THIRD DIVISION

[G.R. No. 156841. June 30, 2005]

Principle of abused rights
GF EQUITY, INC., petitioner, vs. ARTURO VALENZONA, respondent.
DECISION
CARPIO-MORALES, J.:
On challenge via Petition for Review on Certiorari is the Court of Appeals October 14,
2002 Decision[1] reversing that of the Regional Trial Court (RTC) of Manila dated June 28,
1997[2] which dismissed the complaint of herein respondent Arturo Valenzona
(Valenzona) for breach of contract with damages against herein petitioner GF Equity, Inc.
(GF Equity).
The factual antecedents of the case are as follows:
GF Equity, represented by its Chief Financial Officer W. Steven Uytengsu (Uytengsu),
hired Valenzona as Head Coach of the Alaska basketball team in the Philippine Basketball
Association (PBA) under a Contract of Employment.[3]
As head coach, the duties of Valenzona were described in the contract to include the
following:
xxx
1. . . . coaching at all practices and games scheduled for the CORPORATIONs TEAM
during the scheduled season of the ASSOCIATION . . ., coaching all exhibition
games scheduled by the corporation as approved by the PBA during and prior to the
scheduled season, coaching (if invited to participate) in the ASSOCIATIONs All Star Game
and attending every event conducted in association with the All Star
Game, and coaching the play-off games subsequent to the scheduled season based on
the athletic program of the PBA.
xxx
3. The COACH agrees to observe and comply with all requirements of the CORPORATION
respecting conduct of its TEAM and its players, at all times whether on or off the
playing floor. The CORPORATION may, from time to time during the continuance of this
contract, establish reasonable rules for the government of its players at home and on the
road; and such rules shall be part of this contract as fully is (sic) if herein written and
shall be the responsibility of the COACH to implement; x x x

4. The COACH agrees (a) to report at the time and place fixed by the CORPORATION in
good physical condition; (b) to keep himself throughout the entire season in good
physical condition; (c) to give his best services, as well as his loyalty to the
CORPORATION, and to serve as basketball coach for the CORPORATION and its assignees;
(d) to be neatly and fully attired in public and always to conduct himself on and off the
court according to the highest standards of honesty, morality, fair play and
sportsmanship; (e) not to do anything which is detrimental to the best interests of the
CORPORATION.
xxx
7. The COACH agrees that if so requested by the CORPORATION, he will endorse the
CORPORATIONs products in commercial advertising, promotions and the like. The COACH
further agrees to allow the CORPORATION or the ASSOCIATION to take pictures of
the COACH alone or together with others, for still photographs, motion pictures or
television, at such times as the CORPORATION or the ASSOCIATION may designate, and
no matter by whom taken may be used in any manner desired by either of them for
publicity or promotional purposes. (Underscoring supplied).
xxx
Even before the conclusion of the contract, Valenzona had already served GF Equity
under a verbal contract by coaching its team, Hills Brothers, in the 3 rd PBA Conference of
1987 where the team was runner-up.
Under the contract, GF Equity would pay Valenzona the sum of Thirty Five Thousand
Pesos (P35,000.00) monthly, net of taxes, and provide him with a service vehicle and
gasoline allowance.
While the employment period agreed upon was for two years commencing on January
1, 1988 and ending on December 31, 1989, the last sentence of paragraph 3 of the
contract carried the following condition:
3. x x x If at any time during the contract, the COACH, in the sole opinion of the
CORPORATION, fails to exhibit sufficient skill or competitive ability to coach the team, the
CORPORATION may terminate this contract. (Emphasis supplied)
Before affixing his signature on the contract, Valenzona consulted his lawyer who
pointed out the one-sidedness of the above-quoted last sentence of paragraph 3 thereof.
The caveatnotwithstanding, Valenzona still acceded to the terms of the contract because
he had trust and confidence in Uytengsu who had recommended him to the
management of GF Equity.
During his stint as Alaskas head coach, the team placed third both in the Open and
All-Filipino PBA Conferences in 1988.
Valenzona was later advised by the management of GF Equity by letter of September
26, 1988 of the termination of his services in this wise:

We regret to inform you that under the contract of employment dated

January 1, 1988 we are invoking our rights specified in paragraph 3.
You will continue to be paid until your outstanding balance which, as of
September 25, 1988, is P75,868.38 has been fully paid.
Please return the service vehicle to my office no later than September 30, 1988.
(Emphasis supplied)

[4]

Close to six years after the termination of his services, Valenzonas counsel, by letter
of July 30, 1994,[5] demanded from GF Equity payment of compensation arising from the
arbitrary and unilateral termination of his employment. GF Equity, however, refused the
claim.
Valenzona thus filed on September 26, 1994 before the Regional Trial Court of Manila
a complaint[6] against GF Equity for breach of contract with damages, ascribing bad faith,
malice and disregard to fairness and to the rights of the plaintiff by unilaterally and
arbitrarily pre-terminating the contract without just cause and legal and factual basis. He
prayed for the award of actual damages in the amount of P560,000.00 representing his
unpaid compensation from September 26, 1988 up to December 31, 1989, at the rate
of P35,000.00 a month; moral damages in the amount of P100,000.00; exemplary
damages in the amount of P50,000.00; attorneys fees in the amount of P100,000.00; and
costs of suit.
Before the trial court, Valenzona challenged the condition in paragraph 3 of the
contract as lacking the element of mutuality of contract, a clear transgression of Article
1308 of the New Civil Code, and reliance thereon, he contended, did not warrant his
unjustified and arbitrary dismissal.
GF Equity maintained, on the other hand, that it merely exercised its right under the
contract to pre-terminate Valenzonas employment due to incompetence. And it posited
that he was guilty of laches and, in any event, his complaint should have been instituted
before a labor arbiter.
The trial court, upholding the validity of the assailed provision of the contract,
dismissed, by decision of June 28, 1997,[7] the complaint of Valenzona who, it held, was
fully aware of entering into a bad bargain.
The Court of Appeals, before which Valenzona appealed, reversed the trial courts
decision, by decision of October 14, 2002, [8] and accordingly ordered GF Equity to pay
him damages.
In its decision, the appellate court held that the questioned provision in the contract
merely confers upon GF Equity the right to fire its coach upon a finding of inefficiency, a
valid reason within the ambit of its management prerogatives, subject to limitations
imposed
by
law,
although
not
expressly
stated
in
the
clause;
and the right granted in the contract can neither be saidto be immoral, unlawful, or contr
ary to public policy. It concluded, however, that while the mutuality of the clause is

evident, GF Equity abused its right by arbitrarily terminating . . . Valenzonas employment

and opened itself to a charge of bad faith. Hence, finding that Valenzonas claim for
damages is obviously . . . based on Art. 19 of the Civil Code 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.,
the appellate court awarded Valenzona the following damages, furnishing the
justification therefor:
. . . a) Compensatory damages representing his unearned income for 15 months. Actual
and compensatory damages are those recoverable because of a pecuniary loss in
business, trade, property, profession, job or occupation. As testified, his employment
contract provided a monthly income of PhP35,000, which he lost from September 26,
1988 up to December 31, 1989 as a consequence of his arbitrary dismissal; b) Moral
damages of PhP20,000. The act caused wounded feelings on the part of the
plaintiff. Moral damages is recoverable under Article 2220 and the chapter on Human
Relations of the Civil Code (Articles 1936) when a contract is breached in bad faith;
c) Exemplary damages of PhP20,000, by way of example or correction for the public
good; and d) When exemplary damages are awarded, attorneys fees can also be given.
We deem it just to grant 10% of the actual damages as attorneys fees. (Underscoring
supplied)
Hence, this petition at bar, GF Equity faulting the appellate court in
. . . CONCLUD[ING] WRONGLY FROM ESTABLISHED FACTS IN A MANNER VIOLATIVE OF
APPLICABLE LAWS AND ESTABLISHED JURISPRUDENCE.[9]
GF Equity argues that the appellate court committed a non-sequitur when it agreed
with the findings of fact of the lower court but reached an opposite conclusion. It avers
that the appellate court made itself a guardian of an otherwise intelligent individual wellversed in tactical maneuvers; that the freedom to enter into contracts is protected by
law, and the courts will not interfere therewith unless the contract is contrary to law,
morals, good customs, public policy or public order; that there was absolutely no reason
for the appellate court to have found bad faith on its part; and that, at all events,
Valenzona is guilty of laches for his unexplained inaction for six years.
Central to the resolution of the instant controversy is the determination of whether
the questioned last sentence of paragraph 3 is violative of the principle of mutuality of
contracts.
Mutuality is one of the characteristics of a contract, its validity or performance or
compliance of which cannot be left to the will of only one of the parties. [10] This is
enshrined in Article 1308 of the New Civil Code, whose underlying principle is
explained in Garcia v. Rita Legarda, Inc.,[11] viz:
Article 1308 of the New Civil Code reads as follows:

The contract must bind both contracting parties; its validity or compliance cannot be left
to the will of one of them.
The above legal provision is a virtual reproduction of Article 1256 of the old Civil Code
but it was so phrased as to emphasize the principle that the contract must
bind both parties. This, of course is based firstly, on the principle that obligations arising
from contracts have the force of law between the contracting parties and secondly, that
there must be mutuality between the parties based on their essential
equality to which is repugnant to have one party bound by the contract
leaving the other free therefrom (8 Manresa 556). Its ultimate purpose is to
render void a contract containing a condition which makes its fulfillment
dependent exclusively upon the uncontrolled will of one of the contracting
parties.
x x x (Emphasis, italics and underscoring supplied)
The ultimate purpose of the mutuality principle is thus to nullify a contract
containing
a
condition
which
makes
its
fulfillment
or
pre-termination
dependent exclusively upon theuncontrolled will of one of the contracting parties.
Not all contracts though which vest to one party their determination of validity or
compliance or the right to terminate the same are void for being violative of the
mutuality principle. Jurisprudence is replete with instances of cases [12] where this Court
upheld the legality of contracts which left their fulfillment or implementation to the will of
either of the parties. In these cases, however, there was a finding of the presence
of essential equality of the parties to the contracts, thus preventing the perpetration of
injustice on the weaker party.
In the case at bar, the contract incorporates in paragraph 3 the right of GF Equity to
pre-terminate the contract that if the coach, in the sole opinion of the corporation, fails
to exhibit sufficient skill or competitive ability to coach the team, the corporation may
terminate the contract. The assailed condition clearly transgresses the principle of
mutuality of contracts. It leaves the determination of whether Valenzona failed to exhibit
sufficient skill or competitive ability to coach Alaska team solely to the opinion of GF
Equity. Whether Valenzona indeed failed to exhibit the required skill or competitive ability
depended exclusively on the judgment of GF Equity. In other words, GF Equity was given
an unbridled prerogative to pre-terminate the contract irrespective of the soundness,
fairness or reasonableness, or even lack of basis of its opinion.
To sustain the validity of the assailed paragraph would open the gate for arbitrary
and illegal dismissals, for void contractual stipulations would be used as justification
therefor.
The assailed stipulation being violative of the mutuality principle underlying Article
1308 of the Civil Code, it is null and void.

The nullity of the stipulation notwithstanding, GF Equity was not precluded from the
right to pre-terminate the contract. The pre-termination must have legal basis, however,
if it is to be declared justified.
GF Equity failed, however, to advance any ground to justify the pre-termination. It
simply invoked the assailed provision which is null and void.
While GF Equitys act of pre-terminating Valenzonas services cannot be considered
willful as it was based on a stipulation, albeit declared void, it, in doing so, failed to
consider theabuse of rights principle enshrined in Art. 19 of the Civil Code 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 provision of law sets standards which must be observed in the exercise of ones
rights as well as in the performance of its duties, to wit: to act with justice; give every
one his due; and observe honesty and good faith.
Since the pre-termination of the contract was anchored on an illegal ground, hence,
contrary to law, and GF Equity negligently failed to provide legal basis for such pretermination, e.g.that Valenzona breached the contract by failing to discharge his duties
thereunder, GF Equity failed to exercise in a legitimate manner its right to pre-terminate
the contract, thereby abusing the right of Valenzona to thus entitle him to damages
under Art. 19 in relation to Article 20 of the Civil Code the latter of which provides:
Art. 20. Every person who, contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.
In De Guzman v. NLRC,[13] this Court quoted the following explanation of Tolentino
why it is impermissible to abuse our rights to prejudice others.
The exercise of a right ends when the right disappears, and it disappears when it is
abused, especially to the prejudice of others. The mask of a right without the spirit of
justice which gives it life is repugnant to the modern concept of social law. It cannot be
said that a person exercises a right when he unnecessarily prejudices another or offends
morals or good customs. Over and above the specific precepts of positive law are the
supreme norms of justice which the law develops and which are expressed in three
principles: honeste vivere,[14] alterum non laedere[15] and jus suum quique tribuere;[16] and
he who violates them violates the law. For this reason, it is not permissible to abuse our
rights to prejudice others.
The disquisition in Globe Mackay Cable and Radio Corporation v. Court of
Appeals[17] is just as relevant as it is illuminating on the present case. In that case, this
Court declared that even granting that the therein petitioners might have had the right
to dismiss the therein respondent from work, the abusive manner in which that right was
exercised amounted to a legal wrong for which the petitioners must be held liable.

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.[18] Emphasis and underscoring supplied).
As for GF Equitys defense of laches on account of Valenzonas invocation of his right
under the contract only after the lapse of six years, the same fails.
Laches has been defined as the failure or neglect for an unreasonable and
unexplained length of time to do that which by exercising due diligence, could or should
have been done earlier, thus giving rise to a presumption that the party entitled to assert
it either has abandoned or declined to assert it. It is not concerned with mere lapse of
time; the fact of delay, standing alone, is insufficient to constitute laches.[19]
Laches applies in equity, whereas prescription applies at law. Our courts are basically
courts of law, not courts of equity. Laches cannot thus be invoked to evade the
enforcement of an existing legal right. Equity, which has been aptly described as a
justice outside legality, is applied only in the absence of, and never against, statutory
law. Aequetas nunquam contravenit legis. Thus, where the claim was filed within the
statutory period of prescription, recovery therefor cannot be barred by laches. The
doctrine of laches should never be applied earlier than the expiration of time limited for
the commencement of actions at law, [20] unless, as a general rule, inexcusable delay in

asserting a right and acquiescense in existing conditions are proven. [21] GF Equity has not
proven, nay alleged, these.
Under Article 1144[22] of the New Civil Code, an action upon a written contract must
be brought within 10 years from the time the right of action accrues. Since the action
filed by Valenzona is an action for breach upon a written contract, his filing of the case 6
years from the date his cause of action arose was well within the prescriptive period,
hence, the defense of laches would not, under the circumstances, lie.
Consequently, Valenzona is entitled to recover actual damages his salary which he
should have received from the time his services were terminated up to the time the
employment contract expired.[23]
As for moral damages which the appellate court awarded, Article 2220 of the New
Civil Code allows such award to breaches of contract where the defendant acted
fraudulently or in bad faith. Malice or bad faith implies a conscious and intentional design
to do a wrongful act for a dishonest purpose or moral obliquity. It contemplates a state of
mind affirmatively operating with furtive design or ill-will. [24] Bad faith means a breach of
a known duty through some motive of interest or ill will. It must, however, be
substantiated by evidence. Bad faith under the law cannot be presumed, it must be
established by clear and convincing evidence.
As earlier stated, however, the pre-termination of the contract was not willful as GF
Equity based it on a provision therein which is void. Malice or bad faith cannot thus be
ascribed to GF Equity.
The unbroken jurisprudence is that in breach of contract cases where a party is not
shown to have acted fraudulently or in bad faith, liability for damages is limited to the
natural and probable consequences of the breach of the obligation which the parties had
foreseen or could reasonably have foreseen. The damages, however, do not include
moral damages.[25]
The award by the appellate court of moral damages must thus be set aside. And so
must the award of exemplary damages, absent a showing that GF Equity acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner.[26]
The award to Valenzona of attorneys fees must remain, however, GF Equity having
refused to pay the balance of Valenzonas salaries to which he was, under the facts and
circumstances of the case, entitled under the contract, thus compelling him to litigate to
protect his interest.[27]
WHEREFORE, the decision of the Court of Appeals dated October 14, 2002 is hereby
SET ASIDE and another rendered declaring the assailed provision of the contract NULL
AND VOID and ORDERING petitioner, GF Equity, to pay private respondent, Arturo
Valenzona, actual damages in the amount of P525,000.00 and attorneys fees in the
amount of P60,000.00.
Costs against petitioner.

SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.

Globe Mackay vs.CA 176 SCRA 778

GLOBE MACKAY CABLE AND RADIO CORP., and HERBERT C. HENDRY, petitioners vs. THE
HONORABLE COURT OF APPEALS and RESTITUTO M. TOBIAS, respondents.

FACTS: Private respondent Restituto M. Tobias was employed by petitioner Globe

Mackay in dual capacity as purchasing agent and administrative assistant to the
engineering operations manager. In 1972, the respondent discovered fraudulent
anomalies and transactions in the said corporation for which it lost several hundred
thousands of pesos. The private respondent reported to his superiors including Henry,
the petitioner. However, he was confronted by Hendry stating that Tobias was the
number one suspect. He was ordered to take a one week forced leave. When he returned
to work, Hendry called him crook and swindler, and left a scornful remark to the
Filipinos. The petitioners also charged six criminal cases against the respondentfive
cases of estafa and one for violating Article 290 of the RPC (Discovering Secrets through
Seizure of Correspondence). The petitioner also sent a poison letter to RETELCO causing
the respondent to be unemployed.

ISSUE: Whether or not the petitioners are liable for damages to the respondent.

HELD: Petitioners invoked the right of damnun absque injuria or the damage or loss
which does not constitute a violation of legal right or amount to a legal wrong is not
actionable. However, this is not applicable 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 be held liable.
The court awarded Tobias the following: Php 80, 000 as actual damages, Php 200, 000 as
moral damages, Php 20, 0000 as exemplary damages; Php 30, 000 as attorneys fees;
and, costs. Petition was denied and the decision of CA is AFFIRMED.

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

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 132344

February 17, 2000

UNIVERSITY OF THE EAST, petitioner,

vs.
ROMEO A. JADER, respondent.
YNARES-SANTIAGO, J.:
May an educational institution be held liable for damages for misleading a student into
believing that the latter had satisfied all the requirements for graduation when such is
not the case? This is the issue in the instant petition for review premised on the following
undisputed facts as summarized by the trial court and adopted by the Court of Appeals
(CA),1 to wit:
Plaintiff was enrolled in the defendants' College of Law from 1984 up to 1988. In
the first semester of his last year (School year 1987-1988), he failed to take the
regular final examination in Practice Court I for which he was given an incomplete
grade (Exhibits "2", also Exhibit "H"). He enrolled for the second semester as fourth
year law student (Exhibit "A") and on February 1, 1988 he filed an application for
the removal of the incomplete grade given him by Professor Carlos Ortega
(Exhibits "H-2", also Exhibit "2") which was approved by Dean Celedonio Tiongson
after payment of the required fee. He took the examination on March 28, 1988. On

May 30, 1988, Professor Carlos Ortega submitted his grade. It was a grade of five
(5). (Exhibits "H-4", also Exhibits "2-L", "2-N").1wphi1.nt
In the meantime, the Dean and the Faculty Members of the College of Law met to
deliberate on who among the fourth year students should be allowed to graduate.
The plaintiff's name appeared in the Tentative List of Candidates for graduation for
the Degree of Bachelor of Laws (LL.B) as of Second Semester (1987-1988) with the
following annotation:
JADER ROMEO A.
Def. Conflict of Laws x-1-87-88, Practice Court I Inc., 1-87-88 C-1 to submit
transcript with S.O. (Exhibits "3", "3-C-1", "3-C-2").
The 35th Investitures & Commencement Ceremonies for the candidates of
Bachelor of Laws was scheduled on the 16th of April 1988 at 3:00 o'clock in the
afternoon, and in the invitation for that occasion the name of the plaintiff appeared
as one of the candidates. (Exhibits "B", "B-6", "B-6-A"). At the foot of the list of the
names of the candidates there appeared however the following annotation:
This is a tentative list Degrees will be conferred upon these candidates who
satisfactorily complete requirements as stated in the University Bulletin and
as approved of the Department of Education, Culture and Sports (Exhibit "B7-A").
The plaintiff attended the investiture ceremonies at F. dela Cruz Quadrangle, U.E.,
Recto Campus, during the program of which he went up the stage when his name
was called, escorted by her (sic) mother and his eldest brother who assisted in
placing the Hood, and his Tassel was turned from left to right, and he was
thereafter handed by Dean Celedonio a rolled white sheet of paper symbolical of
the Law Diploma. His relatives took pictures of the occasion (Exhibits "C" to "C-6",
"D-3" to "D-11").
He tendered a blow-out that evening which was attended by neighbors, friends and
relatives who wished him good luck in the forthcoming bar examination. There
were pictures taken too during the blow-out (Exhibits "D" to "D-1").
He thereafter prepared himself for the bar examination. He took a leave of absence
without pay from his job from April 20, 1988 to September 30, 1988 (Exhibit "G")
and enrolled at the pre-bar review class in Far Eastern University. (Exhibits "F" to
"F-2"). Having learned of the deficiency he dropped his review class and was not
able to take the bar examination.2
Consequently, respondent sued petitioner for damages alleging that he suffered moral
shock, mental anguish, serious anxiety, besmirched reputation, wounded feelings and
sleepless nights when he was not able to take the 1988 bar examinations arising from
the latter's negligence. He prayed for an award of moral and exemplary damages,
unrealized income, attorney's fees, and costs of suit.

In its answer with counterclaim, petitioner denied liability arguing mainly that it never
led respondent to believe that he completed the requirements for a Bachelor of Laws
degree when his name was included in the tentative list of graduating students. After
trial, the lower court rendered judgment as follows:
WHEREFORE, in view of the foregoing judgment is hereby rendered in favor of the
plaintiff and against the defendant ordering the latter to pay plaintiff the sum of
THIRTY FIVE THOUSAND FOUR HUNDRED SEVENTY PESOS (P35,470.00) with legal
rate of interest from the filing of the complaint until fully paid, the amount of FIVE
THOUSAND PESOS (P5,000.00) as attorney's fees and the cost of suit.
Defendant's counterclaim is, for lack of merit, hereby dismissed.
SO ORDERED.3
which on appeal by both parties was affirmed by the Court of Appeals (CA) with
modification. The dispositive portion of the CA decision reads:
WHEREFORE, in the light of the foregoing, the lower Court's Decision is hereby
AFFIRMED with the MODIFICATION that defendant-appellee, in addition to the sum
adjudged by the lower court in favor of plaintiff-appellant, is also ORDERED to pay
plaintiff-appellant the amount of FIFTY THOUSAND (P50,000.00) PESOS for moral
damages. Costs against defendant-appellee.
SO ORDERED.4
Upon the denial of its motion for reconsideration, petitioner UE elevated the case to this
Court on a petition for review under Rule 45 of the Rules of Court, arguing that it has no
liability to respondent Romeo A. Jader, considering that the proximate and immediate
cause of the alleged damages incurred by the latter arose out of his own negligence in
not verifying from the professor concerned the result of his removal exam.
The petition lacks merit.
When a student is enrolled in any educational or learning institution, a contract of
education is entered into between said institution and the student. The professors,
teachers or instructors hired by the school are considered merely as agents and
administrators tasked to perform the school's commitment under the contract. Since the
contracting parties are the school and the student, the latter is not duty-bound to deal
with the former's agents, such as the professors with respect to the status or result of his
grades, although nothing prevents either professors or students from sharing with each
other such information. The Court takes judicial notice of the traditional practice in
educational institutions wherein the professor directly furnishes his/her students their
grades. It is the contractual obligation of the school to timely inform and furnish
sufficient notice and information to each and every student as to whether he or she had
already complied with all the requirements for the conferment of a degree or whether
they would be included among those who will graduate. Although commencement
exercises are but a formal ceremony, it nonetheless is not an ordinary occasion, since

such ceremony is the educational institution's way of announcing to the whole world that
the students included in the list of those who will be conferred a degree during the
baccalaureate ceremony have satisfied all the requirements for such degree. Prior or
subsequent to the ceremony, the school has the obligation to promptly inform the
student of any problem involving the latter's grades and performance and also most
importantly, of the procedures for remedying the same.
Petitioner, in belatedly informing respondent of the result of the removal examination,
particularly at a time when he had already commenced preparing for the bar exams,
cannot be said to have acted in good faith. Absence of good faith must be sufficiently
established for a successful prosecution by the aggrieved party in a suit for abuse of
right under Article 19 of the Civil Code. Good faith connotes an honest intention to
abstain from taking undue advantage of another, even though the forms and
technicalities of the law, together with the absence of all information or belief of facts,
would render the transaction unconscientious.5 It is the school that has access to those
information and it is only the school that can compel its professors to act and comply
with its rules, regulations and policies with respect to the computation and the prompt
submission of grades. Students do not exercise control, much less influence, over the
way an educational institution should run its affairs, particularly in disciplining its
professors and teachers and ensuring their compliance with the school's rules and
orders. Being the party that hired them, it is the school that exercises general
supervision and exclusive control over the professors with respect to the submission of
reports involving the students' standing. Exclusive control means that no other person or
entity had any control over the instrumentality which caused the damage or injury. 6
The college dean is the senior officer responsible for the operation of an academic
program, enforcement of rules and regulations, and the supervision of faculty and
student services.7 He must see to it that his own professors and teachers, regardless of
their status or position outside of the university, must comply with the rules set by the
latter. The negligent act of a professor who fails to observe the rules of the school, for
instance by not promptly submitting a student's grade, is not only imputable to the
professor but is an act of the school, being his employer.
Considering further, that the institution of learning involved herein is a university which
is engaged in legal education, it should have practiced what it inculcates in its students,
more specifically the principle of good dealings enshrined in Articles 19 and 20 of the
Civil Code which states:
Art. 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good
faith.
Art. 20. Every person who, contrary to law, wilfully or negligently causes damage
to another, shall indemnify the latter for the same.
Art. 19 was intended to expand the concept of torts by granting adequate legal remedy
for the untold number of moral wrongs which is impossible for human foresight to
provide specifically in statutory law.8 In civilized society, men must be able to assume

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

his right, that is, when he acts with prudence and in good faith, but not when he acts
with negligence or abuse.15
However, while petitioner was guilty of negligence and thus liable to respondent for the
latter's actual damages, we hold that respondent should not have been awarded moral
damages. We do not agree with the Court of Appeals' findings that respondent suffered
shock, trauma and pain when he was informed that he could not graduate and will not be
allowed to take the bar examinations. At the very least, it behooved on respondent to
verify for himself whether he has completed all necessary requirements to be eligible for
the bar examinations. As a senior law student, respondent should have been responsible
enough to ensure that all his affairs, specifically those pertaining to his academic
achievement, are in order. Given these considerations, we fail to see how respondent
could have suffered untold embarrassment in attending the graduation rites, enrolling in
the bar review classes and not being able to take the bar exams. If respondent was
indeed humiliated by his failure to take the bar, he brought this upon himself by not
verifying if he has satisfied all the requirements including his school records, before
preparing himself for the bar examination. Certainly, taking the bar examinations does
not only entail a mental preparation on the subjects thereof; there are also prerequisites
of documentation and submission of requirements which the prospective examinee must
meet.
WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED with
MODIFICATION. Petitioner is ORDERED to PAY respondent the sum of Thirty-five Thousand
Four Hundred Seventy Pesos (P35,470.00), with legal interest of 6% per
annum computed from the date of filing of the complaint until fully paid; the amount of
Five Thousand Pesos (P5,000.00) as attorney's fees; and the costs of the suit. The award
of moral damages is DELEIED.1wphi1.nt
SO ORDERED.
Davide, Jr., C.J., Kapunan and Pardo, JJ., concur.
Puno, J., took no part.

PRINCIPLE OF ABUSE OF RIGHTSUNIVERSITY OF THE EAST vs. ROMEO

A. JADERG.R. No. 132344 February 17, 2000Facts:
Romeo Jader graduated at UE College of law from 1984-19988. During his last year,
1stsemester, he failed to take the regular final examination in Practical Court 1where he
was given anincomplete grade remarks. He filed an application for removal of the
incomplete grade given byProf. Carlos Ortega on February 1, 1988 which was approved
by Dean Celedonio Tiongson afterthe payment of required fees. He took the exam
on March 28, 1988 and on May 30, 1988 theprofessor gave him a grade of 5.The
commencement exercise of UE College of law was held April16, 1988, 3PM. In
the invitation, his name appeared. In preparation for the bar exam, he took aleave of
absence from work from April 20- Sept 30, 1988. He had his pre-bar class review in
FEU.Upon learning of such deficiency, he dropped his review classes and was not able to
take the barexam. Jader sued UE for damages resulting to moral shock, mental anguish,
and serious anxiety,besmirched reputation, wounded feelings, and sleepless nights when
he was not able to take the
1988 bar examinations due to UEs negligence.
Issue:
Whether UE should be held liable for misleading a student into believing JADER satisfied
all the requirements for graduation when such is not the case. Can he claim moral
damages?
Ruling:
Supreme Court held that petitioner was guilty of negligence and this liable to respondent
for
the latters actual
damages. Educational institutions are duty-bound to inform the students of
theiracademic status and not wait for the latter to inquire from the former. However,
respondent shouldnot have been awarded moral damages though JADER suffered shock,
trauma, and pain when
he was informed that he could not graduate and will not be allowed to take the bar exam
inations as
what Court of Appeals held because its also respondents duty to verify for
himself whether he has
completed all necessary requirements to be eligible for the bar examinations. As a senior
law student,he should have been responsible in ensuring that all his affairs specifically
those in relation with hisacademic achievement are in order.
Before taking the bar examinations, it doesnt only entail

amental preparation on the subjects but there are other prerequisites such as
documentation andsubmission of requirements which prospective examinee must meet.
Wherefore, the assaileddecision of the Court of Appeals is affirmed with modification.
Petitioner is ordered to payrespondent the sum of Thirty-five Thousand Four Hundred
Seventy Pesos (P35,470.00), with legalinterest of 6% per annum computed from the date
of filing of the complaint until fully paid; theamount of Five Thousand Pesos (P5,000.00)
as attorney's fees; and the costs of the suit. The awardof moral damages is deleted

FIRST DIVISION
ALLAN C. GO, doing business G.R. No. 164703
under the name and style ACG
Express Liner,
Petitioner,
- versus MORTIMER F. CORDERO,
Respondent.
x-----------------------------------------x
MORTIMER F. CORDERO,
Petitioner,

G.R. No. 164747

Present:

- versus -

PUNO, C.J., Chairperson,

CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
ALLAN C. GO, doing business VILLARAMA, JR., JJ.
underthe name and style
ACG Express Liner, FELIPE M. Promulgated:
LANDICHO and VINCENT D.
TECSON,
May 4, 2010
Respondents.
x-----------------------------------------------------------------------------------------x

