition of such services and the use of
respondents therein, including Laurel. such facilities.15

On February 8, 2000, State Prosecutor Calo filed an Information with the RTC of The prosecution asserted that the use of PLDT’s intangible telephone
Makati City charging Matsuura, Miyake, Lacson and Villegas with theft under Article services/facilities allows electronic voice signals to pass through the same, and
308 of the Revised Penal Code. After conducting the requisite preliminary ultimately to the called party’s number. It averred that such service/facility is akin to
investigation, the State Prosecutor filed an Amended Information impleading Laurel (a electricity which, although an intangible property, may, nevertheless, be appropriated
partner in the law firm of Ingles, Laurel, Salinas, and, until November 19, 1999, a and be the subject of theft. Such service over a period of time for a consideration is
member of the board of directors and corporate secretary of Baynet), and the other the business that PLDT provides to its customers, which enables the latter to send
members of the board of directors of said corporation, namely, Yuji Hijioka, Yasushi various messages to installed recipients. The service rendered by PLDT is akin to
Ueshima, Mukaida, Lacson and Villegas, as accused for theft under Article 308 of the merchandise which has specific value, and therefore, capable of appropriation by
Revised Penal Code. The inculpatory portion of the Amended Information reads: another, as in this case, through the ISR operations conducted by the movant and his
co-accused.
On or about September 10-19, 1999, or prior thereto, in Makati City, and within the
jurisdiction of this Honorable Court, the accused, conspiring and confederating The prosecution further alleged that "international business calls and revenues
together and all of them mutually helping and aiding one another, with intent to gain constitute personal property envisaged in Article 308 of the Revised Penal Code."
and without the knowledge and consent of the Philippine Long Distance Telephone Moreover, the intangible telephone services/facilities belong to PLDT and not to the
(PLDT), did then and there willfully, unlawfully and feloniously take, steal and use the movant and the other accused, because they have no telephone services and
international long distance calls belonging to PLDT by conducting International Simple facilities of their own duly authorized by the NTC; thus, the taking by the movant and
Resale (ISR), which is a method of routing and completing international long distance his co-accused of PLDT services was with intent to gain and without the latter’s
calls using lines, cables, antennae, and/or air wave frequency which connect directly consent.
The prosecution pointed out that the accused, as well as the movant, were paid in Penal Code, since a "business" is "(1) a commercial or mercantile activity customarily
exchange for their illegal appropriation and use of PLDT’s telephone services and engaged in as a means of livelihood and typically involving some independence of
facilities; on the other hand, the accused did not pay a single centavo for their illegal judgment and power of decision; (2) a commercial or industrial enterprise; and (3)
ISR operations. Thus, the acts of the accused were akin to the use of a "jumper" by a refers to transactions, dealings or intercourse of any nature." On the other hand, the
consumer to deflect the current from the house electric meter, thereby enabling one to term "revenue" is defined as "the income that comes back from an investment (as in
steal electricity. The prosecution emphasized that its position is fortified by the real or personal property); the annual or periodical rents, profits, interests, or issues of
Resolutions of the Department of Justice in PLDT v. Tiongson, et al. (I.S. No. 97- any species of real or personal property."22
0925) and in PAOCTF-PLDT v. Elton John Tuason, et al. (I.S. No. 2000-370) which
were issued on August 14, 2000 finding probable cause for theft against the Laurel further posited that an electric company’s business is the production and
respondents therein. distribution of electricity; a gas company’s business is the production and/or
distribution of gas (as fuel); while a water company’s business is the production and
On September 14, 2001, the RTC issued an Order16 denying the Motion to Quash the distribution of potable water. He argued that the "business" in all these cases is the
Amended Information. The court declared that, although there is no law that expressly commercial activity, while the goods and merchandise are the products of such
prohibits the use of ISR, the facts alleged in the Amended Information "will show how activity. Thus, in prosecutions for theft of certain forms of energy, it is the electricity or
the alleged crime was committed by conducting ISR," to the damage and prejudice of gas which is alleged to be stolen and not the "business" of providing electricity or gas.
PLDT. However, since a telephone company does not produce any energy, goods or
merchandise and merely renders a service or, in the words of PLDT, "the connection
Laurel filed a Motion for Reconsideration17 of the Order, alleging that international and interconnection to their telephone lines/facilities," such service cannot be the
long distance calls are not personal property, and are not capable of appropriation. subject of theft as defined in Article 308 of the Revised Penal Code. 23
He maintained that business or revenue is not considered personal property, and that
the prosecution failed to adduce proof of its existence and the subsequent loss of He further declared that to categorize "business" as personal property under Article
personal property belonging to another. Citing the ruling of the Court in United States 308 of the Revised Penal Code would lead to absurd consequences; in prosecutions
v. De Guzman,18 Laurel averred that the case is not one with telephone calls which for theft of gas, electricity or water, it would then be permissible to allege in the
originate with a particular caller and terminates with the called party. He insisted that Information that it is the gas business, the electric business or the water business
telephone calls are considered privileged communications under the Constitution and which has been stolen, and no longer the merchandise produced by such
cannot be considered as "the property of PLDT." He further argued that there is no enterprise.24
kinship between telephone calls and electricity or gas, as the latter are forms of
energy which are generated and consumable, and may be considered as personal Laurel further cited the Resolution of the Secretary of Justice in Piltel v.
property because of such characteristic. On the other hand, the movant argued, the Mendoza,25 where it was ruled that the Revised Penal Code, legislated as it was
telephone business is not a form of energy but is an activity. before present technological advances were even conceived, is not adequate to
address the novel means of "stealing" airwaves or airtime. In said resolution, it was
In its Order19 dated December 11, 2001, the RTC denied the movant’s Motion for noted that the inadequacy prompted the filing of Senate Bill 2379 (sic) entitled "The
Reconsideration. This time, it ruled that what was stolen from PLDT was its Anti-Telecommunications Fraud of 1997" to deter cloning of cellular phones and other
"business" because, as alleged in the Amended Information, the international long forms of communications fraud. The said bill "aims to protect in number (ESN) (sic) or
distance calls made through the facilities of PLDT formed part of its business. The Capcode, mobile identification number (MIN), electronic-international mobile
RTC noted that the movant was charged with stealing the business of PLDT. To equipment identity (EMEI/IMEI), or subscriber identity module" and "any attempt to
support its ruling, it cited Strochecker v. Ramirez,20where the Court ruled that interest duplicate the data on another cellular phone without the consent of a public
in business is personal property capable of appropriation. It further declared that, telecommunications entity would be punishable by law." 26 Thus, Laurel concluded,
through their ISR operations, the movant and his co-accused deprived PLDT of fees "there is no crime if there is no law punishing the crime."
for international long distance calls, and that the ISR used by the movant and his co-
accused was no different from the "jumper" used for stealing electricity. On August 30, 2002, the CA rendered judgment dismissing the petition. 27 The
appellate court ruled that a petition for certiorari under Rule 65 of the Rules of Court
Laurel then filed a Petition for Certiorari with the CA, assailing the Order of the RTC. was not the proper remedy of the petitioner. On the merits of the petition, it held that
He alleged that the respondent judge gravely abused his discretion in denying his while business is generally an activity
Motion to Quash the Amended Information.21 As gleaned from the material averments
of the amended information, he was charged with stealing the international long which is abstract and intangible in form, it is nevertheless considered "property" under
distance calls belonging to PLDT, not its business. Moreover, the RTC failed to Article 308 of the Revised Penal Code. The CA opined that PLDT’s business of
distinguish between the business of PLDT (providing services for international long providing international calls is personal property which may be the object of theft, and
distance calls) and the revenues derived therefrom. He opined that a "business" or its cited United States v. Carlos28 to support such conclusion. The tribunal also cited
revenues cannot be considered as personal property under Article 308 of the Revised Strochecker v. Ramirez,29 where this Court ruled that one-half interest in a day’s
business is personal property under Section 2 of Act No. 3952, otherwise known as telephone network, lines or facilities over a period of time; and (c) the income derived
the Bulk Sales Law. The appellate court held that the operations of the ISR are not in connection therewith.33
subsumed in the charge for violation of P.D. No. 401.
PLDT further posits that business revenues or the income derived in connection with
Laurel, now the petitioner, assails the decision of the CA, contending that - the rendition of such services and the use of its telephone network, lines or facilities
are personal properties under Article 308 of the Revised Penal Code; so is the use of
THE COURT OF APPEALS ERRED IN RULING THAT THE PERSONAL said telephone services/telephone network, lines or facilities which allow electronic
PROPERTY ALLEGEDLY STOLEN PER THE INFORMATION IS NOT THE voice signals to pass through the same and ultimately to the called party’s number. It
"INTERNATIONAL LONG DISTANCE CALLS" BUT THE "BUSINESS OF is akin to electricity which, though intangible property, may nevertheless be
PLDT." appropriated and can be the object of theft. The use of respondent PLDT’s telephone
network, lines, or facilities over a period of time for consideration is the business that
it provides to its customers, which enables the latter to send various messages to
THE COURT OF APPEALS ERRED IN RULING THAT THE TERM intended recipients. Such use over a period of time is akin to merchandise which has
"BUSINESS" IS PERSONAL PROPERTY WITHIN THE MEANING OF ART. value and, therefore, can be appropriated by another. According to respondent PLDT,
308 OF THE REVISED PENAL CODE.30 this is what actually happened when petitioner Laurel and the other accused below
conducted illegal ISR operations.34
Petitioner avers that the petition for a writ of certiorari may be filed to nullify an
interlocutory order of the trial court which was issued with grave abuse of discretion The petition is meritorious.
amounting to excess or lack of jurisdiction. In support of his petition before the Court,
he reiterates the arguments in his pleadings filed before the CA. He further claims that
while the right to carry on a business or an interest or participation in business is The issues for resolution are as follows: (a) whether or not the petition for certiorari is
considered property under the New Civil Code, the term "business," however, is not. the proper remedy of the petitioner in the Court of Appeals; (b) whether or not
He asserts that the Philippine Legislature, which approved the Revised Penal Code international telephone calls using Bay Super Orient Cards through the
way back in January 1, 1932, could not have contemplated to include international telecommunication services provided by PLDT for such calls, or, in short, PLDT’s
long distance calls and "business" as personal property under Article 308 thereof. business of providing said telecommunication services, are proper subjects of theft
under Article 308 of the Revised Penal Code; and (c) whether or not the trial court
committed grave abuse of discretion amounting to excess or lack of jurisdiction in
In its comment on the petition, the Office of the Solicitor General (OSG) maintains that denying the motion of the petitioner to quash the amended information.
the amended information clearly states all the essential elements of the crime of theft.
Petitioner’s interpretation as to whether an "international long distance call" is
personal property under the law is inconsequential, as a reading of the amended On the issue of whether or not the petition for certiorari instituted by the petitioner in
information readily reveals that specific acts and circumstances were alleged charging the CA is proper, the general rule is that a petition for certiorari under Rule 65 of the
Baynet, through its officers, including petitioner, of feloniously taking, stealing and Rules of Court, as amended, to nullify an order denying a motion to quash the
illegally using international long distance calls belonging to respondent PLDT by Information is inappropriate because the aggrieved party has a remedy of appeal in
conducting ISR operations, thus, "routing and completing international long distance the ordinary course of law. Appeal and certiorari are mutually exclusive of each other.
calls using lines, cables, antenna and/or airwave frequency which connect directly to The remedy of the aggrieved party is to continue with the case in due course and,
the local or domestic exchange facilities of the country where the call is destined." when an unfavorable judgment is rendered, assail the order and the decision on
The OSG maintains that the international long distance calls alleged in the amended appeal. However, if the trial court issues the order denying the motion to quash the
information should be construed to mean "business" of PLDT, which, while abstract Amended Information with grave abuse of discretion amounting to excess or lack of
and intangible in form, is personal property susceptible of appropriation.31 The OSG jurisdiction, or if such order is patently erroneous, or null and void for being contrary to
avers that what was stolen by petitioner and his co-accused is the business of PLDT the Constitution, and the remedy of appeal would not afford adequate and expeditious
providing international long distance calls which, though intangible, is personal relief, the accused may resort to the extraordinary remedy of certiorari.35 A special
property of the PLDT.32 civil action for certiorari is also available where there are special circumstances
clearly demonstrating the inadequacy of an appeal. As this Court held in Bristol Myers
Squibb (Phils.), Inc. v. Viloria:36
For its part, respondent PLDT asserts that personal property under Article 308 of the
Revised Penal Code comprehends intangible property such as electricity and gas
which are valuable articles for merchandise, brought and sold like other personal Nonetheless, the settled rule is that a writ of certiorari may be granted in cases where,
property, and are capable of appropriation. It insists that the business of international despite availability of appeal after trial, there is at least a prima facie showing on the
calls and revenues constitute personal property because the same are valuable face of the petition and its annexes that: (a) the trial court issued the order with grave
articles of merchandise. The respondent reiterates that international calls involve (a) abuse of discretion amounting to lack of or in excess of jurisdiction; (b) appeal would
the intangible telephone services that are being offered by it, that is, the connection not prove to be a speedy and adequate remedy; (c) where the order is a patent nullity;
and interconnection to the telephone network, lines or facilities; (b) the use of its
(d) the decision in the present case will arrest future litigations; and (e) for certain The rule is that, penal laws are to be construed strictly. Such rule is founded on the
considerations such as public welfare and public policy. 37 tenderness of the law for the rights of individuals and on the plain principle that the
power of punishment is vested in Congress, not in the judicial department. It is
In his petition for certiorari in the CA, petitioner averred that the trial court committed Congress, not the Court, which is to define a crime, and ordain its punishment. 44 Due
grave abuse of its discretion amounting to excess or lack of jurisdiction when it denied respect for the prerogative of Congress in defining crimes/felonies constrains the
his motion to quash the Amended Information despite his claim that the material Court to refrain from a broad interpretation of penal laws where a "narrow
allegations in the Amended Information do not charge theft under Article 308 of the interpretation" is appropriate. The Court must take heed to language, legislative
Revised Penal Code, or any offense for that matter. By so doing, the trial court history and purpose, in order to strictly determine the wrath and breath of the conduct
deprived him of his constitutional right to be informed of the nature of the charge the law forbids.45 However, when the congressional purpose is unclear, the court
against him. He further averred that the order of the trial court is contrary to the must apply the rule of lenity, that is, ambiguity concerning the ambit of criminal
constitution and is, thus, null and void. He insists that he should not be compelled to statutes should be resolved in favor of lenity.46
undergo the rigors and tribulations of a protracted trial and incur expenses to defend
himself against a non-existent charge. Penal statutes may not be enlarged by implication or intent beyond the fair meaning
of the language used; and may not be held to include offenses other than those which
Petitioner is correct. are clearly described, notwithstanding that the Court may think that Congress should
have made them more comprehensive.47 Words and phrases in a statute are to be
construed according to their common meaning and accepted usage.
An information or complaint must state explicitly and directly every act or omission
constituting an offense38 and must allege facts establishing conduct that a penal
statute makes criminal;39 and describes the property which is the subject of theft to As Chief Justice John Marshall declared, "it would be dangerous, indeed, to carry the
advise the accused with reasonable certainty of the accusation he is called upon to principle that a case which is within the reason or
meet at the trial and to enable him to rely on the judgment thereunder of a
subsequent prosecution for the same offense.40 It must show, on its face, that if the mischief of a statute is within its provision, so far as to punish a crime not enumerated
alleged facts are true, an offense has been committed. The rule is rooted on the in the statute because it is of equal atrocity, or of kindred character with those which
constitutional right of the accused to be informed of the nature of the crime or cause are enumerated.48 When interpreting a criminal statute that does not explicitly reach
of the accusation against him. He cannot be convicted of an offense even if proven the conduct in question, the Court should not base an expansive reading on
unless it is alleged or necessarily included in the Information filed against him. inferences from subjective and variable understanding.49

