Borjal vs. CA, 301 SCRA 1; G.R. No.

126466, January 14, 1999 Posted by Pius Morados on November 13, 2011 (Constitutional Law Right to Free Press, Newspaper Commentaries is Privileged Communication) FACTS: Private respondent filed for damages against petitioners for the series of articles written by the latter in a newspaper column, which dealt with alleged anomalous activities without naming or identifying private respondent. Petitioners contends that the right to free press is a privilege communication. ISSUE: WON commentaries on matters of public interest are privilege. HELD: Yes. No culpability could be imputed to petitioners for the alleged offending publication without doing violence to the concept of privileged communications implicit in the freedom of the press. Facts: A civil action for damages based on libel was filed before the court against Borjal and Soliven for writing and publishing articles that are allegedly derogatory and offensive against Francisco Wenceslao, attacking among others the solicitation letters he send to support a conference to be launch concerning resolving matters on transportation crisis that is tainted with anomalous activities. Wenceslao however was never named in any of the articles nor was the conference he was organizing. The lower court ordered petitioners to indemnify the private respondent for damages which was affirmed by the Court of Appeals. A petition for review was filed before the SC contending that private respondent was not sufficiently identified to be the subject of the published articles. Issue: Whether or not there are sufficient grounds to constitute guilt of petitioners for libel.

Held: In order to maintain a libel suit, it is essential that the victim be identifiable although it is not necessary that he be named. It is also not sufficient that the offended party recognized himself as the person attacked or defamed, but it must be shown that at least a third person could identify him as the object of the libelous publication. These requisites have not been complied with in the case at bar. The element of identifiability was not met since it was Wenceslaso who revealed he was the organizer of said conference and had he not done so the public would not have known.

The concept of privileged communications is implicit in the freedom of the press and that privileged communications must be protective of public opinion. Fair commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel or slander. The doctrine of fair comment means that while in general every discreditable imputation publicly made is deemed false, because every man is presumed innocent until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless, when the discreditable imputation is directed against a public person in his public capacity, it is not necessarily actionable. In order that such discreditable imputation to a public official may be actionable, it must either be a false allegation of fact or a comment based on a false supposition. If the comment is an expression of opinion, based on established facts, then it is immaterial that the opinion happens to be mistaken, as long as it might reasonably be inferred from the facts. The questioned article dealt with matters of public interest as the declared objective of the conference, the composition of its members and participants, and the manner by which it was intended to be funded no doubt lend to its activities as being genuinely imbued with public interest. Respondent is also deemed to be a public figure and even otherwise is involved in a public issue. The court held that freedom of expression is constitutionally guaranteed and protected with the reminder among media members to practice highest ethical standards in the exercise thereof. ----------------------------------------------------------------------------------------------------------A privileged communication may be either:

1. Absolutely privileged communication those which are not actionable even if the author has acted in bad faith. An example is found in Sec. 11, Art.VI, of the 1987 Constitution which exempts a member of Congress from liability for any speech or debate in the Congress or in any Committee thereof. 2. Qualifiedly privileged communications those containing defamatory imputations are not actionable unless found to have been made without good intention justifiable motive. To this genre belong "private communications" and "fair and true report without any comments or remarks."

SECOND DIVISION

PHILIPPINE JOURNALISTS, INC. (PEOPLES JOURNAL), ZACARIAS NUGUID, JR. and CRISTINA LEE, P e t i t i o n e r s,

G.R. No. 143372

Present:

PUNO, Chairman, - versus AUSTRIA-MARTINEZ, CALLEJO, SR., TINGA, and CHICO-NAZARIO, JJ. FRANCIS THOENEN, R e s p o n d e n t. Promulgated:

December 13, 2005 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

For almost a century, this Court has sought that elusive equilibrium between the law on defamation on one hand, and the constitutionally guaranteed freedoms of speech and press on the other. This case revisits that search.

On 30 September 1990, the following news item appeared in the Peoples Journal, a tabloid of general circulation:

Swiss Shoots Neighbors Pets

RESIDENTS of a subdivision in Paraaque have asked the Bureau of Immigration to deport a Swiss who allegedly shoots wayward neighbors pets that he finds in his domain.

The BF Homes residents through lawyer Atty. Efren Angara complained that the deportation of Francis Thoenen, of 10 Calcutta BF Homes Phase III, could help prevent the recurrence of such incident in the future.

Angara explained that house owners could not control their dogs and cats when they slip out of their dwellings unnoticed.

An alleged confrontation between Thoenen and the owner of a pet he shot recently threatens to exacerbate the problem, Angara said.

Cristina Lee[1]

The subject of this article, Francis Thoenen, is a retired engineer permanently residing in this country with his Filipina wife and their children. Claiming that the report was false and defamatory, and that the petitioners acted irresponsibly in failing to verify the truth of the same prior to publication, he filed a civil case for damages against herein petitioners Philippine Journalists, Inc., Zacarias Nuguid, Jr., its publisher, and reporter Cristina Lee.

Thoenen claimed that the article destroyed the respect and admiration he enjoyed in the community, and that since it had been published, he and his wife received several queries and angry calls from friends, neighbors and relatives. For the impairment of his reputation and standing in the community, and his mental anguish, Thoenen sought P200,000.00 in moral damages, P100,000.00 in exemplary damages, and P50,000.00 in attorneys fees.

The petitioners admitted publication of the news item, ostensibly out of a social and moral duty to inform the public on matters of general interest, promote the public good and protect the moral public (sic) of the people, and that the story was published in good faith and without malice.[2]

The principal source of the article was a letter[3] by a certain Atty. Efren Angara addressed to Commissioner Andrea Domingo of the Commission on Immigration and Deportation (CID, now Bureau of Immigration), which states:

Dear Madame:

We would like to request your office to verify the true status/authenticity of the residency in the Philippines of a foreign national (a Swiss) by the name of Francis Thoenen who is presently residing at No. 10 Calcuta cor. Beirut Street, BF Homes (PH. III), Paraaque, Metro Manila. I received (sic) complaint from my clients residing around his vicinity that this foreigner had (sic) been causing troubles ever since he showed up. He is too meticulous and had (sic) been shooting dogs and cats passing his house wall everytime.

Such act which (sic) is unacceptable to the owners especially if inspite (sic) of control their pets slips (sic) out unnoticed. A confrontation between him and the owner of the dog he shoot, (sic) already occurred last time. In some instances this guy had been always driving his car barbarously inside the subdivision with children playing around (sic) the street. Before my clients petitioned themselves with the endorsement of the Homeowners Association and filed to your office for deportation were respectfully seeking your assistance to investigate this alien to prevent further incident occurrence (sic) in the future. He should not be allowed to dominate the citizens of this country.

Very truly yours,

Atty. Efren B. Angara

The petitioners claim that Lee, as the reporter assigned to cover news events in the CID, acquired a copy of the above letter from a trusted source in the CIDs Intelligence Division. They claimed to have reasonable grounds to believe in the truth and veracity of the information derived (from their) sources.[4]

It was proven at trial that the news article contained several inaccuracies. The headline, which categorically stated that the subject of the article engaged in the practice of shooting pets, was untrue.[5] Moreover, it is immediately apparent from a comparison between the above letter and the news item in question that while the letter is a mere request for verification of Thoenens status, Lee wrote that residents of BF Homes had asked the Bureau of Immigration to deport a Swiss who allegedly shoots neighbors pets. No complaints had in fact been lodged against him by any of the BF Homeowners,[6] nor had any pending deportation proceedings been initiated against him in the Bureau of Immigration.[7]

Thoenen also submitted a Certification[8] from the Office of the Bar Confidant that there was no lawyer in its rolls by the name of Efren Angara, earlier cited by petitioner Lee as the author of the letter on which she based her article. Finally, the trial also showed that despite the fact that respondents address was indicated in the letter, Cristina Lee made no efforts to contact either him or the purported letter-writer, Atty. Angara.[9]

The petitioners claim that Lee sought confirmation of the story from the newspapers correspondent in Paraaque, who told her that a woman who refused to identify herself confirmed that there had indeed been an incident of petshooting in the neighborhood involving the respondent.[10] However, the correspondent in question was never presented in court to verify the truth of this allegation. Neither was the alleged CID source presented to verify that the above letter had indeed come from the Department, nor even that the same was a certified true copy of a letter on file in their office.

