Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-8883 July 14, 1959

ALFREDO M. VELAYO, ETC., plaintiff,

vs.
SHELL COMPANY OF THE PHILIPPINES ISLANDS, LTD., defendant-appellee.
ALFONSO Z. SYCIP, ET. AL., intervenors-appellants.

Sycip, Quisumbing, Salazar and Associates for appellants.

Ozaeta, Lichauco and Picazo for appellee.

BAUTISTA ANGELO, J.:

On December 17, 1948, Alfredo M. Velayo as assignees of the insolvent Commercial Airlines, Inc.,
instituted an action against Shell Company of the Philippine Islands, Ltd., in the Court of First
Instance of Manila for injunction and damages (Civil Case No. 6966). On October 26, 1951, a
complaint in intervention was filed by Alfonso Sycip, Paul Sycip, and Yek Trading Corporation, and
on November 14, 1951, by Mabasa & Company.

After trial wherein plaintiff presented evidence in his behalf, but none in behalf of intervenors, the
court rendered decision dismissing plaintiff's complaint as well as those filed by the intervenors. On
March 31, 1954, counsel for plaintiff filed a notice of appeal, appeal bond, and record on appeal in
behalf only of plaintiff even if they also represent the intervenors, which in due time were approved,
the Court instructing its clerk to forward the record on appeal to the Supreme Court together with all
the evidence presented in the case. This instruction was actually complied with.

On August 31, 1954, the Deputy Clerk of the Supreme Court notified counsel of plaintiff that the
record as well as the evidence have already been received and that they should file their brief within
45 days from receipt of the notice. On November 2, 1954, counsel filed their brief for appellants. On
November 6, 1954, or 7 months after the judgment had become final as against the intervenors, and
4 days after counsel for appellants had submitted the latter's brief, counsel for intervenors filed with
the Supreme Court a petition for correction of the record on appeal in order to enable them to insert
therein the names of the intervenors as appellants, the petition being based, among others, on the
ground that the omission of the names of the intervenors in said record on appeal was due to the
mistake of the typist who prepared it while the attorney in charge was on vacation. The petition was
vigorously opposed by counsel for defendant, contending that the same would serve no purpose,
whatsoever considering that the intervenors had not presented any evidence in support of their
claim, aside from the fact that the alleged absence of the attorney of the intervenors cannot
constitute a justification for the alleged omission of the intervenors as appellants. On November 12,
1954, the Court denied the petition. Counsel intervenors moved for a reconsideration of the order,
but the same was denied.

On November 19, 1954, counsel for intervenors filed with the lower court a petition for relief under
Rule 38 of the Rules of Court, wherein he reiterated the same grounds they alleged in the petition for
correction filed by them in the Supreme Court, which petition was denied on November 27, 1954, for
having been filed outside the reglementary period fixed in said Rule 38. Counsel filed a motion for
reconsideration, which was again denied, the Court stating that "no judgment or order has been
rendered, nor any other proceeding taken by this Court on the right of the intervenors to appeal."

On December 20, 1954, counsel filed once more a motion to amend the record on appeal based on
grounds identical with those alleged in the petition for correction filed before the Supreme Court. On
December 27, 1954, the lower court denied the motion. On January 6, 1955, counsel filed a petition
for relief from this last order entered on December 27, 1954, to which counsel for defendant filed an
opposition. On February 5, 1955, hearing was had on both the petition for relief and the opposition,
and on February 9, 1955, the petition was denied on the ground that the case is already before the
Supreme Court on appeal. It is from this order that the counsel for intervenors has taken the appeal
now before us.

The instant appeal has no merit.

To begin with, the only remedy which appellants now seek in this appeal is the inclusion of the
intervenors as appellants in the appeal from the decision rendered in the main case, but this remedy
has already been denied twice by this Court, first, in its resolution of November 12, 1954 denying
their petition for correction of the record on appeal, and, second, in denying their motion for
reconsideration of said resolution. It should be noted that the grounds relied upon in this appeal are
the same grounds alleged in said petition for correction.

In the second place, the intervenors have no right or reason to appeal from the decision in the main
case, it appearing that they did not introduce any evidence during the trial in support of their
complaint, which shows that their appeal would be merely pro-forma. And, in any event, they made
the attempt to amend the record on appeal seven (7) months after the decision had become final
against them.

In the third place, the intervenors have no right or reason to file a petition for relief under Rule 38 of
the Rules of Court from the order of the lower court issued on December 27, 1954, for the reason
that the same was entered upon a motion filed by them. Indeed they cannot reasonably assert that
the order was entered against them through fraud, accident, mistake, or negligence. The fraud
mentioned in Rule 38 is the fraud committed by the adverse party and certainly the same cannot be
attributed to the Court.

Finally, it appears that the main case has already been decided by this Court on the merits on
October 31, 1956, reversing the decision of the lower court and awarding damages to plaintiff, which
apparently is the very purpose which the intervenors seek to accomplish in joining the appeal as co-
appellants. This appeal, therefore, has already become moot.

Wherefore, the order appealed from is affirmed, with costs against appellants.

Paras, C.J., Bengzon, Padilla, Montemayor, Labrador, Concepcion, Endencia and Barrera,
JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

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.

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 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). Two of these complaints were refiled with the Judge Advocate General's Office,
lâwphî1.ñèt

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.

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. L-27155, 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 high-handed 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. Ines-Melale
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.

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

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.

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
absque injuria. 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). " [Petition, p. 17;
lâwphî1.ñèt

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.

Fernan, C.J., Gutierrez, Jr. and Bidin, JJ., concur.

Feliciano, J., took no part.

Footnotes

** Penned by Justice Jorge R. Coquia and concurred in be Justice Josue N. Bellosillo

and Justice Venancio D. Aldecoa Jr.

THIRD DIVISION

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

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). On September 7, 1987, defendant paid plaintiff
[1]

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

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:

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.

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:

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]

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:

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
of P500,000.00 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 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.

xxx.

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]

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.
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:

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]

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 notexemplary 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.
Narvasa, C.J., Romero, Francisco, and Purisima, JJ., concur.

[1]
More accurately, the invoices state:

xxx Interest at 12% per annum will be charged on all overdue account plus 25% on said amount for
attorneys fees and collection. xxx.
[2]
Rollo, p. 51.
[3]
Id., at 54.
[4]
Id., at 43; underscoring in the original.
[5]
See Melendez v. Lavarias, 9 SCRA 548 (1963).
IV Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, 1990 ed., p. 298;
[6]

underscoring supplied.
[7]
Globe Mackay Cable and Radio Corp. v. Court of Appeals, 176 SCRA 778 (1989).
ART. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals,
[8]

good customs or public policy shall compensate the latter for the damage.
[9]
Rollo, p. 137.
[10]
Id., at 18-20.
[11]
I Tolentino, pp.61-62; underscoring supplied.
[12]
Ford Philippines v. Court of Appeals, G.R. No. 99039, February 3, 1997.
[13]
ART. 2234, Civil Code.
[14]
ART. 1158, Civil Code.
[15]
ART. 1315, Civil Code.
[16]
ART. 1306, Civil Code.
[17]
Exhibit BB; underscoring supplied.
[18]
See Luneta Motor Co. v. Mora, 73 Phil. 80 (1941).
[19]
Polytrade Corporation v. Blanco, 30 SCRA 187 (1969).
[20]
See Polytrade v. Blanco, supra., note 1.
Korean Airlines Co., Ltd. v. Court of Appeals, 234 SCRA 717 (1994); see also: Asset Privatization
[21]

Trust v. CA, 214 SCRA 400 (1994).

SECOND DIVISION

[G.R. No. 147076. June 17, 2004]

METROPOLITAN WATERWORKS AND SEWERAGE

SYSTEM, petitioner, vs. ACT THEATER, INC., respondent.

DECISION
CALLEJO, SR., J.:
 Before the Court is a petition for review on certiorari filed by the Metropolitan
Waterworks and Sewerage System (MWSS), seeking to reverse and set aside the
Decision[1] dated January 31, 2001 of the Court of Appeals in CA-G.R. CV No. 58581,
which affirmed the civil aspect of the Decision[2] dated May 5, 1997 of the Regional Trial
Court of Quezon City, Branch 77, directing the petitioner MWSS to pay the respondent
Act Theater, Inc. damages and attorneys fees.
The present case stemmed from the consolidated cases of Criminal Case No. Q-89-
2412 entitled People of the Philippines v. Rodolfo Tabian, et al., for violation of
Presidential Decree (P.D.) No. 401, as amended by Batas Pambansa Blg. 876, and Civil
Case No. Q-88-768 entitled Act Theater, Inc. v. Metropolitan Waterworks and Sewerage
System. The two cases were jointly tried in the court a quo as they arose from the same
factual circumstances, to wit:
On September 22, 1988, four employees of the respondent Act Theater, Inc., namely,
Rodolfo Tabian, Armando Aguilar, Arnel Concha and Modesto Ruales, were
apprehended by members of the Quezon City police force for allegedly tampering a water
meter in violation of P.D. No. 401, as amended by B.P. Blg. 876. The respondents
employees were subsequently criminally charged (Criminal Case No. Q-89-2412) before
the court a quo. On account of the incident, the respondents water service connection
was cut off. Consequently, the respondent filed a complaint for injunction with damages
(Civil Case No. Q-88-768) against the petitioner MWSS.
In the civil case, the respondent alleged in its complaint filed with the court a quo that
the petitioner acted arbitrarily, whimsically and capriciously, in cutting off the respondents
water service connection without prior notice. Due to lack of water, the health and
sanitation, not only of the respondents patrons but in the surrounding premises as well,
were adversely affected. The respondent prayed that the petitioner be directed to pay
damages.
After due trial, the court a quo rendered its decision, the dispositive portion of which
reads:

In Criminal Case No. Q-89-2412

WHEREFORE, for failure of the prosecution to prove the guilt of the accused beyond
reasonable doubt, the four (4) above-named Accused are hereby ACQUITTED of the
crime charged.[3]

In Civil Case No. Q-88-768

...

1. Ordering defendant MWSS to pay plaintiff actual or compensatory

damages in the amount of P25,000.00; and to return the sum
of P200,000.00 deposited by the plaintiff for the restoration of its water
services after its disconnection on September 23, 1988;
 2. Defendants counterclaim for undercollection of P530,759.96 is dismissed
for lack of merit;

3. Ordering defendant MWSS to pay costs of suit;

4. Ordering defendant MWSS to pay plaintiff the amount of P5,000.00 as

attorneys fees;

5. Making the mandatory injunction earlier issued to plaintiff Act Theater,

Inc. permanent.

SO ORDERED.[4]

Aggrieved, the petitioner appealed the civil aspect of the aforesaid decision to the
CA. The appellate court, however, dismissed the appeal. According to the CA, the court a
quo correctly found that the petitioners act of cutting off the respondents water service
connection without prior notice was arbitrary, injurious and prejudicial to the latter
justifying the award of damages under Article 19 of the Civil Code.
Undaunted, the petitioner now comes to this Court alleging as follows:
I

WHETHER OR NOT THE HONORABLE COURT OF APPEAL[S] VALIDLY

AFFIRMED THE DECISION OF THE REGIONAL TRIAL COURT IN
RESOLVING THE PETITIONERS APPEAL;

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS VALIDLY

UPHELD THE AWARD OF ATTORNEYS FEES;

III

WHETHER OR NOT THE HONORABLE COURT OF APPEAL[S] CORRECTLY

APPLIED THE PROVISION OF ARTICLE 19 OF THE NEW CIVIL CODE
WITHOUT CONSIDERING THE APPLICABLE PROVISION OF ARTICLE 429
OF THE SAME CODE.[5]

Preliminarily, the petitioner harps on the fact that, in quoting the decretal portion of
the court a quos decision, the CA erroneously typed P500,000 as the attorneys fees
awarded in favor of the respondent when the same should only be P5,000. In any case,
according to the petitioner, whether the amount is P500,000 or P5,000, the award of
attorneys fees is improper considering that there was no discussion or statement in the
body of the assailed decision justifying such award. The petitioner insists that in cutting
off the respondents water service connection, the petitioner merely exercised its
proprietary right under Article 429 of the Civil Code.
The petition is devoid of merit.
Article 429 of the Civil Code, relied upon by the petitioner in justifying its act of
disconnecting the water supply of the respondent without prior notice, reads:

Art. 429. The owner or lawful possessor of a thing has the right to exclude any person
from the enjoyment and disposal thereof. For this purpose, he may use such force as
may be reasonable to repel or prevent an actual or threatened unlawful physical
invasion or usurpation of his property.

A right is a power, privilege, or immunity guaranteed under a constitution, statute or

decisional law, or recognized as a result of long usage,[6] constitutive of a legally
enforceable claim of one person against the other.[7]
Concededly, the petitioner, as the owner of the utility providing water supply to certain
consumers including the respondent, had the right to exclude any person from the
enjoyment and disposal thereof. However, the exercise of rights is not without
limitations. Having the right should not be confused with the manner by which such right
is to be exercised.[8]
Article 19 of the Civil Code precisely sets the norms for the exercise of ones rights:

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.

When a right is exercised in a manner which discards these norms resulting in

damage to another, a legal wrong is committed for which actor can be held
accountable.[9] In this case, the petitioner failed to act with justice and give the respondent
what is due to it when the petitioner unceremoniously cut off the respondents water
service connection. As correctly found by the appellate court:

While it is true that MWSS had sent a notice of investigation to plaintiff-appellee

prior to the disconnection of the latters water services, this was done only a few hours
before the actual disconnection. Upon receipt of the notice and in order to ascertain
the matter, Act sent its assistant manager Teodulo Gumalid, Jr. to the MWSS office
but he was treated badly on the flimsy excuse that he had no authority to represent
Act. Acts water services were cut at midnight of the day following the apprehension
of the employees. Clearly, the plaintiff-appellee was denied due process when it was
deprived of the water services. As a consequence thereof, Act had to contract another
source to provide water for a number of days. Plaintiff-appellee was also compelled to
deposit with MWSS the sum of P200,000.00 for the restoration of their water
services.[10]
 There is, thus, no reason to deviate from the uniform findings and conclusion of the
court a quo and the appellate court that the petitioners act was arbitrary, injurious and
prejudicial to the respondent, justifying the award of damages under Article 19 of the Civil
Code.
Finally, the amount of P500,000 as attorneys fees in that portion of the assailed
decision which quoted the fallo of the court a quos decision was obviously a typographical
error. As attorneys fees, the court a quo awarded the amount of P5,000 only. It was this
amount, as well as actual and compensatory damages of P25,000 and the
reimbursement of P200,000 deposited by the respondent for the restoration of its water
supply, that the CA affirmed, as it expressly stated in its dispositive portion that finding no
cogent reason to reverse the appealed Decision which is in conformity with the law and
evidence, the same is hereby AFFIRMED.[11]
The award of P5,000 as attorneys fees is reasonable and warranted. Attorneys fees
may be awarded when a party is compelled to litigate or incur expenses to protect his
interest by reason of an unjustified act of the other party.[12]
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated
January 31, 2001 in CA-G.R. CV No. 58581 is AFFIRMED in toto.
SO ORDERED.
Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.

[1] Penned by Associate Justice Portia Alio-Hormachuelos, with Associate Justices Fermin A. Martin, Jr.
and Mercedes Gozo-Dadole concurring.
[2] Penned by Judge Normandie B. Pizarro.
[3] Rollo, p. 35.
[4] Id. at 37.
[5] Id. at 13-14.
[6] BLACKS LAW DICTIONARY, 6th Ed., p. 1324.
[7] Rellosa v. Pellosis, 362 SCRA 486 (2001).
[8] Paguio v. Philippine Long Distance Telephone Co., Inc., 393 SCRA 379 (2002).
[9] Rellosa v. Pellosis, supra.
[10] Rollo, p. 26.
[11] Id. at 27.
[12] Terminal Facilities and Services Corporation vs. Philippine Ports Authority, 378 SCRA 82 (2002).

SECOND DIVISION
 [G.R. No. 151866. September 9, 2004]

SOLEDAD CARPIO, petitioner, vs. LEONORA A.

VALMONTE, respondent.

DECISION
TINGA, J.:

Assailed in the instant petition for review is the Decision of the Court of Appeals in
C.A.-G.R. CV No. 69537,[1] promulgated on 17 January 2002.[2] The appellate court
reversed the trial courts decision denying respondents claim for damages against
petitioner and ordered the latter to pay moral damages to the former in the amount
of P100,000.00.
Respondent Leonora Valmonte is a wedding coordinator. Michelle del Rosario and
Jon Sierra engaged her services for their church wedding on 10 October 1996. At about
4:30 p.m. on that day, Valmonte went to the Manila Hotel where the bride and her family
were billeted. When she arrived at Suite 326-A, several persons were already there
including the bride, the brides parents and relatives, the make-up artist and his assistant,
the official photographers, and the fashion designer. Among those present was petitioner
Soledad Carpio, an aunt of the bride who was preparing to dress up for the occasion.
After reporting to the bride, Valmonte went out of the suite carrying the items needed
for the wedding rites and the gifts from the principal sponsors. She proceeded to the
Maynila Restaurant where the reception was to be held. She paid the suppliers, gave the
meal allowance to the band, and went back to the suite. Upon entering the suite,
Valmonte noticed the people staring at her. It was at this juncture that petitioner allegedly
uttered the following words to Valmonte: Ikaw lang ang lumabas ng kwarto, nasaan ang
dala mong bag? Saan ka pumunta? Ikaw lang and lumabas ng kwarto, ikaw ang
kumuha. Petitioner then ordered one of the ladies to search Valmontes bag. It turned out
that after Valmonte left the room to attend to her duties, petitioner discovered that the
pieces of jewelry which she placed inside the comfort room in a paper bag were lost. The
jewelry pieces consist of two (2) diamond rings, one (1) set of diamond earrings, bracelet
and necklace with a total value of about one million pesos. The hotel security was called
in to help in the search. The bags and personal belongings of all the people inside the
room were searched. Valmonte was allegedly bodily searched, interrogated and trailed
by a security guard throughout the evening. Later, police officers arrived and interviewed
all persons who had access to the suite and fingerprinted them including Valmonte.
During all the time Valmonte was being interrogated by the police officers, petitioner kept
on saying the words Siya lang ang lumabas ng kwarto. Valmontes car which was parked
at the hotel premises was also searched but the search yielded nothing.
A few days after the incident, petitioner received a letter from Valmonte demanding a
formal letter of apology which she wanted to be circulated to the newlyweds relatives and
guests to redeem her smeared reputation as a result of petitioners imputations against
her. Petitioner did not respond to the letter. Thus, on 20 February 1997, Valmonte filed a
suit for damages against her before the Regional Trial Court (RTC) of Pasig City, Branch
268. In her complaint, Valmonte prayed that petitioner be ordered to pay actual, moral
and exemplary damages, as well as attorneys fees.
Responding to the complaint, petitioner denied having uttered words or done any act
to confront or single out Valmonte during the investigation and claimed that everything
that transpired after the theft incident was purely a police matter in which she had no
participation. Petitioner prayed for the dismissal of the complaint and for the court to
adjudge Valmonte liable on her counterclaim.
The trial court rendered its Decision on 21 August 2000, dismissing Valmontes
complaint for damages. It ruled that when petitioner sought investigation for the loss of
her jewelry, she was merely exercising her right and if damage results from a person
exercising his legal right, it is damnum absque injuria. It added that no proof was
presented by Valmonte to show that petitioner acted maliciously and in bad faith in
pointing to her as the culprit. The court said that Valmonte failed to show that she suffered
serious anxiety, moral shock, social humiliation, or that her reputation was besmirched
due to petitioners wrongful act.
Respondent appealed to the Court of Appeals alleging that the trial court erred in
finding that petitioner did not slander her good name and reputation and in disregarding
the evidence she presented.
The Court of Appeals ruled differently. It opined that Valmonte has clearly established
that she was singled out by petitioner as the one responsible for the loss of her jewelry. It
cited the testimony of Serena Manding, corroborating Valmontes claim that petitioner
confronted her and uttered words to the effect that she was the only one who went out of
the room and that she was the one who took the jewelry. The appellate court held that
Valmontes claim for damages is not predicated on the fact that she was subjected to body
search and interrogation by the police but rather petitioners act of publicly accusing her
of taking the missing jewelry. It categorized petitioners utterance defamatory considering
that it imputed upon Valmonte the crime of theft. The court concluded that petitioners
verbal assault upon Valmonte was done with malice and in bad faith since it was made in
the presence of many people without any solid proof except petitioners suspicion. Such
unfounded accusation entitles Valmonte to an award of moral damages in the amount
of P100,000.00 for she was publicly humiliated, deeply insulted, and
embarrassed.However, the court found no sufficient evidence to justify the award of
actual damages.
Hence, this petition.
Petitioner contends that the appellate courts conclusion that she publicly humiliated
respondent does not conform to the evidence presented. She adds that even on the
assumption that she uttered the words complained of, it was not shown that she did so
with malice and in bad faith.
In essence, petitioner would want this Court to review the factual conclusions reached
by the appellate court. The cardinal rule adhered to in this jurisdiction is that a petition for
review must raise only questions of law,[3] and judicial review under Rule 45 does not
extend to an evaluation of the sufficiency of evidence unless there is 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. [4] This Court, while not a
trier of facts, may review the evidence in order to arrive at the correct factual conclusion
based on the record especially so when the findings of fact of the Court of Appeals are at
variance with those of the trial court, or when the inference drawn by the Court of Appeals
from the facts is manifestly mistaken.[5]
Contrary to the trial courts finding, we find sufficient evidence on record tending to
prove that petitioners imputations against respondent was made with malice and in bad
faith.
Petitioners testimony was shorn of substance and consists mainly of denials. She
claimed not to have uttered the words imputing the crime of theft to respondent or to have
mentioned the latters name to the authorities as the one responsible for the loss of her
jewelry. Well-settled is the rule that denials, if unsubstantiated by clear and convincing
evidence, are negative and self-serving which merit no weight in law and cannot be given
greater evidentiary value over the testimony of credible witnesses who testify on
affirmative matters.[6]
Respondent, however, has successfully refuted petitioners testimony. Quite credibly,
she has narrated in great detail her distressing experience on that fateful day. She
testified as to how rudely she was treated by petitioner right after she returned to the
room. Petitioner immediately confronted her and uttered the words Ikaw lang ang
lumabas ng kwarto. Nasaan ang dala mong bag? Saan ka pumunta? Ikaw ang kumuha.
Thereafter, her body was searched including her bag and her car. Worse, during the
reception, she was once more asked by the hotel security to go to the ladies room and
she was again bodily searched.[7]
Serea Manding, a make-up artist, corroborated respondents testimony. She testified
that petitioner confronted respondent in the presence of all the people inside the suite
accusing her of being the only one who went out of the comfort room before the loss of
the jewelry. Manding added that respondent was embarrassed because everybody else
in the room thought she was a thief.[8] If only to debunk petitioners assertion that she did
not utter the accusatory remarks in question publicly and with malice, Mandings testimony
on the point deserves to be reproduced. Thus,
Q After that what did she do?
A Then Leo came out from the other room she said, she is (sic) the one I only saw from
the comfort room.
Q Now, what exact word (sic) were said by Mrs. Carpio on that matter?
A She said siya lang yung nakita kong galing sa C.R.
Q And who was Mrs. Carpio or the defendant referring to?
A Leo Valmonte.
Q Did she say anything else, the defendant?
 A Her jewelry were lost and Leo was the only one she saw in the C.R. After that she
get (sic) the paper bag then the jewelry were already gone.
Q Did she confront the plaintiff Mrs. Valmonte regarding that fact?
A Yes.
Q What did the defendant Mrs. Carpio tell the plaintiff, Mrs. Valmonte?
A Ikaw yung nakita ko sa C.R. nawawala yung alahas ko.
Q When the defendant Mrs. Carpio said that to plaintiff Mrs. Valmonte were there other
people inside the room?
A Yes, sir.
Q Were they able to hear what Mrs. Carpio said to Mrs. Valmonte?
A Yes, sir.
Q What was your thinking at that time that Mrs. Carpio said that to Mrs. Valmonte?
A Nakakahiya kasi akala ng iba doon na talagang magnanakaw siya. Kasi marami na
kaming nandodoon, dumating na yung couturier pati yung video man and we sir.
Q Who was the person you [were] alleging na nakakahiya whose (sic) being accused
or being somebody who stole those item of jewelry?
A Nakakahiya para kay Leo kasi pinagbibintangan siya. Sa dami namin doon siya yung
napagbintangan.
Q And who is Leo, what is her full name?
A Leo Valmonte.
Q Did the defendant tell this matter to other people inside the room?
A Yes, the mother of the bride.
Q And who else did she talk to?
A The father of the bride also.
Q And what did the defendant tell the mother regarding this matter?
A Nawawala yung alahas ko. Sabi naman nung mother baka naman hindi mo dala
tignan mo munang mabuti.
Q Who was that other person that she talked to?
A Father of the bride.[9]
Significantly, petitioners counsel elected not to pursue her cross-examination of the
witness on this point following her terse and firm declaration that she remembered
petitioners exact defamatory words in answer to the counsels question. [10]
Jaime Papio, Security Supervisor at Manila Hotel, likewise contradicted petitioners
allegation that she did not suspect or mention the name of respondent as her suspect in
the loss of the jewelry.[11]
 To warrant recovery of damages, there must be both a right of action, for a wrong
inflicted by the defendant, and the damage resulting therefrom to the plaintiff. Wrong
without damage, or damage without wrong, does not constitute a cause of action.[12]
In the sphere of our law on human relations, the victim of a wrongful act or omission,
whether done willfully or negligently, is not left without any remedy or recourse to obtain
relief for the damage or injury he sustained. Incorporated into our civil law are not only
principles of equity but also universal moral precepts which are designed to indicate
certain norms that spring from the fountain of good conscience and which are meant to
serve as guides for human conduct.[13] First of these fundamental precepts is the principle
commonly known as abuse of rights under Article 19 of the Civil Code. It provides
that 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. To find the
existence of an abuse of right, 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 or prejudicing or
injuring another.[14] When a right is exercised in a manner which discards these norms
resulting in damage to another, a legal wrong is committed for which the actor can be
held accountable.[15]One is not allowed to exercise his right in a manner which would cause
unnecessary prejudice to another or if he would thereby offend morals or good customs.
Thus, a person should be protected only when he acts in the legitimate exercise of his
right, that is when he acts with prudence and good faith; but not when he acts with
negligence or abuse.[16]
Complementing the principle of abuse of rights are the provisions of Articles 20 and
21 of the Civil Code which read, thus:

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 or good customs or public policy shall compensate the latter for the
damage.

The foregoing rules provide the legal bedrock for the award of damages to a party
who suffers damage whenever one commits an act in violation of some legal provision,
or an act which though not constituting a transgression of positive law, nevertheless
violates certain rudimentary rights of the party aggrieved.
In the case at bar, petitioners verbal reproach against respondent was certainly
uncalled for considering that by her own account nobody knew that she brought such kind
and amount of jewelry inside the paper bag.[17] This being the case, she had no right to
attack respondent with her innuendos which were not merely inquisitive but outrightly
accusatory. By openly accusing respondent as the only person who went out of the room
before the loss of the jewelry in the presence of all the guests therein, and ordering that
she be immediately bodily searched, petitioner virtually branded respondent as the
thief. True, petitioner had the right to ascertain the identity of the malefactor, but to malign
respondent without an iota of proof that she was the one who actually stole the jewelry is
an act which, by any standard or principle of law is impermissible. Petitioner had willfully
caused injury to respondent in a manner which is contrary to morals and good
customs. Her firmness and resolve to find her missing jewelry cannot justify her acts
toward respondent. She did not act with justice and good faith for apparently, she had no
other purpose in mind but to prejudice respondent. Certainly, petitioner transgressed the
provisions of Article 19 in relation to Article 21 for which she should be held accountable.
Owing to the rule that great weight and even finality is given to factual conclusions of
the Court of Appeals which affirm those of the trial court,[18] we sustain the findings of the
trial court and the appellate court that respondents claim for actual damages has not been
substantiated with satisfactory evidence during the trial and must therefore be denied. To
be recoverable, actual damages must be duly proved with reasonable degree of certainty
and the courts cannot rely on speculation, conjecture or guesswork.[19]
Respondent, however, is clearly entitled to an award of moral damages. Moral
damages may be awarded whenever the defendants wrongful act or omission is the
proximate cause of the plaintiffs physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury[20] in the cases specified or analogous to those provided in Article 2219 of the Civil
Code.[21] Though no proof of pecuniary loss is necessary in order that moral damages may
be adjudicated, courts are mandated to take into account all the circumstances obtaining
in the case and assess damages according to their discretion. [22] Worthy of note is that
moral damages are not awarded to penalize the defendant,[23]or to enrich a complainant,
but to enable the latter to obtain means, diversions or amusements that will serve to
alleviate the moral suffering he has undergone, by reason of defendants culpable action.
In any case, award of moral damages must be proportionate to the sufferings inflicted.[24]
Based on the foregoing jurisprudential pronouncements, we rule that the appellate
court did not err in awarding moral damages. Considering respondents social standing,
and the fact that her profession is based primarily on trust reposed in her by her clients,
the seriousness of the imputations made by petitioner has greatly tarnished her reputation
and will in one way or the other, affect her future dealings with her clients, the award
of P100,000.00 as moral damages appears to be a fair and reasonable assessment of
respondents damages.
WHEREFORE, the instant Petition is DENIED. Costs against petitioner.
SO ORDERED.
Puno, (Chairman), and Callejo, Sr., JJ., concur.
Austria-Martinez, J., on official leave.
Chico-Nazario, J., on leave.