As a general prerequisite, a motion to quash on the ground that the Information does Article 308 of the Revised Penal Code defines theft as follows:
not constitute the offense charged, or any offense for that matter, should be resolved
on the basis of said allegations whose truth and veracity are hypothetically Art. 308. Who are liable for theft.– Theft is committed by any person who, with intent
committed;41 and on additional facts admitted or not denied by the prosecution.42 If to gain but without violence, against or intimidation of persons nor force upon things,
the facts alleged in the Information do not constitute an offense, the complaint or shall take personal property of another without the latter’s consent.
information should be quashed by the court.43
The provision was taken from Article 530 of the Spanish Penal Code which reads:
We have reviewed the Amended Information and find that, as mentioned by the
petitioner, it does not contain material allegations charging the petitioner of theft of
personal property under Article 308 of the Revised Penal Code. It, thus, behooved the 1. Los que con ánimo de lucrarse, y sin violencia o intimidación en las personas ni
trial court to quash the Amended Information. The Order of the trial court denying the fuerza en las cosas, toman las cosas muebles ajenas sin la voluntad de su dueño.50
motion of the petitioner to quash the Amended Information is a patent nullity.
For one to be guilty of theft, the accused must have an intent to steal (animus furandi)
On the second issue, we find and so hold that the international telephone calls placed personal property, meaning the intent to deprive another of his ownership/lawful
by Bay Super Orient Card holders, the telecommunication services provided by PLDT possession of personal property which intent is apart from and concurrently with the
and its business of providing said services are not personal properties under Article general criminal intent which is an essential element of a felony of dolo (dolus malus).
308 of the Revised Penal Code. The construction by the respondents of Article 308 of
the said Code to include, within its coverage, the aforesaid international telephone An information or complaint for simple theft must allege the following elements: (a) the
calls, telecommunication services and business is contrary to the letter and intent of taking of personal property; (b) the said property belongs to another; (c) the taking be
the law. done with intent to gain; and (d) the taking be accomplished without the use of
violence or intimidation of person/s or force upon things. 51
One is apt to conclude that "personal property" standing alone, covers both tangible Taking may be by the offender’s own hands, by his use of innocent persons without
and intangible properties and are subject of theft under the Revised Penal Code. But any felonious intent, as well as any mechanical device, such as an access device or
the words "Personal property" under the Revised Penal Code must be considered in card, or any agency, animate or inanimate, with intent to gain. Intent to gain includes
tandem with the word "take" in the law. The statutory definition of "taking" and the unlawful taking of personal property for the purpose of deriving utility, satisfaction,
movable property indicates that, clearly, not all personal properties may be the proper enjoyment and pleasure.60
subjects of theft. The general rule is that, only movable properties which have
physical or material existence and susceptible of occupation by another are proper We agree with the contention of the respondents that intangible properties such as
objects of theft.52 As explained by Cuelo Callon: "Cosa juridicamente es toda electrical energy and gas are proper subjects of theft. The reason for this is that, as
sustancia corporal, material, susceptible de ser aprehendida que tenga un valor explained by this Court in United States v. Carlos61 and United States v.
cualquiera."53 Tambunting,62 based on decisions of the Supreme Court of Spain and of the courts in
England and the United States of America, gas or electricity are capable of
According to Cuello Callon, in the context of the Penal Code, only those movable appropriation by another other than the owner. Gas and electrical energy may be
properties which can be taken and carried from the place they are found are proper taken, carried away and appropriated. In People v. Menagas,63 the Illinois State
subjects of theft. Intangible properties such as rights and ideas are not subject of theft Supreme Court declared that electricity, like gas, may be seen and felt. Electricity, the
because the same cannot be "taken" from the place it is found and is occupied or same as gas, is a valuable article of merchandise, bought and sold like other personal
appropriated. property and is capable of appropriation by another. It is a valuable article of
merchandise, bought and sold like other personal property, susceptible of being
Solamente las cosas muebles y corporales pueden ser objeto de hurto. La severed from a mass or larger quantity and of being transported from place to place.
sustracción de cosas inmuebles y la cosas incorporales (v. gr., los derechos, las Electrical energy may, likewise, be taken and carried away. It is a valuable
ideas) no puede integrar este delito, pues no es posible asirlas, tomarlas, para commodity, bought and sold like other personal property. It may be transported from
conseguir su apropiación. El Codigo emplea la expresión "cosas mueble" en el place to place. There is nothing in the nature of gas used for illuminating purposes
sentido de cosa que es susceptible de ser llevada del lugar donde se encuentra, which renders it incapable of being feloniously taken and carried away.
como dinero, joyas, ropas, etcétera, asi que su concepto no coincide por completo
con el formulado por el Codigo civil (arts. 335 y 336).54 In People ex rel Brush Electric Illuminating Co. v. Wemple,64 the Court of Appeals of
New York held that electric energy is manufactured and sold in determinate quantities
Thus, movable properties under Article 308 of the Revised Penal Code should be at a fixed price, precisely as are coal, kerosene oil, and gas. It may be conveyed to
distinguished from the rights or interests to which they relate. A naked right existing the premises of the consumer, stored in cells of different capacity known as an
merely in contemplation of law, although it may be very valuable to the person who is accumulator; or it may be sent through a wire, just as gas or oil may be transported
entitled to exercise it, is not the subject of theft or larceny. 55 Such rights or interests either in a close tank or forced through a pipe. Having reached the premises of the
are intangible and cannot be "taken" by another. Thus, right to produce oil, good will consumer, it may be used in any way he may desire, being, like illuminating gas,
or an interest in business, or the right to engage in business, credit or franchise are capable of being transformed either into heat, light, or power, at the option of the
properties. So is the credit line represented by a credit card. However, they are not purchaser. In Woods v. People,65 the Supreme Court of Illinois declared that there is
proper subjects of theft or larceny because they are without form or substance, the nothing in the nature of gas used for illuminating purposes which renders it incapable
mere "breath" of the Congress. On the other hand, goods, wares and merchandise of of being feloniously taken and carried away. It is a valuable article of merchandise,
businessmen and credit cards issued to them are movable properties with physical bought and sold like other personal property, susceptible of being severed from a
and material existence and may be taken by another; hence, proper subjects of theft. mass or larger quantity and of being transported from place to place.