DECISION
VILLARAMA, JR., J.:
For review is the Decision [1] dated March 16, 2004 as modified by the Resolution [2] dated
July 22, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 69113, which affirmed with
modifications the Decision[3] dated May 31, 2000 of the Regional Trial Court (RTC)
of Quezon City, Branch 85 in Civil Case No. 98-35332.
The factual antecedents:
Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation
(Pamana), ventured into the business of marketing inter-island passenger vessels.After
contacting various overseas fast ferry manufacturers from all over the world, he came to
meet Tony Robinson, an Australian national based in Brisbane, Australia, who is the
Managing Director of Aluminium Fast Ferries Australia (AFFA).
Between June and August 1997, Robinson signed documents appointing Cordero as the
exclusive distributor of AFFA catamaran and other fast ferry vessels in the Philippines.As
such exclusive distributor, Cordero offered for sale to prospective buyers the 25-meter
Aluminium Passenger catamaran known as the SEACAT 25.[4]
After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go who is
the owner/operator of ACG Express Liner of Cebu City, a single proprietorship, Cordero
was able to close a deal for the purchase of two (2) SEACAT 25 as evidenced by the
Memorandum of Agreement dated August 7, 1997.[5] Accordingly, the parties executed
Shipbuilding Contract No. 7825 for one (1) high-speed catamaran (SEACAT 25) for the
price of US$1,465,512.00.[6] Per agreement between Robinson and Cordero, the latter
shall receive commissions totalling US$328,742.00, or 22.43% of the purchase price,
from the sale of each vessel.[7]
Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and on one (1)
occasion even accompanied Go and his family and Landicho, to monitor the progress of
the building of the vessel. He shouldered all the expenses for airfare, food, hotel
accommodations, transportation and entertainment during these trips. He also spent for
long distance telephone calls to communicate regularly with Robinson, Go, Tecson and
Landicho.
However, Cordero later discovered that Go was dealing directly with Robinson when he
was informed by Dennis Padua of Wartsila Philippines that Go was canvassing for a
second catamaran engine from their company which provided the ship engine for the
first SEACAT 25. Padua told Cordero that Go instructed him to fax the requested
quotation of the second engine to the Park Royal Hotel in Brisbane where Go was then

staying. Cordero tried to contact Go and Landicho to confirm the matter but they were
nowhere to be found, while Robinson refused to answer his calls. Cordero immediately
flew to Brisbane to clarify matters with Robinson, only to find out that Go and Landicho
were already there in Brisbane negotiating for the sale of the second SEACAT 25. Despite
repeated follow-up calls, no explanation was given by Robinson, Go, Landicho and Tecson
who even made Cordero believe there would be no further sale between AFFA and ACG
Express Liner.
In a handwritten letter dated June 24, 1998, Cordero informed Go that such act of
dealing directly with Robinson violated his exclusive distributorship and demanded that
they respect the same, without prejudice to legal action against him and Robinson should
they fail to heed the same.[8] Corderos lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law
firm, also wrote ACG Express Liner assailing the fraudulent actuations and
misrepresentations committed by Go in connivance with his lawyers (Landicho and
Tecson) in breach of Corderos exclusive distributorship appointment. [9]
Having been apprised of Corderos demand letter, Thyne & Macartney, the lawyer of AFFA
and Robinson, faxed a letter to ACCRA law firm asserting that the appointment of
Cordero as AFFAs distributor was for the purpose of one (1) transaction only, that is, the
purchase of a high-speed catamaran vessel by ACG Express Liner in August 1997. The
letter further stated that Cordero was offered the exclusive distributorship, the terms of
which were contained in a draft agreement which Cordero allegedly failed to return to
AFFA within a reasonable time, and which offer is already being revoked by AFFA. [10]
As to the response of Go, Landicho and Tecson to his demand letter, Cordero testified
before the trial court that on the same day, Landicho, acting on behalf of Go, talked to
him over the telephone and offered to amicably settle their dispute. Tecson and Landicho
offered to convince Go to honor his exclusive distributorship with AFFA and to purchase
all vessels for ACG Express Liner through him for the next three (3) years. In an effort to
amicably settle the matter, Landicho, acting in behalf of Go, set up a meeting with
Cordero on June 29, 1998 between 9:30 p.m. to 10:30 p.m. at the Mactan Island Resort
Hotel lobby. On said date, however, only Landicho and Tecson came and no reason was
given for Gos absence. Tecson and Landicho proposed that they will convince Go to pay
him US$1,500,000.00 on the condition that they will get a cut of 20%. And so it was
agreed between him, Landicho and Tecson that the latter would give him a weekly status
report and that the matter will be settled in three (3) to four (4) weeks and neither party
will file an action against each other until a final report on the proposed settlement. No
such report was made by either Tecson or Landicho who, it turned out, had no intention
to do so and were just buying time as the catamaran vessel was due to arrive from
Australia. Cordero then filed a complaint with the Bureau of Customs (BOC) to prohibit
the
entry
of
SEACAT
25
from Australia based
on
misdeclaration
and
undervaluation. Consequently, an Alert Order was issued by Acting BOC Commissioner

Nelson Tan for the vessel which in fact arrived on July 17, 1998. Cordero claimed that Go
and Robinson had conspired to undervalue the vessel by around US$500,000.00. [11]
On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to hold
Robinson, Go, Tecson and Landicho liable jointly and solidarily for conniving and
conspiring together in violating his exclusive distributorship in bad faith and wanton
disregard of his rights, thus depriving him of his due commissions (balance of unpaid
commission from the sale of the first vessel in the amount of US$31,522.01 and unpaid
commission
for
the
sale
of
the
second
vessel
in
the
amount
of
US$328,742.00) and causing
him
actual,
moral
and
exemplary
damages,
including P800,000.00 representing expenses for airplane travel to Australia,
telecommunications bills and entertainment, on account of AFFAs untimely cancellation
of the exclusive distributorship agreement. Cordero also prayed for the award of moral
and exemplary damages, as well as attorneys fees and litigation expenses.[12]
Robinson filed a motion to dismiss grounded on lack of jurisdiction over his person and
failure to state a cause of action, asserting that there was no act committed in violation
of the distributorship agreement. Said motion was denied by the trial court on December
20, 1999. Robinson was likewise declared in default for failure to file his answer within
the period granted by the trial court. [13] As for Go and Tecson, their motion to dismiss
based on failure to state a cause of action was likewise denied by the trial court
on February 26, 1999.[14] Subsequently, they filed their Answer denying that they have
anything to do with the termination by AFFA of Corderos authority as exclusive distributor
in thePhilippines. On the contrary, they averred it was Cordero who stopped
communicating with Go in connection with the purchase of the first vessel from AFFA and
was not doing his part in making progress status reports and airing the clients
grievances to his principal, AFFA, such that Go engaged the services of Landicho to fly to
Australia and attend to the documents needed for shipment of the vessel to the
Philippines. As to the inquiry for the Philippine price for a Wartsila ship engine for AFFAs
other on-going vessel construction, this was merely requested by Robinson but which
Cordero misinterpreted as indication that Go was buying a second vessel. Moreover,
Landicho and Tecson had no transaction whatsoever with Cordero who had no document
to show any such shipbuilding contract. As to the supposed meeting to settle their
dispute, this was due to the malicious demand of Cordero to be given US$3,000,000 as
otherwise he will expose in the media the alleged undervaluation of the vessel with the
BOC. In any case, Cordero no longer had cause of action for his commission for the sale
of the second vessel under the memorandum of agreement dated August 7,
1997 considering the termination of his authority by AFFAs lawyers on June 26, 1998.[15]
Pre-trial was reset twice to afford the parties opportunity to reach a settlement. However,
on motion filed by Cordero through counsel, the trial court reconsidered the resetting of
the pre-trial to another date for the third time as requested by Go, Tecson and Landicho,
in view of the latters failure to appear at the pre-trial conference on January 7, 2000

despite due notice. The trial court further confirmed that said defendants misled the trial
court in moving for continuance during the pre-trial conference held on December 10,
1999, purportedly to go abroad for the holiday season when in truth a Hold-Departure
Order had been issued against them.[16] Accordingly, plaintiff Cordero was allowed to
present his evidence ex parte.
Corderos testimony regarding his transaction with defendants Go, Landicho and Tecson,
and the latters offer of settlement, was corroborated by his counsel who also took the
witness stand. Further, documentary evidence including photographs taken of the June
29, 1998 meeting with Landicho, Tecson and Atty. Tabujara at Shangri-las Mactan Island
Resort, photographs taken in Brisbane showing Cordero, Go with his family, Robinson and
Landicho, and also various documents, communications, vouchers and bank transmittals
were presented to prove that: (1) Cordero was properly authorized and actually
transacted in behalf of AFFA as exclusive distributor in the Philippines; (2) Cordero spent
considerable sums of money in pursuance of the contract with Go and ACG Express
Liner; and (3) AFFA through Robinson paid Cordero his commissions from each scheduled
payment made by Go for the first SEACAT 25 purchased from AFFA pursuant to
Shipbuilding Contract No. 7825.[17]
On May 31, 2000, the trial court rendered its decision, the dispositive portion of which
reads as follows:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in
favor of Plaintiff and against defendants Allan C. Go, Tony Robinson, Felipe
Landicho, and Vincent Tecson.As prayed for, defendants are hereby ordered
to pay Plaintiff jointly and solidarily, the following:
1. On the First Cause of Action, the sum total of SIXTEEN MILLION TWO
HUNDRED NINETY ONE THOUSAND THREE HUNDRED FIFTY TWO AND
FORTY THREE CENTAVOS (P16,291,352.43) as actual damages with
legal interest from 25 June 1998 until fully paid;
2. On the Second Cause of Action, the sum of ONE MILLION PESOS
(P1,000,000.00) as moral damages;
3. On the Third Cause of Action, the sum of ONE MILLION PESOS
(P1,000,000.00) as exemplary damages; and
4. On the Fourth Cause of Action, the sum of ONE MILLION PESOS
(P1,000,000.00) as attorneys fees;
Costs against the defendants.
SO ORDERED.[18]

Go, Robinson, Landicho and Tecson filed a motion for new trial, claiming that they have
been unduly prejudiced by the negligence of their counsel who was allegedly unaware
that the pre-trial conference on January 28, 2000 did not push through for the reason
that Cordero was then allowed to present his evidence ex-parte, as he had assumed that
the said ex-parte hearing was being conducted only against Robinson who was earlier
declared in default.[19] In its Order dated July 28, 2000, the trial court denied the motion
for new trial.[20] In the same order, Corderos motion for execution pending appeal was
granted. Defendants moved to reconsider the said order insofar as it granted the motion
for execution pending appeal.[21] On August 8, 2000, they filed a notice of appeal.[22]
On August 18, 2000, the trial court denied the motion for reconsideration and on August
21, 2000, the writ of execution pending appeal was issued. [23] Meanwhile, the notice of
appeal was denied for failure to pay the appellate court docket fee within the prescribed
period.[24] Defendants filed a motion for reconsideration and to transmit the case records
to the CA.[25]
On September 29, 2000, the CA issued a temporary restraining order at the instance of
defendants in the certiorari case they filed with said court docketed as CA-G.R. SP No.
60354 questioning the execution orders issued by the trial court. Consequently, as
requested by the defendants, the trial court recalled and set aside its November 6, 2000
Order granting the ex-parte motion for release of garnished funds, cancelled the
scheduled public auction sale of levied real properties, and denied the ex-parte Motion
for Break-Open Order and Ex-Parte Motion for Encashment of Check filed by Cordero.
[26]
On November 29, 2000, the trial court reconsidered its Order dated August 21,
2000 denying due course to the notice of appeal and forthwith directed the transmittal of
the records to the CA.[27]
On January 29, 2001, the CA rendered judgment granting the petition for certiorari in CAG.R. SP No. 60354 and setting aside the trial courts orders of execution pending
appeal.Cordero appealed the said judgment in a petition for review filed with this Court
which was eventually denied under our Decision dated September 17, 2002.[28]
On March 16, 2004, the CA in CA-G.R. CV No. 69113 affirmed the trial court (1) in
allowing Cordero to present his evidence ex-parte after the unjustified failure of
appellants (Go, Tecson and Landicho) to appear at the pre-trial conference despite due
notice; (2) in finding that it was Cordero and not Pamana who was appointed by AFFA as
the exclusive distributor in the Philippines of its SEACAT 25 and other fast ferry vessels,
which is not limited to the sale of one (1) such catamaran to Go on August 7, 1997; and
(3) in finding that Cordero is entitled to a commission per vessel sold for AFFA through
his efforts in the amount equivalent to 22.43% of the price of each vessel or
US$328,742.00, and with payments of US$297,219.91 having been made to Cordero,
there remained a balance of US$31,522.09 still due to him. The CA sustained the trial
court in ruling that Cordero is entitled to damages for the breach of his exclusive

distributorship agreement with AFFA. However, it held that Cordero is entitled only to
commission for the sale of the first catamaran obtained through his efforts with the
remaining unpaid sum of US$31,522.09 or P1,355,449.90 (on the basis of
US$1.00=P43.00 rate) with interest at 6% per annum from the time of the filing of the
complaint until the same is fully paid. As to the P800,000.00 representing expenses
incurred by Cordero for transportation, phone bills, entertainment, food and lodging, the
CA declared there was no basis for such award, the same being the logical and necessary
consequences of the exclusive distributorship agreement which are normal in the field of
sales and distribution, and the expenditures having redounded to the benefit of the
distributor (Cordero).
On the amounts awarded by the trial court as moral and exemplary damages, as
well as attorneys fees, the CA reduced the same to P500,000.00, P300,000.00
andP50,000.00, respectively. Appellants were held solidarily liable pursuant to the
provisions of Article 1207 in relation to Articles 19, 20, 21 and 22 of the New Civil
Code. The CA further ruled that no error was committed by the trial court in denying
their motion for new trial, which said court found to be pro forma and did not raise any
substantial matter as to warrant the conduct of another trial.
By Resolution dated July 22, 2004, the CA denied the motions for reconsideration
respectively filed by the appellants and appellee, and affirmed the Decision dated March
16, 2004 with the sole modification that the legal interest of 6% per annum shall start to
run from June 24, 1998 until the finality of the decision, and the rate of 12% interest per
annum shall apply once the decision becomes final and executory until the judgment has
been satisfied.
The case before us is a consolidation of the petitions for review under Rule
45 separately filed by Go (G.R. No. 164703) and Cordero (G.R. No. 164747) in which
petitioners raised the following arguments:
G.R. No. 164703
(Petitioner Go)
I. THE HONORABLE COURT OF APPEALS DISREGARDED THE RULES OF COURT
AND PERTINENT JURISPRUDENCE AND ACTED WITH GRAVE ABUSE OF
DISCRETION IN NOT RULING THAT THE RESPONDENT IS NOT THE REAL
PARTY-IN-INTEREST AND IN NOT DISMISSING THE INSTANT CASE ON THE
GROUND OF LACK OF CAUSE OF ACTION;
II. THE HONORABLE COURT OF APPEALS IGNORED THE LAW AND
JURISPRUDENCE AND ACTED WITH GRAVE ABUSE OF DISCRETION IN
HOLDING HEREIN PETITIONER RESPONSIBLE FOR THE BREACH IN THE
ALLEGED EXCLUSIVE DISTRIBUTORSHIP AGREEMENT WITH ALUMINIUM
FAST FERRIES AUSTRALIA;