[1]
Penned by Justice Martin S. Villarama, Jr. concurred in by Justices Conchita Carpio-Morales and Sergio
L. Pestao.
[2]
Rollo, pp. 32-37.
[3]
Abalos v. Court of Appeals, 375 Phil. 419 (1999]; Viloria v. Court of Appeals, 368 Phil. 851 (1999].
[4]
Lagrosa v. Court of Appeals, 371 Phil. 225 (1999).
[5]
Roman Catholic Bishop of Malolos, Inc. v. Intermediate Appellate Court, G.R. No. 72110, November 16,
1990, 191 SCRA 411; Ferrer v. Court of Appeals, G.R. No. 98182, March 1, 1993, 219 SCRA 302.
[6]
People v. Sernadilla, G.R. No. 137696, January 24, 2001, 350 SCRA 243; People v. Preciados, G.R. No.
122934, January 5, 2001, 349 SCRA 1; People v. Baway, G.R. No. 130406, January 22, 2001, 350
SCRA 29.
[7]
TSN, October 22, 1997, pp. 6, 13-19.
[8]
TSN, December 15, 1998, pp. 10-12.
[9]
TSN, December 15, 1998, pp. 9-12.
[10]
TSN, February 9, 1999, p. 14.
[11]
TSN, May 27, 1998, pp. 9, 12, and 16.
[12]
Sangco, Torts and Damages, Vol. II, 1994 Edition, p. 941.
[13]
Report on the Code Commission on the Proposed Civil Code of the Philippines, p. 39 cited in Globe
Mackay Cable and Radio Corporation v. Court of Appeals, G.R. No. 81262, August 25, 1989, 176
SCRA 779.
[14]
BPI Express Card Corporation v. Court of Appeals, 357 Phil. 262 (1998); Globe Mackay v. Court of
Appeals, G.R. No. 81262, August 25, 1989, 176 SCRA 779; NPC v. Philipp Brothers Oceanic, Inc.,
, G.R. No. 126204, November 20, 2001, 369 SCRA 629.
[15]
Rellosa v. Pellosis, 414 Phil. 786 [2001].
[16]
See 1 Tolentino, THE CIVIL CODE, 1990 Ed. p. 61.
[17]
TSN, March 17, 1998, pp. 15-16; p. 26.
[18]
Baas Jr., v. Court of Appeals, 382 Phil. 144 [2000]; Compania Maritima, Inc. v. Court of Appeals, 376
Phil. 278 [1999]; Borromeo v. Sun, 375 Phil. 595 [1999].
[19]
Bayer Philippines, Inc. v. Court of Appeals, G.R. No. 109269, September 15, 2000, 340 SCRA 437;
Congregation of the Religious of the Virgin Mary v. Court of Appeals, 353 Phil. 591 [1998]; Marina
Properties Corporation v. Court of Appeals, 355 Phil. 705 [1998].
[20]
Art. 2217, Civil Code.
[21]
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;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
xxxx
[22]
Fule v. Court of Appeals, 350 Phil. 349 [1998]; Zulueta v. Pan American Airways, Inc., 151 Phil. 1 (1973).
[23]
Simex International, Inc. v. Court of Appeals, G.R. No. 88013, March 19, 1990, 183 SCRA 360.
[24]
Llorente, Jr. v. Sandiganbayan, 350 Phil. 820 [1998]; Radio Communications of the Phils., Inc. v.
Rodriguez , G.R. No. 83768, February 28, 1990, 182 SCRA 899.

THIRD DIVISION

ORLANDO D. GARCIA, JR., G.R. No. 168512

doing business under the name and
style COMMUNITY DIAGNOSTIC
CENTER and BU CASTRO,[1]
Petitioners, Present:
Ynares-Santiago, J. (Chairperson),
- versus - Austria-Martinez,
Callejo, Sr.,
Chico-Nazario, and
Nachura, JJ.
RANIDA D. SALVADOR and
RAMON SALVADOR, Promulgated:
Respondents.
March 20, 2007
x ---------------------------------------------------------------------------------------- x

DECISION
YNARES-SANTIAGO, J.:

This is a petition for review[2] under Rule 45 of the Rules of Court assailing
the February 27, 2004 Decision[3] of the Court of Appeals in CA-G.R. CV No. 58668
finding petitioner Orlando D. Garcia liable for gross negligence; and its June 16,
2005 Resolution[4] denying petitioners motion for reconsideration.
 On October 1, 1993, respondent Ranida D. Salvador started working as a
trainee in the Accounting Department of Limay Bulk Handling Terminal, Inc. (the
Company). As a prerequisite for regular employment, she underwent a medical
examination at the Community Diagnostic Center (CDC). Garcia who is a medical
technologist, conducted the HBs Ag (Hepatitis B Surface Antigen) test and
on October 22, 1993, CDC issued the test result[5] indicating that Ranida was HBs
Ag: Reactive. The result bore the name and signature of Garcia as examiner and the
rubber stamp signature of Castro as pathologist.

When Ranida submitted the test result to Dr. Sto. Domingo, the Company
physician, the latter apprised her that the findings indicated that she is suffering from
Hepatitis B, a liver disease. Thus, based on the medical report[6] submitted by Sto.
Domingo, the Company terminated Ranidas employment for failing the physical
examination.[7]

When Ranida informed her father, Ramon, about her ailment, the latter suffered a
heart attack and was confined at the Bataan Doctors Hospital. During Ramons
confinement, Ranida underwent another HBs Ag test at the said hospital and the
result[8] indicated that she is non-reactive. She informed Sto. Domingo of this
development but was told that the test conducted by CDC was more reliable because
it used the Micro-Elisa Method.

Thus, Ranida went back to CDC for confirmatory testing, and this time, the Anti-
HBs test conducted on her indicated a Negative result.[9]

Ranida also underwent another HBs Ag test at the Bataan Doctors Hospital using
the Micro-Elisa Method. The result indicated that she was non-reactive.[10]

Ranida submitted the test results from Bataan Doctors Hospital and CDC to the
Executive Officer of the Company who requested her to undergo another similar test
before her re-employment would be considered. Thus, CDC conducted another HBs
Ag test on Ranida which indicated a Negative result.[11] Ma. Ruby G. Calderon,
Med-Tech Officer-in-Charge of CDC, issued a Certification correcting the initial
result and explaining that the examining medical technologist (Garcia) interpreted
the delayed reaction as positive or reactive.[12]
 Thereafter, the Company rehired Ranida.

On July 25, 1994, Ranida and Ramon filed a complaint[13] for damages against
petitioner Garcia and a purportedly unknown pathologist of CDC, claiming that, by
reason of the erroneous interpretation of the results of Ranidas examination, she lost
her job and suffered serious mental anxiety, trauma and sleepless nights, while
Ramon was hospitalized and lost business opportunities.

On September 26, 1994, respondents amended their complaint[14] by naming Castro

as the unknown pathologist.

Garcia denied the allegations of gross negligence and incompetence and reiterated
the scientific explanation for the false positive result of the first HBs Ag test in
his December 7, 1993 letter to the respondents.[15]

For his part, Castro claimed that as pathologist, he rarely went to CDC and
only when a case was referred to him; that he did not examine Ranida; and that the
test results bore only his rubber-stamp signature.

On September 1, 1997,[16] the trial court dismissed the complaint for failure of the
respondents to present sufficient evidence to prove the liability of Garcia and
Castro. It held that respondents should have presented Sto. Domingo because he was
the one who interpreted the test result issued by CDC. Likewise, respondents should
have presented a medical expert to refute the testimonies of Garcia and Castro
regarding the medical explanation behind the conflicting test results on Ranida.[17]

Respondents appealed to the Court of Appeals which reversed the trial courts
findings, the dispositive portion of which states:

WHEREFORE, the decision appealed from is REVERSED and SET

ASIDE and another one entered ORDERING defendant-appellee Orlando D.
Garcia, Jr. to pay plaintiff-appellant Ranida D. Salvador moral damages in the
amount of P50,000.00, exemplary damages in the amount of P50,000.00 and
attorneys fees in the amount of P25,000.00.

SO ORDERED.[18]
The appellate court found Garcia liable for damages for negligently issuing an
erroneous HBs Ag result. On the other hand, it exonerated Castro for lack of
participation in the issuance of the results.

After the denial of his motion for reconsideration, Garcia filed the instant
petition.

The main issue for resolution is whether the Court of Appeals, in reversing
the decision of the trial court, correctly found petitioner liable for damages to the
respondents for issuing an incorrect HBsAG test result.

Garcia maintains he is not negligent, thus not liable for damages, because he
followed the appropriate laboratory measures and procedures as dictated by his
training and experience; and that he did everything within his professional
competence to arrive at an objective, impartial and impersonal result.

At the outset, we note that the issues raised are factual in nature. Whether a
person is negligent or not is a question of fact which we cannot pass upon in a
petition for review on certiorari which is limited to reviewing errors of law.[19]

Negligence is the failure to observe for the protection of the interest of another
person that degree of care, precaution and vigilance which the circumstances justly
demand,[20] whereby such other person suffers injury. For health care providers, the
test of the existence of negligence is: did the health care provider either fail to do
something which a reasonably prudent health care provider would have done, or that
he or she did something that a reasonably prudent health care provider would not
have done; and that failure or action caused injury to the patient;[21] if yes, then he is
guilty of negligence.

Thus, the elements of an actionable conduct are: 1) duty, 2) breach, 3) injury,

and 4) proximate causation.

All the elements are present in the case at bar.

Owners and operators of clinical laboratories have the duty to comply with
statutes, as well as rules and regulations, purposely promulgated to protect and
promote the health of the people by preventing the operation of substandard,
improperly managed and inadequately supported clinical laboratories and by
improving the quality of performance of clinical laboratory examinations.[22] Their
business is impressed with public interest, as such, high standards of performance
are expected from them.
In F.F. Cruz and Co., Inc. v. Court of Appeals, we found the owner of a
furniture shop liable for the destruction of the plaintiffs house in a fire which started
in his establishment in view of his failure to comply with an ordinance which
required the construction of a firewall. In Teague v. Fernandez, we stated that where
the very injury which was intended to be prevented by the ordinance has happened,
non-compliance with the ordinance was not only an act of negligence, but also the
proximate cause of the death.[23]

In fine, violation of a statutory duty is negligence. Where the law imposes

upon a person the duty to do something, his omission or non-performance will render
him liable to whoever may be injured thereby.

Section 2 of Republic Act (R.A.) No. 4688, otherwise known as The Clinical
Laboratory Law, provides:
Sec. 2. It shall be unlawful for any person to be professionally in-charge of
a registered clinical laboratory unless he is a licensed physician duly qualified in
laboratory medicine and authorized by the Secretary of Health, such authorization
to be renewed annually.

No license shall be granted or renewed by the Secretary of Health for the

operation and maintenance of a clinical laboratory unless such laboratory is under
the administration, direction and supervision of an authorized physician, as
provided for in the preceding paragraph.

Corollarily, Sections 9(9.1)(1), 11 and 25(25.1)(1) of the DOH Administrative

Order No. 49-B Series of 1988, otherwise known as the Revised Rules and
Regulations Governing the Registration, Operation and Maintenance of Clinical
Laboratories in the Philippines, read:

Sec. 9. Management of the Clinical Laboratory:

9.1 Head of the Clinical Laboratory: The head is that person

who assumes technical and administrative supervision and
control of the activities in the laboratory.
 For all categories of clinical laboratories, the head
shall be a licensed physician certified by the Philippine
Board of Pathology in either Anatomic or Clinical Pathology
or both provided that:

(1) This shall be mandatory for all categories of free-

standing clinical laboratories; all tertiary category hospital
laboratories and for all secondary category hospital
laboratories located in areas with sufficient available
pathologist.

xxxx

Sec. 11. Reporting: All laboratory requests shall be considered as

consultations between the requesting physician and pathologist of the
laboratory. As such all laboratory reports on various examinations of human
specimens shall be construed as consultation report and shall bear the name of the
pathologist or his associate. No person in clinical laboratory shall issue a report,
orally or in writing, whole portions thereof without a directive from the pathologist
or his authorized associate and only to the requesting physician or his authorized
representative except in emergencies when the results may be released as
authorized by the pathologist.

xxxx

Sec. 25. Violations:

25.1 The license to operate a clinical laboratory may be suspended or

revoked by the Undersecretary of Health for Standards and Regulation upon
violation of R.A. 4688 or the rules and regulations issued in pursuance thereto or
the commission of the following acts by the persons owning or operating a clinical
laboratory and the persons under their authority.

(1) Operation of a Clinical Laboratory without a certified

pathologist or qualified licensed physician authorized by the
Undersecretary of Health or without employing a registered
medical technologist or a person not registered as a medical
technologist in such a position.
And Section 29(b) of R.A. No. 5527, otherwise known as The Philippine
Medical Technology Act of 1969, reads:

Section 29. Penal Provisions.- Without prejudice to the provision of the Medical
Act of 1959, as amended relating to illegal practice of Medicine, the following shall
be punished by a fine of not less than two thousand pesos nor more than five
 thousand pesos, or imprisonment for not less than six months nor more than two
years, or both, in the discretion of the court:

xxxx

(b) Any medical technologist, even if duly registered, who shall practice
medical technology in the Philippines without the necessary supervision of a
qualified pathologist or physician authorized by the Department of Health;

From the foregoing laws and rules, it is clear that a clinical laboratory must
be administered, directed and supervised by a licensed physician authorized by the
Secretary of Health, like a pathologist who is specially trained in methods of
laboratory medicine; that the medical technologist must be under the supervision of
the pathologist or a licensed physician; and that the results of any examination may
be released only to the requesting physician or his authorized representative upon
the direction of the laboratory pathologist.

These rules are intended for the protection of the public by preventing
performance of substandard clinical examinations by laboratories whose personnel
are not properly supervised. The public demands no less than an effective and
efficient performance of clinical laboratory examinations through compliance with
the quality standards set by laws and regulations.

We find that petitioner Garcia failed to comply with these standards.

First, CDC is not administered, directed and supervised by a licensed

physician as required by law, but by Ma. Ruby C. Calderon, a licensed Medical
Technologist.[24] In the License to Open and Operate a Clinical Laboratory for the
years 1993 and 1996 issued by Dr. Juan R. Naagas, M.D., Undersecretary for Health
Facilities, Standards and Regulation, defendant-appellee Castro was named as the
head of CDC.[25] However, in his Answer with Counterclaim, he stated:
3. By way of affirmative and special defenses, defendant pathologist further avers
and plead as follows:

Defendant pathologist is not the owner of

the Community Diagnostic Center nor an employee of the same nor the employer
of its employees. Defendant pathologist comes to
the CommunityDiagnostic Center when and where a problem is referred to him. Its
employees are licensed under the Medical Technology Law (Republic Act No.
 5527) and are certified by, and registered with, the Professional Regulation
Commission after having passed their Board Examinations. They are competent
within the sphere of their own profession in so far as conducting laboratory
examinations and are allowed to sign for and in behalf of the clinical
laboratory. The defendant pathologist, and all pathologists in general, are hired by
laboratories for purposes of complying with the rules and regulations and orders
issued by the Department of Health through the Bureau of Research and
Laboratories. Defendant pathologist does not stay that long period of time at
the Community Diagnostic Center but only periodically or whenever a case is
referred to him by the laboratory. Defendant pathologist does not appoint or select
the employees of the laboratory nor does he arrange or approve their schedules of
duty.[26]

Castros infrequent visit to the clinical laboratory barely qualifies as an

effective administrative supervision and control over the activities in the
laboratory. Supervision and control means the authority to act directly whenever a
specific function is entrusted by law or regulation to a subordinate; direct the
performance of duty; restrain the commission of acts; review, approve, revise or
modify acts and decisions of subordinate officials or units.[27]

Second, Garcia conducted the HBsAG test of respondent Ranida without the
supervision of defendant-appellee Castro, who admitted that:
[He] does not know, and has never known or met, the plaintiff-patient even
up to this time nor has he personally examined any specimen, blood, urine or any
other tissue, from the plaintiff-patient otherwise his own handwritten signature
would have appeared in the result and not merely stamped as shown in Annex B of
the Amended Complaint.[28]
Last, the disputed HBsAG test result was released to respondent Ranida
without the authorization of defendant-appellee Castro.[29]

Garcia may not have intended to cause the consequences which followed after
the release of the HBsAG test result. However, his failure to comply with the laws
and rules promulgated and issued for the protection of public safety and interest is
failure to observe that care which a reasonably prudent health care provider would
observe. Thus, his act or omission constitutes a breach of duty.

Indubitably, Ranida suffered injury as a direct consequence of Garcias failure

to comply with the mandate of the laws and rules aforequoted. She was terminated
from the service for failing the physical examination; suffered anxiety because of
the diagnosis; and was compelled to undergo several more tests. All these could have
been avoided had the proper safeguards been scrupulously followed in conducting
the clinical examination and releasing the clinical report.

Article 20 of the New Civil Code provides:

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

The foregoing provision provides the legal basis for the award of damages to
a party who suffers damage whenever one commits an act in violation of some legal
provision.[30] This was incorporated by the Code Commission to provide relief to a
person who suffers damage because another has violated some legal provision.[31]

We find the Court of Appeals award of moral damages reasonable under the
circumstances bearing in mind the mental trauma suffered by respondent Ranida
who thought she was afflicted by Hepatitis B, making her unfit or unsafe for any
type of employment.[32] Having established her right to moral damages, we see no
reason to disturb the award of exemplary damages and attorneys fees. Exemplary
damages are imposed, by way of example or correction for the public good, in
addition to moral, temperate, liquidated or compensatory damages,[33] and attorneys
fees may be recovered when, as in the instant case, exemplary damages are
awarded.[34]

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No.

58668 dated February 27, 2004 finding petitioner Orlando D. Garcia, Jr. guilty of
gross negligence and liable to pay to respondents P50,000.00 as moral
damages, P50,000.00 as exemplary damages, and P25,000.00 as attorneys fees,
is AFFIRMED.

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

ROMEO J. CALLEJO, SR. MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

ATTESTATION

I attest that the conclusions in the above decision were reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

[1]
Did not appeal from the Decision of the Court of Appeals.
[2]
Rollo, pp. 7-45.
[3]
Id. at 48-63. Penned by Associate Justice Marina L. Buzon and concurred in by Associate Justices Sergio L. Pestao
and Aurora Santiago-Lagman.
[4]
Id. at 46-47.
[5]
Records, p. 186.
[6]
Id. at 199.
[7]
Id. at 187.
[8]
Id. at 188.
[9]
Id. at 189.
[10]
Id. at 190.
[11]
Id. at 192.
[12]
Id. at 209.
[13]
Id. at 1-7.
[14]
Id. at 45-51.
[15]
Id. at 31-41.
[16]
CA Rollo, pp. 51-61. Penned by Judge Lorenzo R. Silva, Jr.
[17]
Id. at 59.
[18]
Rollo, p. 63.
[19]
Estacion v. Bernardo, G.R. No. 144723, February 27, 2006, 483 SCRA 222, 231.
[20]
Child Learning Center, Inc. v. Tagorio, G.R. No. 150920, November 25, 2005, 476 SCRA 236, 242.
[21]
Garcia-Rueda v. Pascasio, 344 Phil. 323, 331 (1997).
[22]
Department of Health (DOH) Administrative Order 49-B (1988), Sec. 3.
[23]
Cipriano v. Court of Appeals, 331 Phil. 1019, 1025 (1996).
[24]
Records, p. 193.
[25]
Id. at 456-457.
[26]
Id. at 72-73.
[27]
Jalandoni v. Drilon, 383 Phil. 855, 868 (2000).
[28]
Records, p. 73.
[29]
Id.
[30]
Carpio v. Valmonte, G.R. No. 151866, September 9, 2004, 438 SCRA 38, 47-48.
[31]
Sanco, Cezar S., Torts and Damages (1994), Volume II, p. 748.
[32]
Records, p. 199.
[33]
Civil Code, Article 2229.
[34]
Civil Code, Article 2208.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-39019 January 22, 1988

MANILA ELECTRIC COMPANY and PEDRO YAMBAO, petitioners-appellants,

vs.
THE HONORABLE COURT OF APPEALS and ISAAC CHAVEZ, SR., ISAAC O. CHAVEZ, JR.,
ROSENDO O. CHAVES, and JUAN O. CHAVES, respondents-appellees.

YAP, J.:

In an action for recovery of damages for embarassment, humiliation, wounded feelings and hurt pride, caused to herein private respondents,
by reason of the disconnection of their electrical service by the petitioners, the then Court of First Instance of Manila, Sixth Judicial District,
Branch XXIV, rendered a decision dated December 13,1967, ordering herein petitioners jointly and severally to pay private respondents the
sum of Ten Thousand (P10,000.00) Pesos as moral damages, Two Thousand (P2,000.00) Pesos as exemplary damages and, One
Thousand (P1,000.00) Pesos as attorney's fees, and dismissing petitioners' counterclaim.

On appeal, the Court of Appeals and in toto the trial court's decision. Their Motion for
Reconsideration having been denied, petitioners filed the instant petition for certiorari.

Petitioner Manila Electric Company (MERALCO) is a public utility corporation providing electric
power for the consumption of the general public in Metro Manila. Petitioner Pedro Yambao is a bill
collector of MERALCO.

Private respondents Isaac Chaves and Juana O. Chaves, husband and wife, filed the complaint for
damages, together with their children, Isaac O. Chaves, Jr. and Rosendo O. Chaves. Isaac Sr. and
Isaac Jr. and Rosendo were members of the Philippine Bar; Isaac, Sr. and Isaac, Jr. were practicing
lawyers and Rosendo was a Legal Officer at the Agricultural Productivity Commission. Juana O.
Chaves was a public school teacher.

The facts as found by the trial court and adopted by the Court of Appeals are as follows:

Plaintiff Isaac Chaves became a customer of defendant MERALCO in the year 1953
when he and his family were residing at No. 211-D Rubi, Manila. In connection with
the contract for electrical service, he deposited the sum of P5.00 (Exh. "A") with
defendant MERALCO on February 12, 1953. This deposit in the name of plaintiff
Isaac Chaves was retained by MERALCO and made to apply to subsequent
contracts for electrical service entered into after subsequent transfers of the Chaves
family to other residences and up to the time this family went to reside at the place
aforementioned, at No. 2656 Mercedes Street, Singalong, Manila. ...

At or about the end of March, 1965, defendant Pedro Yambao went to the residence
of plaintiffs and presented two overdue bills, one for January 11 to February 9,1965,
for the sum of P7.90 (Exhibit "C"), and the other for February 9 to March 10, 1965,
for the amount of P7.20 (Exhibit "C"). Juana O. Chaves, however, informed Yambao
that these bills would be paid at the MERALCO main office.
 Accordingly, on April 2, 1965, Isaac Chaves went to the defendant's main office at
San Marcelino, Manila, but paid only the bill marked as Exhibit 'C" leaving the other
bill Identified as Exhibit "C-l" unpaid.

Past 2:30 o'clock in the afternoon of April 21,1965, MERALCO caused the electric
service in plaintiff's residence to be discontinued and the power line cut off.

The next day, April 22, 1965, at about 9:00 a.m., plaintiff Rosendo O. Chaves went to
the MERALCO main office and paid the amount of P7.20 for the bill marked as
Exhibit "C-l", and the sum of P7.00 for the subsequent bill corresponding to the
period from March 10 up to April 8, 1965 (Exhibit "C-2") after his attention was called
to the latter account. Rosendo O. Chaves then sought the help of Atty. Lourdy
Torres, one of the defendants' counsel, and, thereafter, the power line was
reconnected and electric service restored to the Chaves residence at about 7:00 p.m.
of that same day. 1

Petitioners dispute the finding that there was no notice given to herein respondent. However, since
only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of
Court, petitioners, 'for the sake of argument and for the purpose of giving focus on the legal issues',
do not take issue with such finding.

Petitioners contend that in the absence of bad faith, they could not be held liable for moral and
exemplary damages as well as attorney's fees. The failure to give a notice of disconnection to
private respondents might have been a breach of duty or breach of contract, but by itself does not
constitute bad faith or fraud; it must be shown that such a failure was motivated by in or done with
fraudulent intent.Petitioners also maintain that ' private respondents were in arrears in the payment
of their electricity bills when their electric service was connected, no moral damages may be
recovered by them under the 'clean hands' doctrine enunciated in Mabutas vs. Calapan Electric
Company, CA-G.R. No. L-9683-R, May 26, 1964.

In its decision, the respondent Court of Appeals held that MERALCO's right to disconnect the electric
service of a delinquent customer "is an absolute one, subject only to the requirement that defendant
MERALCO should give the customer a written notice of disconnection 48 hours in advance." This
requirement is embodied in Section 97 of the Revised Order No. 1 of the Public Service Commission
which provides as follows:

Section 97. Payment of bills. — A public service, may require that bills for service be
paid within a specified time after rendition. When the billing period covers a month or
more, the minimum time allowed will be ten days and upon expiration of the specified
time, service may be discontinued for the non-payment of bills, provided that a 48
hours' written notice of such disconnection has been given the customer: Provided,
however, that disconnections of service shall not be made on Sundays and official
holidays and never after 2 p.m. of any working day: Provided, further, that if at the
moment the disconnection is to be made the customer tenders payment of the
unpaid bill to the agent or employee of the operator who is to effect the
disconnection, the said agent or employee shall be obliged to accept tender of
payment and issue a temporary receipt for the amount and shall desist from
disconnecting the service. 2

The respondent court stressed the importance and necessity of the 48-hour advance written
notification before a disconnection of service may be effected. Said the court:
 ... It sets in motion the disconnection of an electrical service of the customer by
giving the notice, determining the expiration date thereof, and executing the
disconnection. It, therefore, behooves the defendant MERALCO that before it
disconnects a customer's electrical service, there should be sufficient evidence that
the requirements for the disconnection had been duly complied with, otherwise, the
poor consumer can be subjected to the whims and caprices of the defendant, by the
mere pretension that the written notice had been duly served upon the customer. 3

We find no reversible error in the decision appealed from. One can not deny the vital role which a
public utility such as MERALCO, having a monopoly of the supply of electrical power in Metro Manila
and some nearby municipalities, plays in the life of people living in such areas. Electricity has
become a necessity to most people in these areas justifying the exercise by the State of its
regulatory power over the business of supplying electrical service to the public, in which petitioner
MERALCO is engaged. Thus, the state may regulate, as it has done through Section 97 of the
Revised Order No. 1 of the Public Service Commission, the conditions under which and the manner
by which a public utility such as MERALCO may effect a disconnection of service to a delinquent
customer. Among others, a prior written notice to the customer is required before disconnection of
the service. Failure to give such prior notice amounts to a tort, as held by us in a similar
case, 4 where we said:

... petitioner's act in 'disconnecting respondent Ongsip's gas service without prior
notice constitutes breach of contract amounting to an independent tort. The
prematurity of the action is indicative of an intent to cause additional mental and
moral suffering to private respondent. This is a clear violation of Article 21 of the Civil
Code which 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 damages. This is reiterated by paragraph 10 of Article 2219 of the Code.
Moreover, the award of moral damages is sanctioned by Article 2220 which provides
that wilfull injury to property may be a legal ground for awarding moral damages if the
court should find that, under the circumstances, such damages are justly due. The
same rule applies to breaches of contract where the defendant acted fraudulently or
in bad faith.

Likewise, we find no merit in petitioners' contention that being in arrears in the payment of their bills,
the private respondents are not entitled to moral damages under the doctrine that "he who comes to
court in demand of equity, must come with clean hands." We rejected this argument in the Manila
Gas Corporation case, supra, wherein we held that respondents' default in the payment of his bills
"cannot be utilized by petitioner to defeat or null the claim for damages. At most, this circumstance
can be considered as a mitigating factor in ascertaining the amount of damages to which respondent
... is entitled."

Accordingly, we find no grave abuse of discretion committed by respondent court in affirming the trial
court's decision. The petition is hereby DISMISSED for lack of merit.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

Footnotes
 1 Rollo, p.

2 Rollo pp. 35-36.

3 Ibid., p. 39.

4 Manila Gas Corporation vs. Court of Appeals, 100 SCRA 602.

[Syllabus]

SECOND DIVISION

[G.R. No. 116100. February 9, 1996]

SPOUSES CRISTINO and BRIGIDA CUSTODIO and SPOUSES LITO and

MARIA CRISTINA SANTOS, petitioners, vs. COURT OF APPEALS,
HEIRS OF PACIFICO C. MABASA and REGIONAL TRIAL COURT
OF PASIG, METRO MANILA, BRANCH 181, respondents.

DECISION
REGALADO, J.:

This petition for review on certiorari assails the decision of respondent Court of
Appeals in CA-G.R. CV No. 29115, promulgated on November 10, 1993, which affirmed
with modification the decision of the trial court, as well as its resolution dated July 8,
1994 denying petitioners motion for reconsideration.[1]
On August 26, 1982, Civil Case No. 47466 for the grant of an easement of right of
way was filed by Pacifico Mabasa against Cristino Custodio, Brigida R. Custodio,
Rosalina R. Morato, Lito Santos and Maria Cristina C. Santos before the Regional Trial
Court of Pasig and assigned to Branch 22 thereof.[2]
The generative facts of the case, as synthesized by the trial court and adopted by the
Court of Appeals, are as follows:

Perusing the record, this Court finds that the original plaintiff Pacifico Mabasa died
during the pendency of this case and was substituted by Ofelia Mabasa, his surviving
spouse [and children].

The plaintiff owns a parcel of land with a two-door apartment erected thereon situated
at Interior P. Burgos St., Palingon, Tipas, Taguig, Metro Manila. The plaintiff was
able to acquire said property through a contract of sale with spouses Mamerto Rayos
and Teodora Quintero as vendors last September 1981. Said property may be
described to be surrounded by other immovables pertaining to defendants herein.
Taking P. Burgos Streetas the point of reference, on the left side, going to plaintiffs
property, the row of houses will be as follows: That of defendants Cristino and
Brigido Custodio, then that of Lito and Maria Cristina Santos and then that of Ofelia
Mabasa. On the right side (is) that of defendant Rosalina Morato and then a Septic
Tank (Exhibit D). As an access to P. Burgos Street from plaintiffs property, there are
two possible passageways. The first passageway is approximately one meter wide and
is about 20 meters distan(t) from Mabasas residence to P. Burgos Street. Such path is
passing in between the previously mentioned row of houses. The second passageway
is about 3 meters in width and length from plaintiff Mabasas residence to P. Burgos
Street; it is about 26 meters. In passing thru said passageway, a less than a meter wide
path through the septic tank and with 5-6 meters in length has to be traversed.