There is "taking" of personal property, and theft is consummated when the offender Gas and electrical energy should not be equated with business or services provided
unlawfully acquires possession of personal property even if for a short time; or if such by business entrepreneurs to the public. Business does not have an exact definition.
property is under the dominion and control of the thief. The taker, at some particular Business is referred as that which occupies the time, attention and labor of men for
amount, must have obtained complete and absolute possession and control of the the purpose of livelihood or profit. It embraces everything that which a person can be
property adverse to the rights of the owner or the lawful possessor thereof.56 It is not employed.66 Business may also mean employment, occupation or profession.
necessary that the property be actually carried away out of the physical possession of Business is also defined as a commercial activity for gain benefit or
the lawful possessor or that he should have made his escape with it. 57 Neither advantage.67 Business, like services in business, although are properties, are not
asportation nor actual manual possession of property is required. Constructive proper subjects of theft under the Revised Penal Code because the same cannot be
possession of the thief of the property is enough.58 "taken" or "occupied." If it were otherwise, as claimed by the respondents, there
would be no juridical difference between the taking of the business of a person or the
services provided by him for gain, vis-à-vis, the taking of goods, wares or
The essence of the element is the taking of a thing out of the possession of the owner merchandise, or equipment comprising his business.68 If it was its intention to include
without his privity and consent and without animus revertendi.59 "business" as personal property under Article 308 of the Revised Penal Code, the
Philippine Legislature should have spoken in language that is clear and definite: that system known as the Common Channel Inter Office Signaling. Phreaking occurred
business is personal property under Article 308 of the Revised Penal Code.69 only during the 1960’s and 1970’s, decades after the Revised Penal Code took effect.

We agree with the contention of the petitioner that, as gleaned from the material The petitioner is not charged, under the Amended Information, for theft of
averments of the Amended Information, he is charged of "stealing the international telecommunication or telephone services offered by PLDT. Even if he is, the term
long distance calls belonging to PLDT" and the use thereof, through the ISR. Contrary "personal property" under Article 308 of the Revised Penal Code cannot be
to the claims of the OSG and respondent PLDT, the petitioner is not charged of interpreted beyond its seams so as to include "telecommunication or telephone
stealing P20,370,651.95 from said respondent. Said amount of P20,370,651.95 services" or computer services for that matter. The word "service" has a variety of
alleged in the Amended Information is the aggregate amount of access, transmission meanings dependent upon the context, or the sense in which it is used; and, in some
or termination charges which the PLDT expected from the international long distance instances, it may include a sale. For instance, the sale of food by restaurants is
calls of the callers with the use of Baynet Super Orient Cards sold by Baynet Co. Ltd. usually referred to as "service," although an actual sale is involved. 74 It may also
mean the duty or labor to be rendered by one person to another; performance of labor
In defining theft, under Article 308 of the Revised Penal Code, as the taking of for the benefit of another.75 In the case of PLDT, it is to render local and international
personal property without the consent of the owner thereof, the Philippine legislature telecommunications services and such other services as authorized by the CPCA
could not have contemplated the human voice which is converted into electronic issued by the NTC. Even at common law, neither time nor services may be taken and
impulses or electrical current which are transmitted to the party called through the occupied or appropriated.76 A service is generally not considered property and a theft
PSTN of respondent PLDT and the ISR of Baynet Card Ltd. within its coverage. When of service would not, therefore, constitute theft since there can be no caption or
the Revised Penal Code was approved, on December 8, 1930, international asportation.77 Neither is the unauthorized use of the equipment and facilities of PLDT
telephone calls and the transmission and routing of electronic voice signals or by the petitioner theft under the aforequoted provision of the Revised Penal Code. 78
impulses emanating from said calls, through the PSTN, IPL and ISR, were still non-
existent. Case law is that, where a legislative history fails to evidence congressional If it was the intent of the Philippine Legislature, in 1930, to include services to be the
awareness of the scope of the statute claimed by the respondents, a narrow subject of theft, it should have incorporated the same in Article 308 of the Revised
interpretation of the law is more consistent with the usual approach to the construction Penal Code. The Legislature did not. In fact, the Revised Penal Code does not even
of the statute. Penal responsibility cannot be extended beyond the fair scope of the contain a definition of services.
statutory mandate.70
If taking of telecommunication services or the business of a person, is to be
Respondent PLDT does not acquire possession, much less, ownership of the voices proscribed, it must be by special statute79 or an amendment of the Revised Penal
of the telephone callers or of the electronic voice signals or current emanating from Code. Several states in the United States, such as New York, New Jersey, California
said calls. The human voice and the electronic voice signals or current caused and Virginia, realized that their criminal statutes did not contain any provisions
thereby are intangible and not susceptible of possession, occupation or appropriation penalizing the theft of services and passed laws defining and penalizing theft of
by the respondent PLDT or even the petitioner, for that matter. PLDT merely transmits telephone and computer services. The Pennsylvania Criminal Statute now penalizes
the electronic voice signals through its facilities and equipment. Baynet Card Ltd., theft of services, thus:
through its operator, merely intercepts, reroutes the calls and passes them to its toll
center. Indeed, the parties called receive the telephone calls from Japan. (a) Acquisition of services. --

In this modern age of technology, telecommunications systems have become so (1) A person is guilty of theft if he intentionally obtains services for himself or for
tightly merged with computer systems that it is difficult to know where one starts and another which he knows are available only for compensation, by deception or threat,
the other finishes. The telephone set is highly computerized and allows computers to by altering or tampering with the public utility meter or measuring device by which
communicate across long distances.71 The instrumentality at issue in this case is not such services are delivered or by causing or permitting such altering or tampering, by
merely a telephone but a telephone inexplicably linked to a computerized making or maintaining any unauthorized connection, whether physically, electrically or
communications system with the use of Baynet Cards sold by the Baynet Card Ltd. inductively, to a distribution or transmission line, by attaching or maintaining the
The corporation uses computers, modems and software, among others, for its ISR. 72 attachment of any unauthorized device to any cable, wire or other component of an
electric, telephone or cable television system or to a television receiving set
The conduct complained of by respondent PLDT is reminiscent of "phreaking" (a connected to a cable television system, by making or maintaining any unauthorized
slang term for the action of making a telephone system to do something that it modification or alteration to any device installed by a cable television system, or by
normally should not allow by "making the phone company bend over and grab its false token or other trick or artifice to avoid payment for the service.
ankles"). A "phreaker" is one who engages in the act of manipulating phones and
illegally markets telephone services.73 Unless the phone company replaces all its In the State of Illinois in the United States of America, theft of labor or services or use
hardware, phreaking would be impossible to stop. The phone companies in North of property is penalized:
America were impelled to replace all their hardware and adopted full digital switching
(a) A person commits theft when he obtains the temporary use of property, labor or paper instrument. Among the prohibited acts enumerated in Section 9 of the law are
services of another which are available only for hire, by means of threat or deception the acts of obtaining money or anything of value through the use of an access device,
or knowing that such use is without the consent of the person providing the property, with intent to defraud or intent to gain and fleeing thereafter; and of effecting
labor or services. transactions with one or more access devices issued to another person or persons to
receive payment or any other thing of value. Under Section 11 of the law, conspiracy
In 1980, the drafters of the Model Penal Code in the United States of America arrived to commit access devices fraud is a crime. However, the petitioner is not charged of
at the conclusion that labor and services, including professional services, have not violation of R.A. 8484.
been included within the traditional scope of the term "property" in ordinary theft
statutes. Hence, they decided to incorporate in the Code Section 223.7, which defines Significantly, a prosecution under the law shall be without prejudice to any liability for
and penalizes theft of services, thus: violation of any provisions of the Revised Penal Code inclusive of theft under Rule
308 of the Revised Penal Code and estafa under Article 315 of the Revised Penal
(1) A person is guilty of theft if he purposely obtains services which he knows are Code. Thus, if an individual steals a credit card and uses the same to obtain services,
available only for compensation, by deception or threat, or by false token or other he is liable of the following: theft of the credit card under Article 308 of the Revised
means to avoid payment for the service. "Services" include labor, professional Penal Code; violation of Republic Act No. 8484; and estafa under Article 315(2)(a) of
service, transportation, telephone or other public service, accommodation in hotels, the Revised Penal Code with the service provider as the private complainant. The
restaurants or elsewhere, admission to exhibitions, use of vehicles or other movable petitioner is not charged of estafa before the RTC in the Amended Information.
property. Where compensation for service is ordinarily paid immediately upon the
rendering of such service, as in the case of hotels and restaurants, refusal to pay or Section 33 of Republic Act No. 8792, Electronic Commerce Act of 2000 provides:
absconding without payment or offer to pay gives rise to a presumption that the
service was obtained by deception as to intention to pay; (2) A person commits theft Sec. 33. Penalties.— The following Acts shall be penalized by fine and/or
if, having control over the disposition of services of others, to which he is not entitled, imprisonment, as follows:
he knowingly diverts such services to his own benefit or to the benefit of another not
entitled thereto.
a) Hacking or cracking which refers to unauthorized access into or interference in a
computer system/server or information and communication system; or any access in
Interestingly, after the State Supreme Court of Virginia promulgated its decision in order to corrupt, alter, steal, or destroy using a computer or other similar information
Lund v. Commonwealth,80declaring that neither time nor services may be taken and and communication devices, without the knowledge and consent of the owner of the
carried away and are not proper subjects of larceny, the General Assembly of Virginia computer or information and communications system, including the introduction of
enacted Code No. 18-2-98 which reads: computer viruses and the like, resulting on the corruption, destruction, alteration, theft
or loss of electronic data messages or electronic documents shall be punished by a
Computer time or services or data processing services or information or data stored in minimum fine of One hundred thousand pesos (P100,000.00) and a maximum
connection therewith is hereby defined to be property which may be the subject of commensurate to the damage incurred and a mandatory imprisonment of six (6)
larceny under § § 18.2-95 or 18.2-96, or embezzlement under § 18.2-111, or false months to three (3) years.
pretenses under § 18.2-178.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders
In the State of Alabama, Section 13A-8-10(a)(1) of the Penal Code of Alabama of of the Regional Trial Court and the Decision of the Court of Appeals are REVERSED
1975 penalizes theft of services: and SET ASIDE. The Regional Trial Court is directed to issue an order granting the
motion of the petitioner to quash the Amended Information.
"A person commits the crime of theft of services if: (a) He intentionally obtains
services known by him to be available only for compensation by deception, threat, SO ORDERED.
false token or other means to avoid payment for the services …"
G.R. No. L-26278 August 4, 1927
In the Philippines, Congress has not amended the Revised Penal Code to include
theft of services or theft of business as felonies. Instead, it approved a law, Republic
LEON SIBAL , plaintiff-appellant,
Act No. 8484, otherwise known as the Access Devices Regulation Act of 1998, on
vs.
February 11, 1998. Under the law, an access device means any card, plate, code,
EMILIANO J. VALDEZ ET AL., defendants.
account number, electronic serial number, personal identification number and other
EMILIANO J. VALDEZ, appellee.
telecommunication services, equipment or instrumentalities-identifier or other means
of account access that can be used to obtain money, goods, services or any other
thing of value or to initiate a transfer of funds other than a transfer originated solely by
J. E. Blanco for appellant. (b) That he was the owner of parcels 1, 2 and 7 described in the first cause
Felix B. Bautista and Santos and Benitez for appellee. of action of the complaint;