III. THE HONORABLE APPELLATE COURT MISAPPLIED THE LAW AND ACTED
WITH GRAVE ABUSE OF DISCRETION IN FINDING PETITIONER LIABLE IN
SOLIDUMWITH THE CO-DEFENDANTS WITH RESPECT TO THE CLAIMS OF
RESPONDENT;
IV. THE HONORABLE COURT OF APPEALS MISAPPLIED LAW AND
JURISPRUDENCE AND GRAVELY ABUSED ITS DISCRETION WHEN IT
FOUND PETITIONER LIABLE FOR UNPAID COMMISSIONS, DAMAGES,
ATTORNEYS FEES, AND LITIGATION EXPENSES; and
V. THE HONORABLE APPELLATE COURT ACTED CONTRARY TO LAW AND
JURISPRUDENCE AND GRAVELY ABUSED ITS DISCRETION WHEN IT
EFFECTIVELY DEPRIVED HEREIN PETITIONER OF HIS RIGHT TO DUE
PROCESS BY AFFIRMING THE LOWER COURTS DENIAL OF PETITIONERS
MOTION FOR NEW TRIAL.[29]
G.R. No. 164747
(Petitioner Cordero)
I.
THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE JUDGMENT OF THE
TRIAL COURT AWARDING PETITIONER ACTUAL DAMAGES FOR HIS
COMMISSION FOR THE SALE OF THE SECOND VESSEL, SINCE THERE IS
SUFFICIENT EVIDENCE ON RECORD WHICH PROVES THAT THERE WAS A
SECOND SALE OF A VESSEL.
A. THE
MEMORANDUM OF AGREEMENT DATED 7 AUGUST
1997 PROVIDES THAT RESPONDENT GO WAS CONTRACTUALLY
BOUND TO BUY TWO (2) VESSELS FROM AFFA.
B.
RESPONDENT
GOS
POSITION
PAPER
AND
COUNTERAFFIDAVIT/POSITION PAPER THAT WERE FILED BEFORE THE BUREAU
OF CUSTOMS, ADMITS UNDER OATH THAT HE HAD INDEED
PURCHASED A SECOND VESSEL FROM AFFA.
C. RESPONDENTS ADMITTED IN THEIR PRE-TRIAL BRIEF THAT THEY
HAD PURCHASED A SECOND VESSEL.
II.
THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER IS NOT
ENTITLED TO HIS COMMISSIONS FOR THE PURCHASE OF A SECOND VESSEL,
SINCE IT WAS PETITIONERS EFFORTS WHICH ACTUALLY FACILITATED AND SETUP THE TRANSACTION FOR RESPONDENTS.
III.
THE COURT OF APPEALS ERRED IN NOT IMPOSING THE PROPER LEGAL
INTEREST RATE ON RESPONDENTS UNPAID OBLIGATION WHICH SHOULD BE

TWELVE PERCENT (12%) FROM THE TIME OF THE BREACH OF THE

OBLIGATION.

IV.
THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE ORIGINAL AMOUNT
OF CONSEQUENTIAL DAMAGES AWARDED TO PETITIONER BY THE TRIAL
COURT CONSIDERING THE BAD FAITH AND FRAUDULENT CONDUCT OF
RESPONDENTS IN MISAPPROPRIATING THE MONEY OF PETITIONER. [30]

The controversy boils down to two (2) main issues: (1) whether petitioner Cordero has
the legal personality to sue the respondents for breach of contract; and (2) whether the
respondents may be held liable for damages to Cordero for his unpaid commissions and
termination of his exclusive distributorship appointment by the principal, AFFA.

I. Real Party-in-Interest
First, on the issue of whether the case had been filed by the real party-in-interest as
required by Section 2, Rule 3 of the Rules of Court, which defines such party as the one
(1) to be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit. The purposes of this provision are: 1) to prevent the prosecution of
actions by persons without any right, title or interest in the case; 2) to require that the
actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a
multiplicity of suits; and 4) to discourage litigation and keep it within certain bounds,
pursuant to sound public policy. [31] A case is dismissible for lack of personality to sue
upon proof that the plaintiff is not the real party-in-interest, hence grounded on failure to
state a cause of action.[32]
On this issue, we agree with the CA in ruling that it was Cordero and not Pamana who is
the exclusive distributor of AFFA in the Philippines as shown by the Certification
datedJune 1, 1997 issued by Tony Robinson.[33] Petitioner Go mentions the following
documents also signed by respondent Robinson which state that Pamana Marketing
Corporation represented by Mr. Mortimer F. Cordero was actually the exclusive
distributor: (1) letter dated 1 June 1997 [34]; (2) certification dated 5 August 1997 [35]; and
(3) letter dated 5 August 1997 addressed to petitioner Cordero concerning commissions
to be paid to Pamana Marketing Corporation.[36] Such apparent inconsistency in naming
AFFAs exclusive distributor in the Philippines is of no moment. For all intents and
purposes, Robinson and AFFA dealt only with Cordero who alone made decisions in the
performance of the exclusive distributorship, as with other clients to whom he had
similarly offered AFFAs fast ferry vessels. Moreover, the stipulated commissions from
each progress payments made by Go were directly paid by Robinson to Cordero.

[37]

Respondents Landicho and Tecson were only too aware of Corderos authority as the
person who was appointed and acted as exclusive distributor of AFFA, which can be
gleaned from their act of immediately furnishing him with copies of bank transmittals
everytime Go remits payment to Robinson, who in turn transfers a portion of funds
received to the bank account of Cordero in the Philippines as his commission. Out of
these partial payments of his commission, Cordero would still give Landicho and Tecson
their respective commission, or cuts from his own commission. Respondents Landicho
and Tecson failed to refute the evidence submitted by Cordero consisting of receipts
signed by them. Said amounts were apart from the earlier expenses shouldered by
Cordero for Landichos airline tickets, transportation, food and hotel accommodations for
the trip to Australia.[38]
Moreover, petitioner Go, Landicho and Tecson never raised petitioner Corderos lack of
personality to sue on behalf of Pamana, [39] and did so only before the CA when they
contended that it is Pamana and not Cordero, who was appointed and acted as exclusive
distributor for AFFA.[40] It was Robinson who argued in support of his motion to dismiss
that as far as said defendant is concerned, the real party plaintiff appears to be Pamana,
against the real party defendant which is AFFA. [41] As already mentioned, the trial court
denied the motion to dismiss filed by Robinson.
We find no error committed by the trial court in overruling Robinsons objection
over the improper resort to summons by publication upon a foreign national like him and
in an action in personam, notwithstanding that he raised it in a special appearance
specifically raising the issue of lack of jurisdiction over his person. Courts acquire
jurisdiction over the plaintiffs upon the filing of the complaint, while jurisdiction over the
defendants in a civil case is acquired either through the service of summons upon them
in the manner required by law or through their voluntary appearance in court and their
submission to its authority.[42] A party who makes a special appearance in court
challenging the jurisdiction of said court based on the ground of invalid service of
summons is not deemed to have submitted himself to the jurisdiction of the court. [43]
In this case, however, although the Motion to Dismiss filed by Robinson specifically
stated as one (1) of the grounds the lack of personal jurisdiction, it must be noted that
he had earlier filed a Motion for Time to file an appropriate responsive pleading even
beyond the time provided in the summons by publication. [44] Such motion did not state
that it was a conditional appearance entered to question the regularity of the service of
summons, but an appearance submitting to the jurisdiction of the court by
acknowledging the summons by publication issued by the court and praying for
additional time to file a responsive pleading. Consequently, Robinson having
acknowledged the summons by publication and also having invoked the jurisdiction of
the trial court to secure affirmative relief in his motion for additional time, he effectively
submitted voluntarily to the trial courts jurisdiction. He is now estopped from asserting
otherwise, even before this Court.[45]

II. Breach of Exclusive Distributorship,

Contractual Interference and
Respondents Liability for Damages
In Yu v. Court of Appeals,[46] this Court ruled that the right to perform an exclusive
distributorship agreement and to reap the profits resulting from such performance are
proprietary rights which a party may protect. Thus, injunction is the appropriate remedy
to prevent a wrongful interference with contracts by strangers to such contracts where
the legal remedy is insufficient and the resulting injury is irreparable. In that case, the
former dealer of the same goods purchased the merchandise from the manufacturer
in Englandthrough a trading firm in West Germany and sold these in the Philippines. We
held that the rights granted to the petitioner under the exclusive distributorship
agreement may not be diminished nor rendered illusory by the expedient act of utilizing
or interposing a person or firm to obtain goods for which the exclusive distributorship
was conceptualized, at the expense of the sole authorized distributor. [47]
In the case at bar, it was established that petitioner Cordero was not paid the
balance of his commission by respondent Robinson. From the time petitioner Go and
respondent Landicho directly dealt with respondent Robinson in Brisbane, and ceased
communicating through petitioner Cordero as the exclusive distributor of AFFA in the
Philippines, Cordero was no longer informed of payments remitted to AFFA in Brisbane. In
other words, Cordero had clearly been cut off from the transaction until the arrival of the
first SEACAT 25 which was sold through his efforts. When Cordero complained to Go,
Robinson, Landicho and Tecson about their acts prejudicial to his rights and demanded
that they respect his exclusive distributorship, Go simply let his lawyers led by Landicho
and Tecson handle the matter and tried to settle it by promising to pay a certain amount
and to purchase high-speed catamarans through Cordero. However, Cordero was not
paid anything and worse, AFFA through its lawyer in Australia even terminated his
exclusive dealership insisting that his services were engaged for only one (1) transaction,
that is, the purchase of the first SEACAT 25 in August 1997.
Petitioner Go argues that unlike in Yu v. Court of Appeals[48] there is no conclusive
proof adduced by petitioner Cordero that they actually purchased a second SEACAT 25
directly from AFFA and hence there was no violation of the exclusive distributorship
agreement. Further, he contends that the CA gravely abused its discretion in holding
them solidarily liable to Cordero, relying on Articles 1207, 19 and 21 of the Civil
Code despite absence of evidence, documentary or testimonial, showing that they
conspired to defeat the very purpose of the exclusive distributorship agreement.[49]
We find that contrary to the claims of petitioner Cordero, there was indeed no
sufficient evidence that respondents actually purchased a second SEACAT 25 directly
from AFFA. But this circumstance will not absolve respondents from liability for invading

Corderos rights under the exclusive distributorship. Respondents clearly acted in bad
faith in bypassing Cordero as they completed the remaining payments to AFFA without
advising him and furnishing him with copies of the bank transmittals as they previously
did, and directly dealt with AFFA through Robinson regarding arrangements for the arrival
of the first SEACAT 25 in Manila and negotiations for the purchase of the second vessel
pursuant to the Memorandum of Agreement which Cordero signed in behalf of AFFA. As a
result of respondents actuations, Cordero incurred losses as he was not paid the balance
of his commission from the sale of the first vessel and his exclusive distributorship
revoked by AFFA.
Petitioner Go contends that the trial and appellate courts erred in holding them
solidarily liable for Corderos unpaid commission, which is the sole obligation of the
principal AFFA. It was Robinson on behalf of AFFA who, in the letter dated August 5,
1997 addressed to Cordero, undertook to pay commission payments to Pamana on a
staggered progress payment plan in the form of percentage of the commission per
payment. AFFA explicitly committed that it will, upon receipt of progress payments, pay
to Pamana their full commission by telegraphic transfer to an account nominated by
Pamana within one to two days of [AFFA] receiving such payments. [50] Petitioner Go
further maintains that he had not in any way violated or caused the termination of the
exclusive distributorship agreement between Cordero and AFFA; he had also paid in full
the first and only vessel he purchased from AFFA.[51]
While it is true that a third person cannot possibly be sued for breach of contract
because only parties can breach contractual provisions, a contracting party may sue a
third person not for breach but for inducing another to commit such breach.
Article 1314 of the Civil Code provides:
Art. 1314. Any third person who induces another to violate his contract
shall be liable for damages to the other contracting party.
The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on
the part of the third person of the existence of a contract; and (3) interference of the
third person is without legal justification.[52]
The presence of the first and second elements is not disputed. Through the letters issued
by Robinson attesting that Cordero is the exclusive distributor of AFFA in thePhilippines,
respondents were clearly aware of the contract between Cordero and AFFA represented
by Robinson. In fact, evidence on record showed that respondents initially dealt with and
recognized Cordero as such exclusive dealer of AFFA high-speed catamaran vessels in
the Philippines. In that capacity as exclusive distributor, petitioner Go entered into the
Memorandum of Agreement and Shipbuilding Contract No. 7825 with Cordero in behalf of
AFFA.

As to the third element, our ruling in the case of So Ping Bun v. Court of
Appeals[53] is instructive, to wit:
A duty which the law of torts is concerned with is respect for the
property of others, and a cause of action ex delicto may be predicated upon
an unlawful interference by one person of the enjoyment by the other of his
private property. This may pertain to a situation where a third person induces
a party to renege on or violate his undertaking under a contract. In the case
before us, petitioners Trendsetter Marketing asked DCCSI to execute lease
contracts in its favor, and as a result petitioner deprived respondent
corporation of the latters property right. Clearly, and as correctly viewed by
the appellate court, the three elements of tort interference above-mentioned
are present in the instant case.
Authorities debate on whether interference may be justified where the
defendant acts for the sole purpose of furthering his own financial or
economic interest. One view is that, as a general rule, justification for
interfering with the business relations of another exists where the actors
motive is to benefit himself. Such justification does not exist where his sole
motive is to cause harm to the other. Added to this, some authorities believe
that it is not necessary that the interferers interest outweigh that of the party
whose rights are invaded, and that an individual acts under an economic
interest that is substantial, not merely de minimis, such that wrongful and
malicious motives are negatived, for he acts in self-protection. Moreover,
justification for protecting ones financial position should not be made to
depend on a comparison of his economic interest in the subject matter with
that of others. It is sufficient if the impetus of his conduct lies in a proper
business interest rather than in wrongful motives.
As early as Gilchrist vs. Cuddy, we held that where there was no
malice in the interference of a contract, and the impulse behind
ones conduct lies in a proper business interest rather than in
wrongful motives, a party cannot be a malicious interferer. Where the
alleged interferer is financially interested, and such interest motivates his
conduct, it cannot be said that he is an officious or malicious intermeddler.
In the instant case, it is clear that petitioner So Ping Bun prevailed upon
DCCSI to lease the warehouse to his enterprise at the expense of respondent
corporation. Though petitioner took interest in the property of
respondent corporation and benefited from it, nothing on record
imputes deliberate wrongful motives or malice in him.
xxx
While we do not encourage tort interferers seeking their economic
interest to intrude into existing contracts at the expense of others, however,
we find that the conduct herein complained of did not transcend the limits
forbidding an obligatory award for damages in the absence of any malice.
The business desire is there to make some gain to the detriment of the
contracting parties. Lack of malice, however, precludes damages. But
it does not relieve petitioner of the legal liability for entering into

contracts and causing breach of existing ones. The respondent

appellate court correctly confirmed the permanent injunction and nullification
of the lease contracts between DCCSI and Trendsetter Marketing, without
awarding damages. The injunction saved the respondents from further
damage or injury caused by petitioners interference. [54] [EMPHASIS
SUPPLIED.]