On 31 August 1994, the Regional Trial Court, Branch 62, Makati City, rendered a Decision[11] in favor of the petitioners, which reads in part:

There is no malice on the part of the defendants in publishing the news item done in the exercise of their profession as journalists reporting to the people on matters of public interest. The news report was based on an official communication filed with the Bureau of Immigration and Deportation.

As noted by the Court of Appeals in Marti(r)ez vs. Alanao, CA-G.R No. 27086, September 30, 1991, which is similar to the present case:

While indeed, the news item subject of the present case might have ruffled the sensitivities of plaintiff, this Court however believes that the alleged defamatory articles falls within the purview of a qualifiedly privileged matter, and that therefore, it cannot be presumed to be malicious. The onus of proving malice is accordingly shifted to the plaintiff, that is, that he must prove that the defendants were actuated by ill-will in what they caused to be printed and published, with a design to carelessly or wantonly injure the plaintiff. (US vs. Bustos, et al., 37 Phil. 731)

This, plaintiff failed to do, consequently, his case must fall.

The publication in question is a privileged communication protected by the freedom of the press.

WHEREFORE, the Complaint is hereby ordered DISMISSED WITHOUT PRONOUNCEMENT AS TO COSTS.[12]

On appeal, the court a quo reversed[13] the trial court. It held that although freedom of expression and the right of speech and of the press are among the most zealously guarded in the Constitution, still, in the exercise of these rights, Article 19 of the Civil Code requires everyone to act with justice, give everyone his due, and observe honesty and good faith. The appellate court emphasized that Thoenen was neither a public official nor a public figure, and thus,

. . . [E]ven without malice on the part of defendants-appellees, the news item published in the 30 September 1990 edition of Peoples Journal had been done in violation of the principle of abuse of right under Article 19 of the Civil Code, in the absence of a bona fide effort to ascertain the truth thereof, i.e., to observe honesty and good faith, which makes their act a wrongful omission. Neither did they act with justice and give everyone his due, because without ascertaining the veracity of the information given them by the Intelligence Bureau of the Bureau of Immigration, they published a news article which they were aware would bring the person specifically named therein, viz, Francis Thoenen, the plaintiffappellant in this case, into disrepute. .

WHEREFORE, the foregoing considered, the Decision appealed from is hereby REVERSED and SET ASIDE. In its stead, We find for the appellant and award him moral damages of P200,000.00; exemplary damages of P50,000.00, and legal fees to P30,000.00; all of which shall be borne jointly and severally by appellees.[14]

Petitioners motion for reconsideration having been denied,[15] this petition for certiorari under Rule 45 of the 1997 Rules of Civil Procedure was filed on the following grounds:

1.

The Court of Appeals erred in finding the petitioners Cristina Lee, Nuguid and PJI liable under Article 19 of the Civil Code.

2.

The Court of Appeals erred in finding the petitioners liable for libel even if the article was based on a letter released by the Bureau of Immigration, hence a qualified privilege communication.

3.

The Court of Appeals erred in concluding that petitioners did not ascertain the truth of the subject news item.

4.

The Court of Appeals erred in awarding damages notwithstanding that the same was excessive unconscionable and devoid of any basis.

The petitioners argue that this case is one for damages arising from libel, and not one for abuse of rights under the New Civil Code. They further claim the constitutional protections extended by the freedom of speech and of the press clause of the 1987 Constitution against liability for libel, claiming that the article was published in fulfillment of its social and moral duty to inform the public on matters of general interest, promote the public good and protect the moral *fabric+ of the people.[16] They insist that the news article was based on a letter released by the Bureau of Immigration, and is thus a qualifiedly privileged communication. To recover damages, the respondent must prove its

publication was attended by actual malice - that is, with knowledge that it was false or with reckless disregard of whether it was false or not.[17]

For the reasons stated below, we hold that the constitutional privilege granted under the freedom of speech and the press against liability for damages does not extend to the petitioners in this case.

The freedom of speech and of the press is not absolute. The freedom of speech and press and assembly, first laid down by President McKinley in the Instruction to the Second Philippine Commission of 07 April 1900, is an almost verbatim restatement of the first amendment of the Constitution of the United States.[18] Enshrined in Section 4, Article III of the Bill of Rights of the 1987 Constitution, it states, No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances.

But not all speech is protected. The right of free speech is not absolute at all times and under all circumstances. There are certain well-defined and narrowly limited classes of speech, the prevention and punishment of which has never been thought to raise any Constitutional problem. These include the lewd and obscene, the profane, the libelous, and the insulting or fighting words - those which by their very utterance inflict injury or tend to incite an immediate breach of the peace. It has been well observed that such utterances are no essential part of any exposition of ideas, and are of such slight social value as a step to truth that any benefit that may be derived from them is clearly outweighed by the social interest in order and morality. [19]

Libel is not protected speech. Article 353 of the Revised Penal Code defines libel as a public and malicious imputation of a crime, or of a vice or defect, real or imaginary, or any act, omission, condition, status, or circumstance tending to cause the dishonor, discredit, or contempt of a natural or juridical person, or to blacken the memory of one who is dead.

For an imputation to be libelous, the following requisites must be met: (a) the allegation of a discreditable act or condition concerning another; (b) publication of the charge; (c) identity of the person defamed; and (d) existence of malice.[20] In Vasquez v. Court of Appeals,[21] we had occasion to further explain. Thus:

An allegation is considered defamatory if it ascribes to a person the commission of a crime, the possession of a vice or defect, real or imaginary, or any act, omission, condition, status or circumstance which tends to dishonor or discredit or put him in contempt, or which tends to blacken the memory of one who is dead.

There is publication if the material is communicated to a third person. It is not required that the person defamed has read or heard about the libelous remark. What is material is that a third person has read or heard the libelous statement, for a mans reputation is the estimate in which others hold him, not the good opinion which he has of himself. On the other hand, to satisfy the element of identifiability, it must be shown that at least a third person or a stranger was able to identify him as the object of the defamatory statement. Finally, malice or ill will must be present. Art. 354 of the Revised Penal Code provides: Every defamatory imputation is presumed to be malicious, even if it be true, if no good intention and justifiable motive for making it is shown, except in the following cases: 1. A private communication made by any person to another in the performance of any legal, moral or security duty; and 2. A fair and true report, made in good faith, without any comments or remarks, of any judicial, legislative or other official proceedings which are not of confidential nature, or of any statement, report or speech delivered in said proceedings, or of any other act performed by public officers in the exercise of their functions. (citations omitted, emphasis supplied)

In this case, there is no controversy as to the existence of the three elements. The respondents name and address were clearly indicated in the article ascribing to him the questionable practice of shooting the wayward pets of his neighbors. The backlash caused by the publication of the article was in fact such that stones had been thrown at their house, breaking several flower pots, and daily and nightly calls compelled him to request a change of their telephone number.[22] These facts are not contested by the petitioners. What the petitioners claim is the absence of proof of the fourth element - malice.