JOHNSON, J.: (c) That he was the owner of the palay in parcels 1, 2 and 7; and

The action was commenced in the Court of First Instance of the Province of Tarlac on (d) That he never attempted to harvest the palay in parcels 4 and 5.
the 14th day of December 1924. The facts are about as conflicting as it is possible for
facts to be, in the trial causes. The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of
the preliminary injunction he was unable to gather the sugar cane, sugar-cane shoots
As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, (puntas de cana dulce) palay in said parcels of land, representing a loss to him of
deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the P8,375.20 and that, in addition thereto, he suffered damages amounting to
Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J. P3,458.56. He prayed, for a judgment (1) absolving him from all liability under the
Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of complaint; (2) declaring him to be the absolute owner of the sugar cane in question
land described in the complaint in the third paragraph of the first cause of action; that and of the palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the
within one year from the date of the attachment and sale the plaintiff offered to sum of P11,833.76, representing the value of the sugar cane and palay in question,
redeem said sugar cane and tendered to the defendant Valdez the amount sufficient including damages.
to cover the price paid by the latter, the interest thereon and any assessments or
taxes which he may have paid thereon after the purchase, and the interest Upon the issues thus presented by the pleadings the cause was brought on for trial.
corresponding thereto and that Valdez refused to accept the money and to return the After hearing the evidence, and on April 28, 1926, the Honorable Cayetano Lukban,
sugar cane to the plaintiff. judge, rendered a judgment against the plaintiff and in favor of the defendants —

As a second cause of action, the plaintiff alleged that the defendant Emiliano J. (1) Holding that the sugar cane in question was personal property and, as
Valdez was attempting to harvest the palay planted in four of the seven parcels such, was not subject to redemption;
mentioned in the first cause of action; that he had harvested and taken possession of
the palay in one of said seven parcels and in another parcel described in the second
cause of action, amounting to 300 cavans; and that all of said palay belonged to the (2) Absolving the defendants from all liability under the complaint; and
plaintiff.
(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan
Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Sangalang and Marcos Sibal to jointly and severally pay to the defendant
Emiliano J. Valdez his attorneys and agents, restraining them (1) from distributing him Emiliano J. Valdez the sum of P9,439.08 as follows:
in the possession of the parcels of land described in the complaint; (2) from taking
possession of, or harvesting the sugar cane in question; and (3) from taking (a) P6,757.40, the value of the sugar cane;
possession, or harvesting the palay in said parcels of land. Plaintiff also prayed that a
judgment be rendered in his favor and against the defendants ordering them to (b) 1,435.68, the value of the sugar-cane shoots;
consent to the redemption of the sugar cane in question, and that the defendant
Valdez be condemned to pay to the plaintiff the sum of P1,056 the value of palay
harvested by him in the two parcels above-mentioned ,with interest and costs. (c) 646.00, the value of palay harvested by plaintiff;

On December 27, 1924, the court, after hearing both parties and upon approval of the (d) 600.00, the value of 150 cavans of palay which the defendant
bond for P6,000 filed by the plaintiff, issued the writ of preliminary injunction prayed was not able to raise by reason of the injunction, at P4 cavan.
for in the complaint. 9,439.08 From that judgment the plaintiff appealed and in his
assignments of error contends that the lower court erred: (1) In
holding that the sugar cane in question was personal property and,
The defendant Emiliano J. Valdez, in his amended answer, denied generally and therefore, not subject to redemption;
specifically each and every allegation of the complaint and step up the following
defenses:
(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as
well as parcels 7 and 8, and that the palay therein was planted by Valdez;
(a) That the sugar cane in question had the nature of personal property and
was not, therefore, subject to redemption;
(3) In holding that Valdez, by reason of the preliminary injunction failed to (3) That within one year from the sale of said parcel of land, and on the 24th
realized P6,757.40 from the sugar cane and P1,435.68 from sugar-cane day of September, 1923, the judgment debtor, Leon Sibal, paid P2,000 to
shoots (puntas de cana dulce); Macondray & Co., Inc., for the account of the redemption price of said
parcels of land, without specifying the particular parcels to which said
(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the amount was to applied. The redemption price said eight parcels was
defendant was unable to raise palay on the land, which would have netted reduced, by virtue of said transaction, to P2,579.97 including interest (Exhibit
him the sum of P600; and. C and 2).

(5) In condemning the plaintiff and his sureties to pay to the defendant the The record further shows:
sum of P9,439.08.
(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff
It appears from the record: of the Province of Tarlac, by virtue of a writ of execution in civil case No.
1301 of the Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1.º —
the same parties in the present case), attached the personal property of said
(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by Leon Sibal located in Tarlac, among which was included the sugar cane now
virtue of writ of execution in civil case No. 20203 of the Court of First in question in the seven parcels of land described in the complaint (Exhibit
Instance of Manila (Macondray & Co., Inc. vs. Leon Sibal),levied an A).
attachment on eight parcels of land belonging to said Leon Sibal, situated in
the Province of Tarlac, designated in the second of attachment as parcels 1,
2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A). (2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction
said personal properties of Leon Sibal, including the sugar cane in question
to Emilio J. Valdez, who paid therefor the sum of P1,550, of which P600 was
(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels for the sugar cane (Exhibit A).
of land, at the auction held by the sheriff of the Province of Tarlac, for the
sum to P4,273.93, having paid for the said parcels separately as follows
(Exhibit C, and 2-A): (3) That on April 29,1924, said deputy sheriff, by virtue of said writ of
execution, also attached the real property of said Leon Sibal in Tarlac,
including all of his rights, interest and participation therein, which real
property consisted of eleven parcels of land and a house and camarin
Parcel situated in one of said parcels (Exhibit A).

1 ..................................................................... P1.00 (4) That on June 25, 1924, eight of said eleven parcels, including the house
and the camarin, were bought by Emilio J. Valdez at the auction held by the
2 ..................................................................... 2,000.00 sheriff for the sum of P12,200. Said eight parcels were designated in the
certificate of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11. The house and
3 ..................................................................... 120.93 camarin were situated on parcel 7 (Exhibit A).

4 ..................................................................... 1,000.00 (5) That the remaining three parcels, indicated in the certificate of the sheriff
as parcels 2, 12, and 13, were released from the attachment by virtue of
5 ..................................................................... 1.00 claims presented by Agustin Cuyugan and Domiciano Tizon (Exhibit A).

6 ..................................................................... 1.00 (6) That on the same date, June 25, 1924, Macondray & Co. sold and
conveyed to Emilio J. Valdez for P2,579.97 all of its rights and interest in the
7 with the house thereon .......................... 150.00 eight parcels of land acquired by it at public auction held by the deputy
sheriff of Tarlac in connection with civil case No. 20203 of the Court of First
Instance of Manila, as stated above. Said amount represented the unpaid
8 ..................................................................... 1,000.00 balance of the redemption price of said eight parcels, after payment by Leon
========== Sibal of P2,000 on September 24, 1923, fro the account of the redemption
price, as stated above. (Exhibit C and 2).
4,273.93
The foregoing statement of facts shows:
(1) The Emilio J. Valdez bought the sugar cane in question, located in the caracter de productos pertenecientes, como tales, a quienes a ellos tenga
seven parcels of land described in the first cause of action of the complaint derecho, Ilegado el momento de su recoleccion.
at public auction on May 9 and 10, 1924, for P600.
xxx xxx xxx
(2) That on July 30, 1923, Macondray & Co. became the owner of eight
parcels of land situated in the Province of Tarlac belonging to Leon Sibal and Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria,
that on September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 for publicada en 16 de diciembre de 1909, con las reformas introducidas por la
the account of the redemption price of said parcels. de 21 de abril anterior, la hipoteca, salvo pacto expreso que disponga lo
contrario, y cualquiera que sea la naturaleza y forma de la obligacion que
(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. garantice, no comprende los frutos cualquiera que sea la situacion en que
all of its rights and interest in the said eight parcels of land. se encuentre. (3 Manresa, 5. edicion, pags. 22, 23.)

(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights From the foregoing it appears (1) that, under Spanish authorities, pending fruits and
and interest which Leon Sibal had or might have had on said eight parcels ungathered products may be sold and transferred as personal property; (2) that the
by virtue of the P2,000 paid by the latter to Macondray. Supreme Court of Spain, in a case of ejectment of a lessee of an agricultural land,
held that the lessee was entitled to gather the products corresponding to the
(5) That Emilio J. Valdez became the absolute owner of said eight parcels of agricultural year, because said fruits did not go with the land but belonged separately
land. to the lessee; and (3) that under the Spanish Mortgage Law of 1909, as amended, the
mortgage of a piece of land does not include the fruits and products existing thereon,
unless the contract expressly provides otherwise.
The first question raised by the appeal is, whether the sugar cane in question is
personal or real property. It is contended that sugar cane comes under the
classification of real property as "ungathered products" in paragraph 2 of article 334 of An examination of the decisions of the Supreme Court of Louisiana may give us some
the Civil Code. Said paragraph 2 of article 334 enumerates as real property the light on the question which we are discussing. Article 465 of the Civil Code of
following: Trees, plants, and ungathered products, while they are annexed to the land Louisiana, which corresponds to paragraph 2 of article 334 of our Civil Code,
or form an integral part of any immovable property." That article, however, has provides: "Standing crops and the fruits of trees not gathered, and trees before they
received in recent years an interpretation by the Tribunal Supremo de España, which are cut down, are likewise immovable, and are considered as part of the land to which
holds that, under certain conditions, growing crops may be considered as personal they are attached."
property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.)
The Supreme Court of Louisiana having occasion to interpret that provision, held that
Manresa, the eminent commentator of the Spanish Civil Code, in discussing section in some cases "standing crops" may be considered and dealt with as personal
334 of the Civil Code, in view of the recent decisions of the supreme Court of Spain, property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the
admits that growing crops are sometimes considered and treated as personal Supreme Court said: "True, by article 465 of the Civil Code it is provided that
property. He says: 'standing crops and the fruits of trees not gathered and trees before they are cut down
. . . are considered as part of the land to which they are attached, but the immovability
provided for is only one in abstracto and without reference to rights on or to the crop
No creemos, sin embargo, que esto excluya la excepcionque muchos acquired by others than the owners of the property to which the crop is attached. . . .
autores hacen tocante a la venta de toda cosecha o de parte de ella cuando The existence of a right on the growing crop is a mobilization by anticipation, a
aun no esta cogida (cosa frecuente con la uvay y la naranja), y a la de lenas, gathering as it were in advance, rendering the crop movable quoad the right acquired
considerando ambas como muebles. El Tribunal Supremo, en sentencia de therein. Our jurisprudence recognizes the possible mobilization of the growing crop."
18 de marzo de 1904, al entender sobre un contrato de arrendamiento de un (Citizens' Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28 La., Ann., 761;
predio rustico, resuelve que su terminacion por desahucio no extingue los Sandel vs. Douglass, 27 La. Ann., 629; Lewis vs. Klotz, 39 La. Ann., 267.)
derechos del arrendario, para recolectar o percibir los frutos
correspondientes al año agricola, dentro del que nacieron aquellos
derechos, cuando el arrendor ha percibido a su vez el importe de la renta "It is true," as the Supreme Court of Louisiana said in the case of Porche vs.
integra correspondiente, aun cuando lo haya sido por precepto legal durante Bodin (28 La. An., 761) that "article 465 of the Revised Code says that standing crops
el curso del juicio, fundandose para ello, no solo en que de otra suerte se are considered as immovable and as part of the land to which they are attached, and
daria al desahucio un alcance que no tiene, sino en que, y esto es lo article 466 declares that the fruits of an immovable gathered or produced while it is
interesante a nuestro proposito, la consideracion de inmuebles que el under seizure are considered as making part thereof, and incurred to the benefit of
articulo 334 del Codigo Civil atribuge a los frutos pendientes, no les priva del the person making the seizure. But the evident meaning of these articles, is where the
crops belong to the owner of the plantation they form part of the immovable, and
where it is seized, the fruits gathered or produced inure to the benefit of the seizing increment or usual incident of something already in existence, and then belonging to
creditor. the vendor, and then title will vest in the buyer the moment the thing comes into
existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers
A crop raised on leased premises in no sense forms part of the immovable. It Exchange, 21 Am. St. Rep., 63.) Things of this nature are said to have a potential
belongs to the lessee, and may be sold by him, whether it be gathered or existence. A man may sell property of which he is potentially and not actually
not, and it may be sold by his judgment creditors. If it necessarily forms part possessed. He may make a valid sale of the wine that a vineyard is expected to
of the leased premises the result would be that it could not be sold under produce; or the gain a field may grow in a given time; or the milk a cow may yield
execution separate and apart from the land. If a lessee obtain supplies to during the coming year; or the wool that shall thereafter grow upon sheep; or what
make his crop, the factor's lien would not attach to the crop as a separate may be taken at the next cast of a fisherman's net; or fruits to grow; or young animals
thing belonging to his debtor, but the land belonging to the lessor would be not yet in existence; or the good will of a trade and the like. The thing sold, however,
affected with the recorded privilege. The law cannot be construed so as to must be specific and identified. They must be also owned at the time by the vendor.
result in such absurd consequences. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)