When said property was purchased by Mabasa, there were tenants occupying the
premises and who were acknowledged by plaintiff Mabasa as tenants. However,
sometime in February, 1982. one of said tenants vacated the apartment and when
plaintiff Mabasa went to see the premises, he saw that there had been built an adobe
fence in the first passageway making it narrower in width. Said adobe fence was first
constructed by defendants Santoses along their property which is also along the first
passageway. Defendant Morato constructed her adobe fence and even extended said
fence in such a way that the entire passageway was enclosed (Exhibit 1-Santoses and
Custodios, Exh. D for plaintiff, Exhs. 1-C, 1-D and I -E) And it was then that the
remaining tenants of said apartment vacated the area. Defendant Ma. Cristina Santos
testified that she constructed said fence because there was an incident when her
daughter was dragged by a bicycle pedalled by a son of one of the tenants in said
apartment along the first passageway. She also mentioned some other inconveniences
of having (at) the front of her house a pathway such as when some of the tenants were
drunk and would bang their doors and windows. Some of their footwear were even
lost. x x x[3] (Italics in original text; corrections in parentheses supplied)

On February 27, 1990, a decision was rendered by the trial court, with this dispositive
part:
Accordingly, judgment is hereby rendered as follows:

1) Ordering defendants Custodios and Santoses to give plaintiff permanent access -

ingress and egress, to the public street;

2) Ordering the plaintiff to pay defendants Custodios and Santoses the sum of Eight
Thousand Pesos (P8,000) as indemnity for the permanent use of the passageway.

The parties to shoulder their respective litigation expenses.[4]

 Not satisfied therewith, therein plaintiff represented by his heirs, herein private
respondents, went to the Court of Appeals raising the sole issue of whether or not the
lower court erred in not awarding damages in their favor. On November 10, 1993, as
earlier stated, the Court of Appeals rendered its decision affirming the judgment of the
trial court with modification, the decretal portion of which disposes as follows:

WHEREFORE, the appealed decision of the lower court is hereby AFFIRMED WITH
MODIFICATION only insofar as the herein grant of damages to plaintiffs-appellants.
The Court hereby orders defendants-appellees to pay plaintiffs-appellants the sum of
Sixty Five Thousand (P65,000) Pesos as Actual Damages, Thirty Thousand (P30,000)
Pesos as Moral Damages, and Ten Thousand (P10,000) Pesos as Exemplary Damages.
The rest of the appealed decision is affirmed to all respects.[5]

On July 8, 1994, the Court of Appeals denied petitioners motion for

reconsideration.[6] Petitioners then took the present recourse to us, raising two issues,
namely, whether or not the grant of right of way to herein private respondents is proper,
and whether or not the award of damages is in order.
With respect to the first issue, herein petitioners are already barred from raising the
same. Petitioners did not appeal from the decision of the court a quo granting private
respondents the right of way, hence they are presumed to be satisfied with the
adjudication therein. With the finality of the judgment of the trial court as to petitioners,
the issue of propriety of the grant of right of way has already been laid to rest.
For failure to appeal the decision of the trial court to the Court of Appeals, petitioners
cannot obtain any affirmative relief other than those granted in the decision of the trial
court. That decision of the court below has become final as against them and can no
longer be reviewed, much less reversed, by this Court. The rule in this jurisdiction is that
whenever an appeal is taken in a civil case, an appellee who has not himself appealed
may not obtain from the appellate court any affirmative relief other than what was granted
in the decision of the lower court. The appellee can only advance any argument that he
may deem necessary to defeat the appellants claim or to uphold the decision that is being
disputed, and he can assign errors in his brief if such is required to strengthen the views
expressed by the court a quo. These assigned errors, in turn, may be considered by the
appellate court solely to maintain the appealed decision on other grounds, but not for the
purpose of reversing or modifying the judgment in the appellees favor and giving him
other affirmative reliefs.[7]
However, with respect to the second issue, we agree with petitioners that the Court
of Appeals erred in awarding damages in favor of private respondents. The award of
damages has no substantial legal basis. A reading of the decision of the Court of Appeals
will show that the award of damages was based solely on the fact that the original plaintiff,
Pacifico Mabasa, incurred losses in the form of unrealized rentals when the tenants
vacated the leased premises by reason of the closure of the passageway.
However, the mere fact that the plaintiff suffered losses does not give rise to a right
to recover damages. To warrant the recovery of damages, there must be both a right of
action for a legal wrong inflicted by the defendant, and damage resulting to the plaintiff
therefrom. Wrong without damage, or damage without wrong, does not constitute a cause
of action, since damages are merely part of the remedy allowed for the injury caused by
a breach or wrong.[8]
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. These situations are often
called damnum absque injuria.[9] 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.[10] 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 the breach of some duty and the imposition of liability for that breach
before damages may be awarded; it is not sufficient to state that there should be tort
liability merely because the plaintiff suffered some pain and suffering)[11]
Many accidents occur and many injuries are inflicted by acts or omissions which
cause damage or loss to another but which violate no legal duty to such other person,
and consequently create no cause of action in his favor. 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. [12]
In other words, in order that the law will give redress for an act causing damage, that
act must be not only hurtful, but wrongful. There must be damnum et injuria.[13] If, as may
happen in many cases, a person sustains actual damage, that is, harm or loss to his
person or property, without sustaining any legal injury, that is, an act or omission which
the law does not deem an injury, the damage is regarded as damnum absque injuria.[14]
In the case at bar, although there was damage, there was no legal injury. Contrary to
the claim of private respondents, petitioners could not be said to have violated the
principle of abuse of right. In order that the principle of abuse of right provided in Article
21 of the Civil Code can be applied, it is essential that the following requisites concur: (1)
The defendant should have acted in a manner that is contrary to morals, good customs
or public policy; (2) The acts should be willful; and (3) There was damage or injury to the
plaintiff.[15]
The act of petitioners in constructing a fence within their lot is a valid exercise of their
right as owners, hence not contrary to morals, good customs or public policy. The law
recognizes in the owner the right to enjoy and dispose of a thing, without other limitations
than those established by law.[16] It is within the right of petitioners, as owners, to enclose
and fence their property. Article 430 of the Civil Code provides that (e)very owner may
enclose or fence his land or tenements by means of walls, ditches, live or dead hedges,
or by any other means without detriment to servitudes constituted thereon.
At the time of the construction of the fence, the lot was not subject to any
servitudes. There was no easement of way existing in favor of private respondents, either
by law or by contract. The fact that private respondents had no existing right over the said
passageway is confirmed by the very decision of the trial court granting a compulsory
right of way in their favor after payment of just compensation. It was only that decision
which gave private respondents the right to use the said passageway after payment of
the compensation and imposed a corresponding duty on petitioners not to interfere in the
exercise of said right.
Hence, prior to said decision, petitioners had an absolute right over their property and
their act of fencing and enclosing the same was an act which they may lawfully perform
in the employment and exercise of said right. To repeat, whatever injury or damage may
have been sustained by private respondents by reason of the rightful use of the said land
by petitioners is damnum absque injuria.[17]
A person has a right to the natural use and enjoyment of his own property, according
to his pleasure, for all the purposes to which such property is usually applied. As a general
rule, therefore, there is no cause of action for acts done by one person upon his own
property in a lawful and proper manner, although such acts incidentally cause damage or
an unavoidable loss to another, as such damage or loss is damnum absque
injuria.[18] When the owner of property makes use thereof in the general and ordinary
manner in which the property is used, such as fencing or enclosing the same as in this
case, nobody can complain of having been injured, because the inconvenience arising
from said use can be considered as a mere consequence of community life. [19]
The proper exercise of a lawful right cannot constitute a legal wrong for which an
action will lie,[20] although the act may result in damage to another, for no legal right has
been invaded[21] One may use any lawful means to accomplish a lawful purpose and
though the means adopted may cause damage to another, no cause of action arises in
the latters favor. Any injury or damage occasioned thereby is damnum absque
injuria. The courts can give no redress for hardship to an individual resulting from action
reasonably calculated to achieve a lawful end by lawful means. [22]
WHEREFORE, under the compulsion of the foregoing premises, the appealed
decision of respondent Court of Appeals is hereby REVERSED and SET ASIDE and the
judgment of the trial court is correspondingly REINSTATED.
SO ORDERED.
Romero and Puno, JJ., concur.
Mendoza, J., took no part.

[1]
Penned by Justice Lourdes K. Tayao-Jaguros, with Justices Vicente V. Mendoza and Jesus M. Elbinias,
concurring.
[2] Original Record, 1.
[3] Rollo, 28-29.
[4] Ibid., 38.
[5] Ibid., 31.
[6] Ibid., 34.
[7]
See Lumibao vs. Intermediate Appellate Court, et al., G.R. No. 64677, September 13, 1990, 189 SCRA
469; SMI Fish Industries, Inc., et al. vs. National Labor Relations Commission, et al., G.R. Nos. 96952-
56, September 2, 1992, 213 SCRA 444; Heirs of Juan Oclarit, et al. vs. Court of Appeals, et al., G.R. No.
96644, June 17, 1994,233 SCRA 239.
[8] 22 Am Jur 2d, Damages, Sec. 4,35-36.
[9] Ibid., 113
[10]
1 Am Jur 2d, Actions, Sec. 65, 595; see The Board of Liquidators vs. Kalaw, et al., L-18805, August 14,
1967,20 SCRA 987.
[11] Plummer vs. Abbott Laboratories (DC RI), 568, F Supp. 920, CCH Prod Liab Rep 9878.
[12] Ibid., 598.
[13]Comstock vs. Wilson, 257 NY 231 177 NE 421, 76 ALR 676; Haldeman vs. Bruckhart, 45, 45 Pa 514.
[14] U.S. - Premier Malt Roducts Co. vs. Kasser, 23 F. (2d)98.
[15] Jurado, D.P., Personal and Family Law, 1984 ed., 41.
[16] Jovellanos, et al. vs. Court of Appeals, et al., G.R. No. 100728, June 1992,210 SCRA 126.
[17]
See Escano, et al. vs. Court of Appeals, et al., L-47207, September 25 1980, 100 SCRA 197; Ilocos
Norte Electric Co. vs. Court of Appeals, et al., G.R. No. 53401, November 6, 1989, 179 SCRA 5; Albenson
Enterprises Corporation, et al. vs. Court of Appeals, et al., G.R No. 88694, January 11, 1993, 217 SCRA
16.
[18] 1 C.J.S., Actions, Sec. 15, 1007-1008.
[19]
Tolentino, A.M., Commentaries and juris-prudence on the Civil Code of the Philippines, Vol.
11(1987), 59, citing 8 Salvat 614.
[20] Coyne vs. Mississippi & R.R. Boom Co., 72 533, 75 NW 748.
[21] White vs. Kincaid, 149 NC 415, 63 SE 109; Fahn vs. Reichart, 8 Wis 255.
[22] OKeefee vs. Local 463, United Asso. P. & G. 277 NY 300, 14 NE 2d 77, 117 ALR 817.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 97336 February 19, 1993

GASHEM SHOOKAT BAKSH, petitioner,

vs.
HON. COURT OF APPEALS and MARILOU T. GONZALES, respondents.

Public Attorney's Office for petitioner.

Corleto R. Castro for private respondent.

DAVIDE, JR., J.:

This is an appeal by certiorari under Rule 45 of the Rules of Court seeking to review and set aside
the Decision1of the respondent Court of Appeals in CA-G.R. CV No. 24256 which affirmed in toto the
16 October 1939 Decision of Branch 38 (Lingayen) of the Regional Trial Court (RTC) of Pangasinan
in Civil Case No. 16503. Presented is the issue of whether or not damages may be recovered for a
breach of promise to marry on the basis of Article 21 of the Civil Code of the Philippines.

The antecedents of this case are not complicated:

On 27 October 1987, private respondent, without the assistance of counsel, filed with the aforesaid
trial court a complaint2 for damages against the petitioner for the alleged violation of their agreement
to get married. She alleges in said complaint that: she is twenty-two (22) years old, single, Filipino
and a pretty lass of good moral character and reputation duly respected in her community; petitioner,
on the other hand, is an Iranian citizen residing at the Lozano Apartments, Guilig, Dagupan City, and
is an exchange student taking a medical course at the Lyceum Northwestern Colleges in Dagupan
City; before 20 August 1987, the latter courted and proposed to marry her; she accepted his love on
the condition that they would get married; they therefore agreed to get married after the end of the
school semester, which was in October of that year; petitioner then visited the private respondent's
parents in Bañaga, Bugallon, Pangasinan to secure their approval to the marriage; sometime in 20
August 1987, the petitioner forced her to live with him in the Lozano Apartments; she was a virgin
before she began living with him; a week before the filing of the complaint, petitioner's attitude
towards her started to change; he maltreated and threatened to kill her; as a result of such
maltreatment, she sustained injuries; during a confrontation with a representative of the barangay
captain of Guilig a day before the filing of the complaint, petitioner repudiated their marriage
agreement and asked her not to live with him anymore and; the petitioner is already married to
someone living in Bacolod City. Private respondent then prayed for judgment ordering the petitioner
to pay her damages in the amount of not less than P45,000.00, reimbursement for actual expenses
amounting to P600.00, attorney's fees and costs, and granting her such other relief and remedies as
may be just and equitable. The complaint was docketed as Civil Case No. 16503.

In his Answer with Counterclaim,3 petitioner admitted only the personal circumstances of the parties
as averred in the complaint and denied the rest of the allegations either for lack of knowledge or
information sufficient to form a belief as to the truth thereof or because the true facts are those
alleged as his Special and Affirmative Defenses. He thus claimed that he never proposed marriage
to or agreed to be married with the private respondent; he neither sought the consent and approval
of her parents nor forced her to live in his apartment; he did not maltreat her, but only told her to stop
coming to his place because he discovered that she had deceived him by stealing his money and
passport; and finally, no confrontation took place with a representative of the barangay captain.
Insisting, in his Counterclaim, that the complaint is baseless and unfounded and that as a result
thereof, he was unnecessarily dragged into court and compelled to incur expenses, and has suffered
mental anxiety and a besmirched reputation, he prayed for an award of P5,000.00 for miscellaneous
expenses and P25,000.00 as moral damages.

After conducting a pre-trial on 25 January 1988, the trial court issued a Pre-Trial Order4 embodying
the stipulated facts which the parties had agreed upon, to wit:
 1. That the plaintiff is single and resident (sic) of Bañaga, Bugallon, Pangasinan,
while the defendant is single, Iranian citizen and resident (sic) of Lozano Apartment,
Guilig, Dagupan City since September 1, 1987 up to the present;

2. That the defendant is presently studying at Lyceum Northwestern, Dagupan City,

College of Medicine, second year medicine proper;

3. That the plaintiff is (sic) an employee at Mabuhay Luncheonette , Fernandez

Avenue, Dagupan City since July, 1986 up to the present and a (sic) high school
graduate;

4. That the parties happened to know each other when the manager of the Mabuhay
Luncheonette, Johhny Rabino introduced the defendant to the plaintiff on August 3,
1986.

After trial on the merits, the lower court, applying Article 21 of the Civil Code, rendered on 16
October 1989 a decision5 favoring the private respondent. The petitioner was thus ordered to pay the
latter damages and attorney's fees; the dispositive portion of the decision reads:

IN THE LIGHT of the foregoing consideration, judgment is hereby rendered in favor

of the plaintiff and against the defendant.

1. Condemning (sic) the defendant to pay the plaintiff the sum of twenty thousand
(P20,000.00) pesos as moral damages.

2. Condemning further the defendant to play the plaintiff the sum of three thousand
(P3,000.00) pesos as atty's fees and two thousand (P2,000.00) pesos at (sic)
litigation expenses and to pay the costs.

3. All other claims are denied.6

The decision is anchored on the trial court's findings and conclusions that (a) petitioner and private
respondent were lovers, (b) private respondent is not a woman of loose morals or questionable
virtue who readily submits to sexual advances, (c) petitioner, through machinations, deceit and false
pretenses, promised to marry private respondent, d) because of his persuasive promise to marry
her, she allowed herself to be deflowered by him, (e) by reason of that deceitful promise, private
respondent and her parents — in accordance with Filipino customs and traditions — made some
preparations for the wedding that was to be held at the end of October 1987 by looking for pigs and
chickens, inviting friends and relatives and contracting sponsors, (f) petitioner did not fulfill his
promise to marry her and (g) such acts of the petitioner, who is a foreigner and who has abused
Philippine hospitality, have offended our sense of morality, good customs, culture and traditions. The
trial court gave full credit to the private respondent's testimony because, inter alia, she would not
have had the temerity and courage to come to court and expose her honor and reputation to public
scrutiny and ridicule if her claim was false.7

The above findings and conclusions were culled from the detailed summary of the evidence for the
private respondent in the foregoing decision, digested by the respondent Court as follows:

According to plaintiff, who claimed that she was a virgin at the time and that she
never had a boyfriend before, defendant started courting her just a few days after
they first met. He later proposed marriage to her several times and she accepted his
 love as well as his proposal of marriage on August 20, 1987, on which same day he
went with her to her hometown of Bañaga, Bugallon, Pangasinan, as he wanted to
meet her parents and inform them of their relationship and their intention to get
married. The photographs Exhs. "A" to "E" (and their submarkings) of defendant with
members of plaintiff's family or with plaintiff, were taken that day. Also on that
occasion, defendant told plaintiffs parents and brothers and sisters that he intended
to marry her during the semestral break in October, 1987, and because plaintiff's
parents thought he was good and trusted him, they agreed to his proposal for him to
marry their daughter, and they likewise allowed him to stay in their house and sleep
with plaintiff during the few days that they were in Bugallon. When plaintiff and
defendant later returned to Dagupan City, they continued to live together in
defendant's apartment. However, in the early days of October, 1987, defendant
would tie plaintiff's hands and feet while he went to school, and he even gave her
medicine at 4 o'clock in the morning that made her sleep the whole day and night
until the following day. As a result of this live-in relationship, plaintiff became
pregnant, but defendant gave her some medicine to abort the fetus. Still plaintiff
continued to live with defendant and kept reminding him of his promise to marry her
until he told her that he could not do so because he was already married to a girl in
Bacolod City. That was the time plaintiff left defendant, went home to her parents,
and thereafter consulted a lawyer who accompanied her to the barangay captain in
Dagupan City. Plaintiff, her lawyer, her godmother, and a barangay tanod sent by the
barangay captain went to talk to defendant to still convince him to marry plaintiff, but
defendant insisted that he could not do so because he was already married to a girl
in Bacolod City, although the truth, as stipulated by the parties at the pre-trial, is that
defendant is still single.

Plaintiff's father, a tricycle driver, also claimed that after defendant had informed
them of his desire to marry Marilou, he already looked for sponsors for the wedding,
started preparing for the reception by looking for pigs and chickens, and even
already invited many relatives and friends to the forthcoming wedding. 8

Petitioner appealed the trial court's decision to the respondent Court of Appeals which docketed the
case as CA-G.R. CV No. 24256. In his Brief,9 he contended that the trial court erred (a) in not
dismissing the case for lack of factual and legal basis and (b) in ordering him to pay moral damages,
attorney's fees, litigation expenses and costs.

On 18 February 1991, respondent Court promulgated the challenged decision 10 affirming in toto the
trial court's ruling of 16 October 1989. In sustaining the trial court's findings of fact, respondent Court
made the following analysis:

First of all, plaintiff, then only 21 years old when she met defendant who was already
29 years old at the time, does not appear to be a girl of loose morals. It is
uncontradicted that she was a virgin prior to her unfortunate experience with
defendant and never had boyfriend. She is, as described by the lower court, a barrio
lass "not used and accustomed to trend of modern urban life", and certainly would
(sic) not have allowed
"herself to be deflowered by the defendant if there was no persuasive promise made
by the defendant to marry her." In fact, we agree with the lower court that plaintiff and
defendant must have been sweethearts or so the plaintiff must have thought because
of the deception of defendant, for otherwise, she would not have allowed herself to
be photographed with defendant in public in so (sic) loving and tender poses as
those depicted in the pictures Exhs. "D" and "E". We cannot believe, therefore,
defendant's pretense that plaintiff was a nobody to him except a waitress at the
 restaurant where he usually ate. Defendant in fact admitted that he went to plaintiff's
hometown of Bañaga, Bugallon, Pangasinan, at least thrice; at (sic) the town fiesta
on February 27, 1987 (p. 54, tsn May 18, 1988), at (sic) a beach party together with
the manager and employees of the Mabuhay Luncheonette on March 3, 1987 (p. 50,
tsn id.), and on April 1, 1987 when he allegedly talked to plaintiff's mother who told
him to marry her daughter (pp. 55-56, tsn id.). Would defendant have left Dagupan
City where he was involved in the serious study of medicine to go to plaintiff's
hometown in Bañaga, Bugallon, unless there was (sic) some kind of special
relationship between them? And this special relationship must indeed have led to
defendant's insincere proposal of marriage to plaintiff, communicated not only to her
but also to her parents, and (sic) Marites Rabino, the owner of the restaurant where
plaintiff was working and where defendant first proposed marriage to her, also knew
of this love affair and defendant's proposal of marriage to plaintiff, which she
declared was the reason why plaintiff resigned from her job at the restaurant after
she had accepted defendant's proposal (pp. 6-7, tsn March 7, 1988).

Upon the other hand, appellant does not appear to be a man of good moral character
and must think so low and have so little respect and regard for Filipino women that
he openly admitted that when he studied in Bacolod City for several years where he
finished his B.S. Biology before he came to Dagupan City to study medicine, he had
a common-law wife in Bacolod City. In other words, he also lived with another
woman in Bacolod City but did not marry that woman, just like what he did to plaintiff.
It is not surprising, then, that he felt so little compunction or remorse in pretending to
love and promising to marry plaintiff, a young, innocent, trustful country girl, in order
to satisfy his lust on her. 11

and then concluded:

In sum, we are strongly convinced and so hold that it was defendant-appellant's

fraudulent and deceptive protestations of love for and promise to marry plaintiff that
made her surrender her virtue and womanhood to him and to live with him on the
honest and sincere belief that he would keep said promise, and it was likewise these
(sic) fraud and deception on appellant's part that made plaintiff's parents agree to
their daughter's living-in with him preparatory to their supposed marriage. And as
these acts of appellant are palpably and undoubtedly against morals, good customs,
and public policy, and are even gravely and deeply derogatory and insulting to our
women, coming as they do from a foreigner who has been enjoying the hospitality of
our people and taking advantage of the opportunity to study in one of our institutions
of learning, defendant-appellant should indeed be made, under Art. 21 of the Civil
Code of the Philippines, to compensate for the moral damages and injury that he had
caused plaintiff, as the lower court ordered him to do in its decision in this case. 12

Unfazed by his second defeat, petitioner filed the instant petition on 26 March 1991; he raises
therein the single issue of whether or not Article 21 of the Civil Code applies to the case at bar. 13

It is petitioner's thesis that said Article 21 is not applicable because he had not committed any moral
wrong or injury or violated any good custom or public policy; he has not professed love or proposed
marriage to the private respondent; and he has never maltreated her. He criticizes the trial court for
liberally invoking Filipino customs, traditions and culture, and ignoring the fact that since he is a
foreigner, he is not conversant with such Filipino customs, traditions and culture. As an Iranian
Moslem, he is not familiar with Catholic and Christian ways. He stresses that even if he had made a
promise to marry, the subsequent failure to fulfill the same is excusable or tolerable because of his
Moslem upbringing; he then alludes to the Muslim Code which purportedly allows a Muslim to take
four (4) wives and concludes that on the basis thereof, the trial court erred in ruling that he does not
posses good moral character. Moreover, his controversial "common law life" is now his legal wife as
their marriage had been solemnized in civil ceremonies in the Iranian Embassy. As to his unlawful
cohabitation with the private respondent, petitioner claims that even if responsibility could be pinned
on him for the live-in relationship, the private respondent should also be faulted for consenting to an
illicit arrangement. Finally, petitioner asseverates that even if it was to be assumed arguendo that he
had professed his love to the private respondent and had also promised to marry her, such acts
would not be actionable in view of the special circumstances of the case. The mere breach of
promise is not actionable. 14

On 26 August 1991, after the private respondent had filed her Comment to the petition and the
petitioner had filed his Reply thereto, this Court gave due course to the petition and required the
parties to submit their respective Memoranda, which they subsequently complied with.

As may be gleaned from the foregoing summation of the petitioner's arguments in support of his
thesis, it is clear that questions of fact, which boil down to the issue of the credibility of witnesses,
are also raised. It is the rule in this jurisdiction that appellate courts will not disturb the trial court's
findings as to the credibility of witnesses, the latter court having heard the witnesses and having had
the opportunity to observe closely their deportment and manner of testifying, unless the trial court
had plainly overlooked facts of substance or value which, if considered, might affect the result of the
case. 15

Petitioner has miserably failed to convince Us that both the appellate and trial courts had overlooked
any fact of substance or values which could alter the result of the case.

Equally settled is the rule that only questions of law may be raised in a petition for review
on certiorari under Rule 45 of the Rules of Court. It is not the function of this Court to analyze or
weigh all over again the evidence introduced by the parties before the lower court. There are,
however, recognized exceptions to this rule. Thus, in Medina vs. Asistio, Jr., 16 this Court took the
time, again, to enumerate these exceptions:

xxx xxx xxx

(1) When the conclusion is a finding grounded entirely on speculation, surmises or

conjectures (Joaquin v. Navarro, 93 Phil. 257 [1953]); (2) When the inference made
is manifestly mistaken, absurb or impossible (Luna v. Linatok, 74 Phil. 15 [1942]); (3)
Where there is a grave abuse of discretion (Buyco v. People, 95 Phil. 453 [1955]); (4)
When the judgment is based on a misapprehension of facts (Cruz v. Sosing,
L-4875, Nov. 27, 1953); (5) When the findings of fact are conflicting (Casica v.
Villaseca, L-9590 Ap. 30, 1957; unrep.) (6) When the Court of Appeals, in making its
findings, went beyond the issues of the case and the same is contrary to the
admissions of both appellate and appellee (Evangelista v. Alto Surety and Insurance
Co., 103 Phil. 401 [1958]);
(7) The findings of the Court of Appeals are contrary to those of the trial court (Garcia
v. Court of Appeals, 33 SCRA 622 [1970]; Sacay v. Sandiganbayan, 142 SCRA 593
[1986]); (8) When the findings of fact are conclusions without citation of specific
evidence on which they are based (Ibid.,); (9) When the facts set forth in the petition
as well as in the petitioners main and reply briefs are not disputed by the
respondents (Ibid.,); and (10) The finding of fact of the Court of Appeals is premised
on the supposed absence of evidence and is contradicted by the evidence on record
(Salazar v. Gutierrez, 33 SCRA 242 [1970]).
Petitioner has not endeavored to joint out to Us the existence of any of the above quoted exceptions
in this case. Consequently, the factual findings of the trial and appellate courts must be respected.

And now to the legal issue.

The existing rule is that a breach of promise to marry per se is not an actionable wrong. 17 Congress
deliberately eliminated from the draft of the New Civil Code the provisions that would have made it
so. The reason therefor is set forth in the report of the Senate Committees on the Proposed Civil
Code, from which We quote:

The elimination of this chapter is proposed. That breach of promise to marry is not
actionable has been definitely decided in the case of De Jesus vs. Syquia. 18 The
history of breach of promise suits in the United States and in England has shown that
no other action lends itself more readily to abuse by designing women and
unscrupulous men. It is this experience which has led to the abolition of rights of
action in the so-called Heart Balm suits in many of the American states. . . . 19

This notwithstanding, the said Code contains a provision, Article 21, which is designed to expand the
concept of torts or quasi-delict in this jurisdiction by granting adequate legal remedy for the untold
number of moral wrongs which is impossible for human foresight to specifically enumerate and
punish in the statute books. 20

As the Code Commission itself stated in its Report:

But the Code Commission had 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 nineteen 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 family have suffered incalculable moral
damage, she and her parents cannot bring action for damages. But under the
proposed article, she and her parents would have such a right of action.

Thus at one stroke, the legislator, if the forgoing rule is approved, would 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. 21

Article 2176 of the Civil Code, which defines a quasi-delict thus:

 Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there
is no pre-existing contractual relation between the parties, is called a quasi-delict and
is governed by the provisions of this Chapter.

is limited to negligent acts or omissions and excludes the notion of willfulness or

intent. Quasi-delict, known in Spanish legal treatises as culpa aquiliana, is a civil law concept
while torts is an Anglo-American or common law concept. Torts is much broader than culpa
aquiliana because it includes not only negligence, but international criminal acts as well such
as assault and battery, false imprisonment and deceit. In the general scheme of the
Philippine legal system envisioned by the Commission responsible for drafting the New Civil
Code, intentional and malicious acts, with certain exceptions, are to be governed by the
Revised Penal Code while negligent acts or omissions are to be covered by Article 2176 of
the Civil Code. 22 In between these opposite spectrums are injurious acts which, in the
absence of Article 21, would have been beyond redress. Thus, Article 21 fills that vacuum. It
is even postulated that together with Articles 19 and 20 of the Civil Code, Article 21 has
greatly broadened the scope of the law on civil wrongs; it has become much more supple
and adaptable than the Anglo-American law on torts. 23

In the light of the above laudable purpose of Article 21, We are of the opinion, and so hold, that
where a man's promise to marry is in fact the proximate cause of the acceptance of his love by a
woman and his representation to fulfill that promise thereafter becomes the proximate cause of the
giving of herself unto him in a sexual congress, proof that he had, in reality, no intention of marrying
her and that the promise was only a subtle scheme or deceptive device to entice or inveigle her to
accept him and to obtain her consent to the sexual act, could justify the award of damages pursuant
to Article 21 not because of such promise to marry but because of the fraud and deceit behind it and
the willful injury to her honor and reputation which followed thereafter. It is essential, however, that
such injury should have been committed in a manner contrary to morals, good customs or public
policy.

In the instant case, respondent Court found that it was the petitioner's "fraudulent and deceptive
protestations of love for and promise to marry plaintiff that made her surrender her virtue and
womanhood to him and to live with him on the honest and sincere belief that he would keep said
promise, and it was likewise these fraud and deception on appellant's part that made plaintiff's
parents agree to their daughter's living-in with him preparatory to their supposed marriage." 24 In
short, the private respondent surrendered her virginity, the cherished possession of every single
Filipina, not because of lust but because of moral seduction — the kind illustrated by the Code
Commission in its example earlier adverted to. The petitioner could not be held liable for criminal
seduction punished under either Article 337 or Article 338 of the Revised Penal Code because the
private respondent was above eighteen (18) years of age at the time of the seduction.

