operation at the time of the foreclosure sale of the chattels, but also for the reason that whatever
Mambulao Lumber Co. vs PNBGR L-2297330 January 1968
FACTS: Petitioner (P) applied for industrial loan and granted by Respondent bank (R). To secure
payment of loan, P mortgaged a parcel of land together with various sawmill equipment, rolling
units and other fixed assets situated therein.
P failed to pay the amortization and the amounts released to and received by it. Repeated demands
were made but upon inspection it was found that P stopped operation. R sent a letter to R sheriff
of Camarines Norte requesting him to take possession of the parcel of land and the chattels and to
sell them at public auction. R sheriff issued corresponding notice of extrajudicial sale and sent copy
to P.
P sent a bank draft for to PNB allegedly full settlement of the obligation after the application of the
sum representing the proceeds of the foreclosure sale of the parcel of land. P averred that the
foreclosure of chattel mortgage is no longer needed for being fully paid and that it could not be
legally effected at a place other than City of Manila, the place agreed and stipulated in their
contract.
R’s counsel wrote to P that the remitted amount was not enough for its liability to which should be
added the expenses for guarding the mortgaged of chattels, attorney’s fees and expenses of the
sale. Notwithstanding, the foreclosure of both land and the chattels were held.
ISSUE: Whether P is entitled to moral damages.
DECISION: No. Even if the R bank and R sheriff committed several infractions/errors, to wit:
1. R sheriff’s actual work performed should be compensated pursuant to Sec 4 of Act 3135, which
is the governing law for extrajudicial foreclosure and not Sec 7 of Rule 130, which is applicable
for judicial foreclosure;
2. Atty’s fees was found to be excessive and unconscionable;
3. Foreclosure should be conducted in the City of Manila, as agreed in the contract. Ergo, R is
guilty of conversion when he sells under the mortgage but not in accordance with its terms;
and
4. The amount of sale of the chattels is spurious/ grossly unfair to P.
However, P’s claim for moral damages seems to have no legal or factual basis. Obviously, an artificial
person like herein P corporation cannot experience physical sufferings, mental anguish, fright,
serious anxiety, wounded feelings, moral shock or social humiliation which are basis of moral
damages. A corporation may have a good reputation which, if besmirched, may also be a ground
for the award of moral damages. The same cannot be considered under the facts of this case,
however, not only because it is admitted that herein appellant had already ceased in its business
adverse effects of the foreclosure sale of the chattels could have upon its reputation or business
standing would undoubtedly be the same whether the sale was conducted at Jose Panganiban,
Camarines Norte, or in Manila which is the place agreed upon by the parties in the mortgage
contract.
But for the wrongful acts of herein R bank and the R sheriff of Camarines Norte in proceeding
with the sale in utter disregard of the agreement to have the chattels sold in Manila as provided for
in the mortgage contract, to which their attentions were timely called by herein appellant, and in
disposing of the chattels in gross for the miserable amount of P4,200.00, herein appellant should
be awarded exemplary damages in the sum of P10,000.00.
Asset Privatization Trust vs CA00 SCRA 579 – Business Organization – Corporation Law –
Corporation Generally Not Entitled To Moral Damages – Power To Enter Into Contracts
In 1968, the government undertook to support the financing of Marinduque Mining and Industrial
Corporation (MMIC). The government then issued debenture bonds in favor of MMIC which enable
the latter to take out loans from the Development Bank of the Philippines (DBP) and the Philippine
National Bank (PNB). The loans were mortgaged by MMIC’s assets. In 1984 however, MMIC’s
indebtedness reached P13.7 billion and P8.7 billion to DPB and PNB respectively. MMIC had trouble
paying and this exposed the government, because of the debenture bonds, to a P22 billion
obligation.
In order to mitigate MMIC’s loan liability, a financial restructuring plan (FRP) was drafted in the
presence of MMIC’s representatives as well as representatives from DBP and PNB. The two banks
however never formally approved the said FRP. Eventually, the staggering loans became overdue
and PNB and DBP chose to foreclose MMIC’s assets, FRP no longer feasible at that point. So the
assets were foreclosed and were eventually assigned to the Asset Privatization Trust (APT).
Later, Jesus Cabarrus, Sr., a stockholder of MMIC initiated a derivative suit against PNB and DBP
with APT being impleaded as the successor in interest of the two banks. The suit basically
questioned the foreclosure as Cabarrus asserted that the foreclosure was invalid because he
insisted that the FRP was adopted by PNB and DBP as a consequence of the presence of the banks’
representatives when the said FRP was drafted. Cabarrus asserts that APT should restore the assets
to MMIC and that PNB and DBP should honor the FRP. The suit was filed in the RTC of Makati but
while the case was pending, the parties agreed to submit the case for arbitration. Hence, Makati
RTC dismissed the case upon motion of the parties.