As a general rule, malice is presumed. Article 354 of the Revised Penal Code states:

ART. 354. Requirement of Publicity. - Every defamatory imputation is presumed to be malicious, even if it be true, if no good intention and justifiable motive for making it is shown, except in the following cases:

1.

A private communication made by any person to another in the performance of any legal, moral or social duty; and 2. A fair and true report, made in good faith, without any comments or remarks, of any judicial, legislative or other official proceedings which are not of confidential nature, or of any statement,

report or speech delivered in said proceedings, or of any other act performed by public officers in the exercise of their functions.

The article is not a privileged communication. We first discussed the freedom of speech and press and assembly vis-a-vis the laws on libel and slander in the groundbreaking case of US v. Bustos,[23] where we applied the prevailing English and American jurisprudence to the effect that:

The interest of society and the maintenance of good government demand a full discussion of public affairs. Complete liberty to comment on the conduct of public men is a scalpel in the case of free speech. The sharp incision of its probe relieves the abscesses of officialdom. Men in public life may suffer under a hostile and an unjust accusation; the wound can be assuaged with the balm of a clear conscience. A public officer must not be too thin-skinned with reference to comment upon his official acts. Only thus can the intelligence and dignity of the individual be exalted. Of course, criticism does not authorize defamation. Nevertheless, as the individual is less than the State, so must expected criticism be born for the common good? Rising superior to any official, or set of officials, to the Chief Executive, to the Legislature, to the Judiciary - to any or all the agencies of Government - public opinion should be the constant source of liberty and democracy. (citations omitted)

The demand to protect public opinion for the welfare of society and the orderly administration of government inevitably lead to the adoption of the doctrine of privileged communication. A privileged communication may be either absolutely privileged or qualifiedly privileged. Absolutely privileged communications are those which are not actionable even if the author has acted in bad faith. An example is found in Sec. 11, Art. VI of the 1987 Constitution which exempts a member of Congress from liability for any speech or debate in the Congress or in any Committee thereof. Upon the other hand, qualifiedly privileged communications containing defamatory imputations are not actionable unless found to have been made without good intention or justifiable motive. To this genre belong private communications and fair and true report without any comments or remarks.[24]

The appellate court correctly ruled that the petitioners story is not privileged in character, for it is neither private communication nor a fair and true report without any comments or remarks.

US v. Bustos defined the concept of private communication thus: A communication made bona fide upon any subject-matter in which the party communicating has an interest, or in reference to which he has a duty, is privileged, if

made to a person having a corresponding interest or duty, although it contained criminatory matter which without this privilege would be slanderous and actionable. A pertinent illustration of the application of qualified privilege is a complaint made in good faith and without malice in regard to the character or conduct of a public official when addressed to an officer or a board having some interest or duty in the matter.[25]

This defense is unavailing to petitioners. In Daez v. Court of Appeals[26] we held that:

As a rule, it is the right and duty of a citizen to make a complaint of any misconduct on the part of public officials, which comes to his notice, to those charged with supervision over them. Such a communication is qualifiedly privileged and the author is not guilty of libel. The rule on privilege, however, imposes an additional requirement. Such complaints should be addressed solely to some official having jurisdiction to inquire into the charges, or power to redress the grievance or has some duty to perform or interest in connection therewith. (emphasis supplied)

In the instant case, even if we assume that the letter written by the spurious Atty. Angara is privileged communication, it lost its character as such when the matter was published in the newspaper and circulated among the general population. A written letter containing libelous matter cannot be classified as privileged when it is published and circulated in public,[27] which was what the petitioners did in this case.

Neither is the news item a fair and true report without any comments or remarks of any judicial, legislative or other official proceedings; there is in fact no proceeding to speak of. Nor is the article related to any act performed by public officers in the exercise of their functions, for it concerns only false imputations against Thoenen, a private individual seeking a quiet life.

The petitioners also claim to have made the report out of a social and moral duty to inform the public on matters of general interest.

In Borjal v. Court of Appeals, we stated that the enumeration under Art. 354 is not an exclusive list of qualifiedly privileged communications since fair commentaries on matters of public interest are likewise privileged. We stated that the doctrine of fair commentaries means that while in general every discreditable imputation publicly made is deemed false, because every man is presumed innocent until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless, when the discreditable imputation is directed against a public person in his public capacity, it is not necessarily actionable. In order that such discreditable imputation to a public official may be actionable, it must either be a false allegation of fact or a comment based on a false supposition.[28]

Again, this argument is unavailing to the petitioners. As we said, the respondent is a private individual, and not a public official or public figure. We are persuaded by the reasoning of the United States Supreme Court in Gertz v. Robert Welch, Inc.,[29] that a newspaper or broadcaster publishing defamatory falsehoods about an individual who is neither a public official nor a public figure may not claim a constitutional privilege against liability, for injury inflicted, even if the falsehood arose in a discussion of public interest.[30]

Having established that the article cannot be considered as privileged communication, malice is therefore presumed, and the fourth requisite for the imputation of libel to attach to the petitioners in this case is met. The news article is therefore defamatory and is not within the realm of protected speech. There is no longer a need to discuss the other assignment of errors, save for the amount of damages to which respondent is entitled.

In Policarpio v. Manila Times Publishing Co., Inc.,[31] we awarded damages where the defendants deliberately presented a private individual in a worse light that what she actually was, and where other factual errors were not prevented although defendants had the means to ascertain the veracity of their report. Such are the facts obtaining here.

We must point out that Lees brief news item contained falsehoods on two levels. On its face, her statement that residents of BF Homes had asked the Bureau of Immigration to deport a Swiss who allegedly shoots neighbors pets is patently untrue since the letter of the spurious Atty. Angara was a mere request for verification of Thoenens status as a foreign resident. Lees article, moreover, is also untrue, in that the events she reported never happened. The respondent had never shot any of his neighbors pets, no complaints had been lodged against him by his neighbors, and no deportation proceedings had been initiated against him. Worse, the author of Lees main source of information, Atty. Efren Angara, apparently either does not exist, or is not a lawyer. Petitioner Lee would have been enlightened on substantially all these matters had she but tried to contact either Angara or Thoenen.

Although it has been stressed that a newspaper should not be held to account to a point of suppression for honest mistakes, or imperfection in the choice of words,[32] even the most liberal view of free speech has never countenanced the publication of falsehoods, especially the persistent and unmitigated dissemination of patent lies.[33] There is no constitutional value in false statements of fact. Neither the intentional lie nor the careless error materially advances societys interest in uninhibited, robust, and wide-open debate.[34] The use of the known lie as a tool is at once at odds with the premises of democratic government and with the orderly manner in which economic, social, or political change is to be effected. Calculated falsehood falls into that class of utterances which are no essential part of any exposition of ideas, and are of such slight social value as a step to truth that any benefit that may be derived from them is clearly outweighed by the social interest in order and morality The knowingly false statement and the false statement made with reckless disregard of the truth, do not enjoy constitutional protection (citations omitted).[35]

The legitimate state interest underlying the law of libel is the compensation of the individuals for the harm inflicted upon them by defamatory falsehood. After all, the individuals right to protection of his own good name reflects no more than our basic concept of the essential dignity and worth of every human being a concept at the root of any decent system of ordered liberty.[36]

The appellate court awarded Thoenen moral damages of P200,000.00, exemplary damages of P50,000.00 and legal fees of P30,000.00, to be borne jointly and severally by the herein petitioners. In Guevarra v. Almario,[37] we noted that the damages in a libel case must depend upon the facts of the particular case and the sound discretion of the court, although appellate courts were more likely to reduce damages for libel than to increase them.[38] So it is in this case.