Prior decisions of this Court clearly suggest that Article 21 may be applied in a breach of promise to
marry where the woman is a victim of moral seduction. Thus, in Hermosisima vs. Court of
Appeals,25 this Court denied recovery of damages to the woman because:

. . . we find ourselves unable to say that petitioner is morally guilty of seduction, not
only because he is approximately ten (10) years younger than the complainant —
who was around thirty-six (36) years of age, and as highly enlightened as a former
high school teacher and a life insurance agent are supposed to be — when she
became intimate with petitioner, then a mere apprentice pilot, but, also, because the
court of first instance found that, complainant "surrendered herself" to petitioner
 because, "overwhelmed by her love" for him, she "wanted to bind" him by having a
fruit of their engagement even before they had the benefit of clergy.

In Tanjanco vs. Court of Appeals, 26 while this Court likewise hinted at possible recovery if there had
been moral seduction, recovery was eventually denied because We were not convinced that such
seduction existed. The following enlightening disquisition and conclusion were made in the said
case:

The Court of Appeals seem to have overlooked that the example set forth in the
Code Commission's memorandum refers to a tort upon a minor who had
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 person to 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 recovery.

Accordingly it is not seduction where the willingness arises out of

sexual desire of 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)

xxx xxx xxx

Over and above the partisan allegations, the fact stand out that for one whole year,
from 1958 to 1959, the plaintiff-appellee, a woman of adult age, maintain 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
 short all sexual relations upon finding that defendant did not intend to fulfill his
defendant did not intend to fulfill his promise. 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. 27

In his annotations on the Civil Code, 28 Associate Justice Edgardo L. Paras, who recently retired from
this Court, opined that in a breach of promise to marry where there had been carnal knowledge,
moral damages may be recovered:

. . . if there be criminal or moral seduction, but not if the intercourse was due to
mutual lust. (Hermosisima vs. Court of Appeals,
L-14628, Sept. 30, 1960; Estopa vs. Piansay, Jr., L-14733, Sept. 30, 1960; Batarra
vs. Marcos, 7 Phil. 56 (sic); Beatriz Galang vs. Court of Appeals, et al., L-17248, Jan.
29, 1962). (In other words, if the CAUSE be the promise to marry, and the EFFECT
be the carnal knowledge, there is a chance that there was criminal or moral
seduction, hence recovery of moral damages will prosper. If it be the other way
around, there can be no recovery of moral damages, because here mutual lust has
intervened). . . .

together with "ACTUAL damages, should there be any, such as the expenses for the
wedding presentations (See Domalagon v. Bolifer, 33 Phil. 471).

Senator Arturo M. Tolentino 29 is also of the same persuasion:

It is submitted that the rule in Batarra vs. Marcos, 30 still subsists, notwithstanding the
incorporation of the present article31 in the Code. The example given by the Code
Commission is correct, if there was seduction, not necessarily in the legal sense, but
in the vulgar sense of deception. But when the sexual act is accomplished without
any deceit or qualifying circumstance of abuse of authority or influence, but the
woman, already of age, has knowingly given herself to a man, it cannot be said that
there is an injury which can be the basis for indemnity.

But so long as there is fraud, which is characterized by willfulness (sic), the action
lies. The court, however, must weigh the degree of fraud, if it is sufficient to deceive
the woman under the circumstances, because an act which would deceive a girl
sixteen years of age may not constitute deceit as to an experienced woman thirty
years of age. But so long as there is a wrongful act and a resulting injury, there
should be civil liability, even if the act is not punishable under the criminal law and
there should have been an acquittal or dismissal of the criminal case for that reason.

We are unable to agree with the petitioner's alternative proposition to the effect that granting, for
argument's sake, that he did promise to marry the private respondent, the latter is nevertheless also
at fault. According to him, both parties are in pari delicto; hence, pursuant to Article 1412(1) of the
Civil Code and the doctrine laid down in Batarra vs. Marcos, 32 the private respondent cannot recover
damages from the petitioner. The latter even goes as far as stating that if the private respondent had
"sustained any injury or damage in their relationship, it is primarily because of her own doing, 33 for:

. . . She is also interested in the petitioner as the latter will become a doctor sooner
or later. Take notice that she is a plain high school graduate and a mere employee . .
. (Annex "C") or a waitress (TSN, p. 51, January 25, 1988) in a luncheonette and
without doubt, is in need of a man who can give her economic security. Her family is
in dire need of financial assistance. (TSN, pp. 51-53, May 18, 1988). And this
 predicament prompted her to accept a proposition that may have been offered by the
petitioner. 34

These statements reveal the true character and motive of the petitioner. It is clear that he harbors a
condescending, if not sarcastic, regard for the private respondent on account of the latter's ignoble
birth, inferior educational background, poverty and, as perceived by him, dishonorable employment.
Obviously then, from the very beginning, he was not at all moved by good faith and an honest
motive. Marrying with a woman so circumstances could not have even remotely occurred to him.
Thus, his profession of love and promise to marry were empty words directly intended to fool, dupe,
entice, beguile and deceive the poor woman into believing that indeed, he loved her and would want
her to be his life's partner. His was nothing but pure lust which he wanted satisfied by a Filipina who
honestly believed that by accepting his proffer of love and proposal of marriage, she would be able
to enjoy a life of ease and security. Petitioner clearly violated the Filipino's concept of morality and
brazenly defied the traditional respect Filipinos have for their women. It can even be said that the
petitioner committed such deplorable acts in blatant disregard of Article 19 of the Civil Code which
directs every person to act with justice, give everyone his due and observe honesty and good faith in
the exercise of his rights and in the performance of his obligations.

No foreigner must be allowed to make a mockery of our laws, customs and traditions.

The pari delicto rule does not apply in this case for while indeed, the private respondent may not
have been impelled by the purest of intentions, she eventually submitted to the petitioner in sexual
congress not out of lust, but because of moral seduction. In fact, it is apparent that she had qualms
of conscience about the entire episode for as soon as she found out that the petitioner was not going
to marry her after all, she left him. She is not, therefore, in pari delicto with the petitioner. Pari
delicto means "in equal fault; in a similar offense or crime; equal in guilt or in legal fault." 35 At most, it
could be conceded that she is merely in delicto.

Equity often interferes for the relief of the less guilty of the parties, where his
transgression has been brought about by the imposition of undue influence of the
party on whom the burden of the original wrong principally rests, or where his
consent to the transaction was itself procured by
fraud. 36

In Mangayao vs. Lasud, 37 We declared:

Appellants likewise stress that both parties being at fault, there should be no action
by one against the other (Art. 1412, New Civil Code). This rule, however, has been
interpreted as applicable only where the fault on both sides is, more or less,
equivalent. It does not apply where one party is literate or intelligent and the other
one is not. (c.f. Bough vs. Cantiveros, 40 Phil. 209).

We should stress, however, that while We find for the private respondent, let it not be said that this
Court condones the deplorable behavior of her parents in letting her and the petitioner stay together
in the same room in their house after giving approval to their marriage. It is the solemn duty of
parents to protect the honor of their daughters and infuse upon them the higher values of morality
and dignity.

WHEREFORE, finding no reversible error in the challenged decision, the instant petition is hereby
DENIED, with costs against the petitioner.

SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.

Gutierrez, Jr., J., is on leave.

# Footnotes

1 Annex "G" of Petition; Rollo, 53-62. Per Associate Justice Alicia V. Sempio-Diy,
concurred in by Associate Justices Jose C. Campos, Jr. and Jaime M. Lantin.

2 Annex "A" of Petition; Rollo, 20-22.

3 Annex "B" of Petition; Rollo, 23-24.

4 Annex "C", Id.; Id., 25.

5 Annex "D" of Petition; Rollo, 26-33. Per Judge Antonio M. Belen.

6 Id., 33.

7 Rollo, 31-33.

8 Rollo, 54-55.

9 Exhibit "E" of Petition; Rollo, 34-50.

10 Annex "G", Id.; Id.; 53-62.

11 Rollo, 58-59.

12 Rollo, 61.

13 Id., 11.

14 In support thereof, he cites Despi vs. Aliosco, [CA] 64 O.G.; Wassmer vs. Velez,
12 SCRA 648 [1964]; Hermosisima vs. Court of Appeals, 109 Phil. 629 [1960]; and
Estopa vs. Piansay, 109 Phil. 640 [1960].

15 People vs. Garcia, 89 SCRA 440 [1979]; People vs. Bautista, 92 SCRA 465
[1979]; People vs. Abejuela, 92 SCRA 503 [1979]; People vs. Arciaga, 98 SCRA 1
[1980]; People vs. Marzan, 128 SCRA 203 [1984]; People vs. Alcid, 135 SCRA 280
[1985]; People vs. Sanchez, 199 SCRA 414 [1991]; and People vs. Atilano, 204
SCRA 278 [1991].

16 191 SCRA 218 [1990], footnote omitted; see also, Remalante vs. Tibe, 158 SCRA
138 [1988].

17 Hermosisima vs. Court of Appeals, 109 Phil. 629 [1960]; Estopa vs. Piansay, 109
Phil. 640 [1960].
18 58 Phil. 866 [1933].

19 Congressional Record, vol. IV, No. 79, Thursday, 14 May 1949, 2352.

20 Philippine National Bank vs. Court of Appeals, 83 SCRA 237 [1978].

21 Report of the Code Commission, 39-40. This passage is quoted, except for the
last paragraph, in Tanjanco vs. Court of Appeals, 18 SCRA 994, 996-997 [1966]; the
Article 23 referred to is now Article 21.

22 Report of the Code Commission, 161-162.

23 TOLENTINO, A.M., Commentaries and Jurisprudence on the Civil Code of the

Philippines, vol. 1, 1985 ed., 72.

24. Rollo, 61.

25. Supra.

26. Supra.

27 At pages 997-999.

28 Civil Code of the Philippines Annotated, vol. I, Eleventh ed., (1984), 91-92.

29 Commentaries and Jurisprudence on the Civil Code of the Philippines, vol. 1,

1985 ed., 76-77, omitting footnotes.

30 7 Phil. 156 [1906].

31 Article 21.

32 Supra.

33 Rollo, 16.

34 Id., 16-17.

35 Black's Law Dictionary, Fifth ed., 1004.

36 37 Am Jur 2d, 401, omitting citations.

37 11 SCRA 158 [1964]; see also, Liguez vs. Court of Appeals 102 Phil. 577 [1975].

THIRD DIVISION
 [G.R. No. 138964. August 9, 2001]

VICENTE RELLOSA, CYNTHIA ORTEGA assisted by husband Roberto

Ortega, petitioner, vs. GONZALO PELLOSIS, INESITA MOSTE, and
DANILO RADAM, respondents.

DECISION
VITUG, J.:

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.[1] This provision in our law is
not just a declaration of principle for it can in itself constitute, when unduly ignored or violated, a
valid source of a cause of action or defense.
The case seeks to reverse the Court of Appeals in not countenancing an attempt to abridge and
render inutile a legal right to contest an adverse ruling of an agency of government.
Respondents were lessees of a parcel of land, owned by one Marta Reyes, located at San
Pascual Street, Malate, Manila. Respondents had built their houses on the land which, over the
years, underwent continuous improvements. After the demise of Marta, the land was inherited by
her son Victor Reyes. Sometime in 1986, Victor informed respondents that, for being lessees of
the land for more than twenty (20) years, they would have a right of first refusal to buy the
land. Sometime in the early part of 1989, without the knowledge of respondents, the land occupied
by them was sold to petitioner Cynthia Ortega who was able to ultimately secure title to the
property in her name.
On 25 May 1989, Cynthia Ortega, filed a petition for condemnation, docketed Condemnation
Case No. 89-05-007, with the Office of the Building Official, City of Manila, of the structures on
the land.
On 31 May 1989, respondents filed with the Regional Trial Court of Manila a suit for the
Declaration of Nullity of the Sale, docketed as Civil Case No. 89-49176, made in favor of
petitioner Cynthia Ortega predicated upon their right of first refusal which was claimed to have
been impinged upon the sale of the land to petitioner Ortega without their knowledge.
After due hearing in the condemnation case, the Office of the Building Official issued a
resolution, dated 27 November 1989, ordering the demolition of the houses of respondents. Copies
of the resolution were served upon respondents and their counsel on 07 December 1989. The
following day, or on 08 December 1989, Cynthia Ortega, together with her father and co-
petitioner, Vicente Rellosa, hired workers to commence the demolition of respondents'
houses. Due to the timely intervention of a mobile unit of the Western Police District, the intended
demolition did not take place following talks between petitioner Rellosa and counsel who pleaded
that the demolition be suspended since the order sought to be implemented was not yet final and
executory. On 11 December 1989, respondents filed their appeal contesting the order of the Office
of the Building Official.On 12 December 1989, petitioners once again hired workers and
proceeded with the demolition of respondents' houses.
 Resultantly, respondents filed Civil Case No. 89-49176 before the Regional Trial Court of
Manila, Branch 54, praying that petitioners be ordered to pay moral and exemplary damages, as
well as attorneys fees, for the untimely demolition of the houses. After trial, the court dismissed
the complaint of respondents and instead ordered them to pay petitioners moral damages. On
appeal, the Court of Appeals, on the basis of its findings and conclusions, reversed the decision of
the trial court and ordered petitioners to pay respondents the following sums:

"1) Seventy Five Thousand Pesos (P75,000.00) , or Twenty Five Thousand Pesos
(P25,000.00) for each appellant, by way of moral damages;"

"2) Seventy Five Thousand Pesos (P75,000.00), or Twenty Five thousand Pesos
(P25,000.00) for each appellant, by way of exemplary damages;"

"3) Fifteen Thousand Pesos (P15,000.00) as and for attorney's fees; and

"4) The costs of suit."[2]

The appellate court ruled:

"Thus, by the clear provisions of paragraph 23 of the Implementing Rules and

Regulations of PD 1096 (otherwise known as the Building Code), above, appellants,
being the parties adversely affected by the November 27, 1989 Resolution of the
Office of the Building Official, had fifteen (15) days from receipt of a copy of the
same within which to perfect an administrative appeal. Thus, since appellants received
a copy of the Resolution on December 7, 1989, they had until December 22, 1989
within which to perfect an administrative appeal and until such time, the said
Resolution was not yet final and executory."

xxxxxxxxx

"It cannot be denied, therefore, that when appellees commenced to demolish

appellants' houses as early as December 8, 1989 and eventually on December 12,
1989, neither the Resolution of the Building Official nor the Demolition Order itself
were final and executory."[3]

Petitioners filed the instant petition contending that the appellate court gravely erred in ruling
that the premature demolition of respondents' houses entitled them to the award of
damages. Petitioners pointed out that the order of the Office of the Building Official was
eventually upheld on appeal by the Department of Public Works and Highways in its decision of
14 March 1990. Furthermore, petitioners added, the structures subject matter of the demolition
order were declared to be dangerous structures by the Office of the Building Official and, as such,
could be abated to avoid danger to the public.
The Court rules for affirmance of the assailed decision.
 A right is a power, privilege, or immunity guaranteed under a constitution, statute or decisional
law, or recognized as a result of long usage,[4] constitutive of a legally enforceable claim of one
person against another.
Petitioner might verily be the owner of the land, with the right to enjoy[5] and to exclude any
person from the enjoyment and disposal thereof,[6] but the exercise of these rights is not without
limitations. The abuse of rights rule established in Article 19 of the Civil Code requires every
person to act with justice, to give everyone his due; and to observe honesty and good faith.[7] When
a right is exercised in a manner which discards these norms resulting in damage to another, a legal
wrong is committed for which the actor can be held accountable. In this instance, the issue is not
so much about the existence of the right or validity of the order of demolition as the question of
whether or not petitioners have acted in conformity with, and not in disregard of, the standard set
by Article 19 of the Civil Code.
At the time petitioners implemented the order of demolition, barely five days after respondents
received a copy thereof, the same was not yet final and executory. The law provided for a fifteen-
day appeal period in favor of a party aggrieved by an adverse ruling of the Office of the Building
Official but by the precipitate action of petitioners in demolishing the houses of respondents (prior
to the expiration of the period to appeal), the latter were effectively deprived of this recourse. The
fact that the order of demolition was later affirmed by the Department of Public Works and
Highways was of no moment. The action of petitioners up to the point where they were able to
secure an order of demolition was not condemnable but implementing the order unmindful of the
right of respondents to contest the ruling was a different matter and could only be held utterly
indefensible.
The Court, however, finds the award of P75,000.00 exemplary damages and another of
P75,000.00 moral damages for each respondent to be rather excessive given the circumstances; the
awards must be reduced to the reasonable amounts of P20,000.00 exemplary damages and
P20,000.00 moral damages.
WHEREFORE, the assailed decision of the Court of Appeals is MODIFIED by reducing the
awards of P75,000.00 exemplary damages and of P75,000.00 moral damages to each respondent
reduced to P20,000.00 exemplary damages and P20,000.00 moral damages for each respondent. In
all other respects, the decision of the appellate court is AFFIRMED. No costs.
SO ORDERED.
Melo, (Chairman), Panganiban, and Gonzaga-Reyes, JJ., concur.
Sandoval-Gutierrez, J., on leave.

[1]
Art. 19, Civil Code.
[2]
Rollo, p. 126.
[3]
Rollo, pp. 123-124.
[4]
Black's Law Dictionary, 6th Ed., p. 1324.
[5]
Art. 428, New Civil Code.
[6]
Art. 429, New Civil Code.
[7]
Albenson Enterprises Corporation vs. Court of Appeals, 217 SCRA 16.

THIRD DIVISION

[G.R. No. 126204. November 20, 2001]

NATIONAL POWER CORPORATION, petitioner, vs. PHILIPP BROTHERS

OCEANIC, INC., respondent.

DECISION
SANDOVAL-GUTIERREZ, J.:

Where a person merely uses a right pertaining to him, without bad faith or intent to injure, the
fact that damages are thereby suffered by another will not make him liable.[1]
This principle finds useful application to the present case.
Before us is a petition for review of the Decision[2] dated August 27, 1996 of the Court of
Appeals affirming in toto the Decision[3] dated January 16, 1992 of the Regional Trial Court,
Branch 57, Makati City.
The facts are:
On May 14, 1987, the National Power Corporation (NAPOCOR) issued invitations to bid for
the supply and delivery of 120,000 metric tons of imported coal for its Batangas Coal-Fired
Thermal Power Plant in Calaca, Batangas. The Philipp Brothers Oceanic, Inc. (PHIBRO)
prequalified and was allowed to participate as one of the bidders. After the public bidding was
conducted, PHIBROs bid was accepted. NAPOCORs acceptance was conveyed in a letter dated
July 8, 1987, which was received by PHIBRO on July 15, 1987.
The Bidding Terms and Specifications[4] provide for the manner of shipment of coals, thus:

SECTION V

SHIPMENT

The winning TENDERER who then becomes the SELLER shall arrange and provide
gearless bulk carrier for the shipment of coal to arrive at discharging port on or
before thirty (30) calendar days after receipt of the Letter of Credit by the
SELLER or its nominee as per Section XIV hereof to meet the vessel arrival
schedules at Calaca, Batangas, Philippines as follows:

60,000 +/ - 10 % July 20, 1987

60,000 +/ - 10% September 4, 1987[5]

On July 10, 1987, PHIBRO sent word to NAPOCOR that industrial disputes might soon
plague Australia, the shipments point of origin, which could seriously hamper PHIBROs ability to
supply the needed coal.[6]From July 23 to July 31, 1987, PHIBRO again apprised NAPOCOR of
the situation in Australia, particularly informing the latter that the ship owners therein are not
willing to load cargo unless a strike-free clause is incorporated in the charter party or the contract
of carriage.[7] In order to hasten the transfer of coal, PHIBRO proposed to NAPOCOR that they
equally share the burden of a strike-free clause. NAPOCOR refused.
On August 6, 1987, PHIBRO received from NAPOCOR a confirmed and workable letter of
credit. Instead of delivering the coal on or before the thirtieth day after receipt of the Letter of
Credit, as agreed upon by the parties in the July contract, PHIBRO effected its first shipment only
on November 17, 1987.
Consequently, in October 1987, NAPOCOR once more advertised for the delivery of coal to
its Calaca thermal plant. PHIBRO participated anew in this subsequent bidding. On November 24,
1987, NAPOCOR disapproved PHIBROs application for pre-qualification to bid for not meeting
the minimum requirements.[8] Upon further inquiry, PHIBRO found that the real reason for the
disapproval was its purported failure to satisfy NAPOCORs demand for damages due to the delay
in the delivery of the first coal shipment.
This prompted PHIBRO to file an action for damages with application for injunction against
NAPOCOR with the Regional Trial Court, Branch 57, Makati City. [9] In its complaint, PHIBRO
alleged that NAPOCORs act of disqualifying it in the October 1987 bidding and in all subsequent
biddings was tainted with malice and bad faith. PHIBRO prayed for actual, moral and exemplary
damages and attorneys fees.
In its answer, NAPOCOR averred that the strikes in Australia could not be invoked as reason
for the delay in the delivery of coal because PHIBRO itself admitted that as of July 28, 1987 those
strikes had already ceased. And, even assuming that the strikes were still ongoing, PHIBRO should
have shouldered the burden of a strike-free clause because their contract was C and F Calaca,
Batangas, Philippines, meaning, the cost and freight from the point of origin until the point of
destination would be for the account of PHIBRO. Furthermore, NAPOCOR claimed that due to
PHIBROs failure to deliver the coal on time, it was compelled to purchase coal from ASEA at a
higher price. NAPOCOR claimed for actual damages in the amount of P12,436,185.73,
representing the increase in the price of coal, and a claim of P500,000.00 as litigation expenses.[10]
Thereafter, trial on the merits ensued.
On January 16, 1992, the trial court rendered a decision in favor of PHIBRO, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Philipp Brothers
Oceanic Inc. (PHIBRO) and against the defendant National Power Corporation
(NAPOCOR) ordering the said defendant NAPOCOR:

1. To reinstate Philipp Brothers Oceanic, Inc. (PHIBRO) in the defendant National Power
Corporations list of accredited bidders and allow PHIBRO to participate in any and all future
tenders of National Power Corporation for the supply and delivery of imported steam coal;
2 To pay Philipp Brothers Oceanic, Inc. (PHIBRO);

a. The peso equivalent at the time of payment of $864,000 as actual

damages;

b. The peso equivalent at the time of payment of $100,000 as moral

damages;

c. The peso equivalent at the time of payment of $ 50,000 as exemplary

damages;

d. The peso equivalent at the time of payment of $73,231.91 as

reimbursement for expenses, cost of litigation and attorneys fees;

3. To pay the costs of suit;

4. The counterclaims of defendant NAPOCOR are dismissed for lack of merit.

SO ORDERED.[11]

Unsatisfied, NAPOCOR, through the Solicitor General, elevated the case to the Court of
Appeals. On August 27, 1996, the Court of Appeals rendered a Decision affirming in toto the
Decision of the Regional Trial Court. It ratiocinated that:

There is ample evidence to show that although PHIBROs delivery of the shipment of
coal was delayed, the delay was in fact caused by a) Napocors own delay in opening a
workable letter of credit; and b) the strikes which plaqued the Australian coal industry
from the first week of July to the third week of September 1987. Strikes are included
in the definition of force majeure in Section XVII of the Bidding Terms and
Specifications, (supra), so Phibro is not liable for any delay caused thereby.

Phibro was informed of the acceptance of its bid on July 8, 1987. Delivery of coal was
to be effected thirty (30) days from Napocors opening of a confirmed and workable
letter of credit. Napocor was only able to do so on August 6, 1987.

By that time, Australias coal industry was in the middle of a seething controversy and
unrest, occasioned by strikes, overtime bans, mine stoppages. The origin, the scope
and the effects of this industrial unrest are lucidly described in the uncontroverted
testimony of James Archibald, an employee of Phibro and member of the Export
Committee of the Australian Coal Association during the time these events transpired.

xxxxxx

The records also attest that Phibro periodically informed Napocor of these
developments as early as July 1, 1987, even before the bid was approved. Yet,
Napocor did not forthwith open the letter of credit in order to avoid delay which might
be caused by the strikes and their after-effects.

Strikes are undoubtedly included in the force majeure clause of the Bidding Terms
and Specifications (supra). The renowned civilist, Prof. Arturo Tolentino, defines
force majeure as an event which takes place by accident and could not have been
foreseen. (Civil Code of the Philippines, Volume IV, Obligations and Constracts, 126,
[1991]) He further states:

Fortuitous events may be produced by two general causes: (1) by Nature, such as
earthquakes, storms, floods, epidemics, fires, etc., and (2) by the act of man, such as
an armed invasion, attack by bandits, governmental prohibitions, robbery, etc.

Tolentino adds that the term generally applies, broadly speaking, to natural
accidents. In order that acts of man such as a strike, may constitute fortuitous event, it
is necessary that they have the force of an imposition which the debtor could not have
resisted. He cites a parallel example in the case of Philippine National Bank v. Court
of Appeals, 94 SCRA 357 (1979), wherein the Supreme Court said that the outbreak
of war which prevents performance exempts a party from liability.

Hence, by law and by stipulation of the parties, the strikes which took place in
Australia from the first week of July to the third week of September, 1987, exempted
Phibro from the effects of delay of the delivery of the shipment of coal.[12]

Twice thwarted, NAPOCOR comes to us via a petition for review ascribing to the Court of
Appeals the following errors:
I

Respondent Court of Appeals gravely and seriously erred in concluding and so

holding that PHIBROs delay in the delivery of imported coal was due to
NAPOCORs alleged delay in opening a letter of credit and to force majeure, and
not to PHIBROs own deliberate acts and faults.[13]
II
Respondent Court of Appeals gravely and seriously erred in concluding and so
holding that NAPOCOR acted maliciously and unjustifiably in disqualifying
PHIBRO from participating in the December 8, 1987 and future biddings for the
supply of imported coal despite the existence of valid grounds therefor such as
serious impairment of its track record.[14]
III

Respondent Court of Appeals gravely and seriously erred in concluding and so

holding that PHIBRO was entitled to injunctive relief, to actual or
compensatory, moral and exemplary damages, attorneys fees and litigation
expenses despite the clear absence of legal and factual bases for such award.[15]
IV

Respondent Court of Appeals gravely and seriously erred in absolving PHIBRO

from any liability for damages to NAPOCOR for its unjustified and deliberate
refusal and/or failure to deliver the contracted imported coal within the
stipulated period.[16]
V

Respondent Court of Appeals gravely and seriously erred in dismissing

NAPOCORs counterclaims for damages and litigation expenses.[17]

It is axiomatic that only questions of law, not questions of fact, may be raised before this Court
in a petition for review under Rule 45 of the Rules of Court.[18] The findings of facts of the Court
of Appeals are conclusive and binding on this Court[19] and they carry even more weight when the
said court affirms the factual findings of the trial court.[20] Stated differently, the findings of the
Court of Appeals, by itself, which are supported by substantial evidence, are almost beyond the
power of review by this Court.[21]
With the foregoing settled jurisprudence, we find it pointless to delve lengthily on the factual
issues raised by petitioner. The existence of strikes in Australia having been duly established in
the lower courts, we are left only with the burden of determining whether or not NAPOCOR acted
wrongfully or with bad faith in disqualifying PHIBRO from participating in the subsequent public
bidding.
Let us consider the case in its proper perspective.
The Court of Appeals is justified in sustaining the Regional Trial Courts decision exonerating
PHIBRO from any liability for damages to NAPOCOR as it was clearly established from the
evidence, testimonial and documentary, that what prevented PHIBRO from complying with its
obligation under the July 1987 contract was the industrial disputes which besieged Australia during
that time. Extant in our Civil Code is the rule that no person shall be responsible for those events
which could not be foreseeen, or which, though foreseen, were inevitable.[22] This means that when
an obligor is unable to fulfill his obligation because of a fortuitous event or force majeure, he
cannot be held liable for damages for non-performance.[23]
In addition to the above legal precept, it is worthy to note that PHIBRO and NAPOCOR
explicitly agreed in Section XVII of the Bidding Terms and Specifications[24] that neither seller
(PHIBRO) nor buyer (NAPOCOR) shall be liable for any delay in or failure of the performance
of its obligations, other than the payment of money due, if any such delay or failure is due to
Force Majeure. Specifically, they defined force majeure as any disabling cause beyond the control
of and without fault or negligence of the party, which causes may include but are not restricted to
Acts of God or of the public enemy; acts of the Government in either its sovereign or contractual
capacity; governmental restrictions; strikes, fires, floods, wars, typhoons, storms, epidemics and
quarantine restrictions.
The law is clear and so is the contract between NAPOCOR and PHIBRO. Therefore, we have
no reason to rule otherwise.
However, proceeding from the premise that PHIBRO was prevented by force majeure from
complying with its obligation, does it necessarily follow that NAPOCOR acted unjustly,
capriciously, and unfairly in disapproving PHIBROs application for pre-qualification to bid?
First, it must be stressed that NAPOCOR was not bound under any contract to approve
PHIBROs pre-qualification requirements. In fact, NAPOCOR had expressly reserved its right to
reject bids. The Instruction to Bidders found in the Post-Qualification Documents/ Specifications
for the Supply and Delivery of Coal for the Batangas Coal-Fired Thermal Power Plant I at Calaca,
Batangas Philippines,[25] is explicit, thus:

IB-17 RESERVATION OF NAPOCOR TO REJECT BIDS

NAPOCOR reserves the right to reject any or all bids, to waive any minor
informality in the bids received. The right is also reserved to reject the
bids of any bidder who has previously failed to properly perform or
complete on time any and all contracts for delivery of coal or any
supply undertaken by a bidder.[26] (Emphasis supplied)

This Court has held that where the right to reject is so reserved, the lowest bid or any bid for
that matter may be rejected on a mere technicality.[27] And where the government as advertiser,
availing itself of that right, makes its choice in rejecting any or all bids, the losing bidder has no
cause to complain nor right to dispute that choice unless an unfairness or injustice is
shown. Accordingly, a bidder has no ground of action to compel the Government to award
the contract in his favor, nor to compel it to accept his bid. Even the lowest bid or any bid may
be rejected.[28] In Celeste v. Court of Appeals,[29] we had the occasion to rule:

Moreover, paragraph 15 of the Instructions to Bidders states that the Government

hereby reserves the right to reject any or all bids submitted. In the case of A.C.
Esguerra and Sons v. Aytona, 4 SCRA 1245, 1249 (1962), we held:
x x x [I]n the invitation to bid, there is a condition imposed upon the bidders to the
effect that the bidders shall be subject to the right of the government to reject any and
all bids subject to its discretion. Here the government has made its choice, and
unless an unfairness or injustice is shown, the losing bidders have no cause to
complain, nor right to dispute that choice.