In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said: It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil
Code has been modified by section 450 of the Code of Civil Procedure as well as by
Act No. 1508, the Chattel Mortgage Law. Said section 450 enumerates the property of
If the crop quoad the pledge thereof under the act of 1874 was an a judgment debtor which may be subjected to execution. The pertinent portion of said
immovable, it would be destructive of the very objects of the act, it would section reads as follows: "All goods, chattels, moneys, and other property, both real
render the pledge of the crop objects of the act, it would render the pledge of and personal, * * * shall be liable to execution. Said section 450 and most of the other
the crop impossible, for if the crop was an inseparable part of the realty sections of the Code of Civil Procedure relating to the execution of judgment were
possession of the latter would be necessary to that of the former; but such is taken from the Code of Civil Procedure of California. The Supreme Court of
not the case. True, by article 465 C. C. it is provided that "standing crops California, under section 688 of the Code of Civil Procedure of that state (Pomeroy, p.
and the fruits of trees not gathered and trees before they are cut down are 424) has held, without variation, that growing crops were personal property and
likewise immovable and are considered as part of the land to which they are subject to execution.
attached;" but the immovability provided for is only one in abstracto and
without reference to rights on or to the crop acquired by other than the
owners of the property to which the crop was attached. The immovability of a Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are
growing crop is in the order of things temporary, for the crop passes from the personal property. Section 2 of said Act provides: "All personal property shall be
state of a growing to that of a gathered one, from an immovable to a subject to mortgage, agreeably to the provisions of this Act, and a mortgage executed
movable. The existence of a right on the growing crop is a mobilization by in pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides:
anticipation, a gathering as it were in advance, rendering the crop "If growing crops be mortgaged the mortgage may contain an agreement stipulating
movable quoad the right acquired thereon. The provision of our Code is that the mortgagor binds himself properly to tend, care for and protect the crop while
identical with the Napoleon Code 520, and we may therefore obtain light by growing.
an examination of the jurisprudence of France.
It is clear from the foregoing provisions that Act No. 1508 was enacted on the
The rule above announced, not only by the Tribunal Supremo de España but by the assumption that "growing crops" are personal property. This consideration tends to
Supreme Court of Louisiana, is followed in practically every state of the Union. support the conclusion hereinbefore stated, that paragraph 2 of article 334 of the Civil
Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the
sense that "ungathered products" as mentioned in said article of the Civil Code have
From an examination of the reports and codes of the State of California and other the nature of personal property. In other words, the phrase "personal property" should
states we find that the settle doctrine followed in said states in connection with the be understood to include "ungathered products."
attachment of property and execution of judgment is, that growing crops raised by
yearly labor and cultivation are considered personal property. (6 Corpuz Juris, p. 197;
17 Corpus Juris, p. 379; 23 Corpus Juris, p. 329: Raventas vs. Green, 57 Cal., 254; At common law, and generally in the United States, all annual crops which
Norris vs. Watson, 55 Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin are raised by yearly manurance and labor, and essentially owe their annual
on Sales, sec. 126; McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65 existence to cultivation by man, . may be levied on as personal property."
Ga., 644; Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman (23 C. J., p. 329.) On this question Freeman, in his treatise on the Law of
on Execution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales, sec. Executions, says: "Crops, whether growing or standing in the field ready to
200 and 763.) be harvested, are, when produced by annual cultivation, no part of the realty.
They are, therefore, liable to voluntary transfer as chattels. It is equally well
settled that they may be seized and sold under execution. (Freeman on
Mr. Mechem says that a valid sale may be made of a thing, which though not yet Executions, vol. p. 438.)
actually in existence, is reasonably certain to come into existence as the natural
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has Parcels No. 4. — Terreno palayero, ubicado en el barrio de
been modified by section 450 of the Code of Civil Procedure and by Act No. 1508, in Culubasa,Bamban, Tarlac, I. F. de 145,000 metros cuadrados de superficie,
the sense that, for the purpose of attachment and execution, and for the purposes of lindante al Norte con Road of the barrio of Culubasa that goes to
the Chattel Mortgage Law, "ungathered products" have the nature of personal Concepcion; al Este con Juan Dizon; al Sur con Lucio Maño y Canuto Sibal
property. The lower court, therefore, committed no error in holding that the sugar cane y al Oeste con Esteban Lazatin, su valor amillarado asciende a la suma de
in question was personal property and, as such, was not subject to redemption. P2,990. Tax No. 2856.

All the other assignments of error made by the appellant, as above stated, relate to As will be noticed, there is hardly any relation between parcels 1 and 2 of the
questions of fact only. Before entering upon a discussion of said assignments of error, complaint and parcel 4 (Exhibit 2 and B) and parcel 3 (Exhibit A). But, inasmuch as
we deem it opportune to take special notice of the failure of the plaintiff to appear at the plaintiff did not care to appear at the trial when the defendant offered his
the trial during the presentation of evidence by the defendant. His absence from the evidence, we are inclined to give more weight to the evidence adduced by him that to
trial and his failure to cross-examine the defendant have lent considerable weight to the evidence adduced by the plaintiff, with respect to the ownership of parcels 1 and 2
the evidence then presented for the defense. of the compliant. We, therefore, conclude that parcels 1 and 2 of the complaint belong
to the defendant, having acquired the same from Macondray & Co. on June 25, 1924,
Coming not to the ownership of parcels 1 and 2 described in the first cause of action and from the plaintiff Leon Sibal on the same date.
of the complaint, the plaintiff made a futile attempt to show that said two parcels
belonged to Agustin Cuyugan and were the identical parcel 2 which was excluded It appears, however, that the plaintiff planted the palay in said parcels and harvested
from the attachment and sale of real property of Sibal to Valdez on June 25, 1924, as therefrom 190 cavans. There being no evidence of bad faith on his part, he is
stated above. A comparison of the description of parcel 2 in the certificate of sale by therefore entitled to one-half of the crop, or 95 cavans. He should therefore be
the sheriff (Exhibit A) and the description of parcels 1 and 2 of the complaint will condemned to pay to the defendant for 95 cavans only, at P3.40 a cavan, or the sum
readily show that they are not the same. of P323, and not for the total of 190 cavans as held by the lower court.

The description of the parcels in the complaint is as follows: As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel
corresponds to parcel 1 of the deed of sale of Macondray & Co, to Valdez (Exhibit B
1. La caña dulce sembrada por los inquilinos del ejecutado Leon Sibal 1.º en and 2), and to parcel 4 in the certificate of sale to Valdez of real property belonging to
una parcela de terreno de la pertenencia del citado ejecutado, situada en Sibal, executed by the sheriff as above stated (Exhibit A). Valdez is therefore the
Libutad, Culubasa, Bamban, Tarlac, de unas dos hectareas poco mas o absolute owner of said parcel, having acquired the interest of both Macondray and
menos de superficie. Sibal in said parcel.