WHEREFORE, the Decision of the Court of Appeals of 17 January 2000 reversing the Decision of the Regional Trial Court, Branch 62, Makati City, of 31 August 1994 is hereby AFFIRMED, subject to the modification that petitioners are ordered to pay, jointly and severally, moral damages in the sum of P100,000.00, exemplary damages of P30,000.00, and legal fees of P20,000.00. No costs.

SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-22973 January 30, 1968

MAMBULAO LUMBER COMPANY, plaintiff-appellant, vs. PHILIPPINE NATIONAL BANK and ANACLETO HERALDO Deputy Provincial Sheriff of Camarines Norte, defendants-appellees. Ernesto P. Vilar and Arthur Tordesillas for plaintiff-appellant. Tomas Besa and Jose B. Galang for defendants-appellees. ANGELES, J.: An appeal from a decision, dated April 2, 1964, of the Court of First Instance of Manila in Civil Case No. 52089, entitled "Mambulao Lumber Company, plaintiff, versus Philippine National Bank and Anacleto Heraldo, defendants", dismissing the complaint against both defendants and sentencing the plaintiff to pay to defendant Philippine National Bank (PNB for short) the sum of P3,582.52 with interest thereon at the rate of 6% per annum from December 22, 1961 until fully paid, and the costs of suit. In seeking the reversal of the decision, the plaintiff advances several propositions in its brief which may be restated as follows: 1. That its total indebtedness to the PNB as of November 21, 1961, was only P56,485.87 and not P58,213.51 as concluded by the court a quo; hence, the proceeds of the foreclosure sale of its real property alone in the amount of P56,908.00 on that date, added to the sum of P738.59 it remitted to the PNB thereafter was more than sufficient to liquidate its obligation, thereby rendering the subsequent foreclosure sale of its chattels unlawful; 2. That it is not liable to pay PNB the amount of P5,821.35 for attorney's fees and the additional sum of P298.54 as expenses of the foreclosure sale; 3. That the subsequent foreclosure sale of its chattels is null and void, not only because it had already settled its indebtedness to the PNB at the time the sale was effected, but also for the reason that the said sale was not conducted in accordance with the provisions of the Chattel Mortgage Law and the venue agreed upon by the parties in the mortgage contract; 4. That the PNB, having illegally sold the chattels, is liable to the plaintiff for its value; and 5. That for the acts of the PNB in proceeding with the sale of the chattels, in utter disregard of plaintiff's vigorous opposition thereto, and in taking possession thereof after the sale thru force, intimidation, coercion, and by detaining its "man-in-charge" of said properties, the PNB is liable to plaintiff for damages and attorney's fees. The antecedent facts of the case, as found by the trial court, are as follows: On May 5, 1956 the plaintiff applied for an industrial loan of P155,000 with the Naga Branch of defendant PNB and the former offered real estate, machinery, logging and transportation equipments as collaterals. The

application, however, was approved for a loan of P100,000 only. To secure the payment of the loan, the plaintiff mortgaged to defendant PNB a parcel of land, together with the buildings and improvements existing thereon, situated in the poblacion of Jose Panganiban (formerly Mambulao), province of Camarines Norte, and covered by Transfer Certificate of Title No. 381 of the land records of said province, as well as various sawmill equipment, rolling unit and other fixed assets of the plaintiff, all situated in its compound in the aforementioned municipality. On August 2, 1956, the PNB released from the approved loan the sum of P27,500, for which the plaintiff signed a promissory note wherein it promised to pay to the PNB the said sum in five equal yearly installments at the rate of P6,528.40 beginning July 31, 1957, and every year thereafter, the last of which would be on July 31, 1961. On October 19, 1956, the PNB made another release of P15,500 as part of the approved loan granted to the plaintiff and so on the said date, the latter executed another promissory note wherein it agreed to pay to the former the said sum in five equal yearly installments at the rate of P3,679.64 beginning July 31, 1957, and ending on July 31, 1961. The plaintiff failed to pay the amortization on the amounts released to and received by it. Repeated demands were made upon the plaintiff to pay its obligation but it failed or otherwise refused to do so. Upon inspection and verification made by employees of the PNB, it was found that the plaintiff had already stopped operation about the end of 1957 or early part of 1958. On September 27, 1961, the PNB sent a letter to the Provincial Sheriff of Camarines Norte requesting him to take possession of the parcel of land, together with the improvements existing thereon, covered by Transfer Certificate of Title No. 381 of the land records of Camarines Norte, and to sell it at public auction in accordance with the provisions of Act No. 3135, as amended, for the satisfaction of the unpaid obligation of the plaintiff, which as of September 22, 1961, amounted to P57,646.59, excluding attorney's fees. In compliance with the request, on October 16, 1961, the Provincial Sheriff of Camarines Norte issued the corresponding notice of extrajudicial sale and sent a copy thereof to the plaintiff. According to the notice, the mortgaged property would be sold at public auction at 10:00 a.m. on November 21, 1961, at the ground floor of the Court House in Daet, Camarines Norte. On November 6, 1961, the PNB sent a letter to the Provincial Sheriff of Camarines Norte requesting him to take possession of the chattels mortgaged to it by the plaintiff and sell them at public auction also on November 21, 1961, for the satisfaction of the sum of P57,646.59, plus 6% annual interest therefore from September 23, 1961, attorney's fees equivalent to 10% of the amount due and the costs and expenses of the sale. On the same day, the PNB sent notice to the plaintiff that the former was foreclosing extrajudicially the chattels mortgaged by the latter and that the auction sale thereof would be held on November 21, 1961, between 9:00 and 12:00 a.m., in Mambulao, Camarines Norte, where the mortgaged chattels were situated. On November 8, 1961, Deputy Provincial Sheriff Anacleto Heraldo took possession of the chattels mortgaged by the plaintiff and made an inventory thereof in the presence of a PC Sergeant and a policeman of the municipality of Jose Panganiban. On November 9, 1961, the said Deputy Sheriff issued the corresponding notice of public auction sale of the mortgaged chattels to be held on November 21, 1961, at 10:00 a.m., at the plaintiff's compound situated in the municipality of Jose Panganiban, Province of Camarines Norte. On November 19, 1961, the plaintiff sent separate letters, posted as registered air mail matter, one to the Naga Branch of the PNB and another to the Provincial Sheriff of Camarines Norte, protesting against the foreclosure of the real estate and chattel mortgages on the grounds that they could not be effected unless a Court's order was issued against it (plaintiff) for said purpose and that the foreclosure proceedings, according to the terms

