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[G.R. No. L-7817. October 31, 1956.

]
ALFREDO M. VELAYO, in his capacity as Assignee of the insolvent COMMERCIAL AIR LINES,
INC. (CALI), Plaintiff-Appellant, vs. SHELL COMPANY OF THE PHILIPPINE ISLANDS,
LTD., Defendant-Appellee, YEK HUA TRADING CORPORATION, PAUL SYCIP and MABASA &
CO., intervenors.
DECISION
FELIX, J.:
Antecedents The Commercial Air Lines, Inc., which will be hereinafter referred to as CALI, is a
corporation duly organized and existing in accordance with the Philippines laws, with offices in the City
of Manila and previously engaged in air transportation business. The Shell Company of the P. I., Ltd.,
which will be designated as the Defendant, is on the other hand, a corporation organized under the laws of
England and duly licensed to do business in the Philippines, with principal offices at the Hongkong and
Shanghai Bank building in the City of Manila.
Since the start of CALIs operations, its fuel needs were all supplied by the Defendant. Mr. Desmond
Fitzgerald, its Credit Manager who extended credit to CALI, was in charge of the collection thereof.
However, all matters referring to extensions of the term of payment had to be decided first by Mr. Stephen
Crawford and later by Mr. Wildred Wooding, who represented in this country Defendants Board of
Directors, the residence of which is in London, England (Exhs. 4-B and 4-A).
As of August, 1948, the books of the Defendant showed a balance of P170,162.58 in its favor for goods it
sold and delivered to CALI. Even before August 6, 1948, Defendant had reasons to believe that the
financial condition of the CALI was for from being satisfactory. As a matter of fact, according to Mr.
Fitzgerald, CALIs Douglas C-54 plane, then in California, was offered to him by Mr. Alfonso Sycip,
CALIs President of the Board of Directors, in partial settlement of their accounts, which offer was,
however, declined by Mr. Crawford, probably because upon inquiries made by Mr. Fitzgerald sometime
before August 6, 1948, for the purpose of preparing the report for its London office regarding CALIs
indebtedness, Col. Lambert, CALIs Vice President and General Manager, answered that the total
outstanding liabilities of his corporation was only P550,000, and the management of Defendant probably
assumed that the assets of the CALI could very well meet said liabilities and were not included to take
charge of the sale of CALIs said Douglas C-54 plane to collect its credit.
On August 6, 1948, the management of CALI informally convened its principal creditors (excepting only
the insignificant small claims) who were invited to a luncheon that was held between
12:chanroblesvirtuallawlibrary00 and 2:chanroblesvirtuallawlibrary00 oclock in the afternoon of that day
in the Trade and Commerce Building at 123 Juan Luna St., Manila, and informed them that CALI was in a
state of insolvency and had to stop operation. The creditors present, or represented at the meeting,
were:chanroblesvirtuallawlibrary Mr. A. L. Bartolini, representing Firestone Tire & Rubber Co.; chan
roblesvirtualawlibraryMr. Quintin Yu, representing Commercial News; chan roblesvirtualawlibraryMr.
Mark Pringle, representing Smith, Bell & Co. (Lloyds of London); chan roblesvirtualawlibraryMessrs.
Vicente Liwag, C. Dominguez and Pacifico Agcaoili, representing National Airports Corporation; chan
roblesvirtualawlibraryMessrs. W. J. Bunnel and Manuel Chan, representing Goodrich International Rubber
Co.; chan roblesvirtualawlibraryMr. G. E. Adair, representing Goodyear Tire & Rubber Co.; chan
roblesvirtualawlibraryMr. J. T. Chuidian, representing Gibbs, Gibbs, Chuidian & Quasha; chan
roblesvirtualawlibraryMr. E. Valera, representing Mabasa & Co.; chan roblesvirtualawlibraryMr. D.
Fitzgerald, representing Shell Co. P.I. Ltd.; chan roblesvirtualawlibraryand Mr. Alfonso Z. Sycip,
representing himself, Yek Hua Trading Corporation and Paul Sycip (Exhs. NN, JJJ, MM, QQQ, II-4, SS,
TT, UU, VV, WW, XX, YY, ZZ, AAA, BBB, CCC, DDD, EEE, FFF, GGG, and HHH).
The persons present, including Mr. Desmond Fitzgerald, signed their names and the names of the
companies they represented on a memorandum pad of the law firm Quisumbing, Sycip, and Quisumbing
(Exhs. VV and VV-1).
In that meeting at noontime of August 6, 1948, out of the 194 creditors in all (Exh. OO) 15 were listed as
principal creditors having big balances (Exh. NN), to wit:chanroblesvirtuallawlibrary
13th Air Force P12,880.00
Civil Aeronautics Administration 98,127.00
Gibbs, Giibs, Chuidian & Quasha 5,544.90
Goodrich Intl Rubber Co. 3,142.47
Goodyear Tire & Rubber Co. 1,727.50
Mabasa & Co. 4,867.72
Manila Intl Airport 55,280.04

Manila Intl Air Terminal (PAL) 36,163.68


Shell Co. of the Phil., Ltd. 152,641.68
Smith, Bell & Co., Ltd. 45,534.00
Paul Sycip 8,189.33
Mrs. Buenaventura 20,000.00
Firestone Tire & Rubber Co. 4,911.72
Alfonso Sycip 575,880.83
Yek Hua Trading Corp. 487,871.20

P1,512,762.87
What occurred in that meeting may be summarized as follows:chanroblesvirtuallawlibrary Mr. Alexander
Sycip, Secretary of the Board of Directors of the CALI, informed the creditors present that this
corporation was insolvent and had to stop operations. He explained the memorandum agreement executed
by the CALI with the Philippine Air Lines, Inc., on August 4, 1948, regarding the proposed sale to the
latter of the aviation equipments of the former (Exhs. MM and QQQ, par. 1 memo of meeting; chan
roblesvirtualawlibraryExhs. III and PPP P. Agcaoilis memorandum dated August 7, 1948, to the
General Manager of the National Airports Corp.). Mr. Alexander Sycip was assisted in the explanation by
CPA Alfredo Velayo of Washington, Sycip & Company, Auditors of the CALI, who discussed the balance
sheets and distributed copies thereof to the creditors present (Exhs. NN, NN-1 to 7; chan
roblesvirtualawlibraryExh. JJ P. Agcaoilis copy of balance sheet p. 229- 230 t.s.n., Nov. 27, 1951, of
the testimony of D. Fitzgerald). The said balance sheet made mention of a C-54 plane in the United States,
the property now involved in this suit. He was likewise assisted in his explanation by Mr. Curtis L.
Lambert, Vice President and General Manager of the CALI, who described in greater detail the assets of
the CALI. There was a general understanding among all the creditors present on the desirability of
consummating the sale in favor of the Philippine Air Lines Inc. (Exhs. MM and QQQ, par. 2 Memo of
meeting; chan roblesvirtualawlibraryExhs. III and PPP, par. 5 P. Agcoailis memorandum dated August
7, 1948, to the General Manager of the National Airports Corp.; chan roblesvirtualawlibraryand pp. 299300 t.s.n., January 15, 1952, of the testimony of Desmond Fitzgerald).
Then followed a discussion on the payment of claims of creditors and the preferences claimed for the
accounts due to the employees, the Government and the National Airports Corporation. The
representatives of the latter Messrs. Vicente H. Liwag, C. Dominguez and Pacifico V. Agcaoili, contended
that their accounts were preferred. The other creditors disputed such contention of preference (Exhs. MM
and QQQ, par. 3 0151 Memo of meeting; chan roblesvirtualawlibraryExhs. III and PPP, par. 3 P.
Agcaoilis memorandum dated August 1, 1948, to the General Manager of the National Airports
Corp.; chan roblesvirtualawlibraryand pp. 247-248 t.s.n., January 10, 1952, of the testimony of D.
Fitzgerald). No understanding was reached on this point and it was then generally agreed that the matter of
preference be further studied by a working committee to be formed (Exhs. MM, par. 3 Memo of
meeting). The creditors present agreed to the formation of a working committee to continue the discussion
of the payment of claims and preferences alleged by certain creditors, and it was further agreed that said
working committee would supervise the preservation of the properties of the corporation while the
creditors attempted to come to an understanding as to a fair distribution of the assets among them (Exhs.
MM and QQQ, Memo of meeting). From the latter exhibit the following is
copied:chanroblesvirtuallawlibrary
4. Certain specific matters such as the amount owing to the Philippine Air Lines, Inc., and the claims of
Smith, Bell vs. Co., (representing Lloyds of London) that its claim should be offset against the payments
which may be due to CALI from insurance claims were not taken up in detail. It was agreed that these
matters together with the general question of what are preferred claims should be the subject of further
discussions, but shall not interfere with the consummation of the sale in favor of PAL.
5. The creditors present agreed to the formation of the working committee to supervise the preservation
of the properties of the corporation and agreed further that Mr. Fitzgerald shall represent the creditors as a
whole in this committee. It was understood, however, that all questions relating to preference of claims
can be decided only by the creditors assembled.
6. It was the sense of the persons present that, if possible, the insolvency court be avoided but that
should the creditors not meet in agreement, then all the profits from the sale will be submitted to an
insolvency court for proper division among the creditors.
To this working committee, Mr. Desmond Fitzgerald, Credit Manager, of the Defendant, Atty. Agcaoili of
the National Airports Corporation and Atty. Alexander Sycip (Exhs. III and PPP, par. 5 P. Agcaoilis
memorandum dated August 7, 1948, to the General Manager of the National Airports (Corp.) were

appointed. After the creditors present knew the balance sheet and heard the explanations of the officers of
the CALI, it was their unanimous opinion that it would be advantageous not to present suits against this
corporation but to strive for a fair pro-rata division of its assets (Exh. MM, par 6, Memo of meeting),
although the management of the CALI announced that in case of non-agreement of the creditors on a prorata division of the assets, it would file insolvency proceedings (p. 70, t.s.n., October 22, 1951).
Mr. Fitzgerald did not decline the nomination to form part of said working committee and on August 9,
1948, the 3 members thereof discussed methods of achieving the objectives of the committee as decided at
the creditors meeting, which were to preserve the assets of the CALI and to study the way of making a
fair division of all the assets among the creditors. Atty. Sycip made an offer to Mr. D. Fitzgerald to name a
representative to oversee the preservation of the assets of the CALI, but Mr. Fitzgerald replied that the
creditors could rely on Col. Lambert. Atty. Pacifico Agcaoili promised to refer the arguments adduced at
the second meeting to the General Manager of the National Airports Corporations and to obtain the advice
of the Corporate Counsel, so the negotiation with respect to the division of assets of the CALI among the
creditors was left pending or under advice when on that very day of the meeting of the working
committee, August 9, 1948, which Mr. Fitzgerald attended, Defendant effected a telegraphic transfer of its
credit against the CALI to the American corporation Shell Oil Company, Inc., assigning its credit,
amounting to $79,440.00, which was subsequently followed by a deed of assignment of credit dated
August 10, 1948, the credit amounting this time to the sum of $85,081.29 (Exh. I).
On August 12, 1948, the American corporation Shell Oil Company, Inc., filed a complaint against the
CALI in the Superior Court of the State of California, U.S.A. in and for the County of San Bernardino, for
the collection of an assigned credit of $79,440.00 Case No. 62576 of said Court (Exhs. A, E, F, G, H, V,
and Z) and a writ of attachment was applied for and issued on the same date against a C-54 plane (Exhs.
B, C, D, Y, W, X, and X-1).
On September 17, 1948, an amended complaint was filed to recover an assigned credit of $85,081.29
(Exhs. I, K, L, M, Q, R, S, T, U, DD) and a supplemental attachment for a higher sum was applied for and
issued against the C-54 plane, plus miscellaneous personal properties held by Pacific Overseas Air Lines
for the CALI (Exhs. N, O, P, AA, BB, BB-1 and CC) and on January 5, 1949, a judgment by default was
entered by the American court (Exhs. J, EE, FF, GG, and HH).
Unaware of Defendants assignments of credit and attachment suit, the stockholders of CALI resolved in a
special meeting of August 12, 1948, to approve the memorandum agreement of sale to the Philippine Air
Lines, Inc, and noted that the Board had been trying to reach an agreement with the creditors of the
corporation to prevent insolvency proceedings, but so far no definite agreement had been reached (Exh.
OO Minutes of August 12, 1948, stockholders meeting).
By the first week of September, 1948, the National Airports Corporation learned of Defendants action in
the United States and hastened to file its own complaint with attachment against the CALI in the Court of
First Instance of Manila (Exhs. KKK, LLL, and MMM). The CALI, also prompted by Defendants action
in getting the alleged undue preference over the other creditors by attaching the C-54 plane in the United
States, beyond the jurisdiction of the Philippines, filed on October 7, 1948, a petition for voluntary
insolvency. On this date, an order of insolvency was issued by the court (Exh. JJ) which necessarily stayed
the National Airports Corporations action against the CALI and dissolved its attachment (Exh. NNN),
thus compelling the National Airports Corporation to file its claims with the insolvency court (Exh. SS).
By order of October 28, 1948, the Court confirmed the appointment of Mr. Alfredo M. Velayo, who was
unanimously elected by the creditors as Assignee in the proceedings, and ordered him to qualify as such
by taking the oath of office within 5 days from notice and filing a bond in the sum of P30,000.00 to be
approved by the Court conditioned upon the faithful performance of his duties, and providing further that
all funds that the Assignee may collect or receive from the debtors of the corporation, or from any other
source or sources, be deposited in a local bank (Exh. KK). On November 3, 1948, the clerk of court
executed a deed of conveyance in favor of the Assignee (Alfredo M. Velayo) over all the assets of the
CALI (Exh. LL).
The Case. After properly qualifying as Assignee, Alfredo M. Velayo instituted this case (No. 6966 of
the Court of First Instance of Manila) on December 17, 1948, against the Shell Company of P. I., Ltd., for
the purpose of securing from the Court a writ of injunction restrainingDefendant, its agents, servants,
attorneys and solicitors from prosecuting in and for the County of San Bernardino in the Superior Court of
the State of California, U.S.A. the aforementioned Civil Case No. 62576 against the insolvent Commercial
Air Lines, Inc., begun by it in the name of the American corporation Shell Oil Company, Inc., and as an
alternative remedy, in case the purported assignment of Defendants alleged credit to the American
corporation Shell Oil Company, Inc., and the attachment issued against CALI in the said Superior Court of
California shall have the effect of defeating the procurement by Plaintiff as Assignee in insolvency of the

above- mentioned airplane, which is the property of the insolvent CALI, situated in the Ontario
International Airport, with in the County of San Bernardino, State of California, U.S.A., that judgment for
damages in double the value of the airplane be awarded in favor of Plaintiffagainst Defendant, with costs.
The complaint further prays that upon the filing of a bond executed to the Defendant in an amount to be
fixed by the Court, to the effect that Plaintiff will pay to Defendant all damages the latter may sustain by
reason of the injunction if the Court should finally decide that thePlaintiff was not entitled thereto, the
Court issued a writ of preliminary injunction enjoining the Defendant, its agent, servants, attorneys and
solicitor, from prosecuting the aforementioned case No. 62576, the same writ of preliminary injunction to
issue without notice to the Defendant it appearing by verified complaint that the great irreparable injury
will result to the Plaintiff-Appellant before the matter could be on notice. The Plaintiff also prays for such
other remedies that the Court may deem proper in the premises.
On December 20, 1948, the Defendant filed an opposition to the Plaintiffs petition for the issuance of a
writ of the preliminary injunction, and on December 22, 1948, the Court denied the same because whether
the conveyance of Defendants credit was fraudulent or not, the Philippine court would not be in position
to enforce its orders as against the American corporation Shell Oil Company, Inc., which is outside of the
jurisdiction of the Philippines.
Plaintiff having failed to restrain the progress of the attachment suit in the United States by denial of his
application for a writ of preliminary injunction and the consequences on execution of the C-54 plane in the
County of San Bernardino, State of California, U. S. A., he confines his action to the recovery of damages
against the Defendant.
On December 28, 1948, Defendant filed its answer to the complaint, which was amended on February 3,
1949. In its answer, Defendant, besides denying certain averments of the complaint alleged, among other
reasons, that the assignment of its credit in favor of the Shell Oil Company, Inc., in the United States was
for a valuable consideration and made in accordance with the established commercial practices, there
being no law prohibiting a creditor from assigning his credit to another; chan roblesvirtualawlibrarythat it
had no interest whatsoever in Civil Case No. 62576 instituted in the Superior Court in the State of
California by the Shell Oil Company, Inc., which is a separate and distinct corporation organized and
existing in the State of Virginia and doing business in the State of California, U. S. A.,
the Defendant having as its stockholders the Shell Petroleum Company of London and other persons
residing in that City, while the Shell Oil Company Inc., of the United State has its principal stockholders
the Shell Union Oil Company of the U.S. and presumably countless American investors inasmuch as its
shares of stock are being traded daily in the New York stock market; chan roblesvirtualawlibrarythat Mr.
Fitzgerald, Defendants Credit Manager, was merely invited to a luncheon-meeting at the Trade and
Commerce Building in the City of Manila on August 6, 1948, without knowing the purpose for which it
was called; chan roblesvirtualawlibraryand that Mr. Fitzgerald could not have officially represented
the Defendant at that time because such authority resides on Mr. Stephen Crawfurd. Defendant, therefore,
prays that the complaint be dismissed with costs against the Plaintiff.
Then Alfonso Sycip, Yek Hua Trading Corporation and Paul Sycip, as well as Mabasa & Co., filed, with
permission of the Court, their respective complaints in intervention taking the side of thePlaintiff. These
complaints in intervention were timely answered by Defendant which prayed that they be dismissed.
After proper proceedings and hearing, the Court rendered decision on February 26, 1954, dismissing the
complaint as well as the complaints in intervention, with costs against thePlaintiff. In view of this
outcome, Plaintiff comes to us praying that the judgment of the lower court be reversed and that
the Defendant be ordered to pay him damages in the sum of P660,000 (being double the value of the
airplane as established by evidence, i.e., P330,000), with costs, and for such other remedy as the Court
may deem just and equitable in the premises.
The Issues. Either admission of the parties, or by preponderance of evidence, or by sheer weight of the
circumstance attending the transactions herein involved, We find that the facts narrated in the preceding
statement of the antecedents have been sufficiently established, and the questions at issue submitted to
our
determination
in
this
instance
may
be
boiled
down
to
the
following
propositions:chanroblesvirtuallawlibrary
(1) Whether or not under the facts of the case, the Defendant Shell Company of the P. I., Ltd., taking
advantage of its knowledge of the existence of CALIs airplane C-54 at the Ontario International Airport
within the Country of San Bernardino, State of California, U. S. A.,
(Which knowledge it acquired:chanroblesvirtuallawlibrary first at the informal luncheon-meeting of the
principal creditors of CALI on August 5, 1948, where its Credit Manager, Mr. Desmond Fitzgerald, was
selected to form part of the Working Committee to supervise the preservation of CALIs properties and to

study the way of making a fair division of all the assets among the creditors and thus avoid the institution
of insolvency proceedings in court; chan roblesvirtualawlibraryand
Subsequently, at the meeting of August 9, 1948, when said Mr. Fitzgerald met the other members of the
said Working Committee and heard and discussed the contention of certain creditors of CALI on the
accounts due the employees, the Government and the National Airports Corporation who alleged that
their claims were preferred),
acted in bad faith and betrayed the confidence and trust of the other creditors of CALI present in said
meeting by affecting a hasty telegraphic transfer of its credit to the American corporation Shell Oil
Company, Inc., for the sum of $79,440 which was subsequently followed by a deed of assignment of
credit dated August 10, 1948, amounting this time to the sum of $85,081.28 (Exhs. Z), thus defeating the
purpose of the informal meetings of CALIs principal creditors end depriving the Plaintiff, as its Assignee,
of the means of obtaining said C-54 plane, or the value thereof, to the detriment and prejudice of the other
CALIs creditors who were consequently deprived of their share in the distribution of said value; chan
roblesvirtualawlibraryand (2) Whether or not by reason of said betrayal of confidence and
trust, Defendant may be made under the law to answer for the damages prayed by the Plaintiff; chan
roblesvirtualawlibraryand if so, what should be the amount of such damages.
DISCUSSION OF THE CONTROVERSY
I. The mere enunciation of the first proposition can lead to no other conclusion than that Defendant, upon
learning the precarious economic situation of CALI and that with all probability, it could not get much of
its outstanding credit because of the preferred claims of certain other creditors, forgot that Man does not
live by bread alone and entirely disregarded all moral inhibitory tenets. So, on the very day its Credit
Manager attended the meeting of the Working Committee on August 9, 1948, it hastily made a telegraphic
assignment of its credit against the CALI to its sister American Corporation, the Shell Oil Company, Inc.,
and by what is stated in the preceding pages hereof, We know that were the damaging effects of said
assignment upon the right of other creditors of the CALI to participate in the proceeds of said CALIs
plane C-54.
Defendants endeavor to extricate itself from any liability caused by such evident misdeed of its part,
alleging that Mr. Fitzgerald had no authority from his principal to commit the latter on any
agreement; chan roblesvirtualawlibrarythat the assignment of its credit in favor of its sister corporation,
Shell Oil Company, Inc., was for a valuable consideration and in accordance with the established
commercial practices; chan roblesvirtualawlibrarythat there is no law prohibiting a creditor from assigning
his credit to another; chan roblesvirtualawlibraryand that the Shell Oil Company Inc., of the United States
is a corporation different and independent from the Defendant. But all these defenses are entirely
immaterial and have no bearing on the main question at issue in this appeal. Moreover, we might say
thatDefendant could not have accomplished the transfer of its credit to its sister corporation if all the Shell
companies throughout the world would not have a sort of union, relation or understanding among
themselves to come to the aid of each other. The telegraphic transfer made without knowledge and at the
back of the other creditors of CALI may be a shrewd and surprise move that enabled Defendant to collect
almost all if not the entire amount of its credit, but the Court of Justice cannot countenance such attitude at
all, and much less from a foreign corporation to the detriment of our Government and local business.
To justify its actions, Defendant may also claim that Mr. Fitzgerald, based on his feeling of distrust and
apprehension, entertained the conviction that intervenors Alfonso Sycip and Yek Hua Trading Corporation
tried to take undue advantage by infiltrating their credits. But even assuming for the sake of argument, that
these intervenors really resorted to such strategem or fraudulent device, yet Defendants act finds not
justification for no misdeed on the part of a person is cured by any misdeed of another, and it is to be
noted that neither Alfonso Z. Sycip, nor Yek Hua Trading Corporation were the only creditors of CALI,
nor even preferred ones, and that the infiltration of ones credit is of no sequence if it cannot be proven in
the insolvency proceedings to the satisfaction of the court. Under the circumstances of the
case, Defendants transfer of its aforementioned credit would have been justified only if Mr. Fitzgerald
had declined to take part in the Working Committee and frankly and honestly informed the other creditors
present that he had no authority to bind his principal and that the latter was to be left free to collect its
credit from CALI by whatever means his principal deemed wise and were available to it. But then such
information would have immediately dissolved all attempts to come to an amicable conciliation among the
creditors and would have precipitated the filing in court of CALIs voluntary insolvency proceedings and
nulified the intended transfer ofDefendants credit to its above-mentioned sister corporation.
II. We may agree with the trial judge, that the assignment of Defendants credit for a valuable
consideration is not violative of the provisions of sections 32 and 70 of the Insolvency Law (Public Act
No. 1956), because the assignment was made since August 9, 1948, the original complaint in the United

States was filed on August 12, 1948, and the writ of attachment issued on this same date, while CALI filed
its petition for insolvency on October 7, 1948. At his Honor correctly states, said Sections 32 and 70 only
contemplate acts and transactions occuring within 30 days prior to the commencement of the proceedings
in insolvency and, consequently, all other acts outside of the 30-day period cannot possibly be considered
as coming within the orbit of the operation. In addition to this, We may add that Article 70 of the
Insolvency Law refers to acts of the debtor (in this case the insolvent CALI) and not of the creditor, the
Shell Company of the P. I. Ltd. But section 70 does not constitute the only provisions of the law pertinent
to the matter. The Insolvency Law also provides the following:chanroblesvirtuallawlibrary
SEC. 33. The assignee shall have the right to recover all the estate, debt and effects of said insolvent. If
at the time of the commencement of the proceedings in insolvency, an action is pending in the name of the
debtor, for the recovery of a debt or other thing might or ought to pass to the assignee by the assignment,
the assignee shall be allowed to prosecute the action, in like manner and with life effect as if it had been
originally commenced by him. If there are any rights of action in favor of the insolvency for damages, on
any account, for which an action is not pending the assignee shall have the right to prosecute the same
with effect as the insolvent might have done himself if no proceedings in insolvency had been
instituted cralaw .
It must not be forgotten that in accordance with the spirit of the Insolvency Law and with the provisions of
Chapter V thereof which deal with the powers and duties of a receiver, the assignee represents the
insolvent as well as the creditors in voluntary and involuntary proceedings Intestate of Mariano G.
Veloso, etc. vs. Vda. de Veloso S. C. G. R. No. 42454; chan roblesvirtualawlibraryHunter, Kerr & Co.
vs. Samuel Murray, 48 Phil. 449; chan roblesvirtualawlibraryChartered Bank vs. Imperial, 48 Phil.
931; chan roblesvirtualawlibraryAsia Banking Corporation vs. Herridge, 45 Phil. 527 (II Tolentinos
Commercial Laws of the Philippines, 633). See also Section 36 of the Insolvency Law.From the foregoing,
We see thatPlaintiff, as Assignee of the Insolvent CALI, had personality and authority to institute this case
for damages, and the only question that remains determination is whether the payment of damages sought
to be recovered from Defendant may be ordered under the Law and the evidence of record.
IF ANY PERSON, before the assignment is made, having notice of the commencement of the proceedings
in insolvency, or having reason to believe that insolvency proceedings are about to be commenced,
embezzles or disposes of any money, goods, chattels, or effects of the insolvent, he is chargeable
therewith, and liable to an action by the assignee for double the value of the property sought to be
embezzled or disposed of, to be received for the benefit of the insolvent estate.
The writer of this decision does not entertain any doubt that the Defendant taking advantage of his
knowledge that insolvency proceedings were to be instituted by CALI if the creditors did not come to an
understanding as to the manner of distribution of the insolvent asset among them, and believing it most
probable that they would not arrive at such understanding as it was really the case schemed and
effected the transfer of its sister corporation in the United States, where CALIs plane C-54 was by that
swift and unsuspected operation efficaciously disposed of said insolvents property depriving the latter and
the Assignee that was latter appointed, of the opportunity to recover said plane. In addition to the
aforementioned Section 37, Chapter 2 of the PRELIMINARY TITLE of the Civil Code, dealing on
Human Relations, provides the following:chanroblesvirtuallawlibrary
Art 19. Any person must, in the exercise of his rights and in the performances of his duties, act with
justice, give everyone his due and observe honesty and good faith.
It maybe said that this article only contains a mere declarations of principles and while such statement
may be is essentially correct, yet We find that such declaration is implemented by Article 21 and sequence
of the same Chapter which prescribe the following:chanroblesvirtuallawlibrary
Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for the damage.
The Code Commission commenting on this article, says the following:chanroblesvirtuallawlibrary
Thus at one stroke, the legislator, if the forgoing rule is approved (as it was approved), would vouchsafe
adequate legal remedy for that untold numbers of moral wrongs which is impossible for human foresight
to provide for specifically in the statutes.
But, it may be asked, would this proposed article obliterate the boundary line between morality and law?
The answer is that, in the last analysis, every good law draws its breath of life from morals, from those
principles which are written with words of fire in the conscience of man. If this premises is admitted, then
the proposed rule is a prudent earnest of justice in the face of the impossibility of enumerating, one by
one, all wrongs which cause damages. When it is reflected that while codes of law and statutes have
changed from age to age, the conscience of man has remained fixed to its ancient moorings, one cannot

but feel that it is safe and salutary to transmute, as far as may be, moral norms into legal rules, thus
imparting to every legal system that enduring quality which ought to be one of its superlative attributes.
Furthermore, there is no belief of more baneful consequence upon the social order than that a person may
with impunity cause damage to his fellow-men so long as he does not break any law of the State, though
he may be defying the most sacred postulates of morality. What is more, the victim loses faith in the
ability of the government to afford him protection or relief.
A provision similar to the one under consideration is embodied in article 826 of the German Civil Code.
The same observations may be made concerning injurious acts that are contrary to public policy but are
not forbidden by statute. There are countless acts of such character, but have not been foreseen by the
lawmakers. Among these are many business practices that are unfair or oppressive, and certain acts of
landholders and employers affecting their tenants and employees which contravene the public policy of
social justice.
Another rule is expressed in Article 24 which compels the return of a thing acquired without just or legal
grounds. This provision embodies the doctrine that no person should unjustly enrich himself at the
expense of another, which has been one of the mainstays of every legal system for centuries. It is most
needful that this ancient principles be clearly and specifically consecrated in the proposed Civil Code to
the end that in cases not foreseen by the lawmaker, no one may unjustly benefit himself to the prejudice of
another. The German Civil Code has a similar provision (art. 812). (Report of the Code Commission on
the Proposed Civil Code of the Philippines, p. 40- 41).
From the Civil Code Annotated by Ambrosio Padilla, Vol. I, p. 51, 1956 edition, We also copy the
following:chanroblesvirtuallawlibrary
A moral wrong or injury, even if it does not constitute a violation of a statute law, should be compensated
by damages. Moral damages (Art. 2217) may be recovered (Art. 2219). In Article 20, the liability for
damages arises from a willful or negligent act contrary to law. In this article, the act is contrary to morals,
good customs or public policy.
Now, if Article 23 of the Civil Code goes as far as to provide that:chanroblesvirtuallawlibrary
Even if an act or event causing damage to anothers property was not due to the fault or negligence of
the Defendant, the latter shall be liable for indemnity if through the act or event he was benefited.
with mere much more reason the Defendant should be liable for indemnity for acts it committed in bad
faith and with betrayal of confidence.
It may be argued that the aforequoted provisions of the Civil Code only came into effect on August 30,
1950, and that they cannot be applicable to acts that took place in 1948, prior to its effectivity. But Article
2252 of the Civil Code, though providing that:chanroblesvirtuallawlibrary
Changes made and new provisions and rules laid down by this Code which may be prejudice or impair
vested or acquired rights in accordance with the old legislation, shall have no retroactive effect cralaw .
implies that when the new provisions of the Code does nor prejudice or impair vested or acquired rights in
accordance with the old legislation and it cannot be alleged that in the case at bar Defendant had any
vested or acquired right to betray the confidence of the insolvent CALI or of its creditors said new
provisions, like those on Human Relations, can be given retroactive effect. Moreover, Article 2253 of the
Civil Code further provides:chanroblesvirtuallawlibrary
cralaw But if a right should be declared for the first time in this Code, it shall be effective at once, even
though the act or event which may give rise thereto may have been done or may have occurred under the
prior legislation, provided said new right does not prejudice or impair any vested or acquired right, of the
same origin.
and according to Article 2254, no vested or acquired right can arise from acts or omissions which are
against the law or which infringe upon the right of others.
In case of Juan Castro vs. Acro Taxicab Company, (82 Phil., 359; chan roblesvirtualawlibrary47 Off. Gaz.,
[5] 2023), one of the question at issue was whether or not the provisions of the New Civil Code of the
Philippines on moral damages should be applied to an act of negligence which occurred before the
effectivity of said code, and this Court, through Mr. Justice Briones, sustaining the affirmative proposition
and citing decisions of the Supreme Court of Spain of February 14, 1941, and November 14, 1934, as well
as the comment of Mr. Castan, Chief Justice of the Supreme Court of Spain, about the revolutionary
tendency of Spanish jurisprudence, said the following:chanroblesvirtuallawlibrary
We conclude, therefore, reaffirming the doctrine laid down in the case of Lilius (59 J. F. 800) in the sense
that indemnity lies for moral and patrimonial damages which include physical and pain sufferings. With
this (doctrine), We effect in this jurisdiction a real symbiosis 1 of the Spanish and American Laws and, at
the same time, We act in consonance with the spirit and progressive march of time (translation)

The writer of this decision does not see any reason for not applying the provisions of Section 37 of the
Insolvency Law to the case at bar, specially if We take into consideration that the term any person used
therein cannot be limited to the officers or employee of the insolvent, as no such limitation exist in the
wording of the section (See also Sec. 38 of the same Act), and that, as stated before,
the Defendant schemed and affected the transfer of its credits (from which it could derive practically
nothing) to its sister corporation in the United States where CALIs plane C-54 was then situated,
succeeding by such swift and unsuspected operation in disposing of said insolvents property by removing
it from the possession and ownership of the insolvent. However, some members of this Court entertain
doubt as to the applicability of said section 37 because in their opinion what Defendant in reality disposed
of was its own credit and not the insolvents property, although this was practically the effect and result of
the scheme. Having in mind this objection and that the provisions of Article 37 making the person coming
within its purview liable for double the value of the property sought to be disposed of constitute a sort of
penal clause which shall be strictly construed, and considering further that the same result may be
obtained, by applying only the provisions of the Civil Code, the writer of this decision yields to the
objection aforementioned.
Articles 2229, 2232, 2234, 2142, and 2143 of the Civil Code read as follows:chanroblesvirtuallawlibrary
Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages.
Art. 2232. In contracts quasi-contracts, the Court may award exemplary damages if theDefendant acted
in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
Art. 2234. While the amount of the exemplary damages need not be proved, the Plaintiffmust show that
he is entitled to moral, temperate, or compensatory damages before the court may consider the question of
whether or not exemplary damages should be awarded. In case liquidated damages should be upon,
although no proof of loss is necessary in order that such liquidated damages be recovered, nevertheless,
before the court may consider the question of granting exemplary in addition to the liquidated damages,
the Plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not
for the stipulation for liquidated damages.
Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract
to the end that no one shall be unjustly enriched or benefited at the expense of another.
Art, 2143. The provisions for quasi-contracts in this Chapter do not exclude other quasi-contracts which
may come within the purview of the preceding article.
In accordance with these quoted provisions of the Civil Code, We hold Defendant liable to pay to
the Plaintiff, for the benefit of the insolvent CALI and its creditors, as compensatory damages a sum
equivalent to the value of the plane at the time aforementioned and another equal sum as exemplary
damages.
There is no clear proof in the record about the real value of CALIs plane C-54 at the time
whenDefendants credit was assigned to its sister corporation in the United States.
Judgment
Wherefore, and on the strength of the foregoing considerations, the decision appealed from is reversed
and Defendant-Appellee-, Shell Company of the Philippine Islands, Ltd., is hereby sentenced to pay
to Plaintiff-Appellant, as Assignee of the insolvent CALI, damages in a sum double the amount of the
value of the insolvents airplane C-54 at the time Defendants credit against the CALI was assigned to its
sister corporation in the United States, which value shall be determined in the corresponding incident in
the lower court after this decision becomes final. Costs are taxed against Defendant-Appellee. It is SO
ORDERED.
Paras, C.J., Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., and
Endencia, concur.
RESOLUTION
July 30, 1957
FELIX, J.:
Plaintiff-Appellant and intervenors on one hand and Defendant Shell Company of the Philippine Islands,
Ltd., on the other, have filed their respective motions for reconsideration of Our decision rendered in this
case. The motion of Plaintiff Appellant and the intervenors seeks the reconsideration of said decision in so
far as it held that:chanroblesvirtuallawlibrary
There is no clear proof in the record about the real value of CALIs plane C-54, at the time
when Defendants credit was assigned to its sister corporation in the United States.

and, upon such holding, it orders that the value of the C-54 plane
be determined in the corresponding incident in the lower Court after this decision becomes final.
The movants maintain that there is evidence sufficient to support a finding that CALIs C-54 plane had a
fair market value of $165,000 at or about the time Defendant credit was assigned to its sister corporation
in the United States and the plane attached. This motion was opposed byDefendant-Appellee which was
replied by Plaintiff- Appellant with a supplemental motion for reconsideration, and then retorted with a
manifestation and motion of Defendant-Appellantfollowed by Defendants answer to Plaintiffs motion for
reconsideration.
After considering the evidence pointed out by said parties in support of their respective contentions, we
are more convinced that the proofs relative to the real value of CALI plane C-54 at the time Defendants
credit was assigned to its sister corporation in the United States, is not clear. Hence, Plaintiff-Appellants
and intervenors motion for reconsideration is hereby overruled.
The main grounds on which Defendant-Appellee bases its motion for reconsideration, as relied upon in its
counsels memoranda and oral argument, may be reduced to the following:chanroblesvirtuallawlibrary
(1) That the Defendant Appellee is not guilty of bad faith, it having done nothing but to protect
legitimately its own interest or credit against the bad faith of its debtor, the insolvent CALI, under the
control of the latters President Alfonso Sycip;
(2) That Appellees transfer of its credit to its sister corporation in the United States, did not prejudice the
Government, because its claims were fully paid, nor caused any loss or injury to other creditors, except the
entities and groups controlled by Alfonso Z. Sycip;
(3) That Appellee is not liable for exemplary damages because the provisions of the new Civil Code on
the matter are not applicable to this case;
(4) That the Plaintiff-Appellant has no cause of action against Defendant-Appellant and is not the real
party in interest; chan roblesvirtualawlibraryand
(5) That Plaintiffs right of action was based and prosecuted in the lower court under the provisions of the
Insolvency Law and consequently that he is stopped from pursuing another theory and is not entitled to
damages under the provisions of the New Civil Code.
I. The facts on which this Court based its conclusion that Defendant corporation acted in bad faith are
plainly and explicitly narrated in the decision. They are not and cannot be denied or contradicted by
said Defendant. On the contrary they are in many respects admitted by theDefendant and no amount of
reasoning can make Us change that conclusion.
II. As pointed out by counsel for Plaintiff, Defendant choses to ignore that besides the claims of
intervenors Alfonso Z. Sycip and Yek Hua Trading Corporation, which counsel for the Shell says to
constitute 10/11 of the approved ordinary claims, there is still 1/11 of the other creditors whose claims
have been also approved by the insolvency Court, in addition to the ordinary creditors whose claims are
yet unapproved by the insolvency Court, amounting to P560,296,32, and no good reason suggests itself
why these unapproved but pending claims should be taken into account in considering the prejudice
caused all the creditors of the insolvent CALI. As long as these claims are pending, the contingency exist,
that these creditors may recover from the insolvent estate and when they do, they will suffer to the
diminution of CALIs asset resulting from the attachment of the plane by Appellee Shell.
Answering Defendants contention that the transfer of its credit to its sister corporation in the United
States did not prejudice the Government or the other creditors of CALI, counsel forPlaintiff-Appellant has
the following to say:chanroblesvirtuallawlibrary
So far as the claims of the Government are concerned, it is true that they were preferred claims and have
all been paid. But this circumstance cannot erase the fact that the Appellees action jeopardised the
Governments claims as well as the other claims. There was doubt as to the preferential character of the
Governments claims. Indeed, the preferential character of one of the Governments claims necessitated a
litigation to establish. Had it been held to be an ordinary claim, the Government would have suffered as
other creditors. But that is neither here nor there; chan roblesvirtualawlibraryneither the character of the
claim nor the identity of the claimant can possibly affect the application of a principle that no person may
profit from his betrayal of a trust.
And the Appellant continues thus:chanroblesvirtuallawlibrary
Appellee had a credit of P170,000 against the insolvent CALI as of August 1948, which is assigned to its
sister corporation in the United States for P120.000. Hence, Appellee recovered 70% of its credit and
immediately upon making the assignment in 1948. More than this, the stated consideration was fixed by
and and between two sister companies. The fact remains that Appellees sister company was enabled to get
hold of a C-54 plane worth about P330,000.

On the other hand, the ordinary creditors who filed their claims against the insolvent CALI had to wait
until November 1956 to get their dividends and only at the rate of 30%, computed as
follows:chanroblesvirtuallawlibrary
Assets as of October 30, 1956 P668,605.15
Less:chanroblesvirtuallawlibrary
Preferred claims still uncollected,
assignee and attorneys fees and
other reserves P138,719.56

Amount available for distribution P529,885.59


Divident:chanroblesvirtuallawlibrary
Amount available for distribution P529,885.59
= 30%
Total of all ordinary claims approved
and unapproved P1,746,222.33
Had Appellee not assigned its credit in 1948, the insolvent CALI would have realized from the sale of the
plane (which was attached by Appellee) P330,000 representing the fair market value of the plane at the
time of the attachment. Therefore, if this amount of P330,000 is added to the distributable amount of
P529,- 885.59, the share of each of the ordinary creditos would certainly amount to approximately 1 1/2
times the dividend each of them has received; chan roblesvirtualawlibraryin other words, each ordinary
creditors would received not 30% but approximately 45% of his claim, and Appellee would recover
approximately only 45% and not 70% of its credit.
And even if the sale of CALIs plane would not have obtained the sum of P330,000.00, the proceeds
thereof that might be diminished though affecting, no doubt, the calculated dividend of each of the
ordinary creditors, estimated at 45% by reducing it proportionately, such diminution would at the same
time increase the difference between the dividend paid CALIs ordinary creditors in November, 1956, and
the dividend of 70% secured by Defendant Shell in 1948.
III and IV. That Appellee Shell is not liable for exemplary damages in this case and that PlaintiffAppellant has no cause of action against Defendant-Appellee, for he is not the real party in interest, are
matters fully discussed in Our decision and We find no sensible reason for disturbing the conclusions We
reached therein.
V. As to the fifth question raised by counsel for Appellee in the course of his oral argument at the hearing
in the City of Baguio of his motion, i.e., that Plaintiffs right of action was based and prosecuted in the
lower court under the provisions of the Insolvency Law and he is, therefore, stopped from pursuing on
appeal another theory under which he might be entitled to damages in consonance with the provisions of
the new Civil Code, We may invoke the decision in the case of Dimaliwat vs. Asuncion, 59 Phil., 396,
401. In that decision We said the following:chanroblesvirtuallawlibrary
Vicente Dimaliwat contends that Esperanza Dimaliwat has no right to claim the ownership of the
property in question to the exclusion of the children of the third marriage, under the foregoing provisions
of the Civil Code, because the case was not tried on that theory in the lower court. We find no merit in that
contention. The decision cited are not in point. Articles 968 and 969 of the Civil Code are rules of
substantive law, and if they are applicable to the facts of this case they must be given effect.
The same thing can be said in the case at bar. Articles 19, 21, 2229, 2232, 2234, 2142 and 2143 of the new
Civil Code are rules of substantive law, and if they are applicable to the facts of this case, which We hold
they do, they must be made operative and given effect in this litigation.
xxx
xxx
xxx
It maybe seen from the foregoing that the above mentioned grounds on which the motion for
reconsideration of the Defendant Shell stand, are not well taken. However, and despite this finding, We
insist to delve in the question of whether the exemplary damages imposed in this Court
upon Defendant Appellee, which the latters counsel contends to be inequitable and unfair, may be
modified.
It will be remembered that this case was looked into from the point of view of the provisions of Section 37
of the Insolvency Law, which reads as follows:chanroblesvirtuallawlibrary
SEC. 37. IF ANY PERSON, before the assignment is made, having notice of the commencement of the
proceedings in insolvency, or having reason to believe that insolvency proceedings are about to be
commenced, embezzles or disposses of any of the money, goods, chattels, or effects of the insolvent, he is
chargeable therewith, and liable to an action by the assignee for double the value of the property sought to
be embezzled or disposed of, to be received for the benefit of the insolvent estate.

The writer of the decision was then and still is of the opinion that the provisions of this section were
applicable to the case, and accordingly, that Defendant Shell was liable in this action instituted by the
Assignee for double the value of the property disposed of, to be received for the benefit of the Insolvent
estate. However, some of the members of this Court, for the reasons already stated in the decision,
entertained some doubt as to the applicability of said Section 37, and yielding to their objections the writer
of the decision turned his eyes to the provisions of the new Civil Code, inasmuch as the same result could
be achieved. In the case at bar, it cannot be denied that:chanroblesvirtuallawlibrary
Defendant taking advantage of his knowledge that insolvency proceedings were to be instituted by
CALI if the creditors did not come to an understanding as to the manner of distribution of the insolvent
assets among them, and believing as most probable that they would not arrive at such understanding, as it
was really the case- schemed and effected the transfer of its credit to its sister corporation in the United
States where CALIs plane C-54 was and by this swift and unsuspected operation efficaciously disposed
of said insolvents property depriving the latter and the Assignee that was later appointed, of the
opportunity to recover said plane.
These acts of Defendant Shell come squarely within the sanction prescribed by Congress by similar acts
and no reflection can be reasonably cast on Us if in the measure of the exemplary damages that were to be
imposed upon Defendant-Appellee, We were influenced by the provisions of Section 37 of the Insolvency
Law. In this connection it is to be noted that, according to the Civil Code, exemplary or corrective
damages are imposed by way of example or correction for the public good, in addition of the moral,
temperate, liquidated or compensatory damages Art. 2229, and that the amount of the exemplary damages
need not be proved (Art. 2234), for it is left to the sound discretion of the Court.
Notwithstanding the foregoing, a majority of this Court was of the belief that the value of CALIs plane C54, at the time when Defendants credit was assigned to its sister corporation in the United States, might
result quite high, and that exemplary damages should not be left to speculation but properly determined by
a certain and fixed amount. So they voted for the reconsideration of the decision with regard to the amount
of exemplary damages which this Court fixed at P25,000.00.
Because of this attitude of the Court, the dispositive part of our decision rendered in this case is hereby
amended to read as follows:chanroblesvirtuallawlibrary
Wherefore, and on the strength of the foregoing considerations, the decision appealed from is reversed
and Defendant-Appellee, Shell Company of the Philippine Islands Ltd., is hereby sentenced to
pay Plaintiff-Appellant, as Assignee of the insolvent CALI, compensatory damages in a sum equal to the
value of the insolvents airplane C-54 at the time Defendants credit against CALI was assigned to its
sister corporation in the United States - which shall be determined in the corresponding incident in the
lower Court after this decision becomes final - and exemplary damages in the sum of P25,000. Costs are
taxed against Defendant-Appellee. It is SO ORDERED.