Malice connotes ill will or spite, and speaks not in response to duty. It implies an
intention to do ulterior and unjustifiable harm. Malice is bad faith or bad motive.[55] In the
case of Lagon v. Court of Appeals,[56] we held that to sustain a case for tortuous
interference, the defendant must have acted with malice or must have been driven by
purely impure reasons to injure the plaintiff; in other words, his act of interference cannot
be justified. We further explained that the word induce refers to situations where a
person causes another to choose one course of conduct by persuasion or intimidation. As
to the allegation of private respondent in said case that petitioner induced the heirs of
the late Bai Tonina Sepi to sell the property to petitioner despite an alleged renewal of
the original lease contract with the deceased landowner, we ruled as follows:
Assuming ex gratia argumenti that petitioner knew of the contract, such
knowledge alone was not sufficient to make him liable for tortuous
interference. x x x
Furthermore, the records do not support the allegation of private
respondent that petitioner induced the heirs of Bai Tonina Sepi to sell the
property to him. The word induce refers to situations where a person causes
another to choose one course of conduct by persuasion or intimidation. The
records show that the decision of the heirs of the late Bai Tonina Sepi to sell
the property was completely of their own volition and that petitioner did
absolutely nothing to influence their judgment. Private respondent himself
did not proffer any evidence to support his claim. In short, even assuming
that private respondent was able to prove the renewal of his lease contract
with Bai Tonina Sepi, the fact was that he was unable to prove malice or bad
faith on the part of petitioner in purchasing the property. Therefore, the
claim of tortuous interference was never established. [57]
In their Answer, respondents denied having anything to do with the unpaid balance of
the commission due to Cordero and the eventual termination of his exclusive
distributorship by AFFA. They gave a different version of the events that transpired
following the signing of Shipbuilding Contract No. 7825. According to them, several
builder-competitors still entered the picture after the said contract for the purchase of
one (1) SEACAT 25 was sent to Brisbane in July 1997 for authentication, adding that the
contract was to be effective on August 7, 1997, the time when their funds was to become
available. Go admitted he called the attention of AFFA if it can compete with the prices of
other builders, and upon mutual agreement, AFFA agreed to give them a discounted price
under the following terms and conditions: (1) that the contract price be lowered; (2) that
Go will obtain another vessel; (3) that to secure compliance of such conditions, Go must
make an advance payment for the building of the second vessel; and (4) that the

payment scheme formerly agreed upon as stipulated in the first contract shall still be
the basis and used as the guiding factor in remitting money for the building of the first
vessel. This led to the signing of another contract superseding the first one (1), still to
be dated 07 August 1997. Attached to the answer were photocopies of the second
contract stating a lower purchase price (US$1,150,000.00) and facsimile transmission
of AFFA to Go confirming the transaction.[58]
As to the cessation of communication with Cordero, Go averred it was Cordero who was
nowhere to be contacted at the time the shipbuilding progress did not turn good as
promised, and it was always Landicho and Tecson who, after several attempts, were able
to locate him only to obtain unsatisfactory reports such that it was Go who would still
call up Robinson regarding any progress status report, lacking documents for MARINA,
etc., and go to Australia for ocular inspection. Hence, in May 1998 on the scheduled
launching of the ship in Australia, Go engaged the services of Landicho who went to
Australia to see to it that all documents needed for the shipment of the vessel to the
Philippines would be in order. It was also during this time that Robinsons request for
inquiry on the Philippine price of a Wartsila engine for AFFAs then on-going vessel
construction, was misinterpreted by Cordero as indicating that Go was buying a second
vessel.[59]
We find these allegations unconvincing and a mere afterthought as these were the very
same averments contained in the Position Paper for the Importer dated October 9, 1998,
which was submitted by Go on behalf of ACG Express Liner in connection with the
complaint-affidavit filed by Cordero before the BOC-SGS Appeals Committee relative to
the shipment valuation of the first SEACAT 25 purchased from AFFA. [60] It appears that
the purported second contract superseding the original Shipbuilding Contract No. 7825
and stating a lower price of US$1,150,000.00 (not US$1,465,512.00) was only presented
before the BOC to show that the vessel imported into the Philippines was not
undervalued by almost US$500,000.00. Cordero vehemently denied there was such
modification of the contract and accused respondents of resorting to falsified
documents, including the facsimile transmission of AFFA supposedly confirming the said
sale for only US$1,150,000.00. Incidentally, another document filed in said BOC case,
the Counter-Affidavit/Position Paper for the Importer dated November 16, 1998, [61] states
in paragraph 8 under the Antecedent facts thereof, that -8. As elsewhere stated, the total remittances made by herein
Importer to AFFA does not alone represent the purchase price
for Seacat 25. It includes advance payment for the
acquisition of another vessel as part of the deal due to
the discounted price.[62]
which even gives credence to the claim of Cordero that respondents negotiated for the
sale of the second vessel and that the nonpayment of the remaining two (2) instalments
of his commission for the sale of the first SEACAT 25 was a result of Go and Landichos

directly dealing with Robinson, obviously to obtain a lower price for the second vessel at
the expense of Cordero.
The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter into
another contract directly with ACG Express Liner to obtain a lower price for the second
vessel resulted in AFFAs breach of its contractual obligation to pay in full the
commission due to Cordero and unceremonious termination of Corderos appointment as
exclusive distributor. Following our pronouncement in Gilchrist v. Cuddy (supra), such
act may not be deemed malicious if impelled by a proper business interest rather than
in wrongful motives. The attendant circumstances, however, demonstrated that
respondents transgressed the bounds of permissible financial interest to benefit
themselves at the expense of Cordero. Respondents furtively went directly to
Robinson after Cordero had worked hard to close the deal for them to purchase from
AFFA two (2) SEACAT 25, closely monitored the progress of building the first vessel
sold, attended to their concerns and spent no measly sum for the trip to Australia with
Go, Landicho and Gos family members.But what is appalling is the fact that even as Go,
Landicho and Tecson secretly negotiated with Robinson for the purchase of a second
vessel, Landicho and Tecson continued to demand and receive from Cordero their
commission or cut from Corderos earned commission from the sale of the first SEACAT
25.
Cordero was practically excluded from the transaction when Go, Robinson, Tecson
and Landicho suddenly ceased communicating with him, without giving him any
explanation. While there was nothing objectionable in negotiating for a lower price in
the second purchase of SEACAT 25, which is not prohibited by the Memorandum of
Agreement, Go, Robinson, Tecson and Landicho clearly connived not only in ensuring
that Cordero would have no participation in the contract for sale of the second SEACAT
25, but also that Cordero would not be paid the balance of his commission from the sale
of the first SEACAT 25. This, despite their knowledge that it was commission already
earned by and due to Cordero. Thus, the trial and appellate courts correctly ruled that
the actuations of Go, Robinson, Tecson and Landicho were without legal justification and
intended solely to prejudice Cordero.
The existence of malice, ill will or bad faith is a factual matter. As a rule, findings
of fact of the trial court, when affirmed by the appellate court, are conclusive on this
Court.[63] We see no compelling reason to reverse the findings of the RTC and the CA that
respondents acted in bad faith and in utter disregard of the rights of Cordero under the
exclusive distributorship agreement.
The failure of Robinson, Go, Tecson and Landico to act with fairness, honesty and
good faith in securing better terms for the purchase of high-speed catamarans from
AFFA, to the prejudice of Cordero as the duly appointed exclusive distributor, is further
proscribed by Article 19 of the Civil Code:

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.
As we have expounded in another case:
Elsewhere, we explained that 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 responsible. The object of this article, therefore, is to set
certain standards which must be observed not only in the exercise of ones
rights but also in the performance of ones duties. These standards are the
following: act with justice, give everyone his due and observe honesty and
good faith. Its antithesis, necessarily, is any act evincing bad faith or intent
to injure. Its elements are the following: (1) There is a legal right or duty; (2)
which is exercised in bad faith; (3) for the sole intent of prejudicing or
injuring another. When Article 19 is violated, an action for damages is proper
under Articles 20 or 21 of the Civil Code. Article 20 pertains to damages
arising from a violation of law x x x. Article 21, on the other hand, states:
Art. 21. Any person who willfully causes loss or injury to
another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage.
Article 21 refers to acts contra bonus mores and has the following elements:
(1) There is an act which is legal; (2) but which is contrary to morals, good
custom, public order, or public policy; and (3) it is done with intent to injure.
A common theme runs through Articles 19 and 21, and that is, the act
complained of must be intentional.[64]
Petitioner Gos argument that he, Landicho and Tecson cannot be held liable
solidarily with Robinson for actual, moral and exemplary damages, as well as attorneys
fees awarded to Cordero since no law or contract provided for solidary obligation in these
cases, is equally bereft of merit. Conformably with Article 2194 of the Civil Code, the
responsibility of two or more persons who are liable for the quasi-delict is solidary.
[65]
In Lafarge Cement Philippines, Inc. v. Continental Cement Corporation,[66] we held:
[O]bligations arising from tort are, by their nature, always
solidary. We have assiduously maintained this legal principle as
early as 1912 in Worcester v. Ocampo, in which we held:
x x x The difficulty in the contention of the appellants is that
they fail to recognize that the basis of the present action is
tort. They fail to recognize the universal doctrine that each joint
tort feasor is not only individually liable for the tort in which he
participates, but is also jointly liable with his tort feasors. x x x
It may be stated as a general rule that joint tort feasors are
all the persons who command, instigate, promote, encourage,

advise, countenance, cooperate in, aid or abet the commission of

a tort, or who approve of it after it is done, if done for their
benefit. They are each liable as principals, to the same
extent and in the same manner as if they had performed
the wrongful act themselves. x x x
Joint tort feasors are jointly and severally liable for the tort
which they commit. The persons injured may sue all of them or
any number less than all. Each is liable for the whole damages
caused by all, and all together are jointly liable for the whole
damage. It is no defense for one sued alone, that the others who
participated in the wrongful act are not joined with him as
defendants; nor is it any excuse for him that his participation in
the tort was insignificant as compared to that of the others. x x x
Joint tort feasors are not liable pro rata. The damages can not
be apportioned among them, except among themselves. They
cannot insist upon an apportionment, for the purpose of each
paying an aliquot part. They are jointly and severally liable for the
whole amount. x x x
A payment in full for the damage done, by one of the joint
tort feasors, of course satisfies any claim which might exist
against the others. There can be but satisfaction. The release of
one of the joint tort feasors by agreement generally operates to
discharge all. x x x
Of course, the court during trial may find that some of the
alleged tort feasors are liable and that others are not liable. The
courts may release some for lack of evidence while condemning
others of the alleged tort feasors. And this is true even though
they are charged jointly and severally.[67] [EMPHASIS SUPPLIED.]
The rule is that the defendant found guilty of interference with contractual
relations cannot be held liable for more than the amount for which the party who was
inducted to break the contract can be held liable. [68] Respondents Go, Landicho and
Tecson were therefore correctly held liable for the balance of petitioner Corderos
commission from the sale of the first SEACAT 25, in the amount of US$31,522.09 or its
peso equivalent, which AFFA/Robinson did not pay in violation of the exclusive
distributorship agreement, with interest at the rate of 6% per annum from June 24, 1998
until the same is fully paid.
Respondents having acted in bad faith, moral damages may be recovered under
Article 2219 of the Civil Code.[69] On the other hand, the requirements of an award of
exemplary damages are: (1) they may be imposed by way of example in addition to
compensatory damages, and only after the claimants right to them has been
established; (2) that they cannot be recovered as a matter of right, their determination

depending upon the amount of compensatory damages that may be awarded to the
claimant; and (3) the act must be accompanied by bad faith or done in a wanton,
fraudulent, oppressive or malevolent manner. [70] The award of exemplary damages is
thus in order. However, we find the sums awarded by the trial court as moral and
exemplary damages as reduced by the CA, still excessive under the circumstances.
Moral damages are meant to compensate and alleviate the physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injuries unjustly caused. Although incapable of
pecuniary estimation, the amount must somehow be proportional to and in
approximation of the suffering inflicted. Moral damages are not punitive in nature and
were never intended to enrich the claimant at the expense of the defendant. There is no
hard-and-fast rule in determining what would be a fair and reasonable amount of moral
damages, since each case must be governed by its own peculiar facts. Trial courts are
given discretion in determining the amount, with the limitation that it should not be
palpably and scandalously excessive. Indeed, it must be commensurate to the loss or
injury suffered.[71]
We believe that the amounts of P300,000.00 and P200,000.00 as moral and
exemplary damages, respectively, would be sufficient and reasonable. Because
exemplary damages are awarded, attorneys fees may also be awarded in consonance
with Article 2208 (1).[72] We affirm the appellate courts award of attorneys fees in the
amount ofP50,000.00.
WHEREFORE, the petitions are DENIED. The Decision dated March 16, 2004 as
modified by the Resolution dated July 22, 2004 of the Court of Appeals in CA-G.R. CV No.
69113 are hereby AFFIRMED with MODIFICATION in that the awards of moral and
exemplary damages are hereby reduced to P300,000.00 and P200,000.00, respectively.
With costs against the petitioner in G.R. No. 164703.
SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson

CONCHITA CARPIO MORALES

Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

LUCAS P. BERSAMIN
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the conclusions
in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

ALLAN C. GO, doing business under the name and style ACG Express Liner,,
petitioner,vsO!"#E! $. CO!%E!O, respondent
G.!. No. &'()*+
ay (, *&*
Facts:
-ometime in &', ortimer $. Cordero, /i0e12resident o3 2amana ar4eting
Corporation 52amana6, venturedinto the business o3 mar4eting inter1island
passenger vessels. A3ter 0onta0ting various overseas 3ast
3errym a n u 3 a 0 t u re r s 3 r o m a l l o v e r t h e 7 o r l d , h e 0 a m e t o m e e t " o n y !
o b i n s o n , a n A u s t r a l i a n n a t i o n a l b a s e d i n 8risbane, Australia, 7ho is the
anaging %ire0tor o3 Aluminium $ast $erries Australia 5A$$A6.8et7een 9une and
August &), !obinson signed do0uments appointing Cordero as the ex0lusive
distributor o3 A$$A 0atamaran and other 3ast 3erry vessels in the 2hilippines. As su0h
ex0lusive distributor, Cordero o33ered3or sale to prospe0tive buyers the :1meter
Aluminium 2assenger 0atamaran 4no7n as the -EACA" :.A3ter negotiations 7ith $elipe
Landi0ho and /in0ent "e0son, la7yers o3 Allan C. Go 7ho is the o7ner;operator o3 ACG
Express Liner o3 Cebu City, a single proprietorship, Cordero 7as able to 0lose a deal 3or
the pur0haseo3 t7o 56 -EACA" : as eviden0ed by the emorandum o3 Agreement
dated August ), &). A00ordingly, the parties exe0uted -hipbuilding Contra0t No. )
<: 3or one 5&6 high1speed 0atamaran 5-EACA" :6 3or the pri0eo3 =->&,
(':,:&.**. 2er agreement bet7een !obinson and Cordero, the latter shall re0eive
0ommissionstotalling =->+<,)(.**, or .(+? o3 the pur0hase pri0e, 3rom the sale o3
ea0h vessel.C o r d e r o m a d e t 7 o 5 6 t r i p s t o t h e A $ $ A - h i p y a r d i n 8 r i s b a n e ,
Australia, and on one 5&6 o00asion evena00ompanied Go and his
3 a m i l y a n d L a n d i 0 h o , t o m o n i t o r t h e p r o g re s s o 3 t h e b u i l d i n g o 3
t h e v e s s e l . @ e shouldered all the expenses 3or air3are, 3ood, hotel
a00ommodations, transportation and entertainment duringthese trips. @e also
spent 3or long distan0e telephone 0alls to 0ommuni0ate regularly 7ith !
obinson, Go,"e0son and Landi0ho.@o7ever, Cordero later dis0overed that Go 7as
dealing dire0tly 7ith !obinson 7hen he 7as in3ormed by % e n n i s 2 a d u a o 3
artsila 2hilippines that Go 7as 0anvassing 3or a se0ond 0atamaran
e n g i n e 3 r o m t h e i r 0ompany 7hi0h provided the ship engine 3or the 3irst
-EACA" :. 2adua told Cordero that Go instru0ted himto 3ax the reBuested Buotation
o3 the se0ond engine to the 2ar4!oyal @otel in 8risbane 7here Go 7as
thenstaying. Cordero tried to 0onta0t Go and Landi0ho to 0on3irm the matter
but they 7ere no7here to be 3ound,7hile !obinson re3used to ans7er his
0alls. Cordero immediately 3le7 to 8risbane to 0lari3y matters 7ith!obinson, only
to 3ind out that Go and Landi0ho 7ere already there in 8risbane negotiating 3or the sale
o3 these0ond -EACA" :. %espite repeated 3ollo71up 0alls, no explanation 7as given by !
obinson, Go, Landi0hoand "e0son 7ho even made Cordero believe there 7ould
be no 3urther sale bet7een A$$A and ACG Express Liner.On August &, & <,
Cordero instituted Civil Case No. <1+:++ see4ing to hold !obinson,
Go, "e0son
andL a n d i 0 h o l i a b l e o i n t l y a n d s o l i d a r i l y 3 o r 0 o n n i v i n g a n d 0 o n s p i r i n g t