Since there is no evidence to prove bad faith and arbitrariness on the part of the
petitioners in evaluating the bids, we rule that the private respondents are not
entitled to damages representing lost profits. (Emphasis supplied)

Verily, a reservation of the government of its right to reject any bid, generally vests in the
authorities a wide discretion as to who is the best and most advantageous bidder. The exercise of
such discretion involves inquiry, investigation, comparison, deliberation and decision, which are
quasi-judicial functions, and when honestly exercised, may not be reviewed by the
court.[30] In Bureau Veritas v. Office of the President,[31] we decreed:

The discretion to accept or reject a bid and award contracts is vested in the
Government agencies entrusted with that function. The discretion given to the
authorities on this matter is of such wide latitude that the Courts will not
interfere therewith, unless it is apparent that it is used as a shield to a fraudulent
award. (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x. The exercise of this
discretion is a policy decision that necessitates prior inquiry, investigation,
comparison, evaluation, and deliberation. This task can best be discharged by the
Government agencies concerned, not by the Courts. The role of the Courts is to
ascertain whether a branch or instrumentality of the Government has transgresses its
constitutional boundaries. But the Courts will not interfere with executive or
legislative discretion exercised within those boundaries.Otherwise, it strays into the
realm of policy decision-making. x x x. (Emphasis supplied)

Owing to the discretionary character of the right involved in this case, the propriety of
NAPOCORs act should therefore be judged on the basis of the general principles regulating human
relations, the forefront provision of which is Article 19 of the Civil Code which provides that 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.[32] Accordingly, a person will 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.[33]
Did NAPOCOR abuse its right or act unjustly in disqualifying PHIBRO from the public
bidding?
We rule in the negative.
In practice, courts, in the sound exercise of their discretion, will have to determine under all
the facts and circumstances when the exercise of a right is unjust, or when there has been an abuse
of right.[34]
 We went over the record of the case with painstaking solicitude and we are convinced that
NAPOCORs act of disapproving PHIBRO's application for pre-qualification to bid was without
any intent to injure or a purposive motive to perpetrate damage. Apparently, NAPOCOR acted on
the strong conviction that PHIBRO had a seriously-impaired track record. NAPOCOR cannot be
faulted from believing so. At this juncture, it is worth mentioning that at the time NAPOCOR
issued its subsequent Invitation to Bid, i.e., October 1987, PHIBRO had not yet delivered the first
shipment of coal under the July 1987 contract, which was due on or before September 5,
1987. Naturally, NAPOCOR is justified in entertaining doubts on PHIBROs qualification or
capability to assume an obligation under a new contract.
Moreover, PHIBROs actuation in 1987 raised doubts as to the real situation of the coal
industry in Australia. It appears from the records that when NAPOCOR was constrained to
consider an offer from another coal supplier (ASEA) at a price of US$33.44 per metric ton,
PHIBRO unexpectedly offered the immediate delivery of 60,000 metric tons of Ulan steam coal
at US$31.00 per metric ton for arrival at Calaca, Batangas on September 20-21, 1987.[35] Of course,
NAPOCOR had reason to ponder-- how come PHIBRO could assure the immediate delivery
of 60,000 metric tons of coal from the same source to arrive at Calaca not later than
September 20/21, 1987 but it could not deliver the coal it had undertaken under its contract?
Significantly, one characteristic of a fortuitous event, in a legal sense, and consequently in
relations to contracts, is that the concurrence must be such as to render it impossible for the debtor
to fulfill his obligation in a normal manner.[36] Faced with the above circumstance, NAPOCOR is
justified in assuming that, may be, there was really no fortuitous event or force majeure which
could render it impossible for PHIBRO to effect the delivery of coal. Correspondingly, it is also
justified in treating PHIBROs failure to deliver a serious impairment of its track record. That the
trial court, thereafter, found PHIBROs unexpected offer actually a result of its desire to minimize
losses on the part of NAPOCOR is inconsequential. In determining the existence of good faith, the
yardstick is the frame of mind of the actor at the time he committed the act, disregarding actualities
or facts outside his knowledge. We cannot fault NAPOCOR if it mistook PHIBROs unexpected
offer a mere attempt on the latters part to undercut ASEA or an indication of PHIBROs
inconsistency. The circumstances warrant such contemplation.
That NAPOCOR believed all along that PHIBROs failure to deliver on time was unfounded
is manifest from its letters[37] reminding PHIBRO that it was bound to deliver the coal within 30
days from its (PHIBROs) receipt of the Letter of Credit, otherwise it would be constrained to take
legal action. The same honest belief can be deduced from NAPOCORs Board Resolution, thus:

On the legal aspect, Management stressed that failure of PBO to deliver under
the contract makes them liable for damages, considering that the reasons
invoked were not valid. The measure of the damages will be limited to actual and
compensatory damages. However, it was reported that Philipp Brothers advised they
would like to have continuous business relation with NPC so they are willing to sit
down or even proposed that the case be submitted to the Department of Justice as to
avoid a court action or arbitration.

xxxxxx
On the technical-economic aspect, Management claims that if PBO delivers in
November 1987 and January 1988, there are some advantages. If PBO reacts to any
legal action and fails to deliver, the options are: one, to use 100% Semirara and
second, to go into urgent coal order. The first option will result in a 75 MW derating
and oil will be needed as supplement. We will stand to lose around P30 M. On the
other hand, if NPC goes into an urgent coal order, there will be an additional expense
of $786,000 or P16.11 M, considering the price of the latest purchase with ASEA. On
both points, reliability is decreased.[38]

The very purpose of requiring a bidder to furnish the awarding authority its pre-qualification
documents is to ensure that only those responsible and qualified bidders could bid and be awarded
with government contracts. It bears stressing that the award of a contract is measured not solely
by the smallest amount of bid for its performance, but also by the responsibility of the
bidder. Consequently, the integrity, honesty, and trustworthiness of the bidder is to be
considered. An awarding official is justified in considering a bidder not qualified or not responsible
if he has previously defrauded the public in such contracts or if, on the evidence before him, the
official bona fide believes the bidder has committed such fraud, despite the fact that there is yet
no judicial determination to that effect.[39] Otherwise stated, if the awarding body bona
fide believes that a bidder has seriously impaired its track record because of a particular conduct,
it is justified in disqualifying the bidder. This policy is necessary to protect the interest of the
awarding body against irresponsible bidders.
Thus, one who acted pursuant to the sincere belief that another willfully committed an act
prejudicial to the interest of the government cannot be considered to have acted in bad faith. Bad
faith has always been a question of intention. It is that corrupt motive that operates in the mind. As
understood in law, it contemplates a state of mind affirmatively operating with furtive design or
with some motive of self-interest or ill-will or for ulterior purpose.[40] While confined in the realm
of thought, its presence may be ascertained through the partys actuation or through circumstantial
evidence.[41] The circumstances under which NAPOCOR disapproved PHIBRO's pre-qualification
to bid do not show an intention to cause damage to the latter. The measure it adopted was one of
self-protection. Consequently, we cannot penalize NAPOCOR for the course of action it
took.NAPOCOR cannot be made liable for actual, moral and exemplary damages.
Corollarily, in awarding to PHIBRO actual damages in the amount of $864,000, the Regional
Trial Court computed what could have been the profits of PHIBRO had NAPOCOR allowed it to
participate in the subsequent public bidding. It ruled that PHIBRO would have won the tenders for
the supply of about 960,000 metric tons out of at least 1,200,000 metric tons from the public
bidding of December 1987 to 1990. We quote the trial courts ruling, thus:

x x x. PHIBRO was unjustly excluded from participating in at least five (5) tenders
beginning December 1987 to 1990, for the supply and delivery of imported coal with
a total volume of about 1,200,000 metric tons valued at no less than US$32 Million.
(Exhs. AA, AA-1, to AA-2). The price of imported coal for delivery in 1988 was
quoted in June 1988 by bidders at US$ 41.35 to US $ 43.95 per metric ton (Exh. JJ);
in September 1988 at US$41.50 to US$49.50 per metric ton (Exh. J-1); in November
1988 at US$ 39.00 to US$ 48.50 per metric ton (Exh. J-2) and for the 1989 deliveries,
at US$ 44.35 to US$ 47.35 per metric ton (Exh. J-3) and US$38.00 to US$48.25 per
metric ton in September 1990 (Exh. JJ-6 and JJ-7). PHIBRO would have won the
tenders for the supply and delivery of about 960,000 metric tons of coal out of at least
1,200,000 metric tons awarded during said period based on its proven track record of
80%. The Court, therefore finds that as a result of its disqualification, PHIBRO
suffered damages equivalent to its standard 3% margin in 960,000 metric tons of
coal at the most conservative price of US$ 30.000 per metric ton, or the total of
US$ 864,000 which PHIBRO would have earned had it been allowed to
participate in biddings in which it was disqualified and in subsequent tenders for
supply and delivery of imported coal.

We find this to be erroneous.

Basic is the rule that to recover actual damages, the amount of loss must not only be capable
of proof but must actually be proven with reasonable degree of certainty, premised upon competent
proof or best evidence obtainable of the actual amount thereof.[42] A court cannot merely rely on
speculations, conjectures, or guesswork as to the fact and amount of damages. Thus, while
indemnification for damages shall comprehend not only the value of the loss suffered, but also that
of the profits which the obligee failed to obtain,[43] it is imperative that the basis of the alleged
unearned profits is not too speculative and conjectural as to show the actual damages which may
be suffered on a future period.
In Pantranco North Express, Inc. v. Court of Appeals,[44] this Court denied the plaintiffs claim
for actual damages which was premised on a contract he was about to negotiate on the ground that
there was still the requisite public bidding to be complied with, thus:

As to the alleged contract he was about to negotiate with Minister Hipolito, there is no
showing that the same has been awarded to him. If Tandoc was about to negotiate a
contract with Minister Hipolito, there was no assurance that the former would get it or
that the latter would award the contract to him since there was the requisite public
bidding. The claimed loss of profit arising out of that alleged contract which was
still to be negotiated is a mere expectancy. Tandocs claim that he could have
earned P2 million in profits is highly speculative and no concrete evidence was
presented to prove the same. The only unearned income to which Tandoc is entitled
to from the evidence presented is that for the one-month period, during which his
business was interrupted, which is P6,125.00, considering that his annual net income
was P73, 500.00.

In Lufthansa German Airlines v. Court of Appeals,[45] this Court likewise disallowed the trial
court's award of actual damages for unrealized profits in the amount of US$75,000.00 for being
highly speculative. It was held that the realization of profits by respondent x x x was not a certainty,
but depended on a number of factors, foremost of which was his ability to invite investors and to
win the bid. This Court went further saying that actual or compensatory damages cannot be
presumed, but must be duly proved, and proved with reasonable degree of certainty.
 And in National Power Corporation v. Court of Appeals,[46] the Court, in denying the bidders
claim for unrealized commissions, ruled that even if NAPOCOR does not deny its (bidder's) claims
for unrealized commissions, and that these claims have been transmuted into judicial admissions,
these admissions cannot prevail over the rules and regulations governing the bidding for
NAPOCOR contracts, which necessarily and inherently include the reservation by the NAPOCOR
of its right to reject any or all bids.
The award of moral damages is likewise improper. To reiterate, NAPOCOR did not act in bad
faith. Moreover, moral damages are not, as a general rule, granted to a corporation.[47] While it is
true that besmirched reputation is included in moral damages, it cannot cause mental anguish to a
corporation, unlike in the case of a natural person, for a corporation has no reputation in the sense
that an individual has, and besides, it is inherently impossible for a corporation to suffer mental
anguish.[48] In LBC Express, Inc. v. Court of Appeals,[49] we ruled:

Moral damages are granted in recompense for physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. A corporation, being an artificial person and having
existence only in legal contemplation, has no feelings, no emotions, no senses;
therefore, it cannot experience physical suffering and mental anguish. Mental
suffering can be experienced only by one having a nervous system and it flows from
real ills, sorrows, and griefs of life all of which cannot be suffered by respondent bank
as an artificial person.

Neither can we award exemplary damages under Article 2234 of the Civil Code. Before the
court may consider the question of whether or not exemplary damages should be awarded, the
plaintiff must show that he is entitled to moral, temperate, or compensatory damages.
NAPOCOR, in this petition, likewise contests the judgment of the lower courts awarding
PHIBRO the amount of $73,231.91 as reimbursement for expenses, cost of litigation and attorneys
fees.
We agree with NAPOCOR.
This Court has laid down the rule that in the absence of stipulation, a winning party may be
awarded attorney's fees only in case plaintiff's action or defendant's stand is so untenable as to
amount to gross and evident bad faith.[50] This cannot be said of the case at bar. NAPOCOR is
justified in resisting PHIBROs claim for damages. As a matter of fact, we partially grant the prayer
of NAPOCOR as we find that it did not act in bad faith in disapproving PHIBRO's pre-qualification
to bid.
Trial courts must be reminded that attorney's fees may not be awarded to a party simply
because the judgment is favorable to him, for it may amount to imposing a premium on the right
to redress grievances in court.We adopt the same policy with respect to the expenses of
litigation. A winning party may be entitled to expenses of litigation only where he, by reason of
plaintiff's clearly unjustifiable claims or defendant's unreasonable refusal to his demands, was
compelled to incur said expenditures. Evidently, the facts of this case do not warrant the granting
of such litigation expenses to PHIBRO.
 At this point, we believe that, in the interest of fairness, NAPOCOR should give PHIBRO
another opportunity to participate in future public bidding. As earlier mentioned, the delay on its
part was due to a fortuitous event.
But before we dispose of this case, we take this occasion to remind PHIBRO of the
indispensability of coal to a coal-fired thermal plant. With households and businesses being
entirely dependent on the electricity supplied by NAPOCOR, the delivery of coal cannot be
venturesome. Indeed, public interest demands that one who offers to deliver coal at an appointed
time must give a reasonable assurance that it can carry through.With the deleterious possible
consequences that may result from failure to deliver the needed coal, we believe there is greater
strain of commitment in this kind of obligation.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 126204 dated
August 27, 1996 is hereby MODIFIED. The award, in favor of PHIBRO, of actual, moral and
exemplary damages, reimbursement for expenses, cost of litigation and attorneys fees, and costs
of suit, is DELETED.
SO ORDERED.
Vitug, Panganiban, and Carpio, JJ., concur.
Melo, J., (Chairman), see dissenting opinion.

[1]
Tolentino, Civil Code of the Philippines, Vol. I, 1997, p. 67.
[2]
Rollo, pp. 53-69.
[3]
Rollo, pp. 70-80.
[4]
Records, pp. 86-110.
[5]
Records, p. 90.
[6]
Plaintiffs Exhibits, Part I, Exhibit C, p. 66.
[7]
Ibid., Exhibits D, E, F, G, H, I, pp. 67-73.
[8]
Records, p. 180.
[9]
Records, pp. 6-23.
[10]
Records, pp. 187-197.
[11]
Rollo, p. 80.
[12]
Rollo, pp. 59-63.
[13]
Rollo, p.27.
[14]
Rollo, pp. 37-38.
[15]
Rollo, p.42.
[16]
Rollo, p.45.
[17]
Rollo, p. 47.
[18]
Tinio v. Manzano, 307 SCRA 460 (1999); Siguan v. Lim, 318 SCRA 725 (1999); and National Steel
Corporation v. Court of Appeals, 283 SCRA 45 (1997).
[19]
Security Bank and Trust Company v. Triumph Lumber and Construction Corporation, 301 SCRA 537 (1999)
American Express International, Inc. v. Court of Appeals, 308 SCRA 65 (1999).
[20]
Borromeo v. Sun, 317 SCRA 176 (1999); Boneng v. People 304 SCRA 252 (1999).
[21]
Pimentel v. Court of Appeals, 307 SCRA 38 (1999).
[22]
Article 1174 of the Civil Code.
[23]
Tolentino, Civil Code of the Philippines, Volume IV, 1997 Ed., p. 128.
[24]
Records, p. 24.
[25]
Records, p. 234, 279.
[26]
Records, p. 250.
[27]
A Treatise on Government Contracts Under Philippine Law, Fernandez, Jr., 1996 Ed. p. 28.
[28]
A.C. Esguerra & Sons v. Aytona, 4 SCRA 1245 (1962).
[29]
209 SCRA 79 (1992).
[30]
Virata v. Bocar, 50 SCRA 468 (1973); Jalandoni v. NARRA, 108 Phil. 486 (1960).
[31]
205 SCRA 705 (1992).
[32]
The classical theory is that he who uses a right inures no one. Traditionally, therefore, it has been a settled doctrine
that no person can be held liable for damages occasioned to another by the exercise of a right. The modern tendency,
therefore, is to depart from the classical and traditional theory, and to grant indemnity for damages in cases where
there is an abuse of right, even when the act is not illicit. Law cannot be given an anti-social effect. If mere fault or
negligence in ones act can make him liable for damages for injury caused thereby, with more reason should abuse or
bad faith make him liable.
[33]
Tolentino, Civil Code of the Philippines, Vol. I, 1997, pp. 61-62.
There is an abuse of right when it is exercised only for the 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.
[34]
Ibid., p. 62.
[35]
Plaintiffs Exhibit, Part I, p. 120.
[36]
Tolentino, Civil Code of the Philippines, Vol. IV, 1997, p. 128.
[37]
Dated August 11, 1987, August 27, 1987, September 8, 1987 and September 14, 1987, Defendants Exhibits, p. 27.
[38]
Part I, Plaintiffs Exhibit, pp. 178-179.
[39]
Cobach, Lucenario, Law on Public Bidding and Government Contracts, pp. 92-93. Citing 28 Corn. L.Q. 44;
Douglas v. Commonwealth, 108 Pa. 559 (1885); Jacobson v. Board of Education, 64 A. 609 (N.J. 1906).
[40]
Air France v. Carrascoso, 18 SCRA 155 (1966).
[41]
Vda. de Laig v. Court of Appeals, 82 SCRA 294 (1978).
[42]
PNOC Shipping and Transport Corporation v. Court of Appeals, 297 SCRA 402 (1998).
[43]
Article 2200 of the Civil Code of the Philippines.
[44]
224 SCRA 477 (1993).
[45]
243 SCRA 600 (1995).
[46]
273 SCRA 420 (1997).
[47]
Sea Commercial Company, Inc. v. Court of Appeals; (G.R. No. 122823, November 25, 1999).
[48]
Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, 1996 Edition, Vol. 3, p.
17; Tamayo v. University of Negros Occidental 58 OG No. 37, p. 6023, September 10, 1962, citing Memphis
Telephone Co. v. Cumberland Telephone and Telegraph Co., 145 Fed. 906 and other cases cited in 52 ALR 1192-3
and 90 ALR 1180-1.
[49]
236 SCRA 602 (1994); See also Acme Shoe, Rubber & Plastic Corp. v. Court of Appeals, 260 SCRA 714 (1996).
[50]
Jimenez v. Bucoy. 103 Phil. 40 (1958); Castillo v. Samonte, 106 Phil. 1023 (1960).

SECOND DIVISION

[G.R. No. 143958. July 11, 2003]

ALFRED FRITZ FRENZEL, petitioner, vs. EDERLINA P.

CATITO, respondent.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review of the Decision[1] of the Court of Appeals in CA-G.R.
CV No. 53485 which affirmed the Decision[2] of the Regional Trial Court of Davao City,
Branch 14, in Civil Case No. 17,817 dismissing the petitioners complaint, and the
resolution of the Court of Appeals denying his motion for reconsideration of the said
decision.

The Antecedents[3]

As gleaned from the evidence of the petitioner, the case at bar stemmed from the
following factual backdrop:
Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent. He is an
electrical engineer by profession, but worked as a pilot with the New Guinea Airlines. He
arrived in the Philippines in 1974, started engaging in business in the country two years
thereafter, and married Teresita Santos, a Filipino citizen. In 1981, Alfred and Teresita
separated from bed and board without obtaining a divorce.
Sometime in February 1983, Alfred arrived in Sydney, Australia for a vacation. He
went to Kings Cross, a night spot in Sydney, for a massage where he met Ederlina Catito,
a Filipina and a native of Bajada, Davao City. Unknown to Alfred, she resided for a time
in Germany and was married to Klaus Muller, a German national. She left Germany and
tried her luck in Sydney, Australia, where she found employment as a masseuse in the
Kings Cross nightclub. She was fluent in German, and Alfred enjoyed talking with her.
The two saw each other again; this time Ederlina ended up staying in Alfreds hotel for
three days. Alfred gave Ederlina sums of money for her services. [4]
Alfred was so enamored with Ederlina that he persuaded her to stop working at Kings
Cross, return to the Philippines, and engage in a wholesome business of her own. He
also proposed that they meet in Manila, to which she assented. Alfred gave her money
for her plane fare to the Philippines. Within two weeks of Ederlinas arrival in Manila, Alfred
joined her. Alfred reiterated his proposal for Ederlina to stay in the Philippines and engage
in business, even offering to finance her business venture. Ederlina was delighted at the
idea and proposed to put up a beauty parlor.Alfred happily agreed.
Alfred told Ederlina that he was married but that he was eager to divorce his wife in
Australia. Alfred proposed marriage to Ederlina, but she replied that they should wait a
little bit longer.
Ederlina found a building at No. 444 M.H. del Pilar corner Arquiza Street, Ermita,
Manila, owned by one Atty. Jose Hidalgo who offered to convey his rights over the
property for P18,000.00. Alfred and Ederlina accepted the offer. Ederlina put up a beauty
parlor on the property under the business name Edorial Beauty Salon, and had it
registered with the Department of Trade and Industry under her name. Alfred paid Atty.
Hidalgo P20,000.00 for his right over the property and gave P300,000.00 to Ederlina for
the purchase of equipment and furnitures for the parlor. As Ederlina was going to
Germany, she executed a special power of attorney on December 13, 1983 [5] appointing
her brother, Aser Catito, as her attorney-in-fact in managing the beauty parlor
business. She stated in the said deed that she was married to Klaus Muller. Alfred went
back to Papua New Guinea to resume his work as a pilot.
When Alfred returned to the Philippines, he visited Ederlina in her Manila residence
and found it unsuitable for her. He decided to purchase a house and lot owned by Victoria
Binuya Steckel in San Francisco del Monte, Quezon City, covered by Transfer Certificate
of Title No. 218429 for US$20,000.00. Since Alfred knew that as an alien he was
disqualified from owning lands in the Philippines, he agreed that only Ederlinas name
would appear in the deed of sale as the buyer of the property, as well as in the title
covering the same. After all, he was planning to marry Ederlina and he believed that after
their marriage, the two of them would jointly own the property. On January 23, 1984, a
Contract to Sell was entered into between Victoria Binuya Steckel as the vendor and
Ederlina as the sole vendee. Alfred signed therein as a witness. [6] Victoria received from
Alfred, for and in behalf of Ederlina, the amount of US$10,000.00 as partial payment, for
which Victoria issued a receipt.[7] When Victoria executed the deed of absolute sale over
the property on March 6, 1984,[8] she received from Alfred, for and in behalf of Ederlina,
the amount of US$10,000.00 as final and full payment. Victoria likewise issued a receipt
for the said amount.[9] After Victoria had vacated the property, Ederlina moved into her
new house. When she left for Germany to visit Klaus, she had her father Narciso Catito
and her two sisters occupy the property.
Alfred decided to stay in the Philippines for good and live with Ederlina. He returned
to Australia and sold his fiber glass pleasure boat to John Reid for $7,500.00 on May 4,
1984.[10] He also sold his television and video business in Papua New Guinea for
K135,000.00 to Tekeraoi Pty. Ltd.[11] He had his personal properties shipped to the
Philippines and stored at No. 14 Fernandez Street, San Francisco del Monte, Quezon
City. The proceeds of the sale were deposited in Alfreds account with the Hong Kong
Shanghai Banking Corporation (HSBC), Kowloon Branch under Bank Account No. 018-
2-807016.[12] When Alfred was in Papua New Guinea selling his other properties, the bank
sent telegraphic letters updating him of his account.[13] Several checks were credited to his
HSBC bank account from Papua New Guinea Banking Corporation, Westpac Bank of
Australia and New Zealand Banking Group Limited and Westpac BankPNG-Limited.
Alfred also had a peso savings account with HSBC, Manila, under Savings Account No.
01-725-183-01.[14]
Once, when Alfred and Ederlina were in Hong Kong, they opened another account
with HSBC, Kowloon, this time in the name of Ederlina, under Savings Account No. 018-
0-807950.[15] Alfred transferred his deposits in Savings Account No. 018-2-807016 with
the said bank to this new account. Ederlina also opened a savings account with the Bank
of America Kowloon Main Office under Account No. 30069016.[16]
On July 28, 1984, while Alfred was in Papua New Guinea, he received a Letter dated
December 7, 1983 from Klaus Muller who was then residing in Berlin, Germany. Klaus
informed Alfred that he and Ederlina had been married on October 16, 1978 and had a
blissful married life until Alfred intruded therein. Klaus stated that he knew of Alfred and
Ederlinas amorous relationship, and discovered the same sometime in November 1983
when he arrived in Manila. He also begged Alfred to leave Ederlina alone and to return
her to him, saying that Alfred could not possibly build his future on his (Klaus)
misfortune.[17]
Alfred had occasion to talk to Sally MacCarron, a close friend of Ederlina. He inquired
if there was any truth to Klaus statements and Sally confirmed that Klaus was married to
Ederlina. When Alfred confronted Ederlina, she admitted that she and Klaus were,
indeed, married. But she assured Alfred that she would divorce Klaus. Alfred was
appeased. He agreed to continue the amorous relationship and wait for the outcome of
Ederlinas petition for divorce. After all, he intended to marry her. He retained the services
of Rechtsanwltin Banzhaf with offices in Berlin, as her counsel who informed her of the
progress of the proceedings.[18] Alfred paid for the services of the lawyer.
In the meantime, Alfred decided to purchase another house and lot, owned by
Rodolfo Morelos covered by TCT No. 92456 located in Pea Street, Bajada, Davao
City.[19] Alfred again agreed to have the deed of sale made out in the name of Ederlina. On
September 7, 1984, Rodolfo Morelos executed a deed of absolute sale over the said
property in favor of Ederlina as the sole vendee for the amount of P80,000.00.[20] Alfred
paid US$12,500.00 for the property.
Alfred purchased another parcel of land from one Atty. Mardoecheo Camporedondo,
located in Moncado, Babak, Davao, covered by TCT No. 35251. Alfred once more agreed
for the name of Ederlina to appear as the sole vendee in the deed of sale. On December
31, 1984, Atty. Camporedondo executed a deed of sale over the property for P65,000.00
in favor of Ederlina as the sole vendee.[21] Alfred, through Ederlina, paid the lot at the cost
of P33,682.00 and US$7,000.00, respectively, for which the vendor signed receipts. [22] On
August 14, 1985, TCT No. 47246 was issued to Ederlina as the sole owner of the said
property.[23]
Meanwhile, Ederlina deposited on December 27, 1985, the total amount of
US$250,000 with the HSBC Kowloon under Joint Deposit Account No. 018-462341-145.[24]
The couple decided to put up a beach resort on a four-hectare land in Camudmud,
Babak, Davao, owned by spouses Enrique and Rosela Serrano. Alfred purchased the
property from the spouses for P90,000.00, and the latter issued a receipt therefor.[25] A
draftsman commissioned by the couple submitted a sketch of the beach resort. [26] Beach
houses were forthwith constructed on a portion of the property and were eventually rented
out by Ederlinas father, Narciso Catito. The rentals were collected by Narciso, while
Ederlina kept the proceeds of the sale of copra from the coconut trees in the property. By
this time, Alfred had already spent P200,000.00 for the purchase, construction and
upkeep of the property.
Ederlina often wrote letters to her family informing them of her life with Alfred. In a
Letter dated January 21, 1985, she wrote about how Alfred had financed the purchases
of some real properties, the establishment of her beauty parlor business, and her petition
to divorce Klaus.[27]
Because Ederlina was preoccupied with her business in Manila, she executed on July
8, 1985, two special powers of attorney[28] appointing Alfred as attorney-in-fact to receive
in her behalf the title and the deed of sale over the property sold by the spouses Enrique
Serrano.
In the meantime, Ederlinas petition for divorce was denied because Klaus opposed
the same. A second petition filed by her met the same fate. Klaus wanted half of all the
properties owned by Ederlina in the Philippines before he would agree to a divorce.
Worse, Klaus threatened to file a bigamy case against Ederlina.[29]
Alfred proposed the creation of a partnership to Ederlina, or as an alternative, the
establishment of a corporation, with Ederlina owning 30% of the equity thereof. She
initially agreed to put up a corporation and contacted Atty. Armando Dominguez to
prepare the necessary documents. Ederlina changed her mind at the last minute when
she was advised to insist on claiming ownership over the properties acquired by them
during their coverture.
Alfred and Ederlinas relationship started deteriorating. Ederlina had not been able to
secure a divorce from Klaus. The latter could charge her for bigamy and could even
involve Alfred, who himself was still married. To avoid complications, Alfred decided to
live separately from Ederlina and cut off all contacts with her. In one of her letters to Alfred,
Ederlina complained that he had ruined her life. She admitted that the money used for the
purchase of the properties in Davao were his. She offered to convey the properties
deeded to her by Atty. Mardoecheo Camporedondo and Rodolfo Morelos, asking Alfred
to prepare her affidavit for the said purpose and send it to her for her signature.[30] The last
straw for Alfred came on September 2, 1985, when someone smashed the front and rear
windshields of Alfreds car and damaged the windows. Alfred thereafter executed an
affidavit-complaint charging Ederlina and Sally MacCarron with malicious mischief.[31]
 On October 15, 1985, Alfred wrote to Ederlinas father, complaining that Ederlina had
taken all his life savings and because of this, he was virtually penniless. He further
accused the Catito family of acquiring for themselves the properties he had purchased
with his own money. He demanded the return of all the amounts that Ederlina and her
family had stolen and turn over all the properties acquired by him and Ederlina during
their coverture.[32]
Shortly thereafter, Alfred filed a Complaint[33] dated October 28, 1985, against
Ederlina, with the Regional Trial Court of Quezon City, for recovery of real and personal
properties located in Quezon City and Manila. In his complaint, Alfred alleged, inter alia,
that Ederlina, without his knowledge and consent, managed to transfer funds from their
joint account in HSBC Hong Kong, to her own account with the same bank. Using the
said funds, Ederlina was able to purchase the properties subject of the complaints. He
also alleged that the beauty parlor in Ermita was established with his own funds, and that
the Quezon City property was likewise acquired by him with his personal funds. [34]
Ederlina failed to file her answer and was declared in default. Alfred adduced his
evidence ex-parte.
In the meantime, on November 7, 1985, Alfred also filed a complaint [35] against
Ederlina with the Regional Trial Court, Davao City, for specific performance, declaration
of ownership of real and personal properties, sum of money, and damages. He
alleged, inter alia, in his complaint:

4. That during the period of their common-law relationship, plaintiff solely through
his own efforts and resources acquired in the Philippines real and personal properties
valued more or less at P724,000.00; The defendants common-law wife or live-in
partner did not contribute anything financially to the acquisition of the said real and
personal properties. These properties are as follows:

I. Real Properties

a. TCT No. T-92456 located at Bajada, Davao City, consisting of 286 square meters,
(with residential house) registered in the name of the original title owner Rodolfo M.
Morelos but already fully paid by plaintiff. Valued at P342,000.00;
b. TCT No. T-47246 (with residential house) located at Babak, Samal, Davao, consisting
of 600 square meters, registered in the name of Ederlina Catito, with the Register of
Deeds of Tagum, Davao del Norte valued at P144,000.00;
c. A parcel of agricultural land located at Camudmud, Babak, Samal, Davao del Norte,
consisting of 4.2936 hectares purchased from Enrique Serrano and Rosela B.
Serrano. Already paid in full by plaintiff. Valued at P228,608.32;

II. Personal Properties:

 a. Furniture valued at P10,000.00.