[G.R. No. 122191. October 8, 1998]


SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF APPEALS, MILAGROS P. MORADA
and HON. RODOLFO A. ORTIZ, in his capacity as Presiding Judge of Branch 89,
Regional Trial Court of Quezon City, respondents.
DECISION
QUISUMBING, J.:
This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set aside
the Resolution[1] dated September 27, 1995 and the Decision [2] dated April 10, 1996 of the Court of
Appeals[3] in CA-G.R. SP No. 36533,[4] and the Orders[5] dated August 29, 1994[6] and February 2,
1995[7] that were issued by the trial court in Civil Case No. Q-93-18394.[8]
The pertinent antecedent facts which gave rise to the instant petition, as stated in the questioned
Decision[9], are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines
based in Jeddah, Saudi Arabia. x x x
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance
with fellow crew members Thamer Al-Gazzawi and Allah Al-Gazzawi, both Saudi
nationals. Because it was almost morning when they returned to their hotels, they agreed to
have breakfast together at the room of Thamer. When they were in te (sic) room, Allah left on
some pretext. Shortly after he did, Thamer attempted to rape plaintiff. Fortunately, a roomboy
and several security personnel heard her cries for help and rescued her. Later, the Indonesian
police came and arrested Thamer and Allah Al-Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her
about the Jakarta incident. They then requested her to go back to Jakarta to help arrange the
release of Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad and base
manager Baharini negotiated with the police for the immediate release of the detained crew
members but did not succeed because plaintiff refused to cooperate. She was afraid that she
might be tricked into something she did not want because of her inability to understand the
local dialect. She also declined to sign a blank paper and a document written in the local
dialect. Eventually, SAUDIA allowed plaintiff to return to Jeddah but barred her from the
Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi Arabian government, the
Indonesian authorities agreed to deport Thamer and Allah after two weeks of
detention. Eventually, they were again put in service by defendant SAUDI (sic). In
September 1990, defendant SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind
her, her superiors requested her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in

Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where the
police took her passport and questioned her about the Jakarta incident. Miniewy simply stood
by as the police put pressure on her to make a statement dropping the case against Thamer
and Allah. Not until she agreed to do so did the police return her passport and allowed her to
catch the afternoon flight out of Jeddah.
One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before
the departure of her flight to Manila, plaintiff was not allowed to board the plane and instead
ordered to take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal Officer of
SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court
where she was asked to sign a document written in Arabic. They told her that this was
necessary to close the case against Thamer and Allah. As it turned out, plaintiff signed a
notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again
and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving
assurance from SAUDIAs Manila manager, Aslam Saleemi, that the investigation was
routinary and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27,
1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff
through an interpreter about the Jakarta incident. After one hour of interrogation, they let her
go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her
that the airline had forbidden her to take flight. At the Inflight Service Office where she was
told to go, the secretary of Mr. Yahya Saddick took away her passport and told her to remain
in Jeddah, at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the
judge, to her astonishment and shock, rendered a decision, translated to her in English,
sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that
the Saudi court had tried her, together with Thamer and Allah, for what happened in
Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing and
listening to the music in violation of Islamic laws; and (3) socializing with the male crew, in
contravention of Islamic tradition.[10]
Facing conviction, private respondent sought the help of her employer, petitioner
SAUDIA. Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in Jeddah
to help her while her case is on appeal. Meanwhile, to pay for her upkeep, she worked on the domestic
flight of SAUDIA, while Thamer and Allah continued to serve in the international flights. [11]
Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her and
allowed her to leave Saudi Arabia.Shortly before her return to Manila, [12] she was terminated from the
service by SAUDIA, without her being informed of the cause.
On November 23, 1993, Morada filed a Complaint [13] for damages against SAUDIA, and Khaled
Al-Balawi (Al- Balawi), its country manager.

On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss [14] which raised the following
grounds, to wit: (1) that the Complaint states no cause of action against Saudia; (2) that defendant AlBalawi is not a real party in interest; (3) that the claim or demand set forth in the Complaint has been
waived, abandoned or otherwise extinguished; and (4) that the trial court has no jurisdiction to try the
case.
On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) [15] Saudia filed a
reply thereto on March 3, 1994.

Respondent Court of Appeals promulgated a Resolution with Temporary Restraining Order [27] dated
February 23, 1995, prohibiting the respondent Judge from further conducting any proceeding, unless
otherwise directed, in the interim.
In another Resolution[28] promulgated on September 27, 1995, now assailed, the appellate court
denied SAUDIAs Petition for the Issuance of a Writ of Preliminary Injunction dated February 18, 1995, to
wit:

[16]

On June 23, 1994, Morada filed an Amended Complaint [17] wherein Al-Balawi was dropped as party
defendant. On August 11, 1994, Saudia filed its Manifestation and Motion to Dismiss Amended
Complaint[18].
The trial court issued an Order[19] dated August 29, 1994 denying the Motion to Dismiss Amended
Complaint filed by Saudia.
From the Order of respondent Judge [20] denying the Motion to Dismiss, SAUDIA filed on
September 20, 1994, its Motion for Reconsideration [21] of the Order dated August 29, 1994. It alleged that
the trial court has no jurisdiction to hear and try the case on the basis of Article 21 of the Civil Code, since
the proper law applicable is the law of the Kingdom of Saudi Arabia. On October 14, 1994, Morada filed
her Opposition[22] (To Defendants Motion for Reconsideration).
In the Reply[23] filed with the trial court on October 24, 1994, SAUDIA alleged that since its Motion
for Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus Motion Rule does not
apply, even if that ground is raised for the first time on appeal.Additionally, SAUDIA alleged that the
Philippines does not have any substantial interest in the prosecution of the instant case, and hence, without
jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order[24] dated February 2, 1995, denying SAUDIAs
Motion for Reconsideration.The pertinent portion of the assailed Order reads as follows:

The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED, after
considering the Answer, with Prayer to Deny Writ of Preliminary Injunction (Rollo, p. 135)
the Reply and Rejoinder, it appearing that herein petitioner is not clearly entitled thereto
(Unciano Paramedical College, et. Al., v. Court of Appeals, et. Al., 100335, April 7, 1993,
Second Division).
SO ORDERED.
On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition [29] for Review
with Prayer for Temporary Restraining Order dated October 13, 1995.
However, during the pendency of the instant Petition, respondent Court of Appeals rendered the
Decision[30] dated April 10, 1996, now also assailed. It ruled that the Philippines is an appropriate forum
considering that the Amended Complaints basis for recovery of damages is Article 21 of the Civil Code,
and thus, clearly within the jurisdiction of respondent Court. It further held that certiorari is not the proper
remedy in a denial of a Motion to Dismiss, inasmuch as the petitioner should have proceeded to trial, and
in case of an adverse ruling, find recourse in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary
Restraining Order[31] dated April 30, 1996, given due course by this Court. After both parties submitted
their Memoranda,[32] the instant case is now deemed submitted for decision.
Petitioner SAUDIA raised the following issues:

Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru
counsel, on September 20, 1994, and the Opposition thereto of the plaintiff filed, thru
counsel, on October 14, 1994, as well as the Reply therewith of defendant Saudi Arabian
Airlines filed, thru counsel, on October 24, 1994, considering that a perusal of the plaintiffs
Amended Complaint, which is one for the recovery of actual, moral and exemplary damages
plus attorneys fees, upon the basis of the applicable Philippine law, Article 21 of the New
Civil Code of the Philippines, is, clearly, within the jurisdiction of this Court as regards the
subject matter, and there being nothing new of substance which might cause the reversal or
modification of the order sought to be reconsidered, the motion for reconsideration of the
defendant, is DENIED.

I
The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394 based on Article 21 of the
New Civil Code since the proper law applicable is the law of the Kingdom of Saudi Arabia inasmuch as
this case involves what is known in private international law as a conflicts problem. Otherwise, the
Republic of the Philippines will sit in judgment of the acts done by another sovereign state which is
abhorred.
II.

SO ORDERED.[25]
Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition with
Prayer for Issuance of Writ of Preliminary Injunction and/or Temporary Restraining Order [26] with the
Court of Appeals.

Leave of court before filing a supplemental pleading is not a jurisdictional requirement. Besides, the
matter as to absence of leave of court is now moot and academic when this Honorable Court required the
respondents to comment on petitioners April 30, 1996 Supplemental Petition For Review With Prayer For
A Temporary Restraining Order Within Ten (10) Days From Notice Thereof. Further, the Revised Rules of
Court should be construed with liberality pursuant to Section 2, Rule 1 thereof.

III.
Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533 entitled Saudi
Arabian Airlines v. Hon. Rodolfo A. Ortiz, et al. and filed its April 30, 1996 Supplemental Petition For
Review With Prayer For A Temporary Restraining Order on May 7, 1996 at 10:29 a.m. or within the 15day reglementary period as provided for under Section 1, Rule 45 of the Revised Rules of
Court. Therefore, the decision in CA-G.R. SP NO. 36533 has not yet become final and executory and this
Honorable Court can take cognizance of this case.[33]
From the foregoing factual and procedural antecedents, the following issues emerge for our
resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE
REGIONAL TRIAL COURT OF QUEZON CITY HAS JURISDICTION TO HEAR AND
TRY CIVIL CASE NO. Q-93-18394 ENTITLED MILAGROS P. MORADA V. SAUDI
ARABIAN AIRLINES.
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THE
CASE PHILIPPINE LAW SHOULD GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It
maintains that private respondents claim for alleged abuse of rights occurred in the Kingdom of Saudi
Arabia. It alleges that the existence of a foreign element qualifies the instant case for the application of the
law of the Kingdom of Saudi Arabia, by virtue of the lex loci delicti commissi rule.[34]
On the other hand, private respondent contends that since her Amended Complaint is based on
Articles 19[35] and 21[36] of the Civil Code, then the instant case is properly a matter of domestic law.[37]
Under the factual antecedents obtaining in this case, there is no dispute that the interplay of events
occurred in two states, the Philippines and Saudi Arabia.
As stated by private respondent in her Amended Complaint[38] dated June 23, 1994:
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation
doing business in the Philippines. It may be served with summons and other court processes
at Travel Wide Associated Sales (Phils.), Inc., 3rd Floor, Cougar Building, 114 Valero St.,
Salcedo Village, Makati, Metro Manila.

detention. Eventually, they were again put in service by defendant SAUDIA. In September
1990, defendant SAUDIA transferred plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already
behind her, her superiors requested her to see MR. Ali Meniewy, Chief Legal Officer of
SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he brought her to the police station
where the police took her passport and questioned her about the Jakarta incident. Miniewy
simply stood by as the police put pressure on her to make a statement dropping the case
against Thamer and Allah. Not until she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes
before the departure of her flight to Manila, plaintiff was not allowed to board the plane and
instead ordered to take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal Officer
of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi
court where she was asked to sign a document written in Arabic. They told her that this was
necessary to close the case against Thamer and Allah. As it turned out, plaintiff signed a
notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once
again and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after
receiving assurance from SAUDIAs Manila manager, Aslam Saleemi, that the investigation
was routinary and that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27,
1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff
through an interpreter about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer
told her that the airline had forbidden her to take that flight. At the Inflight Service Office
where she was told to go, the secretary of Mr. Yahya Saddick took away her passport and
told her to remain in Jeddah, at the crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where
the judge, to her astonishment and shock, rendered a decision, translated to her in English,
sentencing her to five months imprisonment and to 286 lashes. Only then did she realize
that the Saudi court had tried her, together with Thamer and Allah, for what happened in
Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing, and
listening to the music in violation of Islamic laws; (3) socializing with the male crew, in
contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the
Philippine Embassy in Jeddah. The latter helped her pursue an appeal from the decision of
the court. To pay for her upkeep, she worked on the domestic flights of defendant SAUDIA
while, ironically, Thamer and Allah freely served the international flights. [39]

xxxxxxxxx
6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the
Indonesian authorities agreed to deport Thamer and Allah after two weeks of

Where the factual antecedents satisfactorily establish the existence of a foreign element, we agree
with petitioner that the problem herein could present a conflicts case.

A factual situation that cuts across territorial lines and is affected by the diverse laws of two or
more states is said to contain a foreign element. The presence of a foreign element is inevitable since
social and economic affairs of individuals and associations are rarely confined to the geographic limits of
their birth or conception.[40]
The forms in which this foreign element may appear are many. [41] The foreign element may simply
consist in the fact that one of the parties to a contract is an alien or has a foreign domicile, or that a
contract between nationals of one State involves properties situated in another State. In other cases, the
foreign element may assume a complex form. [42]
In the instant case, the foreign element consisted in the fact that private respondent Morada is a
resident Philippine national, and that petitioner SAUDIA is a resident foreign corporation. Also, by virtue
of the employment of Morada with the petitioner Saudia as a flight stewardess, events did transpire during
her many occasions of travel across national borders, particularly from Manila, Philippines to Jeddah,
Saudi Arabia, and vice versa, that caused a conflicts situation to arise.
We thus find private respondents assertion that the case is purely domestic,
imprecise. A conflicts problem presents itself here, and the question of jurisdiction [43] confronts the court a
quo.

Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the Judiciary
Reorganization Act of 1980, is hereby amended to read as follows:
SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive jurisdiction:
xxxxxxxxx
(8) In all other cases in which demand, exclusive of interest, damages of whatever kind, attorneys fees,
litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand
pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the abovementioned items exceeds Two hundred Thousand pesos (P200,000.00). (Emphasis ours)
xxxxxxxxx
And following Section 2 (b), Rule 4 of the Revised Rules of Courtthe venue, Quezon City, is
appropriate:
SEC. 2 Venue in Courts of First Instance. [Now Regional Trial Court]
(a) x x x x x x x x x

After a careful study of the private respondents Amended Complaint, [44] and the Comment thereon,
we note that she aptly predicated her cause of action on Articles 19 and 21 of the New Civil Code.

(b) Personal actions. All other actions may be commenced and tried where the defendant or
any of the defendants resides or may be found, or where the plaintiff or any of the plaintiff
resides, at the election of the plaintiff.

On one hand, Article 19 of the New Civil Code provides;


Art. 19. Every person must, in the exercise of his rights and in the performance of his duties,
act with justice give everyone his due and observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of Appeals,[45] this Court held that:
The aforecited provisions on human relations were intended to expand the concept of torts
in this jurisdiction by granting adequate legal remedy for the untold number of moral
wrongs which is impossible for human foresight to specifically provide in the statutes.
Although Article 19 merely declares a principle of law, Article 21 gives flesh to its
provisions. Thus, we agree with private respondents assertion that violations of Articles 19 and 21 are
actionable, with judicially enforceable remedies in the municipal forum.
Based on the allegations[46] in the Amended Complaint, read in the light of the Rules of Court on
jurisdiction[47] we find that the Regional Trial Court (RTC) of Quezon City possesses jurisdiction over the
subject matter of the suit.[48] Its authority to try and hear the case is provided for under Section 1 of
Republic Act No. 7691, to wit:

Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor of
the RTC Quezon City assuming jurisdiction. Paramount is the private interest of the
litigant. Enforceability of a judgment if one is obtained is quite obvious. Relative advantages and
obstacles to a fair trial are equally important. Plaintiff may not, by choice of an inconvenient forum, vex,
harass, or oppress the defendant, e.g. by inflicting upon him needless expense or disturbance. But unless
the balance is strongly in favor of the defendant, the plaintiffs choice of forum should rarely be disturbed.
[49]

Weighing the relative claims of the parties, the court a quo found it best to hear the case in the
Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff (private respondent
now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi Arabia where she no longer
maintains substantial connections. That would have caused a fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience
have been shown by either of the parties. The choice of forum of the plaintiff (now private respondent)
should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By filing
her Complaint and Amended Complaint with the trial court, private respondent has voluntary submitted
herself to the jurisdiction of the court.

The records show that petitioner SAUDIA has filed several motions [50] praying for the dismissal of
Moradas Amended Complaint.SAUDIA also filed an Answer In Ex Abundante Cautelam dated February
20, 1995. What is very patent and explicit from the motions filed, is that SAUDIA prayed for other reliefs
under the premises. Undeniably, petitioner SAUDIA has effectively submitted to the trial courts
jurisdiction by praying for the dismissal of the Amended Complaint on grounds other than lack of
jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.:[51]
We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the
lower courts jurisdiction over defendants person, prayed for dismissal of the complaint on
the ground that plaintiffs cause of action has prescribed. By interposing such second ground
in its motion to dismiss, Ker and Co., Ltd. availed of an affirmative defense on the basis of
which it prayed the court to resolve controversy in its favor. For the court to validly decide
the said plea of defendant Ker & Co., Ltd., it necessarily had to acquire jurisdiction upon
the latters person, who, being the proponent of the affirmative defense, should be deemed to
have abandoned its special appearance and voluntarily submitted itself to the jurisdiction of
the court.
Similarly, the case of De Midgely vs. Ferandos, held that:
When the appearance is by motion for the purpose of objecting to the jurisdiction of the
court over the person, it must be for the sole and separate purpose of objecting to the
jurisdiction of the court. If his motion is for any other purpose than to object to the
jurisdiction of the court over his person, he thereby submits himself to the jurisdiction of the
court. A special appearance by motion made for the purpose of objecting to the jurisdiction
of the court over the person will be held to be a general appearance, if the party in said
motion should, for example, ask for a dismissal of the action upon the further ground that
the court had no jurisdiction over the subject matter.[52]
Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon
City. Thus, we find that the trial court has jurisdiction over the case and that its exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-law problems seek to answer two
important questions: (1) What legal system should control a given situation where some of the significant
facts occurred in two or more states; and (2) to what extent should the chosen legal system regulate the
situation.[53]
Several theories have been propounded in order to identify the legal system that should ultimately
control. Although ideally, all choice-of-law theories should intrinsically advance both notions of justice
and predictability, they do not always do so. The forum is then faced with the problem of deciding which
of these two important values should be stressed.[54]
Before a choice can be made, it is necessary for us to determine under what category a certain set of
facts or rules fall. This process is known as characterization, or the doctrine of qualification. It is the
process of deciding whether or not the facts relate to the kind of question specified in a conflicts rule.
[55]
The purpose of characterization is to enable the forum to select the proper law.[56]

Our starting point of analysis here is not a legal relation, but a factual situation, event, or operative
fact.[57] An essential element of conflict rules is the indication of a test or connecting factor or point of
contact. Choice-of-law rules invariably consist of a factual relationship (such as property right, contract
claim) and a connecting factor or point of contact, such as the situs of the res, the place of celebration, the
place of performance, or the place of wrongdoing.[58]
Note that one or more circumstances may be present to serve as the possible test for the
determination of the applicable law.[59]These test factors or points of contact or connecting factors could be
any of the following:
(1) The nationality of a person, his domicile, his residence, his place of sojourn, or his
origin;
(2) the seat of a legal or juridical person, such as a corporation;
(3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In
particular, the lex situs is decisive when real rights are involved;
(4) the place where an act has been done, the locus actus, such as the place where a
contract has been made, a marriage celebrated, a will signed or a tort
committed. The lex loci actus is particularly important in contracts and torts;
(5) the place where an act is intended to come into effect, e.g., the place of performance of
contractual duties, or the place where a power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that should govern their agreement,
the lex loci intentionis;
(7) the place where judicial or administrative proceedings are instituted or done. The lex
forithe law of the forumis particularly important because, as we have seen earlier, matters of
procedure not going to the substance of the claim involved are governed by it; and because
the lex fori applies whenever the content of the otherwise applicable foreign law is excluded
from application in a given case for the reason that it falls under one of the exceptions to the
applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of
the ship and of its master or owner as such. It also covers contractual relationships
particularly contracts of affreightment.[60] (Underscoring ours.)
After a careful study of the pleadings on record, including allegations in the Amended Complaint
deemed submitted for purposes of the motion to dismiss, we are convinced that there is reasonable basis
for private respondents assertion that although she was already working in Manila, petitioner brought her
to Jeddah on the pretense that she would merely testify in an investigation of the charges she made against
the two SAUDIA crew members for the attack on her person while they were in Jakarta. As it turned out,
she was the one made to face trial for very serious charges, including adultery and violation of Islamic
laws and tradition.

There is likewise logical basis on record for the claim that the handing over or turning over of the
person of private respondent to Jeddah officials, petitioner may have acted beyond its duties as
employer. Petitioners purported act contributed to and amplified or even proximately caused additional
humiliation, misery and suffering of private respondent. Petitioner thereby allegedly facilitated the arrest,
detention and prosecution of private respondent under the guise of petitioners authority as employer,
taking advantage of the trust, confidence and faith she reposed upon it. As purportedly found by the Prince
of Makkah, the alleged conviction and imprisonment of private respondent was wrongful. But these
capped the injury or harm allegedly inflicted upon her person and reputation, for which petitioner could be
liable as claimed, to provide compensation or redress for the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one involving torts, the connecting factor or
point of contact could be the place or places where the tortious conduct or lex loci actus occurred. And
applying the torts principle in a conflicts case, we find that the Philippines could be said as a situs of the
tort (the place where the alleged tortious conduct took place). This is because it is in the Philippines where
petitioner allegedly deceived private respondent, a Filipina residing and working here. According to her,
she had honestly believed that petitioner would, in the exercise of its rights and in the performance of its
duties, act with justice, give her her due and observe honesty and good faith. Instead, petitioner failed to
protect her, she claimed. That certain acts or parts of the injury allegedly occurred in another country is of
no moment. For in our view what is important here is the place where the over-all harm or the fatality of
the alleged injury to the person, reputation, social standing and human rights of complainant, had lodged,
according to the plaintiff below (herein private respondent). All told, it is not without basis to identify the
Philippines as the situs of the alleged tort.
Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi, modern
theories and rules on tort liability[61]have been advanced to offer fresh judicial approaches to arrive at just
results. In keeping abreast with the modern theories on tort liability, we find here an occasion to apply the
State of the most significant relationship rule, which in our view should be appropriate to apply now,
given the factual context of this case.
In applying said principle to determine the State which has the most significant relationship, the
following contacts are to be taken into account and evaluated according to their relative importance with
respect to the particular issue: (a) the place where the injury occurred; (b) the place where the conduct
causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation and place of
business of the parties, and (d) the place where the relationship, if any, between the parties is centered. [62]
As already discussed, there is basis for the claim that over-all injury occurred and lodged in the
Philippines. There is likewise no question that private respondent is a resident Filipina national, working
with petitioner, a resident foreign corporation engaged here in the business of international air
carriage. Thus, the relationship between the parties was centered here, although it should be stressed that
this suit is not based on mere labor law violations. From the record, the claim that the Philippines has the
most significant contact with the matter in this dispute, [63] raised by private respondent as plaintiff below
against defendant (herein petitioner), in our view, has been properly established.
Prescinding from this premise that the Philippines is the situs of the tort complaint of and the place
having the most interest in the problem, we find, by way of recapitulation, that the Philippine law on tort
liability should have paramount application to and control in the resolution of the legal issues arising out
of this case. Further, we hold that the respondent Regional Trial Court has jurisdiction over the parties and
the subject matter of the complaint; the appropriate venue is in Quezon City, which could properly apply
Philippine law.Moreover, we find untenable petitioners insistence that [s]ince private respondent instituted

this suit, she has the burden of pleading and proving the applicable Saudi law on the matter. [64] As aptly
said by private respondent, she has no obligation to plead and prove the law of the Kingdom of Saudi
Arabia since her cause of action is based on Articles 19 and 21 of the Civil Code of the Philippines. In her
Amended Complaint and subsequent pleadings she never alleged that Saudi law should govern this case.
[65]
And as correctly held by the respondent appellate court, considering that it was the petitioner who was
invoking the applicability of the law of Saudi Arabia, thus the burden was on it [petitioner] to plead and to
establish what the law of Saudi Arabia is.[66]
Lastly, no error could be imputed to the respondent appellate court in upholding the trial courts
denial of defendants (herein petitioners) motion to dismiss the case. Not only was jurisdiction in order and
venue properly laid, but appeal after trial was obviously available, and the expeditious trial itself indicated
by the nature of the case at hand. Indubitably, the Philippines is the state intimately concerned with the
ultimate outcome of the case below not just for the benefit of all the litigants, but also for the vindication
of the countrys system of law and justice in a transnational setting. With these guidelines in mind, the trial
court must proceed to try and adjudge the case in the light of relevant Philippine law, with due
consideration of the foreign element or elements involved. Nothing said herein, of course, should be
construed as prejudging the results of the case in any manner whatsoever.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-9318394 entitled Milagros P. Morada vs. Saudi Arabia Airlines is hereby REMANDED to Regional Trial
Court of Quezon City, Branch 89 for further proceedings.
SO ORDERED.
Davide, Jr., (Chairman), Bellosillo, Vitug, and Panganiban, JJ., concur.

G.R. No. 81262 August 25, 1989


GLOBE MACKAY CABLE AND RADIO CORP., and HERBERT C. HENDRY, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and RESTITUTO M. TOBIAS, respondents.
Atencia & Arias Law Offices for petitioners.
Romulo C. Felizmena for private respondent.

initials appearing in the checks and other documents involved in the fraudulent transactions were not those
of Tobias. The lie detector tests conducted on Tobias also yielded negative results.
Notwithstanding the two police reports exculpating Tobias from the anomalies and the fact that the report
of the private investigator, was, by its own terms, not yet complete, petitioners filed with the City Fiscal of
Manila a complaint for estafa through falsification of commercial documents, later amended to just estafa.
Subsequently five other criminal complaints were filed against Tobias, four of which were for estafa
through Falsification of commercial document while the fifth was for of Article 290 of' the Revised Penal
Code (Discovering Secrets Through Seizure of Correspondence).lwph1.t Two of these complaints
were refiled with the Judge Advocate General's Office, which however, remanded them to the fiscal's
office. All of the six criminal complaints were dismissed by the fiscal. Petitioners appealed four of the
fiscal's resolutions dismissing the criminal complaints with the Secretary of Justice, who, however,
affirmed their dismissal.

CORTES, J.:
Private respondent Restituto M. Tobias was employed by petitioner Globe Mackay Cable and Radio
Corporation (GLOBE MACKAY) in a dual capacity as a purchasing agent and administrative assistant to
the engineering operations manager. In 1972, GLOBE MACKAY discovered fictitious purchases and
other fraudulent transactions for which it lost several thousands of pesos.
According to private respondent it was he who actually discovered the anomalies and reported them on
November 10, 1972 to his immediate superior Eduardo T. Ferraren and to petitioner Herbert C. Hendry
who was then the Executive Vice-President and General Manager of GLOBE MACKAY.
On November 11, 1972, one day after private respondent Tobias made the report, petitioner Hendry
confronted him by stating that he was the number one suspect, and ordered him to take a one week forced
leave, not to communicate with the office, to leave his table drawers open, and to leave the office keys.
On November 20, 1972, when private respondent Tobias returned to work after the forced leave, petitioner
Hendry went up to him and called him a "crook" and a "swindler." Tobias was then ordered to take a lie
detector test. He was also instructed to submit specimen of his handwriting, signature, and initials for
examination by the police investigators to determine his complicity in the anomalies.
On December 6,1972, the Manila police investigators submitted a laboratory crime report (Exh. "A")
clearing private respondent of participation in the anomalies.
Not satisfied with the police report, petitioners hired a private investigator, retired Col. Jose G. Fernandez,
who on December 10, 1972, submitted a report (Exh. "2") finding Tobias guilty. This report however
expressly stated that further investigation was still to be conducted.
Nevertheless, on December 12, 1972, petitioner Hendry issued a memorandum suspending Tobias from
work preparatory to the filing of criminal charges against him.
On December 19,1972, Lt. Dioscoro V. Tagle, Metro Manila Police Chief Document Examiner, after
investigating other documents pertaining to the alleged anomalous transactions, submitted a second
laboratory crime report (Exh. "B") reiterating his previous finding that the handwritings, signatures, and

In the meantime, on January 17, 1973, Tobias received a notice (Exh. "F") from petitioners that his
employment has been terminated effective December 13, 1972. Whereupon, Tobias filed a complaint for
illegal dismissal. The labor arbiter dismissed the complaint. On appeal, the National Labor Relations
Commission (NLRC) reversed the labor arbiter's decision. However, the Secretary of Labor, acting on
petitioners' appeal from the NLRC ruling, reinstated the labor arbiter's decision. Tobias appealed the
Secretary of Labor's order with the Office of the President. During the pendency of the appeal with said
office, petitioners and private respondent Tobias entered into a compromise agreement regarding the
latter's complaint for illegal dismissal.
Unemployed, Tobias sought employment with the Republic Telephone Company (RETELCO). However,
petitioner Hendry, without being asked by RETELCO, wrote a letter to the latter stating that Tobias was
dismissed by GLOBE MACKAY due to dishonesty.
Private respondent Tobias filed a civil case for damages anchored on alleged unlawful, malicious,
oppressive, and abusive acts of petitioners. Petitioner Hendry, claiming illness, did not testify during the
hearings. The Regional Trial Court (RTC) of Manila, Branch IX, through Judge Manuel T. Reyes rendered
judgment in favor of private respondent by ordering petitioners to pay him eighty thousand pesos
(P80,000.00) as actual damages, two hundred thousand pesos (P200,000.00) as moral damages, twenty
thousand pesos (P20,000.00) as exemplary damages, thirty thousand pesos (P30,000.00) as attorney's fees,
and costs. Petitioners appealed the RTC decision to the Court of Appeals. On the other hand, Tobias
appealed as to the amount of damages. However, the Court of Appeals, an a decision dated August 31,
1987 affirmed the RTC decision in toto. Petitioners' motion for reconsideration having been denied, the
instant petition for review on certiorari was filed.
The main issue in this case is whether or not petitioners are liable for damages to private respondent.
Petitioners contend that they could not be made liable for damages in the lawful exercise of their right to
dismiss private respondent.
On the other hand, private respondent contends that because of petitioners' abusive manner in dismissing
him as well as for the inhuman treatment he got from them, the Petitioners must indemnify him for the
damage that he had suffered.

One of the more notable innovations of the New Civil Code is the codification of "some basic principles
that are to be observed for the rightful relationship between human beings and for the stability of the
social order." [REPORT ON THE CODE COMMISSION ON THE PROPOSED CIVIL CODE OF THE
PHILIPPINES, p. 39]. The framers of the Code, seeking to remedy the defect of the old Code which
merely stated the effects of the law, but failed to draw out its spirit, incorporated certain fundamental
precepts which were "designed to indicate certain norms that spring from the fountain of good conscience"
and which were also meant to serve as "guides for human conduct [that] should run as golden threads
through society, to the end that law may approach its supreme ideal, which is the sway and dominance of
justice" (Id.) Foremost among these principles is that pronounced in Article 19 which provides:
Art. 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good
faith.
This article, known to contain what is commonly referred to as the principle of abuse of rights, sets certain
standards which must be observed not only in the exercise of one's rights but also in the performance of
one's duties. These standards are the following: to act with justice; to give everyone his due; and to
observe honesty and good faith. The law, therefore, recognizes a primordial limitation on all rights; that in
their exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by
itself legal because recognized or granted by law as such, may nevertheless become the source of some
illegality. When a right is exercised in a manner which does not conform with the norms enshrined in
Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer
must be held responsible. But while Article 19 lays down a rule of conduct for the government of human
relations and for the maintenance of social order, it does not provide a remedy for its violation. Generally,
an action for damages under either Article 20 or Article 21 would be proper.
Article 20, which pertains to damage arising from a violation of law, provides that:
Art. 20. Every person who contrary to law, wilfully or negligently causes damage to
another, shall indemnify the latter for the same.
However, in the case at bar, petitioners claim that they did not violate any provision of law since they were
merely exercising their legal right to dismiss private respondent. This does not, however, leave private
respondent with no relief because Article 21 of the Civil Code provides that:
Art. 21. Any person who wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage.
This article, adopted to remedy the "countless gaps in the statutes, which leave so many victims of moral
wrongs helpless, even though they have actually suffered material and moral injury" [Id.] should
"vouchsafe adequate legal remedy for that untold number of moral wrongs which it is impossible for
human foresight to provide for specifically in the statutes" [Id. it p. 40; See also PNB v. CA, G.R. No. L27155, May 18,1978, 83 SCRA 237, 247].
In determining whether or not the principle of abuse of rights may be invoked, there is no rigid test which
can be applied. While the Court has not hesitated to apply Article 19 whether the legal and factual
circumstances called for its application [See for e.g., Velayo v. Shell Co. of the Phil., Ltd., 100 Phil. 186

(1956); PNB v. CA, supra; Grand Union Supermarket, Inc. v. Espino, Jr., G.R. No. L-48250, December
28, 1979, 94 SCRA 953; PAL v. CA, G.R. No. L-46558, July 31,1981,106 SCRA 391; United General
Industries, Inc, v. Paler G.R. No. L-30205, March 15,1982,112 SCRA 404; Rubio v. CA, G.R. No. 50911,
August 21, 1987, 153 SCRA 183] the question of whether or not the principle of abuse of rights has been
violated resulting in damages under Article 20 or Article 21 or other applicable provision of law, depends
on the circumstances of each case. And in the instant case, the Court, after examining the record and
considering certain significant circumstances, finds that all petitioners have indeed abused the right that
they invoke, causing damage to private respondent and for which the latter must now be indemnified.
The trial court made a finding that notwithstanding the fact that it was private respondent Tobias who
reported the possible existence of anomalous transactions, petitioner Hendry "showed belligerence and
told plaintiff (private respondent herein) that he was the number one suspect and to take a one week
vacation leave, not to communicate with the office, to leave his table drawers open, and to leave his keys
to said defendant (petitioner Hendry)" [RTC Decision, p. 2; Rollo, p. 232]. This, petitioners do not dispute.
But regardless of whether or not it was private respondent Tobias who reported the anomalies to
petitioners, the latter's reaction towards the former upon uncovering the anomalies was less than civil. An
employer who harbors suspicions that an employee has committed dishonesty might be justified in taking
the appropriate action such as ordering an investigation and directing the employee to go on a leave.
Firmness and the resolve to uncover the truth would also be expected from such employer. But the highhanded treatment accorded Tobias by petitioners was certainly uncalled for. And this reprehensible attitude
of petitioners was to continue when private respondent returned to work on November 20, 1972 after his
one week forced leave. Upon reporting for work, Tobias was confronted by Hendry who said. "Tobby, you
are the crook and swindler in this company." Considering that the first report made by the police
investigators was submitted only on December 10, 1972 [See Exh. A] the statement made by petitioner
Hendry was baseless. The imputation of guilt without basis and the pattern of harassment during the
investigations of Tobias transgress the standards of human conduct set forth in Article 19 of the Civil
Code. The Court has already ruled that the right of the employer to dismiss an employee should not be
confused with the manner in which the right is exercised and the effects flowing therefrom. If the
dismissal is done abusively, then the employer is liable for damages to the employee [Quisaba v. Sta. InesMelale Veneer and Plywood Inc., G.R. No. L-38088, August 30, 1974, 58 SCRA 771; See also Philippine
Refining Co., Inc. v. Garcia, G.R. No. L-21871, September 27,1966, 18 SCRA 107] Under the
circumstances of the instant case, the petitioners clearly failed to exercise in a legitimate manner their
right to dismiss Tobias, giving the latter the right to recover damages under Article 19 in relation to Article
21 of the Civil Code.
But petitioners were not content with just dismissing Tobias. Several other tortious acts were committed
by petitioners against Tobias after the latter's termination from work. Towards the latter part of January,
1973, after the filing of the first of six criminal complaints against Tobias, the latter talked to Hendry to
protest the actions taken against him. In response, Hendry cut short Tobias' protestations by telling him to
just confess or else the company would file a hundred more cases against him until he landed in jail.
Hendry added that, "You Filipinos cannot be trusted." The threat unmasked petitioner's bad faith in the
various actions taken against Tobias. On the other hand, the scornful remark about Filipinos as well as
Hendry's earlier statements about Tobias being a "crook" and "swindler" are clear violations of 'Tobias'
personal dignity [See Article 26, Civil Code].
The next tortious act committed by petitioners was the writing of a letter to RETELCO sometime in
October 1974, stating that Tobias had been dismissed by GLOBE MACKAY due to dishonesty. Because
of the letter, Tobias failed to gain employment with RETELCO and as a result of which, Tobias remained
unemployed for a longer period of time. For this further damage suffered by Tobias, petitioners must
likewise be held liable for damages consistent with Article 2176 of the Civil Code. Petitioners, however,

contend that they have a "moral, if not legal, duty to forewarn other employers of the kind of employee the
plaintiff (private respondent herein) was." [Petition, p. 14; Rollo, p. 15]. Petitioners further claim that "it is
the accepted moral and societal obligation of every man to advise or warn his fellowmen of any threat or
danger to the latter's life, honor or property. And this includes warning one's brethren of the possible
dangers involved in dealing with, or accepting into confidence, a man whose honesty and integrity is
suspect" [Id.]. These arguments, rather than justify petitioners' act, reveal a seeming obsession to prevent
Tobias from getting a job, even after almost two years from the time Tobias was dismissed.

xxx
To be sure, when despite the two (2) police reports embodying the findings of Lt.
Dioscoro Tagle, Chief Document Examiner of the Manila Police Department,
clearing plaintiff of participation or involvement in the fraudulent transactions
complained of, despite the negative results of the lie detector tests which defendants
compelled plaintiff to undergo, and although the police investigation was "still
under follow-up and a supplementary report will be submitted after all the evidence
has been gathered," defendants hastily filed six (6) criminal cases with the city
Fiscal's Office of Manila, five (5) for estafa thru falsification of commercial
document and one (1) for violation of Art. 290 of the Revised Penal Code, so much
so that as was to be expected, all six (6) cases were dismissed, with one of the
investigating fiscals, Asst. Fiscal de Guia, commenting in one case that, "Indeed,
the haphazard way this case was investigated is evident. Evident likewise is the
flurry and haste in the filing of this case against respondent Tobias," there can be no
mistaking that defendants would not but be motivated by malicious and unlawful
intent to harass, oppress, and cause damage to plaintiff.

Finally, there is the matter of the filing by petitioners of six criminal complaints against Tobias. Petitioners
contend that there is no case against them for malicious prosecution and that they cannot be "penalized for
exercising their right and prerogative of seeking justice by filing criminal complaints against an employee
who was their principal suspect in the commission of forgeries and in the perpetration of anomalous
transactions which defrauded them of substantial sums of money" [Petition, p. 10, Rollo, p. 11].
While sound principles of justice and public policy dictate that persons shall have free resort to the courts
for redress of wrongs and vindication of their rights [Buenaventura v. Sto. Domingo, 103 Phil. 239
(1958)], the right to institute criminal prosecutions can not be exercised maliciously and in bad faith
[Ventura v. Bernabe, G.R. No. L-26760, April 30, 1971, 38 SCRA 5871.] Hence, in Yutuk V. Manila
Electric Co., G.R. No. L-13016, May 31, 1961, 2 SCRA 337, the Court held that the right to file criminal
complaints should not be used as a weapon to force an alleged debtor to pay an indebtedness. To do so
would be a clear perversion of the function of the criminal processes and of the courts of justice. And
in Hawpia CA, G.R. No. L-20047, June 30, 1967. 20 SCRA 536 the Court upheld the judgment against
the petitioner for actual and moral damages and attorney's fees after making a finding that petitioner, with
persistence, filed at least six criminal complaints against respondent, all of which were dismissed.
To constitute malicious prosecution, there must be proof that the prosecution was prompted by a design to
vex and humiliate a person and that it was initiated deliberately by the defendant knowing that the charges
were false and groundless [Manila Gas Corporation v. CA, G.R. No. L-44190, October 30,1980, 100
SCRA 602]. Concededly, the filing of a suit by itself, does not render a person liable for malicious
prosecution [Inhelder Corporation v. CA, G.R. No. 52358, May 301983122 SCRA 576]. The mere
dismissal by the fiscal of the criminal complaint is not a ground for an award of damages for malicious
prosecution if there is no competent evidence to show that the complainant had acted in bad faith [Sison v.
David, G.R. No. L-11268, January 28,1961, 1 SCRA 60].
In the instant case, however, the trial court made a finding that petitioners acted in bad faith in filing the
criminal complaints against Tobias, observing that:
xxx
Defendants (petitioners herein) filed with the Fiscal's Office of Manila a total of six
(6) criminal cases, five (5) of which were for estafa thru falsification of commercial
document and one for violation of Art. 290 of the Revised Penal Code "discovering
secrets thru seizure of correspondence," and all were dismissed for insufficiency or
lack of evidence." The dismissal of four (4) of the cases was appealed to the
Ministry of Justice, but said Ministry invariably sustained the dismissal of the cases.
As above adverted to, two of these cases were refiled with the Judge Advocate
General's Office of the Armed Forces of the Philippines to railroad plaintiffs arrest
and detention in the military stockade, but this was frustrated by a presidential
decree transferring criminal cases involving civilians to the civil courts.

xxx
[RTC Decision, pp. 5-6; Rollo, pp. 235-236].
In addition to the observations made by the trial court, the Court finds it significant that the criminal
complaints were filed during the pendency of the illegal dismissal case filed by Tobias against petitioners.
This explains the haste in which the complaints were filed, which the trial court earlier noted. But
petitioners, to prove their good faith, point to the fact that only six complaints were filed against Tobias
when they could have allegedly filed one hundred cases, considering the number of anomalous
transactions committed against GLOBE MACKAY. However, petitioners' good faith is belied by the threat
made by Hendry after the filing of the first complaint that one hundred more cases would be filed against
Tobias. In effect, the possible filing of one hundred more cases was made to hang like the sword of
Damocles over the head of Tobias. In fine, considering the haste in which the criminal complaints were
filed, the fact that they were filed during the pendency of the illegal dismissal case against petitioners, the
threat made by Hendry, the fact that the cases were filed notwithstanding the two police reports
exculpating Tobias from involvement in the anomalies committed against GLOBE MACKAY, coupled by
the eventual dismissal of all the cases, the Court is led into no other conclusion than that petitioners were
motivated by malicious intent in filing the six criminal complaints against Tobias.
Petitioners next contend that the award of damages was excessive. In the complaint filed against
petitioners, Tobias prayed for the following: one hundred thousand pesos (P100,000.00) as actual
damages; fifty thousand pesos (P50,000.00) as exemplary damages; eight hundred thousand pesos
(P800,000.00) as moral damages; fifty thousand pesos (P50,000.00) as attorney's fees; and costs. The trial
court, after making a computation of the damages incurred by Tobias [See RTC Decision, pp. 7-8; Rollo,
pp. 154-1551, awarded him the following: eighty thousand pesos (P80,000.00) as actual damages; two
hundred thousand pesos (P200,000.00) as moral damages; twenty thousand pesos (P20,000.00) as
exemplary damages; thirty thousand pesos (P30,000.00) as attorney's fees; and, costs. It must be
underscored that petitioners have been guilty of committing several actionable tortious acts, i.e., the
abusive manner in which they dismissed Tobias from work including the baseless imputation of guilt and
the harassment during the investigations; the defamatory language heaped on Tobias as well as the
scornful remark on Filipinos; the poison letter sent to RETELCO which resulted in Tobias' loss of possible

employment; and, the malicious filing of the criminal complaints. Considering the extent of the damage
wrought on Tobias, the Court finds that, contrary to petitioners' contention, the amount of damages
awarded to Tobias was reasonable under the circumstances.
Yet, petitioners still insist that the award of damages was improper, invoking the principle of damnum
absqueinjuria. It is argued that "[t]he only probable actual damage that plaintiff (private respondent
herein) could have suffered was a direct result of his having been dismissed from his employment, which
was a valid and legal act of the defendants-appellants (petitioners herein).lwph1.t " [Petition, p. 17;
Rollo, p. 18].
According to the principle of damnum absque injuria, damage or loss which does not constitute a
violation of a legal right or amount to a legal wrong is not actionable [Escano v. CA, G.R. No. L-47207,
September 25, 1980, 100 SCRA 197; See also Gilchrist v. Cuddy 29 Phil, 542 (1915); The Board of
Liquidators v. Kalaw, G.R. No. L-18805, August 14, 1967, 20 SCRA 987]. This principle finds no
application in this case. It bears repeating that even granting that petitioners might have had the right to
dismiss Tobias from work, the abusive manner in which that right was exercised amounted to a legal
wrong for which petitioners must now be held liable. Moreover, the damage incurred by Tobias was not
only in connection with the abusive manner in which he was dismissed but was also the result of several
other quasi-delictual acts committed by petitioners.
Petitioners next question the award of moral damages. However, the Court has already ruled in Wassmer v.
Velez, G.R. No. L-20089, December 26, 1964, 12 SCRA 648, 653, that [p]er express provision of Article
2219 (10) of the New Civil Code, moral damages are recoverable in the cases mentioned in Article 21 of
said Code." Hence, the Court of Appeals committed no error in awarding moral damages to Tobias.
Lastly, the award of exemplary damages is impugned by petitioners. Although Article 2231 of the Civil
Code provides that "[i]n quasi-delicts, exemplary damages may be granted if the defendant acted with
gross negligence," the Court, in Zulueta v. Pan American World Airways, Inc., G.R. No. L- 28589, January
8, 1973, 49 SCRA 1, ruled that if gross negligence warrants the award of exemplary damages, with more
reason is its imposition justified when the act performed is deliberate, malicious and tainted with bad faith.
As in the Zuluetacase, the nature of the wrongful acts shown to have been committed by petitioners
against Tobias is sufficient basis for the award of exemplary damages to the latter.
WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals in CA-G.R. CV
No. 09055 is AFFIRMED.
SO ORDERED.

G.R. No. 88694 January 11, 1993


ALBENSON ENTERPRISES CORP., JESSE YAP, AND BENJAMIN MENDIONA, petitioners,
vs.
THE COURT OF APPEALS AND EUGENIO S. BALTAO, respondents.
Puruganan, Chato, Chato & Tan for petitioners.
Lino M. Patajo, Francisco Ma. Chanco, Ananiano Desierto and Segundo Mangohig for private
respondent.

BIDIN, J.:
This petition assails the decision of respondent Court of Appeals in
CA-GR CV No. 14948 entitled "Eugenio S. Baltao, plaintiff-appellee vs. Albenson Enterprises
Corporation, et al, defendants-appellants", which modified the judgment of the Regional Trial Court of
Quezon City, Branch XCVIII in Civil Case No. Q-40920 and ordered petitioner to pay private respondent,
among others, the sum of P500,000.00 as moral damages and attorney's fees in the amount of P50,000.00.
The facts are not disputed.
In September, October, and November 1980, petitioner Albenson Enterprises Corporation (Albenson for
short) delivered to Guaranteed Industries, Inc. (Guaranteed for short) located at 3267 V. Mapa Street, Sta.
Mesa, Manila, the mild steel plates which the latter ordered. As part payment thereof, Albenson was given
Pacific Banking Corporation Check No. 136361 in the amount of P2,575.00 and drawn against the
account of E.L. Woodworks (Rollo, p. 148).
When presented for payment, the check was dishonored for the reason "Account Closed." Thereafter,
petitioner Albenson, through counsel, traced the origin of the dishonored check. From the records of the
Securities and Exchange Commission (SEC), Albenson discovered that the president of Guaranteed, the
recipient of the unpaid mild steel plates, was one "Eugenio S. Baltao." Upon further inquiry, Albenson was
informed by the Ministry of Trade and Industry that E.L. Woodworks, a single proprietorship business,
was registered in the name of one "Eugenio Baltao". In addition, upon verification with the drawee bank,
Pacific Banking Corporation, Albenson was advised that the signature appearing on the subject check
belonged to one "Eugenio Baltao."
After obtaining the foregoing information, Albenson, through counsel, made an extrajudicial demand upon
private respondent Eugenio S. Baltao, president of Guaranteed, to replace and/or make good the
dishonored check.