The Arbitration Committee (AC) which heard the case ruled in favor of Cabarrus. The AC granted
Cabarrus prayer and at the same time awarded him P10 million in moral damages. Not only that,
the AC also awarded P2.5 billion in moral damages in favor of MMIC to be paid by the government.
APT’s MFR was denied. Cabarrus then filed before the Makati RTC a motion to confirm the
arbitration award. APT opposed the same as it alleged that the motion is improper. Makati RTC
 denied APT’s opposition and confirmed the arbitration award. The Court of Appeals affirmed the
ruling of the RTC.
ISSUE: Whether or not the ruling of the Arbitration Committee as affirmed by the Regional Trial
Court of Makati (Branch 62) and the Court of Appeals is correct.
HELD: No.
1. The award of damages in favor of MMIC is improper. First, it was not made a party to the case. The
derivative suit filed by Cabarrus failed to implead MMIC. So how can an award for damages be
awarded to a non-party? Second, even if MMIC, which is actually a real party in interest, was
impleaded, it is not entitled to moral damages. It is not yet a well settled jurisprudence that
corporations are entitled to moral damages. While the Supreme Court in some cases did award
certain corporations moral damages for besmirched reputations, such is not applicable in this case
because when the alleged wrongful foreclosure was done, MMIC was already in bad standing hence
it has no good wholesome reputation to protect. So it could not be said that there was a
“reputation” besmirched by the act of foreclosure. Likewise, the award of moral damages in favor
of Cabarrus is invalid. He cannot have possibly suffered any moral damages because the alleged
wrongful act was committed against MMIC. It is a basic postulate that a corporation has a
personality separate and distinct from its stockholders. The properties foreclosed belonged to
MMIC, not to its stockholders. Hence, if wrong was committed in the foreclosure, it was done
against the corporation.
2. The FRP is not valid hence the foreclosure is valid. The mere presence of DBP’s and PNB’s
representatives during the drafting of FRP is not constitutive of the banks’ formal approval of the
FRP. The representatives are personalities distinct from PNB and DBP. PNB and DBP have their own
boards and officers who may have different decisions. The representatives were not shown to have
been authorized by the respective boards of the two banks to enter into any agreement with MMIC.
3. Further, the proceeding is procedurally infirm. RTC Makati had already dismissed the civil case when
the parties opted for arbitration. Hence, it should have never took cognizance of the Cabarrus’
motion to confirm the AC’ award. The same should have been brought through a separate action
not through a motion because RTC Makati already lost jurisdiction over the case when it dismissed
it to give way for the arbitration. The arbitration was a not a continuation of the civil case filed in
Makati RTC.
ABS CBN vs CA
301 SCRA 572 – Business Organization – Corporation Law – Delegation of Corporate Powers – Moral
Damages. In 1992, ABS-CBN Broadcasting Corporation, through its vice president Charo Santos-
Concio, requested Viva Production, Inc. to allow ABS-CBN to air at least 14 films produced by Viva.
Pursuant to this request, a meeting was held between Viva’s representative (Vicente Del Rosario)
and ABS-CBN’s Eugenio Lopez (General Manager) and Santos-Concio was held on April 2, 1992.
During the meeting Del Rosario proposed a film package which will allow ABS-CBN to air 104 Viva
films for P60 million. Later, Santos-Concio, in a letter to Del Rosario, proposed a counterproposal
of 53 films (including the 14 films initially requested) for P35 million. Del Rosario presented the
counter offer to Viva’s Board of Directors but the Board rejected the counter offer. Several
negotiations were subsequently made but on April 29, 1992, Viva made an agreement with Republic
Broadcasting Corporation (referred to as RBS – or GMA 7) which gave exclusive rights to RBS to air
104 Viva films including the 14 films initially requested by ABS-CBN.
ABS-CBN now filed a complaint for specific performance against Viva as it alleged that there is
already a perfected contract between Viva and ABS-CBN in the April 2, 1992 meeting. Lopez
testified that Del Rosario agreed to the counterproposal and he (Lopez) even put the agreement in
a napkin which was signed and given to Del Rosario. ABS-CBN also filed an injunction against RBS to
enjoin the latter from airing the films. The injunction was granted. RBS now filed a countersuit with
a prayer for moral damages as it claimed that its reputation was debased when they failed to air
the shows that they promised to their viewers. RBS relied on the ruling in People vs Manero and
Mambulao Lumber vs PNB which states that a corporation may recover moral damages if it “has a
good reputation that is debased, resulting in social humiliation”. The trial court ruled in favor of
Viva and RBS. The Court of Appeals affirmed the trial court.
ISSUE:1. Whether or not a contract was perfected in the April 2, 1992 meeting between the
representatives of the two corporations.