of the mortgage contracts, should be made in Manila. In said letter to the Naga Branch of the PNB, it was intimated that if the public auction sale would be suspended and the plaintiff would be given an extension of ninety (90) days, its obligation would be settled satisfactorily because an important negotiation was then going on for the sale of its "whole interest" for an amount more than sufficient to liquidate said obligation. The letter of the plaintiff to the Naga Branch of the PNB was construed by the latter as a request for extension of the foreclosure sale of the mortgaged chattels and so it advised the Sheriff of Camarines Norte to defer it to December 21, 1961, at the same time and place. A copy of said advice was sent to the plaintiff for its information and guidance. The foreclosure sale of the parcel of land, together with the buildings and improvements thereon, covered by Transfer Certificate of Title No. 381, was, however, held on November 21, 1961, and the said property was sold to the PNB for the sum of P56,908.00, subject to the right of the plaintiff to redeem the same within a period of one year. On the same date, Deputy Provincial Sheriff Heraldo executed a certificate of sale in favor of the PNB and a copy thereof was sent to the plaintiff. In a letter dated December 14, 1961 (but apparently posted several days later), the plaintiff sent a bank draft for P738.59 to the Naga Branch of the PNB, allegedly in full settlement of the balance of the obligation of the plaintiff after the application thereto of the sum of P56,908.00 representing the proceeds of the foreclosure sale of parcel of land described in Transfer Certificate of Title No. 381. In the said letter, the plaintiff reiterated its request that the foreclosure sale of the mortgaged chattels be discontinued on the grounds that the mortgaged indebtedness had been fully paid and that it could not be legally effected at a place other than the City of Manila. In a letter dated December 16, 1961, the plaintiff advised the Provincial Sheriff of Camarines Norte that it had fully paid its obligation to the PNB, and enclosed therewith a copy of its letter to the latter dated December 14, 1961. On December 18, 1961, the Attorney of the Naga Branch of the PNB, wrote to the plaintiff acknowledging the remittance of P738.59 with the advice, however, that as of that date the balance of the account of the plaintiff was P9,161.76, to which should be added the expenses of guarding the mortgaged chattels at the rate of P4.00 a day beginning December 19, 1961. It was further explained in said letter that the sum of P57,646.59, which was stated in the request for the foreclosure of the real estate mortgage, did not include the 10% attorney's fees and expenses of the sale. Accordingly, the plaintiff was advised that the foreclosure sale scheduled on the 21st of said month would be stopped if a remittance of P9,161.76, plus interest thereon and guarding fees, would be made. On December 21, 1961, the foreclosure sale of the mortgaged chattels was held at 10:00 a.m. and they were awarded to the PNB for the sum of P4,200 and the corresponding bill of sale was issued in its favor by Deputy Provincial Sheriff Heraldo. In a letter dated December 26, 1961, the Manager of the Naga Branch of the PNB advised the plaintiff giving it priority to repurchase the chattels acquired by the former at public auction. This offer was reiterated in a letter dated January 3, 1962, of the Attorney of the Naga Branch of the PNB to the plaintiff, with the suggestion that it exercise its right of redemption and that it apply for the condonation of the attorney's fees. The plaintiff did not follow the advice but on the contrary it made known of its intention to file appropriate action or actions for the protection of its interests. On May 24, 1962, several employees of the PNB arrived in the compound of the plaintiff in Jose Panganiban, Camarines Norte, and they informed Luis Salgado, Chief Security Guard of the premises, that the properties therein had been auctioned and bought by the PNB, which in turn sold them to Mariano Bundok. Upon

being advised that the purchaser would take delivery of the things he bought, Salgado was at first reluctant to allow any piece of property to be taken out of the compound of the plaintiff. The employees of the PNB explained that should Salgado refuse, he would be exposing himself to a litigation wherein he could be held liable to pay big sum of money by way of damages. Apprehensive of the risk that he would take, Salgado immediately sent a wire to the President of the plaintiff in Manila, asking advice as to what he should do. In the meantime, Mariano Bundok was able to take out from the plaintiff's compound two truckloads of equipment. In the afternoon of the same day, Salgado received a telegram from plaintiff's President directing him not to deliver the "chattels" without court order, with the information that the company was then filing an action for damages against the PNB. On the following day, May 25, 1962, two trucks and men of Mariano Bundok arrived but Salgado did not permit them to take out any equipment from inside the compound of the plaintiff. Thru the intervention, however, of the local police and PC soldiers, the trucks of Mariano Bundok were able finally to haul the properties originally mortgaged by the plaintiff to the PNB, which were bought by it at the foreclosure sale and subsequently sold to Mariano Bundok. Upon the foregoing facts, the trial court rendered the decision appealed from which, as stated in the first paragraph of this opinion, sentenced the Mambulao Lumber Company to pay to the defendant PNB the sum of P3,582.52 with interest thereon at the rate of 6% per annum from December 22, 1961 (day following the date of the questioned foreclosure of plaintiff's chattels) until fully paid, and the costs. Mambulao Lumber Company interposed the instant appeal. We shall discuss the various points raised in appellant's brief in seriatim. The first question Mambulao Lumber Company poses is that which relates to the amount of its indebtedness to the PNB arising out of the principal loans and the accrued interest thereon. It is contended that its obligation under the terms of the two promissory notes it had executed in favor of the PNB amounts only to P56,485.87 as of November 21, 1961, when the sale of real property was effected, and not P58,213.51 as found by the trial court. There is merit to this claim. Examining the terms of the promissory note executed by the appellant in favor of the PNB, we find that the agreed interest on the loan of P43,000.00 P27,500.00 released on August 2, 1956 as per promissory note of even date (Exhibit C-3), and P15,500.00 released on October 19, 1956, as per promissory note of the same date (Exhibit C-4) was six per cent (6%) per annum from the respective date of said notes "until paid". In the statement of account of the appellant as of September 22, 1961, submitted by the PNB, it appears that in arriving at the total indebtedness of P57,646.59 as of that date, the PNB had compounded the principal of the loan and the accrued 6% interest thereon each time the yearly amortizations became due, and on the basis of these compounded amounts charged additional delinquency interest on them up to September 22, 1961; and to this erroneously computed total of P57,646.59, the trial court added 6% interest per annum from September 23, 1961 to November 21 of the same year. In effect, the PNB has claimed, and the trial court has adjudicated to it, interest on accrued interests from the time the various amortizations of the loan became due until the real estate mortgage executed to secure the loan was extra-judicially foreclosed on November 21, 1961. This is an error. Section 5 of Act No. 2655 expressly provides that in computing the interest on any obligation, promissory note or other instrument or contract, compound interest shall not be reckoned, except by agreement, or in default thereof, whenever the debt is judicially claimed. This is also the clear mandate of Article 2212 of the new Civil Code which provides that interest due shall earn legal interest only from the time it is judicially demanded, and of Article 1959 of the same code which ordains that interest due and unpaid shall not earn interest. Of course, the parties may, by stipulation, capitalize the interest due and unpaid, which as added principal shall earn new interest; but such stipulation is nowhere to be found in the terms of the promissory notes involved in this case. Clearly therefore, the trial court fell into error when it awarded interest on accrued interests, without any agreement to that effect and before they had been judicially demanded.