On February 14, 1983, Albenson filed with the Office of the Provincial Fiscal of Rizal a complaint against
Eugenio S. Baltao for violation of Batas Pambansa Bilang 22. Submitted to support said charges was an
affidavit of petitioner Benjamin Mendiona, an employee of Albenson. In said affidavit, the abovementioned circumstances were stated.
It appears, however, that private respondent has a namesake, his son Eugenio Baltao III, who manages a
business establishment, E.L. Woodworks, on the ground floor of the Baltao Building, 3267 V. Mapa
Street, Sta. Mesa, Manila, the very same business address of Guaranteed.
On September 5, 1983, Assistant Fiscal Ricardo Sumaway filed an information against Eugenio S. Baltao
for Violation of Batas Pambansa Bilang 22. In filing said information, Fiscal Sumaway claimed that he
had given Eugenio S. Baltao opportunity to submit controverting evidence, but the latter failed to do so
and therefore, was deemed to have waived his right.
Respondent Baltao, claiming ignorance of the complaint against him, immediately filed with the
Provincial Fiscal of Rizal a motion for reinvestigation, alleging that it was not true that he had been given
an opportunity to be heard in the preliminary investigation conducted by Fiscal Sumaway, and that he
never had any dealings with Albenson or Benjamin Mendiona, consequently, the check for which he has
been accused of having issued without funds was not issued by him and the signature in said check was
not his.
On January 30, 1984, Provincial Fiscal Mauro M. Castro of Rizal reversed the finding of Fiscal Sumaway
and exonerated respondent Baltao. He also instructed the Trial Fiscal to move for dismissal of the
information filed against Eugenio S. Baltao. Fiscal Castro found that the signature in PBC Check No.
136361 is not the signature of Eugenio S. Baltao. He also found that there is no showing in the records of
the preliminary investigation that Eugenio S. Baltao actually received notice of the said investigation.
Fiscal Castro then castigated Fiscal Sumaway for failing to exercise care and prudence in the performance
of his duties, thereby causing injustice to respondent who was not properly notified of the complaint
against him and of the requirement to submit his counter evidence.
Because of the alleged unjust filing of a criminal case against him for allegedly issuing a check which
bounced in violation of Batas Pambansa Bilang 22 for a measly amount of P2,575.00, respondent Baltao
filed before the Regional Trial Court of Quezon City a complaint for damages against herein petitioners
Albenson Enterprises, Jesse Yap, its owner, and Benjamin Mendiona, its employee.
In its decision, the lower court observed that "the check is drawn against the account of "E.L.
Woodworks," not of Guaranteed Industries of which plaintiff used to be President. Guaranteed Industries
had been inactive and had ceased to exist as a corporation since 1975. . . . . The possibility is that it was
with Gene Baltao or Eugenio Baltao III, a son of plaintiff who had a business on the ground floor of
Baltao Building located on V. Mapa Street, that the defendants may have been dealing with . . . ." (Rollo,
pp. 41-42).
The dispositive portion of the trial court 's decision reads:

Respondent Baltao, through counsel, denied that he issued the check, or that the signature appearing
thereon is his. He further alleged that Guaranteed was a defunct entity and hence, could not have
transacted business with Albenson.

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against


defendants ordering the latter to pay plaintiff jointly and severally:

1. actual or compensatory damages of P133,350.00;


2. moral damages of P1,000,000.00 (1 million pesos);

5.1. P133,350.00 as actual or compensatory damages, even in


the absence of sufficient evidence to show that such was
actually suffered.

5 costs.

5.2. P500,000.00 as moral damages considering that the


evidence in this connection merely involved private
respondent's alleged celebrated status as a businessman, there
being no showing that the act complained of adversely
affected private respondent's reputation or that it resulted to
material loss.

Defendants' counterclaim against plaintiff and claim for damages against Mercantile
Insurance Co. on the bond for the issuance of the writ of attachment at the instance
of plaintiff are hereby dismissed for lack of merit. (Rollo, pp. 38-39).

5.3. P200,000.00 as exemplary damages despite the fact that


petitioners were duly advised by counsel of their legal
recourse.

3. exemplary damages of P200,000.00;


4. attorney's fees of P100,000.00;

On appeal, respondent court modified the trial court's decision as follows:


WHEREFORE, the decision appealed from is MODIFIED by reducing the moral
damages awarded therein from P1,000,000.00 to P500,000.00 and the attorney's
fees from P100,000.00 to P50,000.00, said decision being hereby affirmed in all its
other aspects. With costs against appellants. (Rollo, pp. 50-51)
Dissatisfied with the above ruling, petitioners Albenson Enterprises Corp., Jesse Yap, and Benjamin
Mendiona filed the instant Petition, alleging that the appellate court erred in:
1. Concluding that private respondent's cause of action is not one based on
malicious prosecution but one for abuse of rights under Article 21 of the Civil Code
notwithstanding the fact that the basis of a civil action for malicious prosecution is
Article 2219 in relation to Article 21 or Article 2176 of the Civil Code . . . .
2. Concluding that "hitting at and in effect maligning (private respondent) with an
unjust criminal case was, without more, a plain case of abuse of rights by
misdirection" and "was therefore, actionable by itself," and which "became
inordinately blatant and grossly aggravated when . . . (private respondent) was
deprived of his basic right to notice and a fair hearing in the so-called preliminary
investigation . . . . "
3. Concluding that petitioner's "actuations in this case were coldly deliberate and
calculated", no evidence having been adduced to support such a sweeping
statement.
4. Holding the petitioner corporation, petitioner Yap and petitioner Mendiona
jointly and severally liable without sufficient basis in law and in fact.
5. Awarding respondents

5.4. P50,000.00 as attorney's fees, no evidence having been


adduced to justify such an award (Rollo, pp. 4-6).
Petitioners contend that the civil case filed in the lower court was one for malicious prosecution. Citing
the case ofMadera vs. Lopez (102 SCRA 700 [1981]), they assert that the absence of malice on their part
absolves them from any liability for malicious prosecution. Private respondent, on the other hand,
anchored his complaint for Damages on Articles 19, 20, and 21 ** of the Civil Code.
Article 19, known to contain what is commonly referred to as the principle of abuse of rights, sets certain
standards which may be observed not only in the exercise of one's rights but also in the performance of
one's duties. These standards are the following: to act with justice; to give everyone his due; and to
observe honesty and good faith. The law, therefore, recognizes the primordial limitation on all rights: that
in their exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by
itself legal because recognized or granted by law as such, may nevertheless become the source of some
illegality. When a right is exercised in a manner which does not conform with the norms enshrined in
Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer
must be held responsible. Although the requirements of each provision is different, these three (3) articles
are all related to each other. As the eminent Civilist Senator Arturo Tolentino puts it: "With this article
(Article 21), combined with articles 19 and 20, the scope of our law on civil wrongs has been very greatly
broadened; it has become much more supple and adaptable than the Anglo-American law on torts. It is
now difficult to conceive of any malevolent exercise of a right which could not be checked by the
application of these articles" (Tolentino, 1 Civil Code of the Philippines 72).
There is however, no hard and fast rule which can be applied to determine whether or not the principle of
abuse of rights may be invoked. The question of whether or not the principle of abuse of rights has been
violated, resulting in damages under Articles 20 and 21 or other applicable provision of law, depends on
the circumstances of each case. (Globe Mackay Cable and Radio Corporation vs. Court of Appeals, 176
SCRA 778 [1989]).
The elements of an abuse of right under Article 19 are the following: (1) There is a legal right or duty; (2)
which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. Article 20 speaks
of the general sanction for all other provisions of law which do not especially provide for their own
sanction (Tolentino, supra, p. 71). Thus, anyone who, whether willfully or negligently, in the exercise of
his legal right or duty, causes damage to another, shall indemnify his victim for injuries suffered thereby.

Article 21 deals with acts contra bonus mores, and has the following elements: 1) There is an act which is
legal; 2) but which is contrary to morals, good custom, public order, or public policy; 3) and it is done
with intent to injure.
Thus, under any of these three (3) provisions of law, an act which causes injury to another may be made
the basis for an award of damages.
There is a common element under Articles 19 and 21, and that is, the act must be intentional. However,
Article 20 does not distinguish: the act may be done either "willfully", or "negligently". The trial court as
well as the respondent appellate court mistakenly lumped these three (3) articles together, and cited the
same as the bases for the award of damages in the civil complaint filed against petitioners, thus:
With the foregoing legal provisions (Articles 19, 20, and 21) in focus, there is not
much difficulty in ascertaining the means by which appellants' first assigned error
should be resolved, given the admitted fact that when there was an attempt to
collect the amount of P2,575.00, the defendants were explicitly warned that plaintiff
Eugenio S. Baltao is not the Eugenio Baltao defendants had been dealing with
(supra, p. 5). When the defendants nevertheless insisted and persisted in filing a
case a criminal case no less against plaintiff, said defendants ran afoul of the
legal provisions (Articles 19, 20, and 21 of the Civil Code) cited by the lower court
and heretofore quoted (supra).
Defendants, not having been paid the amount of P2,575.00, certainly had the right
to complain. But that right is limited by certain constraints. Beyond that limit is the
area of excess, of abuse of rights. (Rollo, pp.
44-45).
Assuming, arguendo, that all the three (3) articles, together and not independently of each one, could be
validly made the bases for an award of damages based on the principle of "abuse of right", under the
circumstances, We see no cogent reason for such an award of damages to be made in favor of private
respondent.
Certainly, petitioners could not be said to have violated the aforestated principle of abuse of right. What
prompted petitioners to file the case for violation of Batas Pambansa Bilang 22 against private respondent
was their failure to collect the amount of P2,575.00 due on a bounced check which they honestly believed
was issued to them by private respondent. Petitioners had conducted inquiries regarding the origin of the
check, and yielded the following results: from the records of the Securities and Exchange Commission, it
was discovered that the President of Guaranteed (the recipient of the unpaid mild steel plates), was one
"Eugenio S. Baltao"; an inquiry with the Ministry of Trade and Industry revealed that E.L. Woodworks,
against whose account the check was drawn, was registered in the name of one "Eugenio Baltao";
verification with the drawee bank, the Pacific Banking Corporation, revealed that the signature appearing
on the check belonged to one "Eugenio Baltao".
In a letter dated December 16, 1983, counsel for petitioners wrote private respondent demanding that he
make good the amount of the check. Counsel for private respondent wrote back and denied, among others,
that private respondent ever transacted business with Albenson Enterprises Corporation; that he ever
issued the check in question. Private respondent's counsel even went further: he made a warning to
defendants to check the veracity of their claim. It is pivotal to note at this juncture that in this same letter,
if indeed private respondent wanted to clear himself from the baseless accusation made against his person,

he should have made mention of the fact that there are three (3) persons with the same name, i.e.: Eugenio
Baltao, Sr., Eugenio S. Baltao, Jr. (private respondent), and Eugenio Baltao III (private respondent's son,
who as it turned out later, was the issuer of the check). He, however, failed to do this. The last two Baltaos
were doing business in the same building Baltao Building located at 3267 V. Mapa Street, Sta.
Mesa, Manila. The mild steel plates were ordered in the name of Guaranteed of which respondent Eugenio
S. Baltao is the president and delivered to Guaranteed at Baltao building. Thus, petitioners had every
reason to believe that the Eugenio Baltao who issued the bouncing check is respondent Eugenio S. Baltao
when their counsel wrote respondent to make good the amount of the check and upon refusal, filed the
complaint for violation of BP Blg. 22.
Private respondent, however, did nothing to clarify the case of mistaken identity at first hand. Instead,
private respondent waited in ambush and thereafter pounced on the hapless petitioners at a time he thought
was propitious by filing an action for damages. The Court will not countenance this devious scheme.
The criminal complaint filed against private respondent after the latter refused to make good the amount
of the bouncing check despite demand was a sincere attempt on the part of petitioners to find the best
possible means by which they could collect the sum of money due them. A person who has not been paid
an obligation owed to him will naturally seek ways to compel the debtor to pay him. It was normal for
petitioners to find means to make the issuer of the check pay the amount thereof. In the absence of a
wrongful act or omission or of fraud or bad faith, moral damages cannot be awarded and that the adverse
result of an action does not per se make the action wrongful and subject the actor to the payment of
damages, for the law could not have meant to impose a penalty on the right to litigate (Rubio vs. Court of
Appeals, 141 SCRA 488 [1986]).
In the case at bar, private respondent does not deny that the mild steel plates were ordered by and
delivered to Guaranteed at Baltao building and as part payment thereof, the bouncing check was issued by
one Eugenio Baltao. Neither had private respondent conveyed to petitioner that there are two Eugenio
Baltaos conducting business in the same building he and his son Eugenio Baltao III. Considering that
Guaranteed, which received the goods in payment of which the bouncing check was issued is owned by
respondent, petitioner acted in good faith and probable cause in filing the complaint before the provincial
fiscal.
To constitute malicious prosecution, there must be proof that the prosecution was prompted by a sinister
design to vex and humiliate a person, and that it was initiated deliberately by the defendant knowing that
his charges were false and groundless. Concededly, the mere act of submitting a case to the authorities for
prosecution does not make one liable for malicious prosecution. (Manila Gas Corporation vs. Court of
Appeals, 100 SCRA 602 [1980]). Still, private respondent argues that liability under Articles 19, 20, and
21 of the Civil Code is so encompassing that it likewise includes liability for damages for malicious
prosecution under Article 2219 (8). True, a civil action for damages for malicious prosecution is allowed
under the New Civil Code, more specifically Articles 19, 20, 26, 29, 32, 33, 35, and 2219 (8) thereof. In
order that such a case can prosper, however, the following three (3) elements must be present, to wit: (1)
The fact of the prosecution and the further fact that the defendant was himself the prosecutor, and that the
action was finally terminated with an acquittal; (2) That in bringing the action, the prosecutor acted
without probable cause; (3) The prosecutor was actuated or impelled by legal malice (Lao vs. Court of
Appeals, 199 SCRA 58, [1991]).
Thus, a party injured by the filing of a court case against him, even if he is later on absolved, may file a
case for damages grounded either on the principle of abuse of rights, or on malicious prosecution. As
earlier stated, a complaint for damages based on malicious prosecution will prosper only if the three (3)

elements aforecited are shown to exist. In the case at bar, the second and third elements were not shown to
exist. It is well-settled that one cannot be held liable for maliciously instituting a prosecution where one
has acted with probable cause. "Probable cause is the existence of such facts and circumstances as would
excite the belief, in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the
person charged was guilty of the crime for which he was prosecuted. In other words, a suit will lie only in
cases where a legal prosecution has been carried on without probable cause. The reason for this rule is that
it would be a very great discouragement to public justice, if prosecutors, who had tolerable ground of
suspicion, were liable to be sued at law when their indictment miscarried" (Que vs. Intermediate Appellate
Court, 169 SCRA 137 [1989]).
The presence of probable cause signifies, as a legal consequence, the absence of malice. In the instant
case, it is evident that petitioners were not motivated by malicious intent or by sinister design to unduly
harass private respondent, but only by a well-founded anxiety to protect their rights when they filed the
criminal complaint against private respondent.
To constitute malicious prosecution, there must be proof that the prosecution was
prompted by a sinister design to vex and humiliate a person, that it was initiated
deliberately by the defendant knowing that his charges were false and groundless.
Concededly, the mere act of submitting a case to the authorities for prosecution
does not make one liable for malicious prosecution. Proof and motive that the
institution of the action was prompted by a sinister design to vex and humiliate a
person must be clearly and preponderantly established to entitle the victims to
damages (Ibid.).
In the case at bar, there is no proof of a sinister design on the part of petitioners to vex or humiliate private
respondent by instituting the criminal case against him. While petitioners may have been negligent to
some extent in determining the liability of private respondent for the dishonored check, the same is not so
gross or reckless as to amount to bad faith warranting an award of damages.
The root of the controversy in this case is founded on a case of mistaken identity. It is possible that with a
more assiduous investigation, petitioners would have eventually discovered that private respondent
Eugenio S. Baltao is not the "Eugenio Baltao" responsible for the dishonored check. However, the record
shows that petitioners did exert considerable effort in order to determine the liability of private
respondent. Their investigation pointed to private respondent as the "Eugenio Baltao" who issued and
signed the dishonored check as the president of the debtor-corporation Guaranteed Enterprises. Their error
in proceeding against the wrong individual was obviously in the nature of an innocent mistake, and cannot
be characterized as having been committed in bad faith. This error could have been discovered if
respondent had submitted his counter-affidavit before investigating fiscal Sumaway and was immediately
rectified by Provincial Fiscal Mauro Castro upon discovery thereof, i.e., during the reinvestigation
resulting in the dismissal of the complaint.

Thus, an award of damages and attorney's fees is unwarranted where the action was filed in good faith. If
damage results from a person's exercising his legal rights, it is damnum absque injuria (Ilocos Norte
Electric Company vs. Court of Appeals, 179 SCRA 5 [1989]).
Coming now to the claim of private respondent for actual or compensatory damages, the records show that
the same was based solely on his allegations without proof to substantiate the same. He did not present
proof of the cost of the medical treatment which he claimed to have undergone as a result of the nervous
breakdown he suffered, nor did he present proof of the actual loss to his business caused by the unjust
litigation against him. In determining actual damages, the court cannot rely on speculation, conjectures or
guesswork as to the amount. Without the actual proof of loss, the award of actual damages becomes
erroneous (Guilatco vs. City of Dagupan, 171 SCRA 382 [1989]).
Actual and compensatory damages are those recoverable because of pecuniary loss in business, trade,
property, profession, job or occupation and the same must be proved, otherwise, if the proof is flimsy
and unsubstantiated, no damages will be given (Rubio vs. Court of Appeals, 141 SCRA 488 [1986]). For
these reasons, it was gravely erroneous for respondent court to have affirmed the award of actual damages
in favor of private respondent in the absence of proof thereof.
Where there is no evidence of the other party having acted in wanton, fraudulent or reckless, or oppressive
manner, neither may exemplary damages be awarded (Dee Hua Liong Electrical Equipment Corporation
vs. Reyes, 145 SCRA 488 [1986]).
As to the award of attorney's fees, it is well-settled that the same is the exception rather than the general
rule. Needless to say, the award of attorney's fees must be disallowed where the award of exemplary
damages is eliminated (Article 2208, Civil Code; Agustin vs. Court of Appeals, 186 SCRA 375 [1990]).
Moreover, in view of the fact that there was no malicious prosecution against private respondent,
attorney's fees cannot be awarded him on that ground.
In the final analysis, there is no proof or showing that petitioners acted maliciously or in bad faith in the
filing of the case against private respondent. Consequently, in the absence of proof of fraud and bad faith
committed by petitioners, they cannot be held liable for damages (Escritor, Jr. vs. Intermediate Appellate
Court, 155 SCRA 577 [1987]). No damages can be awarded in the instant case, whether based on the
principle of abuse of rights, or for malicious prosecution. The questioned judgment in the instant case
attests to the propensity of trial judges to award damages without basis. Lower courts are hereby cautioned
anew against awarding unconscionable sums as damages without bases therefor.
WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals in C.A. G.R. C.V. No.
14948 dated May 13, 1989, is hereby REVERSED and SET ASIDE. Costs against respondent Baltao.
SO ORDERED.

Furthermore, the adverse result of an action does not per se make the act wrongful and subject the actor to
the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate,
such right is so precious that moral damages may not be charged on those who may even exercise it
erroneously. And an adverse decision does not ipso facto justify the award of attorney's fees to the winning
party (Garcia vs. Gonzales, 183 SCRA 72 [1990]).

[G.R. No. 140420. February 15 , 2001]


SERGIO

AMONOY, petitioner,
FORNILDA, respondents.

vs. Spouses

JOSE

GUTIERREZ

Asuncion Pasamba died on 24 February 1969 while Alfonso Fornilda passed away on 2 July 1969. Among
the heirs of the latter was his daughter, plaintiff-appellant Angela Gutierrez.
and

ANGELA

DECISION
PANGANIBAN, J.:
Damnum absque injuria. Under this principle, the legitimate exercise of a persons rights, even if it
causes loss to another, does not automatically result in an actionable injury. The law does not prescribe a
remedy for the loss. This principle does not, however, apply when there is an abuse of a persons right, or
when the exercise of this right is suspended or extinguished pursuant to a court order. Indeed, in the
availment of ones rights, one must act with justice, give others their due, and observe honesty and good
faith.
The Case

Because his attorneys fees thus secured by the two lots were not paid, on 21 January 1970 Amonoy filed
for their foreclosure in Civil Case No. 12726 entitled Sergio Amonoy vs. Heirs of Asuncion Pasamba and
Heirs of Alfonso Fornilda before the CFI of Pasig, Rizal, and this was assigned to Branch VIII. The heirs
opposed, contending that the attorneys fees charged [were] unconscionable and that the agreed sum was
only P11,695.92. But on 28 September 1972 judgment was rendered in favor of Amonoy requiring the
heirs to pay within 90 days the P27,600.00 secured by the mortgage, P11,880.00 as value of the harvests,
and P9,645.00 as another round of attorneys fees. Failing in that, the two (2) lots would be sold at public
auction.
They failed to pay. On 6 February 1973, the said lots were foreclosed and on 23 March 1973 the auction
sale was held where Amonoy was the highest bidder at P23,760.00. On 2 May 1973 his bid was judicially
confirmed. A deficiency was claimed and to satisfy it another execution sale was conducted, and again the
highest bidder was Amonoy at P12,137.50.
Included in those sold was the lot on which the Gutierrez spouses had their house.

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the April 21, 1999
Decision[1] of the Court of Appeals (CA) in CA-GR CV No. 41451, which set aside the judgment [2] of the
Regional Trial Court (RTC) of Tanay, Rizal. The RTC had earlier dismissed the Complaint for damages
filed by herein respondents against petitioner. The dispositive portion of the challenged CA Decision reads
as follows:

More than a year after the Decision in Civil Case No. 12726 was rendered, the said decedents heirs filed
on 19 December 1973 before the CFI of Pasig, Rizal[,] Civil Case No. 18731 entitled Maria Penano, et al
vs. Sergio Amonoy, et al, a suit for the annulment thereof. The case was dismissed by the CFI on 7
November 1977, and this was affirmed by the Court of Appeals on 22 July 1981.

WHEREFORE, the appealed Decision is SET ASIDE, and in its stead judgment is rendered ordering the
defendant-appellee Sergio Amonoy to pay the plaintiffs-appellants Bruno and Bernardina Gutierrez as
actual damages the sum of [t]wo [h]undred [f]ifty [t]housand [p]esos (P250,000.00).[3]

Thereafter, the CFI on 25 July 1985 issued a Writ of Possession and pursuant to which a notice to vacate
was made on 26 August 1985. On Amonoys motion of 24 April 1986, the Orders of 25 April 1986 and 6
May 1986 were issued for the demolition of structures in the said lots, including the house of the Gutierrez
spouses.

Likewise assailed is the October 19, 1999 CA Resolution,[4] which denied the Motion for
Reconsideration.
The Facts

The appellate court narrated the factual antecedents of this case as follows:
This case had its roots in Special Proceedings No. 3103 of Branch I of the CFI of Pasig, Rizal, for the
settlement of the estate of the deceased Julio Cantolos, involving six (6) parcels of land situated in Tanay,
Rizal. Amonoy was the counsel of therein Francisca Catolos, Agnes Catolos, Asuncion Pasamba and
Alfonso Formilda. On 12 January 1965, the Project of Partition submitted was approved and x x x two (2)
of the said lots were adjudicated to Asuncion Pasamba and Alfonso Formilda. The attorneys fees charged
by Amonoy was P27,600.00 and on 20 January 1965 Asuncion Pasamba and Alfonso Formilda executed a
deed of real estate mortgage on the said two (2) lots adjudicated to them, in favor of Amonoy to secure the
payment of his attorneys fees. But it was only on 6 August 1969 after the taxes had been paid, the claims
settled and the properties adjudicated, that the estate was declared closed and terminated.

On 27 September 1985 the petition entitled David Fornilda, et al vs Branch 164 RTC IVth Pasig, Deputy
Sheriff Joaquin Antonil and Atty. Sergio Amonoy, G.R. No. L-72306, was filed before the Supreme
Court. Among the petitioners was the plaintiff-appellant Angela Gutierrez. On a twin Musiyun(Mahigpit
na Musiyon Para Papanagutin Kaugnay ng Paglalapastangan, and Musiyung Makahingi ng Utos sa
Pagpapapigil ng Pagpapagiba at Pananagutin sa Paglalapastangan) with full titles as fanciful and elongated
as their Petisyung (Petisyung Makapagsuri Taglay and Pagpigil ng Utos), a temporary restraining order
was granted on 2 June 1986 enjoining the demolition of the petitioners houses.
Then on 5 October 1988 a Decision was rendered in the said G.R. No. L-72306 disposing that:
WHEREFORE, Certiorari is granted; the Order of respondent Trial Court, dated 25 July 1985, granting a
Writ of Possession, as well as its Orders, dated 25 April 1986 and 16 May 1986, directing and authorizing
respondent Sheriff to demolish the houses of petitioners Angela and Leocadia Fornilda are hereby set
aside, and the Temporary Restraining Order heretofore issued, is made permanent. The six (6) parcels of
land herein controverted are hereby ordered returned to petitioners unless some of them have been
conveyed to innocent third persons.[5]

But by the time the Supreme Court promulgated the above-mentioned Decision, respondents house
had already been destroyed, supposedly in accordance with a Writ of Demolition ordered by the lower
court.

Q. On May 30, 1986, were they able to destroy your house?


A. Not all, a certain portion only

Thus, a Complaint for damages in connection with the destruction of their house was filed by
respondents against petitioner before the RTC on December 15, 1989.
In its January 27, 1993 Decision, the RTC dismissed respondents suit. On appeal, the CA set aside
the lower courts ruling and ordered petitioner to pay respondents P250,000 as actual damages. Petitioner
then filed a Motion for Reconsideration, which was also denied.

xxxxxxxxx
Q. Was your house completely demolished?
A. No, sir.
Q. How about the following day?

Hence, this recourse.[6]


The Issue

A. It was completely demolished


xxxxxxxxx

In his Memorandum,[7] petitioner submits this lone issue for our consideration:
Whether or not the Court of Appeals was correct in deciding that the petitioner [was] liable to the
respondents for damages[8]

Q. Until when[,] Mrs. Witness?


A. Until 1987.

The Courts Ruling

Q. About what month of 1987?


The Petition has no merit.
A. Middle of the year.
Main Issue: Petitioners Liability

Q. Can you tell the Honorable Court who completed the demolition?
Well-settled is the maxim that damage resulting from the legitimate exercise of a persons rights is a
loss without injury -- damnum absque injuria -- for which the law gives no remedy.[9] In other words, one
who merely exercises ones rights does no actionable injury and cannot be held liable for damages.
Petitioner invokes this legal precept in arguing that he is not liable for the demolition of
respondents house. He maintains that he was merely acting in accordance with the Writ of Demolition
ordered by the RTC.
We reject this submission. Damnum absque injuria finds no application to this case.
True, petitioner commenced the demolition of respondents house on May 30, 1986 under the
authority of a Writ of Demolition issued by the RTC. But the records show that a Temporary Restraining
Order (TRO), enjoining the demolition of respondents house, was issued by the Supreme Court on June 2,
1986. The CA also found, based on the Certificate of Service of the Supreme Court process server, that a
copy of the TRO was served on petitioner himself on June 4, 1986.
Petitioner, however, did not heed the TRO of this Court. We agree with the CA that he unlawfully
pursued the demolition of respondents house well until the middle of 1987. This is clear from Respondent
Angela Gutierrezs testimony. The appellate court quoted the following pertinent portion thereof:[10]

A. The men of Fiscal Amonoy.[11]


The foregoing disproves the claim of petitioner that the demolition, which allegedly commenced
only on May 30, 1986, was completed the following day.It likewise belies his allegation that the
demolitions had already ceased when he received notice of the TRO.
Although the acts of petitioner may have been legally justified at the outset, their continuation after
the issuance of the TRO amounted to an insidious abuse of his right. Indubitably, his actions were tainted
with bad faith. Had he not insisted on completing the demolition, respondents would not have suffered the
loss that engendered the suit before the RTC. Verily, his acts constituted not only an abuse of a right, but
an invalid exercise of a right that had been suspended when he received the TRO from this Court on June
4, 1986. By then, he was no longer entitled to proceed with the demolition.
A commentator on this topic explains:
The exercise of a right ends when the right disappears, and it disappears when it is abused, especially to
the prejudice of others. The mask of a right without the spirit of justice which gives it life, is repugnant to
the modern concept of social law. It cannot be said that a person exercises a right when he unnecessarily
prejudices another x x x. Over and above the specific precepts of positive law are the supreme norms of

justice x x x; and he who violates them violates the law. For this reason, it is not permissible to abuse our
rights to prejudice others.[12]
Likewise, in Albenson Enterprises Corp. v. CA,[13] the Court discussed the concept of abuse of
rights as follows:
Article 19, known to contain what is commonly referred to as the principle of abuse of rights, sets certain
standards which may be observed not only in the exercise of ones rights but also in the performance of
ones duties. These standards are the following: to act with justice; to give everyone his due; and to observe
honesty and good faith. The law, therefore, recognizes the primordial limitation on all rights: that in their
exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by itself
legal because recognized or granted by law as such, may nevertheless become the source of some
illegality. When a right is exercised in a manner which does not conform with norms enshrined in Article
19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be
held responsible x x x.
Clearly then, the demolition of respondents house by petitioner, despite his receipt of the TRO,
was not only an abuse but also an unlawful exercise of such right. In insisting on his alleged right, he
wantonly violated this Courts Order and wittingly caused the destruction of respondents house.
Obviously, petitioner cannot invoke damnum absque injuria, a principle premised on the valid
exercise of a right. [14] Anything less or beyond such exercise will not give rise to the legal protection that
the principle accords. And when damage or prejudice to another is occasioned thereby, liability cannot be
obscured, much less abated.
In the ultimate analysis, petitioners liability is premised on the obligation to repair or to make
whole the damage caused to another by reason of ones act or omission, whether done intentionally or
negligently and whether or not punishable by law.[15]
WHEREFORE, the Petition is DENIED and the appealed Decision AFFIRMED. Costs against
petitioner.
SO ORDERED.

G.R. No. 132344

February 17, 2000

UNIVERSITY OF THE EAST, petitioner,


vs.
ROMEO A. JADER, respondent.

turned from left to right, and he was thereafter handed by Dean Celedonio a rolled white sheet
of paper symbolical of the Law Diploma. His relatives took pictures of the occasion (Exhibits
"C" to "C-6", "D-3" to "D-11").

YNARES-SANTIAGO, J.:

He tendered a blow-out that evening which was attended by neighbors, friends and relatives
who wished him good luck in the forthcoming bar examination. There were pictures taken too
during the blow-out (Exhibits "D" to "D-1").

May an educational institution be held liable for damages for misleading a student into believing that the
latter had satisfied all the requirements for graduation when such is not the case? This is the issue in the
instant petition for review premised on the following undisputed facts as summarized by the trial court and
adopted by the Court of Appeals (CA),1 to wit:

He thereafter prepared himself for the bar examination. He took a leave of absence without pay
from his job from April 20, 1988 to September 30, 1988 (Exhibit "G") and enrolled at the prebar review class in Far Eastern University. (Exhibits "F" to "F-2"). Having learned of the
deficiency he dropped his review class and was not able to take the bar examination.2

Plaintiff was enrolled in the defendants' College of Law from 1984 up to 1988. In the first
semester of his last year (School year 1987-1988), he failed to take the regular final
examination in Practice Court I for which he was given an incomplete grade (Exhibits "2", also
Exhibit "H"). He enrolled for the second semester as fourth year law student (Exhibit "A") and
on February 1, 1988 he filed an application for the removal of the incomplete grade given him
by Professor Carlos Ortega (Exhibits "H-2", also Exhibit "2") which was approved by Dean
Celedonio Tiongson after payment of the required fee. He took the examination on March 28,
1988. On May 30, 1988, Professor Carlos Ortega submitted his grade. It was a grade of five
(5). (Exhibits "H-4", also Exhibits "2-L", "2-N").1wphi1.nt

Consequently, respondent sued petitioner for damages alleging that he suffered moral shock, mental
anguish, serious anxiety, besmirched reputation, wounded feelings and sleepless nights when he was not
able to take the 1988 bar examinations arising from the latter's negligence. He prayed for an award of
moral and exemplary damages, unrealized income, attorney's fees, and costs of suit.
In its answer with counterclaim, petitioner denied liability arguing mainly that it never led respondent to
believe that he completed the requirements for a Bachelor of Laws degree when his name was included in
the tentative list of graduating students. After trial, the lower court rendered judgment as follows:

In the meantime, the Dean and the Faculty Members of the College of Law met to deliberate
on who among the fourth year students should be allowed to graduate. The plaintiff's name
appeared in the Tentative List of Candidates for graduation for the Degree of Bachelor of Laws
(LL.B) as of Second Semester (1987-1988) with the following annotation:

WHEREFORE, in view of the foregoing judgment is hereby rendered in favor of the plaintiff
and against the defendant ordering the latter to pay plaintiff the sum of THIRTY FIVE
THOUSAND FOUR HUNDRED SEVENTY PESOS (P35,470.00) with legal rate of interest
from the filing of the complaint until fully paid, the amount of FIVE THOUSAND PESOS
(P5,000.00) as attorney's fees and the cost of suit.

JADER ROMEO A.

Defendant's counterclaim is, for lack of merit, hereby dismissed.

Def. Conflict of Laws x-1-87-88, Practice Court I Inc., 1-87-88 C-1 to submit transcript
with S.O. (Exhibits "3", "3-C-1", "3-C-2").

SO ORDERED.3

The 35th Investitures & Commencement Ceremonies for the candidates of Bachelor of Laws
was scheduled on the 16th of April 1988 at 3:00 o'clock in the afternoon, and in the invitation
for that occasion the name of the plaintiff appeared as one of the candidates. (Exhibits "B", "B6", "B-6-A"). At the foot of the list of the names of the candidates there appeared however the
following annotation:
This is a tentative list Degrees will be conferred upon these candidates who
satisfactorily complete requirements as stated in the University Bulletin and as
approved of the Department of Education, Culture and Sports (Exhibit "B-7-A").
The plaintiff attended the investiture ceremonies at F. dela Cruz Quadrangle, U.E., Recto
Campus, during the program of which he went up the stage when his name was called, escorted
by her (sic) mother and his eldest brother who assisted in placing the Hood, and his Tassel was

which on appeal by both parties was affirmed by the Court of Appeals (CA) with modification. The
dispositive portion of the CA decision reads:
WHEREFORE, in the light of the foregoing, the lower Court's Decision is hereby AFFIRMED
with the MODIFICATION that defendant-appellee, in addition to the sum adjudged by the
lower court in favor of plaintiff-appellant, is also ORDERED to pay plaintiff-appellant the
amount of FIFTY THOUSAND (P50,000.00) PESOS for moral damages. Costs against
defendant-appellee.
SO ORDERED.4
Upon the denial of its motion for reconsideration, petitioner UE elevated the case to this Court on a
petition for review under Rule 45 of the Rules of Court, arguing that it has no liability to respondent
Romeo A. Jader, considering that the proximate and immediate cause of the alleged damages incurred by

the latter arose out of his own negligence in not verifying from the professor concerned the result of his
removal exam.

Art. 19. Every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith.

The petition lacks merit.

Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another,
shall indemnify the latter for the same.

When a student is enrolled in any educational or learning institution, a contract of education is entered into
between said institution and the student. The professors, teachers or instructors hired by the school are
considered merely as agents and administrators tasked to perform the school's commitment under the
contract. Since the contracting parties are the school and the student, the latter is not duty-bound to deal
with the former's agents, such as the professors with respect to the status or result of his grades, although
nothing prevents either professors or students from sharing with each other such information. The Court
takes judicial notice of the traditional practice in educational institutions wherein the professor directly
furnishes his/her students their grades. It is the contractual obligation of the school to timely inform and
furnish sufficient notice and information to each and every student as to whether he or she had already
complied with all the requirements for the conferment of a degree or whether they would be included
among those who will graduate. Although commencement exercises are but a formal ceremony, it
nonetheless is not an ordinary occasion, since such ceremony is the educational institution's way of
announcing to the whole world that the students included in the list of those who will be conferred a
degree during the baccalaureate ceremony have satisfied all the requirements for such degree. Prior or
subsequent to the ceremony, the school has the obligation to promptly inform the student of any problem
involving the latter's grades and performance and also most importantly, of the procedures for remedying
the same.
Petitioner, in belatedly informing respondent of the result of the removal examination, particularly at a
time when he had already commenced preparing for the bar exams, cannot be said to have acted in good
faith. Absence of good faith must be sufficiently established for a successful prosecution by the aggrieved
party in a suit for abuse of right under Article 19 of the Civil Code. Good faith connotes an honest
intention to abstain from taking undue advantage of another, even though the forms and technicalities of
the law, together with the absence of all information or belief of facts, would render the transaction
unconscientious.5 It is the school that has access to those information and it is only the school that can
compel its professors to act and comply with its rules, regulations and policies with respect to the
computation and the prompt submission of grades. Students do not exercise control, much less influence,
over the way an educational institution should run its affairs, particularly in disciplining its professors and
teachers and ensuring their compliance with the school's rules and orders. Being the party that hired them,
it is the school that exercises general supervision and exclusive control over the professors with respect to
the submission of reports involving the students' standing. Exclusive control means that no other person or
entity had any control over the instrumentality which caused the damage or injury.6
The college dean is the senior officer responsible for the operation of an academic program, enforcement
of rules and regulations, and the supervision of faculty and student services.7 He must see to it that his
own professors and teachers, regardless of their status or position outside of the university, must comply
with the rules set by the latter. The negligent act of a professor who fails to observe the rules of the school,
for instance by not promptly submitting a student's grade, is not only imputable to the professor but is an
act of the school, being his employer.
Considering further, that the institution of learning involved herein is a university which is engaged in
legal education, it should have practiced what it inculcates in its students, more specifically the principle
of good dealings enshrined in Articles 19 and 20 of the Civil Code which states:

Art. 19 was intended to expand the concept of torts by granting adequate legal remedy for the untold
number of moral wrongs which is impossible for human foresight to provide specifically in statutory
law.8 In civilized society, men must be able to assume that others will do them no intended injury that
others will commit no internal aggressions upon them; that their fellowmen, when they act affirmatively
will do so with due care which the ordinary understanding and moral sense of the community exacts and
that those with whom they deal in the general course of society will act in good faith. The ultimate thing in
the theory of liability is justifiable reliance under conditions of civilized society.9 Schools and professors
cannot just take students for granted and be indifferent to them, for without the latter, the former are
useless.
Educational institutions are duty-bound to inform the students of their academic status and not wait for the
latter to inquire from the former. The conscious indifference of a person to the rights or welfare of the
person/persons who may be affected by his act or omission can support a claim for damages. 10 Want of
care to the conscious disregard of civil obligations coupled with a conscious knowledge of the cause
naturally calculated to produce them would make the erring party liable.11 Petitioner ought to have known
that time was of the essence in the performance of its obligation to inform respondent of his grade. It
cannot feign ignorance that respondent will not prepare himself for the bar exams since that is precisely
the immediate concern after graduation of an LL.B. graduate. It failed to act seasonably. Petitioner cannot
just give out its student's grades at any time because a student has to comply with certain deadlines set by
the Supreme Court on the submission of requirements for taking the bar. Petitioner's liability arose from
its failure to promptly inform respondent of the result of an examination and in misleading the latter into
believing that he had satisfied all requirements for the course. Worth quoting is the following disquisition
of the respondent court:
It is apparent from the testimony of Dean Tiongson that defendant-appellee University had
been informed during the deliberation that the professor in Practice Court I gave plaintiffappellant a failing grade. Yet, defendant-appellee still did not inform plaintiff-appellant of his
failure to complete the requirements for the degree nor did they remove his name from the
tentative list of candidates for graduation. Worse, defendant-appellee university, despite the
knowledge that plaintiff-appellant failed in Practice Court I, again included plaintiff-appellant's
name in the "tentative list of candidates for graduation which was prepared after the
deliberation and which became the basis for the commencement rites program. Dean Tiongson
reasons out that plaintiff-appellant's name was allowed to remain in the tentative list of
candidates for graduation in the hope that the latter would still be able to remedy the situation
in the remaining few days before graduation day. Dean Tiongson, however, did not explain
how plaintiff appellant Jader could have done something to complete his deficiency if
defendant-appellee university did not exert any effort to inform plaintiff-appellant of his failing
grade in Practice Court I.12
Petitioner cannot pass on its blame to the professors to justify its own negligence that led to the delayed
relay of information to respondent. When one of two innocent parties must suffer, he through whose
agency the loss occurred must bear it.13 The modern tendency is to grant indemnity for damages in cases
where there is abuse of right, even when the act is not illicit. 14 If mere fault or negligence in one's acts can

make him liable for damages for injury caused thereby, with more reason should abuse or bad faith make
him liable. A person should be protected only when he acts in the legitimate exercise of his right, that is,
when he acts with prudence and in good faith, but not when he acts with negligence or abuse. 15
However, while petitioner was guilty of negligence and thus liable to respondent for the latter's actual
damages, we hold that respondent should not have been awarded moral damages. We do not agree with
the Court of Appeals' findings that respondent suffered shock, trauma and pain when he was informed that
he could not graduate and will not be allowed to take the bar examinations. At the very least, it behooved
on respondent to verify for himself whether he has completed all necessary requirements to be eligible for
the bar examinations. As a senior law student, respondent should have been responsible enough to ensure
that all his affairs, specifically those pertaining to his academic achievement, are in order. Given these
considerations, we fail to see how respondent could have suffered untold embarrassment in attending the
graduation rites, enrolling in the bar review classes and not being able to take the bar exams. If respondent
was indeed humiliated by his failure to take the bar, he brought this upon himself by not verifying if he
has satisfied all the requirements including his school records, before preparing himself for the bar
examination. Certainly, taking the bar examinations does not only entail a mental preparation on the
subjects thereof; there are also prerequisites of documentation and submission of requirements which the
prospective examinee must meet.
WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED with MODIFICATION.
Petitioner is ORDERED to PAY respondent the sum of Thirty-five Thousand Four Hundred Seventy Pesos
(P35,470.00), with legal interest of 6% per annum computed from the date of filing of the complaint until
fully paid; the amount of Five Thousand Pesos (P5,000.00) as attorney's fees; and the costs of the suit. The
award of moral damages is DELEIED.1wphi1.nt
SO ORDERED.

G.R. No. 96126 August 10, 1992


ESTERIA F. GARCIANO, petitioner,
vs.
THE HON. COURT OF APPEALS, EMERITO LABAJO, LUNISITA MARODA, LALIANA
DIONES, CANONISA PANINSORO, DIONISIO ROSAL, REMEDIOS GALUSO, FLORDELUNA
PETALCORIN, MELCHIZEDECH LOON, NORBERTA MARODA and JOSEPH
WIERTZ, respondents.
Basilio E. Duaban for petitioner.
Julius Z. Neri for private respondent.

GRIO-AQUINO, J.:
This is a petition for review of the decision of the Court of Appeals dismissing the complaint for damages
filed by the petitioner against the private respondents.
The petitioner was hired to teach during the 1981-82 school year in the Immaculate Concepcion Institute
in the Island of Camotes. On January 13, 1982, or before the school year ended, she applied for an
indefinite leave of absence because her daughter was taking her to Austria where her daughter was
employed (Exh. B). The application was recommended for approval by the school principal, Emerito O.
Labajo, and approved by the President of the school's Board of Directors (Exh. B-1).
On June 1, 1982, Emerito Labajo addressed a letter to the petitioner through her husband, Sotero Garciano
(for she was still abroad), informing her of the decision of Fr. Joseph Wiertz, the school's founder,
concurred in by the president of the Parent-Teachers Association and the school faculty, to terminate her
services as a member of the teaching staff because of: (1) the absence of any written contract of
employment between her and the school due to her refusal to sign one; and (2) the difficulty of getting a
substitute for her on a temporary basis as no one would accept the position without a written contract
(Exhs. C and 1). Upon her return from Austria in the later part of June, 1982, she received the letter
informing her that her services at the Immaculate Concepcion Institute had been terminated. She made
inquiries from the school about the matter and, on July 7, 1982, the members of the Board of Directors of
the school, with the exception of Fr. Joseph Wiertz, signed a letter notifying her that she was "reinstated to
report and do your usual duties as Classroom Teacher . . . effective July 5, 1982," and that "any letter or
notice of termination received by you before this date has no sanction or authority by the Board of
Directors of this Institution, therefore it is declared null and void . . ." (Exhs. D and 2).
On July 9, 1982, the president, vice president, secretary, and three members of the Board of Directors, out
of a membership of nine (9), resigned their positions from the Board "for the reason that the ICI Faculty,
has reacted acidly to the Board's deliberations for the reinstatement of Mrs. Esteria F. Garciano, thereby
questioning the integrity of the Board's decision" (Exh. E).