2. Whether or not a corporation, like RBS, is entitled to an award of moral damages upon
grounds of debased reputation.
HELD: 1. No. There is no proof that a contract was perfected in the said meeting. Lopez’ testimony
about the contract being written in a napkin is not corroborated because the napkin was never
produced in court. Further, there is no meeting of the minds because Del Rosario’s offer was of 104
films for P60 million was not accepted. And that the alleged counter-offer made by Lopez on the
same day was not also accepted because there’s no proof of such. The counter offer can only be
deemed to have been made days after the April 2 meeting when Santos-Concio sent a letter to Del
Rosario containing the counter-offer. Regardless, there was no showing that Del Rosario accepted.
But even if he did accept, such acceptance will not bloom into a perfected contract because Del
Rosario has no authority to do so.
As a rule, corporate powers, such as the power; to enter into contracts; are exercised by the Board
of Directors. But this power may be delegated to a corporate committee, a corporate officer or
corporate manager. Such a delegation must be clear and specific. In the case at bar, there was no
such delegation to Del Rosario. The fact that he has to present the counteroffer to the Board of
Directors of Viva is proof that the contract must be accepted first by the Viva’s Board. Hence, even
if Del Rosario accepted the counter-offer, it did not result to a contract because it will not bind Viva
sans authorization.
2. No. The award of moral damages cannot be granted in favor of a corporation because, being an
artificial person and having existence only in legal contemplation, it has no feelings, no emotions,
no senses, It cannot, therefore, experience physical suffering and mental anguish, which call be
experienced only by one having a nervous system. No moral damages can be awarded to a juridical
person. The statement in the case of People vs Manero and Mambulao Lumber vs PNB is a mere
obiter dictum hence it is not binding as a jurisprudence.
JARDINE DAVIES INC., petitioner, vs. COURT OF APPEALS and FAR EAST MILLS SUPPLY CORPORATION,
respondents. GRN 128066 June 19, 2000
PURE FOODS CORPORATION, petitioner, vs. COURT OF APPEALS and FAR EAST MILLS SUPPLY
CORPORATION, respondents. GRN 128069 June 19, 2000
FACTS: In 1992, petitioner PUREFOODS decided to install two 1500 KW generators in its food
processing plant in San Roque, Marikina City. A bidding for the supply and installation of the
generators was held. Out of the 8 prospective bidders who attended the pre-bidding conference,
only 3 bidders, namely, respondent FAR EAST MILLS SUPPLY CORPORATION (FEMSCO), MONARK
and ADVANCE POWER submitted bid proposals and gave bid bonds.
In a letter dated 12 December 1992 addressed to FEMSCO President Alfonso Po, PUREFOODS
confirmed the award of the contract to FEMSCO. FEMSCO submitted the required performance
bond in the amount of P1,841,187.90 and contractor’s all-risk insurance policy in the amount of
P6,137,293.00 which PUREFOODS through its VP Benedicto G. Tope acknowledged in a letter dated
18 December 1992.
However, in a letter dated 22 December 1992, PUREFOODS through its Senior VP Teodoro L.
Dimayuga unilaterally canceled the award as “significant factors were uncovered and brought to
their attention which dictate the cancellation and warrant a total review and re-bid of the project.
FEMSCO protested the cancellation of the award. Before the matter could be resolved, PUREFOODS
awarded the project and entered into a contract with JARDINE NELL, a division of Jardine Davies,
Inc. (JARDINE), which was not one of the bidders.
FEMSCO sued PUREFOODS and JARDINE: PUREFOODS for reneging on its contract, and JARDINE for
its unwarranted interference and inducement.
RTC- Pasig, granted JARDINE’s Demurrer to Evidence. The RTC ordered PUREFOODS to indemnify
FEMSCO. FEMSCO and PUREFOODS appealed to CA. FEMSCO appealed the Resolution of the trial
court which granted the Demurrer to Evidence filed by JARDINE resulting in the dismissal of the
complaint against it.
CA affirmed the Decision of the trial court. It also reversed the Resolution of the lower court and
ordered JARDINE to pay FEMSCO moral damages for inducing PUREFOODS to violate the latter’s
contract with FEMSCO. CA denied MR. Hence, these 2 petitions for review.
ISSUE: WON FEMSCO should be awarded with Moral Damages.
RULING:YES. Contracts are perfected by mere consent, upon the acceptance by the offeree of the
offer made by the offeror. From that moment, the parties are bound not only to the fulfillment of
what has been expressly stipulated but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage and law. The acceptance must not qualify the
terms of the offer. However, the acceptance may be express or implied. For a contract to arise, the
acceptance must be made known to the offeror. Acceptance can be withdrawn or revoked before
it is made known to the offeror.
In the instant case, since PUREFOODS started the process of entering into the contract by
conducting a bidding, Art. 1326 of the Civil Code, which provides that “advertisements for bidders
are simply invitations to make proposals,” applies.