...

5. That defendant made no contribution at all to the acquisition of the above-

mentioned properties as all the monies (sic) used in acquiring said properties belonged
solely to plaintiff; [36]

Alfred prayed that after hearing, judgment be rendered in his favor:

WHEREFORE, in view of the foregoing premises, it is respectfully prayed that

judgment be rendered in favor of plaintiff and against defendant:

a) Ordering the defendant to execute the corresponding deeds of transfer and/or

conveyances in favor of plaintiff over those real and personal properties enumerated
in Paragraph 4 of this complaint;
b) Ordering the defendant to deliver to the plaintiff all the above real and personal
properties or their money value, which are in defendants name and custody because
these were acquired solely with plaintiffs money and resources during the duration of
the common-law relationship between plaintiff and defendant, the description of which
are as follows:
(1) TCT No. T-92456 (with residential house) located at Bajada, Davao City, consisting
of 286 square meters, registered in the name of the original title owner Rodolfo
Morelos but already fully paid by plaintiff. Valued at P342,000.00;
(2) TCT No. T-47246 (with residential house) located at Babak, Samal, Davao, consisting
of 600 square meters, registered in the name of Ederlina Catito, with the Register of
Deeds of Tagum, Davao del Norte, valued at P144,000.00;
(3) A parcel of agricultural land located at Camudmud, Babak, Samal, Davao del Norte,
consisting of 4.2936 hectares purchased from Enrique Serrano and Rosela B.
Serrano. Already fully paid by plaintiff. Valued at P228,608.32;
c) Declaring the plaintiff to be the sole and absolute owner of the above-mentioned real
and personal properties;
d) Awarding moral damages to plaintiff in an amount deemed reasonable by the trial
court;
e) To reimburse plaintiff the sum of P12,000.00 as attorneys fees for having compelled
the plaintiff to litigate;
f) To reimburse plaintiff the sum of P5,000.00 incurred as litigation expenses also for
having compelled the plaintiff to litigate; and
g) To pay the costs of this suit;

Plaintiff prays for other reliefs just and equitable in the premises. [37]
 In her answer, Ederlina denied all the material allegations in the complaint, insisting
that she acquired the said properties with her personal funds, and as such, Alfred had no
right to the same.She alleged that the deeds of sale, the receipts, and certificates of titles
of the subject properties were all made out in her name. [38] By way of special and
affirmative defense, she alleged that Alfred had no cause of action against her. She
interposed counterclaims against the petitioner.[39]
In the meantime, the petitioner filed a Complaint dated August 25, 1987, against the
HSBC in the Regional Trial Court of Davao City[40] for recovery of bank deposits and
damages.[41] He prayed that after due proceedings, judgment be rendered in his favor,
thus:

WHEREFORE, plaintiff respectfully prays that the Honorable Court adjudge

defendant bank, upon hearing the evidence that the parties might present, to pay
plaintiff:

1. ONE HUNDRED TWENTY SIX THOUSAND TWO HUNDRED AND THIRTY

U.S. DOLLARS AND NINETY EIGHT CENTS (US$126,230.98) plus legal
interests, either of Hong Kong or of the Philippines, from 20 December 1984 up to the
date of execution or satisfaction of judgment, as actual damages or in restoration of
plaintiffs lost dollar savings;

2.The same amount in (1) above as moral damages;

3. Attorneys fees in the amount equivalent to TWENTY FIVE PER CENT (25%) of
(1) and (2) above;

4. Litigation expenses in the amount equivalent to TEN PER CENT (10%) of the
amount in (1) above; and

5. For such other reliefs as are just and equitable under the circumstances. [42]

On April 28, 1986, the RTC of Quezon City rendered its decision in Civil Case No. Q-
46350, in favor of Alfred, the decretal portion of which reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering the

defendant to perform the following:

(1) To execute a document waiving her claim to the house and lot in No. 14
Fernandez St., San Francisco Del Monte, Quezon City in favor of plaintiff or to return
to the plaintiff the acquisition cost of the same in the amount of $20,000.00, or to sell
the said property and turn over the proceeds thereof to the plaintiff;
(2) To deliver to the plaintiff the rights of ownership and management of the beauty
parlor located at 444 Arquiza St., Ermita, Manila, including the equipment and
fixtures therein;

(3) To account for the earnings of rental of the house and lot in No. 14 Fernandez St.,
San Francisco Del Monte, Quezon City, as well as the earnings in the beauty parlor at
444 Arquiza St., Ermita, Manila and turn over one-half of the net earnings of both
properties to the plaintiff;

(4) To surrender or return to the plaintiff the personal properties of the latter left in the
house at San Francisco Del Monte, to wit:

(1) Mamya automatic camera

(1) 12 inch Sonny T.V. set, colored with remote control.
(1) Micro oven
(1) Electric fan (tall, adjustable stand)
(1) Office safe with (2) drawers and safe
(1) Electric Washing Machine
(1) Office desk and chair
(1) Double bed suits
(1) Mirror/dresser
(1) Heavy duty voice/working mechanic
(1) Sony Beta-Movie camera
(1) Suitcase with personal belongings
(1) Cardboard box with belongings
(1) Guitar Amplifier
(1) Hanger with mens suit (white).

To return to the plaintiff, (1) Hi-Fi Stereo equipment left at 444 Arquiza Street,
Ermita, Manila, as well as the Fronte Suzuki car.

(4) To account for the monies (sic) deposited with the joint account of the plaintiff
and defendant (Account No. 018-0-807950); and to restore to the plaintiff all the
monies (sic) spent by the defendant without proper authority;

(5) To pay the amount of P5,000.00 by way of attorneys fees, and the costs of suit.

SO ORDERED. [43]

However, after due proceedings in the RTC of Davao City, in Civil Case No. 17,817,
the trial court rendered judgment on September 28, 1995 in favor of Ederlina, the
dispositive portion of which reads:
WHEREFORE, the Court cannot give due course to the complaint and hereby orders
its dismissal. The counterclaims of the defendant are likewise dismissed.

SO ORDERED. [44]

The trial court ruled that based on documentary evidence, the purchaser of the three
parcels of land subject of the complaint was Ederlina. The court further stated that even
if Alfred was the buyer of the properties, he had no cause of action against Ederlina for
the recovery of the same because as an alien, he was disqualified from acquiring and
owning lands in the Philippines. The sale of the three parcels of land to the petitioner was
null and void ab initio. Applying the pari delicto doctrine, the petitioner was precluded from
recovering the properties from the respondent.
Alfred appealed the decision to the Court of Appeals[45] in which the petitioner posited
the view that although he prayed in his complaint in the court a quo that he be declared
the owner of the three parcels of land, he had no intention of owning the same
permanently. His principal intention therein was to be declared the transient owner for the
purpose of selling the properties at public auction, ultimately enabling him to recover the
money he had spent for the purchase thereof.
On March 8, 2000, the CA rendered a decision affirming in toto the decision of the
RTC. The appellate court ruled that the petitioner knowingly violated the Constitution;
hence, was barred from recovering the money used in the purchase of the three parcels
of land. It held that to allow the petitioner to recover the money used for the purchase of
the properties would embolden aliens to violate the Constitution, and defeat, rather than
enhance, the public policy.[46]
Hence, the petition at bar.
The petitioner assails the decision of the court contending that:

THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE RULE

OF IN PARI DELICTO IN THE INSTANT CASE BECAUSE BY THE FACTS AS
NARRATED IN THE DECISION IT IS APPARENT THAT THE PARTIES
ARE NOT EQUALLY GUILTY BUT RATHER IT WAS THE RESPONDENT
WHO EMPLOYED FRAUD AS WHEN SHE DID NOT INFORM PETITIONER
THAT SHE WAS ALREADY MARRIED TO ANOTHER GERMAN NATIONAL
AND WITHOUT SUCH FRAUDULENT DESIGN PETITIONER COULD NOT
HAVE PARTED WITH HIS MONEY FOR THE PURCHASE OF THE
PROPERTIES. [47]

and

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT

THE INTENTION OF THE PETITIONER IS NOT TO OWN REAL PROPERTIES
IN THE PHILIPPINES BUT TO SELL THEM AT PUBLIC AUCTION TO BE
ABLE TO RECOVER HIS MONEY USED IN PURCHASING THEM. [48]

Since the assignment of errors are intertwined with each other, the Court shall resolve
the same simultaneously.
The petitioner contends that he purchased the three parcels of land subject of his
complaint because of his desire to marry the respondent, and not to violate the Philippine
Constitution. He was, however, deceived by the respondent when the latter failed to
disclose her previous marriage to Klaus Muller. It cannot, thus, be said that he and the
respondent are equally guilty; as such, the pari delicto doctrine is not applicable to him.
He acted in good faith, on the advice of the respondents uncle, Atty. Mardoecheo
Camporedondo. There is no evidence on record that he was aware of the constitutional
prohibition against aliens acquiring real property in the Philippines when he purchased
the real properties subject of his complaint with his own funds. The transactions were not
illegal per se but merely prohibited, and under Article 1416 of the New Civil Code, he is
entitled to recover the money used for the purchase of the properties. At any rate, the
petitioner avers, he filed his complaint in the court a quo merely for the purpose of having
him declared as the owner of the properties, to enable him to sell the same at public
auction. Applying by analogy Republic Act No. 133[49] as amended by Rep. Act No. 4381
and Rep. Act No. 4882, the proceeds of the sale would be remitted to him, by way of
refund for the money he used to purchase the said properties. To bar the petitioner from
recovering the subject properties, or at the very least, the money used for the purchase
thereof, is to allow the respondent to enrich herself at the expense of the petitioner in
violation of Article 22 of the New Civil Code.
The petition is bereft of merit.
Section 14, Article XIV of the 1973 Constitution provides, as follows:

Save in cases of hereditary succession, no private land shall be transferred or

conveyed except to individuals, corporations, or associations qualified to acquire or
hold lands in the public domain. [50]

Lands of the public domain, which include private lands, may be transferred or
conveyed only to individuals or entities qualified to acquire or hold private lands or lands
of the public domain. Aliens, whether individuals or corporations, have been disqualified
from acquiring lands of the public domain. Hence, they have also been disqualified from
acquiring private lands.[51]
Even if, as claimed by the petitioner, the sales in question were entered into by him
as the real vendee, the said transactions are in violation of the Constitution; hence, are
null and void ab initio.[52] A contract that violates the Constitution and the law, is null and
void and vests no rights and creates no obligations. It produces no legal effect at all. [53] The
petitioner, being a party to an illegal contract, cannot come into a court of law and ask to
have his illegal objective carried out. One who loses his money or property by knowingly
engaging in a contract or transaction which involves his own moral turpitude may not
maintain an action for his losses. To him who moves in deliberation and premeditation,
the law is unyielding.[54] The law will not aid either party to an illegal contract or agreement;
it leaves the parties where it finds them.[55] Under Article 1412 of the New Civil Code, the
petitioner cannot have the subject properties deeded to him or allow him to recover the
money he had spent for the purchase thereof.[56] Equity as a rule will follow the law and
will not permit that to be done indirectly which, because of public policy, cannot be done
directly.[57] Where the wrong of one party equals that of the other, the defendant is in the
stronger position ... it signifies that in such a situation, neither a court of equity nor a court
of law will administer a remedy.[58] The rule is expressed in the maxims: EX DOLO MALO
NON ORITUR ACTIO and IN PARI DELICTO POTIOR EST CONDITIO
DEFENDENTIS.[59]
The petitioner cannot feign ignorance of the constitutional proscription, nor claim that
he acted in good faith, let alone assert that he is less guilty than the respondent. The
petitioner is charged with knowledge of the constitutional prohibition.[60] As can be gleaned
from the decision of the trial court, the petitioner was fully aware that he was disqualified
from acquiring and owning lands under Philippine law even before he purchased the
properties in question; and, to skirt the constitutional prohibition, the petitioner had the
deed of sale placed under the respondents name as the sole vendee thereof:

Such being the case, the plaintiff is subject to the constitutional restrictions governing
the acquisition of real properties in the Philippines by aliens.

From the plaintiffs complaint before the Regional Trial Court, National Capital
Judicial Region, Branch 84, Quezon City in Civil Case No. Q-46350 he alleged:

xxx That on account that foreigners are not allowed by the Philippine laws to acquire
real properties in their name as in the case of my vendor Miss Victoria Vinuya (sic)
although married to a foreigner, we agreed and I consented in having the title to
subject property placed in defendants name alone although I paid for the whole price
out of my own exclusive funds. (paragraph IV, Exhibit W.)

and his testimony before this Court which is hereby quoted:

ATTY. ABARQUEZ:
Q. In whose name the said house and lot placed, by the way, where is his house and
lot located?
A. In 14 Fernandez St., San Francisco, del Monte, Manila.
Q. In whose name was the house placed?
A. Ederlina Catito because I was informed being not a Filipino, I cannot own the
property. (tsn, p. 11, August 27, 1986).
xxx xxx xxx
COURT:
 Q. So you understand that you are a foreigner that you cannot buy land in the
Philippines?
A. That is correct but as she would eventually be my wife that would be owned by us
later on. (tsn, p. 5, September 3, 1986)
xxx xxx xxx
Q. What happened after that?
A. She said you foreigner you are using Filipinos to buy property.
Q. And what did you answer?
A. I said thank you very much for the property I bought because I gave you a lot of
money (tsn., p. 14, ibid).
It is evident that the plaintiff was fully aware that as a non-citizen of the Philippines,
he was disqualified from validly purchasing any land within the country.[61]
The petitioners claim that he acquired the subject properties because of his desire to
marry the respondent, believing that both of them would thereafter jointly own the said
properties, is belied by his own evidence. It is merely an afterthought to salvage a lost
cause. The petitioner admitted on cross-examination that he was all along legally married
to Teresita Santos Frenzel, while he was having an amorous relationship with the
respondent:
ATTY. YAP:
Q When you were asked to identify yourself on direct examination you claimed before
this Honorable Court that your status is that of being married, do you confirm that?
A Yes, sir.
Q To whom are you married?
A To a Filipina, since 1976.
Q Would you tell us who is that particular person you are married since 1976?
A Teresita Santos Frenzel.
Q Where is she now?
A In Australia.
Q Is this not the person of Teresita Frenzel who became an Australian citizen?
A I am not sure, since 1981 we were separated.
Q You were only separated, in fact, but not legally separated?
A Thru my counsel in Australia I filed a separation case.
Q As of the present you are not legally divorce[d]?
A I am still legally married.[62]
The respondent was herself married to Klaus Muller, a German citizen. Thus, the
petitioner and the respondent could not lawfully join in wedlock. The evidence on record
shows that the petitioner in fact knew of the respondents marriage to another man, but
nonetheless purchased the subject properties under the name of the respondent and paid
the purchase prices therefor. Even if it is assumed gratia arguendi that the respondent
and the petitioner were capacitated to marry, the petitioner is still disqualified to own the
properties in tandem with the respondent.[63]
The petitioner cannot find solace in Article 1416 of the New Civil Code which reads:

Art. 1416. When the agreement is not illegal per se but is merely prohibited, and the
prohibition by the law is designed for the protection of the plaintiff, he may, if public
policy is thereby enhanced, recover what he has paid or delivered. [64]

The provision applies only to those contracts which are merely prohibited, in order to
benefit private interests. It does not apply to contracts void ab initio. The sales of three
parcels of land in favor of the petitioner who is a foreigner is illegal per se. The
transactions are void ab initio because they were entered into in violation of the
Constitution. Thus, to allow the petitioner to recover the properties or the money used in
the purchase of the parcels of land would be subversive of public policy.
Neither may the petitioner find solace in Rep. Act No. 133, as amended by Rep. Act
No. 4882, which reads:

SEC. 1. Any provision of law to the contrary notwithstanding, private real property
may be mortgaged in favor of any individual, corporation, or association, but the
mortgagee or his successor-in- interest, if disqualified to acquire or hold lands of the
public domain in the Philippines, shall not take possession of the mortgaged property
during the existence of the mortgage and shall not take possession of mortgaged
property except after default and for the sole purpose of foreclosure, receivership,
enforcement or other proceedings and in no case for a period of more than five years
from actual possession and shall not bid or take part in any sale of such real property
in case of foreclosure: Provided, That said mortgagee or successor-in-interest may
take possession of said property after default in accordance with the prescribed
judicial procedures for foreclosure and receivership and in no case exceeding five
years from actual possession. [65]

From the evidence on record, the three parcels of land subject of the complaint were
not mortgaged to the petitioner by the owners thereof but were sold to the respondent as
the vendee, albeit with the use of the petitioners personal funds.
Futile, too, is petitioners reliance on Article 22 of the New Civil Code which reads:

Art. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him. [66]
 The provision is expressed in the maxim: MEMO CUM ALTERIUS DETER
DETREMENTO PROTEST (No person should unjustly enrich himself at the expense of
another). An action for recovery of what has been paid without just cause has been
designated as an accion in rem verso.[67] This provision does not apply if, as in this case,
the action is proscribed by the Constitution or by the application of the pari
delicto doctrine.[68] It may be unfair and unjust to bar the petitioner from filing an accion in
rem verso over the subject properties, or from recovering the money he paid for the said
properties, but, as Lord Mansfield stated in the early case of Holman vs. Johnson:[69] The
objection that a contract is immoral or illegal as between the plaintiff and the defendant,
sounds at all times very ill in the mouth of the defendant. It is not for his sake, however,
that the objection is ever allowed; but it is founded in general principles of policy, which
the defendant has the advantage of, contrary to the real justice, as between him and the
plaintiff.
IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. The decision of
the Court of Appeals is AFFIRMED in toto.
Costs against the petitioner.
SO ORDERED.
Bellosillo, J., (Chairman), Austria-Martinez, and Tinga, JJ., concur.
Quisumbing, on leave.

[1]
Penned by Justice Martin Villarama, Jr., with Presiding Justice Cancio C. Garcia and Justice Andres B.
Reyes, Jr. concurring.
[2]
Penned by Judge William M. Layague.
[3]
The petitioner adduced testimonial and documentary evidence. The respondent did not adduce any
testimonial evidence, but adduced as Exhibit 5, the petitioners complaint in Civil Case No. 18,750-
87 filed with the RTC of Davao City.
[4]
Exhibits A to D-4.
[5]
Exhibits B and B-1.
[6]
Exhibit C.
[7]
Exhibit E.
[8]
Exhibit D.
[9]
Exhibit F.
[10]
Exhibit G.
[11]
Exhibits H to H-12.
[12]
Exhibit J.
[13]
Exhibits K to K-5.
[14]
Exhibit L.
[15]
Exhibit M.
[16]
Exhibit V.
[17]
Exhibit N.
[18]
Exhibits O to O-4.
[19]
Exhibit P-4.
[20]
Exhibit P & P-1.
[21]
Exhibit Q & Q-1.
[22]
Exhibits Q-4 to Q-6.
[23]
Exhibit Q-20.
[24]
Exhibits V-4-V-10.
[25]
Exhibit R-5.
[26]
Exhibit R-13.
[27]
Exhibit BB.
[28]
Exhibits S and T.
[29]
Exhibit BB.
[30]
Exhibits CC to CC-4.
[31]
Exhibit U; Entitled and docketed as Alfred Fritz Frenzel vs. Ederlina P. Catito, Civil Case No. 46350.
[32]
Exhibit GG.
[33]
Entitled and docketed as Alfred Fritz Frenzel vs. Ederlina P. Catito, Civil Case No. Q-46350.
[34]
Exhibit W.
[35]
Entitled and docketed as Alfred Frenzel vs. Ederlina P. Catito, Civil Case No. 17,817.
[36]
Records, p. 2.
[37]
Records, pp. 4-5.
[38]
Exhibit 5.
[39]
Records, pp. 13-16.
[40]
Docketed as Civil Case No. 18,750-87.
[41]
Exhibit 5; Records, pp. 194-198
[42]
Exhibit 5-D; Records, pp. 197-198.
[43]
Exhibit X-2-X-3.
[44]
Records, p. 232.
[45]
Docketed as CA-G.R. CV. No. 53485.
[46]
Rollo, p. 30.
[47]
Id., at 16.
[48]
Id., at 19.
[49]
An act to authorize the mortgage of private real property in favor of any individual, corporation or
association subject to certain conditions.
[50]
Supra. The conveyances subject of the case were executed when the 1973 Constitution was in effect.
[51]
Ong Ching Po vs. Court of Appeals, 239 SCRA 341 [1994].
[52]
Alexander Krivenko, vs. Register of Deeds, et al., 79 Phil. 461 [1947]; Rellosa vs. Hun, 93 Phil. 827
[1953]; Caoile vs. Peng, 93 Phil. 861 [1953]; Ong Ching Po vs. Court of Appeals, supra.
[53]
Francisco Chavez vs. Presidential Commission on Good Government, et al., 307 SCRA 394 [1999].
[54]
Aikman vs. City of Wheeling, Southeastern Reporter, 667 [1938].
[55]
Rellosa vs. Hun, supra.
[56]
ART. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue
of the contract, or demand the performance of the others undertaking. . .
[57]
Corkins vs. Ritter, 40 N.W., Reporter, 2d 726 [1950], Daley vs. City of Melvindale, 260 N.W. Reporter,
898 [1935].
[58]
19 Am. Jur., Equity, Section 478.
[59]
Bough & Bough vs. Cantiveros and Hanopol, 40 Phil. 209 [1919], Reporter.
[60]
Cheesman vs. Intermediate Appellate Court, et al., 193 SCRA 93 [1991].
[61]
Records, pp. 230-231.
[62]
TSN, 7 April 1987, pp. 2-3 (Frenzel).
[63]
See note 57.
[64]
Supra.
[65]
Supra.
[66]
Supra.
[67]
Id., at 85.
[68]
Tolentino, Civil Code of the Philippines, 1990 ed., Vol. I, p. 85.
[69]
Cited in Marissey vs. Bologna, 123 So.2d 537 [1960].

FIRST DIVISION

[G.R. No. 134241. August 11, 2003]

DAVID REYES (Substituted by Victoria R. Fabella), petitioner, vs. JOSE

LIM, CHUY CHENG KENG and HARRISON LUMBER,
INC., respondents.
 DECISION
CARPIO, J.:

The Case

This is a petition for review on certiorari of the Decision[1] dated 12 May 1998 of the
Court of Appeals in CA-G.R. SP No. 46224. The Court of Appeals dismissed the petition
for certiorari assailing the Orders dated 6 March 1997, 3 July 1997 and 3 October 1997
of the Regional Trial Court of Paranaque, Branch 260 [2] (trial court) in Civil Case No. 95-
032.

The Facts

On 23 March 1995, petitioner David Reyes (Reyes) filed before the trial court a
complaint for annulment of contract and damages against respondents Jose Lim (Lim),
Chuy Cheng Keng (Keng) and Harrison Lumber, Inc. (Harrison Lumber).
The complaint[3] alleged that on 7 November 1994, Reyes as seller and Lim as buyer
entered into a contract to sell (Contract to Sell) a parcel of land (Property) located along
F.B. Harrison Street, Pasay City. Harrison Lumber occupied the Property as lessee with
a monthly rental of P35,000. The Contract to Sell provided for the following terms and
conditions:

1. The total consideration for the purchase of the aforedescribed parcel of land
together with the perimeter walls found therein is TWENTY EIGHT MILLION
(P28,000,000.00) PESOS payable as follows:

(a) TEN MILLION (P10,000,000.00) PESOS upon signing of this Contract to Sell;

(b) The balance of EIGHTEEN MILLION (P18,000,000.00) PESOS shall be paid on

or before March 8, 1995 at 9:30 A.M. at a bank to be designated by the Buyer but
upon the complete vacation of all the tenants or occupants of the property and
execution of the Deed of Absolute Sale. However, if the tenants or occupants have
vacated the premises earlier than March 8, 1995, the VENDOR shall give the
VENDEE at least one week advance notice for the payment of the balance and
execution of the Deed of Absolute Sale.

2. That in the event, the tenants or occupants of the premises subject of this sale shall
not vacate the premises on March 8, 1995 as stated above, the VENDEE shall
withhold the payment of the balance of P18,000,000.00 and the VENDOR agrees to
pay a penalty of Four percent (4%) per month to the herein VENDEE based on the
amount of the downpayment of TEN MILLION (P10,000,000.00) PESOS until the
complete vacation of the premises by the tenants therein. [4]

The complaint claimed that Reyes had informed Harrison Lumber to vacate the
Property before the end of January 1995. Reyes also informed Keng [5] and Harrison
Lumber that if they failed to vacate by 8 March 1995, he would hold them liable for the
penalty of P400,000 a month as provided in the Contract to Sell. The complaint further
alleged that Lim connived with Harrison Lumber not to vacate the Property until the
P400,000 monthly penalty would have accumulated and equaled the unpaid purchase
price of P18,000,000.
On 3 May 1995, Keng and Harrison Lumber filed their Answer [6] denying they
connived with Lim to defraud Reyes. Keng and Harrison Lumber alleged that Reyes
approved their request for an extension of time to vacate the Property due to their difficulty
in finding a new location for their business. Harrison Lumber claimed that as of March
1995, it had already started transferring some of its merchandise to its new business
location in Malabon.[7]
On 31 May 1995, Lim filed his Answer[8] stating that he was ready and willing to pay
the balance of the purchase price on or before 8 March 1995. Lim requested a meeting
with Reyes through the latters daughter on the signing of the Deed of Absolute Sale and
the payment of the balance but Reyes kept postponing their meeting. On 9 March 1995,
Reyes offered to return the P10 million down payment to Lim because Reyes was having
problems in removing the lessee from the Property. Lim rejected Reyes offer and
proceeded to verify the status of Reyes title to the Property. Lim learned that Reyes had
already sold the Property to Line One Foods Corporation (Line One) on 1 March 1995 for
P16,782,840. After the registration of the Deed of Absolute Sale, the Register of Deeds
issued to Line One TCT No. 134767 covering the Property. Lim denied conniving with
Keng and Harrison Lumber to defraud Reyes.
On 2 November 1995, Reyes filed a Motion for Leave to File Amended Complaint
due to supervening facts. These included the filing by Lim of a complaint for estafa against
Reyes as well as an action for specific performance and nullification of sale and title plus
damages before another trial court.[9] The trial court granted the motion in an Order dated
23 November 1995.
In his Amended Answer dated 18 January 1996,[10] Lim prayed for the cancellation of
the Contract to Sell and for the issuance of a writ of preliminary attachment against Reyes.
The trial court denied the prayer for a writ of preliminary attachment in an Order dated 7
October 1996.
On 6 March 1997, Lim requested in open court that Reyes be ordered to deposit the
P10 million down payment with the cashier of the Regional Trial Court of Paraaque. The
trial court granted this motion.
On 25 March 1997, Reyes filed a Motion to Set Aside the Order dated 6 March 1997
on the ground the Order practically granted the reliefs Lim prayed for in his Amended
Answer.[11] The trial court denied Reyes motion in an Order[12] dated 3 July 1997. Citing
Article 1385 of the Civil Code, the trial court ruled that an action for rescission could
prosper only if the party demanding rescission can return whatever he may be obliged to
restore should the court grant the rescission.
The trial court denied Reyes Motion for Reconsideration in its Order [13] dated 3
October 1997. In the same order, the trial court directed Reyes to deposit the P10 million
down payment with the Clerk of Court on or before 30 October 1997.
On 8 December 1997, Reyes[14] filed a Petition for Certiorari[15] with the Court of
Appeals. Reyes prayed that the Orders of the trial court dated 6 March 1997, 3 July 1997
and 3 October 1997 be set aside for having been issued with grave abuse of discretion
amounting to lack of jurisdiction. On 12 May 1998, the Court of Appeals dismissed the
petition for lack of merit.
Hence, this petition for review.