2. La caña dulce sembrada por el inquilino del ejecutado Leon Sibal 1.º, With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of
Ilamado Alejandro Policarpio, en una parcela de terreno de la pertenencia the second cause of action, it appears from the testimony of the plaintiff himself that
del ejecutado, situada en Dalayap, Culubasa, Bamban, Tarlac de unas dos said parcel corresponds to parcel 8 of the deed of sale of Macondray to Valdez
hectareas de superficie poco mas o menos." The description of parcel 2 (Exhibit B and 2) and to parcel 10 in the deed of sale executed by the sheriff in favor
given in the certificate of sale (Exhibit A) is as follows: of Valdez (Exhibit A). Valdez is therefore the absolute owner of said parcel, having
acquired the interest of both Macondray and Sibal therein.
2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090
metros cuadrados de superficie, linda al N. con Canuto Sibal, Esteban In this connection the following facts are worthy of mention:
Lazatin and Alejandro Dayrit; al E. con Francisco Dizon, Felipe Mañu and
others; al S. con Alejandro Dayrit, Isidro Santos and Melecio Mañu; y al O. Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were
con Alejandro Dayrit and Paulino Vergara. Tax No. 2854, vador amillarado attached under said execution. Said parcels of land were sold to Macondray & Co. on
P4,200 pesos. the 30th day of July, 1923. Rice paid P4,273.93. On September 24, 1923, Leon Sibal
paid to Macondray & Co. P2,000 on the redemption of said parcels of land. (See
On the other hand the evidence for the defendant purported to show that parcels 1 Exhibits B and C ).
and 2 of the complaint were included among the parcels bought by Valdez from
Macondray on June 25, 1924, and corresponded to parcel 4 in the deed of sale Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was
(Exhibit B and 2), and were also included among the parcels bought by Valdez at the attached, including the sugar cane in question. (Exhibit A) The said personal property
auction of the real property of Leon Sibal on June 25, 1924, and corresponded to so attached, sold at public auction May 9 and 10, 1924. April 29, 1924, the real
parcel 3 in the certificate of sale made by the sheriff (Exhibit A). The description of property was attached under the execution in favor of Valdez (Exhibit A). June 25,
parcel 4 (Exhibit 2) and parcel 3 (Exhibit A) is as follows: 1924, said real property was sold and purchased by Valdez (Exhibit A).
June 25, 1924, Macondray & Co. sold all of the land which they had purchased at G.R. No. 123498 November 23, 2007
public auction on the 30th day of July, 1923, to Valdez.
BPI FAMILY BANK, Petitioner,
As to the loss of the defendant in sugar cane by reason of the injunction, the evidence vs.
shows that the sugar cane in question covered an area of 22 hectares and 60 ares AMADO FRANCO and COURT OF APPEALS, Respondents.
(Exhibits 8, 8-b and 8-c); that said area would have yielded an average crop of 1039
picos and 60 cates; that one-half of the quantity, or 519 picos and 80 cates would DECISION
have corresponded to the defendant, as owner; that during the season the sugar was
selling at P13 a pico (Exhibit 5 and 5-A). Therefore, the defendant, as owner, would
have netted P 6,757.40 from the sugar cane in question. The evidence also shows NACHURA, J.:
that the defendant could have taken from the sugar cane 1,017,000 sugar-cane
shoots (puntas de cana) and not 1,170,000 as computed by the lower court. During Banks are exhorted to treat the accounts of their depositors with meticulous care and
the season the shoots were selling at P1.20 a thousand (Exhibits 6 and 7). The utmost fidelity. We reiterate this exhortation in the case at bench.
defendant therefore would have netted P1,220.40 from sugar-cane shoots and not
P1,435.68 as allowed by the lower court. Before us is a Petition for Review on Certiorari seeking the reversal of the Court of
Appeals (CA) Decision1 in CA-G.R. CV No. 43424 which affirmed with modification
As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, the judgment2 of the Regional Trial Court, Branch 55, Manila (Manila RTC), in Civil
amounting to 190 cavans, one-half of said quantity should belong to the plaintiff, as Case No. 90-53295.
stated above, and the other half to the defendant. The court erred in awarding the
whole crop to the defendant. The plaintiff should therefore pay the defendant for 95 This case has its genesis in an ostensible fraud perpetrated on the petitioner BPI
cavans only, at P3.40 a cavan, or P323 instead of P646 as allowed by the lower Family Bank (BPI-FB) allegedly by respondent Amado Franco (Franco) in conspiracy
court. with other individuals,3 some of whom opened and maintained separate accounts with
BPI-FB, San Francisco del Monte (SFDM) branch, in a series of transactions.
The evidence also shows that the defendant was prevented by the acts of the plaintiff
from cultivating about 10 hectares of the land involved in the litigation. He expected to On August 15, 1989, Tevesteco Arrastre-Stevedoring Co., Inc. (Tevesteco) opened a
have raised about 600 cavans of palay, 300 cavans of which would have savings and current account with BPI-FB. Soon thereafter, or on August 25, 1989,
corresponded to him as owner. The lower court has wisely reduced his share to 150 First Metro Investment Corporation (FMIC) also opened a time deposit account with
cavans only. At P4 a cavan, the palay would have netted him P600. the same branch of BPI-FB with a deposit of ₱100,000,000.00, to mature one year
thence.
In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff
and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal are hereby Subsequently, on August 31, 1989, Franco opened three accounts, namely, a
ordered to pay to the defendant jointly and severally the sum of P8,900.80, instead of current,4 savings,5 and time deposit,6with BPI-FB. The current and savings accounts
P9,439.08 allowed by the lower court, as follows: were respectively funded with an initial deposit of ₱500,000.00 each, while the time
deposit account had ₱1,000,000.00 with a maturity date of August 31, 1990. The total
amount of ₱2,000,000.00 used to open these accounts is traceable to a check issued
P6,757.40 for the sugar cane; by Tevesteco allegedly in consideration of Franco’s introduction of Eladio
Teves,7 who was looking for a conduit bank to facilitate Tevesteco’s business
1,220.40 for the sugar cane shoots; transactions, to Jaime Sebastian, who was then BPI-FB SFDM’s Branch Manager. In
turn, the funding for the ₱2,000,000.00 check was part of the ₱80,000,000.00 debited
323.00 for the palay harvested by plaintiff in parcels 1 and 2; by BPI-FB from FMIC’s time deposit account and credited to Tevesteco’s current
account pursuant to an Authority to Debit purportedly signed by FMIC’s officers.
600.00 for the palay which defendant could have raised.
It appears, however, that the signatures of FMIC’s officers on the Authority to Debit
were forged.8 On September 4, 1989, Antonio Ong,9 upon being shown the Authority
8,900.80 to Debit, personally declared his signature therein to be a forgery. Unfortunately,
============ Tevesteco had already effected several withdrawals from its current account (to which
had been credited the ₱80,000,000.00 covered by the forged Authority to Debit)
amounting to ₱37,455,410.54, including the ₱2,000,000.00 paid to Franco.
In all other respects, the judgment appealed from is hereby affirmed, with costs. So
ordered.
On September 8, 1989, impelled by the need to protect its interests in light of FMIC’s and in BPI Family Savings Bank, Inc. v. First Metro Investment Corporation, 18 we
forgery claim, BPI-FB, thru its Senior Vice-President, Severino Coronacion, instructed upheld the finding of the courts below that BPI-FB failed to exercise the degree of
Jesus Arangorin10 to debit Franco’s savings and current accounts for the amounts diligence required by the nature of its obligation to treat the accounts of its depositors
remaining therein.11 However, Franco’s time deposit account could not be debited with meticulous care. Thus, BPI-FB was found liable to FMIC for the debited amount
due to the capacity limitations of BPI-FB’s computer.12 in its time deposit. It was ordered to pay ₱65,332,321.99 plus interest at 17% per
annum from August 29, 1989 until fully restored. In turn, the 17% shall itself earn
In the meantime, two checks13 drawn by Franco against his BPI-FB current account interest at 12% from October 4, 1989 until fully paid.
were dishonored upon presentment for payment, and stamped with a notation
"account under garnishment." Apparently, Franco’s current account was garnished by In a related case, Edgardo Buenaventura, Myrna Lizardo and Yolanda Tica
virtue of an Order of Attachment issued by the Regional Trial Court of Makati (Makati (Buenaventura, et al.),19 recipients of a ₱500,000.00 check proceeding from the
RTC) in Civil Case No. 89-4996 (Makati Case), which had been filed by BPI-FB ₱80,000,000.00 mistakenly credited to Tevesteco, likewise filed suit. Buenaventura et
against Franco et al.,14 to recover the ₱37,455,410.54 representing Tevesteco’s total al., as in the case of Franco, were also prevented from effecting withdrawals 20 from
withdrawals from its account. their current account with BPI-FB, Bonifacio Market, Edsa, Caloocan City Branch.
Likewise, when the case was elevated to this Court docketed as BPI Family Bank v.
Notably, the dishonored checks were issued by Franco and presented for payment at Buenaventura,21 we ruled that BPI-FB had no right to freeze Buenaventura, et al.’s
BPI-FB prior to Franco’s receipt of notice that his accounts were under accounts and adjudged BPI-FB liable therefor, in addition to damages.
garnishment.15 In fact, at the time the Notice of Garnishment dated September 27,
1989 was served on BPI-FB, Franco had yet to be impleaded in the Makati case Meanwhile, BPI-FB filed separate civil and criminal cases against those believed to
where the writ of attachment was issued. be the perpetrators of the multi-million peso scam.22 In the criminal case, Franco,
along with the other accused, except for Manuel Bienvenida who was still at large,
It was only on May 15, 1990, through the service of a copy of the Second Amended were acquitted of the crime of Estafa as defined and penalized under Article 351, par.
Complaint in Civil Case No. 89-4996, that Franco was impleaded in the Makati 2(a) of the Revised Penal Code.23 However, the civil case24 remains under litigation
case.16 Immediately, upon receipt of such copy, Franco filed a Motion to Discharge and the respective rights and liabilities of the parties have yet to be adjudicated.
Attachment which the Makati RTC granted on May 16, 1990. The Order Lifting the
Order of Attachment was served on BPI-FB on even date, with Franco demanding the Consequently, in light of BPI-FB’s refusal to heed Franco’s demands to unfreeze his
release to him of the funds in his savings and current accounts. Jesus Arangorin, BPI- accounts and release his deposits therein, the latter filed on June 4, 1990 with the
FB’s new manager, could not forthwith comply with the demand as the funds, as Manila RTC the subject suit. In his complaint, Franco prayed for the following reliefs:
previously stated, had already been debited because of FMIC’s forgery claim. As (1) the interest on the remaining balance25 of his current account which was
such, BPI-FB’s computer at the SFDM Branch indicated that the current account eventually released to him on October 31, 1991; (2) the balance 26 on his savings
record was "not on file." account, plus interest thereon; (3) the advance interest 27 paid to him which had been
deducted when he pre-terminated his time deposit account; and (4) the payment of
With respect to Franco’s savings account, it appears that Franco agreed to an actual, moral and exemplary damages, as well as attorney’s fees.
arrangement, as a favor to Sebastian, whereby ₱400,000.00 from his savings account
was temporarily transferred to Domingo Quiaoit’s savings account, subject to its BPI-FB traversed this complaint, insisting that it was correct in freezing the accounts
immediate return upon issuance of a certificate of deposit which Quiaoit needed in of Franco and refusing to release his deposits, claiming that it had a better right to the
connection with his visa application at the Taiwan Embassy. As part of the amounts which consisted of part of the money allegedly fraudulently withdrawn from it
arrangement, Sebastian retained custody of Quiaoit’s savings account passbook to by Tevesteco and ending up in Franco’s accounts. BPI-FB asseverated that the
ensure that no withdrawal would be effected therefrom, and to preserve Franco’s claimed consideration of ₱2,000,000.00 for the introduction facilitated by Franco
deposits. between George Daantos and Eladio Teves, on the one hand, and Jaime Sebastian,
on the other, spoke volumes of Franco’s participation in the fraudulent transaction.
On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted
the amount of ₱63,189.00 from the remaining balance of the time deposit account On August 4, 1993, the Manila RTC rendered judgment, the dispositive portion of
representing advance interest paid to him. which reads as follows:

These transactions spawned a number of cases, some of which we had already WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of
resolved. [Franco] and against [BPI-FB], ordering the latter to pay to the former the following
sums:
FMIC filed a complaint against BPI-FB for the recovery of the amount of
₱80,000,000.00 debited from its account.17The case eventually reached this Court,
1. ₱76,500.00 representing the legal rate of interest on the amount of First. On the issue of who has a better right to the deposits in Franco’s accounts, BPI-
₱450,000.00 from May 18, 1990 to October 31, 1991; FB urges us that the legal consequence of FMIC’s forgery claim is that the money
transferred by BPI-FB to Tevesteco is its own, and considering that it was able to
2. ₱498,973.23 representing the balance on [Franco’s] savings account as of recover possession of the same when the money was redeposited by Franco, it had
May 18, 1990, together with the interest thereon in accordance with the the right to set up its ownership thereon and freeze Franco’s accounts.
bank’s guidelines on the payment therefor;
BPI-FB contends that its position is not unlike that of an owner of personal property
3. ₱30,000.00 by way of attorney’s fees; and who regains possession after it is stolen, and to illustrate this point, BPI-FB gives the
following example: where X’s television set is stolen by Y who thereafter sells it to Z,
and where Z unwittingly entrusts possession of the TV set to X, the latter would have
4. ₱10,000.00 as nominal damages. the right to keep possession of the property and preclude Z from recovering
possession thereof. To bolster its position, BPI-FB cites Article 559 of the Civil Code,
The counterclaim of the defendant is DISMISSED for lack of factual and legal anchor. which provides:

Costs against [BPI-FB]. Article 559. The possession of movable property acquired in good faith is equivalent
to a title. Nevertheless, one who has lost any movable or has been unlawfully
SO ORDERED.28 deprived thereof, may recover it from the person in possession of the same.