On September 3, 1982, petitioner filed a complaint for damages in the Regional Trial Court, Cebu, Branch
XI, against Fr. Wiertz, Emerito Labajo, and some members of the faculty of the school for discrimination
and unjust and illegal dismissal.
After trial, the lower court rendered a decision on August 30, 1985, ordering the defendants jointly and
severally to pay her P200,000 as moral damages, P50,000 exemplary damages, P32,400 as lost earnings
for nine years, and P10,000 as litigation expenses and attorney's fees.
The defendants (now private respondents) appealed to the Court of Appeals (CA-G.R. CV No. 10692),
which on August 30, 1990 reversed the trial court's decision thus:
WHEREFORE, the decision appealed from is reversed, the complaint is dismissed,
and defendants-appellants are absolved from any liability to plaintiff-appellee. With
costs against plaintiff-appellee. (p. 13, Rollo.)
The plaintiff-appellee (now petitioner) filed a motion for reconsideration which the Court of Appeals
denied on October 26, 1990. Hence, this petition for review wherein the lone error assigned by petitioner
reads:
Respondent Court of Appeals gravely erred in absolving the private respondents
from liability by faulting the petitioner for her failure to report back to her work. (p.
6, Rollo.)
After a careful perusal of the petition and the respondents' comments, the Court resolved to deny the
petition for lack of merit.
The board of directors of the Immaculate Concepcion Institute, which alone possesses the authority to hire
and fire teachers and other employees of the school, did not dismiss the petitioner. It in fact directed her to
report for work. While the private respondents sent her a letter of termination through her husband, they
admittedly had no authority to do so. As the Court of Appeals aptly observed:
We agree with defendants-appellants, however, that they should not have been held
liable to plaintiff-appellee for damages. Defendants-appellants had no authority to
dismiss plaintiff-appellee and the latter was aware of this. Hence, the letter of
termination sent to her through her husband (Exhs. C and 1) by defendantsappellants had no legal effect whatsoever. It did not effectively prevent her from
reporting for work. What is more, it was subsequently repudiated by the Board of
Directors which directed her to report for work. (Exhs. D and 2) There was,
therefore, no reason why she did not continue with her teaching in the school. No
evidence had been presented to show that defendants-appellants prevented her from
reporting for work. The fact that defendants-appellants had "acidly" received the
action of the Board of Directors repudiating their decision to terminate plaintiffappellee is not proof that defendants-appellants had effectively and physically
prevented plaintiff-appellee from resuming her post. It was nothing more than a
reaction to what defendants-appellants perceived as an affront to their collective
prestige. It would appear, therefore, that plaintiff-appellee voluntarily desisted from

her teaching job in the school and has no right to recover damages from defendantsappellants. (p. 13, Rollo.)
Liability for damages under Articles 19, 20 and 21 of the Civil Code arises only from unlawful, willful or
negligent acts that are contrary to law, or morals, good customs or public policy.
Art. 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good
faith.
Art. 20. Every person who, contrary to law, willfully or negligently causes damage
to another, shall indemnify the latter for the same.
Art. 21. Any person who willfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter for
the damage.
The Court of Appeals was correct in finding that petitioner's discontinuance from teaching was her own
choice. While the respondents admittedly wanted her service terminated, they actually did nothing to
physically prevent her from reassuming her post, as ordered by the school's Board of Directors. That the
school principal and Fr. Wiertz disagreed with the Board's decision to retain her, and some teachers
allegedly threatened to resign en masse, even if true, did not make them liable to her for damages. They
were simply exercising their right of free speech or their right to dissent from the Board's decision. Their
acts were not contrary to law, morals, good customs or public policy. They did not "illegally dismiss" her
for the Board's decision to retain her prevailed. She was ordered to report for work on July 5, 1982, but
she did not comply with that order. Consequently, whatever loss she may have incurred in the form of lost
earnings was self-inflicted. Volenti non fit injuria.
With respect to petitioner's claim for moral damages, the right to recover them under Article 21 is based
on equity, and he who comes to court to demand equity, must come with clean hands. Article 21 should be
construed as granting the right to recover damages to injured persons who are not themselves at fault
(Mabutas vs. Calapan Electric Co. [CA] 50 OG 5828, cited in Padilla, Civil Code Annotated, Vol. 1, 1975
Ed., p. 87). Moral damages are recoverable only if the case falls under Article 2219 in relation to Article
21 (Flordelis vs. Mar, 114 SCRA 41). In the case at bar, petitioners is not without fault. Firstly, she went
on an indefinite leave of absence and failed to report back in time for the regular opening of classes.
Secondly, for reasons known to herself alone, she refused to sign a written contract of employment. Lastly,
she ignored the Board of Directors' order for her to report for duty on July 5, 1982.
The trial court's award of exemplary damages to her was not justified for she is not entitled to moral,
temperate or compensatory damages. (Art. 2234, Civil Code).
In sum, the Court of Appeals correctly set aside the damages awarded by the trial court to the petitioner
for they did not have any legal or factual basis.
WHEREFORE, the petition is DISMISSED for lack of merit and the decision of the Court of Appeals is
AFFIRMED.
SO ORDERED.

[G. R. No. 126486. February 9, 1998]

After hearing, the trial court on 17 June 1991 rendered its decision, the dispositive portion of which
reads:

BARONS MARKETING CORP., petitioner, vs. COURT OF APPEALS and PHELPS DODGE
PHILS., INC.respondents.
DECISION
KAPUNAN, J.:
The instant petition raises two issues: (1) whether or not private respondent is guilty of abuse of
right; and (2) whether or not private respondent is entitled to interest and attorneys fees.
The facts are undisputed:
On August 31, 1973, plaintiff [Phelps Dodge, Philippines, Inc. private respondent herein] appointed
defendant [petitioner Barons Marketing, Corporation] as one of its dealers of electrical wires and cables
effective September 1, 1973 (Exh. A). As such dealer, defendant was given by plaintiff 60 days credit for
its purchases of plaintiffs electrical products. This credit term was to be reckoned from the date of delivery
by plaintiff of its products to defendant (Exh. 1).
During the period covering December 1986 to August 17, 1987, defendant purchased, on credit, from
plaintiff various electrical wires and cables in the total amount of P4,102,438.30 (Exh. B to K). These
wires and cables were in turn sold, pursuant to previous arrangements, by defendant to MERALCO, the
former being the accredited supplier of the electrical requirements of the latter. Under the sales invoices
issued by plaintiff to defendant for the subject purchases, it is stipulated that interest at 12% on the amount
due for attorneys fees and collection (Exh. BB).[1] On September 7, 1987, defendant paid plaintiff the
amount of P300,000.00 out of its total purchases as above-stated (Exh. S), thereby leaving an unpaid
account on the aforesaid deliveries of P3,802,478.20. On several occasions, plaintiff wrote defendant
demanding payment of its outstanding obligations due plaintiff (Exhs. L, M, N, and P). In response,
defendant wrote plaintiff on October 5, 1987 requesting the latter if it could pay its outstanding account in
monthly installments of P500,000.00 plus 1% interest per month commencing on October 15, 1987 until
full payment (Exh. O and O-4). Plaintiff, however, rejected defendants offer and accordingly reiterated its
demand for the full payment of defendants account (Exh. P).[2]
On 29 October 1987, private respondent Phelps Dodge Phils., Inc. filed a complaint before the
Pasig Regional Trial Court against petitioner Barons Marketing Corporation for the recovery of
P3,802,478.20 representing the value of the wires and cables the former had delivered to the latter,
including interest. Phelps Dodge likewise prayed that it be awarded attorneys fees at the rate of 25% of the
amount demanded, exemplary damages amounting to at least P100,000.00, the expenses of litigation and
the costs of suit.
Petitioner, in its answer, admitted purchasing the wires and cables from private respondent but
disputed the amount claimed by the latter. Petitioner likewise interposed a counterclaim against private
respondent, alleging that it suffered injury to its reputation due to Phelps Dodges acts. Such acts were
purportedly calculated to humiliate petitioner and constituted an abuse of rights.

WHEREFORE, from all the foregoing considerations, the Court finds Phelps Dodge Phils., Inc. to have
preponderantly proven its case and hereby orders Barons Marketing, Inc. to pay Phelps Dodge the
following:
1. P3,108,000.00 constituting the unpaid balance of defendants purchases from plaintiff and interest
thereon at 12% per annum computed from the respective expiration of the 60 day credit term, vis--vis the
various sales invoices and/or delivery receipts;
2. 25% of the preceding obligation for and as attorneys fees;
3. P10,000.00 as exemplary damages;
4. Costs of suit.[3]
Both parties appealed to respondent court. Private respondent claimed that the trial court should
have awarded it the sum of P3,802,478.20, the amount which appeared in the body of the complaint and
proven during the trial rather than P3,108,000.00. The latter amount appears in petitioners prayer
supposedly as a result of a typographical error.
On the other hand, petitioner reiterated its claims for damages as a result of creditors abuse. It also
alleged that private respondent failed to prove its cause of action against it.
On 25 June 1996, the Court of Appeals rendered a decision modifying the decision of the trial
court, thus:
WHEREFORE, from all the foregoing considerations, the Court finds Phelps Dodge Phils., Inc. to have
preponderantly proven its case and hereby orders Barons Marketing, Inc. to pay Phelps Dodge the
following:
1. P3,802,478.20 constituting the unpaid balance of defendants purchases from plaintiff and interest
thereon at 12% per annum computed from the respective expiration of the 60 day credit term, vis--vis the
various sales invoices and/or delivery receipts; and
2. 5% of the preceding obligation for and as attorneys fees.
No costs.[4]
Petitioner Barons Marketing is now before this Court alleging that respondent court erred when it
held (1) private respondent Phelps Dodge not guilty of creditors abuse, and (2) petitioner liable to private
respondent for interest and attorneys fees.
I

Petitioner does not deny private respondents rights to institute an action for collection and to claim
full payment. Indeed, petitioners right to file an action for collection is beyond cavil. [5] Likewise, private
respondents right to reject petitioners offer to pay in installments is guaranteed by Article 1248 of the Civil
Code which states:

is always wiser and more prudent to accept an offer of payment in installment rather than file an action in
court to compel the debtor to settle his obligation in full in a single payment.

ART. 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelled partially
to receive the prestations in which the obligation consists. Neither may the debtor be required to make
partial payments.

xxx. Why then did private respondent elect to file a suit for collection rather than accept petitioners offer
of settlement, supported by post-dated checks, by paying monthly installments of P500,000.00 plus 1%
per month commencing on October 15, 1987 until full payment?The answer is obvious. The action of
private respondent in filling a suit for collection was an abuse of right and exercised for the sole purpose
of prejudicing and injuring the petitioner.[10]

However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and the
debtor may effect the payment of the former without waiting for the liquidation of the latter.
Under this provision, the prestation , i.e., the object of the obligation, must be performed in one act, not in
parts.
Tolentino concedes that the right has its limitations:

xxx.

Petitioner prays that the Court order private respondent to pay petitioner moral and exemplary
damages, attorneys fees, as well as the costs of suit. It likewise asks that it be allowed to liquidate its
obligation to private respondent, without interests, in eight equal monthly installments.
Petitioners theory is untenable.

Partial Prestations. Since the creditor cannot be compelled to accept partial performance, unless
otherwise stipulated, the creditor who refuses to accept partial prestations does not incur in delay or mora
accipiendi, except when there is abuse of right or if good faith requires acceptance.[6]

Both parties agree that to constitute an abuse of rights under Article 19 the defendant must act with
bad faith or intent to prejudice the plaintiff. They cite the following comments of Tolentino as their
authority:

Indeed, the law, as set forth in Article 19 of the Civil Code, prescribes a primordial limitation on all rights
by setting certain standards that must be observed in the exercise thereof .[7] Thus:

Test of Abuse of Right. Modern jurisprudence does not permit acts which, although not unlawful, are
anti-social. There is undoubtedly an abuse of right when it is exercised for the only purpose of prejudicing
or injuring another. When the objective of the actor is illegitimate, the illicit act cannot be concealed under
the guise of exercising a right. The principle does not permit acts which, without utility or legitimate
purpose cause damage to another, because they violate the concept of social solidarity which considers
law as rational and just. Hence, every abnormal exercise of a right, contrary to its socio-economic
purpose, is an abuse that will give rise to liability. The exercise of a right must be in accordance with the
purpose for which it was established, and must not be excessive or unduly harsh; there must be no
intention to injure another. Ultimately, however, and in practice, courts, in the sound exercise of their
discretion, will have to determine all the facts and circumstances when the exercise of a right is unjust, or
when there has been an abuse of right.[11]

ART. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith.
Petitioner now invokes Article 19 and Article 21 [8] of the Civil Code, claiming that private
respondent abused its rights when it rejected petitioners offer of settlement and subsequently filed the
action for collection considering:
xxx that the relationship between the parties started in 1973 spanning more than 13 years before the
complaint was filed, that the petitioner had been a good and reliable dealer enjoying a good credit standing
during the period before it became delinquent in 1987, that the relationship between the parties had been a
fruitful one especially for the private respondent, that the petitioner exerted its outmost efforts to settle its
obligations and avoid a suit, that the petitioner did not evade in the payment of its obligation to the private
respondent, and that the petitioner was just asking a small concession that it be allowed to liquidate its
obligation to eight (8) monthly installments ofP500,000.00 plus 1% interest per month on the balance
which proposal was supported by post-dated checks.[9]
Expounding on its theory, petitioner states:
In the ordinary course of events, a suit for collection of a sum of money filed in court is done for the
primary purpose of collecting a debt or obligation. If there is an offer by the debtor to pay its debt or
obligation supported by post-dated checks and with provision for interests, the normal response of a
creditor would be to accept the offer of compromise and not file the suit for collection. It is of common
knowledge that proceedings in our courts would normally take years before an action is finally settled. It

The question, therefore, is whether private respondent intended to prejudice or injure petitioner
when it rejected petitioners offer and filed the action for collection.
We hold in the negative. It is an elementary rule in this jurisdiction that good faith is presumed and
that the burden of proving bad faith rests upon the party alleging the same. [12] In the case at bar, petitioner
has failed to prove bad faith on the part of private respondent.Petitioners allegation that private respondent
was motivated by a desire to terminate its agency relationship with petitioner so that private respondent
itself may deal directly with Meralco is simply not supported by the evidence. At most, such supposition
is merely speculative.
Moreover, we find that private respondent was driven by very legitimate reasons for rejecting
petitioners offer and instituting the action for collection before the trial court. As pointed out by private
respondent, the corporation had its own cash position to protect in order for it to pay its own
obligations. This is not such a lame and poor rationalization as petitioner purports it to be. For if private
respondent were to be required to accept petitioners offer, there would be no reason for the latter to reject

similar offers from its other debtors. Clearly, this would be inimical to the interests of any enterprise,
especially a profit-oriented one like private respondent. It is plain to see that what we have here is a
mere exercise of rights, not an abuse thereof. Under these circumstances, we do not deem private
respondent to have acted in a manner contrary to morals, good customs or public policy as to violate the
provisions of Article 21 of the Civil Code.
Consequently, petitioners prayer for moral and exemplary damages must thus be
rejected. Petitioners claim for moral damages is anchored on Article 2219 (10) of the Civil Code which
states:
ART. 2219. Moral damages may be recovered in the following and analogous cases:
xxx.
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
xxx.
Having ruled that private respondents acts did not transgress the provisions of Article 21, petitioner cannot
be entitled to moral damages or, for that matter, exemplary damages. While the amount of exemplary
damages need not be proved, petitioner must show that he is entitled to moral, temperate or compensatory
damages before the court may consider the question of whether or not exemplary damages should be
awarded.[13] As we have observed above, petitioner has failed to discharge this burden.
It may not be amiss to state that petitioners contract with private respondent has the force of law
between them.[14] Petitioner is thus bound to fulfill what has been expressly stipulated therein. [15] In the
absence of any abuse of right, private respondent cannot be allowed to perform its obligation under such
contract in parts. Otherwise, private respondents right under Article 1248 will be negated, the sanctity of
its contract with petitioner defiled. The principle of autonomy of contracts[16] must be respected.
II
Under said contract, petitioner is liable to private respondent for the unpaid balance of its purchases
from private respondent plus 12% interest. Private respondents sales invoices expressly provide that:
xxx. Interest at 12% per annum will be charged on all overdue account plus 25% on said amount for
attorneys fees and collection. xxx.[17]
It may also be noted that the above stipulation, insofar as it provides for the payment of 25% on
said amount for attorneys fees and collection (sic), constitutes what is known as a penal clause.
[18]
Petitioner is thus obliged to pay such penalty in addition to the 12% annual interest, there being an
express stipulation to that effect.
Petitioner nevertheless urges this Court to reduce the attorneys fees for being grossly
excessive, considering the nature of the case which is a mere action for collection of a sum of money. It
may be pointed out however that the above penalty is supposed to answer not only for attorneys fees but
for collection fees as well. Moreover:

x x x the attorneys fees here provided is not, strictly speaking, the attorneys fees recoverable as between
attorney and client spoken of and regulated by the Rules of Court. Rather, the attorneys fees here are in the
nature of liquidated damages and the stipulation therefor is aptly called a penal clause. It has been said that
so long as such stipulation does not contravene law, morals, or public order, it is strictly binding upon
defendant. The attorneys fees so provided are awarded in favor of the litigant, not his counsel. It is the
litigant, not counsel, who is the judgment creditor entitled to enforce the judgment by execution.[19]
Nonetheless, courts are empowered to reduce such penalty if the same is iniquitous or
unconscionable. Article 1229 of the Civil Code states thus:
ART. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or
irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable. (Underscoring supplied.)
The sentiments of the law are echoed in Article 2227 of the same Code:
ART. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable.
It is true that we have upheld the reasonableness of penalties in the form of attorneys fees
consisting of twenty-five percent (25%) of the principal debt plus interest. [20] In the case at bar, however,
the interest alone runs to some four and a half million pesos (P4.5M), even exceeding the principal debt
amounting to almost four million pesos (P4.0M). Twenty five percent (25%) of the principal and interest
amounts to roughly two million pesos (P2M). In real terms, therefore, the attorneys fees and collection
fees are manifestly exorbitant.Accordingly, we reduce the same to ten percent (10%) of the principal.
Private respondent, however, argues that petitioner failed to question the award of attorneys fees on
appeal before respondent court and raised the issue only in its motion for reconsideration. Consequently,
petitioner should be deemed to have waived its right to question such award.
Private respondents attempts to dissuade us from reducing the penalty are futile. The Court is
clothed with ample authority to review matters, even if they are not assigned as errors in their appeal, if it
finds that their consideration is necessary in arriving at a just decision of the case.[21]
WHEREFORE, the decision of the Court of Appeals is hereby MODIFIED in that the attorneys
and collection fees are reduced to ten percent (10%) of the principal but is AFFIRMED in all other
respects.
SO ORDERED.

[G.R. No. 120639. September 25, 1998]


BPI EXPRESS CARD CORPORATION, petitioner, vs. COURT OF APPEALS and RICARDO J.
MARASIGAN,respondents.
DECISION
KAPUNAN, J.:
The question before this Court is whether private respondent can recover moral damages arising
from the cancellation of his credit card by petitioner credit card corporation.
The facts of the case are as stated in the decision of the respondent court,[1] to wit:
The case arose from the dishonor of the credit card of the plaintiff Atty. Ricardo J. Marasigan
by Cafe Adriatico, a business establishment accredited with the defendant-appellant BPI
Express Card Corporation (BECC for brevity) on December 8, 1989 when the plaintiff
entertained some guests thereat.
The records of this case show that plaintiff, who is a lawyer by profession was a
complimentary member of BECC from February 1988 to February 1989 and was issued
Credit Card No. 100-012-5534 with a credit limit of P3,000.00 and with a monthly billing
every 27th of the month (Exh. N), subject to the terms and conditions stipulated in the
contract (Exh. 1-b). His membership was renewed for another year or until February 1990
and the credit limit was increased to P5,000.00 (Exh. A). The plaintiff oftentimes exceeded
his credit limits (Exhs. I, I-1 to I-12) but this was never taken against him by the defendant
and even his mode of paying his monthly bills in check was tolerated. Their contractual
relations went on smoothly until his statement of account for October, 1989 amounting
to P8,987.84 was not paid in due time. The plaintiff admitted having inadvertently failed to
pay his account for the said month because he was in Quezon province attending to some
professional and personal commitments. He was informed by his secretary that defendant was
demanding immediate payment of his outstanding account, was requiring him to issue a
check for P15,000.00 which would include his future bills, and was threatening to suspend his
credit card. Plaintiff issued Far East Bank and Trust Co. Check No. 494675 in the amount
of P15,000.00, postdated December 15, 1989 which was received on November 23, 1989 by
Tess Lorenzo, an employee of the defendant (Exhs. J and J-1), who in turn gave the said
check to Jeng Angeles, a co-employee who handles the account of the plaintiff. The check
remained in the custody of Jeng Angeles. Mr. Roberto Maniquiz, head of the collection
department of defendant was formally informed of the postdated check about a week later. On
November 28, 1989, defendant served plaintiff a letter by ordinary mail informing him of the
temporary suspension of the privileges of his credit card and the inclusion of his account
number in their Caution List. He was also told to refrain from further use of his credit card to
avoid any inconvenience/embarrassment and that unless he settles his outstanding account
with the defendant within 5 days from receipt of the letter, his membership will be
permanently cancelled (Exh. 3). There is no showing that the plaintiff received this letter
before December 8, 1989. Confident that he had settled his account with the issuance of the
postdated check, plaintiff invited some guests on December 8, 1989 and entertained them at

Caf Adriatico. When he presented his credit card to Caf Adriatico for the bill amounting
to P735.32, said card was dishonored. One of his guests, Mary Ellen Ringler, paid the bill by
using her own credit card, a Unibankard (Exhs. M, M-1 and M-2).
In a letter addressed to the defendant dated December 12, 1989, plaintiff requested that he be
sent the exact billing due him as of December 15, 1989, to withhold the deposit of his
postdated check and that said check be returned to him because he had already instructed his
bank to stop the payment thereof as the defendant violated their agreement that the plaintiff
issue the check to the defendant to cover his account amounting to onlyP8,987.84 on the
condition that the defendant will not suspend the effectivity of the card (Exh. D). A letter
dated December 16, 1989 was sent by the plaintiff to the manager of FEBTC, Ramada
Branch, Manila requesting the bank to stop the payment of the check (Exhs. E, E-1). No reply
was received by plaintiff from the defendant to his letter dated December 12, 1989. Plaintiff
sent defendant another letter dated March 12, 1990 reminding the latter that he had long
rescinded and cancelled whatever arrangement he entered into with defendant and requesting
for his correct billing, less the improper charges and penalties, and for an explanation within
five (5) days from receipt thereof why his card was dishonored on December 8, 1989 despite
assurance to the contrary by defendant's personnel-in-charge, otherwise the necessary court
action shall be filed to hold defendant responsible for the humiliation and embarrassment
suffered by him (Exh. F). Plaintiff alleged further that after a few days, a certain Atty. Albano,
representing himself to be working with office of Atty. Lopez, called him inquiring as to how
the matter can be threshed out extrajudicially but the latter said that such is a serious matter
which cannot be discussed over the phone. The defendant served its final demand to the
plaintiff dated March 21, 1990 requiring him to pay in full his overdue account, including
stipulated fees and charges, within 5 days from receipt thereof or face court action also to
replace the postdated check with cash within the same period or face criminal suit for
violation of the Bouncing Check Law (Exh. G/Exh. 13). The plaintiff, in a reply letter dated
April 5, 1990 (Exh. H), demanded defendant's compliance with his request in his first letter
dated March 12, 1990 within three (3) days from receipt, otherwise the plaintiff will file a
case against them, x x x.[2]
Thus, on May 7, 1990 private respondent filed a complaint for damages against petitioner before
the Regional Trial Court of Makati, Branch 150, docketed as Civil Case No. 90-1174.
After trial, the trial court ruled for private respondent, finding that herein petitioner abused its right
in contravention of Article 19 of the Civil Code.[3] The dispositive portion of the decision reads:
Wherefore, judgment is hereby rendered ordering the defendant to pay plaintiff the following:
1. P100,000.00 as moral damages;
2. P50,000.00 as exemplary damages; and
3. P20,000.00 by way of attorney's fees.
On the other hand, plaintiff is ordered to pay defendant its outstanding obligation in the
amount of P14,439.41, amount due as of December 15, 1989.[4]

The trial court's ruling was based on its findings and conclusions, to wit:

4. That the card was suspended almost a week after receipt of the postdated check;

There is no question that plaintiff had been in default in the payment of his billings for more
than two months, prompting defendant to call him and reminded him of his
obligation. Unable to personally talk with him, this Court is convinced that somehow one or
another employee of defendant called him up more than once.

5. That despite the many instances that defendant could have informed plaintiff over the phone of the
cancellation or suspension of his credit card, it did not do so, which could have prevented the incident of
December 8, 1989, the notice allegedly sent thru ordinary mail is not only unreliable but takes a long
time.Such action as suspension of credit card must be immediately relayed to the person affected so as to
avoid embarrassing situations.

However, while it is true that, as indicated in the terms and conditions of the application for
BPI credit card, upon failure of the cardholder to pay his outstanding obligation for more than
thirty (30) days, the defendant can automatically suspend or cancel the credit card, that
reserved right should not have been abused, as it was in fact abused, in plaintiff's case. What
is more peculiar here is that there have been admitted communications between plaintiff and
defendant prior to the suspension or cancellation of plaintiff's credit card and his inclusion in
the caution list. However, nowhere in any of these communications was there ever a hint
given to plaintiff that his card had already been suspended or cancelled. In fact, the Court
observed that while defendant was trying its best to persuade plaintiff to update its account
and pay its obligation, it had already taken steps to suspend/cancel plaintiff's card and include
him in the caution list. While the Court admires defendant's diplomacy in dealing with its
clients, it cannot help but frown upon the backhanded way defendant dealt with plaintiff's
case. For despite Tess Lorenzo's denial, there is reason to believe that plaintiff was indeed
assured by defendant of the continued honoring of his credit card so long as he pays his
obligation of P15,000.00. Worst, upon receipt of the postdated check, defendant kept the
same until a few days before it became due and said check was presented to the head of the
collection department, Mr. Maniquiz, to take steps thereon, resulting to the embarrassing
situation plaintiff found himself in on December 8, 1989.Moreover, Mr. Maniquiz himself
admitted that his request for plaintiff to replace the check with cash was not because it was a
postdated check but merely to tally the payment with the account due.
Likewise, the Court is not persuaded by the sweeping denials made by Tess Lorenzo and her
claim that her only participation was to receive the subject check. Her immediate superior,
Mr. Maniquiz testified that he had instructed Lorenzo to communicate with plaintiff once or
twice to request the latter to replace the questioned check with cash, thus giving support to
the testimony of plaintiff's witness, Dolores Quizon, that it was one Tess Lorenzo who she
had talked over the phone regarding plaintiff's account and plaintiff's own statement that it
was this woman who assured him that his card has not yet been and will not be
cancelled/suspended if he would pay defendant the sum of P15,000.00.

6. And that the postdated check was deposited on December 20, 1989.
In view of the foregoing observations, it is needless to say that there was indeed an
arrangement between plaintiff and the defendant, as can be inferred from the acts of the
defendant's employees, that the subject credit card is still good and could still be used by the
plaintiff as it would be honored by the duly accredited establishment of defendant.[5]
Not satisfied with the Regional Trial Court's decision, petitioner appealed to the Court of Appeals,
which, in a decision promulgated on March 9, 1995 ruled in its dispositive portion:
WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED with
the MODIFICATION that the defendant-appellant shall pay the plaintiff-appellee the
following: P50,000.00 as moral damages; P25,000.00 as exemplary damages; and P10,000.00
by way of attorney's fees.
SO ORDERED.[6]
Hence, the present petition on the following assignment of errors:
I
THE LOWER COURT ERRED IN DECLARING THAT THERE WAS INDEED AN
AGREEMENT OR ARRANGEMENT ENTERED INTO BETWEEN THE PARTIES
WHEREIN THE DEFENDANT REQUIRED THE PLAINTIFF TO ISSUE A POSTDATED
CHECK IN ITS FAVOR IN THE AMOUNT OF P15,000.00 AS PAYMENT FOR HIS
OVERDUE ACCOUNTS, WITH THE CONDITION THAT THE PLAINTIFF'S CREDIT
CARD WILL NOT BE SUSPENDED OR CANCELLED.

Now, on the issue of whether or not upon receipt of the subject check, defendant had agreed
that the card shall remain effective, the Court takes note of the following:
1. An employee of defendant corporation unconditionally accepted the subject check upon its delivery,
despite its being a postdated one; and the amount did not tally with plaintiff's obligation;

II
THE LOWER COURT ERRED IN HOLDING DEFENDANT LIABLE FOR DAMAGES
AND ATTORNEY'S FEES ARISING OUT FROM THE DISHONOR OF THE
PLAINTIFF'S CREDIT CARD.[7]

2. Defendant did not deny nor controvert plaintiff's claim that all his payments were made in checks;
We find the petition meritorious.
3. Defendant's main witness, Mr. Maniquiz, categorically stated that the request for plaintiff to replace his
postdated check with cash was merely for the purpose of tallying plaintiff's outstanding obligation with his
payment and not to question the postdated check;

The first issue to be resolved is whether petitioner had the right to suspend the credit card of the
private respondent.

Under the terms and conditions of the credit card, signed by the private respondent, any card with
outstanding balances after thirty (30) days from original billing/statement shall automatically be
suspended, thus:

The next issue is whether prior to the suspension of private respondent's credit card on 28
November 1989, the parties entered into an agreement whereby the card could still be used and would be
duly honored by duly accredited establisments.

PAYMENT OF CHARGES - BECC shall furnish the Cardholder a monthly statement of


account made through the use of the CARD and the Cardholder agrees that all charges made
through the use of the CARD shall be paid by the Cardholder on or before the last day for
payments, which is twenty (20) days from the date of the said statement of account, and such
payment due date may be changed to an earlier date if the Cardholder's account is considered
overdue and/or with balances in excess of the approved credit limit; or to such other date as
may be deemed proper by the CARD issuer with notice to the Cardholder on the same
monthly statement of account. If the last day for payment falls on a Saturday, Sunday or
Holiday, the last day for payment automatically becomes the last working day prior to said
payment date. However, notwithstanding the absence or lack of proof of service of the
statement of charges to the Cardholder, the latter shall pay any or all charges made through
the use of the CARD within thirty (30) days from the date or dates thereof. Failure of
Cardholder to pay any and all charges made through the CARD within the payment period as
stated in the statement of charges or within thirty (30) days from actual date or dates
whichever occur earlier, shall render him in default without the necessity of demand from
BECC, which the Cardholder expressly waives. These charges or balance thereof remaining
unpaid after the payment due date indicated on the monthly statement of account shall bear
interest at the rate of 3% per month and an additional penalty fee equivalent to another 3% of
the amount due for every month or a fraction of a month's delay. PROVIDED, that if there
occurs any change on the prevailing market rates. BECC shall have the option to adjust the
rate of interest and/or penalty fee due on the outstanding obligation with prior notice to the
Cardholder.

We agree with the findings of the respondent court, that there was an arrangement between the
parties, wherein the petitioner required the private respondent to issue a check worth P15,000 as payment
for the latter's billings. However, we find that the private respondent was not able to comply with his
obligation.

xxx xxx xxx


Any CARD with outstanding balances unpaid after thirty (30) days from original
billing/statement date shall automatically be suspended, and those with accounts unpaid after
sixty (60) days from said original billing/statement date shall automatically be cancelled,
without prejudice to BECC's right to suspend or cancel any CARD any time and for
whatever reason. In case of default in his obligation as provided for in the preceding
paragraph, Cardholder shall surrender his CARD to BECC and shall in addition to the
interest and penalty charges aforementioned, pay the following liquidated damages and/or
fees (a) a collection fee of 25% of the amount due if the account is referred to a collection
agency or attorney; (b) a service fee of P100 for every dishonored check issued by the
Cardholder in payment of his account, with prejudice, however, to BECC's right of
considering Cardholder's obligation unpaid, cable cost for demanding payment or advising
cancellation of membership shall also be for Cardholder's account; and (c) a final fee
equivalent to 25% of the unpaid balance, exclusive of litigation expenses and judicial costs,
if the payment of the account is enforced through court action. [8]
The aforequoted provision of the credit card cannot be any clearer. By his own admission, private
respondent made no payment within thirty days for his original billing/statement dated 27 September
1989. Neither did he make payment for his original billing/statement dated 27 October
1989. Consequently, as early as 28 October 1989, thirty days from the non-payment of his billing dated 27
September 1989, petitioner corporation could automatically suspend his credit card.

As the testimony of private respondent himself bears out, the agreement was for the immediate
payment of the outstanding account:
Q In said statement of account that you are supposed to pay the P8,974.84 the charge of interest and
penalties, did you note that?
A Yes, sir. I noted the date.
Q When?
A When I returned from the Quezon province, sir.
Q When?
A I think November 22, sir.
Q So that before you used again the credit card you were not able to pay immediately this P8,987.84
in cash?
A I paid P15,000.00, sir.
Q My question Mr. Witness is, did you pay this P8,987.84 in charge of interest and penalties
immediately in cash?
A In cash no, but in check, sir.
Q You said that you noted the word "immediately" in bold letters in your statement of account, why
did you not pay immediately?
A Because I received that late, sir.
Q Yes, on November 22 when you received from the secretary of the defendant telling you to pay the
principal amount of P8,987.84, why did you not pay?
A There was a communication between me and the defendant, I was required to pay P8,000.00 but I
paid in check for P15,000.00, sir.

Q Do you have any evidence to show that the defendant required you to pay in check for P15,000.00?
A Yes, sir.
Q Where is it?
A It was by telecommunication, sir.
Q So there is no written communication between you and the defendant?
A There was none, sir.
Q There is no written agreement which says that P8,987.84 should be paid for P15,000.00 in check,
there is none?
A Yes, no written agreement, sir.
Q And you as a lawyer you know that a check is not considered as cash specially when it is postdated
sent to the defendant?
A That is correct, sir.
Clearly, the purpose of the arrangement between the parties on November 22, 1989, was for the
immediate payment of the private respondent's outstanding account, in order that his credit card would not
be suspended.
As agreed upon by the parties, on the following day, private respondent did issue a check
for P15,000. However, the check was postdated 15 December 1989. Settled is the doctrine that a check is
only a substitute for money and not money, the delivery of such an instrument does not, by itself operate
as payment.[9] This is especially true in the case of a postdated check.
Thus, the issuance by the private respondent of the postdated check was not effective payment. It
did not comply with his obligation under the arrangement with Miss Lorenzo. Petitioner corporation was
therefore justified in suspending his credit card.
Finally, we find no legal and factual basis for private respondent's assertion that in canceling the
credit card of the private respondent, petitioner abused its right under the terms and conditions of the
contract.
To find the existence of an abuse of right under Article 19 the following elements must be
present: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of
prejudicing or injuring another.[10]
Time and again this Court has held that good faith is presumed and the burden of proving bad faith
is on the party alleging it. [11] This private respondent failed to do. In fact, the action of the petitioner belies
the existence of bad faith. As early as 28 October 1989, petitioner could have suspended private

respondent's card outright. Instead, petitioner allowed private respondent to use his card for several
weeks. Petitioner had even notified private respondent of the impending suspension of his credit card and
made special accommodations for him for settling his outstanding account. As such, petitioner cannot be
said to have capriciously and arbitrarily canceled the private respondent's credit card.
We do not dispute the findings of the lower court that private respondent suffered damages as a
result of the cancellation of his credit card. However, there is a material distinction between damages and
injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt, or harm which results from
the injury; and damages are the recompense or compensation awarded for the damage suffered. Thus,
there can be damage without injury in those instances in which the loss or harm was not the result of a
violation of a legal duty. In such cases, the consequences must be borne by the injured person alone, the
law affords no remedy for damages resulting from an act which does not amount to a legal injury or
wrong. These situations are often called damnum absque injuria.[12]
In other words, in order that a plaintiff may maintain an action for the injuries of which he
complains, he must establish that such injuries resulted from a breach of duty which the defendant owed to
the plaintiff - a concurrence of injury to the plaintiff and legal responsibility by the person causing it. The
underlying basis for the award of tort damages is the premise that an individual was injured in
contemplation of law. Thus, there must first be a breach of some duty and the imposition of liability for
that breach before damages may be awarded;[13] and the breach of such duty should be the proximate cause
of the injury.
We therefore disagree with the ruling of the respondent court that the dishonor of the credit card of
the private respondent by Caf Adriatico is attributable to petitioner for its willful or gross neglect to
inform the private respondent of the suspension of his credit card, the unfortunate consequence of which
brought social humiliation and embarrassment to the private respondent.[14]
It was petitioner's failure to settle his obligation which caused the suspension of his credit card and
subsequent dishonor at Caf Adriatico. He can not now pass the blame to the petitioner for not notifying
him of the suspension of his card. As quoted earlier, the application contained the stipulation that the
petitioner could automatically suspend a card whose billing has not been paid for more than thirty
days. Nowhere is it stated in the terms and conditions of the application that there is a need of notice
before suspension may be effected as private respondent claims.[15]
This notwithstanding, on November 28, 1989, the day of the suspension of private respondent's
card, petitioner sent a letter by ordinary mail notifying private respondent that his card had been
temporarily suspended. Under the Rules on Evidence, there is a disputable presumption that letters duly
directed and mailed were received on the regular course of mail. [16] Aside from the private respondent's
bare denial, he failed to present evidence to rebut the presumption that he received said notice. In fact
upon cross examination, private respondent admitted that he did received the letter notifying him of the
cancellation:
Q Now you were saying that there was a first letter sent to you by the defendant?
A Your letter, sir.
Q Was that the first letter that you received?

A Yes, sir.
Q Is it that there was a communication first between you and the defendant?
A There was none, sir. I received a cancellation notice but that was after November 27.[17]
As it was private respondent's own negligence which was the proximate cause of his embarrassing
and humiliating experience, we find the award of damages by the respondent court clearly unjustified. We
take note of the fact that private respondent has not yet paid his outstanding account with petitioner.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals ordering petitioner to pay
private respondent P100,000.00 as moral damages, P50,000.00 as exemplary damages and P20,000.00 as
attorney's fees, is SET ASIDE. Private respondent is DIRECTED to pay his outstanding obligation with
the petitioner in the amount of P14,439.41.
SO ORDERED.

G.R. No. L-15526

December 28, 1963

ENRIQUE J. L. RUIZ and JOSE V. HERRERA, in their behalf and as minority stockholders of the
Allied Technologists, Inc., plaintiffs-appellants,
vs.
THE SECRETARY OF NATIONAL DEFENSE, COL. NICOLAS JIMENEZ, Head of the Engineer
Group, Office of the Secretary of National Defense, THE FINANCE OFFICER of the Department
of National Defense, THE AUDITOR of the Dept. of National Defense, PABLO D. PANLILIO and
ALLIED TECHNOLOGISTS, INC.,defendants-appellees.
Montenegro, Madayag, Viola and Hernandez for plaintiffs-appellants.
Office of the Solicitor General for defendant-appellee Secretary of National Defense.
Rosauro Alvarez for defendant-appellee Allied Technologists, Inc.
L. D. Panlilio for defendant-appellee Pablo Panlilio.
PAREDES, J.:
This is an appeal by plaintiffs Enrique J. L. Ruiz and Jose V. Herrera from an Order of the Court of First
Instance of Manila, in Civil Case No. 26601, dated February 25, 1959, dismissing plaintiffs' complaint.
On September 11, 1950, a contract was executed between the defendant Allied Technologists, Inc.
(corporation, for short), and the Republic of the Philippines, for the construction of the Veterans Memorial
Hospital. Ruiz and Herrera were stockholders and officers of the corporation. The construction of the
hospital was terminated in 1955. On August 20, 1954, and June 20, 1955, Civil Cases Nos. 23778 and
26601, respectively, were filed by same plaintiffs herein, making as parties-defendants in both cases, the
same defendants herein, the Secretary of National Defense, Col. Nicolas Jimenez (Engineer), the Finance
Officer, and the Auditor of the Dept. of National Defense, Pablo D. Panlilio and Allied Technologists, Inc.
Civil Case No. 23778 was dismissed by the CFI on October 12, 1954; and the dismissal was affirmed by
this Court on July 7, 1955, in G.R. No. L-8638. Civil Case No. 26601 was also dismissed on September
13, 1955. On appeal, this Court reversed the order of dismissal, under the impression that the real
controversy was confined merely between defendant Panlilio and plaintiffs Ruiz and Herrera over the 15%
of the contract price, which was retained by the Department of National Defense. The retention of the 15%
of the contract price in the sum of P34,740.00 was made to answer for any claim or lien that might arise,
in the course of the construction. The last case, however, was remanded to the court of origin, for further
proceedings. Panlilio and the corporation filed their amended answers, stating that the amount retained by
the Department of National Defense was already paid to defendant corporation, as sought for by the
plaintiffs in their complaint. In view of this development, the trial court invited the parties to a conference,
in which the plaintiffs indicated their conformity, to the dismissal of the complaint with respect to the
retention of the 15% of the contract price; but insisted upon the hearing of the second question, which
sought the declaration and recognition of plaintiffs Ruiz and Herrera, as two of the three architects of the
hospital. The trial court, nevertheless, dismissed the complaint, for being already academic and moot.
Hence, this appeal by plaintiffs-appellants, who alleged in their lone assignment of error that "the lower
court grievously erred in ordering the dismissal of the case, with costs against the plaintiffs".
Plaintiffs-appellants contend that the only ground relied upon by the lower court to dismiss the case
without any trial is the allegation contained in pars. 4 and (e) of the answers of the appellees Panlilio and
Allied Technologists, Inc., respectively; that the amount retained by the Department of National Defense
had already been paid; that except for this bare allegation of the appellees, no evidence was adduced to

prove the truth of the same; that even assuming, for the sake of argument, that the same is true,
nevertheless the first part of the first cause of action still remains, for which they had insisted upon a
hearing in order to establish their right to be recognized as two of the three architects of the hospital; that
because the pleadings do not show any ground which might legally justify the action taken by the lower
court, the latter should not have ordered the dismissal of the entire case but should have ordered only the
striking out of the moot portion of appellants' first cause of action, citing Pacal v. Ramos, 81 Phil. 30, 33;
27 C.J.S. 209-210; Bush v. Murray, 205 N.Y.S. 21, 26, 209 App. Div. 563; Bearden v. Longino. 190 S.E.
12, 183 Ga. 819. Appellants further argue in their brief that they base their cause of action on article 21,
New Civil Code.
The appeal has no merit. The order appealed from, states
Considering the manifestation of counsel for plaintiffs that the latter would insist on the
hearing of the above-entitled case for the purpose of establishing their right to be recognized as
the architects of the Veterans Hospital together with defendant Pablo D. Panlilio, and it
appearing that plaintiffs' Amended Complaint with Injunction prays, among others, "That this
Honorable Court order defendants Secretary of National Defense, Col. Nicolas Jimenez, and
the Finance Officer and Auditor of the Department of National Defense to pay the Allied
Technologists, Inc., the balance unpaid by virtue of the contract executed on September 11,
1950 (Annex "C" hereof) for services rendered under Title I and to be rendered under Title II of
said contract; that paragraph 4 of defendant Pablo Panlilio's Amended Answer to said
complaint alleges "That whatever amounts were retained by the Dept. of National Defense on
the contract price, which retention was authorized by the contract, was paid by the Dept. of
National Defense to the Allied Technologists Inc. as sought by the plaintiffs; that paragraph (e)
of the ANSWER TO THE AMENDED COMPLAINT of defendant Allied Technologists, Inc.,
also alleges "That whatever amounts were retained by the Department of National Defense, per
the stipulations contained in the contract, have already been paid by the Allied Technologists,
Inc. and, therefore, the present action seeking to compel the aforementioned Department of
National Defense to pay to defendant Allied Technologists, Inc. the amounts retained by the
Department of National Defense is academic, groundless, unfounded and malicious"; that the
said allegations of the separate answers of defendants Pablo Panlilio and Allied Technologists,
Inc., are not and can not be denied by plaintiffs, and that it is this Court's understanding that
defendant has no objection to the dismissal of this case it is ordered that this case be, as it is
hereby DISMISSED, with costs against plaintiffs.
A cursory reading of pars. 18 and 19 of the amended complaint with injunction and prayers (1) and (2)
thereof, reveals that appellants' first cause of action is composed of two parts, as follows:
(a) A judicial declaration or recognition that appellants Ruiz and Herrera, together with appellee Panlilio,
were the architects of the Veterans Hospital; and
(b) An injunction restraining the appellee government officials paying their co-appellee Panlilio the sum
retained by the former, as per stipulation contained in the contract for the construction of the hospital
because "they will not only be deprived of the monetary value of the services legally due them, but that
their professional prestige and standing will be seriously impaired".lawphil.net
As appellants admitted, they no longer consider the Secretary and other officials of the Department of
National Defense, as parties-defendants in the case, said officials can no longer be compelled to recognize

the appellants, Ruiz and Herrera, as co-architects with appellee Panlilio of the Veterans Hospital. And, as
the amount retained by the Department on the contract price, which retention was authorized by the
contract, was, as sought by the appellants, already paid to the Allied Technologists, Inc., there is nothing
more for the trial court to decide, even without first ruling on the special defenses of appellees Panlilio and
the corporation.
Moreover, by discarding the Secretary and other officials of the Department of National Defense, as
parties-defendants, appellants could not expect the trial court to order them to recognize and declare
appellants as co-architects in the construction of the hospital. And this must be so, because the
construction agreement expressly provides that the architect being contracted by the Government was
appellee Pablo Panlilio. The said agreement states that the same was entered into by the government, party
of the first part and "Allied Technologists, Inc. . . . and Mr. Pablo D. Panlilio, architect, hereinafter called
the party of the second part" and "The Allied Technologists, Inc. for rendering engineering services and
Mr. Pablo D. Panlilio, architect, for rendering architectural services". And the contract was signed for the
Government by "Ramon Magsaysay, Secretary of National Defense (party of the first part," and "Allied
Technologists, Inc., by Enrique J. L. Ruiz, President, Contractor, Pablo D. Panlilio, Architect".
Appellants maintain that their claim for recognition is divisible and separable from their allegations
regarding the non-payment by the government of a portion of the architectural fees; thereby concluding
that what the lower court should have done, should have been merely to order the striking out of the moot
portion of appellants' cause of action, and should have proceeded with hearing their claim for recognition.
But the allegations in pars. 18 and 19 of the amended complaint, show otherwise. There is an indivisible
and single cause of action which is primarily to prevent payment exclusively to defendant Panlilio of the
amount of P34,740.00, which said appellants contend should be paid to appellee Allied Technologists,
Inc.; the matter recognizing them together with Pablo Panlilio as architects of the hospital, being merely
incidental thereto. The case of Pacal v. Ramos, 81 Phil. 30, cited by appellants is not applicable. In this
case, the grounds for quo warranto are separable from the grounds for election irregularities which are
distinct and separate causes of action, entitling the petitioner to separate and unrelated reliefs. These two
grounds were alleged under separate paragraphs and they were two independent actions improperly joined
in one proceeding. In the case at bar, in one paragraph (par. 19 of the amended complaint), as first cause of
action, the claim for recognition is inseparably linked with their allegations regarding alleged threatened
payment of P34,740.00 to Panlilio alone, because "they will not only be deprived of the monetary value of
the services legally due them, but that their professional prestige and standing will be seriously impaired".
When the very defendant Allied Technologists, Inc. itself asserted in its answer the amended complaint,
that the amount was paid to it, an assertion which was not at all denied, plaintiffs-appellants' cause of
action under said par. 19 dissipated entirely.
There is a veiled insinuation that appellants, thesis would fall under the provisions of the Rules on
declaratory relief, because appellants wanted merely a declaration of their rights in a contract in which
they were interested. The trial court, however, was correct in refusing to make such declaration, because it
was not necessary and proper under the circumstances (sec. 6, Rule 66). Appellants were not parties to the
construction agreement. The sole object the appeal is only to secure for them a recognition, that they were
allegedly the co-architects of Panlilio, in the construction of the hospital, so as to enhance their
professional prestige and not to impair their standing. If this is the goal of appellants, a judicial declaration
to the effect would seem unnecessary. Let us ponder over the thought that a brilliant professional enjoys
the respect and esteem of his fellowmen, even without any court declaration of such fact, and that an
incompetent one may summon all the tribunals in the world, to proclaim his genius in vain.
But appellants invoke Article 21 of the Civil Code, which states

Any person who willfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damages.
contending that the word "injury" in the said article, refers not only to any indeterminate right or property,
but also to honor or credit (I Tolentino Civil Code, p. 67). It may be added, however, that this article also
envisions a situation where a person has a legal right, and such right is violated by another in a manner
contrary to morals, good customs or public policy; it presupposes losses or injuries, material or otherwise,
which one may suffer as a result of said violation. The pleadings do not show that damages were ever
asked or alleged, in connection with this case, predicated upon the article aforecited. And under the facts
and circumstances obtaining in this case, one cannot plausibly sustain the contention that the failure or
refusal to extend the recognition was an act contrary to morals, good customs or public policy.
IN VIEW HEREOF, the order appealed from is affirmed, with costs against plaintiffs-appellants.