Appellant next assails the award of attorney's fees and the expenses of the foreclosure sale in favor of the PNB. With respect to the amount of P298.54 allowed as expenses of the extra-judicial sale of the real property, appellant maintains that the same has no basis, factual or legal, and should not have been awarded. It likewise decries the award of attorney's fees which, according to the appellant, should not be deducted from the proceeds of the sale of the real property, not only because there is no express agreement in the real estate mortgage contract to pay attorney's fees in case the same is extra-judicially foreclosed, but also for the reason that the PNB neither spent nor incurred any obligation to pay attorney's fees in connection with the said extra-judicial foreclosure under consideration. There is reason for the appellant to assail the award of P298.54 as expenses of the sale. In this respect, the trial court said: The parcel of land, together with the buildings and improvements existing thereon covered by Transfer Certificate of Title No. 381, was sold for P56,908. There was, however, no evidence how much was the expenses of the foreclosure sale although from the pertinent provisions of the Rules of Court, the Sheriff's fees would be P1 for advertising the sale (par. k, Sec. 7, Rule 130 of the Old Rules) and P297.54 as his commission for the sale (par. n, Sec. 7, Rule 130 of the Old Rules) or a total of P298.54. There is really no evidence of record to support the conclusion that the PNB is entitled to the amount awarded as expenses of the extra-judicial foreclosure sale. The court below committed error in applying the provisions of the Rules of Court for purposes of arriving at the amount awarded. It is to be borne in mind that the fees enumerated under paragraphs k and n, Section 7, of Rule 130 (now Rule 141) are demandable, only by a sheriff serving processes of the court in connection with judicial foreclosure of mortgages under Rule 68 of the new Rules, and not in cases of extra-judicial foreclosure of mortgages under Act 3135. The law applicable is Section 4 of Act 3135 which provides that the officer conducting the sale is entitled to collect a fee of P5.00 for each day of actual work performed in addition to his expenses in connection with the foreclosure sale. Admittedly, the PNB failed to prove during the trial of the case, that it actually spent any amount in connection with the said foreclosure sale. Neither may expenses for publication of the notice be legally allowed in the absence of evidence on record to support it. 1 It is true, as pointed out by the appellee bank, that courts should take judicial notice of the fees provided for by law which need not be proved; but in the absence of evidence to show at least the number of working days the sheriff concerned actually spent in connection with the extra-judicial foreclosure sale, the most that he may be entitled to, would be the amount of P10.00 as a reasonable allowance for two day's work one for the preparation of the necessary notices of sale, and the other for conducting the auction sale and issuance of the corresponding certificate of sale in favor of the buyer. Obviously, therefore, the award of P298.54 as expenses of the sale should be set aside. But the claim of the appellant that the real estate mortgage does not provide for attorney's fees in case the same is extra-judicially foreclosed, cannot be favorably considered, as would readily be revealed by an examination of the pertinent provision of the mortgage contract. The parties to the mortgage appear to have stipulated under paragraph (c) thereof, inter alia: . . . For the purpose of extra-judicial foreclosure, the Mortgagor hereby appoints the Mortgagee his attorney-in-fact to sell the property mortgaged under Act 3135, as amended, to sign all documents and to perform all acts requisite and necessary to accomplish said purpose and to appoint its substitute as such attorney-in-fact with the same powers as above specified. In case of judicial foreclosure, the Mortgagor hereby consents to the appointment of the Mortgagee or any of its employees as receiver, without any bond, to take charge of the mortgaged property at once, and to hold possession of the same and the rents, benefits and profits derived from the mortgaged property before the sale, less the costs and expenses of the receivership; the Mortgagor hereby agrees further that in all cases, attorney's fees hereby fixed at Ten Per cent (10%) of the total indebtedness then unpaid which in no case shall be less than P100.00 exclusive of all fees allowed by law, and the expenses of collection shall be the obligation of the Mortgagor and shall with priority, be paid to the Mortgagee out of any

sums realized as rents and profits derived from the mortgaged property or from the proceeds realized from the sale of the said property and this mortgage shall likewise stand as security therefor. . . . We find the above stipulation to pay attorney's fees clear enough to cover both cases of foreclosure sale mentioned thereunder, i.e., judicially or extra-judicially. While the phrase "in all cases" appears to be part of the second sentence, a reading of the whole context of the stipulation would readily show that it logically refers to extra-judicial foreclosure found in the first sentence and to judicial foreclosure mentioned in the next sentence. And the ambiguity in the stipulation suggested and pointed out by the appellant by reason of the faulty sentence construction should not be made to defeat the otherwise clear intention of the parties in the agreement. It is suggested by the appellant, however, that even if the above stipulation to pay attorney's fees were applicable to the extra-judicial foreclosure sale of its real properties, still, the award of P5,821.35 for attorney's fees has no legal justification, considering the circumstance that the PNB did not actually spend anything by way of attorney's fees in connection with the sale. In support of this proposition, appellant cites authorities to the effect: (1) that when the mortgagee has neither paid nor incurred any obligation to pay an attorney in connection with the foreclosure sale, the claim for such fees should be denied; 2 and (2) that attorney's fees will not be allowed when the attorney conducting the foreclosure proceedings is an officer of the corporation (mortgagee) who receives a salary for all the legal services performed by him for the corporation. 3 These authorities are indeed enlightening; but they should not be applied in this case. The very same authority first cited suggests that said principle is not absolute, for there is authority to the contrary. As to the fact that the foreclosure proceeding's were handled by an attorney of the legal staff of the PNB, we are reluctant to exonerate herein appellant from the payment of the stipulated attorney's fees on this ground alone, considering the express agreement between the parties in the mortgage contract under which appellant became liable to pay the same. At any rate, we find merit in the contention of the appellant that the award of P5,821.35 in favor of the PNB as attorney's fees is unconscionable and unreasonable, considering that all that the branch attorney of the said bank did in connection with the foreclosure sale of the real property was to file a petition with the provincial sheriff of Camarines Norte requesting the latter to sell the same in accordance with the provisions of Act 3135. The principle that courts should reduce stipulated attorney's fees whenever it is found under the circumstances of the case that the same is unreasonable, is now deeply rooted in this jurisdiction to entertain any serious objection to it. Thus, this Court has explained: But the principle that it may be lawfully stipulated that the legal expenses involved in the collection of a debt shall be defrayed by the debtor does not imply that such stipulations must be enforced in accordance with the terms, no matter how injurious or oppressive they may be. The lawful purpose to be accomplished by such a stipulation is to permit the creditor to receive the amount due him under his contract without a deduction of the expenses caused by the delinquency of the debtor. It should not be permitted for him to convert such a stipulation into a source of speculative profit at the expense of the debtor. Contracts for attorney's services in this jurisdiction stands upon an entirely different footing from contracts for the payment of compensation for any other services. By express provision of section 29 of the Code of Civil Procedure, an attorney is not entitled in the absence of express contract to recover more than a reasonable compensation for his services; and even when an express contract is made the court can ignore it and limit the recovery to reasonable compensation if the amount of the stipulated fee is found by the court to be unreasonable. This is a very different rule from that announced in section 1091 of the Civil Code with reference to the obligation of contracts in general, where it is said that such obligation has the force of law between the contracting parties. Had the plaintiff herein made an express contract to pay his attorney an uncontingent fee of P2,115.25 for the services to be rendered in reducing the note here in suit to judgment, it would not have been enforced against him had he seen fit to oppose it, as such a fee is obviously far greater than is necessary to remunerate the attorney for the work involved and is therefore unreasonable. In order to enable the court to ignore an express contract for an