Unsatisfied with the decision, both parties filed their respective appeals before the If the possessor of a movable lost or of which the owner has been unlawfully
CA. Franco confined his appeal to the Manila RTC’s denial of his claim for moral and deprived, has acquired it in good faith at a public sale, the owner cannot obtain its
exemplary damages, and the diminutive award of attorney’s fees. In affirming with return without reimbursing the price paid therefor.
modification the lower court’s decision, the appellate court decreed, to wit:
BPI-FB’s argument is unsound. To begin with, the movable property mentioned in
WHEREFORE, foregoing considered, the appealed decision is hereby AFFIRMED Article 559 of the Civil Code pertains to a specific or determinate thing. 30 A
with modification ordering [BPI-FB] to pay [Franco] ₱63,189.00 representing the determinate or specific thing is one that is individualized and can be identified or
interest deducted from the time deposit of plaintiff-appellant. ₱200,000.00 as moral distinguished from others of the same kind.31
damages and ₱100,000.00 as exemplary damages, deleting the award of nominal
damages (in view of the award of moral and exemplary damages) and increasing the In this case, the deposit in Franco’s accounts consists of money which, albeit
award of attorney’s fees from ₱30,000.00 to ₱75,000.00. characterized as a movable, is generic and fungible. 32 The quality of being fungible
depends upon the possibility of the property, because of its nature or the will of the
Cost against [BPI-FB]. parties, being substituted by others of the same kind, not having a distinct
individuality.33

SO ORDERED.29
Significantly, while Article 559 permits an owner who has lost or has been unlawfully
deprived of a movable to recover the exact same thing from the current possessor,
In this recourse, BPI-FB ascribes error to the CA when it ruled that: (1) Franco had a BPI-FB simply claims ownership of the equivalent amount of money, i.e., the value
better right to the deposits in the subject accounts which are part of the proceeds of a thereof, which it had mistakenly debited from FMIC’s account and credited to
forged Authority to Debit; (2) Franco is entitled to interest on his current account; (3) Tevesteco’s, and subsequently traced to Franco’s account. In fact, this is what BPI-
Franco can recover the ₱400,000.00 deposit in Quiaoit’s savings account; (4) the FB did in filing the Makati Case against Franco, et al. It staked its claim on the money
dishonor of Franco’s checks was not legally in order; (5) BPI-FB is liable for interest itself which passed from one account to another, commencing with the forged
on Franco’s time deposit, and for moral and exemplary damages; and (6) BPI-FB’s Authority to Debit.
counter-claim has no factual and legal anchor.
It bears emphasizing that money bears no earmarks of peculiar ownership, 34 and this
The petition is partly meritorious. characteristic is all the more manifest in the instant case which involves money in a
banking transaction gone awry. Its primary function is to pass from hand to hand as a
We are in full accord with the common ruling of the lower courts that BPI-FB cannot medium of exchange, without other evidence of its title.35 Money, which had passed
unilaterally freeze Franco’s accounts and preclude him from withdrawing his deposits. through various transactions in the general course of banking business, even if of
However, contrary to the appellate court’s ruling, we hold that Franco is not entitled to traceable origin, is no exception.
unearned interest on the time deposit as well as to moral and exemplary damages.
Thus, inasmuch as what is involved is not a specific or determinate personal property, The point is that as a business affected with public interest and because of the nature
BPI-FB’s illustrative example, ostensibly based on Article 559, is inapplicable to the of its functions, the bank is under obligation to treat the accounts of its depositors with
instant case. meticulous care, always having in mind the fiduciary nature of their relationship. x x x.

There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know
but not as a legal consequence of its unauthorized transfer of FMIC’s deposits to the signatures of its customers. Having failed to detect the forgery in the Authority to
Tevesteco’s account. BPI-FB conveniently forgets that the deposit of money in banks Debit and in the process inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB
is governed by the Civil Code provisions on simple loan or mutuum. 36 As there is a cannot now shift liability thereon to Franco and the other payees of checks issued by
debtor-creditor relationship between a bank and its depositor, BPI-FB ultimately Tevesteco, or prevent withdrawals from their respective accounts without the
acquired ownership of Franco’s deposits, but such ownership is coupled with a appropriate court writ or a favorable final judgment.
corresponding obligation to pay him an equal amount on demand. 37Although BPI-FB
owns the deposits in Franco’s accounts, it cannot prevent him from demanding Further, it boggles the mind why BPI-FB, even without delving into the authenticity of
payment of BPI-FB’s obligation by drawing checks against his current account, or the signature in the Authority to Debit, effected the transfer of ₱80,000,000.00 from
asking for the release of the funds in his savings account. Thus, when Franco issued FMIC’s to Tevesteco’s account, when FMIC’s account was a time deposit and it had
checks drawn against his current account, he had every right as creditor to expect already paid advance interest to FMIC. Considering that there is as yet no indubitable
that those checks would be honored by BPI-FB as debtor. evidence establishing Franco’s participation in the forgery, he remains an innocent
party. As between him and BPI-FB, the latter, which made possible the present
More importantly, BPI-FB does not have a unilateral right to freeze the accounts of predicament, must bear the resulting loss or inconvenience.
Franco based on its mere suspicion that the funds therein were proceeds of the multi-
million peso scam Franco was allegedly involved in. To grant BPI-FB, or any bank for Second. With respect to its liability for interest on Franco’s current account, BPI-FB
that matter, the right to take whatever action it pleases on deposits which it supposes argues that its non-compliance with the Makati RTC’s Order Lifting the Order of
are derived from shady transactions, would open the floodgates of public distrust in Attachment and the legal consequences thereof, is a matter that ought to be taken up
the banking industry. in that court.

Our pronouncement in Simex International (Manila), Inc. v. Court of The argument is tenuous. We agree with the succinct holding of the appellate court in
Appeals38 continues to resonate, thus: this respect. The Manila RTC’s order to pay interests on Franco’s current account
arose from BPI-FB’s unjustified refusal to comply with its obligation to pay Franco
The banking system is an indispensable institution in the modern world and plays a pursuant to their contract of mutuum. In other words, from the time BPI-FB refused
vital role in the economic life of every civilized nation. Whether as mere passive Franco’s demand for the release of the deposits in his current account, specifically,
entities for the safekeeping and saving of money or as active instruments of business from May 17, 1990, interest at the rate of 12% began to accrue thereon. 39
and commerce, banks have become an ubiquitous presence among the people, who
have come to regard them with respect and even gratitude and, most of all, Undeniably, the Makati RTC is vested with the authority to determine the legal
confidence. Thus, even the humble wage-earner has not hesitated to entrust his life’s consequences of BPI-FB’s non-compliance with the Order Lifting the Order of
savings to the bank of his choice, knowing that they will be safe in its custody and will Attachment. However, such authority does not preclude the Manila RTC from ruling
even earn some interest for him. The ordinary person, with equal faith, usually on BPI-FB’s liability to Franco for payment of interest based on its continued and
maintains a modest checking account for security and convenience in the settling of unjustified refusal to perform a contractual obligation upon demand. After all, this was
his monthly bills and the payment of ordinary expenses. x x x. the core issue raised by Franco in his complaint before the Manila RTC.