o g e t h e r i n v i o l a t i n g h i s e x 0 l u s i v e distributorship in bad 3aith and 7anton

disregard o3 his rights, thus depriving him o3 his due 0ommissions5balan0e o3
unpaid 0ommission 3rom the sale o3 the 3irst vessel in the amount o3 =>+&,:.*& and unpaid0ommission 3or the sale o3 the se0ond vessel in the amount
o3 =->+<,)(.**6 and 0ausing him
a0tual, morala n d e xe m p l a r y d a m a g e s , i n 0 l u d i n g 2 < * * , * * * . * * re p re s e n t i n g
e x p e n s e s 3 o r a i r p l a n e t r a v e l t o A u s t r a l i a , tele0ommuni0ations bills and
entertainment, on a00ount o3 A$$ADs untimely 0an0ellation o3 the
ex0lusivedistributorship agreement. Cordero also prayed 3or the a7ard
o3 moral and exemplary damages, as 7ell asattorneyDs 3ees and litigation
expenses.!obinson 3iled a motion to dismiss grounded on la04 o3 urisdi0tion over his
person and 3ailure to state a 0auseo3 a0tion, asserting that there 7as no a0t 0ommitted
in violation o3 the distributorship agreement. -aid motion7as denied by the trial 0ourt
on %e0ember *, & . !obinson 7as li4e7ise de0lared in de3ault 3or 3ailure
to3ile his ans7er 7ithin the period granted by the trial 0ourt. As 3or Go and "e0son, their
motion to dismiss basedon 3ailure to state a 0ause o3 a0tion 7as li4e7ise denied by the
trial 0ourt on $ebruary ', &. -ubseBuently,they 3iled their Ans7er denying that
they have anything to do 7ith the termination by A$$A o3 CorderoDs

authority as ex0lusive distributor in the 2hilippines. On the 0ontrary, they averred it 7as
Cordero 7ho stopped0ommuni0ating 7ith Go in 0onne0tion 7ith the pur0hase o3 the 3irst
vessel 3rom A$$A and 7as not doing
his part in ma4ing progress status reports and airing the 0lientDs
grievan0es to his prin0ipal, A$$A, su0h that Goengaged the servi0es o3 Landi0ho to
3ly to Australia and attend to the do0uments needed 3or shipment o3 the vessel
to the 2hilippines. As to the inBuiry 3or the 2hilippine pri0e 3or a artsila ship
engine 3or A$$ADs other on1going vessel 0onstru0tion, this 7as merely reBuested
by !obinson but 7hi0h Cordero misinterpreted as indi0ation that Go 7as buying a
se0ond vessel. oreover, Landi0ho and "e0son had no transa0tion 7hatsoever 7ith
Cordero 7ho had no do0ument to sho7 any su0h shipbuilding 0ontra0t. As to
the supposed meeting tosettle their dispute, this 7as due to the mali0ious demand o3
Cordero to be given =->+,***,*** as other7ise he7ill expose in the media the alleged
undervaluation o3 the vessel 7ith the 8OC. #n any 0ase, Cordero no longer had 0ause o3
a0tion 3or his 0ommission 3or the sale o3 the se0ond vessel under the memorandum o3
agreementdated August ), &) 0onsidering the termination o3 his authority by A$
$ADs la7yers on 9une ', &<.On ay +&, ***, the trial 0ourt rendered its udgment
in 3avor o3 2lainti33 and against de3endants Allan C. Go,"ony !obinson, $elipe Landi0ho,
and /in0ent "e0son. On 9anuary , **&, the CA rendered udgment grantingthe
petition 3or 0ertiorari in CA1G.!. -2 No. '*+:( and setting aside the trial 0ourtDs
orders o3 exe0ution pending appeal."he 0ase be3ore the -upreme Court is a
0onsolidation o3 the petitions 3or revie7 under !ule (: separately 3iled by Go 5G.!. No.
&'()*+6 and Cordero 5G.!. No. &'()()6.
Issue:
5&6 hether petitioner Cordero has the legal personality to sue the respondents 3or
brea0h o3 0ontra0t and5 6 7 h e t h e r t h e r e s p o n d e n t s m a y b e h e l d l i a b l e
3 o r d a m a g e s t o C o r d e r o 3 o r h i s u n p a i d 0 o m m i s s i o n s a n d termination o3 his
ex0lusive distributorship appointment by the prin0ipal, A$$A.
Held:

 hile it is true that a third person 0annot possibly be sued 3or brea0h o3
0ontra0t be0ause only parties 0an brea0h 0ontra0tual provisions, a 0ontra0ting
party may sue a third person not 3or brea0h but 3or indu0ing another to 0ommit su0h
brea0h. Arti0le &+&( o3 the Civil Code providesFArt. &+&(. Any third person 7ho indu0es
another to violate his 0ontra0t shall be liable 3or damages to theother
0ontra0ting party."he elements o3 tort inter3eren0e areF 5&6 existen0e o3 a
valid 0ontra0t 56 4no7ledge on the part o3 the third person o3 the existen0e
o3 a 0ontra0t and 5+6 inter3eren0e o3 the third person is 7ithout legal
usti3i0ation."he presen0e o3 the 3irst and se0ond elements is not disputed. "hrough
the letters issued by !obinson attestingthat Cordero is the ex0lusive distributor o3
A$$A in the 2hilippines, respondents 7ere 0learly a7are o3
the0 o n t r a 0 t b e t 7 e e n C o r d e r o a n d A $ $ A re p re s e n t e d b y !
o b i n s o n . # n 3 a 0 t , e v i d e n 0 e o n re 0 o rd s h o 7 e d t h a t respondents initially dealt
7ith and re0ognied Cordero as su0h ex0lusive dealer o3 A$$A high1speed
0atamaranvessels in the 2hilippines. #n that 0apa0ity as ex0lusive distributor, petitioner
Go entered into the emorandumo3 Agreement and -hipbuilding Contra0t No. )<: 7ith
Cordero in behal3 o3 A$$A."he rule is that the de3endant 3ound guilty o3
inter3eren0e 7ith 0ontra0tual relations 0annot be held liable 3or m o r e t h a n
the amount 3or 7hi0h the party 7ho 7as indu0ted to brea4 the
0ontra0t 0an be held liable.!
e s p o n d e n t s G o , L a n d i 0 h o a n d " e 0 s o n 7 e re t h e re 3 o re 0 o r re 0 t l y h e l d l i a b l
e 3 o r t h e b a l a n 0 e o 3 p e t i t i o n e r CorderoDs 0ommission 3rom the sale o3 the
3irst -EACA" :, in the amount o3 =->+&,:.* or its pesoeBuivalent, 7hi0h
A$$A;!obinson did not pay in violation o3 the ex0lusive distributorship
agreement, 7ithinterest at the rate o3 '? per annum 3rom 9une (, &< until the
same is 3ully paid.!espondents having a0ted in bad 3aith, moral damages may be
re0overed under Arti0le & o3 the Civil Code.

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
Street as 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 56 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.
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.
[6]

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 isdamnum 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.

Spouses Custodio vs. CA

Spouses Cristino and Brigida Custodio and Spouses Lito and Maria Cristina
Santos vs. Court of Appeals, Heirs of Pacifico C. Mabasa
G.R. No. 116100, February 9, 1996
Regalado, J.:
Doctrine: Every owner has an absolute right over his property and his act of fencing and
enclosing the same was an act which he may lawfully perform in the employment and
exercise of said right. Whatever injury or damage that may have been sustained by
others by reason of the rightful use of the said land by the owner is damnum absque
injuria.

Facts: The respondent (Pacifico Mabasa) owns a parcel of land with a two-door
apartment erected thereon situated at Interior P. Burgos St., Palingon, Tipas, Tagig, Metro
Manila. Said property may be described to be surrounded by other immovables
pertaining to respondents herein.
As an access to P. Burgos Street from respondents 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 of the petitioners The second
passageway is about 3 meters in width and length from 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
remises and who were acknowledged by Mabasa as tenants. However, sometime in
February, 1982, one of said tenants vacated the apartment and when 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
Petitioners Santoses along their property which is also along the first passageway.
Petitioner Morato constructed her adobe fence and even extended said fence in such a
way that the entire passageway was enclosed. And it was then that the remaining
tenants of said apartment vacated the area.
Petitioner Ma. Cristina Santos testified that she constructed said fence because of 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.
Trial court rendered a decision ordering the Petitioners Custodios and Santoses to give
Respondent Mabasa permanent access ingress and egress, to the public street and
Mabasa to pay the Custodios and Santoses the sum of Eight Thousand Pesos (P8,000) as
indemnity for the permanent use of the passageway.
Respondent Mabasa went to the CA raising the sole issue of whether or not the lower
court erred in not awarding damages in their favor. The CA rendered its decision
affirming the judgment of the trial court with modification only insofar as the. grant of
damages to Mabasa The motion for reconsideration filed by the petitioners was denied.
Issues:
Whether the grant of right of way to herein private respondent Mabasa is proper.
Whether the award of damages is in order.

Held:
No. 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.
No. A reading of the decision of the CA 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.
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. (damnum absque injuria). 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
(damnum et injuria.)
In the case at bar, although there was damage, there was no legal injury. 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. 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.
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.

. Both courts, however, were in agreement that it was Dr. Filarts invitation that
brought Mr. Reyes to the party.
The consequential question then is: Which version is credible?
From an in depth review of the evidence, we find more credible the lower courts
findings of fact.
First, let us put things in the proper perspective.
We are dealing with a formal party in a posh, five-star hotel, [53] for-invitation-only,
thrown for the hotels former Manager, a Japanese national. Then came a person who was
clearly uninvited (by the celebrant)[54] and who could not just disappear into the crowd as
his face is known by many, being an actor. While he was already spotted by the
organizer of the party, Ms. Lim, the very person who generated the guest list, it did not
yet appear that the celebrant was aware of his presence. Ms. Lim, mindful of the
celebrants instruction to keep the party intimate, would naturally want to get rid of the
gate-crasher in the most hush-hush manner in order not to call attention to a glitch in an
otherwise seamless affair and, in the process, risk the displeasure of the celebrant, her
former boss. To unnecessarily call attention to the presence of Mr. Reyes would certainly
reflect badly on Ms. Lims ability to follow the instructions of the celebrant to invite only
his close friends and some of the hotels personnel. Mr. Reyes, upon whom the burden
rests to prove that indeed Ms. Lim loudly and rudely ordered him to leave, could not offer
any satisfactory explanation why Ms. Lim would do that and risk ruining a formal and
intimate affair. On the contrary, Mr. Reyes, on cross-examination, had unwittingly sealed
his fate by admitting that when Ms. Lim talked to him, she was very close. Close enough
for him to kiss:
Q: And, Mr. Reyes, you testified that Miss Lim approached you while you were at
the buffet table? How close was she when she approached you?
A: Very close because we nearly kissed each other.
Q: And yet, she shouted for you to go down? She was that close and she shouted?
A: Yes. She said, wag kang kumain, hindi ka imbitado dito, bumaba ka na lang.
Q: So, you are testifying that she did this in a loud voice?
...
A: Yes. If it is not loud, it will not be heard by many.[55]
In the absence of any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and
expose him to ridicule and shame, it is highly unlikely that she would shout at him from a
very close distance. Ms. Lim having been in the hotel business for twenty years wherein
being polite and discreet are virtues to be emulated, the testimony of Mr. Reyes that she
acted to the contrary does not inspire belief and is indeed incredible. Thus, the lower
court was correct in observing that

Considering the closeness of defendant Lim to plaintiff when the request for the latter to
leave the party was made such that they nearly kissed each other, the request was
meant to be heard by him only and there could have been no intention on her part to
cause embarrassment to him. It was plaintiffs reaction to the request that must have
made the other guests aware of what transpired between them. . .
Had plaintiff simply left the party as requested, there was no need for the police to take
him out.[56]
Moreover, another problem with Mr. Reyess version of the story is that it is
unsupported. It is a basic rule in civil cases that he who alleges proves. Mr. Reyes,
however, had not presented any witness to back his story up. All his witnesses Danny
Rodinas, Pepito Guerrero and Alexander Silva - proved only that it was Dr. Filart who
invited him to the party.[57]
Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to which he
was not invited, cannot be made liable to pay for damages under Articles 19 and 21 of
the Civil Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its
liability springs from that of its employee.[58]
Article 19, known to contain what is commonly referred to as the principle of abuse of
rights,[59] is not a panacea for all human hurts and social grievances. Article 19 states:
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.
Elsewhere, we explained that 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 responsible. [60] The object
of this article, therefore, is to set certain standards which must be observed not only in
the exercise of ones rights but also in the performance of ones duties. [61] These standards
are the following: act with justice, give everyone his due and observe honesty and good
faith.[62] Its antithesis, necessarily, is any act evincing bad faith or intent to injure. Its
elements are the following: (1) There is a legal right or duty; (2) which is exercised in bad
faith; (3) for the sole intent of prejudicing or injuring another. [63] When Article 19 is
violated, an action for damages is proper under Articles 20 or 21 of the Civil Code. Article
20 pertains to damages arising from a violation of law [64] which does not obtain herein as
Ms. Lim was perfectly within her right to ask Mr. Reyes to leave. Article 21, on the other
hand, states:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage.
Article 21[65] refers to acts contra bonus mores and has the following elements: (1) There
is an act which is legal; (2) but which is contrary to morals, good custom, public order, or
public policy; and (3) it is done with intent to injure.[66]
A common theme runs through Articles 19 and 21, [67] and that is, the act complained
of must be intentional.[68]
As applied to herein case and as earlier discussed, Mr. Reyes has not shown that Ms.
Lim was driven by animosity against him. These two people did not know each other

personally before the evening of 13 October 1994, thus, Mr. Reyes had nothing to offer
for an explanation for Ms. Lims alleged abusive conduct except the statement that Ms.
Lim, being single at 44 years old, had a very strong bias and prejudice against (Mr.
Reyes) possibly influenced by her associates in her work at the hotel with foreign
businessmen.[69] The lameness of this argument need not be belabored. Suffice it to say
that a complaint based on Articles 19 and 21 of the Civil Code must necessarily fail if it
has nothing to recommend it but innuendos and conjectures.
Parenthetically, the manner by which Ms. Lim asked Mr. Reyes to leave was likewise
acceptable and humane under the circumstances. In this regard, we cannot put our
imprimatur on the appellate courts declaration that Ms. Lims act of personally
approaching Mr. Reyes (without first verifying from Mrs. Filart if indeed she invited Mr.
Reyes) gave rise to a cause of action predicated upon mere rudeness or lack of
consideration of one person, which calls not only protection of human dignity but respect
of such dignity.[70] Without proof of any ill-motive on her part, Ms. Lims act of by-passing
Mrs. Filart cannot amount to abusive conduct especially because she did inquire from
Mrs. Filarts companion who told her that Mrs. Filart did not invite Mr. Reyes. [71] If at all,
Ms. Lim is guilty only of bad judgment which, if done with good intentions, cannot
amount to bad faith.
Not being liable for both actual and moral damages, neither can petitioners Lim and
Hotel Nikko be made answerable for exemplary damages [72] especially for the reason
stated by the Court of Appeals. The Court of Appeals held
Not a few of the rich people treat the poor with contempt because of the latters lowly
station in life. This has to be limited somewhere. In a democracy, such a limit must be
established. Social equality is not sought by the legal provisions under consideration, but
due regard for decency and propriety (Code Commission, pp. 33-34). And by way of
example or correction for public good and to avert further commission of such acts,
exemplary damages should be imposed upon appellees.[73]
The fundamental fallacy in the above-quoted findings is that it runs counter with the very
facts of the case and the evidence on hand. It is not disputed that at the time of the
incident in question, Mr. Reyes was an actor of long standing; a co-host of a radio
program over DZRH; a Board Member of the Music Singer Composer (MUSICO) chaired
by popular singer Imelda Papin; a showbiz Coordinator of Citizen Crime Watch; and 1992
official candidate of the KBL Party for Governor of Bohol; and an awardee of a number of
humanitarian organizations of the Philippines.[74] During his direct examination on
rebuttal, Mr. Reyes stressed that he had income [75] and nowhere did he say otherwise. On
the other hand, the records are bereft of any information as to the social and economic
standing of petitioner Ruby Lim. Consequently, the conclusion reached by the appellate
court cannot withstand scrutiny as it is without basis.
All told, and as far as Ms. Lim and Hotel Nikko are concerned, any damage which Mr.
Reyes might have suffered through Ms. Lims exercise of a legitimate right done within
the bounds of propriety and good faith, must be his to bear alone.
WHEREFORE, premises considered, the petition filed by Ruby Lim and Nikko Hotel
Manila Garden is GRANTED. The Decision of the Court of Appeals dated 26 November
2001 and its Resolution dated 09 July 2002 are hereby REVERSED and SET ASIDE. The
Decision of the Regional Trial Court of Quezon City, Branch 104, dated 26 April 1999 is
hereby AFFIRMED. No costs.

SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Nikko Hotel vs. Reyes

TITLE: Nikko Hotel Manila vs. Reyes
CITATION: GR No. 154259, February 28, 2005
FACTS:
Petitioners Nikko Hotel Manila and Ruby Lim assailed the decision of the Court of Appeals
in reversing the decision of RTC of Quezon City. CA held petitioner liable for damages to
Roberto Reyes aka Amang Bisaya, an entertainment artist.
There are two versions of the story:
Mr. Reyes: On the eve of October 13, 1994, Mr. Reyes while having coffee at the lobby of
Nikko Hotel was approached by Dr. Violet Filart, a friend several years back. According to
Mr. Reyes, Dr. Filart invited him to join a birthday party at the penthouse for the hotels
former General Manager, Mr. Tsuruoka. Plaintiff agreed as Dr. Filart agreed to vouch for
him and carried a basket of fruits, the latters gift. He He lined up at the buffet table as
soon as it was ready but to his great shock, shame and embarrassment, Ruby Lim,
Hotels Executive Secretary, asked him to leave in a loud voice enough to be heard by
the people around them. He was asked to leave the party and a Makati policeman
accompanied him to step-out the hotel. All these time, Dr Filart ignored him adding to
his shame and humiliation.
Ms. Ruby Lim: She admitted asking Mr. Reyes to leave the party but not in the manner
claimed by the plaintiff. Ms. Lim approached several people including Dr. Filarts sister,
Ms. Zenaida Fruto, if Dr. Filart did invite him as the captain waiter told Ms. Lim that Mr.
Reyes was with Dr. Filarts group. She wasnt able to ask it personally with Dr. Filart since
the latter was talking over the phone and doesnt want to interrupt her. She asked Mr.
Reyes to leave because the celebrant specifically ordered that the party should be
intimate consisting only of those who part of the list. She even asked politely with the
plaintiff to finish his food then leave the party.

During the plaintiffs cross-examination, he was asked how close was Ms. Lim when she
approached him at the buffet table. Mr. Reyes answered very close because we nearly
kissed each other. Considering the close proximity, it was Ms. Lims intention to relay
the request only be heard by him. It was Mr. Reyes who made a scene causing
everybody to know what happened.

ISSUE: Whether or not petitioners acted abusively in asking Mr. Reyes to leave the party.

HELD:
Supreme Court held that petitioners did not act abusively in asking Mr. Reyes to leave
the party. Plaintiff failed to establish any proof of ill-motive on the part of Ms. Lim who
did all the necessary precautions to ensure that Mr. Reyes will not be humiliated in
requesting him to leave the party. Considering almost 20 years of experience in the
hotel industry, Ms. Lim is experienced enough to know how to handle such matters.
Hence, petitioners will not be held liable for damages brought under Article 19 and 20 of
the Civil Code.

In contrast, under the 1988 Family Code, in order that a subsequent

bigamous marriage may exceptionally be considered valid, the following
conditions must concur, viz.: (a) The prior spouse of the contracting party
must have been absent for four consecutive years, or two years where there
is danger of death under the circumstances stated in Article 391 of the Civil
Code at the time of disappearance; (b) the spouse present has a wellfounded belief that the absent spouse is already dead; and (c) there is, unlike
the old rule, a judicial declaration of presumptive death of the absentee for
which purpose the spouse present can institute a summary proceeding in
court to ask for that declaration. The last condition is consistent and in
consonance with the requirement of judicial intervention in subsequent
marriages as so provided in Article 41, in relation to Article 40, of the Family
Code.

The Court rejects petitioners contention that the requirement of instituting a

petition for declaration of presumptive death under Article 41 of the Family Code is
designed merely to enable the spouse present to contract a valid second marriage and

not for the acquittal of one charged with bigamy. Such provision was designed to
harmonize civil law and Article 349 of the Revised Penal Code, and put to rest the
confusion spawned by the rulings of this Court and comments of eminent authorities on
Criminal Law.

As early as March 6, 1937, this Court ruled in Jones v. Hortiguela[47] that, for
purposes of the marriage law, it is not necessary to have the former spouse judicially
declared an absentee before the spouse present may contract a subsequent marriage. It
held that the declaration of absence made in accordance with the provisions of the Civil
Code has for its sole purpose the taking of the necessary precautions for the
administration of the estate of the absentee. For the celebration of civil marriage,
however, the law only requires that the former spouse had been absent for seven
consecutive years at the time of the second marriage, that the spouse present does not
know his or her former spouse to be living, that such former spouse is generally reputed
to be dead and the spouse present so believes at the time of the celebration of the
marriage.[48] In In Re Szatraw,[49] the Court declared that a judicial declaration that a
person is presumptively dead, because he or she had been unheard from in seven years,
being a presumption juris tantumonly, subject to contrary proof, cannot reach the stage
of finality or become final; and that proof of actual death of the person presumed dead
being unheard from in seven years, would have to be made in another proceeding to
have such particular fact finally determined. The Court ruled that if a judicial decree
declaring a person presumptively dead because he or she had not been heard from in
seven years cannot become final and executory even after the lapse of the reglementary
period within which an appeal may be taken, for such presumption is still disputable and
remains subject to contrary proof, then a petition for such a declaration is useless,
unnecessary, superfluous and of no benefit to the petitioner. The Court stated that it
should not waste its valuable time and be made to perform a superfluous and
meaningless act.[50] The Court also took note that a petition for a declaration of the
presumptive death of an absent spouse may even be made in collusion with the other
spouse.

In Lukban v. Republic of the Philippines,[51] the Court declared that the words
proper proceedings in Article 349 of the Revised Penal Code can only refer to those
authorized by law such as Articles 390 and 391 of the Civil Code which refer to the

administration or settlement of the estate of a deceased person. In Gue v. Republic of

the Philippines,[52] the Court rejected the contention of the petitioner therein that, under
Article 390 of the Civil Code, the courts are authorized to declare the presumptive death
of a person after an absence of seven years. The Court reiterated its rulings in Szatraw,
Lukban and Jones.

Former Chief Justice Ramon C. Aquino was of the view that the provision of Article
349 or before the absent spouse has been declared presumptively dead by means of a
judgment reached in the proper proceedings is erroneous and should be considered as
not written. He opined that such provision presupposes that, if the prior marriage has not
been legally dissolved and the absent first spouse has not been declared presumptively
dead in a proper court proceedings, the subsequent marriage is bigamous. He maintains
that the supposition is not true.[53] A second marriage is bigamous only when the
circumstances in paragraphs 1 and 2 of Article 83 of the Civil Code are not present.
[54]

Former Senator Ambrosio Padilla was, likewise, of the view that Article 349 seems to

require judicial decree of dissolution or judicial declaration of absence but even with such
decree, a second marriage in good faith will not constitute bigamy. He posits that a
second marriage, if not illegal, even if it be annullable, should not give rise to bigamy.
[55]

Former Justice Luis B. Reyes, on the other hand, was of the view that in the case of an

absent spouse who could not yet be presumed dead according to the Civil Code, the
spouse present cannot be charged and convicted of bigamy in case he/she contracts a
second marriage.[56]

The Committee tasked to prepare the Family Code proposed the amendments of
Articles 390 and 391 of the Civil Code to conform to Article 349 of the Revised Penal
Code, in that, in a case where a spouse is absent for the requisite period, the present
spouse may contract a subsequent marriage only after securing a judgment declaring
the presumptive death of the absent spouse to avoid being charged and convicted of
bigamy; the present spouse will have to adduce evidence that he had a well-founded
belief that the absent spouse was already dead. [57] Such judgment is proof of the good
faith of the present spouse who contracted a subsequent marriage; thus, even if the
present spouse is later charged with bigamy if the absentee spouse reappears, he
cannot be convicted of the crime. As explained by former Justice Alicia Sempio-Diy:

Such rulings, however, conflict with Art. 349 of the Revised Penal Code
providing that the present spouse must first ask for a declaration of
presumptive death of the absent spouse in order not to be guilty of bigamy
in case he or she marries again.

The above Article of the Family Code now clearly provides that for the
purpose of the present spouse contracting a second marriage, he or she
must file a summary proceeding as provided in the Code for the declaration
of the presumptive death of the absentee, without prejudice to the latters
reappearance. This provision is intended to protect the present spouse from
a criminal prosecution for bigamy under Art. 349 of the Revised Penal Code
because with the judicial declaration that the missing spouses presumptively
dead, the good faith of the present spouse in contracting a second marriage
is already established.[58]

Of the same view is former Dean Ernesto L. Pineda (now Undersecretary of Justice)
who wrote that things are now clarified. He says judicial declaration of presumptive
death

is

now

authorized

for

purposes

of

remarriage. The present spouse must institute a summary proceeding for declaration of
presumptive death of the absentee, where the ordinary rules of procedure in trial will not
be followed. Affidavits will suffice, with possible clarificatory examinations of affiants if
the Judge finds it necessary for a full grasp of the facts. The judgment declaring an
absentee as presumptively dead is without prejudice to the effect of reappearance of the
said absentee.

Dean Pineda further states that before, the weight of authority is that the clause
before the absent spouse has been declared presumptively dead x x x should be
disregarded because of Article 83, paragraph 3 of the Civil Code. With the new law, there
is a need to institute a summary proceeding for the declaration of the presumptive death
of the absentee, otherwise, there is bigamy.[59]

According to Retired Supreme Court Justice Florenz D. Regalado, an eminent authority on

Criminal Law, in some cases where an absentee spouse is believed to be dead, there
must be a judicial declaration of presumptive death, which could then be made only in
the proceedings for the settlement of his estate. [60] Before such declaration, it was held

that the remarriage of the other spouse is bigamous even if done in good faith. [61] Justice
Regalado opined that there were contrary views because of the ruling in Jones and the
provisions of Article 83(2) of the Civil Code, which, however, appears to have been set to
rest by Article 41 of the Family Code, which requires a summary hearing for the
declaration of presumptive death of the absent spouse before the other spouse can
remarry.

Under Article 238 of the Family Code, a petition for a declaration of the
presumptive death of an absent spouse under Article 41 of the Family Code may be filed
under Articles 239 to 247 of the same Code.[62]

On the second issue, the petitioner, likewise, faults the trial court and the CA for
awarding moral damages in favor of the private complainant. The petitioner maintains
that moral damages may be awarded only in any of the cases provided in Article 2219 of
the Civil Code, and bigamy is not one of them. The petitioner asserts that the appellate
court failed to apply its ruling in People v. Bondoc,[63] where an award of moral damages
for bigamy was disallowed. In any case, the petitioner maintains, the private complainant
failed to adduce evidence to prove moral damages.

The appellate court awarded moral damages to the private complainant on its
finding that she adduced evidence to prove the same. The appellate court ruled that
while bigamy is not included in those cases enumerated in Article 2219 of the Civil Code,
it is not proscribed from awarding moral damages against the petitioner. The appellate
court ruled that it is not bound by the following ruling in People v. Bondoc:

... Pero si en dichos asuntos se adjudicaron daos, ello se debi

indedublamente porque el articulo 2219 del Cdigo Civil de Filipinas autoriza
la adjudicacin de daos morales en los delitos de estupro, rapto, violacin,
adulterio o concubinato, y otros actos lascivos, sin incluir en esta
enumeracin el delito de bigamia. No existe, por consiguiente, base legal para
adjudicar aqu los daos de P5,000.00 arriba mencionados.[64]

The OSG posits that the findings and ruling of the CA are based on the evidence
and the law. The OSG, likewise, avers that the CA was not bound by its ruling in People v.
Rodeo.

The Court rules against the petitioner.

Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral damages may be recovered if
they are the proximate result of the defendants wrongful act or omission. [65] An award for
moral damages requires the confluence of the following conditions: first, there must be
an injury, whether physical, mental or psychological, clearly sustained by the
claimant;second, there must be culpable act or omission factually established; third, the
wrongful act or omission of the defendant is the proximate cause of the injury sustained
by the claimant; and fourth, the award of damages is predicated on any of the cases
stated in Article 2219 or Article 2220 of the Civil Code.[66]

Moral damages may be awarded in favor of the offended party only in criminal
cases enumerated in Article 2219, paragraphs 1, 3, 4, 5 and 7 of the Civil Code and
analogous cases, viz.:
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.

The parents of the female seduced, abducted, raped, or abused,

referred to in No. 3 of this article, may also recover moral damages.

The spouse, descendants, ascendants, and brothers and sisters may

bring the action mentioned in No. 9 of this article in the order named.

Thus, the law does not intend that moral damages should be awarded in all cases where
the aggrieved party has suffered mental anguish, fright, moral anxieties, besmirched
reputation, wounded feelings, moral shock, social humiliation and similar injury arising
out of an act or omission of another, otherwise, there would not have been any reason
for the inclusion of specific acts in Article 2219 [67] and analogous cases (which refer to
those cases bearing analogy or resemblance, corresponds to some others or resembling,
in other respects, as in form, proportion, relation, etc.)[68]

Indeed, bigamy is not one of those specifically mentioned in Article 2219 of the
Civil Code in which the offender may be ordered to pay moral damages to the private
complainant/offended party. Nevertheless, the petitioner is liable to the private
complainant for moral damages under Article 2219 in relation to Articles 19, 20 and 21 of
the Civil Code.

According to Article 19, every person must, in the exercise of his rights and in the
performance of his act with justice, give everyone his due, and observe honesty and
good faith. This provision contains what is commonly referred to as the principle of abuse
of rights, and sets certain standards which must be observed not only in the exercise of
ones rights but also in the performance of ones duties. The standards are the following:
act with justice; give everyone his due; and observe honesty and good faith. The
elements for abuse of rights are: (a) there is a legal right or duty; (b) exercised in bad
faith; and (c) for the sole intent of prejudicing or injuring another.[69]

Article 20 speaks of the general sanctions of all other provisions of law which do
not especially provide for its own sanction. When a right is exercised in a manner which
does not conform to the standards set forth in the said provision and results in damage
to another, a legal wrong is thereby committed for which the wrongdoer must be
responsible.[70] If the provision does not provide a remedy for its violation, an action for
damages under either Article 20 or Article 21 of the Civil Code would be proper. Article
20 provides that every person who, contrary to law, willfully or negligently causes
damage to another shall indemnify the latter for the same. On the other hand, Article 21
provides that any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for
damages.