G.R. No. L-20089

December 26, 1964

the proceedings the possibility of arriving at an amicable settlement." It added that should any of them fail
to appear "the petition for relief and the opposition thereto will be deemed submitted for resolution."

BEATRIZ P. WASSMER, plaintiff-appellee,


vs.
FRANCISCO X. VELEZ, defendant-appellant.

On August 23, 1955 defendant failed to appear before court. Instead, on the following day his counsel
filed a motion to defer for two weeks the resolution on defendants petition for relief. The counsel stated
that he would confer with defendant in Cagayan de Oro City the latter's residence on the possibility
of an amicable element. The court granted two weeks counted from August 25, 1955.

Jalandoni & Jamir for defendant-appellant.


Samson S. Alcantara for plaintiff-appellee.

Plaintiff manifested on June 15, 1956 that the two weeks given by the court had expired on September 8,
1955 but that defendant and his counsel had failed to appear.

BENGZON, J.P., J.:


The facts that culminated in this case started with dreams and hopes, followed by appropriate planning and
serious endeavors, but terminated in frustration and, what is worse, complete public humiliation.
Francisco X. Velez and Beatriz P. Wassmer, following their mutual promise of love, decided to get married
and set September 4, 1954 as the big day. On September 2, 1954 Velez left this note for his bride-to-be:
Dear Bet
Will have to postpone wedding My mother opposes it. Am leaving on the
Convair today.
Please do not ask too many people about the reason why That would only create
a scandal.
Paquing
But the next day, September 3, he sent her the following telegram:
NOTHING CHANGED REST ASSURED RETURNING VERY SOON
APOLOGIZE MAMA PAPA LOVE .
PAKING

Another chance for amicable settlement was given by the court in its order of July 6, 1956 calling the
parties and their attorneys to appear on July 13, 1956. This time. however, defendant's counsel informed
the court that chances of settling the case amicably were nil.
On July 20, 1956 the court issued an order denying defendant's aforesaid petition. Defendant has appealed
to this Court. In his petition of June 21, 1955 in the court a quo defendant alleged excusable negligence as
ground to set aside the judgment by default. Specifically, it was stated that defendant filed no answer in
the belief that an amicable settlement was being negotiated.
A petition for relief from judgment on grounds of fraud, accident, mistake or excusable negligence, must
be duly supported by an affidavit of merits stating facts constituting a valid defense. (Sec. 3, Rule 38,
Rules of Court.) Defendant's affidavit of merits attached to his petition of June 21, 1955 stated: "That he
has a good and valid defense against plaintiff's cause of action, his failure to marry the plaintiff as
scheduled having been due to fortuitous event and/or circumstances beyond his control." An affidavit of
merits like this stating mere conclusions or opinions instead of facts is not valid. (Cortes vs. Co Bun Kim,
L-3926, Oct. 10, 1951; Vaswani vs. P. Tarrachand Bros., L-15800, December 29, 1960.)
Defendant, however, would contend that the affidavit of merits was in fact unnecessary, or a mere
surplusage, because the judgment sought to be set aside was null and void, it having been based on
evidence adduced before the clerk of court. In Province of Pangasinan vs. Palisoc, L-16519, October 30,
1962, this Court pointed out that the procedure of designating the clerk of court as commissioner to
receive evidence is sanctioned by Rule 34 (now Rule 33) of the Rules of Court. Now as to defendant's
consent to said procedure, the same did not have to be obtained for he was declared in default and thus had
no standing in court (Velez vs. Ramas, 40 Phil. 787; Alano vs. Court of First Instance, L-14557, October
30, 1959).

Thereafter Velez did not appear nor was he heard from again.
Sued by Beatriz for damages, Velez filed no answer and was declared in default. Plaintiff adduced
evidence before the clerk of court as commissioner, and on April 29, 1955, judgment was rendered
ordering defendant to pay plaintiff P2,000.00 as actual damages; P25,000.00 as moral and exemplary
damages; P2,500.00 as attorney's fees; and the costs.

In support of his "motion for new trial and reconsideration," defendant asserts that the judgment is
contrary to law. The reason given is that "there is no provision of the Civil Code authorizing" an action for
breach of promise to marry. Indeed, our ruling in Hermosisima vs. Court of Appeals (L-14628, Sept. 30,
1960), as reiterated in Estopa vs. Biansay (L-14733, Sept. 30, 1960), is that "mere breach of a promise to
marry" is not an actionable wrong. We pointed out that Congress deliberately eliminated from the draft of
the new Civil Code the provisions that would have it so.

On June 21, 1955 defendant filed a "petition for relief from orders, judgment and proceedings and motion
for new trial and reconsideration." Plaintiff moved to strike it cut. But the court, on August 2, 1955,
ordered the parties and their attorneys to appear before it on August 23, 1955 "to explore at this stage of

It must not be overlooked, however, that the extent to which acts not contrary to law may be perpetrated
with impunity, is not limitless for Article 21 of said Code provides that "any person who wilfully causes

loss or injury to another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage."
The record reveals that on August 23, 1954 plaintiff and defendant applied for a license to contract
marriage, which was subsequently issued (Exhs. A, A-1). Their wedding was set for September 4, 1954.
Invitations were printed and distributed to relatives, friends and acquaintances (Tsn., 5; Exh. C). The
bride-to-be's trousseau, party drsrses and other apparel for the important occasion were purchased (Tsn., 78). Dresses for the maid of honor and the flower girl were prepared. A matrimonial bed, with accessories,
was bought. Bridal showers were given and gifts received (Tsn., 6; Exh. E). And then, with but two days
before the wedding, defendant, who was then 28 years old,: simply left a note for plaintiff stating: "Will
have to postpone wedding My mother opposes it ... " He enplaned to his home city in Mindanao, and
the next day, the day before the wedding, he wired plaintiff: "Nothing changed rest assured returning
soon." But he never returned and was never heard from again.
Surely this is not a case of mere breach of promise to marry. As stated, mere breach of promise to marry is
not an actionable wrong. But to formally set a wedding and go through all the above-described preparation
and publicity, only to walk out of it when the matrimony is about to be solemnized, is quite different. This
is palpably and unjustifiably contrary to good customs for which defendant must be held answerable in
damages in accordance with Article 21 aforesaid.
Defendant urges in his afore-stated petition that the damages awarded were excessive. No question is
raised as to the award of actual damages. What defendant would really assert hereunder is that the award
of moral and exemplary damages, in the amount of P25,000.00, should be totally eliminated.
Per express provision of Article 2219 (10) of the New Civil Code, moral damages are recoverable in the
cases mentioned in Article 21 of said Code. As to exemplary damages, defendant contends that the same
could not be adjudged against him because under Article 2232 of the New Civil Code the condition
precedent is that "the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent
manner." The argument is devoid of merit as under the above-narrated circumstances of this case
defendant clearly acted in a "wanton ... , reckless [and] oppressive manner." This Court's opinion,
however, is that considering the particular circumstances of this case, P15,000.00 as moral and exemplary
damages is deemed to be a reasonable award.
PREMISES CONSIDERED, with the above-indicated modification, the lower court's judgment is hereby
affirmed, with costs.

G.R. No. L-18630

December 17, 1966

September 30, 1960; Hermosisima vs. Court of Appeals, L-14628, January 29, 1962; and De Jesus vs.
SyQuia, 58 Phil. 886.

APOLONIO TANJANCO, petitioner,


vs.
HON. COURT OF APPEALS and ARACELI SANTOS, respondents.

We find this appeal meritorious.

P. Carreon and G. O. Veneracion, Jr. for petitioner.


Antonio V. Bonoan for respondents.

In holding that the complaint stated a cause of action for damages, under Article 21 above mentioned, the
Court of Appeals relied upon and quoted from the memorandum submitted by the Code Commission to
the Legislature in 1949 to support the original draft of the Civil Code. Referring to Article 23 of the draft
(now Article 21 of the Code), the Commission stated:

REYES, J.B.L., J.:


Appeal from a decision of the Court of Appeals (in its Case No. 27210-R) revoking an order of the Court
of First Instance of Rizal (in Civil Case No. Q-4797) dismissing appellant's action for support and
damages.
The essential allegations of the complaint are to the effect that, from December, 1957, the defendant
(appellee herein), Apolonio Tanjanco, courted the plaintiff, Araceli Santos, both being of adult age; that
"defendant expressed and professed his undying love and affection for plaintiff who also in due time
reciprocated the tender feelings"; that in consideration of defendant's promise of marriage plaintiff
consented and acceded to defendant's pleas for carnal knowledge; that regularly until December 1959,
through his protestations of love and promises of marriage, defendant succeeded in having carnal access to
plaintiff, as a result of which the latter conceived a child; that due to her pregnant condition, to avoid
embarrassment and social humiliation, plaintiff had to resign her job as secretary in IBM Philippines, Inc.,
where she was receiving P230.00 a month; that thereby plaintiff became unable to support herself and her
baby; that due to defendant's refusal to marry plaintiff, as promised, the latter suffered mental anguish,
besmirched reputation, wounded feelings, moral shock, and social humiliation. The prayer was for a
decree compelling the defendant to recognize the unborn child that plaintiff was bearing; to pay her not
less than P430.00 a month for her support and that of her baby, plus P100,000.00 in moral and exemplary
damages, plus P10,000.00 attorney's fees.
Upon defendant's motion to dismiss, the court of first instance dismissed the complaint for failure to state
a cause of action.
Plaintiff Santos duly appealed to the Court of Appeals, and the latter ultimately decided the case, holding
with the lower court that no cause of action was shown to compel recognition of a child as yet unborn, nor
for its support, but decreed that the complaint did state a cause of action for damages, premised on Article
21 of the Civil Code of the Philippines, prescribing as follows:
ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the latter for the damage.
The Court of Appeals, therefore, entered judgment setting aside the dismissal and directing the court of
origin to proceed with the case.
Defendant, in turn, appealed to this Court, pleading that actions for breach of a promise to marry are not
permissible in this jurisdiction, and invoking the rulings of this Court in Estopa vs. Piansay, L-14733,

But the Code Commission has gone farther than the sphere of wrongs defined or determined by
positive law. Fully sensible that there are countless gaps in the statutes, which leave so many
victims of moral wrongs helpless, even though they have actually suffered material and moral
injury, the Commission has deemed it necessary, in the interest of justice, to incorporate in the
proposed Civil Code the following rule:
"ART. 23. Any person who wilfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter for
the damage."
An example will illustrate the purview of the foregoing norm: "A" seduces the nineteen-year
old daughter of "X". A promise of marriage either has not been made, or can not be proved.
The girl becomes pregnant. Under the present laws, there is no crime, as the girl is above
eighteen years of age. Neither can any civil action for breach of promise of marriage be filed.
Therefore, though the grievous moral wrong has been committed, and though the girl and her
family have suffered incalculable moral damage, she and her parents cannot bring any action
for damages. But under the proposed article, she and her parents would have such a right of
action.
The Court of Appeals seems to have overlooked that the example set forth in the Code Commission's
memorandum refers to a tort upon a minor who has been seduced. The essential feature is seduction, that
in law is more than mere sexual intercourse, or a breach of a promise of marriage; it connotes essentially
the idea of deceit, enticement, superior power or abuse of confidence on the part of the seducer to which
the woman has yielded (U.S. vs. Buenaventura, 27 Phil. 121; U.S. vs. Arlante, 9 Phil. 595).
It has been ruled in the Buenaventura case (supra) that
To constitute seduction there must in all cases be some sufficient promise or inducement and
the woman must yield because of the promise or other inducement. If she consents merely from
carnal lust and the intercourse is from mutual desire, there is no seduction (43 Cent. Dig. tit.
Seduction, par. 56). She must be induced to depart from the path of virtue by the use of some
species of arts, persuasions and wiles, which are calculated to have and do have that effect, and
which result in her ultimately submitting her person to the sexual embraces of her seducer (27
Phil. 123).
And in American Jurisprudence we find:

On the other hand, in an action by the woman, the enticement, persuasion or deception is the
essence of the injury; and a mere proof of intercourse is insufficient to warrant a recover.
Accordingly it is not seduction where the willingness arises out of sexual desire or curiosity of
the female, and the defendant merely affords her the needed opportunity for the commission of
the act. It has been emphasized that to allow a recovery in all such cases would tend to the
demoralization of the female sex, and would be a reward for unchastity by which a class of
adventuresses would be swift to profit." (47 Am. Jur. 662)
Bearing these principles in mind, let us examine the complaint. The material allegations there are as
follows:
I. That the plaintiff is of legal age, single, and residing at 56 South E. Diliman, Quezon City,
while defendant is also of legal age, single and residing at 525 Padre Faura, Manila, where he
may be served with summons;
II. That the plaintiff and the defendant became acquainted with each other sometime in
December, 1957 and soon thereafter, the defendant started visiting and courting the plaintiff;
III. That the defendant's visits were regular and frequent and in due time the defendant
expressed and professed his undying love and affection for the plaintiff who also in due time
reciprocated the tender feelings;
IV. That in the course of their engagement, the plaintiff and the defendant as are wont of young
people in love had frequent outings and dates, became very close and intimate to each other
and sometime in July, 1958, in consideration of the defendant's promises of marriage, the
plaintiff consented and acceded to the former's earnest and repeated pleas to have carnal
knowledge with him;
V. That subsequent thereto and regularly until about July, 1959 except for a short period in
December, 1958 when the defendant was out of the country, the defendant through his
protestations of love and promises of marriage succeeded in having carnal knowledge with the
plaintiff;
VI. That as a result of their intimate relationship, the plaintiff started conceiving which was
confirmed by a doctor sometime in July, 1959;
VII. That upon being certain of her pregnant condition, the plaintiff informed the defendant and
pleaded with him to make good his promises of marriage, but instead of honoring his promises
and righting his wrong, the defendant stopped and refrained from seeing the plaintiff since
about July, 1959 has not visited the plaintiff and to all intents and purposes has broken their
engagement and his promises.
Over and above the partisan allegations, the facts stand out that for one whole year, from 1958 to 1959, the
plaintiff-appellee, a woman of adult age, maintained intimate sexual relations with appellant, with
repeated acts of intercourse. Such conduct is incompatible with the idea of seduction. Plainly there is here
voluntariness and mutual passion; for had the appellant been deceived, had she surrendered exclusively
because of the deceit, artful persuasions and wiles of the defendant, she would not have again yielded to

his embraces, much less for one year, without exacting early fulfillment of the alleged promises of
marriage, and would have cut chart all sexual relations upon finding that defendant did not intend to fulfill
his promises. Hence, we conclude that no case is made under Article 21 of the Civil Code, and no other
cause of action being alleged, no error was committed by the Court of First Instance in dismissing the
complaint.
Of course, the dismissal must be understood as without prejudice to whatever actions may correspond to
the child of the plaintiff against the defendant-appellant, if any. On that point, this Court makes no
pronouncement, since the child's own rights are not here involved.
FOR THE FOREGOING REASONS, the decision of the Court of Appeals is reversed, and that of the
Court of First Instance is affirmed. No costs.

G.R. No. 101749 July 10, 1992


CONRADO BUNAG, JR., petitioner,
vs.
HON. COURT OF APPEALS, First Division, and ZENAIDA B. CIRILO, respondents.

REGALADO, J.:
Petitioner appeals for the reversal of the decision 1 of respondent Court of Appeals promulgated on May
17, 1991 in CA-G.R. CV No. 07054, entitled "Zenaida B. Cirilo vs. Conrado Bunag, Sr. and Conrado
Bunag, Jr.," which affirmed in toto the decision of the Regional Trial Court, Branch XI at Bacoor, Cavite,
and, implicitly, respondent court's resolution of September 3, 1991 2 denying petitioner's motion for
reconsideration.
Respondent court having assiduously discussed the salient antecedents of this case, vis-a-vis the factual
findings of the court below, the evidence of record and the contentions of the parties, it is appropriate that
its findings, which we approve and adopt, be extensively reproduced hereunder:
Based on the evidence on record, the following facts are considered indisputable:
On the afternoon of September 8, 1973, defendant-appellant Bunag, Jr. brought
plaintiff-appellant to a motel or hotel where they had sexual intercourse. Later that
evening, said defendant-appellant brought plaintiff-appellant to the house of his
grandmother Juana de Leon in Pamplona, Las Pias, Metro Manila, where they
lived together as husband and wife for 21 days, or until September 29, 1973. On
September 10, 1973, defendant-appellant Bunag, Jr. and plaintiff-appellant filed
their respective applications for a marriage license with the Office of the Local
Civil Registrar of Bacoor, Cavite. On October 1, 1973, after leaving plaintiffappellant, defendant-appellant Bunag, Jr. filed an affidavit withdrawing his
application for a marriage license.
Plaintiff-appellant contends that on the afternoon of September 8, 1973, defendantappellant Bunag, Jr., together with an unidentified male companion, abducted her in
the vicinity of the San Juan de Dios Hospital in Pasay City and brought her to a
motel where she was raped. The court a quo, which adopted her evidence,
summarized the same which we paraphrased as follows:
Plaintiff was 26 years old on November 5, 1974 when she
testified, single and had finished a college course in
Commerce (t.s.n., p. 4, Nov. 5, 1974). It appears that on
September 8, 1973, at about 4:00 o'clock in the afternoon,
while she was walking along Figueras Street, Pasay City on
her way to the San Juan de Dios Canteen to take her snack,
defendant, Conrado Bunag, Jr., came riding in a car driven by
a male companion. Plaintiff and defendant Bunag, Jr. were
sweethearts, but two weeks before September 8, 1973, they

had a quarrel, and Bunag, Jr. wanted to talk matters over with
plaintiff, so that he invited her to take their merienda at the
Aristocrat Restaurant in Manila instead of at the San Juan de
Dios Canteen, to which plaintiff obliged, as she believed in
his sincerity (t.s.n., pp. 8-10, Nov. 5, 1974).
Plaintiff rode in the car and took the front seat beside the
driver while Bunag, Jr. seated himself by her right side. The
car travelled north on its way to the Aristocrat Restaurant but
upon reaching San Juan Street in Pasay City, it turned
abruptly to the right, to which plaintiff protested, but which
the duo ignored and instead threatened her not to make any
noise as they were ready to die and would bump the car
against the post if she persisted. Frightened and silenced, the
car travelled its course thru F.B. Harrison Boulevard until
they reached a motel. Plaintiff was then pulled and dragged
from the car against her will, and amidst her cries and pleas.
In spite of her struggle she was no match to the joint strength
of the two male combatants because of her natural weakness
being a woman and her small stature. Eventually, she was
brought inside the hotel where the defendant Bunag, Jr.
deflowered her against her will and consent. She could not
fight back and repel the attack because after Bunag, Jr. had
forced her to lie down and embraced her, his companion held
her two feet, removed her panty, after which he left. Bunag,
Jr. threatened her that he would ask his companion to come
back and hold her feet if she did not surrender her
womanhood to him, thus he succeeded in feasting on her
virginity. Plaintiff described the pains she felt and how blood
came out of her private parts after her vagina was penetrated
by the penis of the defendant Bunag, Jr. (t.s.n. pp. 17-24,
Nov. 5, 1974).
After that outrage on her virginity, plaintiff asked Bunag, Jr.
once more to allow her to go home but the latter would not
consent and stated that he would only let her go after they
were married as he intended to marry her, so much so that
she promised not to make any scandal and to marry him.
Thereafter, they took a taxi together after the car that they
used had already gone, and proceeded to the house of Juana
de Leon, Bunag, Jr.'s grandmother in Pamplona, Las Pias,
Metro Manila where they arrived at 9:30 o'clock in the
evening (t.s.n., p. 26, Nov. 5, 1974). At about ten (10) o'clock
that same evening, defendant Conrado Bunag, Sr., father of
Bunag, Jr. arrived and assured plaintiff that the following day
which was a Monday, she and Bunag, Jr. would go to Bacoor,
to apply for a marriage license, which they did. They filed
their applications for marriage license (Exhibits "A" and "C")
and after that plaintiff and defendant Bunag, Jr. returned to

the house of Juana de Leon and lived there as husband and


wife from September 8, 1973 to September 29, 1973.
On September 29, 1973 defendant Bunag, Jr. left and never
returned, humiliating plaintiff and compelled her to go back
to her parents on October 3, 1973. Plaintiff was ashamed
when she went home and could not sleep and eat because of
the deception done against her by defendants-appellants
(t.s.n., p. 35, Nov. 5, 1974).
The testimony of plaintiff was corroborated in toto by her
uncle, Vivencio Bansagan who declared that on September 8,
1973 when plaintiff failed to arrive home at 9:00 o'clock in
the evening, his sister who is the mother of plaintiff asked
him to look for her but his efforts proved futile, and he told
his sister that plaintiff might have married (baka nag-asawa,
t.s.n., pp. 5-6, March 18, 1976). However, in the afternoon of
the next day (Sunday), his sister told him that Francisco
Cabrera, accompanied by barrio captain Jacinto Manalili of
Ligas, Bacoor, Cavite, informed her that plaintiff and Bunag,
Jr. were in Cabrera's house, so that her sister requested him to
go and see the plaintiff, which he did, and at the house of
Mrs. Juana de Leon in Pamplona, Las Pias, Metro Manila he
met defendant Conrado Bunag, Sr., who told him, "Pare, the
children are here already. Let us settle the matter and have
them married."
He conferred with plaintiff who told him that as she had already lost her honor, she
would bear her sufferings as Boy Bunag, Jr. and his father promised they would be
married.
Defendants-appellants, on the other hand, deny that defendant-appellant Conrado
Bunag, Jr. abducted and raped plaintiff-appellant on September 8, 1973. On the
contrary, plaintiff-appellant and defendant-appellant Bunag, Jr. eloped on that date
because of the opposition of the latter's father to their relationship.
Defendant-appellants claim that defendant-appellant Bunag, Jr. and plaintiffappellant had earlier made plans to elope and get married, and this fact was known
to their friends, among them, Architect Chito Rodriguez. The couple made good
their plans to elope on the afternoon of September 8, 1973, when defendantappellant Bunag, Jr., accompanied by his friend Guillermo Ramos, Jr., met plaintiffappellant and her officemate named Lydia in the vicinity of the San Juan de Dios
Hospital. The foursome then proceeded to (the) aforesaid hospital's canteen where
they had some snacks. Later, Guillermo Ramos, Jr. took Lydia to Quirino Avenue
where she could get a ride home, thereby leaving the defendant-appellant Bunag, Jr.
and plaintiff-appellant alone. According to defendant-appellant Bunag, Jr., after
Guillermo Ramos, Jr. and Lydia left, he and plaintiff-appellant took a taxi to the
Golden Gate and Flamingo Hotels where they tried to get a room, but these were
full. They finally got a room at the Holiday Hotel, where defendant-appellant

registered using his real name and residence certificate number. Three hours later,
the couple check out of the hotel and proceeded to the house of Juana de Leon at
Pamplona, Las Pias, where they stayed until September 19, 1873. Defendantappellant claims that bitter disagreements with the plaintiff-appellant over money
and the threats made to his life prompted him to break off their plan to get married.
During this period, defendant-appellant Bunag, Sr. denied having gone to the house
of Juan de Leon and telling plaintiff-appellant that she would be wed to defendantappellant Bunag, Jr. In fact, he phoned Atty. Conrado Adreneda, member of the
board of directors of Mandala Corporation, defendant-appellant Bunag, Jr.'s
employer, three times between the evening of September 8, 1973 and September 9,
1973 inquiring as to the whereabouts of his son. He came to know about his son's
whereabouts when he was told of the couple's elopement late in the afternoon of
September 9, 1973 by his mother Candida Gawaran. He likewise denied having met
relatives and emissaries of plaintiff-appellant and agreeing to her marriage to his
son. 3
A complaint for damages for alleged breach of promise to marry was filed by herein private respondent
Zenaida B. Cirilo against petitioner Conrado Bunag, Jr. and his father, Conrado Bunag, Sr., as Civil Case
No. N-2028 of the Regional Trial Court, Branch XIX at Bacoor, Cavite. On August 20, 1983, on a
finding, inter alia, that petitioner had forcibly abducted and raped private respondent, the trial court
rendered a decision 4 ordering petitioner Bunag, Jr. to pay private respondent P80,000.00 as moral
damages, P20,000.00 as exemplary damages, P20,000.00 by way of temperate damages, and P10,000.00
for and as attorney's fees, as well as the costs of suit. Defendant Conrado Bunag, Sr. was absolved from
any and all liability.
Private respondent appealed that portion of the lower court's decision disculpating Conrado Bunag, Sr.
from civil liability in this case. On the other hand, the Bunags, as defendants-appellants, assigned in their
appeal several errors allegedly committed by trial court, which were summarized by respondent court as
follows: (1) in finding that defendant-appellant Conrado Bunag, Jr. forcibly abducted and raped plaintiffappellant; (2) in finding that defendants-appellants promised plaintiff-appellant that she would be wed to
defendant-appellant Conrado Bunag, Jr.; and (3) in awarding plaintiff-appellant damages for the breach of
defendants-appellants' promise of marriage. 5
As stated at the outset, on May 17, 1991 respondent Court of Appeals rendered judgment dismissing both
appeals and affirming in toto the decision of the trial court. His motion for reconsideration having been
denied, petitioner Bunag, Jr. is before us on a petition for review, contending that (1) respondent court
failed to consider vital exhibits, testimonies and incidents for petitioner's defense, resulting in the
misapprehensions of facts and violative of the law on preparation of judgment; and (2) it erred in the
application of the proper law and jurisprudence by holding that there was forcible abduction with rape, not
just a simple elopement and an agreement to marry, and in the award of excessive damages. 6
Petitioner Bunag, Jr. first contends that both the trial and appellate courts failed to take into consideration
the alleged fact that he and private respondent had agreed to marry, and that there was no case of forcible
abduction with rape, but one of simple elopement and agreement to marry. It is averred that the agreement
to marry has been sufficiently proven by the testimonies of the witnesses for both parties and the exhibits
presented in court.

This submission, therefore, clearly hinges on the credibility of the witnesses and evidence presented by
the parties and the weight accorded thereto in the factual findings of the trial court and the Court of
Appeals. In effect, what petitioner would want this Court to do is to evaluate and analyze anew the
evidence, both testimonial and documentary, presented before and calibrated by the trial court, and as
further meticulously reviewed and discussed by respondent court.
The issue raised primarily and ineluctably involves questions of fact. We are, therefore, once again
constrained to stress the well-entrenched statutory and jurisprudential mandate that findings of fact of the
Court of Appeals are, as a rule, conclusive upon this Court. Only questions of law, distinctly set forth, may
be raised in a petition for review on certiorari under Rule 45 of the Rules of Court, subject to clearly
settled exceptions in case law.
Our jurisdiction in cases brought to us from the Court of Appeals is limited to reviewing and revising the
errors of law imputed to the latter, its findings of fact being conclusive. This Court has emphatically
declared that it is not its function to analyze or weigh such evidence all over again, its jurisdiction being
limited to reviewing errors of law that might have been committed by the lower court. Barring, therefore,
a showing that the findings complained of are totally devoid of support in the record, or that they are so
glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is
not expected or required to examine or contrast the oral and documentary evidence submitted by the
parties. 7 Neither does the instant case reveal any feature falling within, any of the exceptions which under
our decisional rules may warrant a review of the factual findings of the Court of Appeals. On the
foregoing considerations and our review of the records, we sustain the holding of respondent court in
favor of private respondent.
Petitioner likewise asserts that since action involves a breach of promise to marry, the trial court erred in
awarding damages.
It is true that in this jurisdiction, we adhere to the time-honored rule that an action for breach of promise to
marry has no standing in the civil law, apart from the right to recover money or property advanced by the
plaintiff upon the faith of such promise. 8 Generally, therefore, a breach of promise to marry per se is not
actionable, except where the plaintiff has actually incurred expenses for the wedding and the necessary
incidents thereof.
However, the award of moral damages is allowed in cases specified in or analogous to those provided in
Article 2219 of the Civil Code. Correlatively, under Article 21 of said Code, in relation to paragraph 10 of
said Article 2219, any person who wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for moral damages. 9 Article 21 was
adopted to remedy the countless gaps in the statutes which leave so many victims of moral wrongs
helpless even though they have actually suffered material and moral injury, and is intended to vouchsafe
adequate legal remedy for that untold number of moral wrongs which is impossible for human foresight to
specifically provide for in the statutes. 10
Under the circumstances obtaining in the case at bar, the acts of petitioner in forcibly abducting private
respondent and having carnal knowledge with her against her will, and thereafter promising to marry her
in order to escape criminal liability, only to thereafter renege on such promise after cohabiting with her for
twenty-one days, irremissibly constitute acts contrary to morals and good customs. These are grossly
insensate and reprehensible transgressions which indisputably warrant and abundantly justify the award of
moral and exemplary damages, pursuant to Article 21 in relation to paragraphs 3 and 10, Article 2219, and
Article 2229 and 2234 of Civil Code.

Petitioner would, however, belabor the fact that said damages were awarded by the trial court on the basis
of a finding that he is guilty of forcible abduction with rape, despite the prior dismissal of the complaint
therefor filed by private respondent with the Pasay City Fiscal's Office.
Generally, the basis of civil liability from crime is the fundamental postulate of our law that every person
criminally liable for a felony is also civilly liable. In other words, criminal liability will give rise to civil
liability ex delicto only if the same felonious act or omission results in damage or injury to another and is
the direct and proximate cause thereof. 11 Hence, extinction of the penal action does not carry with it the
extinction of civil liability unless the extinction proceeds from a declaration in a final judgment that the
fact from which the civil might arise did not exist. 12
In the instant case, the dismissal of the complaint for forcible abduction with rape was by mere resolution
of the fiscal at the preliminary investigation stage. There is no declaration in a final judgment that the fact
from which the civil case might arise did not exist. Consequently, the dismissal did not in any way affect
the right of herein private respondent to institute a civil action arising from the offense because such
preliminary dismissal of the penal action did not carry with it the extinction of the civil action.
The reason most often given for this holding is that the two proceedings involved are not between the
same parties. Furthermore, it has long been emphasized, with continuing validity up to now, that there are
different rules as to the competency of witnesses and the quantum of evidence in criminal and civil
proceedings. In a criminal action, the State must prove its case by evidence which shows the guilt of the
accused beyond reasonable doubt, while in a civil action it is sufficient for the plaintiff to sustain his cause
by preponderance of evidence only. 13 Thus, in Rillon, et al. vs. Rillon, 14 we stressed that it is not now
necessary that a criminal prosecution for rape be first instituted and prosecuted to final judgment before a
civil action based on said offense in favor of the offended woman can likewise be instituted and
prosecuted to final judgment.
WHEREFORE, the petition is hereby DENIED for lack of merit, and the assailed judgment and resolution
are hereby AFFIRMED.
SO ORDERED.

G.R. No. 57227 May 14, 1992


AMELITA CONSTANTINO and MICHAEL CONSTANTINO, the latter represented herein by the
former, his mother and natural guardian, petitioners,
vs.
IVAN MENDEZ and the HONORABLE COURT OF APPEALS, respondents.
Roberto M. Sarenas for petitioners.

On September 1, 1975, Amelita Constantino filed a motion for leave to amend the complaint impleading
as co-plaintiff her son Michael Constantino who was born on August 3, 1975. In its order dated September
4, 1975, the trial court admitted the amended complaint.
On September 11, 1975, Ivan Mendez filed his answer to the amended complaint reiterating his previous
answer denying that Michael Constantino is his illegitimate son.
After hearing, the trial court rendered a decision dated June 21, 1976, the dispositive portion of which
reads, viz:

Bienvinido D. Cariaga for private respondent.

BIDIN, J.:
This is a petition for review on certiorari questioning the decision 1 dated April 30, 1981 of the Court of
Appeals in CA-G.R. No. 61552-R which dismissed petitioner's complaint and set aside the
resolution 2 dated October 21, 1976 of the then Court of First Instance of Davao, 16th Judicial District,
amending the dispositive portion of its decision dated June 21, 1976 and ordering private respondent Ivan
Mendez: (1) to acknowledge the minor Michael Constantino as his illegitimate child; (2) to give a monthly
support of P300.00 to the minor child; (3) to pay complainant Amelita Constantino the sum of P8,200.00
as actual and moral damages; and (4) to pay attorney's fees in the sum of P5,000 plus costs.
It appears on record that on June 5, 1975, petitioner Amelita Constantino filed an action for
acknowledgment, support and damages against private respondent Ivan Mendez. The case was filed with
the then CFI of Davao, 10th Judicial District and docketed as Civil Case No. 8881. In her complaint,
Amelita Constantino alleges, among others, that sometime in the month of August, 1974, she met Ivan
Mendez at Tony's Restaurant located at Sta. Cruz, Manila, where she worked as a waitress; that the day
following their first meeting, Ivan invited Amelita to dine with him at Hotel Enrico where he was billeted;
that while dining, Ivan professed his love and courted Amelita; that Amelita asked for time to think about
Ivan's proposal; that at about 11:00 o'clock in the evening, Amelita asked Ivan to bring her home to which
the latter agreed, that on the pretext of getting something, Ivan brought Amelita inside his hotel room and
through a promise of marriage succeeded in having sexual intercourse with the latter; that after the sexual
contact, Ivan confessed to Amelita that he is a married man; that they repeated their sexual contact in the
months of September and November, 1974, whenever Ivan is in Manila, as a result of which Amelita got
pregnant; that her pleas for help and support fell on deaf ears; that Amelita had no sexual relations with
any other man except Ivan who is the father of the child yet to be born at the time of the filing of the
complaint; that because of her pregnancy, Amelita was forced to leave her work as a waitress; that Ivan is
a prosperous businessman of Davao City with a monthly income of P5,000 to P8,000. As relief, Amelita
prayed for the recognition of the unborn child, the payment of actual, moral and exemplary damages,
attorney's fees plus costs.
In his answer dated August 5, 1975, Ivan admitted that he met Amelita at Tony's Cocktail Lounge but
denied having sexual knowledge or illicit relations with her. He prayed for the dismissal of the complaint
for lack of cause of action. By way of counterclaim, he further prayed for the payment of exemplary
damages and litigation expense including attorney's fees for the filing of the malicious complaint.

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of


plaintiff Amelita Constantino and against defendant Ivan Mendez, ordering the
latter to pay Amelita Constantino the sum of P8,000.00 by way of actual and moral
damages; and, the sum of P3,000.00, as and by way of attorney's fees. The
defendant shall pay the costs of this suit.
SO ORDERED.
From the above decision, both parties filed their separate motion for reconsideration. Ivan Mendez
anchored his motion on the ground that the award of damages was not supported by evidence. Amelita
Constantino, on the other hand, sought the recognition and support of her son Michael Constantino as the
illegitimate son of Ivan Mendez.
In its resolution dated October 21, 1976, the trial court granted Amelita Constantino's motion for
reconsideration, and amended the dispositive portion of its decision dated June 21, 1976 to read as
follows, viz:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of
plaintiff Amelita Constantino and plaintiff-minor Michael Constantino, and against
defendant Ivan Mendez ordering the latter to pay Amelita Constantino the sum of
P8,000.00 by way of actual and moral damages and the sum of P200.00 as and by
way of payment of the hospital and medical bills incurred during the delivery of
plaintiff-minor Michael Constantino; to recognize as his own illegitimate child the
plaintiff-minor Michael Constantino who shall be entitled to all the rights,
privileges and benefits appertaining to a child of such status; to give a permanent
monthly support in favor of plaintiff Michael Constantino the amount of P300.00;
and the sum of P5,000.00 as and by way of attorney's fees. The defendant shall pay
the costs of this suit.
Let this Order form part of the decision dated June 21, 1976.
SO ORDERED.
On appeal to the Court of Appeals, the above amended decision was set aside and the complaint was
dismissed. Hence, this petition for review.

Basically, the issue to be resolved in the case at bar is whether or not the Court of Appeals committed a
reversible error in setting aside the decision of the trial court and in dismissing the complaint.
Petitioners contend that the Court of Appeals erred in reversing the factual findings of the trial and in not
affirming the decision of the trial court. They also pointed out that the appellate court committed a
misapprehension of facts when it concluded that Ivan did not have sexual access with Amelita during the
first or second week of November, 1976 (should be 1974), the time of the conception of the child.
It must be stressed at the outset that factual findings of the trial court have only a persuasive and not a
conclusive effect on the Court of Appeals. In the exercise of its appellate jurisdiction, it is the duty of the
Court of Appeals to review the factual findings of the trial court and rectify the errors it committed as may
have been properly assigned and as could be established by a re-examination of the evidence on record. It
is the factual findings of the Court of Appeals, not those of the trial court, that as a rule are considered
final and conclusive even on this Court (Hermo v. Hon. Court of Appeals, et al., 155 SCRA 24 [1987]).
This being a petition for certiorari under Rule 45 of the Rules of Court, this Court will review only errors
of law committed by the Court of Appeals. It is not the function of this Court to re-examine all over again
the oral and documentary evidence submitted by the parties unless the findings of facts of the Court of
Appeals is not supported by the evidence on record or the judgment is based on misapprehension of facts
(Remalante v. Tibe, et al., 158 SCRA 138 [1988]; Hernandez v. Court of Appeals, et al., 149 SCRA 97
[1987]).
It is the conclusion of the Court of Appeals, based on the evidence on record, that Amelita Constantino has
not proved by clear and convincing evidence her claim that Ivan Mendez is the father of her son Michael
Constantino. Such conclusion based on the evaluation of the evidence on record is controlling on this
Court as the same is supported by the evidence on record. Even the trial court initially entertained such
posture. It ordered the recognition of Michael as the illegitimate son of Ivan only when acting on the
motions for reconsideration, it reconsidered, on October 21, 1976, its earlier decision dated June 21, 1976.
Amelita's testimony on cross-examination that she had sexual contact with Ivan in Manila in the first or
second week of November, 1974 (TSN, December 8, 1975, p. 108) is inconsistent with her response that
she could not remember the date of their last sexual intercourse in November, 1974 (Ibid, p. 106). Sexual
contact of Ivan and Amelita in the first or second week of November, 1974 is the crucial point that was not
even established on direct examination as she merely testified that she had sexual intercourse with Ivan in
the months of September, October and November, 1974.
Michael Constantino is a full-term baby born on August 3, 1975 (Exhibit 6) so that as correctly pointed
out by private respondent's counsel, citing medical science (Williams Obstetrics, Tenth Ed., p. 198) to the
effect that "the mean duration of actual pregnancy, counting from the day of conception must be close to
267 days", the conception of the child (Michael) must have taken place about 267 days before August 3,
1975 or sometime in the second week of November, 1974. While Amelita testified that she had sexual
contact with Ivan in November, 1974, nevertheless said testimony is contradicted by her own evidence
(Exh. F), the letter dated February 11, 1975, addressed to Ivan Mendez requesting for a conference,
prepared by her own counsel Atty. Roberto Sarenas to whom she must have confided the attendant
circumstances of her pregnancy while still fresh in her memory, informing Ivan that Amelita is four (4)
months pregnant so that applying the period of the duration of actual pregnancy, the child was conceived
on or about October 11, 1974.
Petitioner's assertion that Ivan is her first and only boyfriend (TSN, December 8, 1975, p. 65) is belied by
Exhibit 2, her own letter addressed to Mrs. Mendez where she revealed the reason for her attachment to
Ivan who possessed certain traits not possessed by her boyfriend. She also confided that she had a quarrel

with her boyfriend because of gossips so she left her work. An order for recognition and support may
create an unwholesome atmosphere or may be an irritant in the family or lives of the parties so that it must
be issued only if paternity or filiation is established by clear and convincing evidence. The burden of proof
is on Amelita to establish her affirmative allegations that Ivan is the father of her son. Consequently, in the
absence of clear and convincing evidence establishing paternity or filiation, the complaint must be
dismissed.
As regards Amelita's claim for damages which is based on Articles 19 3 & 21 4 of the Civil Code on the
theory that through Ivan's promise of marriage, she surrendered her virginity, we cannot but agree with the
Court of Appeals that more sexual intercourse is not by itself a basis for recovery. Damages could only be
awarded if sexual intercourse is not a product of voluntariness and mutual desire. At the time she met Ivan
at Tony's Restaurant, Amelita was already 28 years old and she admitted that she was attracted to Ivan
(TSN, December 3, 1975, p. 83). Her attraction to Ivan is the reason why she surrendered her womanhood.
Had she been induced or deceived because of a promise of marriage, she could have immediately severed
her relation with Ivan when she was informed after their first sexual contact sometime in August, 1974,
that he was a married man. Her declaration that in the months of September, October and November,
1974, they repeated their sexual intercourse only indicates that passion and not the alleged promise of
marriage was the moving force that made her submit herself to Ivan.
WHEREFORE, the instant petition is Dismissed for lack of merit.
SO ORDERED.

G.R. No. 26795 July 31, 1970


CARMEN QUIMIGUING, Suing through her parents, ANTONIO QUIMIGUING and JACOBA
CABILIN,plaintiffs-appellants,
vs.
FELIX ICAO, defendant-appellee.

ART. 742. Donations made to conceived and unborn children may be accepted by
those persons who would legally represent them if they were already born.
ART. 854. The preterition or omission of one, some, or all of the compulsory heirs
in the direct line, whether living at the time of the execution of the will or born after
the death of the testator, shall annul the institution of heir; but the devises and
legacies shall be valid insofar as they are not inofficious.

Torcuato L. Galon for plaintiffs-appellants.


Godardo Jacinto for defendant-appellee.

REYES, J.B.L., J.:


Appeal on points of law from an order of the Court of First Instance of Zamboanga del Norte (Judge
Onofre Sison Abalos, presiding), in its Civil Case No. 1590, dismissing a complaint for support and
damages, and another order denying amendment of the same pleading.

If the omitted compulsory heirs should die before the testator, the institution shall
be effectual, without prejudice to the right of 'representation.
It is thus clear that the lower court's theory that Article 291 of the Civil Code declaring that support is an
obligation of parents and illegitimate children "does not contemplate support to children as yet unborn,"
violates Article 40 aforesaid, besides imposing a condition that nowhere appears in the text of Article 291.
It is true that Article 40 prescribing that "the conceived child shall be considered born for all purposes that
are favorable to it" adds further "provided it be born later with the conditions specified in the following
article" (i.e., that the foetus be alive at the time it is completely delivered from the mother's womb). This
proviso, however, is not a condition precedent to the right of the conceived child; for if it were, the first
part of Article 40 would become entirely useless and ineffective. Manresa, in his Commentaries (5th Ed.)
to the corresponding Article 29 of the Spanish Civil Code, clearly points this out:

The events in the court of origin can be summarized as follows:


Appellant, Carmen Quimiguing, assisted by her parents, sued Felix Icao in the court below. In her
complaint it was averred that the parties were neighbors in Dapitan City, and had close and confidential
relations; that defendant Icao, although married, succeeded in having carnal intercourse with plaintiff
several times by force and intimidation, and without her consent; that as a result she became pregnant,
despite efforts and drugs supplied by defendant, and plaintiff had to stop studying. Hence, she claimed
support at P120.00 per month, damages and attorney's fees.
Duly summoned, defendant Icao moved to dismiss for lack of cause of action since the complaint did not
allege that the child had been born; and after hearing arguments, the trial judge sustained defendant's
motion and dismissed the complaint.
Thereafter, plaintiff moved to amend the complaint to allege that as a result of the intercourse, plaintiff
had later given birth to a baby girl; but the court, sustaining defendant's objection, ruled that no
amendment was allowable, since the original complaint averred no cause of action. Wherefore, the
plaintiff appealed directly to this Court.
We find the appealed orders of the court below to be untenable. A conceived child, although as yet unborn,
is given by law a provisional personality of its own for all purposes favorable to it, as explicitly provided
in Article 40 of the Civil Code of the Philippines. The unborn child, therefore, has a right to support from
its progenitors, particularly of the defendant-appellee (whose paternity is deemed admitted for the purpose
of the motion to dismiss), even if the said child is only "en ventre de sa mere;" just as a conceived child,
even if as yet unborn, may receive donations as prescribed by Article 742 of the same Code, and its being
ignored by the parent in his testament may result in preterition of a forced heir that annuls the institution
of the testamentary heir, even if such child should be born after the death of the testator Article 854, Civil
Code).

Los derechos atribuidos al nasciturus no son simples expectativas, ni aun en el


sentido tecnico que la moderna doctrina da a esta figura juridica sino que
constituyen un caso de los propiamente Ilamados 'derechos en estado de
pendenci'; el nacimiento del sujeto en las condiciones previstas por el art. 30, no
determina el nacimiento de aquellos derechos (que ya existian de antemano), sino
que se trata de un hecho que tiene efectos declarativos. (1 Manresa, Op. cit., page
271)
A second reason for reversing the orders appealed from is that for a married man to force a woman not his
wife to yield to his lust (as averred in the original complaint in this case) constitutes a clear violation of
the rights of his victim that entitles her to claim compensation for the damage caused. Says Article 21 of
the Civil Code of the Philippines:
ART. 21. Any person who wilfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter for
the damage.
The rule of Article 21 is supported by Article 2219 of the same Code:
ART 2219. Moral damages may be recovered in the following and analogous cases:
(3) Seduction, abduction, rape or other lascivious acts:
xxx xxx xxx

(10) Acts and actions referred to in Articles 21, 26, 27, 28 ....
Thus, independently of the right to Support of the child she was carrying, plaintiff herself had a cause of
action for damages under the terms of the complaint; and the order dismissing it for failure to state a cause
of action was doubly in error.
WHEREFORE, the orders under appeal are reversed and set aside. Let the case be remanded to the court
of origin for further proceedings conformable to this decision. Costs against appellee Felix Icao. So
ordered.