The Ruling of the Court of Appeals

The Court of Appeals ruled the trial court could validly issue the assailed orders in
the exercise of its equity jurisdiction. The court may grant equitable reliefs to breathe life
and force to substantive law such as Article 1385[16] of the Civil Code since the provisional
remedies under the Rules of Court do not apply to this case.
The Court of Appeals held the assailed orders merely directed Reyes to deposit the
P10 million to the custody of the trial court to protect the interest of Lim who paid the
amount to Reyes as down payment. This did not mean the money would be returned
automatically to Lim.

The Issues

Reyes raises the following issues:

1. Whether the Court of Appeals erred in holding the trial court could issue
the questioned Orders dated March 6, 1997, July 3, 1997 and October 3,
1997, requiring petitioner David Reyes to deposit the amount of Ten
Million Pesos (P10,000,000.00) during the pendency of the action, when
deposit is not among the provisional remedies enumerated in Rule 57 to
61 of the 1997 Rules on Civil Procedure.

2. Whether the Court of Appeals erred in finding the trial court could issue the
questioned Orders on grounds of equity when there is an applicable law
on the matter, that is, Rules 57 to 61 of the 1997 Rules on Civil
Procedure. [17]
 The Courts Ruling

Reyes contentions are without merit.

Reyes points out that deposit is not among the provisional remedies enumerated in
the 1997 Rules of Civil Procedure. Reyes stresses the enumeration in the Rules is
exclusive. Not one of the provisional remedies in Rules 57 to 61 [18] applies to this case.
Reyes argues that a court cannot apply equity and require deposit if the law already
prescribes the specific provisional remedies which do not include deposit. Reyes invokes
the principle that equity is applied only in the absence of, and never against, statutory law
or x x x judicial rules of procedure.[19] Reyes adds the fact that the provisional remedies do
not include deposit is a matter of dura lex sed lex.[20]
The instant case, however, is precisely one where there is a hiatus in the law and in
the Rules of Court. If left alone, the hiatus will result in unjust enrichment to Reyes at the
expense of Lim. The hiatus may also imperil restitution, which is a precondition to the
rescission of the Contract to Sell that Reyes himself seeks. This is not a case of equity
overruling a positive provision of law or judicial rule for there is none that governs this
particular case. This is a case of silence or insufficiency of the law and the Rules of Court.
In this case, Article 9 of the Civil Code expressly mandates the courts to make a ruling
despite the silence, obscurity or insufficiency of the laws.[21] This calls for the application
of equity,[22] which fills the open spaces in the law.[23]
Thus, the trial court in the exercise of its equity jurisdiction may validly order the
deposit of the P10 million down payment in court. The purpose of the exercise of equity
jurisdiction in this case is to prevent unjust enrichment and to ensure restitution. Equity
jurisdiction aims to do complete justice in cases where a court of law is unable to adapt
its judgments to the special circumstances of a case because of the inflexibility of its
statutory or legal jurisdiction.[24] Equity is the principle by which substantial justice may be
attained in cases where the prescribed or customary forms of ordinary law are
inadequate.[25]
Reyes is seeking rescission of the Contract to Sell. In his amended answer, Lim is
also seeking cancellation of the Contract to Sell. The trial court then ordered Reyes to
deposit in court the P10 million down payment that Lim made under the Contract to Sell.
Reyes admits receipt of the P10 million down payment but opposes the order to deposit
the amount in court. Reyes contends that prior to a judgment annulling the Contract to
Sell, he has the right to use, possess and enjoy[26] the P10 million as its owner[27] unless
the court orders its preliminary attachment.[28]
To subscribe to Reyes contention will unjustly enrich Reyes at the expense of Lim.
Reyes sold to Line One the Property even before the balance of P18 million under the
Contract to Sell with Lim became due on 8 March 1995. On 1 March 1995, Reyes signed
a Deed of Absolute Sale[29] in favor of Line One. On 3 March 1995, the Register of Deeds
issued TCT No. 134767[30] in the name of Line One.[31] Reyes cannot claim ownership of
the P10 million down payment because Reyes had already sold to another buyer the
Property for which Lim made the down payment. In fact, in his Comment[32] dated 20 March
1996, Reyes reiterated his offer to return to Lim the P10 million down payment.
 On balance, it is unreasonable and unjust for Reyes to object to the deposit of the
P10 million down payment. The application of equity always involves a balancing of the
equities in a particular case, a matter addressed to the sound discretion of the court. Here,
we find the equities weigh heavily in favor of Lim, who paid the P10 million down payment
in good faith only to discover later that Reyes had subsequently sold the Property to
another buyer.
In Eternal Gardens Memorial Parks Corp. v. IAC,[33] this Court held the plaintiff
could not continue to benefit from the property or funds in litigation during the pendency
of the suit at the expense of whomever the court might ultimately adjudge as the lawful
owner. The Court declared:

In the case at bar, a careful analysis of the records will show that petitioner admitted
among others in its complaint in Interpleader that it is still obligated to pay certain
amounts to private respondent; that it claims no interest in such amounts due and is
willing to pay whoever is declared entitled to said amounts. x x x

Under the circumstances, there appears to be no plausible reason for petitioners

objections to the deposit of the amounts in litigation after having asked for the
assistance of the lower court by filing a complaint for interpleader where the deposit
of aforesaid amounts is not only required by the nature of the action but is a
contractual obligation of the petitioner under the Land Development Program (Rollo,
p. 252).

There is also no plausible or justifiable reason for Reyes to object to the deposit of
the P10 million down payment in court. The Contract to Sell can no longer be enforced
because Reyes himself subsequently sold the Property to Line One. Both Reyes and Lim
are now seeking rescission of the Contract to Sell. Under Article 1385 of the Civil Code,
rescission creates the obligation to return the things that are the object of the contract.
Rescission is possible only when the person demanding rescission can return whatever
he may be obliged to restore. A court of equity will not rescind a contract unless there is
restitution, that is, the parties are restored to the status quo ante.[34]
Thus, since Reyes is demanding to rescind the Contract to Sell, he cannot refuse to
deposit the P10 million down payment in court.[35] Such deposit will ensure restitution of
the P10 million to its rightful owner. Lim, on the other hand, has nothing to refund, as he
has not received anything under the Contract to Sell.[36]
In Government of the Philippine Islands v. Wagner and Cleland Wagner,[37] the
Court ruled the refund of amounts received under a contract is a precondition to the
rescission of the contract. The Court declared:

The Government, having asked for rescission, must restore to the defendants whatever
it has received under the contract. It will only be just if, as a condition to rescission,
the Government be required to refund to the defendants an amount equal to the
purchase price, plus the sums expended by them in improving the land. (Civil Code,
art. 1295.)

The principle that no person may unjustly enrich himself at the expense of another is
embodied in Article 22[38] of the Civil Code. This principle applies not only to substantive
rights but also to procedural remedies. One condition for invoking this principle is that the
aggrieved party has no other action based on contract, quasi-contract, crime, quasi-delict
or any other provision of law.[39]Courts can extend this condition to the hiatus in the Rules
of Court where the aggrieved party, during the pendency of the case, has no other
recourse based on the provisional remedies of the Rules of Court.
Thus, a court may not permit a seller to retain, pendente lite, money paid by a buyer
if the seller himself seeks rescission of the sale because he has subsequently sold the
same property to another buyer.[40] By seeking rescission, a seller necessarily offers to
return what he has received from the buyer. Such a seller may not take back his offer if
the court deems it equitable, to prevent unjust enrichment and ensure restitution, to put
the money in judicial deposit.
There is unjust enrichment when a person unjustly retains a benefit to the loss of
another, or when a person retains money or property of another against the fundamental
principles of justice, equity and good conscience.[41] In this case, it was just, equitable and
proper for the trial court to order the deposit of the P10 million down payment to prevent
unjust enrichment by Reyes at the expense of Lim.[42]
WHEREFORE, we AFFIRM the Decision of the Court of Appeals.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Azcuna, JJ., concur.

[1]
Penned by Associate Justice Quirino D. Abad Santos, Jr., with Associate Justices Ruben T. Reyes and
Eloy R. Bello, Jr. concurring.
[2]
Presided by Judge Helen Bautista-Ricafort.
[3]
Rollo, pp. 47-52.
[4]
Ibid., pp. 53-54.
[5]
Chuy Cheng Keng is the General Manager of Harrison Lumber.
[6]
Rollo, pp. 56-65.
[7]
According to the Stipulation of Facts agreed upon by the parties, defendant Harrison Lumber vacated the
leased premises on 30 April 1995. Rollo, p. 119.
[8]
Rollo, pp. 66-81.
[9]
Upon a joint motion to dismiss filed by Lim and Line One and a separate motion to dismiss filed by Reyes,
the Regional Trial Court of Pasay City dismissed on 17 January 1996 the action for specific
performance and nullification of sale and title plus damages filed by Lim. Rollo, pp. 144, 191-197.
[10]
Rollo, pp. 121-143.
[11]
Ibid., pp. 155-159.
[12]
Ibid. ,p. 165.
[13]
Ibid.,p. 166.
[14]
Reyes died on 4 November 1999. In a Resolution dated 14 June 2000, the Court granted Lims petition
to substitute deceased Reyes with his eldest daughter Victoria R. Fabella. Rollo, pp. 406-426.
[15]
Rollo, pp. 177-203.
[16]
Art. 1385. Rescission creates the obligation to return the things which were the object of the contract,
together with their fruits, and the price with its interest; consequently, it can be carried out only
when he who demands rescission can return whatever he may be obliged to restore.
xxx.
[17]
Rollo, p. 26.
[18]
These are preliminary attachment, preliminary injunction, receivership, replevin and support pendente
lite.
[19]
Zabat, Jr. v. CA, 226 Phil. 489 (1986).
[20]
Petition for Review, p. 17. Rollo, p. 24.
[21]
Article 9 of the Civil Code provides: No judge or court shall decline to render judgment by reason of the
silence, obscurity or insufficiency of the laws.
[22]
1 ARTURO M. TOLENTINO, CIVIL CODE OF THE PHILIPPINES 43 (1990) citing Camus.
[23]
JUSTICE BENJAMIN N. CARDOZO, THE NATURE OF THE JUDICIAL PROCESS 113 (1921).
[24]
Agcaoili v. Government Service Insurance System, G.R. No. L-30056, 30 August 1988, 165 SCRA 1; Air
Manila, Inc. v. Court of Industrial Relations, G.R. No. L-39742, 9 June 1978, 83 SCRA 579.
[25]
American Life Ins. Co. v. Stewart, 300 U.S. 203, 81 L. Ed. 605 (1936); Davis v. Wallace, 257 U.S. 478,
66 L. Ed. 325 (1921).
[26]
Petition for Review, pp. 32-33. Rollo, pp. 39-40.
[27]
Ibid.
[28]
Memorandum for Petitioner, p. 32. Rollo, p. 462.
[29]
Rollo, pp. 88-90.
[30]
CA Rollo, pp. 159-160.
[31]
In the Stipulation of Facts agreed upon by the parties to this case, the existence of the Deed of Absolute
Sale between David Reyes and Line One Foods Corporation and the TCT No. 134767 in the name
of One Line Foods Corporation (sic) was admitted. Rollo, p. 119.
[32]
CA Rollo, pp. 206-211.
[33]
G.R. No. L-73794, 19 September 1988, 165 SCRA 439.
[34]
Grymes v. Sanders, 93 U.S. 55, 23 L.Ed. 798 (1876).
[35]
See Spouses Velarde v. Court of Appeals, 413 Phil. 360 (2001). See also Binalbagan Tech.,
Inc. v. Court of Appeals, G.R. No. 100594, 10 March 1993, 219 SCRA 777.
[36]
See Spouses Co v. Court of Appeals, 371 Phil. 445 (1999).
[37]
49 Phil. 944 (1927).
[38]
Article 22 of the Civil Code provides: Every person who through an act of performance by another, or
any other means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him.
[39]
1 TOLENTINO, supra note 22, at 77, 82.
[40]
See Bonzon v. Standard Oil Co. and Osorio, 27 Phil. 141 (1914), where the Court held: In this jurisdiction
(even in the absence of the statute), under the general principle that one person may not enrich
himself at the expense of another, a judgment creditor would not be permitted to retain the purchase
price of land sold as the property of the judgment debtor after it has been made to appear that the
judgment debtor had no title to the land and that the purchaser had failed to secure title thereto,
and we find no difficulty therefore in accepting a liberal construction of the statute which arrives at
the same equitable result.
[41]
66 Am. Jur. 2D Restitution and Implied Contracts 3 (1973).
[42]
See Ong Yong v. Tiu, G.R. No. 144476, 1 February 2002, 375 SCRA 614.

THIRD DIVISION

[G.R. No. 148332. September 30, 2003]

NATIONAL DEVELOPMENT COMPANY, petitioner, vs. MADRIGAL

WAN HAI LINES CORPORATION, respondent.

DECISION
SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari[1] assailing the Decision of the Court of
Appeals dated May 21, 2001 in CA-G.R. CV No. 66026, affirming with modification the
Decision dated August 6, 1999 of the Regional Trial Court, Branch 62, Makati City, in Civil
Case No. 96-558 for sum of money and damages.
The factual antecedents are:
The National Development Company, petitioner, is a government-owned and
controlled corporation created and existing under Commonwealth Act No. 182, as
amended by Presidential Decree No. 1648. The National Shipping Corporation of the
Philippines (NSCP) is a wholly-owned subsidiary of petitioner offering shipping services
for containerized cargo between the Far East ports and the U.S. West Coast.[2]
On March 1, 1993, petitioners Board of Directors approved the privatization plan of
the NSCP.[3] In May 1993, the Board offered for sale to the public its one hundred percent
(100%) stock ownership in NSCP worth P150,000.00, as well as its three (3) ocean-going
vessels (M/V National Honor, M/V National Pride and M/V National Dignity).[4]
 Consequently, petitioner released to the public an Information Package[5] containing
NSCPs background, assets, operational and financial status. Attached thereto is NSCPs
Financial Statements covering the period from December 1990 up to 1992.
The Information Package likewise contained the Negotiated Sale
Guidelines which embodied the terms and conditions of the proposed
sale. Attached thereto is a Proposal Letter Form[6] wherein bidders were advised to
submit their bids to be specified in the same form. Petitioners desired price for the NSCP
shares of stock and the vessels was Twenty-Six Million Seven Hundred Fifty Thousand
US Dollars ($26,750,000.00).[7]
During the public bidding on May 7, 1993, the lone bidder was herein respondent,
Madrigal Wan Hai Lines Corporation, a domestic private corporation duly organized and
existing under the Philippine laws with principal office in Manila. Mr. Willie J. Uy,
respondents Consultant, submitted a bid of $15 million through the Proposal Letter Form. [8]
The respondents bid was rejected by petitioner and the Commission on Audit.
But since there was no other bidder, petitioner entered into a negotiated sale with
respondent.[9] After several negotiations, respondent increased its offer to $18.5 million
which was accepted by petitioner. The negotiated sale was then approved by petitioners
Board of Directors on August 26, 1993, the President of the Philippines on September 28,
1993, the Committee on Privatization on October 7, 1993, and the Commission on Audit
on February 2, 1994.[10]
Accordingly, on February 11, 1994, petitioner issued a Notice of Award to respondent
of the sale of the NSCP shares and vessels for $18.5 million.[11] On March 14, 1994,
petitioner and respondent executed the corresponding Contract of Sale,[12] and the
latter acquired NSCP, its assets, personnel, records and its three (3) vessels.[13]
On September 22, 1994, respondent was surprised to receive from the US
Department of Treasury, Internal Revenue Service (US IRS), a Notice of Final
Assessment against NSCP for deficiency taxes on gross transportation income
derived from US sources for the years ending 1990, 1991 and 1992.[14] The tax
assessment was based on Section 887 of the US Internal Revenue Code imposing a 4%
tax on gross transportation income of any foreign corporation derived from US sources.[15]
Anxious that the delay in the payment of the deficiency taxes may hamper its shipping
operations overseas, respondent, on October 14, 1994, assumed and paid
petitioners tax liabilities, including the tax due for the year 1993, in the total amount
of $671,653.00. These taxes were incurred prior to respondents take-over of NSCPs
management.[16]Respondent likewise paid the additional amount of $16,533.10 as
penalty for late payment.[17]
Eventually, respondent demanded from petitioner reimbursement for the amounts it
paid to the US IRS. But petitioner refused despite repeated demands. Hence, on March
20, 1996, respondent filed with the Regional Trial Court (RTC), Branch 62, Makati City a
complaint[18] against petitioner for reimbursement and damages, docketed as Civil Case
No. 96-558.
 On August 6, 1999, the RTC rendered a Decision[19] in favor of respondent and against
petitioner. The trial court found, among others, that even before the sale, petitioner knew
that NSCP had tax liabilities with the US IRS, yet it did not inform respondent about it. The
dispositive portion of the RTC Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

(1) defendant (now petitioner) to pay plaintiff (now respondent), to wit:

a. US $671,653, US $14,415.87, and US $2,117.23 or their peso

equivalent at the time of payment;

b. 6% interest of the above-mentioned amounts per annum from the time

of the filing of the complaint until the same shall have been fully
paid;

c. P100,000.00 as exemplary damages;

d. P100,000.00 as attorneys fees;

(2) The Counterclaims of the defendant dated August 20, 1996 is DISMISSED. [20]

Upon appeal, the Court of Appeals rendered a Decision[21] on May 21, 2001 affirming
the trial courts judgment with modification, thus:

WHEREFORE, upon the premises, the Decision appealed from is AFFIRMED with
the MODIFICATION that the award of exemplary damages is DELETED and the
award of attorneys fees is REDUCED to P20,000.00.

SO ORDERED. [22]

The Court of Appeals held:

We concur with the trial court in ordering defendant-appellant (now petitioner) to

reimburse plaintiff-appellee (now respondent) the deficiency taxes it paid to the US
IRS, and quote with favor its well-written ratiocination as follows:

In its effort to extricate itself from liability, defendant further argues that the sale with
the plaintiff was on CASH, AS-WHERE-IS basis and that plaintiff, as an offeror, was
responsible for informing itself with respect to any and all conditions regarding the
NSCP shares and vessels which may in any manner affect the offer price or the nature
of offerors proposal (Exhs. 8, 8-A to A-B).
The above-mentioned contracts form part of the NSCPs Negotiated Sale Guidelines
dated March 1993 prepared by NSCP and required by NDC (now petitioner) to be
attached with the Proposal Letter Form, which was also prepared by NSCP, and
submitted to NDC by bidders. These contracts are ready-made form of contracts, the
preparation of which was left entirely to the NSCP. Their nature is that of a contract
of adhesion. A contract of adhesion may be struck down as void and unenforceable,
for being subversive of public policy, when the weaker party is imposed upon in
dealing with the dominant bargaining party and is reduced to the alternative of taking
it or leaving it, completely deprived of the opportunity to bargain on equal footing
(Saludo, Jr. vs. Court of Appeals, 207 SCRA 498 [1992]). In the case at bar, the
acceptance of the Negotiated Sale Guidelines and submission thereof together with
the Proposal Letter Form by a prospective buyer is a required formality of the
bidding. Under the circumstance, the plaintiff, in taking such contracts, may not be
deemed to have been given the opportunity to bargain on equal footing. [23]

Petitioner now comes to us via the instant petition, ascribing to the Court of Appeals
the following error:

THE COURT OF APPEALS ERRED IN CONCURRING WITH THE TRIAL

COURT IN ORDERING HEREIN PETITIONER TO REIMBURSE RESPONDENT
THE DEFICIENCY TAXES IT PAID TO THE US IRS. [24]

Petitioner contends that contrary to the findings of both lower courts, the Negotiated
Sale Guidelines and the Proposal Letter Form are mere invitations to bid. As such, they
are not contracts and should be treated as mere offer or proposal to prospective buyers
of the NSCP shares and marine vessels.[25]
Petitioner further stresses that the sale was on an AS IS, WHERE IS basis. [26] By
accepting the terms and conditions of the sale, respondent, in effect, accepted the risk of
an AS IS, WHERE IS arrangement wherein the latter is charged with caution under the
principle of caveat emptor.[27] Pursuant to the Negotiated Sale Guidelines and the
Proposal Letter Form, respondent should have apprised itself of the financial status and
liabilities of NSCP and its marine vessels. Therefore, for its predicament, respondent
should not fault petitioner.[28]
For its part, respondent maintains that the Court of Appeals did not commit any error
in its challenged Decision. The Negotiated Sale Guidelines and the Proposal Letter Form
constitute a contract of adhesion because the buyer was required to submit its bid through
a pro-forma proposal letter.[29] The offer to bidders was on a take it, or leave it basis,
leaving no room for argument or negotiation, except as to the price.[30] Being a contract of
adhesion, it should be strictly construed against the seller, herein petitioner. [31]
Respondent also contends that under Articles 19,[32] 20[33] and 21[34] of the Civil Code,
petitioner had then the legal duty to disclose its tax liabilities. Records show that
respondent repeatedly inquired from petitioner about such matter.[35] Instead of telling the
truth, petitioner made several assurances that the NSCP was a clean, lien-free going
concern and profitable entity.[36] In fact, under Section 7.01 of the Negotiated Sale
Guidelines, petitioner made a warranty against any lien or encumbrance.[37]
In this petition, the issues for our resolution are:

(1) Whether the Negotiated Sale Guidelines and the Proposal Letter Form constitute a
contract of adhesion; and

(2) Whether petitioner is legally bound to reimburse respondent for the amounts it
paid corresponding to the formers tax liabilities to the US IRS.

On the first issue, we agree with both lower courts that the Negotiated Sale Guidelines
and the Proposal Letter Form constitute a contract of adhesion.
A contract of adhesion is one in which one of the parties imposes a ready-made form
of contract, which the other party may accept or reject, but which the latter cannot
modify. In other words, in such contract, the terms therein are fixed by one party, and the
other party has merely to take it, or leave it.[38] Thus, it can be struck down as void and
unenforceable for being subversive of public policy, especially when the will of the
dominant party is imposed upon the weaker party and the latter is denied the opportunity
to bargain on equal footing.[39]
It must be stressed, however, that contracts of adhesion are not strictly against the
law. In Ong Yiu vs. Court of Appeals[40] and Pan American World Airways, Inc. vs.
Intermediate Appellate Court,[41] we held that contracts of adhesion wherein one party
imposes a ready-made form of contract on the other are not entirely prohibited. The other
party is free to reject it entirely; if he adheres, he gives his consent.
Nevertheless, the inequality of bargaining positions and the resulting impairment of
the other partys freedom to contract necessarily call upon us to exercise our mandate as
a court of justice and equity. Indeed, we have ruled that contracts of such nature obviously
call for greater strictness and vigilance on the part of the courts of justice with a view to
protecting the weaker party from abuses and imposition and prevent their becoming traps
for the unwary.[42]
In the case at bar, the Negotiated Sale Guidelines and Proposal Letter Form fit the
characteristics of a contract of adhesion. On their very face, these documents show that
petitioner NDC had control over the terms and conditions of the sale. The Negotiated Sale
Guidelines provides:

4.0 PREPARATION OF OFFERS

4.01 Offerors shall use the Proposal Letter Form for Sale of NSCP
and Vessels provided herein.

4.02 All offers should be accompanied by: x x x (b) the Negotiated

Sale Guidelines duly signed by the offeror or authorized
representative in every page thereof x x x.
 xxxxxxxxx

14.0 OTHER PROVISIONS

14.01 NDC and APT reserve the right in their discretion to reject any and
all offers, to waive any formality therein and of these
guidelines, and to consider only such offer as may be
advantageous to the National Government.

NDC and APT may, at their discretion require additional

information and/or documents from any offeror.

14.02 NDC and APT reserve the right to amend the Guidelines prior
to the submission of offers x x x.

xxxxxxxxx

14.05 Violation of any of these terms and conditions shall cause the
cancellation of the award and the automatic forfeiture of the
deposit. (Underscoring ours)
[43]

The Proposal Letter Form provides that the bidder is bound by the Negotiated Sale
Guidelines, thus:

It is understood that:

1. We accept and undertake without any reservations whatsoever that, if this

offer to purchase the vessels and NSCP shares is accepted, we shall be subjected
to all the terms and conditions issued by the NDC and APT including those
outlined in the March, 1993 Information Memorandum and the Negotiated Sale
Guidelines for the sale of NSCP and the three vessels.

xxxxxxxxx

5. We represent and warrant that: (i) we have examined and understood the
Information Package, (ii) we accept the conditions of the March, 1993 Negotiated
Sale Guidelines, including the right of NDC and APT to reject any and all offers
without thereby creating any liability in our favor x x x. (Underscoring ours)
[44]

Clearly, respondent had hardly any say in the terms and conditions expressed in the
Negotiated Sale Guidelines. Other than the price of the offer, respondent was left with
little or no alternative at all but to comply with its terms. Thus, the trial court correctly
found:
The above-mentioned contracts form part of NSCPs Negotiated Sale Guidelines dated
March 1993 prepared by NSCP and required by NDC to be attached with the Proposal
Letter Form, which was also prepared by NSCP, and submitted to NDC by
bidders. These contracts are ready-made form of contracts, the preparation of
which was left entirely to the NSCP. Their nature is that of a contract of
adhesion. x x x. In the case at bar, the acceptance of the Negotiated Sale Guidelines
and submission thereof together with the Proposal Letter Form by a prospective buyer
is a required formality of the bidding. Under this circumstance, the plaintiff, in
taking such contracts, may not be deemed to have been given the opportunity to
bargain on equal footing. (Underscoring ours)
[45]

Being a contract of adhesion, we reiterate that it is our duty to apply a strict

construction of its terms upon the party who made the same [46] and to construe any
ambiguity in such contract against its author.[47] It is public policy to protect a party (herein
respondent) against oppressive and onerous conditions.[48]
We are not impressed by petitioners argument that the Negotiated Sale Guidelines
was a mere invitation to bid.[49] On the contrary, the Contract of Sale itself provides that it
is an integral part or applicable to this Contract, thus:

8. All of the terms and conditions of (a) the March 1993 NDC Information
Memorandum and Negotiated Sale Guidelines, including the amendments thereto,
more particularly those contained in NDCs letter to A. P. Madrigal Steamship Co. Inc.
dated May 4, 1993, and (b) the Notice of Award dated February 11, 1993 are hereby
incorporated herein by reference and shall insofar as they are not inconsistent
with the terms and conditions hereof, be applicable to this
Contract. (Underscoring ours)
[50]

We now determine whether petitioner is obliged under the law and the contract to
reimburse respondent for the amounts it paid corresponding to the formers US tax
liabilities. We quote with approval the trial courts findings affirmed by the Court of
Appeals, thus:

From the foregoing facts, there is no doubt that during the negotiation for the sale of
defendants (now petitioners) shares of stocks and three (3) ocean-going vessels, NSCP
was already aware of an impending assessment by the US government on NSCPs
gross transportation income derived from US sources. The exchanges of
communications (Exhibits D, E, F, G, H and I) between NSCP and US IRS are
glaring proof of NSCPs prior knowledge of a possible assessment or additional
taxes. Moreover, in the Partial Printout of NSCPs Unaudited Financial
Statements for the Year ending December 31, 1993 (Exhibit V), NSCP made
provisions for US taxes as follows: for the year ending 1993, US $3,919,018.81
(Exh. V-2), and for the years ending 1990-1992, US $11,736,192.64 (Exh. V-
3). Exhibit V is a clear indication that, indeed, NSCP had prior knowledge of such
deficiency taxes, and in fact, recognized the same even though there was no final
assessment yet from the US IRS. [51]

xxxxxxxxx

The Partial Printout of NSCPs Unaudited Financial Statements for the Year ending
December 1993 (Exhs. 2, 2-A to 2-B or Exhs. V, V-2 to V-3), true to the word of the
defendant (now petitioner), carries provisions for US taxes. The problem, however,
with this evidence is there is no showing that this had been furnished the
plaintiff (now respondent). On the contrary, plaintiff vehemently asserts having been
denied by defendant access to the latters accounting books and financial
statements. Basic in the law of evidence that he who asserts the affirmative of the
allegation has the burden of proving it (Geraldez vs. CA, 230 SCRA 320). The
defendant has failed to prove that the pertinent statement made in this document
or the document itself had been disclosed to the plaintiff.