attorney's fees, it is not necessary to show, as in other contracts, that it is contrary to morality or public policy (Art. 1255, Civil Code). It is enough that it is unreasonable or unconscionable. 4 Since then this Court has invariably fixed counsel fees on a quantum meruit basis whenever the fees stipulated appear excessive, unconscionable, or unreasonable, because a lawyer is primarily a court officer charged with the duty of assisting the court in administering impartial justice between the parties, and hence, the fees should be subject to judicial control. Nor should it be ignored that sound public policy demands that courts disregard stipulations for counsel fees, whenever they appear to be a source of speculative profit at the expense of the debtor or mortgagor. 5 And it is not material that the present action is between the debtor and the creditor, and not between attorney and client. As court have power to fix the fee as between attorney and client, it must necessarily have the right to say whether a stipulation like this, inserted in a mortgage contract, is valid. 6 In determining the compensation of an attorney, the following circumstances should be considered: the amount and character of the services rendered; the responsibility imposed; the amount of money or the value of the property affected by the controversy, or involved in the employment; the skill and experience called for in the performance of the service; the professional standing of the attorney; the results secured; and whether or not the fee is contingent or absolute, it being a recognized rule that an attorney may properly charge a much larger fee when it is to be contingent than when it is not. 7 From the stipulation in the mortgage contract earlier quoted, it appears that the agreed fee is 10% of the total indebtedness, irrespective of the manner the foreclosure of the mortgage is to be effected. The agreement is perhaps fair enough in case the foreclosure proceedings is prosecuted judicially but, surely, it is unreasonable when, as in this case, the mortgage was foreclosed extra-judicially, and all that the attorney did was to file a petition for foreclosure with the sheriff concerned. It is to be assumed though, that the said branch attorney of the PNB made a study of the case before deciding to file the petition for foreclosure; but even with this in mind, we believe the amount of P5,821.35 is far too excessive a fee for such services. Considering the above circumstances mentioned, it is our considered opinion that the amount of P1,000.00 would be more than sufficient to compensate the work aforementioned. The next issue raised deals with the claim that the proceeds of the sale of the real properties alone together with the amount it remitted to the PNB later was more than sufficient to liquidate its total obligation to herein appellee bank. Again, we find merit in this claim. From the foregoing discussion of the first two errors assigned, and for purposes of determining the total obligation of herein appellant to the PNB as of November 21, 1961 when the real estate mortgage was foreclosed, we have the following illustration in support of this conclusion:1wph1.t A. I. Principal Loan (a) Promissory note dated August 2, 1956 (1) Interest at 6% per annum from Aug. 2, 1956 to Nov. 21, 1961 (b) Promissory note dated October 19, 1956 (1) Interest at 6% per annum from Oct.19, 1956 to Nov. 21, 1961 II. Sheriff's fees [for two (2) day's work] P27,500.00 8,751.78 P15,500.00 4,734.08 10.00 1,000.00

III. Attorney's fee

Total obligation as of Nov. 21, 1961 P57,495.86 B. -

I. II.

Proceeds of the foreclosure sale of the real estate mortgage on Nov. 21, 1961 P56,908.00 Additional amount remitted to the PNB on Dec. 18, 1961 738.59

Total amount of Payment made to PNB as of Dec. 18, 1961 P57,646.59

Deduct: Total obligation to the PNB P57,495.86

Excess Payment to the PNB

P 150.73 ========

From the foregoing illustration or computation, it is clear that there was no further necessity to foreclose the mortgage of herein appellant's chattels on December 21, 1961; and on this ground alone, we may declare the sale of appellant's chattels on the said date, illegal and void. But we take into consideration the fact that the PNB must have been led to believe that the stipulated 10% of the unpaid loan for attorney's fees in the real estate mortgage was legally maintainable, and in accordance with such belief, herein appellee bank insisted that the proceeds of the sale of appellant's real property was deficient to liquidate the latter's total indebtedness. Be that as it may, however, we still find the subsequent sale of herein appellant's chattels illegal and objectionable on other grounds. That appellant vigorously objected to the foreclosure of its chattel mortgage after the foreclosure of its real estate mortgage on November 21, 1961, can not be doubted, as shown not only by its letter to the PNB on November 19, 1961, but also in its letter to the provincial sheriff of Camarines Norte on the same date. These letters were followed by another letter to the appellee bank on December 14, 1961, wherein herein appellant, in no uncertain terms, reiterated its objection to the scheduled sale of its chattels on December 21, 1961 at Jose Panganiban, Camarines Norte for the reasons therein stated that: (1) it had settled in full its total obligation to the PNB by the sale of the real estate and its subsequent remittance of the amount of P738.59; and (2) that the contemplated sale at Jose Panganiban would violate their agreement embodied under paragraph (i) in the Chattel Mortgage which provides as follows: (i) In case of both judicial and extra-judicial foreclosure under Act 1508, as amended, the parties hereto agree that the corresponding complaint for foreclosure or the petition for sale should be filed with the courts or the sheriff of the City of Manila, as the case may be; and that the Mortgagor shall pay attorney's fees hereby fixed at ten per cent (10%) of the total indebtedness then unpaid but in no case shall it be less than P100.00, exclusive of all costs and fees allowed by law and of other expenses incurred in connection with the said foreclosure. [Emphasis supplied] Notwithstanding the abovequoted agreement in the chattel mortgage contract, and in utter disregard of the objection of herein appellant to the sale of its chattels at Jose Panganiban, Camarines Norte and not in the City of Manila as agreed upon, the PNB proceeded with the foreclosure sale of said chattels. The trial court, however, justified said action of the PNB in the decision appealed from in the following rationale: While it is true that it was stipulated in the chattel mortgage contract that a petition for the extra-judicial foreclosure thereof should be filed with the Sheriff of the City of Manila, nevertheless, the effect thereof was merely to provide another place where the mortgage chattel could be sold in addition to those specified in the Chattel Mortgage Law. Indeed, a stipulation in a contract cannot abrogate much less impliedly repeal a specific provision of the statute. Considering that Section 14 of Act No. 1508 vests in the mortgagee the choice where the foreclosure sale should be held, hence, in the case under consideration, the PNB had three places from which to select, namely: (1) the place of residence of the mortgagor; (2) the place of the mortgaged chattels were situated;

and (3) the place stipulated in the contract. The PNB selected the second and, accordingly, the foreclosure sale held in Jose Panganiban, Camarines Norte, was legal and valid. To the foregoing conclusion, We disagree. While the law grants power and authority to the mortgagee to sell the mortgaged property at a public place in the municipality where the mortgagor resides or where the property is situated, 8 this Court has held that the sale of a mortgaged chattel may be made in a place other than that where it is found, provided that the owner thereof consents thereto; or that there is an agreement to this effect between the mortgagor and the mortgagee. 9 But when, as in this case, the parties agreed to have the sale of the mortgaged chattels in the City of Manila, which, any way, is the residence of the mortgagor, it cannot be rightly said that mortgagee still retained the power and authority to select from among the places provided for in the law and the place designated in their agreement over the objection of the mortgagor. In providing that the mortgaged chattel may be sold at the place of residence of the mortgagor or the place where it is situated, at the option of the mortgagee, the law clearly contemplated benefits not only to the mortgagor but to the mortgagee as well. Their right arising thereunder, however, are personal to them; they do not affect either public policy or the rights of third persons. They may validly be waived. So, when herein mortgagor and mortgagee agreed in the mortgage contract that in cases of both judicial and extra-judicial foreclosure under Act 1508, as amended, the corresponding complaint for foreclosure or the petition for sale should be filed with the courts or the Sheriff of Manila, as the case may be, they waived their corresponding rights under the law. The correlative obligation arising from that agreement have the force of law between them and should be complied with in good faith. 10 By said agreement the parties waived the legal venue, and such waiver is valid and legally effective, because it, was merely a personal privilege they waived, which is not contrary, to public policy or to the prejudice of third persons. It is a general principle that a person may renounce any right which the law gives unless such renunciation is expressly prohibited or the right conferred is of such nature that its renunciation would be against public policy. 11 On the other hand, if a place of sale is specified in the mortgage and statutory requirements in regard thereto are complied with, a sale is properly conducted in that place. Indeed, in the absence of a statute to the contrary, a sale conducted at a place other than that stipulated for in the mortgage is invalid, unless the mortgagor consents to such sale. 12 Moreover, Section 14 of Act 1508, as amended, provides that the officer making the sale should make a return of his doings which shall particularly describe the articles sold and the amount received from each article. From this, it is clear that the law requires that sale be made article by article, otherwise, it would be impossible for him to state the amount received for each item. This requirement was totally disregarded by the Deputy Sheriff of Camarines Norte when he sold the chattels in question in bulk, notwithstanding the fact that the said chattels consisted of no less than twenty different items as shown in the bill of sale. 13 This makes the sale of the chattels manifestly objectionable. And in the absence of any evidence to show that the mortgagor had agreed or consented to such sale in gross, the same should be set aside. It is said that the mortgagee is guilty of conversion when he sells under the mortgage but not in accordance with its terms, or where the proceedings as to the sale of foreclosure do not comply with the statute. 14 This rule applies squarely to the facts of this case where, as earlier shown, herein appellee bank insisted, and the appellee deputy sheriff of Camarines Norte proceeded with the sale of the mortgaged chattels at Jose Panganiban, Camarines Norte, in utter disregard of the valid objection of the mortgagor thereto for the reason that it is not the place of sale agreed upon in the mortgage contract; and the said deputy sheriff sold all the chattels (among which were a skagit with caterpillar engine, three GMC 6 x 6 trucks, a Herring Hall Safe, and Sawmill equipment consisting of a 150 HP Murphy Engine, plainer, large circular saws etc.) as a single lot in violation of the requirement of the law to sell the same article by article. The PNB has resold the chattels to another buyer with whom it appears to have actively cooperated in subsequently taking possession of and removing the chattels from appellant compound by force, as shown by the circumstance that they had to take along PC