G.R. No. L-17396

May 30, 1962

CECILIO PE, ET AL., plaintiffs-appellants,


vs.
ALFONSO PE, defendant-appellee.
Cecilio L. Pe for and in his own behalf as plaintiff-appellant.
Leodegario L. Mogol for defendant-appellee.

paper approximately 4" by 3" in size, was in a handwriting recognized to be that of defendant's. In English
it reads:
Honey, suppose I leave here on Sunday night, and that's 13th of this month and we will have a
date on the 14th, that's Monday morning at 10 a.m.
Reply
Love

BAUTISTA ANGELO, J.:


Plaintiffs brought this action before the Court of First Instance of Manila to recover moral, compensatory,
exemplary and corrective damages in the amount of P94,000.00 exclusive of attorney's fees and expenses
of litigation.
Defendant, after denying some allegations contained in the complaint, set up as a defense that the facts
alleged therein, even if true, do not constitute a valid cause of action.
After trial, the lower court, after finding that defendant had carried on a love affair with one Lolita Pe, an
unmarried woman, being a married man himself, declared that defendant cannot be held liable for moral
damages it appearing that plaintiffs failed to prove that defendant, being aware of his marital status,
deliberately and in bad faith tried to win Lolita's affection. So it rendered decision dismissing the
complaint.1wph1.t
Plaintiffs brought this case on appeal before this Court on the ground that the issues involved are purely of
law.
The facts as found by the trial court are: Plaintiffs are the parents, brothers and sisters of one Lolita Pe. At
the time of her disappearance on April 14, 1957, Lolita was 24 years old and unmarried. Defendant is a
married man and works as agent of the La Perla Cigar and Cigarette Factory. He used to stay in the town
of Gasan, Marinduque, in connection with his aforesaid occupation. Lolita was staying with her parents in
the same town. Defendant was an adopted son of a Chinaman named Pe Beco, a collateral relative of
Lolita's father. Because of such fact and the similarity in their family name, defendant became close to the
plaintiffs who regarded him as a member of their family. Sometime in 1952, defendant frequented the
house of Lolita on the pretext that he wanted her to teach him how to pray the rosary. The two eventually
fell in love with each other and conducted clandestine trysts not only in the town of Gasan but also in
Boac where Lolita used to teach in a barrio school. They exchanged love notes with each other the
contents of which reveal not only their infatuation for each other but also the extent to which they had
carried their relationship. The rumors about their love affairs reached the ears of Lolita's parents
sometime, in 1955, and since then defendant was forbidden from going to their house and from further
seeing Lolita. The plaintiffs even filed deportation proceedings against defendant who is a Chinese
national. The affair between defendant and Lolita continued nonetheless.
Sometime in April, 1957, Lolita was staying with her brothers and sisters at their residence at 54-B Espaa
Extension, Quezon City. On April 14, 1957, Lolita disappeared from said house. After she left, her
brothers and sisters checked up her thing and found that Lolita's clothes were gone. However, plaintiffs
found a note on a crumpled piece of paper inside Lolita's aparador. Said note, written on a small slip of

The disappearance of Lolita was reported to the police authorities and the NBI but up to the present there
is no news or trace of her whereabouts.
The present action is based on Article 21 of the New Civil Code which provides:
Any person who wilfully causes loss or injury to another in a manner which is contrary to
morals, good customs or public policy shall compensate the latter for the damage.
There is no doubt that the claim of plaintiffs for damages is based on the fact that defendant, being a
married man, carried on a love affair with Lolita Pe thereby causing plaintiffs injury in a manner contrary
to morals, good customs and public policy. But in spite of the fact that plaintiffs have clearly established
that in illicit affair was carried on between defendant and Lolita which caused great damage to the name
and reputation of plaintiffs who are her parents, brothers and sisters, the trial court considered their
complaint not actionable for the reason that they failed to prove that defendant deliberately and in bad
faith tried to win Lolita's affection Thus, the trial court said: "In the absence of proof on this point, the
court may not presume that it was the defendant who deliberately induced such relationship. We cannot be
unmindful of the uncertainties and sometimes inexplicable mysteries of the human emotions. It is a
possibility that the defendant and Lolita simply fell in love with each other, not only without any desire on
their part, but also against their better judgment and in full consciousness of what it will bring to both of
them. This is specially so with respect to Lolita, being an unmarried woman, falling in love with defendant
who is a married man."
We disagree with this view. The circumstances under which defendant tried to win Lolita's affection
cannot lead, to any other conclusion than that it was he who, thru an ingenious scheme or trickery, seduced
the latter to the extent of making her fall in love with him. This is shown by the fact that defendant
frequented the house of Lolita on the pretext that he wanted her to teach him how to pray the rosary.
Because of the frequency of his visits to the latter's family who was allowed free access because he was a
collateral relative and was considered as a member of her family, the two eventually fell in love with each
other and conducted clandestine love affairs not only in Gasan but also in Boac where Lolita used to teach
in a barrio school. When the rumors about their illicit affairs reached the knowledge of her parents,
defendant was forbidden from going to their house and even from seeing Lolita. Plaintiffs even filed
deportation proceedings against defendant who is a Chinese national. Nevertheless, defendant continued
his love affairs with Lolita until she disappeared from the parental home. Indeed, no other conclusion can
be drawn from this chain of events than that defendant not only deliberately, but through a clever strategy,
succeeded in winning the affection and love of Lolita to the extent of having illicit relations with her. The
wrong he has caused her and her family is indeed immeasurable considering the fact that he is a married

man. Verily, he has committed an injury to Lolita's family in a manner contrary to morals, good customs
and public policy as contemplated in Article 21 of the new Civil Code.
WHEREFORE, the decision appealed from is reversed. Defendant is hereby sentenced to pay the
plaintiffs the sum of P5,000.00 as damages and P2,000.00 as attorney's fees and expenses of litigations.
Costs against appellee.

[G.R. No. 47013. February 17, 2000]


ANDRES LAO, petitioner, vs. COURT OF APPEALS, THE ASSOCIATED ANGLO-AMERICAN
TOBACCO CORPORATION and ESTEBAN CO, respondents.
[G.R. No. 60647. February 17, 2000]
ESTEBAN CO, petitioner, vs. COURT OF APPEALS and ANDRES LAO, respondents. Esmsc
[G.R. No. 60958-59. February 17, 2000]
THE ASSOCIATED ANGLO-AMERICAN TOBACCO CORPORATION, petitioner, vs. COURT
OF APPEALS, ANDRES LAO, JOSE LAO, and TOMAS LAO, respondents.
DECISION
PURISIMA, J.: PURISIMA
These consolidated petitions for review on certiorari under Rule 45 of the Rules of Court revolve around
discrepant statements of accountability between a principal and its agent in the sale of cigarettes.
The common factual background at bar follows:
On April 6, 1965, The Associated Anglo-American Tobacco Corporation (Corporation for brevity) entered
into a "Contract of Sales Agent" with Andres Lao. Under the contract, Lao agreed to sell cigarettes
manufactured and shipped by the Corporation to his business address in Tacloban City. Lao would in turn
remit the sales proceeds to the Corporation. For his services, Lao would receive commission depending on
the kind of cigarettes sold, fixed monthly salary, and operational allowance. As a guarantee to Laos
compliance with his contractual obligations, his brother Jose and his father Tomas executed a deed of
mortgage[1] in favor of the Corporation in the amount of P200,000.00
In compliance with the contract, Lao regularly remitted the proceeds of his sales to the Corporation,
generating, in the process, a great deal of business. Thus, the Corporation awarded him trophies and
plaques in recognition of his outstanding performance from 1966 to 1968. However, in February 1968 and
until about seven (7) months later, Lao failed to accomplish his monthly sales report. In a conference in
Cebu, Ching Kiat Kam, the President of the Corporation, reminded Lao of his enormous accounts and the
difficulty of obtaining a tally thereon despite Laos avowal of regular remittances of his collections.
Sometime in August and September 1969, Esteban Co, the vice-president and general manager of the
Corporation, summoned Lao to Pasay City for an accounting. It was then and there established that Laos
liability amounted to P525,053.47. And so, Lao and his brother Lao Y Ka, enlisted the services of the
Sycip Gorres and Velayo Accounting Firm (SGV) to check and reconcile the accounts. Esmmis
Ching Kiat Kam allowed Lao to continue with the sales agency provided Lao would reduce his
accountability to P200,000.00, the amount secured by the mortgage. The Corporation thereafter credited in
favor of Lao the amount of P325,053.47 representing partial payments he had made but without prejudice
to the result of the audit of accounts. However, the SGV personnel Lao had employed failed to conclude
their services because the Corporation did not honor its commitment to assign two of its accountants to
assist them. Neither did the Corporation allow the SGV men access to its records.
Subsequently, the Corporation discovered that Lao was engaging in the construction business so much so
that it suspected that Lao was diverting the proceeds of his sales to finance his business. In the demand
letter of April 15, 1979,[2] counsel for the Corporation sought payment of the obligations of Lao, warning
him of the intention of the Corporation to foreclose the mortgage. Attached to said letter was a statement
of account indicating that Laos total obligations duly supported by receipts amounted to P248,990.82.
Since Lao appeared to encounter difficulties in complying with his obligations under the contract of
agency, the Corporation sent Ngo Kheng to supervise Laos sales operations in Leyte and Samar. Ngo
Kheng discovered that, contrary to Laos allegation that he still had huge collectibles from his customers,
nothing was due the Corporation from Laos clients. From then on, Lao no longer received shipments from
the Corporation which transferred its vehicles to another compound controlled by Ngo Kheng. Shipments
of cigarettes and the corresponding invoices were also placed in the name of Ngo Kheng.
On May 21, 1970, Andres, Jose and Tomas Lao brought a complaint for accounting and damages with writ
of preliminary injunction[3]against the Corporation, docketed as Civil Case No. 4452 before the then Court
of First Instance of Leyte, Branch I in Tacloban City, which court[4] came out with its decision[5] on March
26, 1975, disposing as follows:
"IN VIEW OF ALL THE FOREGOING PREMISES, and upon a clear
preponderance of evidence in favor of the plaintiffs, the court hereby renders
judgment as follows: Esmso
1........Ordering both the plaintiffs and defendant corporation to undergo a Court
supervised accounting of their respective account with the view of establishing once
and for all, by a reconciliation of their respective books of accounts, the true and
correct accountability of Andres Lao to the defendant corporation. Pursuant thereto,

both plaintiff Andres Lao and the defendant The Associated Anglo-American
Tobacco Corporation are directed to make available all their records pertainting
[sic] to their business transactions with each other under the contract of sales agent,
from 1965 up to the time Andres Lao ceased being the agent of the defendant. A
Committee on Audit is hereby formed to be composed of three (3) members, one
member to be nominated by the plaintiffs, another to be nominated by the defendant
corporation and the third member who shall act as the Committee Chairman to be
appointed by this Court. As Committee Chairman, the Court hereby appoints the
Branch Clerk of Court of this Court, Atty. Victorio Galapon, who shall immediately
convene the Committee upon appointment of the other two members, and undertake
to finish their assigned task under his decision within two (2) months.
2........Ordering the defendant corporation to pay Plaintiffs the amount of P180,000
representing actual loss of earnings.
3........Ordering the defendant to pay plaintiffs moral damages in the amount of
P130,000.00.
4........Ordering the defendant to pay to the plaintiffs, exemplary damages in the
amount of P50,000.00.
5........Ordering the defendant to pay to the plaintiffs, attorneys fees in the amount of
P40,000.00.
6........Ordering the plaintiffs and the defendant to pay the compensation of the
commissioners pro-rata.
7........Finally ordering the defendant to pay the cost of this suit.
SO ORDERED."
The Committee of Audit that was eventually constituted was composed of Atty. Victorio L. Galapon, Jr.,
as chairman, Wilfredo Madarang, Jr. and Cesar F.P. Corcuera, as representatives of the Corporation, and
Lao himself. On September 16, 1976, said committee submitted a report[6] with the following
findings: Msesm
"Total remittances made by Mr. Andres Lao in favor of Associated
from April 10, 1965 to November 1969 which are substantially
supported by official receipt .....................................................
Shipments by Associated to Mr. Andres Lao duly supported by bills of
lading, factory consignment invoices and delivery
receipts..................................
Shipments by Associated to Mr. Andres Lao, covered by bills of lading
and factory consignment invoices but with no supporting delivery
receipts purported to have been delivered to Mr. Lao on the basis of
sales made by him as reported in his monthly sales reports (except for
sales in December, 1968 and November and December 1968 where the
sales reports were not available to the Audit
Committee)...............................................
Shipments covered by bills of lading and factory consignment invoices
but with no supporting delivery
receipts ......................................................
Shipments with covering factory consignment invoices but not covered
by bills of lading and delivery
receipts ......................................................
On February 28, 1977, the trial court[7] promulgated a supplemental decision wherein it dismissed Laos
claim that he had made an overpayment of P556,444.20. The alleged overpayment was arrived at after
deducting the total payment made by Lao in the amount of P13,686,148.80 from the total volume of
shipments made by the Corporation in the amount of P13,129,704.60, without including the amount of
P597,239.40, representing alleged shipments covered by bills of lading and factory consignment invoices
but with no supporting delivery receipts, and the amount of P126,950.00, representing shipments with
factory consignment invoices but not covered by bills of lading and delivery receipts. The trial court, in
rejecting the claim of overpayment, held that "when he (referring to Lao) made partial payments
amounting to P325,053.47 subsequent to the demand in September, 1969, he is deemed to have admitted
his liability and his claim of overpayment is not only preposterous but devoid of logic." Therefore, with
the sums of P597,239.40 and P126,950.00 included in the total volume of shipments made by the

Corporation in the amount of P13,129,704.60, Laos total remittances of P13,686,248.80 were short of
P167,745.20. Thus, the trial court held:
"WHEREFORE, judgment is hereby rendered declaring plaintiff Andres Laos
accountability to defendant Corporation in the amount of P167,745.20 and ordering
him to pay said amount of P167,745.20 to defendant The Associated AngloAmerican Tobacco Corporation." Exsm
The Corporation appealed the decision, dated March 26, 1975, just as Lao appealed the supplemental
decision, dated February 28, 1977, to the Court of Appeals. Docketed as CA-G.R. No. 62532-R, the
appeal was resolved in the Decision of the Court of Appeals dated October 26, 1981, [8] disposing thus:
"WHEREFORE, in connection with the decision of March 26, 1975, defendant
corporation is hereby ordered to pay plaintiffs P150,000.00 actual damages for loss
of earnings, P30,000.00 by way of moral damages and P10,000.00 for exemplary
damages. As modified, the decision is AFFIRMED in all other respects.
As for the supplemental decision of February 28, 1977, the same is hereby reversed
and set aside, and defendant-appellant corporation sentenced to reimburse Andres
Laos overpayment in the amount of P556,444.20. Costs against defendant-appellant
corporation."
The Corporation presented a motion for reconsideration [9] of the said Decision but the same was denied in
a Resolution dated May 18, 1982.[10] A motion for leave to file a second motion for reconsideration was
likewise denied.[11] Kylex
Meanwhile, on June 24, 1974 and during the pendency of Civil Case No. 4452, Esteban Co, representing
the Corporation as its new vice-president, filed an affidavit of complaint [12] with the Pasay City Fiscals
Office under I.S. No. 90994; alleging that Lao failed to remit the amount of P224,585.82 which he
allegedly misappropriated and converted to his personal use. Although the amount supposedly defalcated
was put up as a counterclaim in Civil Case No. 4452 for accounting, the Corporation averred that it
reserved the right to institute a criminal case against Lao.
On July 31, 1974, after finding a prima facie case against Lao, the Pasay City Fiscal filed an
information[13] for estafa against Lao, docketed as Criminal Case No. 2650-P before the then Court of First
Instance of Rizal, Branch XXVII. Lao sought a reinvestigation [14] of the case, contending that he was
never served a subpoena or notice of preliminary investigation that was considered mandatory in cases
cognizable by Court of First Instance, now Regional Trial Court. Apparently, the preliminary investigation
proceeded ex-parte because Esteban Co made it appear that Lao could not be located. Kycalr
On December 17, 1974, without awaiting the termination of the criminal case, Lao lodged a
complaint[15] for malicious prosecution against the Corporation and Esteban Co, praying for an award of
damages for violation of Articles 20 and 21 of the Civil Code. The case was docketed as Civil Case No.
5528 before Branch I of the then Court of First Instance in Cotabato City.
In his resolution dated January 3, 1975,[16] then Pasay City Fiscal Jose Flaminiano found merit in the
petition for reinvestigation of the estafa case. He opined that Lao had not committed estafa as his liability
was essentially civil in nature. The Fiscal entertained doubts about the motive of the Corporation in
instituting the criminal case against Lao because of the undue delay in its filing, aside from the fact that
the estafa case involved the same subject matter the Corporation sued upon by way of counterclaim in
Civil Case No. 4452. Eventually, on May 13, 1976, the Court of First Instance of Rizal, Branch XXVII, in
Pasay City, promulgated a decision[17] acquitting Lao of the crime charged and adopting in toto the said
Resolution of Fiscal Flaminiano.
On March 18, 1977, the Court of First Instance of Samar[18] handed down a decision in Civil Case No.
5528, the action for damages arising from malicious prosecution, disposing thus:
"WHEREFORE, the Court declares that the defendants filed Criminal Case No.
2650-P against the plaintiff for estafa before the Court of First Instance of Rizal,
Branch XXVII, Pasay City, without probable cause and with malice and therefore
orders the defendants Associated Anglo-American Tobacco Corporation and
Esteban Co to jointly and severally pay the plaintiff:
a........P30,000 as actual damages; Calrky
b........P150,000.00 as moral damages;
c........P100,000.00 as exemplary damages;
d........P50,000.00 as attorneys fees and costs.
SO ORDERED."
The Corporation and Esteban Co both appealed the aforesaid decision to the Court of Appeals under CAG.R. No. 61925-R.

On April 18, 1977, Lao presented a motion for execution pending appeal[19] before the trial court. The
opposition of the Corporation notwithstanding, on June 8, 1977 the trial court issued a special order
granting the motion for execution pending appeal,[20] and on the following day, the corresponding writ of
execution issued.[21]
On June 10, 1977, the Court of Appeals issued a Restraining Order enjoining the execution of subject
judgment.[22] The said order was issued on account of a petition for certiorari, prohibition and mandamus
with preliminary injunction[23] filed by the Corporation and Esteban Co with the said appellate court.
Docketed as CA-G.R. No. 06761, the petition was received by the Court of Appeals on June 9, 1977. A
supplemental to the petition and a "compliance" were also received on the same time and date. [24] On June
21, 1977, Lao moved to lift the restraining order.
On September 14, 1977, the Court of Appeals resolved in CA-G.R. No. 06761 thus:
"WHEREFORE, the petition for certiorari is hereby granted, the special order
granting execution pending appeal is annulled and the restraining order heretofore
issued is made permanent.
No pronouncement as to costs."
On October 21, 1981, the Court of Appeals likewise rendered a Decision[25] in CA-G.R. No. 62532-R,
affirming the trial courts finding that Criminal Case No. 2650-P was filed without probable cause and with
malice; and held the Corporation and Esteban Co solidarily liable for damages, attorneys fees and costs.
The Corporation and Esteban Co moved to reconsider[26] the said decision in CA-G.R. No. 61925-R but to
no avail. The motion for reconsideration was denied in a Resolution promulgated on May 18, 1992. A
motion for leave of court to file a second motion for reconsideration[27] met the same fate. It was likewise
denied in a Resolution[28] dated June 23, 1982.
From the said cases sprung the present petitions which were ordered consolidated in the Resolutions of
December 15, 1982 and November 11, 1985.[29] Subject petitions are to be passed upon in the order they
were filed. Mesm
G.R. No. 47013
A petition for review on certiorari of the Decision of the Court of Appeals in CA-G.R. No. 06761 that Lao
filed, contending that:
1........The Court of Appeals cannot validly give due course to an original action
for certiorari, prohibition and mandamus where the petition is fatally defective for
not being accompanied by a copy of the trial courts questioned process/order.
2........The Court of Appeals, cannot, in a petition for certiorari, prohibition and
mandamus, disregard, disturb and substitute its own judgment for the findings of
facts of the trial court, particularly as in the present case, where the trial court did
not exceed nor abuse its discretion.
3........The Court of Appeals did not act in accordance with established
jurisprudence when it overruled the trial courts holding that the posting of a good
and solvent bond is a good or special reason for execution pending appeal.
For clarity, the petition for review on certiorari questioning the Decision of the Court of Appeals that
nullified the special order granting execution pending appeal is anchored on the antecedent facts as
follows: Slx
After the Court of First Instance of Samar had decided in favor of Lao in the action for damages by reason
of malicious prosecution, Lao filed a motion for execution pending appeal [30] even as the Corporation and
Co had interposed an appeal from the said decision. In that motion, Lao theorized that the appeal had no
merit and the judgment in his favor would be rendered ineffectual on account of losses incurred by the
Corporation in the 1972 floods in Luzon and in a fire that cost the Corporation P5 million, as well as the
fact that the properties of the Corporation were heavily encumbered as it had even incurred an overdraft
with a bank; for which reasons, Lao evinced his willingness to post a bond although Section 2, Rule 39 of
the Rules of Court does not require such bond. Lao thereafter sent in a supplemental motion[31] asserting
that the Corporations properties were mortgaged in the total amount of Seven Million (P7,000,000.00)
Pesos. The Corporation and Co opposed both motions.
On June 8, 1977, after hearing and presentation of evidence by both parties, the Court of First Instance of
Samar issued a special order granting the motion for execution pending appeal.[32] The following day, June
9, 1977, the corresponding writ of execution pending appeal issued.[33] At 8:00 a.m. on the same day, the
Corporation and Co filed a petition for certiorari, prohibition and mandamus with preliminary injunction
with the Court of Appeals, the filling of which petition was followed by the filing of a supplement to the
petition and a "compliance" with each pleading bearing the docket stamp showing that the Court of
Appeals also received the same at 8:00 a.m.[34] Scslx

In the petition under consideration, petitioner Lao contends that the supplemental petition and
"compliance" could not have been filed with the Court of Appeals at the same time as the original petition;
pointing out that the supplemental petition contains an allegation to the effect that the special order
granting execution pending appeal was then still "being flown to Manila" and would be attached to the
petition "as soon as it arrives in Manila which is expected tomorrow, June 10, 1977 or
Saturday."[35] Petitioner Lao thus expressed incredulity on the fact that both the supplemental petition and
the "compliance" submitted to the appellate court a copy of the special order bearing the same time of
receipt. He theorized that the writ of execution could have been issued by the Court of First Instance of
Samar at the earliest, at 8:30 a.m. on July 9, 1977. Petitioner Lao then noted that, the restraining order
enjoining execution pending appeal did not mention the date of issuance of the writ subsequently issued
and the names of the special sheriffs tasked to execute it simply because when the restraining order was
issued the copy of the writ of execution was not yet filed with the Court of Appeals. Petitioner Lao also
averred that because his counsel was furnished a copy of the restraining order through the mail, he was
deprived of the opportunity to take immediate "remedial steps in connection with the improvident issuance
of the restraining order."[36]
In their comment on the petition, respondent Corporation and Co assail petitioner Laos insinuation of
irregularity in the filing of their pleadings. They aver that in view of petitioner Laos allegation, they, made
inquiries in the Docket Section of the Court of Appeals, and they were informed that the receiving
machine of said section was out of order when the pleadings were received "as the time of receipt
appearing therein is always 8:00 a.m."[37]
This Court cannot gloss over, as it has never glossed over allegations of irregularity in the handling of
pleadings filed in the Court. However, in the absence of concrete proof that there was malicious intent to
derail the propriety of procedure, this Court has no basis on which to arrive at a conclusion thereon. The
documentary evidence of simultaneous receipt of pleadings that should ordinarily be received one after
another is simply insufficient to warrant any conclusion on irregularity of procedure.
All court personnel are enjoined to do their jobs properly and according to law. Should they notice
anything in the performance of their duties that may generate even a mere suspicion of irregularity, they
are duty-bound to correct the same. In this case, more diligence on the part of the personnel handling the
receiving machine could have prevented the stamping on the pleadings with erroneous date and time of
receipt and would have averted suspicion of an anomaly in the filing of pleadings. Persons responsible for
the negligence should be taken to task. However, since this is not the proper forum for whatever
administrative measures may be taken under the premises, the Court opts to discuss the merits of the
petition for review on certiorari at bar rather than tarry more on an administrative matter that is
fundamentally extraneous to the petition. Slxsc
Petitioner Lao maintains that the Court of Appeals should not have been given due course to the petition
for certiorari, prohibition and mandamus considering that it was fatally defective for failure of the
petitioners to attach thereto a copy of the questioned writ of execution. On their part, private respondents
concede the mandatory character of the requirement of Section 1, Rule 65 of the Rules of Court - that the
petition "shall be accompanied by a certified true copy of the judgment or order subject thereof, together
with copies of all pleadings and documents relevant and pertinent thereto." However, private respondents
asked that their submission of a certified true copy of the special order granting execution pending appeal
attached to their "compliance" dated June 9, 1977[38] be taken as substantial compliance with the rule.
The Court gives due consideration to private respondents stance. Strict adherence to procedural rules must
at all times be observed. However, it is not the end-all and be-all of litigation. As this Court said:
"xxx adjective law is not to be taken lightly for, without it, the enforcement of
substantive law may not remain assured. The Court must add, nevertheless, that
technical rules of procedure are not ends in themselves but primarily devised and
designed to help in the proper and expedient dispensation of justice. In appropriate
cases, therefore, the rules may have to be so construed liberally as to meet and
advance the cause of substantial justice."[39]
Thus, in holding that the Court of Appeals may entertain a second motion for reconsideration of its
decision although the filing of such motion violates a prohibition thereof, the Court said:
"xxx (I)t is within the power of this Court to temper rigid rules in favor of
substantial justice. While it is desirable that the Rules of Court be faithfully and
even meticulously observed, courts should not be so strict about procedural lapses
that do not really impair the proper administration of justice. If the rules are
intended to ensure the orderly conduct of litigation, it is because of the higher

objective they seek which is the protection of substantive rights of the


parties."[40] Slxmis
In the case under consideration, private respondents substantially complied with the Rules of Court when
they submitted a copy of the writ of execution sought to be enjoined on the same day they filed the
petition for certiorari, prohibition and mandamus. Petitioner Cos allegation of irregularity as to the time
of receipt of the "compliance" to which copy of the writ was attached being unsubstantiated, the
presumption of regularity of its receipt on the day the original petition was filed should prevail.
Petitioner Co argues that the Court of Appeals cannot disturb the factual findings of the trial court and
substitute its own in a petition for certiorari, prohibition and mandamus where the basic issue is one of
jurisdiction or grave abuse of discretion. It is well-settled, however, that in a petition
for certiorari and mandamus, the Court of Appeals, when inevitable, may examine the factual merits of
the case.[41] In the present case, it was necessary and inevitable for the Court of Appeals to look into the
diverse factual allegations of the parties. It is worthy to note that petitioners motion for execution pending
appeal was premised on his contention that the award of damages in his favor would be meaningless on
account of respondent Corporations precarious financial status. On the other hand, respondent Corporation
countered that it was operating at a profit, an assurance that at the time, it was a stable business entity that
could answer for its obligations. In the face of these contradictory allegations, the appellate court correctly
opted to make its own finding of facts on the issue of the propriety of the issuance of the writ of execution
pending appeal. It should be stressed that what was at issue was not the award of damages itself but the
issuance of said writ.
Petitioner Laos position that the posting of a good and solvent bond is a special reason for the issuance of
the writ of execution pending appeal is utterly barren of merit. Mere posting of a bond to answer for
damages does not suffice as a good reason for the granting of execution pending appeal, within the context
of "good reasons" under Section 2, Rule 39 of the Rules of Court.[42] In Roxas v. Court of Appeals,[43] the
Court held: Missdaa
"It is not intended obviously that execution pending appeal shall issue as a matter of
course. Good reasons, special, important, pressing reasons must exist to justify it;
otherwise, instead of an instrument of solicitude and justice, it may well become a
tool of oppression and inequity. But to consider the mere posting of a bond a good
reason would precisely make immediate execution of a judgment pending appeal
routinary, the rule rather than the exception. Judgments would be executed
immediately, as a matter of course, once rendered, if all that the prevailing party
needed to do was to post a bond to answer for damages that might result therefrom.
This is a situation, to repeat, neither contemplated nor intended by law."[44]
G.R. No. 60647
From the decision of the Court of First Instance of Samar in Civil Case No. 5528, finding that they are
liable for malicious prosecution and therefore, they must pay Lao damages, the Corporation and Co
appealed to the Court of Appeals. In affirming the lower courts decision, the Court of Appeals deduced
from the facts established that the Corporation knew all along that Laos liability was civil in nature.
However, after around four (4) years had elapsed and sensing that Civil Case No. 4452 would result in a
decision against them, they instituted the criminal case for estafa. In awarding damages in the total amount
of P330,000, the Court of Appeals took into account Laos social and business standing.[45] Sdaadsc
From the Decision of the Court of Appeals in CA-G.R. No. 61925-R, Co filed the instant petition for
review on certiorari; contending that the Court of Appeals erred in affirming the decision of the Samar
Court of First Instance because when the case for malicious prosecution was commenced there was as yet
no cause of action as the criminal case was still pending decision. Co also asserted that he should not be
held jointly and severally liable with the Corporation because in filing the affidavit-complaint against
respondent Lao, he was acting as the executive vice-president of the Corporation and his action was within
the scope of his authority as such corporate officer.
The issue of whether the Court of Appeals correctly ruled that the Corporation and petitioner Co should be
held liable for damages on account of malicious prosecution shall be ratiocinated upon and resolved with
the issues submitted for resolution in G.R. Nos. 60958-59. What should concern the Court here is whether
petitioner Co should be held solidarily liable with the Corporation for whatever damages would be
imposed upon them for filing the complaint for malicious prosecution.
Petitioner Co argues that following the dictum in agency, the suit should be against his principal unless he
acted on his own or exceeded the limits of his agency.
A perusal of his affidavit-complaint reveals that at the time he filed the same on June 24, 1974, petitioner
Co was the vice-president of the Corporation. As a corporate officer, his power to bind the Corporation as

its agent must be sought from statute, charter, by-laws, a delegation of authority to a corporate officer, or
from the acts of the board of directors formally expressed or implied from a habit or custom of doing
business.[46] In this case, no such sources of petitioners authority from which to deduce whether or not he
was acting beyond the scope of his responsibilities as corporate vice-president are mentioned, much less
proven. It is thus logical to conclude that the board of directors or by laws- of the corporation vested
petitioner Co with certain executive duties[47]one of which is a case for the Corporation.
That petitioner Co was authorized to institute the estafa case is buttressed by the fact that the Corporation
failed to make an issue out of his authority to file said case. Upon well-established principles of pleading,
lack of authority of an officer of a corporation to bind it by contract executed by him in its name, is a
defense which should have been specially pleaded by the Corporation.[48] The Corporations failure to
interpose such a defense could only mean that the filing of the affidavit-complaint by petitioner Co was
with the consent and authority of the Corporation. In the same vein, petitioner Co may not be held
personally liable for acts performed in pursuance of an authority and therefore, holding him solidarily
liable with the Corporation for the damages awarded to respondent Lao does accord with law and
jurisprudence. Rtcspped
G.R. No. 606958-59
In this petition for review on certiorari of the Decisions of the Court of Appeals in CA-G.R. No. 61925-R,
regarding Laos claim for damages on account of malicious prosecution, and in CA-G.R. No. 62532-R that
arose from Laos complaint for accounting and damages, petitioner Corporation assigns as errors, that:
1........The respondent Court of Appeals erred and/or committed a grave abuse of
discretion in affirming the erroneous decision of the lower court. The civil case for
malicious prosecution was filed during the pendency of the criminal case upon
which the civil suit was based. There is as yet no cause of action. xxx.
2........The respondent Court of Appeals erred and/or committed a grave abuse of
discretion when it reversed or set aside the supplemental decision of the lower court
in Civil Case No. 4452, which reversal was merely based on surmises and
conjectures. xxx.
3........The respondent Court of Appeals erred and/or committed grave abuse of
discretion when it awarded moral damages in Civil Case No. 4452 which was not
prayed for because Andres Lao prayed for moral damages and was already awarded
in Civil Case No. 5528. Moral damages must be specifically prayed for. xxx.[49]
Petitioner Corporation contends that the complaint for malicious prosecution brought by Lao during the
pendency of subject criminal case for estafa, states no cause of action as it was prematurely filed when the
criminal case that resulted in the acquittal of Lao was not yet terminated. On the other hand, respondent
Lao countered that the elements supportive of an action for malicious prosecution are evidentiary in nature
and their existence or non-existence cannot be the subject of evaluation and conclusion upon the filing of
the complaint. For Lao, those elements must be determined at the time the plaintiff has offered all his
evidence and rested his case. Kortex
Malicious prosecution has been defined as an action for damages brought by one against whom a criminal
prosecution, civil suit or other legal proceeding has been instituted maliciously and without probable
cause, after the termination of such prosecution, suit or other proceeding in favor of the defendant therein.
[50]
As thus defined, the fact of termination of the criminal prosecution, civil suit or legal proceeding
maliciously filed and without probable cause, should precede the complaint for malicious prosecution.
Such a complaint states a cause of action if it alleges: (a) that the defendant was himself the prosecutor or
at least instigated the prosecution; (b) that the prosecution finally terminated in the acquittal of the
plaintiff; (c) that in bringing the action the prosecutor acted without probable cause, and (d) that the
prosecutor was actuated by malice, i.e., by improper and sinister motives. [51]
Ocamp v. Buenaventura[52] demonstrates the importance of the requirement that the case maliciously
commenced should be terminated before a claim for damages arising from the filing of such case should
be presented. In that case, a complaint for damages arising from the alleged malicious filing of an
administrative case for serious misconduct, grave abuse of authority and commission of a felony, was held
to be premature during the pendency of said administrative case before the then Police Commission
(POLCOM). Observing that the complaint for damages was based on the claim that the administrative
case brought before the POLCOM was malicious, unfounded and aimed to harass the respondents, the
Court there held:
"xxx. The veracity of this allegation is not for us to determine, for if We rule and
allow the civil case for damages to proceed on that ground, there is the possibility
that the court a quo in deciding said case might declare the respondents victims of

harassment and thereby indirectly interfere with the proceedings before the
POLCOM. The respondents case for damages before the lower court is, therefore,
premature as it was filed during the pendency of the administrative case against the
respondents before the POLCOM. The possibility cannot be overlooked that the
POLCOM may hand down a decision adverse to the respondents, in which case the
damage suit will become unfounded and baseless for wanting in cause of action. Of
persuasive force is the ruling in William H. Brown vs. Bank of the Philippine
Islands and Santiago Freixas, 101 Phil. 309, 312, where this Court said: Sclaw
"xxx. In effect, plaintiff herein seeks to recover damages
upon the ground that the detainer case has been filed, and is
being maintained, maliciously and without justification; but
this pretense affects the merits of said detainer case. Should
final judgment be eventually rendered in that case in favor of
the plaintiffs therein, such as the one rendered in the
municipal court, the validity of the cause of action of said
lessors against Brown, would thereby be conclusively
established, and necessarily, his contention in the present
case would have to be rejected. Similarly, we cannot sustain
the theory of Brown in the case at bar, without prejudging the
issue in the detainer case, which is still pending. Until final
determination of said case, plaintiff herein cannot, and does
not, have, therefore, a cause of action - if any, on which we
do not express our opinion - against the herein defendants. In
short, the lower court has correctly held that the present
action is premature, and, that, consequently, the complain
herein does not set forth a cause of action against the
defendants."[53]
A similar ruling was laid down in Cabacungan v. Corrales[54] where the Court sustained the dismissal of
an action for damages on the ground of prematurity. The records disclosed that the alleged false and
malicious complaint charging plaintiffs with malicious mischief was still pending trial when the action for
damages based on the subject complaint was brought.
Premises studiedly viewed in proper perspective, the contention of Lao that the elements of an action for
malicious prosecution are evidentiary in nature and should be determined at the time the plaintiff offers
evidence and rests his case, is untenable. To rule otherwise would, in effect, sanction the filing of actions
without a cause of action. The existence of a cause of action is determined solely by the facts alleged in
the complaint. Consideration of other facts is proscribed and any attempt to prove extraneous
circumstances is not allowed.[55]As this Court said in Surigao Mine Exploration Co., Inc. v. Harris,
[56]
"unless the plaintiff has a valid and subsisting cause of action at the time his action is commenced, the
defect cannot be cured or remedied by the acquisition or accrual of one while the action is pending, and a
supplemental complaint or an amendment setting up such after-accrued cause of action is not
permissible."[57] Thus, the circumstance that the estafa case concluded in respondent Laos acquittal during
the pendency of the complaint for malicious prosecution did not cure the defect of lack of cause of action
at the time of filing of the complaint. Sclex
Neither does the Court find merit in respondent Laos submission that the complaint for malicious
prosecution is viable inasmuch as it is also anchored on Articles 20 and 21 of the Civil Code. This may
appear to be a persuasive argument since there is no hard and fast rule which can be applied in the
determination of whether or not the principle of abuse of rights has been violated, resulting in damages
under the said articles of the Civil Code on Human Relations. Indeed, a party injured by the filing of a
court case against him, even if he is later on absolved, may file a case for damages grounded either on the
principle of abuse of rights or on malicious prosecution. [58] However, whether based on the principle of
abuse of rights or malicious prosecution, a reading of the complaint here reveals that it is founded on the
mere filing of the estafa charge against respondent Lao. As such, it was prematurely filed and it failed to
allege a cause of action. Should the action for malicious prosecution be entertained and the estafa charge
would result in respondent Laos conviction during the pendency of the damage suit, even if it is based on
Articles 20 and 21, such suit would nonetheless become groundless and unfounded. To repeat; that the
estafa case, in fact, resulted in respondent Laos acquittal would not infuse a cause of action on the
malicious prosecution case already commenced and pending resolution.

The complaint for damages based on malicious prosecution and/or on Articles 20 and 21 should have been
dismissed for lack of cause of action and therefore, the Court of Appeals erred in affirming the decision of
the trial court of origin. It should be stressed, however, that the dismissal of subject complaint should not
be taken as an adjudication on the merits, the same being merely grounded on the failure of the complaint
to state a cause of action.[59]
As regards the Decision in CA-G.R. No. 62532-R which was spawned by respondent Laos complaint for
accounting, petitioner contends that the appellate court erred when it reversed and set aside the
supplemental decision in Civil Case No. 4452 and directed the corporation to reimburse the amount of
P556,444.20, representing Laos overpayment to the Corporation. The Court would normally have
restricted itself to questions of law and shunned away from questions of fact were it not for the conflicting
findings of fact by the trial court and appellate court on the matter. The Court is therefore constrained to
relax the rule on conclusiveness of factual findings of the Court of Appeals and, on the basis of the facts
on record, make its own findings.[60]
It is significant to note that as per decision of the trial court dated March 26, 1975, a court-supervised
accounting was directed so as to ascertain the true and correct accountability of Andres Lao to the
defendant corporation. Thus, a three-man audit committee was formed with the branch of clerk of court,
Atty. Victorio Galapon, as chairman, and two other certified public accountants respectively nominated by
the parties, as members.
On September 16, 1976, the said Audit Committee submitted its report[61] and in the hearing of November
25, 1976, the parties interposed no objection thereto and unanimously accepted the Audit Committee
Report. The Committee found that Andres Lao has made a total overpayment to defendant corporation in
the amount of P556,444.20. Xlaw
Trial by commissioners is allowed by the Rules of Court when a) the trial of an issue of fact requires the
examination of a long account on either side, in which case the commissioner may be directed to hear and
report upon the whole issue or any specific question involved therein; b) when the taking of an account is
necessary for the information of the court before judgment, or for carrying a judgment or order into effect;
and c) when a question of fact, other than upon the pleadings, arises upon motion or otherwise, at any
stage of a case, or for carrying a judgment or order into effect. [62] Ultimately, the trial court, in the exercise
of its sound discretion, may either adopt, modify, or reject in whole or in part, the commissioners report or
it may recommit the same with instructions, or require the parties to present additional evidence before the
commissioners or before the court.[63]
In the case under consideration, it is thus within the power of the trial court to refer the accounting to
court-appointed commissioners because a true and correct accounting is necessary for the information of
the court before it can render judgment. Moreover, the technical nature of the audit procedure necessitates
the assistance of a certified public accountant. And since both parties offered no objection to the
commissioners report, they are deemed to have accepted and admitted the findings therein contained.
There is no discernible cause for veering from the findings of the Audit Committee. In arriving at its
conclusion, the Audit Committee subtracted the total remittances of Lao in the amount of P13,686,148.80
from the entire volume of shipments made by the corporation. In determining the total volume of
shipments made by the corporation, the Audit Committee did not include the shipments covered by bills of
lading and factory consignment invoices but without the corresponding delivery receipts. These included
shipments in the amount of P597, 239.40 covered by bills of lading and factory consignment invoices but
with no supporting delivery receipts, and shipments worth P126, 950.00 with factory consignment
invoices but not covered by bills of lading and delivery receipts. However, the Audit Committee
considered shipments made by the corporation to Lao in the amount of P9,110,777.00 covered by bills of
lading and factory invoices but without the corresponding delivery receipts because subject shipments
were duly reported in Laos monthly sales report. Xsc
The Audit Committee correctly excluded the shipments not supported by delivery receipts, albeit covered
by bills of lading and factory consignment invoices. Under Article 1497 of the Civil Code, a thing sold
shall be understood as delivered when it is placed in the control or possession of the vendee. Unless
possession or control has been transferred to the vendee, the thing or goods sold cannot be considered as
delivered. Thus, in the present case, the Audit Committee was correct when it adopted as guideline that
accountability over the goods shipped was transferred from the corporation to Andres Lao only upon
actual delivery of the goods to him. For it is only when the goods were actually delivered to and received
by Lao, did Lao have control and possession over subject goods, and only when he had control and
possession over said goods could he sell the same.
Delivery is generally evidenced by a written acknowledgement of a person that he or she has actually
received the thing or the goods, as in delivery receipts. A bill of lading cannot substitute for a delivery

receipt. This is because it is a written acknowledgement of the receipt of the goods by the carrier and an
agreement to transport and deliver them at a specific place to a person named or upon his order.[64] It does
not evidence receipt of the goods by the consignee or the person named in the bill of lading; rather, it is
evidence of receipt by the carrier of the goods from the shipper for transportation and delivery.
Likewise, a factory consignment invoice is not evidence of actual delivery of the goods. An invoice is
nothing more than a detailed statement of the nature, quantity and cost of the thing sold. [65] It is not proof
that the thing or goods were actually delivered to the vendee or the consignee. As admitted by the witness
for the corporation:
A: Factory consignment invoices represents what the company billed the plaintiff
Mr. Lao and the bill of lading represents the goods which were supposed to have
been shipped.
xxx.......xxx.......xxx
A: Shipments covered by factory consignment invoices simply meant these are
billings made again by the Associated Anglo-American Tobacco Corporation to
plaintiff Andres Lao. (t.s.n., November 25, 1976, pp. 45-47 as cited in Respondent
Laos Comment, Rollo, p. 259)
Thus, in the absence of proof that the goods were actually received by Lao as evidenced by delivery
receipts, the shipments allegedly made by the corporation in the amount of P597,239.40 and P126,950.00
covered only by bills of lading and factory consignment invoices cannot be included in Laos
accountability. Sc
However, as to the shipments worth P4,018,927.60 likewise covered only by bills of lading and factory
consignment invoices, the Audit Committee correctly considered them in Laos account because such
shipments were reported in the latters sales reports. The fact that Lao included them in his sales reports is
an implied admission that subject goods were actually delivered to him, and that he received the said
goods for resale.
As regards the award of moral damages, petitioner Corporation faults the Court of Appeals for awarding
such damages not specifically prayed for in the complaint for accounting and damages in Civil Case No.
4452. Petitioner Corporation argues that moral damages were prayed for and duly awarded in Civil Case
No. 5528 and therefore, it would be unfair and unjust to allow once again, recovery of moral damages on
similar grounds.
Contrary to the allegation of the petitioner Corporation, the award of moral damages was specifically
prayed for in the complaint albeit it left the amount of the same to the discretion of the court.[66] Moreover,
Civil Case Nos. 4452 and 5528 were on varied causes of action. While the award for moral damages in
Civil Case No. 4452 was based on the evident bad faith of the petitioner Corporation in unilaterally
rescinding respondent Laos sales agency through his immediate replacement by Ngo Kheng, the claim for
moral damages in Civil Case No. 5528 was anchored on the supposed malice that attended the filing of the
criminal case for estafa.
Petitioner Corporation also opposes for being conjectural, the award of P150,000.00 in Civil Case No.
4452, representing actual damages for loss of earnings. True, damages cannot be presumed or premised on
conjecture or even logic. A party is entitled to adequate compensation only for duly substantiated
pecuniary loss actually suffered by him or her.[67] In this case, however, the trial court correctly found that
an award for actual damages was justified because several months before their contract of agency was due
to expire in 1969, the petitioner Corporation replaced Lao with Ngo Kheng as sales agent for the areas of
Leyte and Samar. This, despite the fact that they had already agreed that Lao would continue to act as the
corporations sales agent provided that he would reduce his accountability to P200,000.00, the amount
covered by his bond, and engaged the services of an independent accounting firm to do an audit to
establish Laos true liability. Due to his ouster as sales agent, Lao failed to realize a net income from his
sales agency in the amount of P30,000.00 a year. Scmis
However, the amount of actual damages should be reduced to P30,000.00 only instead of the P150,000.00
awarded by the appellate court. Since the contract of sales agency was on a yearly basis, the actual
damages Lao suffered should be limited to the annual net income he failed to realize due to his unjust
termination as sales agent prior to the expiration of his contract in 1969. Unrealized income for the
succeeding years cannot be awarded to Lao because the corporation is deemed to have opted not to renew
the contract with Lao for the succeeding years.
As to the award of exemplary damages, suffice it to state that in contracts and quasi-contracts, the court
may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.[68] In the case under scrutiny, the Court finds the award of exemplary damages
unjustified or unwarranted in the absence of any proof that the petitioner Corporation acted in a wanton,

fraudulent, reckless, oppressive, and malevolent manner. For the same reasons, the award for attorneys
fees should be deleted.
WHEREFORE,
In G.R. No. L-47013, the petition for review on certiorari is DENIED for lack of merit;
In G.R. No. 60647, the petition is GRANTED and the assailed decision is SET ASIDE; and the Decision
of the Court of Appeals in CA-G.R. No. 61925-R, finding Esteban Co solidarily liable with the respondent
Associated Anglo-American Tobacco Corporation for damages, is REVERSED AND SET ASIDE. As
above ratiocinated, the respondent corporation cannot be held liable for damages.
In G.R. Nos. 60958-59, the Decision in CA-G.R. No. 61925-R is REVERSED AND SET ASIDE; the
respondent corporation is adjudged not liable for malicious prosecution due to the prematurity of the
action; while the Decision in CA-G.R. No. 62532-R is AFFIRMED, insofar as it ordered respondent
corporation to reimburse Andres Laos overpayment in the amount of P556,444.20, but MODIFIED, in that
only an award of P30,000.00 for actual damages is GRANTED, and all the other monetary awards are
deleted. No pronouncement as to costs.
SO ORDERED.