The Unaudited Financial Statements of NSCP (Exhs. 3, 3-A and 3-B), which
allegedly includes the subject US taxes among NSCPs Trade Payable and Accrued
Expenses and Dividends, does not clearly indicate the said taxes. The Trade Payable
and Accrued Expenses and Dividends as including the said taxes is vague or
unequivocal on the matter. By mere reading of it, one would not have the
slightest inkling or suspicion that such taxes exist as among NSCPs
liabilities. (Underscoring ours)
[52]

There is no dispute that petitioner was aware of its US tax liabilities considering its
numerous communications with the agents of the United States Internal Revenue
Service, just prior to the sale of NSCP and the marine vessels to respondent.[53] The NSCP
itself made an ambiguous contingent provision in its Unaudited Financial Statements for
the year ending December 1993, thereby indicating its awareness of a possible US tax
assessment.[54] It bears stressing that petitioner did not convey such information to
respondent despite its inquiries.[55] Obviously, such concealment constitutes bad faith on
its part. Bad faith implies a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity; it x x x contemplates a state of mind affirmatively
operating with furtive design or ill will.[56]
We see no reason to disturb the factual findings of both the trial court and Court of
Appeals which petitioner does not dispute. Absent any showing that such findings were
reached arbitrarily or without sufficient basis, the same must be respected and binding
upon us.[57]
That petitioner has the obligation to reimburse respondent is likewise clear under the
Negotiated Sale Guidelines, which provides:

7.0 OFFERORS RESPONSIBILITY

 7.01 x x x. Seller gives no warranty regarding the sale of the shares and
assets except for a warranty on ownership and against any liens or
encumbrances, and the offeror shall not be relieved of his obligation to
make the aforesaid examinations and verifications. (Underscoring ours)
[58]

The terms of the parties contract are clear and unequivocal. The seller (petitioner
NDC) gives a warranty as to the ownership of the object of sale and against any lien
and encumbrance. A tax liability of $688,186.10 was then a potential lien upon NSCPs
marine vessels. Being in bad faith for having failed to inform the buyer, herein respondent,
of such potential lien, petitioner breached its warranty and should, therefore, be held liable
for the resulting damage, i.e., reimbursement for the amounts paid by petitioner to the US
IRS.
The Negotiated Sale Guidelines further provides:

2.0 TERMS OF SALE

2.01 The sale of the NSCP and the three vessels shall be strictly on
CASH, AS IS-WHERE IS basis. (Underscoring ours)
[59]

In Hian vs. Court of Tax Appeals,[60] we had the occasion to construe the phrase as is,
where is basis, thus:

We cannot accept the contention in the Governments Memorandum of March 31,

1976 that Condition No. 5 in the Notice of Sale to the effect that The above-
mentioned articles (the tobacco) are offered for sale AS IS and the Bureau of Customs
gives no warranty as to their condition relieves the Bureau of Customs of liability for
the storage fees in dispute. As we understand said Condition No. 5, it refers
to the physical condition of the tobacco and not to the legal situation in which it
was at the time of the sale, as could be implied from the right of inspection to
prospective bidders under Condition No. 1. x x x. (Underscoring ours)

The phrase as is, where is basis pertains solely to the physical condition of the thing
sold, not to its legal situation. In the case at bar, the US tax liabilities constitute a
potential lien which applies to NSCPs legal situation, not to its physical aspect. Thus,
respondent as a buyer, has no obligation to shoulder the same.
The case at bar calls to mind the principle of unjust enrichment Nemo cum alterius
detrimento locupletari potest. No person shall be allowed to enrich himself unjustly at the
expense of others. This principle of equity has been enshrined in our Civil Code, Article
22 of which provides:

Art. 22. Every person who through an act or performance by another or by any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him.
 Justice and equity thus oblige that petitioner be held liable for NSCPs tax liabilities
and reimburse respondent for the amounts it paid. It would be unjust enrichment on the
part of petitioner to be relieved of that obligation.
The deletion of the award of exemplary damages and reduction of the attorneys fees
by the Court of Appeals are not challenged by either of the parties. At any rate, we find
no error in its ruling quoted hereunder:

However, we find no basis for the grant of exemplary damages which can be granted
only in addition to moral, temperate, liquidated or compensatory damages (Art. 2229,
Civil Code of the Philippines), none of which was awarded or deserved in this case.
The trial court merely granted plaintiffs prayer in its main cause of action for
reimbursement of taxes plaintiff paid to the U.S. Since no actual or moral damages
was awarded, there is no legal basis for the award of exemplary damages which may
only be granted in addition thereto (Scott Consultants and Resources Development
Corp. Inc. vs. CA, 242 SCRA 393).

xxxxxxxxx

Anent the award of attorneys fees, we find it excessive, considering that the instant
case is a simple action for reimbursement and did not involve extensive litigation.
Nothing precludes the appellate courts from reducing the award of attorneys fees
when it is found to be unconscionable or excessive under the circumstances (Brahm
Industries Inc. vs. NLRC, 280 SCRA 828). Thus, the award of attorneys fees is
reduced to P20,000.00. [61]

WHEREFORE, the petition is DENIED and the assailed Decision of the Court of
Appeals is AFFIRMED.
SO ORDERED.
Puno, (Chairman), Panganiban, and Carpio-Morales, JJ., concur.
Corona J., on leave.

[1]
Filed under Rule 45 of the 1997 Rules of Civil Procedure, as amended.
[2]
Exhibit 7-A, Petition, Rollo at 136.
[3]
Petition, Rollo at 27.
[4]
Exhibit 8, Petition, Rollo at 179.
[5]
Exhibit 7, Petition, Rollo at 135.
[6]
Exhibit 8, Petition, Rollo at 186.
[7]
Id. at 180.
[8]
Respondents Comment on the Petition, Rollo at 222.
[9]
Id. at 222-223.
[10]
Annex V-1 (Contract of Sale), Respondents Memorandum, Rollo at 479.
[11]
Id.
[12]
Annex V, id. at 478-482.
[13]
Respondents Comment on the Petition, Rollo at 226.
[14]
Annex F (RTC Decision dated August 6, 1999), Petition, Rollo at 207; see also Annex B, Petition, id. at
75-76.
[15]
Annex J, Respondents Memorandum, Rollo at 462.
[16]
Annex F (RTC Decision dated August 6, 1999), Petition, Rollo at 207-208.
[17]
Id.
[18]
Rollo at 55-65.
[19]
Penned by Judge Roberto C. Diokno; Rollo at 207-212.
[20]
Rollo at 212.
[21]
Penned by Justice Portia Alio-Hormachuelos and concurred in by Justices Fermin A. Martin, Jr. (now
retired) and Mercedes Gozo-Dadole.
[22]
Annex A, Petition, Rollo at 53.
[23]
Id. at 50-51.
[24]
Petition, Rollo at 30.
[25]
Petitioners Memorandum, Rollo at 497-498.
[26]
Id. at 479.
[27]
Id. at 501-502.
[28]
Id. at 499-501.
[29]
Id. at 385-388.
[30]
Id. at 390.
[31]
Id. at 388-390.
[32]
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.
[33]
Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall
indemnify the latter for the same.
[34]
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.
[35]
Rollo at 368-369.
[36]
Id. at 377-381.
[37]
Id. at 383-384.
[38]
Sweet Lines, Inc. vs. Teves, G.R. No. L-37750, May 19, 1978, 83 SCRA 361; Tolentino, COMMENTS
AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES, VOL. IV, 1997 reprint at
503.
[39]
Saludo vs. Court of Appeals, G.R. No. 95536, March 23, 1992, 207 SCRA 498.
[40]
G.R. No. L-40597, June 29, 1979, 91 SCRA 223.
[41]
G.R. No. L-70462, August 11, 1988, 164 SCRA 268.
[42]
Qua Chee Gan vs. Law Union and Rock Insurance Co., 98 Phil. 95 (1955); Fieldmens Insurance,
Co. vs. Vda. de Songco, G.R. No. L-24833, September 23, 1968, 25 SCRA 70.
[43]
Exnibit 8, Petition, Rollo at 180, 184-185.
[44]
Exhibit 8, Petition, Rollo at 186-187.
[45]
Annex F, Petition, Rollo at 211.
[46]
Angeles vs. Calasanz, G.R. No. L-42283, March 18, 1985, 135 SCRA 323.
[47]
Eastern Shipping Lines, Inc. vs. Margarine-Verkaufs-Union, G.R. No. L-31087, September 27, 1979, 93
SCRA 257.
[48]
Palay, Inc. vs. Clave, G.R. No. L-56076, September 21, 1983, 124 SCRA 638; Villacorta vs. Insurance
Commissioner, G.R. No. L-54171, October 28, 1980, 100 SCRA 467.
[49]
Petitioners Memorandum, Rollo at 497.
[50]
Annex V, Respondents Memorandum, Rollo at 481.
[51]
Id. at 208-209.
[52]
Id. at 209-210.
[53]
Annex F, Petition, Rollo at 208-209.
[54]
Id. at 209-210.
[55]
Id. at 210-211.
[56]
Laureano Investment and Development Corporation vs. Court of Appeals, G.R. No. 100468, May 6,
1997, 272 SCRA 253, 265-266, citing Far East Bank and Trust Company vs. Court of Appeals,
G.R. No. 108164, February 23, 1995, 241 SCRA 671, 674-675.
[57]
Goldenrod, Inc. vs. Court of Appeals, 418 Phil. 492 (2001); AHS Philippines vs. Court of Appeals, G.R.
No. 111807, June 14, 1996, 257 SCRA 319.
[58]
Exhibit 8, Petition, Rollo at 182.
[59]
Exhibit 8, Petition, Rollo at 179.
[60]
G.R. No. L-28782, November 27, 1981, 109 SCRA 470.
[61]
Annex A, Petition, Rollo at 52-53.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
G.R. No. L-39999 May 31, 1984

ROY PADILLA, FILOMENO GALDONES, ISMAEL GONZALGO and JOSE FARLEY

BEDENIA, petitioners,
vs.
COURT OF APPEALS, respondent.

Sisenando Villaluz, Sr. for petitioners.

The Solicitor General for respondent.

GUTIERREZ, JR., J.:

This is a petition for review on certiorari of a Court of Appeals' decision which reversed the trial
court's judgment of conviction and acquitted the petitioners of the crime of grave coercion on the
ground of reasonable doubt but inspite of the acquittal ordered them to pay jointly and severally the
amount of P9,000.00 to the complainants as actual damages.

The petitioners were charged under the following information:

The undersigned Fiscal accused ROY PADILLA, FILOMENO GALDONES, PEPITO

BEDENIA, YOLLY RICO, DAVID BERMUNDO, VILLANOAC, ROBERTO ROSALES,
VILLANIA, ROMEO GARRIDO, JOSE ORTEGA, JR., RICARDO CELESTINO,
REALINGO alias "KAMLON", JOHN DOE alias TATO, and FOURTEEN (14)
RICARDO DOES of the crime of GRAVE COERCION, committed as follows:

That on or about February 8, 1964 at around 9:00 o'clock in the morning, in the
municipality of Jose Panganiban, province of Camarines Norte, Philippines, and
within the jurisdiction of this Honorable Court, the above- named accused, Roy
Padilla, Filomeno Galdones, Pepito Bedenia, Yolly Rico, David Bermundo, Villanoac,
Roberto Rosales, Villania, Romeo Garrido, Jose Ortega, Jr., Ricardo Celestino,
Realingo alias Kamlon, John Doe alias Tato, and Fourteen Richard Does, by
confederating and mutually helping one another, and acting without any authority of
law, did then and there wilfully, unlawfully, and feloniously, by means of threats, force
and violence prevent Antonio Vergara and his family to close their stall located at the
Public Market, Building No. 3, Jose Panganiban, Camarines Norte, and by
subsequently forcibly opening the door of said stall and thereafter brutally
demolishing and destroying said stall and the furnitures therein by axes and other
massive instruments, and carrying away the goods, wares and merchandise, to the
damage and prejudice of the said Antonio Vergara and his family in the amount of
P30,000.00 in concept of actual or compensatory and moral damages, and further
the sum of P20,000.00 as exemplary damages.

That in committing the offense, the accused took advantage of their public positions:
Roy Padilla, being the incumbent municipal mayor, and the rest of the accused being
policemen, except Ricardo Celestino who is a civilian, all of Jose Panganiban,
Camarines Norte, and that it was committed with evident premeditation.
The Court of First Instance of Camarines Norte, Tenth Judicial District rendered a decision, the
dispositive portion of which states that:

IN VIEW OF THE FOREGOING, the Court finds the accused Roy Padilla, Filomeno Galdonez,
Ismael Gonzalgo and Jose Parley Bedenia guilty beyond reasonable doubt of the crime of grave
coercion, and hereby imposes upon them to suffer an imprisonment of FIVE (5) months and One (1)
day; to pay a fine of P500.00 each; to pay actual and compensatory damages in the amount of
P10,000.00; moral damages in the amount of P30,000.00; and another P10,000.00 for exemplary
damages, jointly and severally, and all the accessory penalties provided for by law; and to pay the
proportionate costs of this proceedings.

The accused Federico Realingo alias 'Kamlon', David Bermundo, Christopher

Villanoac, Godofredo Villania, Romeo Garrido, Roberto Rosales, Ricardo Celestino
and Jose Ortega, are hereby ordered acquitted on grounds of reasonable doubt for
their criminal participation in the crime charged.

The petitioners appealed the judgment of conviction to the Court of Appeals. They contended that
the trial court's finding of grave coercion was not supported by the evidence. According to the
petitioners, the town mayor had the power to order the clearance of market premises and the
removal of the complainants' stall because the municipality had enacted municipal ordinances
pursuant to which the market stall was a nuisance per se. The petitioners stated that the lower court
erred in finding that the demolition of the complainants' stall was a violation of the very directive of
the petitioner Mayor which gave the stall owners seventy two (72) hours to vacate the market
premises. The petitioners questioned the imposition of prison terms of five months and one day and
of accessory penalties provided by law. They also challenged the order to pay fines of P500.00
each, P10,000.00 actual and compensatory damages, P30,000.00 moral damages, P10,000.00
exemplary damages, and the costs of the suit.

The dispositive portion of the decision of the respondent Court of Appeals states:

WHEREFORE, we hereby modify the judgment appealed from in the sense that the
appellants are acquitted on ground of reasonable doubt. but they are ordered to pay
jointly and severally to complainants the amount of P9,600.00, as actual damages.

The petitioners filed a motion for reconsideration contending that the acquittal of the defendants-
appellants as to criminal liability results in the extinction of their civil liability. The Court of Appeals
denied the motion holding that:

xxx xxx xxx

... appellants' acquittal was based on reasonable doubt whether the crime of coercion
was committed, not on facts that no unlawful act was committed; as their taking the
law into their hands, destructing (sic) complainants' properties is unlawful, and, as
evidence on record established that complainants suffered actual damages, the
imposition of actual damages is correct.

Consequently, the petitioners filed this special civil action, contending that:

I
 THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW OR
GRAVELY ABUSED ITS DISCRETION IN IMPOSING UPON PETITIONERS
PAYMENT OF DAMAGES TO COMPLAINANTS AFTER ACQUITTING
PETITIONERS OF THE CRIME CHARGED FROM WHICH SAID LIABILITY
AROSE.

II

THE COURT OF APPEALS ERRED IN HOLDING IN ITS RESOLUTION DATED

DECEMBER 26, 1974 THAT SINCE APPELLANTS' ACQUITTAL WAS BASED ON
REASONABLE DOUBT, NOT ON FACTS THAT NO UNLAWFUL ACT WAS
COMMITTED, THE IMPOSITION OF ACTUAL DAMAGES IS CORRECT.

III

THE COURT OF APPEALS COMMITTED A LEGAL INCONSISTENCY, IF NOT

PLAIN JUDICIAL ERROR, IN HOLDING IN ITS APPEALED RESOLUTION THAT
PETITIONERS COMMITTED AN UNLAWFUL ACT, THAT IS TAKING THE LAW
INTO THEIR HANDS, DESTRUCTING (sic) 'COMPLAINANTS' PROPERTIES',
AFTER HOLDING IN ITS MAIN DECISION OF NOVEMBER 6,1974 THAT THE
ACTS FOR WHICH THEY WERE CHARGED DID NOT CONSTITUTE GRAVE
COERCION AND THEY WERE NOT CHARGED OF ANY OTHER CRIME.

IV

THE COURT OF APPEALS ERRED IN ORDERING THE PETITIONERS HEREIN,

APPELLANTS IN CA-G.R. NO. 13456CR, JOINTLY AND SEVERALLY, TO PAY
COMPLAINANTS P9,600.00 IN SUPPOSED ACTUAL DAMAGES.

The issue posed in the instant proceeding is whether or not the respondent court committed a
reversible error in requiring the petitioners to pay civil indemnity to the complainants after acquitting
them from the criminal charge.

Petitioners maintain the view that where the civil liability which is included in the criminal action is
that arising from and as a consequence of the criminal act, and the defendant was acquitted in the
criminal case, (no civil liability arising from the criminal case), no civil liability arising from the criminal
charge could be imposed upon him. They cite precedents to the effect that the liability of the
defendant for the return of the amount received by him may not be enforced in the criminal case but
must be raised in a separate civil action for the recovery of the said amount (People v. Pantig, 97
Phil. 748; following the doctrine laid down in Manila Railroad Co. v. Honorable Rodolfo Baltazar, 49
O.G. 3874; Pueblo contra Abellera, 69 Phil. 623; People v. Maniago 69 Phil. 496; People v. Miranda,
5 SCRA 1067; Aldaba v. Elepafio 116 Phil. 457). In the case before us, the petitioners were
acquitted not because they did not commit the acts stated in the charge against them. There is no
dispute over the forcible opening of the market stall, its demolition with axes and other instruments,
and the carting away of the merchandize. The petitioners were acquitted because these acts were
denominated coercion when they properly constituted some other offense such as threat or
malicious mischief.

The respondent Court of Appeals stated in its decision:

 For a complaint to prosper under the foregoing provision, the violence must be
employed against the person, not against property as what happened in the case at
bar. ...

xxx xxx xxx

The next problem is: May the accused be convicted of an offense other than
coercion?

From all appearances, they should have been prosecuted either for threats or
malicious mischief. But the law does not allow us to render judgment of conviction for
either of these offenses for the reason that they were not indicted for, these offenses.
The information under which they were prosecuted does not allege the elements of
either threats or malicious mischief. Although the information mentions that the act
was by means of threats', it does not allege the particular threat made. An accused
person is entitled to be informed of the nature of the acts imputed to him before he
can be made to enter into trial upon a valid information.

We rule that the crime of grave coercion has not been proved in accordance with
law.

While appellants are entitled to acquittal they nevertheless are liable for the actual
damages suffered by the complainants by reason of the demolition of the stall and
loss of some of their properties. The extinction of the penal action does not carry with
it that of the civil, unless the extinction proceeds from a declaration in a final
judgment that the fact from which the civil might arise did not exist. (Rule 111, Sec. 3
(c), Rev. Rules of Court; Laperal v. Aliza, 51 OG.R. 1311, People v. Velez, 44 OG.
1811). In the instant case, the fact from which the civil might arise, namely, the
demolition of the stall and loss of the properties contained therein; exists, and this is
not denied by the accused. And since there is no showing that the complainants
have reserved or waived their right to institute a separate civil action, the civil aspect
therein is deemed instituted with the criminal action. (Rule 111, Sec. 1, Rev. Rules of
Court).

xxx xxx xxx

Section 1 of Rule 111 of the Rules of Court states the fundamental proposition that when a criminal
action is instituted, the civil action for recovery of civil liability arising from the offense charged is
impliedly instituted with it. There is no implied institution when the offended party expressly waives
the civil action or reserves his right to institute it separately. (Morte Sr. v. Alvizo, Jr., 101 SCRA 221).

The extinction of the civil action by reason of acquittal in the criminal case refers exclusively to civil
liability ex delicto founded on Article 100 of the Revised Penal Code. (Elcano v. Hill, 77 SCRA 98;
Virata v. Ochoa, 81 SCRA 472). In other words, the civil liability which is also extinguished upon
acquittal of the accused is the civil liability arising from the act as a crime.

As easily as 1942, the Supreme Court speaking through Justice Jorge Bocobo in Barredo v. Garcia,
et at. 73 Phil. 607 laid down the rule that the same punishable act or omission can create two kinds
of civil liabilities against the accused and, where provided by law, his employer. 'There is the civil
liability arising from the act as a crime and the liability arising from the same act as a quasi-
delict. Either one of these two types of civil liability may be enforced against the accused, However,
the offended party cannot recover damages under both types of liability. For instance, in cases of
criminal negligence or crimes due to reckless imprudence, Article 2177 of the Civil Code provides:

Responsibility for fault or negligence under the preceding article is entirely separate
and distinct from the civil liability arising from negligence under the Penal Code. But
the plaintiff cannot recover damages twice for the same act or omission of the
defendant.

Section 3 (c) of Rule 111 specifically provides that:

Sec. 3. Other civil actions arising from offenses. — In all cases not included in the
preceding section the following rules shall be observed:

xxx xxx xxx

xxx xxx xxx

(c) Extinction of the penal action does not carry with it extinction of the civil, unless
the extinction proceeds from a declaration in a final judgment that the fact from which
the civil might arise did not exist. In other cases, the person entitled to the civil action
may institute it in the Jurisdiction and in the manner provided by law against the
person who may be liable for restitution of the thing and reparation or indemnity for
the damage suffered.

The judgment of acquittal extinguishes the liability of the accused for damages only when it includes
a declaration that the facts from which the civil might arise did not exist. Thus, the civil liability is not
extinguished by acquittal where the acquittal is based on reasonable doubt (PNB v. Catipon, 98 Phil.
286) as only preponderance of evidence is required in civil cases; where the court expressly
declares that the liability of the accused is not criminal but only civil in nature (De Guzman v. Alvia,
96 Phil. 558; People v. Pantig, supra) as, for instance, in the felonies of estafa, theft, and malicious
mischief committed by certain relatives who thereby incur only civil liability (See Art. 332, Revised
Penal Code); and, where the civil liability does not arise from or is not based upon the criminal act of
which the accused was acquitted (Castro v. Collector of Internal Revenue, 4 SCRA 1093; See
Regalado, Remedial Law Compendium, 1983 ed., p. 623). Article 29 of the Civil Code also provides
that:

When the accused in a criminal prosecution is acquitted on the ground that his guilt
has not been proved beyond reasonable doubt, a civil action for damages for the
same act or omission may be instituted. Such action requires only a preponderance
of evidence. Upon motion of the defendant, the court may require the plaintiff to file a
bond to answer for damages in case the complaint should be found to be malicious.

If in a criminal case the judgment of acquittal is based upon reasonable doubt, the
court shall so declare. In the absence of any declaration to that effect, it may be
inferred from the text of the decision whether or not the acquittal is due to that
ground.

More recently, we held that the acquittal of the defendant in the criminal case would not constitute an
obstacle to the filing of a civil case based on the same acts which led to the criminal prosecution:
 ... The finding by the respondent court that he spent said sum for and in the interest
of the Capiz Agricultural and Fishery School and for his personal benefit is not a
declaration that the fact upon which Civil Case No. V-3339 is based does not exist.
The civil action barred by such a declaration is the civil liability arising from the
offense charged, which is the one impliedly instituted with the criminal action.
(Section 1, Rule III, Rules of Court.) Such a declaration would not bar a civil action
filed against an accused who had been acquitted in the criminal case if the criminal
action is predicated on factual or legal considerations other than the commission of
the offense charged. A person may be acquitted of malversation where, as in the
case at bar, he could show that he did not misappropriate the public funds in his
possession, but he could be rendered liable to restore said funds or at least to make
a proper accounting thereof if he shall spend the same for purposes which are not
authorized nor intended, and in a manner not permitted by applicable rules and
regulations. (Republic v. Bello, 120 SCRA 203)

There appear to be no sound reasons to require a separate civil action to still be filed considering
that the facts to be proved in the civil case have already been established in the criminal
proceedings where the accused was acquitted. Due process has been accorded the accused. He
was, in fact, exonerated of the criminal charged. The constitutional presumption of innocence called
for more vigilant efforts on the part of prosecuting attorneys and defense counsel, a keener
awareness by all witnesses of the serious implications of perjury, and a more studied consideration
by the judge of the entire records and of applicable statutes and precedents. To require a separate
civil action simply because the accused was acquitted would mean needless clogging of court
dockets and unnecessary duplication of litigation with all its attendant loss of time, effort, and money
on the part of all concerned.

The trial court found the following facts clearly established by the evidence adduced by both the
prosecution and the defense:

xxx xxx xxx

(9) In the morning of February 8, 1964, then Chief Galdones, complying with the
instructions contained in said Memorandum No. 32 of the Mayor, and upon seeing
that Antonio Vergara had not vacated the premises in question, with the aid of his
policemen, forced upon the store or stall and ordered the removal of the goods inside
the store of Vergara, at the same time taking inventory of the goods taken out, piled
them outside in front of the store and had it cordoned with a rope, and after all the
goods were taken out from the store, ordered the demolition of said stall of Antonio
Vergara. Since then up to the trial of this case, the whereabouts of the goods taken
out from the store nor the materials of the demolished stall have not been made
known.

The respondent Court of Appeals made a similar finding that:

On the morning of February 8th, because the said Vergaras had not up to that time
complied with the order to vacate, the co-accused Chief of Police Galdones and
some members of his police force, went to the market and, using ax, crowbars and
hammers, demolished the stall of the Vergaras who were not present or around, and
after having first inventoried the goods and merchandise found therein, they had
them brought to the municipal building for safekeeping. Inspite of notice served upon
the Vergaras to take possession of the goods and merchandise thus taken away, the
latter refused to do so.
 The loss and damage to the Vergaras as they evaluated them were:

Cost of stall construction P1,300.00

Value of furniture and equipment

judgment destroyed 300.00

Value of goods and equipment taken 8,000.00

P9,600.00

It is not disputed that the accused demolished the grocery stall of the complainants
Vergaras and carted away its contents. The defense that they did so in order to
abate what they considered a nuisance per se is untenable, This finds no support in
law and in fact. The couple has been paying rentals for the premises to the
government which allowed them to lease the stall. It is, therefore, farfetched to say
that the stall was a nuisance per se which could be summarily abated.

The petitioners, themselves, do not deny the fact that they caused the destruction of the
complainant's market stall and had its contents carted away. They state:

On February 8, 1964, despite personal pleas on Vergaras by the Mayor to vacate the
passageways of Market Building No. 3, the Vergaras were still in the premises, so
the petitioners Chief of Police and members of the Police Force of Jose Panganiban,
pursuant to the Mayor' 6 directives, demolished the store of the Vergaras, made an
inventory of the goods found in said store, and brought these goods to the municipal
building under the custody of the Municipal Treasurer, ...

The only supposed obstacle is the provision of Article 29 of the Civil Code, earlier cited, that "when
the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved
beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted."
According to some scholars, this provision of substantive law calls for a separate civil action and
cannot be modified by a rule of remedial law even in the interests of economy and simplicity and
following the dictates of logic and common sense.

As stated by retired Judge J. Cezar Sangco:

... if the Court finds the evidence sufficient to sustain the civil action but inadequate to
justify a conviction in the criminal action, may it render judgment acquitting the
accused on reasonable doubt, but hold him civilly liable nonetheless? An affirmative
answer to this question would be consistent with the doctrine that the two are distinct
and separate actions, and win (a) dispense with the reinstituting of the same civil
action, or one based on quasi-delict or other independent civil action, and of
presenting the same evidence: (b) save the injured party unnecessary expenses in
the prosecution of the civil action or enable him to take advantage of the free
services of the fiscal; and (c) otherwise resolve the unsettling implications of
permitting the reinstitution of a separate civil action whether based on delict, or
quasi-delict, or other independent civil actions.

... But for the court to be able to adjudicate in the manner here suggested, Art. 29 of
the Civil Code should be amended because it clearly and expressly provides that the
 civil action based on the same act or omission may only be instituted in a separate
action, and therefore, may not inferentially be resolved in the same criminal action.
To dismiss the civil action upon acquittal of the accused and disallow the reinstitution
of any other civil action, would likewise render, unjustifiably, the acquittal on
reasonable doubt without any significance, and would violate the doctrine that the
two actions are distinct and separate.

In the light of the foregoing exposition, it seems evident that there is much sophistry
and no pragmatism in the doctrine that it is inconsistent to award in the same
proceedings damages against the accused after acquitting him on reasonable doubt.
Such doctrine must recognize the distinct and separate character of the two actions,
the nature of an acquittal on reasonable doubt, the vexatious and oppressive effects
of a reservation or institution of a separate civil action, and that the injured party is
entitled to damages not because the act or omission is punishable but because he
was damaged or injured thereby (Sangco, Philippine Law on Torts and Damages, pp.
288-289).

We see no need to amend Article 29 of the Civil Code in order to allow a court to grant damages
despite a judgment of acquittal based on reasonable doubt. What Article 29 clearly and expressly
provides is a remedy for the plaintiff in case the defendant has been acquitted in a criminal
prosecution on the ground that his guilt has not been proved beyond reasonable doubt. It merely
emphasizes that a civil action for damages is not precluded by an acquittal for the same criminal act
or omission. The Civil Code provision does not state that the remedy can be availed of only in a
separate civil action. A separate civil case may be filed but there is no statement that such separate
filing is the only and exclusive permissible mode of recovering damages.

There is nothing contrary to the Civil Code provision in the rendition of a judgment of acquittal and a
judgment awarding damages in the same criminal action. The two can stand side by side. A
judgment of acquittal operates to extinguish the criminal liability. It does not, however, extinguish the
civil liability unless there is clear showing that the act from which civil liability might arise did not
exist.

A different conclusion would be attributing to the Civil Code a trivial requirement, a provision which
imposes an uncalled for burden before one who has already been the victim of a condemnable, yet
non-criminal, act may be accorded the justice which he seeks.

We further note the rationale behind Art. 29 of the Civil Code in arriving at the intent of the legislator
that they could not possibly have intended to make it more difficult for the aggrieved party to recover
just compensation by making a separate civil action mandatory and exclusive:

The old rule that the acquittal of the accused in a criminal case also releases him
from civil liability is one of the most serious flaws in the Philippine legal system. It has
given rise to numberless instances of miscarriage of justice, where the acquittal was
due to a reasonable doubt in the mind of the court as to the guilt of the accused. The
reasoning followed is that inasmuch as the civil responsibility is derived from the the
criminal offense, when the latter is not proved, civil liability cannot be demanded.

This is one of those cases where confused thinking leads to unfortunate and
deplorable consequences. Such reasoning fails to draw a clear line of demarcation
between criminal liability and civil responsibility, and to determine the logical result of
the distinction. The two liabilities are separate and distinct from each other. One
affects the social order and the other, private rights. One is for the punishment or
 correction of the offender while the other is for reparation of damages suffered by the
aggrieved party... it is just and proper that, for the purposes of the imprisonment of or
fine upon the accused, the offense should be proved beyond reasonable doubt. But
for the purpose of indemnifying the complaining party, why should the offense also
be proved beyond reasonable doubt? Is not the invasion or violation of every private
right to be proved only by preponderance of evidence? Is the right of the aggrieved
person any less private because the wrongful act is also punishable by the criminal
law? (Code Commission, pp. 45-46).

A separate civil action may be warranted where additional facts have to be established or more
evidence must be adduced or where the criminal case has been fully terminated and a separate
complaint would be just as efficacious or even more expedient than a timely remand to the trial court
where the criminal action was decided for further hearings on the civil aspects of the case. The
offended party may, of course, choose to file a separate action. These do not exist in this case.
Considering moreover the delays suffered by the case in the trial, appellate, and review stages, it
would be unjust to the complainants in this case to require at this time a separate civil action to be
filed.

With this in mind, we therefore hold that the respondent Court of Appeals did not err in awarding
damages despite a judgment of acquittal.

WHEREFORE, we hereby AFFIRM the decision of the respondent Court of Appeals and dismiss the
petition for lack of merit.

SO ORDERED.

Fernando, C.J., Teehankee, Makasiar, Guerrero, Abad Santos, Melencio- Herrera, Plana, Escolin,
Relova and De la Fuente, JJ., concur.

Aquino, J., concur in the result.

De Castro, J., took no part.

Concepcion, Jr. J., is on leave.