The 12 December 1992 letter of petitioner PUREFOODS to FEMSCO constituted acceptance of
respondent FEMSCO’s offer as contemplated by law. The tenor of the letter, i.e., “This will confirm
that Pure Foods has awarded to your firm (FEMSCO) the project,” could not be more categorical.
While the same letter enumerated certain “basic terms and conditions,” these conditions were
imposed on the performance of the obligation rather than on the perfection of the contract.
But even granting arguendo that the 12 December 1992 letter of petitioner PUREFOODS
constituted a “conditional counter-offer,” respondent FEMCO’s submission of the performance
bond and contractor’s all-risk insurance was an implied acceptance, if not a clear indication of its
acquiescence to, the “conditional counter-offer,”
Petitioner PUREFOODS also argues that it was never in bad faith. But by the unilateral cancellation
of the contract, the defendant (petitioner PURE FOODS) has acted with bad faith and this was
further aggravated by the subsequent inking of a contract between defendant Purefoods and
erstwhile co-defendant Jardine. It is very evident that Purefoods thought that by the expedient
means of merely writing a letter would automatically cancel or nullify the existing contract entered
into by both parties after a process of bidding. This, to the Court’s mind, is a flagrant violation of
the express provisions of the law and is contrary to fair and just dealings to which every man is due.
This Court has awarded in the past moral damages to a corporation whose reputation has been
besmirched. In the instant case, respondent FEMSCO has sufficiently shown that its reputation was
tarnished after it immediately ordered equipment from its suppliers on account of the urgency of
the project, only to be canceled later. We thus sustain respondent appellate court’s award of moral
damages. We however reduce the award from P2Mto P1M, as moral damages are never intended
to enrich the recipient. Likewise, the award of exemplary damages by way of example for the public
good is excessive and should be reduced to P100,000.00.
Petitioner JARDINE maintains on the other hand that respondent appellate court erred in ordering
it to pay moral damages to respondent FEMSCO as it supposedly induced PUREFOODS to violate
the contract with FEMSCO. We agree. While it may seem that petitioners PUREFOODS and JARDINE
connived to deceive respondent FEMSCO, we find no specific evidence on record to support such
perception. There is no showing whatsoever that petitioner JARDINE induced petitioner
PUREFOODS. The similarity in the design submitted to petitioner PUREFOODS by both petitioner
JARDINE and respondent FEMSCO, and the tender of a lower offer by petitioner JARDINE are
insufficient to show that petitioner JARDINE indeed induced petitioner PUREFOODS to violate its
contract with respondent FEMSCO.

MERALCO V. TEAM ELECTRONIC CORP (PD 401/RA 7832, CORP'S CLAIM OF MORAL DAMAGES)
The law in force at the time material to this controversy was PD 401. It penalized unauthorized
installation of water, electrical, telephone connections and such acts as the use of tampered
electrical meters. PD 401 granted the electrical companies the right to conduct inspections of
electric meters and the criminal prosecution or erring customers who were found to have tampered
with their electrical meters. It did not provide for more expedient remedies as the charging of
differential billing and immediate disconnection against erring customers. Thus, electric companies
found a creative way of availing themselves of such remedies by inserting into the service contracts
a provision for differential billing with the option of disconnection upon non-payment by the erring
customers. The Court has recognized the validity of such stipulations. However, recourse to
differential billing with disconnection was subject to the prior requirement of a 48-hour written
notice of disconnection.

MERALCO, in the instant case, resorted to the remedy of disconnection without prior notice. While
it is true that MERALCO sent a demand letter to TEC for the payment of differential billing, it did
not include any notice that the electric supply would be disconnected. In fine, it abused the
remedies granted to it under PD 401 by outright depriving TEC of electric services without first
notifying it of the impending disconnection.

SC deems it proper to delete the award of moral damages. TEC's claim was premised allegedly on
the damage to its goodwill and reputation. As a rule, A CORPORATION IS NOT ENTITLED TO MORAL
DAMAGES BECAUSE, NOT BEING A NATURAL PERSON, IT CANNOT EXPERIENCE PHYSICAL
SUFFERING OR SENTIMENTS like wounded feelings, serious anxiety, mental anguish, and moral
shock. The only EXCEPTION to this rule is when the corporation has a reputation that is debased,
resulting in its humiliation in the business realm. but in such a case, it is imperative for the claimant
to present proof to justify the award. It is essential to prove the existence of the factual basis of the
damage and its causal relation to petitioner's acts. In the present case, the records are bereft of
any evidence that the name or reputation of TEC/TPC has been debased as a result of petitioner's
act. Besides, the trial court simply awarded moral damages in the dispositive portion of its decision
without stating the basis thereof.