G.R. No. L-66865 January 13, 1989


MAGTANGGOL QUE, petitioner,
vs.
THE HON. INTERMEDIATE APPELLATE COURT and NICOLAS, respondents.
Manuel O. Chan Law Offices for petitioner.
Jose M. Castillo for respondents.

CRUZ, J.:
Both procedural and substantive issues are involved in this petition for review by certiorari of a decision
of the respondent court reinstating the original decision of the trial court in favor of the appellant, the
private respondent herein.
The petitioner claims that the respondent court committed reversible error in holding that his second
motion for reconsideration was pro forma and therefore null and void. It is also his contention that the
revived original decision of the trial court, which had been reversed on his motion for reconsideration, was
not in accordance with law and jurisprudence and should itself be annulled.
The case arose when Magtanggol Que, the herein petitioner, filed a complaint for estafa against private
respondent Antonio Nicolas in the office of the city fiscal of Caloocan City for issuance of several checks
which were subsequently dishonored when presented for encashment. 1 The charge was dismissed for lack
of merit, the investigating fiscal holding that the controversy was an accounting matter that did not
necessarily involve deceit on the part of Nicolas. 2 Subsequently, Nicolas filed his own complaint for
damages against Que, this time in the Court of First Instance of Bulacan, for what he claimed was his
malicious prosecution by the latter. 3 It was now Que's turn to claim harassment. In his counterclaim, he
averred that Nicolas had maliciously filed the complaint in Bulacan although he was a resident of
Caloocan City; that the private respondent was really indebted to him in any 4 case; and that it was he who
had suffered damages as a result of the unwarranted suit.
The dispute goes back to several previous business transactions between the protagonists when they were
still on amicable terms. In July and August of 1975, the private respondent ordered from the petitioner
certain amounts of canvass strollers which were delivered to and accepted by Nicolas, who issued five
checks therefore to Que. The total face value of the cheeks was P7,600.00. Payment thereof was
subsequently stopped by Nicolas and Que was unable to encash them. Nicolas explained later that he had
ordered the "stop payment" because of defects in the articles sold which despite his requests Que had not
corrected. Que for his part argued that the allegedly defective articles were never returned to him until
after he had filed the charge for estafa and that Nicolas had earlier merely ignored his complaints about
the dishonored checks.
The original decision written by the late Judge Benigno M. Puno held in favor of the plaintiff and awarded
him the total amount of P80,500.00 in moral, exemplary, and nominal damages plus a P4,000.00 attorney's

fee and the costs of the suit. 5 The finding was that the defendant had acted maliciously in filing the estafa
charge and in alleging that the plaintiff had issued the dishonored checks with deceit aforethought.
The decision was served on the petitioner on November 8, 1977. 6 He filed a motion for reconsideration,
which was denied on November 3, 1978, by Judge Oscar C. Fernandez, who had succeeded Judge
Puno. 7 On November 15, 1978, the petitioner filed his notice of appeal and appeal bond, followed two
days later by his record on appeal, which was opposed by the private respondent. 8 On November 29,
1978, Nicolas filed a motion for execution pending appeal. 9 On December 29, 1978, Que filed a motion to
stay the running of the period for appeal and leave to file a second motion for reconsideration within a
period of thirty days. The trial court granted an extension up to January 29, 1978. 10 The second motion for
reconsideration was filed on that date and on the basis thereof the trial court rendered its amended decision
dated February 21, 1978, 11 which reversed the original decision penned by Judge Puno. It also awarded
P10,000.00 moral damages to Que on his counterclaim. Thus it was that Nicolas, the would-be-appellee,
became himself the appellant in the respondent court.
In his appeal, the private respondent contended that the amended decision rendered by Judge Fernandez
was null and void because the trial court lost jurisdiction over the case when the petitioner filed his notice
of appeal, appeal bond and record on appeal. Assuming the appeal had not yet been perfected, the trial
judge nevertheless could not have acted on the second motion for reconsideration because it did not
contain any notice of hearing and was also filed beyond the thirty-day extension prayed for by the
petitioner himself. There was the further contention that the second motion for reconsideration was pro
forma and as "a mere scrap of paper" did not suspend the running of the reglementary period for appeal . 12
The first objection is clearly without merit as it is not disputed that the record on appeal had not yet been
approved by the trial court and in fact had been opposed by the private respondent himself. The trial court
had not yet lost jurisdiction over the case because Rule 41, Section 9, of the Rules of Court provides:
Sec. 9. When appeal deemed perfected, effect thereof If the notice of appeal
bond and the record on appeal, the appeal bond and the record on appeal have been
filed in due time, the appeal is deemed perfected upon the approval of the record on
appeal and of the appeal bond other than a cash bond, and thereafter the trial court
loses its jurisdiction over the case...
While it is conceded that the motion for reconsideration did not contain any notice of hearing, it is also
true that the private respondent was notified of such hearing by the trial court and that his counsel
appeared thereat, to reiterate his position that the second 13 motion was null and void. It seems to us that in
opting not to oppose the same on the merits, the private respondent was relying too much on a
technicality. As for the claimed tardiness, the respondent court correctly ruled that although the petitioner
had asked for an extension of thirty days, which would have ended on January 28, 1979, the recorded fact
was that the extension granted was up to January 29, 1979. The motion was filed on this date and so it
could not be faulted for tardiness.
On the last ground, however, the respondent court 14 sustained the private respondent. It held that the
second motion for reconsideration should have been denied for being pro forma as it was a mere
reiteration of the issues previously raised and already decided by the trial court. Accordingly, it annulled
the amended decision based on the second motion for reconsideration and reinstated the original decision
of Judge Puno.

The Court has carefully gone over the first and the second motions for reconsideration and cannot agree
with the respondent court that the latter simply reproduces the issues already raised and resolved in the
first motion. We find that the second motion not only restates and reargues the first motion but also
amplifies the same; and more than that, it also invokes and supports other substantial grounds not earlier
raised in the first motion.
In the first motion, 15 the petitioner argued that there was probable cause to justify his filing of the
complaint for estafa and that he had not been motivated by malice; that the filing of the complaint for
malicious prosecution in Bulacan was intended to harass him because the plaintiff was a resident of
Caloocan City; and that there was no basis for the award of damages. In the second motion, 16 the
petitioner augmented his claim that he had not filed the estafa charge with malice; that he had probable
cause because the defendant had not gone beyond his own self-serving statements to prove that he had
stopped payment of the checks because the goods delivered to him were defective; that the mere dismissal
of the charge in the fiscal's office was not a ground for damages nor did it constitute an actionable wrong;
and that the award of damages was not justified.
While some of the grounds raised in the first motion were admittedly also invoked in the second motion,
the purpose was evidently to reinforce the arguments thereon; and, no less significantly, the additional
issues raised were seriously argued and supported with authorities. It is therefore incorrect to say that the
second motion for reconsideration was a mere repetition of the first motion and so should not have been
accepted by the trial court.
Coming now to the substantive issues, we observe that the declared nullity of the second motion for
reconsideration was the sole basis of the respondent court in setting aside the amended decision of Judge
Fernandez and reinstating the original decision of Judge Puno. The more important question of whether or
not the petitioner had instituted a malicious prosecution of the private respondent was not resolved as it
was felt no longer necessary to do so. But as we have here ruled that the second motion for
reconsideration was not merely pro forma it should follow that that important substantive question raised
by the appellant must still be addressed and decided.
Normally, the resolution of this question should be undertaken by the respondent court, to which this case
ought to be remanded for further proceedings on the matter. However, considering the time this case has
been pending since it was commenced in 1976 with the filing of the complaint for damages, and the
pertinent records being available for direct examination and study by the Court, we deem it necessary and
expedient to resolve the question ourselves, that this case may be decided once and for all without further
delay.
In the amended decision that reversed the original decision awarding damages to the private respondent,
Judge Fernandez declared:
'In awarding plaintiff damages and attorney's fees in the total amount of
P80,900.00, by way of moral, nominal and exemplary damages and attorney's fees,
the Court overlooked the ruling that failure in suit is not per se an actionable wrong,
that adverse result of an action does not per se make the act wrongful and subject
the actor to payment of moral damages, for the law could not have meant to impose
a penalty of a right to litigate, the right so precious that moral damages may be
charged to those who exercise it erroneously; that reliance in good faith to counsel's
advice given after a full and fair statement of all the facts to the attorney, does not
render the party liable for damages and that it is immaterial that the attorney's

advice is unsound or erroneous; and that where there is no clear showing of malice
on the part of petitioner in filing the action, the worries and anxiety suffered by
respondent are usually caused to the party haled into a court as a defendant, and
there is no sufficient justification for awarding of damages.
The resolution of dismissal by the Fiscal's office of Caloocan City is not tantamount
to a decision in the sense that the proceedings had therein were merely summary in
nature as the title of the proceeding 'preliminary investigation' so connotes. As a
preliminary proceeding, it lacks the thoroughness and rigidity of an ordinary trial.
The investigating fiscal was merely called upon to determine at first instance
whether or not there exists a prima facie case to justify the filing of an infromation
in court.
'Viewed in the light of the foregoing, the Court so believes that the lone self-serving
testimony of plaintiff is insufficient to justify the award of the fabulous sum of
P80,900.00 by way of moral, nominal and exemplary damages and attorney's fees.
On the other hand, the Court is convinced that defendant had proven that of the sum
of P7,600.00 covered by the five bouncing checks issued to him by plaintiff, at least
P4,600.00 remains unpaid up to now.
The defense of plaintiff that 198 pieces of canvass strollers which he received from
defendant were defective, is in reality a lame and shallow excuse for plaintiff's non
payment of his truly, just, valid, legal and moral obligation to defendant.**
We take note at this point of the jurisprudence cited by the private respondent regarding the inhibitions
that ought to be observed by a judge in reviewing the decision of his predecessor who conducted the trial
and had the opportunity to observe the demeanor of the witnesses and to test their credibility firsthand. We
affirm the rule announced in Miranda v. Court of Appeals 17 that the original decision should not be lightly
revised. Nevertheless, the rule is not inflexible and ought not to be applied where an objective reexamination of the facts and the applicable laws dictates a reversal of the former judgment in the interest
of justice. Decisions are after all not infallible, and much less are they immutable, more so if, as in the
present case, they have not yet become final and executory.
The question is not really whether or not Judge Fernandez had the authority to reverse the decision of
Judge Puno but whether or not the reversal was correct.
A study of the appealed amended decision shows that it was not arbitrarily reached by Judge Fernandez.
On the contrary, the detailed assessment of the facts in light of the pertinent laws shows that the
conclusions of the trial court were the result of a careful study of the record, as befitted a judge who was
in effect reviewing the verdict of a colleague. In our view, the private respondent has not shown that Judge
Fernandez committed any reversible error when on the basis of his own appraisal of the case he found for
the petitioner and reversed the original decision of Judge Puno.
As early as in 1932, in Buchanan v. Esteban, 18 this Court had already stressed that "one cannot be held
liable in damages for maliciously instituting a prosecution where he acted with probable cause." As Justice
Moreland explained in that case:

Probable cause is the existence of such facts and circumstances as would excite the
belief, in a reasonable mind, acting on the facts within the knowledge of the
prosecutor, that the person charged was guilty of the crime for which be was
prosecuted. The general rule is well settled that one cannot be held liable in
damages for maliciously instituting a prosecution where he acted with probable
cause. In other words, a suit will lie only in cases where a legal prosecution has
been carried on without probable cause. And the reason for the rule as stated by
Blackstone, is that it would be a very great discouragement to public justice if
prosecutors, who had a tolerable ground of suspicion, were liable to be sued at law
when their indictments miscarried.
xxx xxx xxx
'Under the Spanish Law, the element of probable cause was not treated separately
from that of malice, as under the American Law. When a complaint was laid and
there was probable cause to believe that the person charged had committed the acts
complained of, although, as a matter of fact, he had not, the complainant was fully
protected, but not so much on the theory of probable cause as on the ground that,
under such circumstances, there was no intent to accuse falsely. If the charge,
although false, was made with an honest belief in its truth and justice, and there
were reasonable grounds on which such a belief could be founded, the accusation
could not be held to have been false in the legal sense.' (Italics supplied.)
In the case at bar, it is indisputable that the five checks issued by the private respondent had been
dishonored and that the drawer had failed to make them good despite the protests of the petitioner. Nicolas
had merely ignored him. It is also a matter of record that the checks were post-dated, which made the
petitioner assume that at the time they were issued the private respondent did not really have sufficient
funds for their encashment. It could be, as the original decision assumed, that the checks were in the
nature of promissory notes, to be made good when the articles delivered met with the drawer's approval.
However, considering that the checks could not be encashed and the supposedly defective goods had not
been returned by the drawer, the petitioner had reason to believe when he filed his complaint that the
buyer had at the outset intended to deceive him.
The record shows the the criminal charge for estafa was filed by the petitioner with the fiscal's office on
October 8, 1975, 19 and that the supposedly defective articles were returned by the private respondent to
the former's driver only on October 13, 1975. 20 The only evidence that the articles were defective was the
testimony of the private respondent himself, who claimed that the buttons on the canvass strollers were
misplaced. Considering that Nicolas and Que had apparently been cordial until then and that they were
businessmen involved in a symbiotic relationship, the Court feels that what Nicolas would or should have
done was request the petitioner to correct the claimed defects instead of arbitrarily stopping payment on
the checks in question. Strangely, what the private respondent did instead was simply cut short a mutually
profitable association with this hostile act. The petitioner had to find out for himself that the checks had
been dishonored on orders of the drawer.
Except for his own allegations, there is no evidence that Nicolas asked or, if necessary, demanded the
repair of the strollers. Neither is there any evidence that he had warned Que that payment on the checks
would be stopped unless the repairs were undertaken. The private respondent says that he did all this by
telephone. 21 but this self-serving statement is denied by the petitioner. 22 As the Court itself sees it,
Nicolas, while retaining the strollers which had been delivered to him on the strength of his post-dated

checks, simply issued the stop payment order without even previous notice to the petitioner. The petitioner
alleged that he complained about the dishonored checks-also verbally, over the telephone but the private
respondent simply ignored him. 23 It is noteworthy that, by contrast, this averment of the petitioner was not
denied by the private respondent.
The presence of probable cause signifies as a legal consequence the absence of malice. It is evident that
the petitioner was not motivated by ill feeling but only by an anxiety to protect his his rights when he filed
the criminal complaint for estafa with the fiscal's office. If he averred that the private respondent had no
funds in the bank when he issued the postdated checks and intended to cheat the payee, it was because the
circumstances of the case as Que saw them led him to this conclusion. Even if the fiscal found that no
deceit was involved and that the petitioner's claim was unfounded, the mistaken charge was nonetheless,
in the legal sense, not malicious.
As the Court has held:
To constitute malicious prosecution, there must be proof that the prosecution was
prompted by a sinister design to vex and humiliate a person that it was initiated
deliberately by the defendant knowing that his charges were false and
groundless. Concededly, the mere act of submitting a case to the authorities for
prosecution does not make one liable for malicious prosecution 24 (Italics supplied.)
We agree with the petitioner that the mere dismissal of the criminal complaint by the fiscal's office did not
create a cause of action because the proceedings therein did not involve an exhaustive examination of the
elements of malicious prosecution. What was inquired into in that preliminary investigation was whether
or not there was aprima facie showing of estafa that would justify the filing of the corresponding
information. Nowhere in the fiscal's investigation report is there any statement imputing malice to the
complainant nor could it have as this was not the matter in issue.
The Court is not unaware of the common tactic of filing complaints for estafa in the fiscal's office in hopes
that fear of criminal prosecution will compel the debtor to settle his civil obligation. Fortunately, the fiscal
has often seen through this maneuver and resisted this none-too-clever effort to make his office a
collection agency for the complainant. In view of the antecedents of the case at bar, however, we are
satisfied that the criminal complaint filed by the petitioner was not a mere ploy to enforce the payment of
his account by Nicolas. There was here a genuine protest over the abrupt and suspicious order to stop the
encashment of the checks issued to him by the private respondent.
In a free society, controversies are heard and settled under the rule of law in the forum of the courts of
justice. It is one of the virtues of our system of government that if a person feels he has been aggrieved, he
does not have to take the law into his hands or resort to the use of force for the vindication of his injury.
The courts are there to hear and act on his complaint. The right to litigate is an escape valve to relieve the
pressures of personal disagreements that might otherwise explode in physical confrontation, It is necessary
not only for upholding one's claims when they are unjustly denied but also for the maintenance of peace if
not goodwill among incipient antagonists. Without the right to litigate, conflicting claims cannot be
examined and resolved in accordance with one of the primary purposes of government, which is to
provide for a just and orderly society.
As the Court has held:

While we must look upon the plight of hapless victims of unfounded and malicious prosecutions with
tolerance and sympathy, sound principles of justice and public policy dictate that persons shall have free
resort to the courts for redress of wrongs and vindications of their rights without fear of later on standing
trial for damages whereby lack of sufficient evidence, legal technicalities or a different interpretation of
the laws on the matter the case would lose ground and therein defendants acquitted. Proof and motive that
the prosecution or institution of the action was prompted by a sinister design to vex and humiliate a person
and to cast dishonor and disgrace must be clearly and preponderantly established to entitle the victims to
damages and other rights granted by law; otherwise, there would always be a civil action for damages
after every prosecution's failure to prove its cause resulting in the consequent acquittal of the accused
therein. 25
Furthermore:
The adverse result of an action does not per se make the wrongful and subject the
actor to the payment of moral damages. The law could not have meant to impose a
penalty on the right to litigate, such right is so precious that moral damages may not
be charged on those who may exercise it erroneously. 26
There is in fact a stronger suggestion of malice in the circumstance that the private respondent filed his
complaint for damages in Valenzuela, Bulacan, as his alleged residence, notwithstanding that his place of
business, in which he had dealings with the petitioner, was Caloocan City. The Court finds the petitioner's
claim of harassment more plausible. However, inasmuch as good faith is presumed, and applying this
presumption both to the petitioner and the private respondent, we hereby rule that, absent sufficient
rebuttable evidence, neither of them is guilty of malice in their mutual relations.
There remains the issue of the actual damages, which the amended decision awarded in the sum of
P4,600.00, representing the cost of the strollers not yet paid for by the private respondent. The evidence
shows that these items were returned, albeit belatedly, for which the petitioner's driver had issued a receipt
to Nicolas. The private respondent questioned this award in his appeal and argued his challenge in his
appellant's brief, but the petitioner for his part offered no rebuttal and did not even file the appellee's
brief. 27 In view of this, we hold that the said award should for lack of basis be, as it is hereby, disallowed.
The acts of the petitioner and the private respondent have in the view of the Court been far from
exemplary. The petitioner could have exercised a little more diligence in ascertaining the facts before
filing the criminal complaint in the fiscal's office and provoking all this legal conflict. The private
respondent, on the other hand, exhibited an undue belligerence that naturally excited the suspicions of the
petitioner and later exacerbated their relations when he filed bis own complaint in Bulacan instead of
Caloocan City.
In the exercise of its discretion, the Court denies both parties their respective claims for damages and
holds that each of them must bear the financial consequences of bis own acts, including the litigation
expenses. The damages awarded in the original and amended decisions are all disallowed.
WHEREFORE, the decision of the respondent court dated March 12, 1984, is SET ASIDE and the
amended decision of the trial court dated February 21, 1979, is REINSTATED as above modified. This
decision is immediately executory.

[G.R. No. 107019. March 20, 1997]


FRANKLIN M. DRILON, AURELIO C. TRAMPE, GREGORIO A. ARIZALA, CESAR M. SOLIS
and FERDINAND R. ABESAMIS, petitioners, vs. COURT OF APPEALS, HON.
GEORGE C. MACLI-ING, in his capacity as Presiding Judge of Branch 100 of the
Regional Trial Court of Quezon City, and HOMOBONO ADAZA, respondents.

plaintiff versus Franklin Drilon, et al., respondents. In his complaint, Adaza charged petitioners with
engaging in a deliberate, willful and malicious experimentation by filing against him a charge of rebellion
complexed with murder and frustrated murder when petitioners, according to Adaza, were fully aware of
the non-existence of such crime in the statute books.
On October 15, 1990, petitioners filed a Motion to Dismiss Adazas complaint on the ground that
said complaint states no actionable wrong constituting a valid cause of action against petitioners.

DECISION
HERMOSISIMA, JR., J.:

On February 8, 1991, public respondent judge issued an Order [8] denying petitioners Motion to
Dismiss. In the same Order, petitioners were required to file their answer to the complaint within fifteen
(15) days from receipt of the Order.

Petitioners seek the reversal of the Resolutions of respondent Court of Appeals in CA-G.R. SP No.
25080 dated January 31, 1992 and September 2, 1992 affirming the Orders, dated February 8, 1991 and
May 14, 1991, of respondent Judge George C. Macli-ing which denied herein petitioners Motion to
Dismiss the complaint filed in Civil Case No. Q-90-6073 by respondent Homobono Adaza.

Petitioners moved for a reconsideration of the Order of denial, but the same was likewise denied by
respondent Judge in another Order dated May 14, 1991.[9] The subsequent Order reiterated that petitioners
file their responsive pleading within the prescribed reglementary period.

The facts are not in dispute.


In a letter-complaint to then Secretary of Justice Franklin Drilon [1] dated March 20, 1990, General
Renato de Villa,[2] who was then the Chief of Staff of the Armed Forces of the Philippines, requested the
Department of Justice to order the investigation of several individuals named therein, including herein
private respondent Homobono Adaza, for their alleged participation in the failed December 1989 coup
detat. The letter-complaint was based on the affidavit of Brigadier General Alejandro Galido, Captain
Oscarlito Mapalo, Colonel Juan Mamorno, Colonel Hernani Figueroa and Major Eduardo Sebastian.
Gen. de Villas letter-complaint with its annexes was referred for preliminary inquiry to the Special
Composite Team of Prosecutors created pursuant to Department of Justice Order No. 5 dated January 10,
1990. Petitioner then Assistant Chief State Prosecutor Aurelio Trampe, [3] the Team Leader, finding
sufficient basis to continue the inquiry, issued a subpoena to the individuals named in the letter-complaint,
Adaza included, and assigned the case for preliminary investigation to a panel of investigators composed
of prosecutors George Arizala, as Chairman, and Ferdinand Abesamis and Cesar Solis as members. The
case was docketed as I.S. No. DOJ-SC-90-013.
On April 17, 1990, the panel released its findings, thru a Resolution, which reads:
PREMISES CONSIDERED, we find and so hold that there is probable cause to hold herein respondents
for trial for the crime of REBELLION WITH MURDER AND FRUSTRATED MURDER. Hence we
respectfully recommend the filing of the corresponding information against them in court. [4]

Instead of filing their answer as ordered, petitioners filed on June 5, 1991 a petition
for certiorari under Rule 65 before the Court of Appeals, docketed as CA-G.R. No. 25080, alleging grave
abuse of discretion on the part of the respondent Judge in ruling that sufficient cause of action exists to
warrant a full-blown hearing of the case filed by Adaza and thus denying petitioners Motion to Dismiss.
In its Resolution promulgated on January 31, 1992, the appellate court dismissed the petition for
lack of merit and ordered respondent Judge to proceed with the trial of Civil Case No. Q-90-6073. [10] A
Motion for Reconsideration having been subsequently filed on February 28, 1992, the court a quo denied
the same in a Resolution dated September 2, 1992.[11]
Hence, this petition, dated October 9, 1992, pleading this Court to exercise its power of review
under Rule 45 of the Revised Rules of Court.
On January 13, 1993, however, this Court, thru the Second Division, dismissed the petition for
failure to comply with Revised Circular No. 1-88, particularly the requirement on the payment of the
prescribed docketing fees.[12]
On March 8, 1993,[13] we reinstated the petition and required the respondents to comment on the
aforesaid petition. In the same Resolution, a temporary restraining order was issued by this Court
enjoining respondent Judge from further proceeding with Civil Case No. Q-90-6073 until further orders
from this Court.
The petition has merit.

The above Resolution became the basis for the filing of an Information, [5] dated April 18, 1990,
charging private respondent with the crime of rebellion with murder and frustrated murder before the
Regional Trial Court of Quezon City, with no recommendation as to bail. [6]
Feeling aggrieved by the institution of these proceedings against him, private respondent Adaza
filed a complaint for damages,[7]dated July 11, 1990, before Branch 100 of the Regional Trial Court of
Quezon City. The complaint was docketed as Civil Case No. Q-90-6073 entitled, Homobono Adaza,

In his Comment,[14] dated March 23, 1993, respondent Adaza maintains that his claim before the
trial court was merely a suit for damages based on tort by reason of petitioners various malfeasance,
misfeasance and nonfeasance in office, as well as for violation by the petitioners of Section 3 (e) of
Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act. It was not a suit for
malicious prosecution.

Private respondent is taking us for a ride. A cursory perusal of the complaint filed by Adaza before
respondent Judge George Macli-ing reveals that it is one for malicious prosecution against the petitioners
for the latters filing of the charge against him of rebellion with murder and frustrated murder. An
examination of the records would show that this latest posture as to the nature of his cause of action is
only being raised for the first time on appeal. Nowhere in his complaint filed with the trial court did
respondent Adaza allege that his action is one based on tort or on Section 3 (e) of Republic Act No.
3019. Such a change of theory cannot be allowed. When a party adopts a certain theory in the court
below, he will not be permitted to change his theory on appeal, for to permit him to do so would not only
be unfair to the other party but it would also be offensive to the basic rules of fair play, justice and due
process.[15] Any member of the Bar, even if not too schooled in the art of litigation, would easily discern
that Adazas complaint is no doubt a suit for damages for malicious prosecution against the herein
petitioners. Unfortunately, however, his complaint filed with the trial court suffers from a fatal infirmity -that of failure to state a cause of action -- and should have been dismissed right from the start. We shall
show why.
The term malicious prosecution has been defined in various ways. In American jurisdiction, it is
defined as:
One begun in malice without probable cause to believe the charges can be sustained (Eustace v. Dechter,
28 Cal. App. 2d. 706,83 P. 2d. 525). Instituted with intention of injuring defendant and without probable
cause, and which terminates in favor of the person prosecuted. For this injury an action on the case lies,
called the action of malicious prosecution (Hicks v. Brantley, 29 S.E. 459, 102 Ga. 264; Eggett v. Allen,
96 N.W. 803, 119 Wis. 625).[16]
In Philippine jurisdiction, it has been defined as:
An action for damages brought by one against whom a criminal prosecution, civil suit, or other legal
proceeding has been instituted maliciously and without probable cause, after the termination of such
prosecution, suit, or other proceeding in favor of the defendant therein. The gist of the action is the putting
of legal process in force, regularly, for the mere purpose of vexation or injury (Cabasaan v. Anota, 14169R, November 19, 1956).[17]
The statutory basis for a civil action for damages for malicious prosecution are found in the
provisions of the New Civil Code on Human Relations and on damages particularly Articles 19, 20, 21,
26, 29, 32, 33, 35, 2217 and 2219 (8).[18] To constitute malicious prosecution, however, there must be proof
that the prosecution was prompted by a sinister design to vex and humiliate a person, and that it was
initiated deliberately by the defendant knowing that his charges were false and groundless. Concededly,
the mere act of submitting a case to the authorities for prosecution does not make one liable for malicious
prosecution.[19] Thus, in order for a malicious prosecution suit to prosper, the plaintiff must prove three (3)
elements: (1) the fact of the prosecution and the further fact that the defendant was himself the prosecutor
and that the action finally terminated with an acquittal; (2) that in bringing the action, the prosecutor acted
without probable cause; and (3) that the prosecutor was actuated or impelled by legal malice, that is by
improper or sinister motive.[20] All these requisites must concur.
Judging from the face of the complaint itself filed by Adaza against the herein petitioners, none of
the foregoing requisites have been alleged therein, thus rendering the complaint dismissible on the ground
of failure to state a cause of action under Section 1 (g), Rule 16 of the Revised Rules of Court.

There is nothing in the records which shows, and the complaint does not allege, that Criminal Case
No. Q-90-11855, filed by the petitioners against respondent Adaza for Rebellion with Murder and
Frustrated Murder, has been finally terminated and therein accused Adaza acquitted of the charge. Not
even Adaza himself, thru counsel, makes any positive asseveration on this aspect that would establish his
acquittal. Insofar as Criminal Case No. Q-90-11855 is concerned, what appears clear from the records
only is that respondent has been discharged on a writ of habeas corpus and granted bail. [21] This is not,
however, considered the termination of the action contemplated under Philippine jurisdiction to warrant
the institution of a malicious prosecution suit against those responsible for the filing of the informaion
against him.
The complaint likewise does not make any allegation that the prosecution acted without probable
cause in filing the criminal information dated April 18, 1990 for rebellion with murder and frustrated
murder. Elementarily defined, probable cause is the existence of such facts and circumstances as would
excite the belief, in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the
person charged was guilty of the crime for which he was prosecuted. It is well-settled that one cannot be
held liable for maliciously instituting a prosecution where one has acted with probable cause. Elsewise
stated, a suit for malicious prosecution will lie only in cases where a legal prosecution has been carried on
without probable cause. The reason for this rule is that it would be a very great discouragement to public
justice, if prosecutors, who had tolerable ground of suspicion, were liable to be sued at law when their
indictment miscarried.[22]
In the case under consideration, the decision of the Special Team of Prosecutors to file the
information for rebellion with murder and frustrated murder against respondent Adaza, among others,
cannot be dismissed as the mere product of whim or caprice on the part of the prosecutors who conducted
the preliminary investigation. Said decision was fully justified in an eighteen (18)-page Resolution dated
April 17, 1990.[23] While it is true that the petitioners were fully aware of the prevailing jurisprudence
enunciated in People v. Hernandez,[24] which proscribes the complexing of murder and other common
crimes with rebellion, petitioners were of the honest conviction that the Hernandez Case can be
differentiated from the present case. The petitioners thus argued:
Of course we are aware of the ruling in People vs. Hernandez, 99 Phil. 515, which held that common
crimes like murder, arson, etc. are absorbed by rebellion. However, the Hernandez case is different from
the present case before us. In the Hernandez case, the common crimes of murder, arson, etc. were found
by the fiscal to have been committed as a necessary means to commit rebellion, or in furtherance
thereof. Thus, the fiscal filed an information for rebellion alleging those common crimes as a necessary
means of committing the offense charged under the second part of Article 48, RPC.
We, however, find no occasion to apply the Hernandez ruling since as intimated above, the crimes of
murder and frustrated murder in this case were absolutely unnecessary to commit rebellion although they
were the natural consequences of the unlawful bombing. Hence, the applicable provision is the first part of
Article 48 of the RPC.[25]
While the Supreme Court in the case of Enrile v. Salazar,[26] addressing the issue of whether or not
the Hernandez doctrine is still good law, in a 10-3 vote, did not sustain the position espoused by the herein
petitioners on the matter, three justices[27] felt the need to re-study the Hernandez ruling in light of presentday developments, among whom was then Chief Justice Marcelo Fernan who wrote a dissenting opinion
in this wise:

I am constrained to write this separate opinion on what seems to be a rigid adherence to the 1956 ruling of
the Court. The numerous challenges to the doctrine enunciated in the case of People vs. Hernandez, 99
Phil. 515 (1956), should at once demonstrate the need to redefine the applicability of said doctrine so as to
make it conformable with accepted and well-settled principles of criminal law and jurisprudence.

this regard is only too obvious to have escaped respondent judges attention. Paragraph 14 of the complaint
which states:

To my mind, the Hernandez doctrine should not be interpreted as an all-embracing authority for the rule
that all common crimes committed on the occasion, or in furtherance of, or in connection with, rebellion
are absorbed by the latter. To that extent, I cannot go along with the view of the majority in the instant
case that Hernandez remains binding doctrine operating to prohibit the complexing of rebellion with any
other offense committed on the occasion thereof, either as a means necessary to its commission or as an
unintended effect of an activity that constitutes rebellion (p. 9, Decision).

14. The malicious prosecution, nay persecution, of plaintiff for a non-existent crime had severely injured
and besmirched plaintiffs name and reputation and forever stigmatized his stature as a public figure,
thereby causing him extreme physical suffering, serious anxiety, mental anguish, moral shock and social
humiliation.[34]

The Hernandez doctrine has served the purpose for which it was applied by the Court in 1956 during the
communist-inspired rebellion of the Huks. The changes in our society in the span of 34 years since then
have far-reaching effects on the all-embracing applicability of the doctrine considering the emergence of
alternative modes of seizing the powers of the duly-constituted Government not contemplated in Articles
134 and 135 of the Revised Penal Code and their consequent effects on the lives of our people. The
doctrine was good law then, but I believe that there is a certain aspect of the Hernandez doctrine that
needs clarification.[28]
Apparently, not even the Supreme Court then was of one mind in debunking the theory being
advanced by the petitioners in this case, some of whom were also the petitioners in the Enrile case.
Nevertheless, we held in Enrile that the Information filed therein properly charged an offense -- that of
simple rebellion --[29] and thereupon ordered the remand of the case to the trial court for the prosecution of
the named accused[30] in the Information therein. Following this lead, the Information against Adaza in
Criminmal Case No. Q-90-11855 was not quashed, but was instead treated likewise as charging the crime
of simple rebellion.
A doubtful or difficult question of law may become the basis of good faith and, in this regard, the
law always accords to public officials the presumption of good faith and regularity in the performance of
official duties.[31] Any person who seeks to establish otherwise has the burden of proving bad faith or illmotive. Here, since the petitioners were of the honest conviction that there was probable cause to hold
respondent Adaza for trial for the crime of rebellion with murder and frustrated murder, and since Adaza
himself, through counsel, did not allege in his complaint lack of probable cause, we find that the
petitioners cannot be held liable for malicious prosecution. Needless to say, probable cause was not
wanting in the institution of Criminal Case No. Q-90-11855 against Adaza.
As to the requirement that the prosecutor must be impelled by malice in bringing the unfounded
action, suffice it to state that the presence of probable cause signifies, as a legal consequence, the absence
of malice.[32] At the risk of being repetitious, it is evident in this case that petitioners were not motivated
by malicious intent or by a sinister design to unduly harass private respondent, but only by a well-founded
belief that respondent Adaza can be held for trial for the crime alleged in the information.
All told, the complaint, dated July 11, 1990, filed by Adaza before Branch 100 of the Regional Trial
Court against the petitioners does not allege facts sufficient to constitute a cause of action for malicious
prosecution. Lack of cause of action, as a ground for a motion to dismiss under Section 1 (g), Rule 16 of
the Revised Rules of Court, must appear on the face of the complaint itself, meaning that it must be
determined from the allegations of the complaint and from none other.[33] The infirmity of the complaint in

xxxxxxxxx

is a mere conclusion of law and is not an averment or allegation of ultimate facts. It does not, therefore,
aid in any wise the complaint in setting forth a valid cause of action against the petitioners.
It is worthy to note that this case was elevated to the public respondent Court of Appeals and now
to this Court because of respondent Judge Macli-ings denial of petitioners motion to dismiss the Adaza
complaint. The ordinary procedure, as a general rule, is that petitioners should have filed an answer, go to
trial, and if the decision is adverse, reiterate the issue on appeal. [35] This general rule, however, is subject to
certain exceptions, among which are, if the court denying the motion to dismiss acts without or in excess
of jurisdiction or with grave abuse of discretion, in which case certiorari under Rule 65 may be availed
of. The reason is that it would be unfair to require the defendants (petitioners in this case) to undergo the
ordeal and expense of trial under such circumstances, because the remedy of appeal then would then not
be plain and adequate.[36] Judge Macli-ing committed grave abuse of discretion in denying petitioners
motion to dismiss the Adaza complaint, and thus public respondent Court of Appeals should have issued
the writ of certiorariprayed for by the petitioners and annulled the February 8, 1991 and May 14, 1991
Orders of respondent Judge. It was grievous error on the part of the court a quo not to have done so. This
has to be corrected. Respondent Adazas baseless action cannot be sustained for this would unjustly compel
the petitioners to needlessly go through a protracted trial and thereby unduly burden the court with one
more futile and inconsequential case.
WHEREFORE, the petition is GRANTED. The Resolutions of respondent Court of Appeals dated
January 31, 1992 and September 2, 1992 affirming the February 8, 1991 and May 14, 1991 Orders of
respondent Judge George C. Macli-ing are all hereby NULLIFIED AND SET ASIDE. Respondent Judge
is DIRECTED to take no further action on Civil Case No. Q-90-6073 except to DISMISS the same.
SO ORDERED.

G.R. No. L-51832 April 26, 1989

b) Exemplary damages, P1,000.00 and

RAFAEL PATRICIO, petitioner,


vs.
THE HONORABLE OSCAR LEVISTE, JUDGE, CFI CAPIZ, BRANCH II and BIENVENIDO
BACALOCOS,respondents.

c) Attorney's fees, P2,000.00.

Stephen C. Arceo for petitioner.


Isagani V. Roblete for private respondent.

PADILLA, J.:
Petition for review on certiorari of the Order 1 of the Court of First Instance of Capiz, Branch II, on the
motion for reconsideration flied by private respondent Bienvenido Bacalocos, dismissing the complaint
for damages against the latter, docketed as Civil Case No. V-3937.
Petitioner Rafael Patricio, an ordained Catholic priest, and actively engaged in social and civic affairs in
Pilar, Capiz, where he is residing, was appointed Director General of the 1976 Religious and Municipal
Town Fiesta of Pilar, Capiz.
On 16 May 1976 at about 10:00 o'clock in the evening, while a benefit dance was on-going in connection
with the celebration of the town fiesta, petitioner together with two (2) policemen were posted near the
gate of the public auditorium to check on the assigned watchers of the gate. Private respondent Bienvenido
Bacalocos, President of the Association of Barangay Captains of Pilar, Capiz and a member of the
Sangguniang Bayan, who was in a state of drunkenness and standing near the same gate together with his
companions, struck a bottle of beer on the table causing an injury on his hand which started to bleed.
Then, he approached petitioner in a hostile manner and asked the latter if he had seen his wounded hand,
and before petitioner could respond, private respondent, without provocation, hit petitioner's face with his
bloodied hand. As a consequence, a commotion ensued and private respondent was brought by the
policemen to the municipal building. 2
As a result of the incident, a criminal complaint for "Slander by Deed was flied by petitioner with the
Municipal Trial Court of Pilar, Capiz, docketed as Criminal Case No. 2228, but the same was
dismissed. 3 Subsequently, a complaint for damages was filed by petitioner with the court a quo. In a
decision 4 dated 18 April 1978, the court ruled in favor of herein petitioner (as complainant), holding
private respondent liable to the former for moral damages as a result of the physical suffering, moral
shock and social humiliation caused by private respondent's act of hitting petitioner on the face in public.
The dispositive part of the decision reads as follows:
WHEREFORE, the Court orders defendant to pay plaintiff the damages as follows:
a) Moral damages of P10,000.00

SO ORDERED. 5
On 9 June 1978, petitioner filed a motion for execution of judgment, alleging that the 18 April 1978
decision had become final and executory after the lapse of thirty (30) days from receipt thereof by private
respondent, without any motion for reconsideration or appeal having been filed. 6 However, said motion
was denied by the court a quo on the ground that there was a pending motion for reconsideration filed by
private respondent. 7 Subsequently, private respondent filed a supplemental motion for
reconsideration 8 and the court ordered petitioner to file a reply (opposition) thereto. 9 In compliance,
petitioner flied a reply (opposition) to the motion for reconsideration, alleging that the filing of said
motion and supplement thereto was without notice to the adverse party and proof of service, hence, the
decision sought to be reconsidered had already become final and unappealable. 10
Private respondent filed a rejoinder (reply) and a manifestation stating that petitioner was duly served with
a copy of said motion for reconsideration by ordinary mail, attaching thereto the affidavit of Godofredo
Almazol who stated that he mailed the envelope to counsel for herein petitioner. 11 The court a quo then
scheduled the motion for oral argument and the parties were allowed to extensively argue their respective
causes.
On 3 August 1979, an order 12 of dismissal of the petitioner's complaint was issued by the trial court, thus

ORDER
This is a motion for reconsideration of the decision of this Court dated April 18,
1978, filed by counsel for defendant on May 18, 1978.
In view of the recent trend in the Supreme Court to liberally construe the Rules, and
in view of Section 2, Rule 1, the Court resolves to give due course to the motion.
Upon review of the facts of the case, it appears and the Court finds merit in the
motion for reconsideration, particularly noting that there is indeed no showing of
compensatory damages being proved.
WHEREFORE, tills Court reconsiders its decision to conform to the facts and the
law, namely, that moral and exemplary damages, in order to merit, the plaintiff
ought to have proven actual or compensatory damages.
WHEREFORE, this case is ordered dismissed.
SO ORDERED.

Not satisfied with said order, petitioner filed the petition at bar contending that no copy of the Motion for
consideration was served upon petitioner and no proof of service as well as notice of hearing were
attached to said motion when filed with the court a quo; thus, the motion for reconsideration did not
interrupt the running of the period to appeal. The alleged mailing of a copy of said motion by ordinary
mail did not, according to petitioner, cure the defect. Petitioner further argues that respondent's admission
that he slapped herein petitioner in public causing him physical suffering and social humiliation, entitles
the latter to moral damages. Actual and compensatory damages need not be proven before an award of
moral damages can be granted, so petitioner contends.

(5) Illegal or arbitrary detention or arrest;

On the other hand, private respondent claims that the order of the court a quo apprising petitioner of the
motion for reconsideration filed by private respondent and requiring the former to file a reply (opposition)
thereto, had cured the defect of lack of proof of service and notice of hearing of said motion for
reconsideration; and that the award of moral damages to petitioner is without basis for lack of proof of bad
faith on the part of private respondent.

(9) Acts mentioned in article 309;

With respect to the alleged lack of service on petitioner of a copy of the motion and notice of hearing and
failure to attach to the motion proof of service thereof, the general rule is that notice of motion is required
where a party has a right to resist the relief sought by the motion and principles of natural justice demand
that his rights be not affected without an opportunity to be heard. 13
In the case at bar, a copy of the motion for reconsideration was served upon petitioner, although service
was effected through ordinary mail and not by registered mail as reqired by the rules. But, petitioner was
duly given the full opportunity to be heard and to argue his case when the court a quo required him to file
a reply (opposition) to the motion for reconsideration and subsequently set the motion for oral argument.
What the law really eschews is not the lack of previous notice of hearing but the lack of opportunity to be
heard. It has been held that parties should not rely on mere technicalities which, in the interest of justice,
may be relaxed. 14The rifles of procedure should be viewed as mere tools designed to facilitate the
attainment of justice. Their strict and rigid application, which would result in technicalities that tend to
frustrate rather than promote substantial justice, must be avoided. 15 Moreover, the case should, as much
as possible, be decided on the merits and not merely on technicalities.
As to the petitioner's claim for moral damages, we find the same to be meritorious. There is no question
that moral damages may be recovered in cases where a defendant's wrongful act or omission has caused
the complainant physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation and similar injury. 16 An award of moral damages is
allowed in cases specified or analogous to those provided in Article 2219 of the Civil Code, to wit:
ART. 2219. Moral damages may be recovered in the following and analogous cases
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;

(6) Illegal search;


(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
xxx xxx xxx
Private respondent's contention that there was no bad faith on his part in slapping petitioner on the face
and that the incident was merely accidental is not tenable. It was established before the court a quo that
there was an existing feud between the families of both petitioner and private respondent and that private
respondent slapped the petitioner without provocation in the presence of several persons.
The act of private respondent in hitting petitioner on the face is contrary to morals and good customs and
caused the petitioner mental anguish, moral shock, wounded feelings and social humiliation. Private
respondent has to take full responsibility for his act and his claim that he was unaware of what he had
done to petitioner because of drunkenness is definitely no excuse and does not relieve him of his liability
to the latter.
Pursuant to Art. 21 of the Civil Code in relation to par. (10) of Art. 2219 of the same Code, "any person
who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage."
The fact that no actual or compensatory damage was proven before the trial court, does not adversely
affect petitioner's right to recover moral damages. Moral damages may be awarded in appropriate cases
referred to in the chapter on human relations of the Civil Code (Articles 19 to 36), without need of proof
that the wrongful act complained of had caused any physical injury upon the complainant. 17 It is clear
from the report of the Code Commission that the reason underlying an award of damages under Art. 21 of
the Civil Code is to compensate the injured party for the moral injury caused upon his person, thus
... . Fully sensible that there are countless gaps in the statutes, which leave so many
victims of moral wrongs helpless, even though they have actually suffered material
and moral injury, the Commission has deemed it necessary, in the interest of justice,
to incorporate in the proposed Civil Code the following rule:

(3) Seduction, abduction, rape, or other lascivious acts.

ART. 23. Any person who wilfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter for
the damage.

(4) Adultery or concubinage;

xxx xxx xxx 18

In addition to the award of moral damages, exemplary or corrective damages may be imposed upon herein
private respondent by way of example or correction for the public good. 19 Exemplary damages are
required by public policy to suppress the wanton acts of the offender. They are an antidote so that the
poison of wickedness may not run through the body politic. 20 The amount of exemplary damages need
not be proved where it is shown that plaintiff is entitled to either moral, temperate or compensatory
damages, as the case may be, 21although such award cannot be recovered as a matter of right. 22
In cases where exemplary damages are awarded to the injured party, attorney's fees are also
recoverable. 23
WHEREFORE, the petition is GRANTED. The order appealed from, dated 3 August 1979, is
REVERSED and the decision of the court a quo dated 18 April 1978 is hereby REINSTATED. With costs
against private respondent.
SO ORDERED.