soldiers and municipal policemen of Jose Panganiban who placed the chief security officer of the premises in jail to deprive herein appellant of its possession thereof. To exonerate itself of any liability for the breach of peace thus committed, the PNB would want us to believe that it was the subsequent buyer alone, who is not a party to this case, that was responsible for the forcible taking of the property; but assuming this to be so, still the PNB cannot escape liability for the conversion of the mortgaged chattels by parting with its interest in the property. Neither would its claim that it afterwards gave a chance to herein appellant to repurchase or redeem the chattels, improve its position, for the mortgagor is not under obligation to take affirmative steps to repossess the chattels that were converted by the mortgagee. 15 As a consequence of the said wrongful acts of the PNB and the Deputy Sheriff of Camarines Norte, therefore, We have to declare that herein appellant is entitled to collect from them, jointly and severally, the full value of the chattels in question at the time they were illegally sold by them. To this effect was the holding of this Court in a similar situation. 16 The effect of this irregularity was, in our opinion to make the plaintiff liable to the defendant for the full value of the truck at the time the plaintiff thus carried it off to be sold; and of course, the burden is on the defendant to prove the damage to which he was thus subjected. . . . This brings us to the problem of determining the value of the mortgaged chattels at the time of their sale in 1961. The trial court did not make any finding on the value of the chattels in the decision appealed from and denied altogether the right of the appellant to recover the same. We find enough evidence of record, however, which may be used as a guide to ascertain their value. The record shows that at the time herein appellant applied for its loan with the PNB in 1956, for which the chattels in question were mortgaged as part of the security therefore, herein appellant submitted a list of the chattels together with its application for the loan with a stated value of P107,115.85. An official of the PNB made an inspection of the chattels in the same year giving it an appraised value of P42,850.00 and a market value of P85,700.00. 17 The same chattels with some additional equipment acquired by herein appellant with part of the proceeds of the loan were reappraised in a re-inspection conducted by the same official in 1958, in the report of which he gave all the chattels an appraised value of P26,850.00 and a market value of P48,200.00. 18 Another re-inspection report in 1959 gave the appraised value as P19,400.00 and the market value at P25,600.00. 19 The said official of the PNB who made the foregoing reports of inspection and re-inspections testified in court that in giving the values appearing in the reports, he used a conservative method of appraisal which, of course, is to be expected of an official of the appellee bank. And it appears that the values were considerably reduced in all the re-inspection reports for the reason that when he went to herein appellant's premises at the time, he found the chattels no longer in use with some of the heavier equipments dismantled with parts thereof kept in the bodega; and finding it difficult to ascertain the value of the dismantled chattels in such condition, he did not give them anymore any value in his reports. Noteworthy is the fact, however, that in the last reinspection report he made of the chattels in 1961, just a few months before the foreclosure sale, the same inspector of the PNB reported that the heavy equipment of herein appellant were "lying idle and rusty" but were "with a shed free from rains" 20 showing that although they were no longer in use at the time, they were kept in a proper place and not exposed to the elements. The President of the appellant company, on the other hand, testified that its caterpillar (tractor) alone is worth P35,000.00 in the market, and that the value of its two trucks acquired by it with part of the proceeds of the loan and included as additional items in the mortgaged chattels were worth no less than P14,000.00. He likewise appraised the worth of its Murphy engine at P16,000.00 which, according to him, when taken together with the heavy equipments he mentioned, the sawmill itself and all other equipment forming part of the chattels under consideration, and bearing in mind the current cost of equipments these days which he alleged to have increased by about five (5) times, could safely be estimated at P120,000.00. This testimony, except for the appraised and market values appearing in the inspection and reinspection reports of the PNB official earlier mentioned, stand uncontroverted in the record; but We are not inclined to accept such testimony at its par value, knowing that the equipments of herein appellant had been idle and unused since it stopped operating its sawmill in 1958 up to the time of the sale of the chattels in 1961. We have no doubt that the value of chattels was depreciated after all those years of inoperation, although from the evidence aforementioned, We may also safely conclude that the amount of P4,200.00 for which the chattels were sold in the foreclosure sale in question was grossly unfair to the mortgagor. Considering, however, the facts that the appraised value of P42,850.00 and the market value of P85,700.00 originally given by the PNB official were admittedly conservative; that two 6 x 6 trucks subsequently

bought by the appellant company had thereafter been added to the chattels; and that the real value thereof, although depreciated after several years of inoperation, was in a way maintained because the depreciation is off-set by the marked increase in the cost of heavy equipment in the market, it is our opinion that the market value of the chattels at the time of the sale should be fixed at the original appraised value of P42,850.00. Herein appellant's claim for moral damages, however, seems to have no legal or factual basis. Obviously, an artificial person like herein appellant corporation cannot experience physical sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or social humiliation which are basis of moral damages. 21 A corporation may have a good reputation which, if besmirched, may also be a ground for the award of moral damages. The same cannot be considered under the facts of this case, however, not only because it is admitted that herein appellant had already ceased in its business operation at the time of the foreclosure sale of the chattels, but also for the reason that whatever adverse effects of the foreclosure sale of the chattels could have upon its reputation or business standing would undoubtedly be the same whether the sale was conducted at Jose Panganiban, Camarines Norte, or in Manila which is the place agreed upon by the parties in the mortgage contract. But for the wrongful acts of herein appellee bank and the deputy sheriff of Camarines Norte in proceeding with the sale in utter disregard of the agreement to have the chattels sold in Manila as provided for in the mortgage contract, to which their attentions were timely called by herein appellant, and in disposing of the chattels in gross for the miserable amount of P4,200.00, herein appellant should be awarded exemplary damages in the sum of P10,000.00. The circumstances of the case also warrant the award of P3,000.00 as attorney's fees for herein appellant. WHEREFORE AND CONSIDERING ALL THE FOREGOING, the decision appealed from should be, as hereby, it is set aside. The Philippine National Bank and the Deputy Sheriff of the province of Camarines Norte are ordered to pay, jointly and severally, to Mambulao Lumber Company the total amount of P56,000.73, broken as follows: P150.73 overpaid by the latter to the PNB, P42,850.00 the value of the chattels at the time of the sale with interest at the rate of 6% per annum from December 21, 1961, until fully paid, P10,000.00 in exemplary damages, and P3,000.00 as attorney's fees. Costs against both appellees.