In every case, the depositor expects the bank to treat his account with the utmost Third. As to the award to Franco of the deposits in Quiaoit’s account, we find no
fidelity, whether such account consists only of a few hundred pesos or of millions. The reason to depart from the factual findings of both the Manila RTC and the CA.
bank must record every single transaction accurately, down to the last centavo, and
as promptly as possible. This has to be done if the account is to reflect at any given
time the amount of money the depositor can dispose of as he sees fit, confident that Noteworthy is the fact that Quiaoit himself testified that the deposits in his account are
the bank will deliver it as and to whomever directs. A blunder on the part of the bank, actually owned by Franco who simply accommodated Jaime Sebastian’s request to
such as the dishonor of the check without good reason, can cause the depositor not a temporarily transfer ₱400,000.00 from Franco’s savings account to Quiaoit’s
little embarrassment if not also financial loss and perhaps even civil and criminal account.40 His testimony cannot be characterized as hearsay as the records reveal
litigation. that he had personal knowledge of the arrangement made between Franco,
Sebastian and himself.41
BPI-FB makes capital of Franco’s belated allegation relative to this particular a copy of the complaint, the application for attachment, on the defendant within the
arrangement. It insists that the transaction with Quiaoit was not specifically alleged in Philippines."
Franco’s complaint before the Manila RTC. However, it appears that BPI-FB had
impliedly consented to the trial of this issue given its extensive cross-examination of Franco was impleaded as party-defendant only on May 15, 1990. The Makati RTC
Quiaoit. had yet to acquire jurisdiction over the person of Franco when BPI-FB garnished his
accounts.43 Effectively, therefore, the Makati RTC had no authority yet to bind the
Section 5, Rule 10 of the Rules of Court provides: deposits of Franco through the writ of attachment, and consequently, there was no
legal basis for BPI-FB to dishonor the checks issued by Franco.
Section 5. Amendment to conform to or authorize presentation of evidence.— When
issues not raised by the pleadings are tried with the express or implied consent of the Fifth. Anent the CA’s finding that BPI-FB was in bad faith and as such liable for the
parties, they shall be treated in all respects as if they had been raised in the advance interest it deducted from Franco’s time deposit account, and for moral as
pleadings. Such amendment of the pleadings as may be necessary to cause them to well as exemplary damages, we find it proper to reinstate the ruling of the trial court,
conform to the evidence and to raise these issues may be made upon motion of any and allow only the recovery of nominal damages in the amount of ₱10,000.00.
party at any time, even after judgment; but failure to amend does not affect the result However, we retain the CA’s award of ₱75,000.00 as attorney’s fees.
of the trial of these issues. If evidence is objected to at the trial on the ground that it is
now within the issues made by the pleadings, the court may allow the pleadings to be In granting Franco’s prayer for interest on his time deposit account and for moral and
amended and shall do so with liberality if the presentation of the merits of the action exemplary damages, the CA attributed bad faith to BPI-FB because it (1) completely
and the ends of substantial justice will be subserved thereby. The court may grant a disregarded its obligation to Franco; (2) misleadingly claimed that Franco’s deposits
continuance to enable the amendment to be made. (Emphasis supplied) were under garnishment; (3) misrepresented that Franco’s current account was not
on file; and (4) refused to return the ₱400,000.00 despite the fact that the ostensible
In all, BPI-FB’s argument that this case is not the right forum for Franco to recover the owner, Quiaoit, wanted the amount returned to Franco.
₱400,000.00 begs the issue. To reiterate, Quiaoit, testifying during the trial,
unequivocally disclaimed ownership of the funds in his account, and pointed to In this regard, we are guided by Article 2201 of the Civil Code which provides:
Franco as the actual owner thereof. Clearly, Franco’s action for the recovery of his
deposits appropriately covers the deposits in Quiaoit’s account.
Article 2201. In contracts and quasi-contracts, the damages for which the obligor who
acted in good faith is liable shall be those that are the natural and probable
Fourth. Notwithstanding all the foregoing, BPI-FB continues to insist that the dishonor consequences of the breach of the obligation, and which the parties have foreseen or
of Franco’s checks respectively dated September 11 and 18, 1989 was legally in could have reasonable foreseen at the time the obligation was constituted.
order in view of the Makati RTC’s supplemental writ of attachment issued on
September 14, 1989. It posits that as the party that applied for the writ of attachment
before the Makati RTC, it need not be served with the Notice of Garnishment before it In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible
could place Franco’s accounts under garnishment. for all damages which may be reasonably attributed to the non-performance of the
obligation. (Emphasis supplied.)
The argument is specious. In this argument, we perceive BPI-FB’s clever but
transparent ploy to circumvent Section 4,42 Rule 13 of the Rules of Court. It should be We find, as the trial court did, that BPI-FB acted out of the impetus of self-protection
noted that the strict requirement on service of court papers upon the parties affected and not out of malevolence or ill will. BPI-FB was not in the corrupt state of mind
is designed to comply with the elementary requisites of due process. Franco was contemplated in Article 2201 and should not be held liable for all damages now being
entitled, as a matter of right, to notice, if the requirements of due process are to be imputed to it for its breach of obligation. For the same reason, it is not liable for the
observed. Yet, he received a copy of the Notice of Garnishment only on September unearned interest on the time deposit.
27, 1989, several days after the two checks he issued were dishonored by BPI-FB on
September 20 and 21, 1989. Verily, it was premature for BPI-FB to freeze Franco’s Bad faith does not simply connote bad judgment or negligence; it imports a dishonest
accounts without even awaiting service of the Makati RTC’s Notice of Garnishment on purpose or some moral obliquity and conscious doing of wrong; it partakes of the
Franco. nature of fraud.44 We have held that it is a breach of a known duty through some
motive of interest or ill will.45 In the instant case, we cannot attribute to BPI-FB fraud
Additionally, it should be remembered that the enforcement of a writ of attachment or even a motive of self-enrichment. As the trial court found, there was no denial
cannot be made without including in the main suit the owner of the property attached whatsoever by BPI-FB of the existence of the accounts. The computer-generated
by virtue thereof. Section 5, Rule 13 of the Rules of Court specifically provides that document which indicated that the current account was "not on file" resulted from the
"no levy or attachment pursuant to the writ issued x x x shall be enforced unless it is prior debit by BPI-FB of the deposits. The remedy of freezing the account, or the
preceded, or contemporaneously accompanied, by service of summons, together with garnishment, or even the outright refusal to honor any transaction thereon was
resorted to solely for the purpose of holding on to the funds as a security for its
intended court action,46 and with no other goal but to ensure the integrity of the WHEREFORE, the petition is PARTIALLY GRANTED. The Court of Appeals Decision
accounts. dated November 29, 1995 is AFFIRMED with the MODIFICATION that the award of
unearned interest on the time deposit and of moral and exemplary damages is
We have had occasion to hold that in the absence of fraud or bad faith,47 moral DELETED.
damages cannot be awarded; and that the adverse result of an action does not per se
make the action wrongful, or the party liable for it. One may err, but error alone is not No pronouncement as to costs.
a ground for granting such damages.48
SO ORDERED.
An award of moral damages contemplates the existence of the following requisites:
(1) there must be an injury clearly sustained by the claimant, whether physical, mental
G.R. No. L-41506 March 25, 1935
or psychological; (2) there must be a culpable act or omission factually established;
(3) the wrongful act or omission of the defendant is the proximate cause of the injury
sustained by the claimant; and (4) the award for damages is predicated on any of the PHILIPPINE REFINING CO., INC., plaintiff-appellant,
cases stated in Article 2219 of the Civil Code.49 vs.
FRANCISCO JARQUE, JOSE COROMINAS, and ABOITIZ & CO., defendants.
JOSE COROMINAS, in his capacity as assignee of the estate of the insolvent
Franco could not point to, or identify any particular circumstance in Article 2219 of the
Francisco Jarque, appellee.
Civil Code,50 upon which to base his claim for moral damages.1âwphi1

Thos. G. Ingalls, Vicente Pelaez and DeWitt, Perkins and Brady for appellant.
Thus, not having acted in bad faith, BPI-FB cannot be held liable for moral damages
D.G. McVean and Vicente L. Faelnar for appellee.
under Article 2220 of the Civil Code for breach of contract. 51

MALCOLM, J.:
We also deny the claim for exemplary damages. Franco should show that he is
entitled to moral, temperate, or compensatory damages before the court may even
consider the question of whether exemplary damages should be awarded to him. 52 As First of all the reason why the case has been decided by the court in banc needs
there is no basis for the award of moral damages, neither can exemplary damages be explanation. A motion was presented by counsel for the appellant in which it was
granted. asked that the case be heard and determined by the court sitting in banc because the
admiralty jurisdiction of the court was involved, and this motion was granted in regular
course. On further investigation it appears that this was error. The mere mortgage of
While it is a sound policy not to set a premium on the right to litigate, 53 we, however,
a ship is a contract entered into by the parties to it without reference to navigation or
find that Franco is entitled to reasonable attorney’s fees for having been compelled to
perils of the sea, and does not, therefore, confer admiralty jurisdiction. (Bogart vs.
go to court in order to assert his right. Thus, we affirm the CA’s grant of ₱75,000.00
Steamboat John Jay [1854], 17 How., 399.)
as attorney’s fees.

Coming now to the merits, it appears that on varying dates the Philippine Refining
Attorney’s fees may be awarded when a party is compelled to litigate or incur
Co., Inc., and Francisco Jarque executed three mortgages on the motor
expenses to protect his interest,54 or when the court deems it just and equitable.55 In
vessels Pandan and Zaragoza. These documents were recorded in the record of
the case at bench, BPI-FB refused to unfreeze the deposits of Franco despite the
transfers and incumbrances of vessels for the port of Cebu and each was therein
Makati RTC’s Order Lifting the Order of Attachment and Quiaoit’s unwavering
denominated a "chattel mortgage". Neither of the first two mortgages had appended
assertion that the ₱400,000.00 was part of Franco’s savings account. This refusal
an affidavit of good faith. The third mortgage contained such an affidavit, but this
constrained Franco to incur expenses and litigate for almost two (2) decades in order
mortgage was not registered in the customs house until May 17, 1932, or within the
to protect his interests and recover his deposits. Therefore, this Court deems it just
period of thirty days prior to the commencement of insolvency proceedings against
and equitable to grant Franco ₱75,000.00 as attorney’s fees. The award is
Francisco Jarque; also, while the last mentioned mortgage was subscribed by
reasonable in view of the complexity of the issues and the time it has taken for this
Francisco Jarque and M. N. Brink, there was nothing to disclose in what capacity the
case to be resolved.56
said M. N. Brink signed. A fourth mortgage was executed by Francisco Jarque and
Ramon Aboitiz on the motorship Zaragoza and was entered in the chattel mortgage
Sixth. As for the dismissal of BPI-FB’s counter-claim, we uphold the Manila RTC’s registry of the register of deeds on May 12, 1932, or again within the thirty-day period
ruling, as affirmed by the CA, that BPI-FB is not entitled to recover ₱3,800,000.00 as before the institution of insolvency proceedings. These proceedings were begun on
actual damages. BPI-FB’s alleged loss of profit as a result of Franco’s suit is, as June 2, 1932, when a petition was filed with the Court of First Instance of Cebu in
already pointed out, of its own making. Accordingly, the denial of its counter-claim is which it was prayed that Francisco Jarque be declared an insolvent debtor, which
in order. soon thereafter was granted, with the result that an assignment of all the properties of
the insolvent was executed in favor of Jose Corominas.
On these facts, Judge Jose M. Hontiveros declined to order the foreclosure of the
mortgages, but on the contrary sustained the special defenses of fatal defectiveness
of the mortgages. In so doing we believe that the trial judge acted advisedly.

Vessels are considered personal property under the civil law. (Code of Commerce,
article 585.) Similarly under the common law, vessels are personal property although
occasionally referred to as a peculiar kind of personal property. (Reynolds vs. Nielson
[1903], 96 Am. Rep., 1000; Atlantic Maritime Co vs. City of Gloucester [1917], 117 N.
E., 924.) Since the term "personal property" includes vessels, they are subject to
mortgage agreeably to the provisions of the Chattel Mortgage Law. (Act No. 1508,
section 2.) Indeed, it has heretofore been accepted without discussion that a
mortgage on a vessel is in nature a chattel mortgage. (McMicking vs. Banco Español-
Filipino [1909], 13 Phil., 429; Arroyo vs. Yu de Sane [1930], 54 Phil., 511.) The only
difference between a chattel mortgage of a vessel and a chattel mortgage of other
personalty is that it is not now necessary for a chattel mortgage of a vessel to be
noted n the registry of the register of deeds, but it is essential that a record of
documents affecting the title to a vessel be entered in the record of the Collector of
Customs at the port of entry. (Rubiso and Gelito vs. Rivera [1917], 37 Phil., 72;
Arroyo vs. Yu de Sane, supra.) Otherwise a mortgage on a vessel is generally like
other chattel mortgages as to its requisites and validity. (58 C.J., 92.)

The Chattell Mortgage Law in its section 5, in describing what shall be deemed
sufficient to constitute a good chattel mortgage, includes the requirement of an
affidavit of good faith appended to the mortgage and recorded therewith. The
absence of the affidavit vitiates a mortgage as against creditors and subsequent
encumbrancers. (Giberson vs. A. N. Jureidini Bros. [1922], 44 Phil., 216; Benedicto
de Tarrosa vs. F. M. Yap Tico & Co. and Provincial Sheriff of Occidental Negros
[1923], 46 Phil., 753.) As a consequence a chattel mortgage of a vessel wherein the
affidavit of good faith required by the Chattel Mortgage Law is lacking, is
unenforceable against third persons.

In effect appellant asks us to find that the documents appearing in the record do not
constitute chattel mortgages or at least to gloss over the failure to include the affidavit
of good faith made a requisite for a good chattel mortgage by the Chattel Mortgage
Law. Counsel would further have us disregard article 585 of the Code of Commerce,
but no reason is shown for holding this article not in force. Counsel would further have
us revise doctrines heretofore announced in a series of cases, which it is not
desirable to do since those principles were confirmed after due liberation and
constitute a part of the commercial law of the Philippines. And finally counsel would
have us make rulings on points entirely foreign to the issues of the case. As neither
the facts nor the law remains in doubt, the seven assigned errors will be overruled.

Judgment affirmed, the costs of this instance to be paid by the appellant.