G.R. No. L-48250 December 28, 1979


GRAND UNION SUPERMARKET, INC. and NELIA SANTOS FANDINO, petitioners,
vs.
JOSE J. ESPINO JR., and THE HONORABLE COURT OF APPEALS, respondents.

"Into a cubicle which was immediately adjacent to the area where deliveries to the supermarket were
being made, the plaintiff was ushered. The guard directed him to a table and gave the file to the man
seated at the desk. Another man stood beside the plaintiff. The man at the desk looked at the plaintiff and
the latter immediately explained the circumstances that led to the finding of the file in his possession. The
man at the desk pulled out a sheet of paper and began to ask plaintiff's name, age, residence and other
personal data. Plaintiff was asked to make a brief statement, and on the sheet of paper or "Incident Report"
he wrote down the following: "While talking to my aunt's maid with my wife, I put this item in my shirt
pocket. I forgot to check it out with my wife's items" (Exhibit A). Meanwhile, the plaintiff's wife joined
him and asked what had taken him so long.

GUERRERO, J.
This is a petition tor certiorari by way of appeal from the decision of the Court of Appeals 1 dated
September 26, 1977 rendered in CA-G.R. No. 55186-R entitled "Jose J. Espino, Jr., plaintiff-appellant.
versus Grand Union Supermarket, Inc. and Nelia Santos-Fandino, defendants-appellees," the dispositive
portion of which states;
WHEREFORE, the appealed judgment is hereby reversed and set aside. Defendants
are ordered to pay plaintiff-jointly and severally, the sum of Seventy-Five Thousand
Pesos (P75,000.00) by way of moral damages. Twenty-Five Thousand Pesos
(P25,000.00) as exemplary damages, and Five Thousand Pesos (P5,000.00) as
attorney's fee, Costs of both instances shall be taxed against the defendant
defendants.
The facts of the case are as stated in the decision of the respondent court to wit:
"Upon the evidence, and from the findings of the lower court, it appears that in the morning of August 22,
1970, plaintiff Jose J. Espino. Jr., a civil engineer and an executive of Procter and Gamble Philippines,
Inc., and his wife and their two daughters went to shop at the defendants' South Supermarket in Makati.
While his wife was shopping at the groceries section, plaintiff browsed around the other parts of the
market. Finding a cylindrical "rat tail" file which he needed in his hobby and had been wanting to buy,
plaintiff picked up that item from one of the shelves. He held it in his hand thinking that it might be lost,
because of its tiny size, if he put it in his wife's grocery cart. In the course of their shopping, plaintiff and
his wife saw the maid of plaintiff's aunt. While talking to this maid, plaintiff stuck the file into the front
breast pocket of his shirt with a good part of the merchandise exposed.
"At the check-out counter, the plaintiff paid for his wife's purchases which amounted to P77.00, but he
forgot to pay for the file. As he was leaving by the exit of the supermarket on his way to his car, carrying
two bags of groceries and accompanied by his wife and two daughter, plaintiff was approached by a
uniformed guard of the supermarket who said: "Excuse me, Mr., I think you have something in your
pocket which you have not paid for." (p. 5, tsn, Aug. 13, 1971), pointing to his left front breast pocket.
Suddenly reminded of the file, plaintiff apologized thus: "I am sorry," and he turned back toward the
cashier to pay for the file. But the guard stopped him and led him instead toward the rear of the
supermarket. The plaintiff protested but the guard was firm saying: "No, Mr., please come with me. It is
the procedure of the supermarket to bring people that we apprehend to the back of the supermarket" (p. 8,
Ibid). The time was between 9 and 10 o'clock. A crowd of customers on their way into the supermarket
saw the plaintiff being stopped and led by a uniformed guard toward the rear of the supermarket. Plaintiff
acquiesced and signaled to his wife and daughters to wait.

"The guard who had accosted plaintiff took him back inside the supermarket in the company of his wife.
Plaintiff and his wife were directed across the main entrance to the shopping area, down the line of checkout counters, to a desk beside the first checkout counter. To the woman seated at the desk, who turned out
to be defendant Nelia Santos-Fandino, the guard presented the incident report and the file, Exhibit B.
Defendant Fandino read the report and addressing the guard remarked: "Ano, nakaw na naman ito" (p. 22,
Id.). Plaintiff explained and narrated the incident that led to the finding of the file in his pocket, telling
Fandino that he was going to pay for the file because he needed it. But this defendant replied: "That is all
they say, the people whom we cause not paying for the goods say... They all intended to pay for the things
that are found to them." (p. 23, Id). Plaintiff objected and said that he was a regular customer of the
supermarket.
"Extracting a P5.00 bill from his pocket, plaintiff told Fandino that he was paying for the file whose cost
was P3.85. Fandino reached over and took the P5.00 bill from plaintiff with these words: "We are fining
you P5.00. That is your the fine." Plaintiff was shocked. He and his wife objected vigorously that he was
not a common criminal, and they wanted to get back the P5.00. But Fandino told them that the money
would be given as an incentive to the guards who apprehend pilferers. People were milling around them
and staring at the plaintiff. Plaintiff gave up the discussion. He drew a P50.00 bill and took back the file.
Fandino directed him to the nearest check-out counter where he had to fall in line. The people who heard
the exchange of words between Fandino and plaintiff continued to stare at him. At the trial, plaintiff
expressed his embarrassment and humiliation thus: " I felt as though I wanted to disappear into a hole on
the ground" (p. 34, Id.). After paying for the file, plaintiff and his wife walked as fast as they could out of
the supermarket. His first impulse was to go back to the supermarket that night to throw rocks at its glass
windows. But reason prevailed over passion and he thought that justice should take its due course.
"Plaintiff was certain during the trial that when he signed the incident report, Exhibit A, inside the cubicle
at the back of the supermarket only his brief statement of the facts (Exhibit A-2), aside from his name and
personal circumstances, was written thereon. He swore that the following were not in the incident report
at, the time he signed it:
Exhibit A-I which says opposite the stenciled word SUBJECT "Shoplifting"
Exhibit A-3 which says opposite the stenciled words Action Taken: Released by
Mrs. Fandino after paying the item.
Exhibit A-4 which says opposite the stenciled words Remarks Noted: "Grd. Ebreo
requested Grd. Paunil to apprehend subject shoplifter.

Private respondent's complaint filed on October 8, 1970 is founded on Article 21 in relation to Article
2219 of the New Civil Code and prays for moral damages, exemplary damages, attorney s fees and
'expenses of litigation, costs of the suit and the return of the P5.00 fine. After trial, the Court of First
Instance of Pasig, Rizal, Branch XIX dismissed the complaint, Interposing the appeal to the Court of
Appeals, the latter reversed and set aside the appealed judgment, granting and damages as earlier stated.
Not satisfied with the decision of the respondent court, petitioners instituted the present petition and
submits the following grounds and/or assignment of errors, to wit:
I
Respondent Court of Appeals erred in awarding moral and exemplary damages to
the respondent Espino under Articles 19 and 21 in relation to Article 2219 of the
Civil Code, considering that
A. Respondent Espino was guilty of theft;
B. Petitioners legitimately exercised their right of defense of property within the
context of Article 429 of the Civil Code negating the application of Articles 19 and
21 of the same Code;
C. Petitioners acted upon probable cause in stopping and investigating respondent
Espino for shoplifting and as held in various decisions in the United States on
shoplifting, a merchant who acts upon probable cause should not be held liable in
damages by the suspected shoplifter;
D. Petitioners did not exercise their right maliciously, wilfully or in bad faith;
and/or
E. The proximate cause of respondent Espino's alleged injury or suffering was his
own negligence or forgetfulness; petitioners acted in good faith.
II
Assuming arguendo that petitioners are hable for moral and exemplary damages,
the award of P75,000.00 for moral damages and P25,000.00 for exemplary damages
by the respondent Court of Appeals is not legally justified and/or is grossly
excessive in the premises.
III
The award of P5,000.00 for attorney's fees by the respondent Court of Appeals is
unjustified and unwarranted under Article 2199 of the Civil Code.
We agree with the holding of the respondent appellate court that "the evidence sustains the court's finding
that the plaintiff had absolutely no intention to steal the file." The totality of the facts and circumstances as
found by the Court of Appeals unerringly points to the conclusion that private respondent did not intend to

steal the file and that is act of picking up the file from the open shelf was not criminal nor done with
malice or criminal intent for on the contrary, he took the item with the intention of buying and paying for
it.
This Court needs only to stress the following undisputed facts which strongly and convincingly uphold the
conclusion that private respondent was not "shoplifting." Thus, the facts that private respondent after
picking the cylindrical "rat-tail" file costing P3.85 had placed it inside his left front breast pocket with a
good portion of the item exposed to view and that he did not conceal it in his person or hid it from sight as
well as the fact that he paid the purchases of his wife amounting to P77.00 at the checkout counter of the
Supermarket, owed that he was not acting suspiciously or furtively. And the circumstance that he was with
his family consisting of his wife Mrs. Caridad Jayme Espino, and their two daughters at the time negated
any criminal intent on his part to steal. Moreover, when private respondent was approached by the guard
of the Supermarket as he was leaving by the exit to his car who told him, "Excuse me, Mr., I think you
have something in your pocket which you have not paid for," Espino, immediately apologized and
answered, "I am sorry," which indicated his sincere apology or regrets. He turned back towards the cashier
to pay for the file which proved his honesty sincerity and good faith in buying the item, and not to shoplift
the same. His brief statement on the sheet of paper called the Incident Report where private respondent
wrote the following: "While talking to my aunt's maid with my wife, I put this item in in my shirt pocket. I
forgot to check it out with my wife's item," was an instant and contemporaneous explanation of the
incident.
Considering further the personal circumstances of the private respondent. his education, position and
character showing that he is a graduate Mechanical Engineer from U.P. Class 1950, employed as an
executive of Proctor & Gamble Phils., Inc., a corporate manager incharge of motoring and warehousing
therein; honorably discharged from the Philippine Army in 1946; a Philippine government pensionado of
the United States for six months; member of the Philippine veterans Legion; author of articles published in
the Manila Sunday Times and Philippines Free Press; member of the Knights of Columbus, Council No.
3713; son of the late Jose Maria Espino, retired Minister, Department of Foreign Affairs at the Philippine
Embassy Washington, We are fully convinced, as the trial and appellate courts were, that private
respondent did not intend to steal the article costing P3.85. Nothing in the records intimates or hints
whatsoever that private respondent has had any police record of any sort much less suspicion of stealing or
shoplifting.
We do not lay down here any hard-and-fast rule as to what act or combination of acts constitute the crime
of shoplifting for it must be stressed that each case must be considered and adjudged on a case-to-case
basis and that in the determination of whether a person suspected of shoplifting has in truth and in fact
committed the same, all the attendant facts and circumstances should be considered in their entirety and
not from any single fact or circumstance from which to impute the stigma of shoplifting on any person
suspected and apprehended therefor.
We likewise concur with the Court of Appeals that "(u)pon the facts and under the law, plaintiff has clearly
made the cause of action for damages against the defendants. Defendants wilfully caused loss or injury to
plaintiff in a manner that was contrary to morals, good customs or public policy, making them amenable to
damages under Articles 19 and 21 in relation to Article 2219 of the Civil Code." 2
That private respondent was falsely accused of shoplifting is evident. The Incident Report (Exhibit A)
with the entries thereon under Exhibit A-1 which says opposite the stenciled word SUBJECT:
"Shoplifting," Exhibit A-3 which says opposite the stenciled words Action Taken: Relesed by Mrs.
Fandino after paying the item," Exhibit A-4 which says opposite the stenciled words Remarks Noted: Grd.

Ebreo requested Grd. Paunil to apprehend subject shoplifter," established the opinion, judgment or
thinking of the management of petitioner's supermarket upon private respondent's act of picking up the
file. ln plain words, private respondent was regarded and pronounced a shoplifter and had committed
"shoplifting."
We also affirm the Court of Appeals' finding that petitioner Nelia Santos Fandino, after reading the
incident report, remarked the following: "Ano, nakaw na naman ito". Such a remark made in the presence
of private respondent and with reference to the incident report with its entries, was offensive to private
respondent's dignity and defamatory to his character and honesty. When Espino explained that he was
going to pay the file but simply forgot to do so, Fandino doubted the explanation. saying: "That is all what
they say, the people whom we caught not paying for the goods say... they all intended to pay for the things
that are found to them." Private respondent objected and said that he was a regular customer of the
Supermarket.
The admission of Fandino that she required private respondent to pay a fine of P5.00 and did in fact take
the P5.00 bill of private respondent tendered by the latter to pay for the file, as a fine which would be
given as an incentive to the guards who apprehend pilferers clearly proved that Fandino branded private
respondent as a thief which was not right nor justified.
The testimony of the guard that management instructed them to bring the suspected customers to the
public area for the people to see those kind of customers in order that they may be embarassed (p. 26, tsn,
Sept. 30, 1971); that management wanted "the customers to be embarrassed in public so that they will not
repeat the stealing again" (p. 2, tsn, Dec. 10, 1971); that the management asked the guards "to bring these
customers to different cashiers in order that they will know that they are pilferers" (p. 2, Ibid.) may
indicate the manner or pattern whereby a confirmed or self-confessed shoplifter is treated by the
Supermarket management but in the case at bar, there is no showing that such procedure was taken in the
case of the private respondent who denied strongly and vehemently the charge of shoplifting.
Nonetheless, the false accusation charged against the private respondent after detaining and interrogating
him by the uniformed guards and the mode and manner in which he was subjected, shouting at him,
imposing upon him a fine, threatening to call the police and in the presence and hearing of many people at
the Supermarket which brought and caused him humiliation and embarrassment, sufficiently rendered the
petitioners liable for damages under Articles 19 and 21 in relation to Article 2219 of the Civil Code. We
rule that under the facts of the case at bar, petitioners wilfully caused loss or injury to private respondent
in a manner that was contrary to morals, good customs or public policy. It is against morals, good customs
and public policy to humiliate, embarrass and degrade the dignity of a person. Everyone must respect the
dignity, personality, privacy and peace of mind of his neighbors and other persons (Article 26, Civil
Code). And one must act with justice, give everyone his due and observe honesty and good faith (Article
19, Civil Code).
Private respondent is entitled to damages but We hold that the award of Seventy-Five Thousand Pesos
(P75,000.00) for moral damages and Twenty-Five Thousand Pesos (P25,000.00, for exemplary damages is
unconscionable and excessive.
While no proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or
exemplary damages may be adjudicated, the assessment of such damages, except liquidated ones, is left to
the discretion of the court, according to the circumstances of each case (Art. 2216, New Civil Code). In
the case at bar, there is no question that the whole incident that befell respondent had arisen in such a
manner that was created unwittingly by his own act of forgetting to pay for the file. It was his

forgetfullness in checking out the item and paying for it that started the chain of events which led to his
embarassment and humiliation thereby causing him mental anguish, wounded feelings and serious anxiety.
Yet, private respondent's act of omission contributed to the occurrence of his injury or loss and such
contributory negligence is a factor which may reduce the damages that private respondent may recover
(Art. 2214, New Civil Code). Moreover, that many people were present and they saw and heard the
ensuing interrogation and altercation appears to be simply a matter of coincidence in a supermarket which
is a public place and the crowd of onlookers, hearers or bystanders was not deliberately sought or called
by management to witness private respondent's predicament. We do not believe that private respondent
was intentionally paraded in order to humiliate or embarrass him because petitioner's business depended
for its success and patronage the good will of the buying public which can only be preserved and
promoted by good public relations.
As succinctly expressed by Mr. Justice J. B. L. Reyes in his concurring and dissenting opinion in
Pangasinan Transportation Company, Inc, vs. Legaspi, 12 SCRA 598, the purpose of moral damages is
essentially indemnity or reparation, both punishment or correction. Moral damages are emphatically not
intended to enrich a complainant at the expense of a defendant; they are awarded only to enable the
injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he
has undergone, by reason of the defendant's culpable action. In other words, the award of moral damages
is aimed at a restoration, within the limits of the possible, of the spiritual status quo ante and, it must be
proportionate to the suffering inflicted.
In Our considered estimation and assessment, moral damages in the amount of Five Thousand Pesos
(P5,000.00) is reasonable and just to award to private respondent.
The grant of Twenty-Five Thousand Pesos (P25,000.00) as exemplary damages is unjustified. Exemplary
or corrective damages are imposed by way of example or correction for the public good, in addition to the
moral, temperate, liquidated or compensatory damages (Art. 2229, New Civil Code). Exemplary damages
cannot be recovered as a matter of right; the court will decide whether or not they could be adjudicated
(Art. 2223, New Civil Code). Considering that exemplary damages are awarded for wanton acts, that they
are penal in character granted not by way of compensation but as a punishment to the offender and as a
warning to others as a sort of deterrent, We hold that the facts and circumstances of the case at bar do not
warrant the grant of exemplary damages.
Petitioners acted in good faith in trying to protect and recover their property, a right which the law accords
to them. Under Article 429, New Civil Code, the owner or lawful possessor of a thing has a right to
exclude any person from the enjoyment and disposal thereof and for this purpose, he may use such force
as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion or
usurpation of his property. And since a person who acts in the fulfillment of a duty or in the lawful
exercise of a right or office exempts him from civil or criminal liability, petitioner may not be punished by
imposing exemplary damages against him. We agree that petitioners acted upon probable cause in
stopping and investigating private respondent for taking the file without paying for it, hence, the
imposition of exemplary damages as a warning to others by way of a deterrent is without legal basis. We,
therefore, eliminate the grant of exemplary damages to the private respondent.
In the light of the reduction of the damages, We hereby likewise reduce the original award of Five
Thousand Pesos (P5,000.00) as attorney's fees to Two Thousand Pesos (P2,000.00).
WHEREFORE, IN VIEW OF THE FOREGOING, the judgment of the Court of Appeals is hereby
modified. Petitioners are hereby ordered to pay, jointly and severally, to private respondent moral damages

in the sum of Five Thousand Pesos (P5,000.00) and the amount of Two Thousand Pesos (P2,000.00) as
and for attorney's fees; and further, to return the P5.00 fine to private respondent. No costs.
SO ORDERED.

G.R. No. L-47739 June 22, 1983


SINGAPORE AIRLINES LIMITED, petitioner,
vs.
HON. ERNANI CRUZ PAO as Presiding Judge of Branch XVIII, Court of First Instance of Rizal,
CARLOS E. CRUZ and B. E. VILLANUEVA, respondents.

2. Being dismissed or having his


services terminated by the company
for misconduct,
the Engineer Officer and the Sureties hereby bind themselves jointly and severally
to pay to the Company as liquidated damages such sums of money as are set out
hereunder:

Bengzon, Zarraga, Narciso, Cudala Pecson, Azucena & Bengzon Law Offices for petitioner.
(a) during the first year of the period of five years referred to
in Clause 4
above ......................................................................................
$ 67,460/

Celso P. Mariano Law Office for private respondent Carlos Cruz.


Romeo Comia for private respondent B. E. Villanueva.

(b) during the second year of the period of five years referred
to in Clause 4
above ................................................................................. $
53,968/

MELENCIO-HERRERA, J.:
On the basic issue of lack of jurisdiction, petitioner company has elevated to us for review the two Orders
of respondent Judge dated October 28, 1977 and January 24, 1978 dismissing petitioner's complaint for
damages in the first Order, and denying its Motion for Reconsideration in the second.
On August 21, 1974, private respondent Carlos E. Cruz was offered employment by petitioner as Engineer
Officer with the opportunity to undergo a B-707 I conversion training course," which he accepted on
August 30, 1974. An express stipulation in the letter-offer read:
3. BONDING. As you win be provided with conversion training you are required to
enter into a bond with SIA for a period of 5 years. For this purpose, please inform
me of the names and addresses of your sureties as soon as possible.
Twenty six days thereafter, or on October 26, 1974, Cruz entered into an "Agreement for a Course of
Conversion Training at the Expense of Singapore Airlines Limited" wherein it was stipulated among
others:
4. The Engineer Officer shall agree to remain in the service of the Company for a
period of five years from the date of commencement of such aforesaid conversion
training if so required by the Company.

(c) during the third year of the period of five years referred to
in Clause 4
above ......................................................................................
$ 40,476/
(d) during the fourth year of the period of five years referred
to in Clause 4
above .................................................................................. $
26,984/
(e) during the fifth year of the period of five years referred to
in Clause 4
above .......................................................................................
$ 13,492/
6. The provisions of Clause 5 above shall not apply in a case where an Engineer
Officer has his training terminated by the Company for reasons other than
misconduct or where, subsequent to the completion of training, he 1. loses his license to operate as a Flight Engineer due to
medical reasons which can in no way be attributable to any
act or omission on his part;

5. In the event of the Engineer Officer:


1. Leaving the service of the company
during the period of five years referred
to in Clause 4 above, or

2. is unable to continue in employment with the Company


because his employment pass or work permit, as the case
may be, has been withdrawn or has not been renewed due to
no act or omission on his part;

3. has his services terminated by the Company as a result of


being replaced by a national Flight Engineer;
4. has to leave the service of the Company on valid
compassionate grounds stated to and accepted by the
Company in writing. 1
Cruz signed the Agreement with his co-respondent, B. E. Villanueva, as surety.
Claiming that Cruz had applied for "leave without pay" and had gone on leave without approval of the
application during the second year of the Period of five years, petitioner filed suit for damages against
Cruz and his surety, Villanueva, for violation of the terms and conditions of the aforesaid Agreement.
Petitioner sought the payment of the following sums: liquidated damages of $53,968.00 or its equivalent
of P161,904.00 (lst cause of action); $883.91 or about P2,651.73 as overpayment in salary (2nd clause of
action); $61.00 or about P183.00 for cost of uniforms and accessories supplied by the company plus
$230.00, or roughly P690.00, for the cost of a flight manual (3rd cause of action); and $1,533.71, or
approximately P4,601.13 corresponding to the vacation leave he had availed of but to which he was no
longer entitled (4th cause Of action); exemplary damages attorney's fees; and costs.
In his Answer, Cruz denied any breach of contract contending that at no time had he been required by
petitioner to agree to a straight service of five years under Clause 4 of the Agreement (supra) and that he
left the service on "valid compassionate grounds stated to and accepted by the company so that no
damages may be awarded against him. And because of petitioner-plaintiff's alleged ungrounded causes of
action, Cruz counterclaimed for attorney's fees of P7,000.00.
The surety, Villanueva, in his own Answer, contended that his undertaking was merely that of one of two
guarantors not that of surety and claimed the benefit of excussion, if at an found liable. He then filed a
cross-claim against Cruz for damages and for whatever amount he may be held liable to petitionerplaintiff, and a counterclaim for actual, exemplary, moral and other damages plus attorney's fees and
litigation expenses against petitioner-plaintiff.
The issue of jurisdiction having been raised at the pre-trial conference, the parties were directed to submit
their respective memoranda on that question, which they complied with in due time. On October 28, 1977,
respondent Judge issued the assailed Order dismissing the complaint, counterclaim and cross-claim for
lack of jurisdiction stating.
2. The present case therefore involves a money claim arising from an employeremployee relation or at the very least a case arising from employer-employee
relations, which under Art. 216 of the Labor Code is vested exclusively with the
Labor Arbiters of the National Labor Relations Commission. 2
Reconsideration thereof having been denied in the Order of January 24, 1978, petitioner availed of the
present recourse. We gave due course.
We are here confronted with the issue of whether or not this case is properly cognizable by Courts of
justice or by the Labor Arbiters of the National Labor Relations Commission.

Upon the facts and issues involved, jurisdiction over the present controversy must be held to belong to the
civil Courts. While seemingly petitioner's claim for damages arises from employer-employee relations,
and the latest amendment to Article 217 of the Labor Code under PD No. 1691 and BP Blg. 130 provides
that all other claims arising from employer-employee relationship are cognizable by Labor Arbiters, 3 in
essence, petitioner's claim for damages is grounded on the "wanton failure and refusal" without just cause
of private respondent Cruz to report for duty despite repeated notices served upon him of the disapproval
of his application for leave of absence without pay. This, coupled with the further averment that Cruz
"maliciously and with bad faith" violated the terms and conditions of the conversion training course
agreement to the damage of petitioner removes the present controversy from the coverage of the Labor
Code and brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per se by private respondent Cruz of his job
as the latter was not required in the Complaint to report back to work but on the manner and consequent
effects of such abandonment of work translated in terms of the damages which petitioner had to suffer.
Squarely in point is the ruling enunciated in the case of Quisaba vs. Sta. Ines Melale Veneer & Plywood,
Inc.4 the pertinent portion of which reads:
Although the acts complied of seemingly appear to constitute "matter involving
employee employer" relations as Quisaba's dismiss was the severance of a preexisting employee-employer relations, his complaint is grounded not on his
dismissal per se, as in fact he does not ask for reinstatement or backwages, but on
the manner of his dismiss and the consequent effects of such
Civil law consists of that 'mass of precepts that determine or regulate the
relations ... that exist between members of a society for the protection of private
interest (1 Sanchez Roman 3).
The "right" of the respondents to dismiss Quisaba should not be confused with the
manner in which the right was exercised and the effects flowing therefrom. If the
dismiss was done anti-socially or oppressively, as the complaint alleges, then the
respondents violated article 1701 of the Civil Code which prohibits acts of
oppression by either capital or labor against the other, and article 21, which makers
a person liable for damages if he wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy, the sanction for
which, by way of moral damages, is provided in article 2219, No. 10 (Cf, Philippine
Refining Co. vs. Garcia, L-21962, Sept. 27, 1966, 18 SCRA 107).
Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the labor
Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other
items demanded are not labor benefits demanded by workers generally taken cognizance of in labor
disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the
natural consequences flowing from breach of an obligation, intrinsically a civil dispute.
Additionally, there is a secondary issue involved that is outside the pale of competence of Labor Arbiters.
Is the liability of Villanueva one of suretyship or one of guaranty? Unquestionably, this question is beyond
the field of specialization of Labor Arbiters.

WHEREFORE, the assailed Orders of respondent Judge are hereby set aside. The records are hereby
ordered remanded to the proper Branch of the Regional Trial Court of Quezon City, to which this case
belongs, for further proceedings. No costs.
SO ORDERED.

G.R. No. L-59825 September 11, 1982


ERNESTO MEDINA and JOSE G. ONG, petitioners,
vs.
HON. FLORELIANA CASTRO-BARTOLOME in her capacity as Presiding Judge of the Court of
First Instance Cf Rizal, Branch XV, Makati, Metro Manila, COSME DE ABOITIZ and PEPSICOLA BOTTLING COMPANY OF THE PHILIPPINES, INC., respondents.

ABAD SANTOS, J.:


Civil Case No. 33150 of the Court of First Instance of Rizal Branch XV, was filed in May, 1979, by
Ernesto Medina and Jose G. Ong against Cosme de Aboitiz and Pepsi-Cola Bottling Co. of the
Philippines, Inc. Medina was the former Plant General Manager and Ong was the former Plant
Comptroller of the company. Among the averments in the complaint are the following:
3. That on or about 1:00 o'clock in the afternoon of December 20, 1977, defendant
Cosme de Aboitiz, acting in his capacity as President and Chief Executive Officer
of the defendant Pepsi-Cola Bottling Company of the Philippines, Inc., went to the
Pepsi-Cola Plant in Muntinlupa, Metro Manila, and without any provocation,
shouted and maliciously humiliated the plaintiffs with the use of the following
slanderous language and other words of similar import uttered in the presence of the
plaintiffs' subordinate employees, thusGOD DAMN IT. YOU FUCKED ME UP ... YOU SHUT UP! FUCK YOU! YOU
ARE BOTH SHIT TO ME! YOU ARE FIRED (referring to Ernesto Medina). YOU
TOO ARE FIRED! '(referring to Jose Ong )
4. That on January 9, 1978, the herein plaintiffs filed a joint criminal complaint for
oral defamation against the defendant Cosme de Aboitiz duly supported with
respective affidavits and corroborated by the affidavits of two (2) witnesses: Isagani
Hernandez and Jose Ganseco II, but after conducting a preliminary investigation,
Hon. Jose B. Castillo, dismissed the complaint allegedly because the expression
"Fuck you and "You are both shit to me" were uttered not to slander but to express
anger and displeasure;
5. That on February 8, 1978, plaintiffs filed a Petition for Review with the office of
the Secretary of Justice (now Ministry of Justice) and on June 13, 1978, the Deputy
Minister of Justice, Catalino Macaraig, Jr., issued a resolution sustaining the
plaintiff's complaint, reversing the resolution of the Provincial Fiscal and directing
him to file against defendant Cosme de Aboitiz an information for Grave Slander. ...
;
6. That the employment records of plaintiffs show their track performance and
impeccable qualifications, not to mention their long years of service to the
Company which undoubtedly caused their promotion to the two highest positions in

Muntinlupa Plant having about 700 employees under them with Ernesto Medina as
the Plant General Manager receiving a monthly salary of P6,600.00 excluding other
perquisites accorded only to top executives and having under his direct supervision
other professionals like himself, including the plaintiff Jose G. Ong, who was the
Plant Comptroller with a basic monthly salary of P4,855.00;
7. That far from taking these matters into consideration, the defendant corporation,
acting through its President, Cosme de Aboitiz, dismissed and slandered the
plaintiffs in the presence of their subordinate employees although this could have
been done in private;
8. That the defendants have evidently enjoyed the act of dismissing the plaintiffs
and such dismissal was planned to make it as humiliating as possible because
instead of allowing a lesser official like the Regional Vice President to take
whatever action was necessary under the circumstances, Cosme de Aboitiz himself
went to the Muntinlupa Plant in order to publicly upbraid and dismiss the plaintiffs;
9. That the defendants dismissed the plaintiffs because of an alleged delay in the use
of promotional crowns when such delay was true with respect to the other Plants,
which is therefore demonstrative of the fact that Cosme de Aboitiz did not really
have a strong reason for publicly humiliating the plaintiffs by dismissing them on
the spot;
10. That the defendants were moved by evil motives and an anti-social attitude in
dismissing the plaintiffs because the dismissal was effected on the very day that
plaintiffs were awarded rings of loyalty to the Company, five days before Christmas
and on the day when the employees' Christmas party was held in the Muntinlupa
Plant, so that when plaintiffs went home that day and found their wives and children
already dressed up for the party, they didn't know what to do and so they cried
unashamedly;
xxx xxx xxx
20. That because of the anti-social manner by which the plaintiffs were dismissed
from their employment and the embarrassment and degradation they experience in
the hands of the defendants, the plaintiffs have suffered and will continue to suffer
wounded feelings, sleepless nights, mental torture, besmirched reputation and other
similar injuries, for which the sum of P150,000.00 for each plaintiff, or the total
amount. of P300,000.00 should be awarded as moral damages;
21. That the defendants have demonstrated their lack of concern for the rights and
dignity of the Filipino worker and their callous disregard of Philippine labor and
social legislation, and to prevent other persons from following the footsteps of
defendants, the amount of P50,000.00 for each plaintiff, or the total sum of
P100,000.00, should be awarded as exemplary damages;

22. That plaintiffs likewise expect to spend no less than P5,000.00 as litigation
expenses and were constrained to secure the services of counsel for the protection
and enforcement of their rights for which they agreed to pay the sum of P10,000.00
and P200.00 per appearance as and for attorney's fees.

This case was filed on May 10, 1979. The amendatory decree, P.D. 1367, which
took effect on May 1, 1978 and which provides that Regional Directors shall not
indorse and Labor Arbiters shall not entertain claims for moral or other forms of
damages, now expressly confers jurisdiction on the courts in these cases,
specifically under the plaintiff's causes of action.

The complaint contains the following:


P R AY E R
WHEREFORE, in view of all the foregoing. it is most respectfully that after proper
notice and hearing, judgment be rendered for the plaintiffs and against the
defendants ordering them, jointly and solidarily, to pay the plaintiffs the sums of:

Because of the letter dated January 4, 1978 and the statement of plaintiff Medina
that his receipt of the amount from defendant company was done "under strong
protest," it cannot be said that the demands set forth in the complaint have been
paid, waived or other extinguished. In fact, in defendants' Motion to Dismiss, it is
stated that 'in the absence of a showing that there was fraud, duress or violence
attending said transactions, such Release and Quitclaim Deeds are valid and binding
contracts between them, which in effect admits that plaintiffs can prove fraud,
violence, duress or violence. Hence a cause of action for plaintiffs exist.

1. Unrealized income in such sum as will be established during the trial;


2. P300,000.00 as moral damages;
3. P100,000.00 by way of exemplary damages:
4. P5,000.00 as litigation expenses;
5. P10,000.00 and P200.00 per appearance as and for attorney's fees; and

It is noticed that the defamatory remarks standing alone per se had been made the
sole cause under the first cause of action, but it is alleged in connection with the
manner in which the plaintiffs had been dismissed, and whether the statute of
limitations would apply or not would be a matter of evidence.
IT has been alreadly settled by jurisprudence that mere asking for reinstatement
does not remove from the CFI jurisdiction over the damages. The case must involve
unfair labor practices to bring it within the jurisdiction of the CIR (now NLRC).

6. Costs of this suit.

WHEREFORE, the defendants' Motion to Dismiss dated June 4, 1979 is hereby


denied.

Plaintiffs also pray for such further reliefs and remedies as may be in keeping with
justice and equity.

The defendants are hereby directed to interpose their answer within ten (10) days
from receipt hereof.

On June 4, 1979, a motion to dismiss the complaint on the ground of lack of


jurisdiction was filed by the defendants. The trial court denied the motion on
September 6, 1979, in an order which reads as follows:
Up for resolution by the Court is the defendants' Motion to Dismiss dated June 4,
1979, which is basically anchored on whether or not this Court has jurisdiction over
the instant petition.
The complaint alleges that the plaintiffs' dismissal was without any provocation and
that defendant Aboitiz shouted and maliciously humiliated plaintiffs and used the
words quoted in paragraph 3 thereof. The plaintiffs further allege that they were
receiving salaries of P6,600.00 and P4,855.00 a month. So the complaint for civil
damages is clearly not based on an employer-employee relationship but on the
manner of plaintiffs' dismissal and the effects flowing therefrom. (Jovito N. Quisaba
vs, Sta. Ines-Melale Veneer & Plywood Co., Inc., et al., No. L-38088, Aug.
30,1974.)

While the trial was underway, the defendants filed a second motion to dismiss the complaint dated January
23, 1981, because of amendments to the Labor Code immediately prior thereto. Acting on the motion, the
trial court issued on May 23, 1981, the following order:
Up for resolution by the Court is the defendants' Motion to Dismiss dated January
23, 1981, on grounds not existing when the first Motion to Dismiss dated June 4,
1979 was interposed. The ground relied upon is the promulgation of P.D. No. 1691
amending Art. 217 of the Labor Code of the Philippines and Batasan Pambansa
Bldg. 70 which took effect on May 1, 1980, amending Art. 248 of the Labor Code.
The Court agrees with defendants that the complaint alleges unfair labor practices
which under Art. 217 of the Labor Code, as amended by P.D. 1691, has vested
original and exclusive jurisdiction to Labor Arbiters, and Art. 248, thereof ... "which
may include claims for damages and other affirmative reliefs." Under the
amendment, therefore, jurisdiction over employee-employer relations and claims of
workers have been removed from the Courts of First Instance. If it is argued that
this case did not arise from employer-employee relation, but it cannot be denied that
this case would not have arisen if the plaintiffs had not been employees of

defendant Pepsi-Cola. Even the alleged defamatory remarks made by defendant


Cosme de Aboitiz were said to plaintiffs in the course of their employment, and the
latter were dismissed from such employment. Hence, the case arose from such
employer-employee relationship which under the new Presidential Decree 1691 are
under the exclusive, original jurisdiction of the labor arbiters. The ruling of this
Court with respect to the defendants' first motion to dismiss, therefore, no longer
holds as the positive law has been subsequently issued and being a curative law, can
be applied retroactively (Garcia v. Martinez, et al., L-47629, May 28, 1979; 90
SCRA 331-333).
It will also logically follow that plaintiffs can reinterpose the same complaint with
the Ministry of Labor.
WHEREFORE, let this case be, as it is hereby ordered, dismissed, without
pronouncement as to costs.

The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought
by the plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending
it and whether or not they have retroactive effect is unnecessary.
It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a
simple action for damages for tortious acts allegedly committed by the defendants. Such being the case,
the governing statute is the Civil Code and not the Labor Code. It results that the orders under review are
based on a wrong premise.
WHEREFORE, the petition is granted; the respondent judge is hereby ordered to reinstate Civil Case No.
33150 and render a decision on the merits. Costs against the private respondents.
SO ORDERED.
Barredo (Chairman), Concepcion, Jr. Guerrero, De Castro and Escolin, JJ., concur.

A motion to reconsider the above order was filed on July 7, 1981, but it was only on February 8, 1982, or
after a lapse of around seven (7) months when the motion was denied.
Plaintiffs have filed the instant petition pursuant to R. A. No. 5440 alleging that the respondent court
committed the following errors:
Separate Opinions
IN DIVESTING ITSELF OF ITS JURISDICTION TO HEAR AND DECIDE
CIVIL CASE NO. 33150 DESPITE THE FACT THAT JURISDICTION HAD
ALREADY ATTACHED WHICH WAS NOT OUSTED BY THE SUBSEQUENT
ENACTMENT OF PRESIDENTIAL DECREE 1691;
IN HOLDING THAT PRESIDENTIAL DECREE 1691 SHOULD BE GIVEN A
RETROSPECTIVE EFFECT WHEN PRESIDENTIAL DECREE 1367 WHICH
WAS IN FORCE WHEN CIVIL CASE NO. 33150 WAS FILED AND TRIAL
THEREOF HAD COMMENCED, WAS NEVER EXPRESSLY REPEALED BY
PRESIDENTIAL DECREE 1691, AND IF EVER THERE WAS AN IMPLIED
REPEAL, THE SAME IS NOT FAVORED UNDER PREVAILED
JURISPRUDENCE;
IN HOLDING THAT WITH THE REMOVAL BY PRESIDENTIAL DECREE
1691 OF THE PROVISO INSERTED IN ARTICLE 217 OF THE LABOR CODE
BY PRESIDENTIAL DECREE 1367, THE LABOR ARBITERS HAVE
ACQUIRED JURISDICTION OVER CLAIMS FOR DAMAGES ARISING
FROM EMPLOYER-EMPLOYEE RELATIONS TO THE EXCLUSION OF THE
REGULAR COURTS, WHEN A READING OF ARTICLE 217 WITHOUT THE
PROVISO IN QUESTION READILY REVEALS THAT JURISDICTION OVER
DAMAGE CLAIMS IS STILL VESTED WITH THE REGULAR COURTS;
IN DISMISSING FOR LACK OF JURISDICTION CIVIL CASE NO. 33150
THEREBY VIOLATING THE CONSTITUTIONAL RIGHTS OF THE
PETITIONERS NOTABLY THEIR RIGHT TO DUE PROCESS.

AQUINO, J.,dissenting:
I dissent with due deference to the opinion penned by Mr. Justice Abad Santos.
This case is about the jurisdiction of the Court of First Instance to entertain an action for damages arising
from the alleged disgraceful termination of petitioners' employment.
Ernesto Medina, the manager of the Muntinlupa plant of Pepsi-Cola Bottling Company of the Philippines
with a monthly salary of P6,600, and Jose G. Ong, Pepsi's controller in the same plant with a monthly
salary of P4,855, were summarily dismissed by Cosme de Aboitiz, Pepsi's president and chief executive
officer, on December 20, 1977 for having allegedly delayed the use of promotional crowns (pp. 29-31,
Rollo),
The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and
P84,386 as separation pay, respectively. However, before receiving those amounts, Medina and Ong sent
by registered mail to Aboitiz letters wherein they indicated that they objected to their illegal dismissal and
that they would sign the quitclaim and resignation papers "under protest" (pp. 32, 270-275, Rollo).
More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry
of Labor, a complaint for illegal dismissal. They prayed for reinstatement with full backwages and, in the
alternative, they prayed for additional separation pay of P72,904 for Medina and P35,927 for Ong (NLRC
Case No. R4-STF-1-492-78, pp. 40, 288-299, Rollo).

The director of Region IV of the Ministry of Labor dismissed that complaint because of their resignation
and quitclaim. Medina and Ong appealed to the National Labor Relations Commission. Deputy Minister
Amado C. Inciong affirmed the dismissal in his order of April 23, 1979 (p. 246, Rollo), He denied the
motion for reconsideration of Medina and Ong in his Order of October 25, 1979 (p. 327, Rollo).
Seventeen days after that order of dismissal, or on May 10, 1979, Medina and Ong filed, in the Court of
First Instance of Rizal, Makati Branch XV an action for damages against Aboitiz and Pepsi-Cola by
reason of the humiliating manner in which they were dismissed. They prayed for the payment of
unrealized income and P415,000 as moral and exemplary damages, attorney's fees and litigation expenses
(pp. 34-5, 246, Rollo).
Aboitiz and Pepsi-Cola filed a motion to dismiss on the grounds of lack of jurisdiction, pendency of a
labor case, lack of cause of action, payment and prescription (p. 37, Rollo). Ong and Medina opposed the
motion.
Judge Floreliana Castro-Bartolome in her order of September 6, 1979 denied the motion to dismiss on the
ground that under Presidential Decree No. 1367, which took effect on May 1, 1979, the NLRC and Labor
Arbiters cannot entertain claims for moral or other damages, thus implying that such claims should be
ventilated in court (p. 247, Rollo).
After Medina had commenced his testimony, Aboitiz and Pepsi-Cola filed another motion to dismiss based
on Presidential Decree No. 1691, which took effect on May 1, 1980 and which repealed Presidential
Decree No. 1367 and restored to the NLRC and Labor Arbiters the jurisdiction to adjudicate money claims
of workers, including moral damages, and other claims arising from employer- employee relationship.
Judge Bartolome in her order of May 23, 1981 dismissed the case for lack of jurisdiction. That order of
dismissal is assailed in this appeal by Medina and Ong under Republic Act No. 5440.
In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and
Ong were within the exclusive jurisdiction of the Labor Arbiter and the NLRC, as originally provided in
article 217 of the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could
not split their cause of action against Aboitiz and Pepsi-Cola. (See Aguda vs. Judge Vallejos, G. R. No.
58133, March 26,1982; Ebon vs. Judge De Guzman, G. R. No. 58265, March 25, 1982; Cardinal
Industries, Inc. vs. Vallejos, G. R. No. 57032, June 19, 1982; Pepsi-Cola Bottling Co. vs. Martinez, G. R.
No. 58877, March 15,1982.)
The decisions of the Regional Director and Deputy Minister Inciong are res judicata as to the claims of
Medina and Ong.

Separate Opinions
AQUINO, J.,dissenting:
I dissent with due deference to the opinion penned by Mr. Justice Abad Santos.

This case is about the jurisdiction of the Court of First Instance to entertain an action for damages arising
from the alleged disgraceful termination of petitioners' employment.
Ernesto Medina, the manager of the Muntinlupa plant of Pepsi-Cola Bottling Company of the Philippines
with a monthly salary of P6,600, and Jose G. Ong, Pepsi's controller in the same plant with a monthly
salary of P4,855, were summarily dismissed by Cosme de Aboitiz, Pepsi's president and chief executive
officer, on December 20, 1977 for having allegedly delayed the use of promotional crowns (pp. 29-31,
Rollo),
The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and
P84,386 as separation pay, respectively. However, before receiving those amounts, Medina and Ong sent
by registered mail to Aboitiz letters wherein they indicated that they objected to their illegal dismissal and
that they would sign the quitclaim and resignation papers "under protest" (pp. 32, 270-275, Rollo).
More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry
of Labor, a complaint for illegal dismissal. They prayed for reinstatement with full backwages and, in the
alternative, they prayed for additional separation pay of P72,904 for Medina and P35,927 for Ong (NLRC
Case No. R4-STF-1-492-78, pp. 40, 288-299, Rollo).
The director of Region IV of the Ministry of Labor dismissed that complaint because of their resignation
and quitclaim. Medina and Ong appealed to the National Labor Relations Commission. Deputy Minister
Amado C. Inciong affirmed the dismissal in his order of April 23, 1979 (p. 246, Rollo), He denied the
motion for reconsideration of Medina and Ong in his Order of October 25, 1979 (p. 327, Rollo).
Seventeen days after that order of dismissal, or on May 10, 1979, Medina and Ong filed, in the Court of
First Instance of Rizal, Makati Branch XV an action for damages against Aboitiz and Pepsi-Cola by
reason of the humiliating manner in which they were dismissed. They prayed for the payment of
unrealized income and P415,000 as moral and exemplary damages, attorney's fees and litigation expenses
(pp. 34-5, 246, Rollo).
Aboitiz and Pepsi-Cola filed a motion to dismiss on the grounds of lack of jurisdiction, pendency of a
labor case, lack of cause of action, payment and prescription (p. 37, Rollo). Ong and Medina opposed the
motion.
Judge Floreliana Castro-Bartolome in her order of September 6, 1979 denied the motion to dismiss on the
ground that under Presidential Decree No. 1367, which took effect on May 1, 1979, the NLRC and Labor
Arbiters cannot entertain claims for moral or other damages, thus implying that such claims should be
ventilated in court (p. 247, Rollo).
After Medina had commenced his testimony, Aboitiz and Pepsi-Cola filed another motion to dismiss based
on Presidential Decree No. 1691, which took effect on May 1, 1980 and which repealed Presidential
Decree No. 1367 and restored to the NLRC and Labor Arbiters the jurisdiction to adjudicate money claims
of workers, including moral damages, and other claims arising from employer- employee relationship.
Judge Bartolome in her order of May 23, 1981 dismissed the case for lack of jurisdiction. That order of
dismissal is assailed in this appeal by Medina and Ong under Republic Act No. 5440.

In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and
Ong were within the exclusive jurisdiction of the Labor Arbiter and the NLRC, as originally provided in
article 217 of the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could
not split their cause of action against Aboitiz and Pepsi-Cola. (See Aguda vs. Judge Vallejos, G. R. No.
58133, March 26,1982; Ebon vs. Judge De Guzman, G. R. No. 58265, March 25, 1982; Cardinal
Industries, Inc. vs. Vallejos, G. R. No. 57032, June 19, 1982; Pepsi-Cola Bottling Co. vs. Martinez, G. R.
No. 58877, March 15,1982.)

The decisions of the Regional Director and Deputy Minister Inciong are res judicata as to the claims of
Medina and Ong.