The

latter

provision

is 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 should vouchsafe adequate legal remedy for that untold number of moral wrongs
which it is impossible for human foresight to prove for specifically in the statutes.
Whether or not the principle of abuse of rights has been violated resulting in damages
under Article 20 or Article 21 of the Civil Code or other applicable provisions of law
depends upon the circumstances of each case.[71]

In the present case, the petitioner courted the private complainant and proposed to
marry her. He assured her that he was single. He even brought his parents to the house
of the private complainant where he and his parents made the same assurance that he
was single. Thus, the private complainant agreed to marry the petitioner, who even
stated in the certificate of marriage that he was single. She lived with the petitioner and
dutifully performed her duties as his wife, believing all the while that he was her lawful
husband. For two years or so until the petitioner heartlessly abandoned her, the private
complainant had no inkling that he was already married to another before they were
married.

Thus, the private complainant was an innocent victim of the petitioners chicanery
and heartless deception, the fraud consisting not of a single act alone, but a continuous
series of acts. Day by day, he maintained the appearance of being a lawful husband to
the

private

complainant,

who

changed her status from a single woman to a married woman, lost the consortium,

attributes and support of a single man she could have married lawfully and endured
mental pain and humiliation, being bound to a man who it turned out was not her lawful
husband.[72]

The Court rules that the petitioners collective acts of fraud and deceit before,
during and after his marriage with the private complainant were willful, deliberate and
with malice and caused injury to the latter. That she did not sustain any physical injuries
is not a bar to an award for moral damages. Indeed, in Morris v. Macnab,[73] the New
Jersey Supreme Court ruled:

xxx The defendant cites authorities which indicate that, absent

physical injuries, damages for shame, humiliation, and mental anguish are
not recoverable where the actor is simply negligent. See Prosser, supra, at p.
180; 2 Harper & James, Torts, 1031 (1956). But the authorities all recognize
that where the wrong is willful rather than negligent, recovery may be had
for the ordinary, natural, and proximate consequences though they consist of
shame, humiliation, and mental anguish. See Spiegel v. Evergreen Cemetery
Co., 117 NJL 90, 94, 186 A 585 (Sup. Ct. 1936); Kuzma v. Millinery Workers,
etc., Local 24, 27 N.J. Super, 579, 591, 99 A.2d 833 (App. Div. 1953); Prosser,
supra, at p. 38. Here the defendants conduct was not merely negligent, but
was willfully and maliciously wrongful. It was bound to result in shame,
humiliation, and mental anguish for the plaintiff, and when such result did
ensue the plaintiff became entitled not only to compensatory but also to
punitive damages. See Spiegel v. Evergreen Cemetery Co., supra; Kuzma v
Millinery Workers, etc., Local 24, supra. CF. Note, Exemplary Damages in the
Law of Torts, 70 Harv. L. Rev. 517 (1957). The plaintiff testified that because
of the defendants bigamous marriage to her and the attendant publicity she
not only was embarrassed and ashamed to go out but couldnt sleep but
couldnt eat, had terrific headaches and lost quite a lot of weight. No just
basis appears for judicial interference with the jurys reasonable allowance of
$1,000 punitive damages on the first count. See Cabakov v. Thatcher, 37 N.J.
Super 249, 117 A.2d 298 (App. Div.[74] 1955).

The Court thus declares that the petitioners acts are against public policy as they
undermine and subvert the family as a social institution, good morals and the interest
and general welfare of society.

Because the private complainant was an innocent victim of the petitioners perfidy,
she is not barred from claiming moral damages. Besides, even considerations of public
policy would not prevent her from recovery. As held in Jekshewitz v. Groswald:[75]

Where a person is induced by the fraudulent representation of another to do

an act which, in consequence of such misrepresentation, he believes to be
neither illegal nor immoral, but which is in fact a criminal offense, he has a
right of action against the person so inducing him for damages sustained by
him in consequence of his having done such act. Burrows v. Rhodes, [1899] 1
Q.B. 816. In Cooper v. Cooper, 147 Mass. 370, 17 N.E. 892, 9 Am. St. Rep.
721, the court said that a false representation by the defendant that he was
divorced from his former wife, whereby the plaintiff was induced to marry
him, gave her a remedy in tort for deceit. It seems to have been assumed
that the fact that she had unintentionally violated the law or innocently
committed a crime by cohabiting with him would be no bar to the action, but
rather that it might be a ground for enhancing her damages. The injury to
the plaintiff was said to be in her being led by the promise to give the
fellowship and assistance of a wife to one who was not her husband and to
assume and act in a relation and condition that proved to be false and
ignominious. Damages for such an injury were held to be recoverable in
Sherman v. Rawson, 102 Mass. 395 and Kelley v. Riley, 106 Mass. 339, 343, 8
Am. Rep. 336.

Furthermore, in the case at bar the plaintiff does not base her cause of action
upon any transgression of the law by herself but upon the defendants
misrepresentation. The criminal relations which followed, innocently on her
part, were but one of the incidental results of the defendants fraud for which
damages may be assessed.

[7] Actions for deceit for fraudulently inducing a woman to enter into
the marriage relation have been maintained in other jurisdictions. Sears v.
Wegner, 150 Mich. 388, 114 N.W. 224, 17 L.R. A. (N.S.) 819; Larson v.
McMillan, 99 Wash. 626, 170 P. 324; Blossom v. Barrett, 37 N.Y. 434, 97 Am.
Dec. 747; Morril v. Palmer, 68 Vt. 1, 33 A. 829, 33 L.R.A. 411. Considerations
of public policy would not prevent recovery where the circumstances are
such that the plaintiff was conscious of no moral turpitude, that her illegal
action was induced solely by the defendants misrepresentation, and that she
does not base her cause of action upon any transgression of the law by
herself.
Such
considerations
distinguish this case from cases in which the court has refused to lend its aid
to the enforcement of a contract illegal on its face or to one who has
consciously and voluntarily become a party to an illegal act upon which the

cause of action is founded. Szadiwicz v. Cantor, 257 Mass. 518, 520, 154 N.E.
251, 49 A. L. R. 958.[76]

Considering the attendant circumstances of the case, the Court finds the award
of P200,000.00 for moral damages to be just and reasonable.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed

decision of the Court of Appeals is AFFIRMED. Costs against the petitioner.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice

WE CONCUR:

REYNATO S. PUNO
Associate Justice
Chairman

MA. ALICIA AUSTRIA-MARTINEZ DANTE O. TINGA

Associate Justice Associate Justice

On leave
MINITA V. CHICO-NAZARIO
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.

REYNATO S. PUNO
Associate Justice
Chairman, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairmans
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.

HILARIO G. DAVIDE, JR.

Chief Justice

Manuel v. People
G.R. No. 165842 November 29, 2005

Lesson: Felony, Bigamy, Judicial Declaration of Presumptive Death, malice, good faith as
a valid defense
Actus non facit reum, nisi mens sit rea
Laws Applicable: Art. 3 par 2 RPC, Art. 349 RPC, Art. 41 FC

FACTS:

July 28, 1975: Eduardo married Rubylus Gaa before Msgr. Feliciano Santos in Makati
o Rubylus was charged with estafa in 1975 and thereafter imprisoned
o Eduardo only visited 3 times and never saw her again

January 1996: Eduardo met Tina B. Gandalera, 21 year old computer secretarial
student, in Dagupan City while she looked for a friend during her 2 days stay

Later, Eduardo visited Tina, they went to a motel together and he proposed marriage
and introduced her to his parents who assures that he is single

April 22, 1996: Eduardo married Tina before Judge Antonio C. Reyes, the Presiding
Judge of the RTC of Baguio City and they were able to build a home after

1999: Eduardo only visited their home twice or thrice a year and whenever jobless
Tina would ask for money, he would slap her

January 2001: Eduardo packed his things and left and stopped giving financial support

August 2001: Tina through inquiries from the National Statistics Office (NSO) in Manila
and was embarrassed and humiliated to learn that Eduardo was previously married

Eduardo claimed that he did NOT know that he had to go to court to seek for the
nullification of his first marriage before marrying Tina

RTC: Eduardo guilty beyond reasonable doubt of bigamy and sentenced to an

indeterminate penalty of from 6 years and 10 months, as minimum, to 10 years, as
maximum and P200,000.00 by way of moral damages, plus costs of suit
o Eduardos belief, that his first marriage had been dissolved because of his first wifes 20year absence, even if true, did not exculpate him from liability for bigamy

Eduardo appealed to the CA contending that he did so in good faith and without any
malicious intent whereas under Article 3 of the Revised Penal Code, there must be malice
for one to be criminally liable for a felony

CA: affirming the decision of the RTC stating that Article 41 of the Family Code should
apply that there should have been a judicial declaration of Gaas presumptive death as
the absent spouse and modified minimum to 2 years and four months
ISSUE: W/N Eduardo is guilty of Bigamy, a felony by dolo (deceit).
HELD: YES. petition is DENIED. CA affirmed

o
o

o
o

o
o
o

Art. 349. Bigamy. The penalty of prision mayor shall be imposed upon any person
who shall contract a second or subsequent marriage before the former marriage has
been legally dissolved, or before the absent spouse has been declared presumptively
dead by means of a judgment rendered in the proper proceedings.
The reason why bigamy is considered a felony is to preserve and ensure the juridical tie
of marriage established by law.
Article 349 of the Revised Penal Code has made the dissolution of marriage dependent
not only upon the personal belief of parties, but upon certain objective facts easily
capable of accurate judicial cognizance, namely, a judgment of the presumptive death of
the absent spouse
For the accused to be held guilty of bigamy, the prosecution is burdened to prove the
felony:
(a) he/she has been legally married; and
(b) he/she contracts a subsequent marriage without the former marriage having been
lawfully dissolved.
The felony is consummated on the celebration of the second marriage or subsequent
marriage
Article 3, paragraph 2 of the Revised Penal Code provides that there is deceit when
the act is performed with deliberate intent
Malice -a mental state or condition prompting the doing of an overt act WITHOUT legal
excuse or justification from which another suffers injury
When the act or omission defined by law as a felony is proved to have been done or
committed by the accused, the law presumes it to have been intentional
For one to be criminally liable for a felony by dolo, there must be a confluence of both
an evil act and an evil intent.
Actus non facit reum, nisi mens sit rea

GR: mistake of fact or good faith of the accused is a valid defense in a prosecution for
a felony by dolo; such defense negates malice or criminal intent.

EX: ignorance of the law is not an excuse because everyone is presumed to know the
law.
o Ignorantia legis neminem excusat

burden of the petitioner to prove his defense that when he married he was of the
well-grounded belief that his first wife was already dead, as he had not heard from her
for more than 20 years since 1975
o failed to discharge his burden since no judicial declaration as proof

Article 41 of the Family Code amended the rules on presumptive death on Articles
390 and 391 of the Civil Code which states that before the spouse present may contract
a subsequent marriage, he or she must institute summary proceedings for the
declaration of the presumptive death of the absentee spouse, without prejudice to the
effect of the reappearance of the absentee spouse.

moral damages may be awarded under Article 2219 in relation to Articles 19, 20 and
21 of the Civil Code for being against public policy as they undermine and subvert the
family as a social institution, good morals and the interest and general welfare of society

G.R. No. L-17248

January 29, 1962

BEATRIZ GALANG, petitioner,

vs.
HON. COURT OF APPEALS, MAXIMO QUINIT and RODRIGO QUINIT, respondents.
R. Meris-Morales for petitioner.
De Santos, Herrera and Delfino for respondents.
CONCEPCION, J.:
This is an action against Rodrigo Quinit and his father Maximo Quinit to recover damages
claimed to have been sustained by plaintiff Beatriz Galang for an alleged breach of

promise on the part of Rodrigo Quinit to marry her. In due course, the Court of First
Instance of Baguio, in which the case was originally instituted, rendered a decision
sentencing the defendants jointly and severally to pay the sums of P275.00, by way of
actual damages, P5,000.00, as moral damages, and P500.00, as attorney's fees, apart
from the costs. On appeal, taken by the defendants, the Court of Appeals absolved
Maximino Quinit, and accordingly, reversed said decision insofar as he is concerned, and
modified it as regards Rodrigo Quinit, by eliminating the awards for moral damages and
attorney's fees. The case is before us on appeal by certiorari taken by plaintiff Beatriz
Galang.
As found by the Court of Appeals, it appears that plaintiff "and Rodrigo Quinit were
engaged, but Rodrigo's parents were strongly opposed to their marriage"; that "from
April 27, 1955", plaintiff "and Rodrigo lived as husband and wife in the house of Adolfo
Dagawan located at Colorado Falls, Tuba, Mountain Province, until May 9 when Rodrigo
left and never returned"; that "both were from the same town of Sison, Pangasinan and
their love relations started in the year 1953, the two having exchanged a long series of
love letters since then until they separated", and that "at the time when went to
Colorado Falls, both were of age." .
The evidence on other pertinent facts is, however, conflicting. In the language of the
decision appealed from plaintiff also referred to therein as appellee tried to prove .
"... that Rodrigo courted her in 1953 and they, thereafter, became engaged, albeit
Rodrigo's mother was opposed to their marriage; that on April 15, 1955 Rodrigo
and his father went to her house and her marriage with Rodrigo were arranged,
with the concurrence of her mother, appellant Maximino Quinit having agreed to
give dowry and to defray the expenses of the marriage, with the exception of the
wedding dress of appellee; that they agreed to have the marriage celebrated in
Baguio, for which reason on April 27, 1955, appellee, Rodrigo and the latter's
father left for Baguio; that upon arriving at Colorado Falls, however, Maximino
made them alight from the bus and took them to the house of Adolfo Dagawan
with whom Maximino agreed that appellee and Rodrigo would stay in said house,
Maximino to pay P5.00 daily for their lodging and asked Dagawan to make all
arrangements for their wedding in Baguio and to act as their sponsor; that after
making these arrangements Maximino left, while appellee and Rodrigo remained in
Dagawan's house where they lived as husband and wife until May 9, that on May 7,
appellee and Rodrigo, accompanied by Dagawan, went to Baguio to secure a
marriage license but failed because Rodrigo did not have a residence certificate,
although both prospective contracting parties signed the corresponding
application; that on May 9, on the pretext that he going to their hometown to get
his residence certificate, Rodrigo left Colorado Falls and never returned; that when
appellee returned to their hometown (Sison, Pangasinan), she found out that
Rodrigo's parents had sprinted him away because, in their opinion, appellee's
reputation was unsavory." .
Upon the other hand, the defendants sought to establish that Rodrigo and plaintiff .

"... were engaged; that Rodrigo's parents were opposed to their marriage; that
while Rodrigo was agreeable to marrying appellee, he wanted the marriage to take
place after his graduation, while appellee was impatient and wanted the marriage
to be held at an earlier date; that on April 26, 1955, in view of Rodrigo's continued
relations with appellee, his parents told him to leave the parental home, for which
reason on that date he left their house with his belongings and some gantas of
rice; that before leaving their hometown he passed by the house of appellee and
told her what had happened and further told her that he was intending to go to
Manila to look for a job; that appellee convinced him to go, instead to Colorado
Falls where they could discuss their plans and so there he went - followed later by
appellee - both staying at the house of Dagawan; that because Rodrigo persistently
refused to marry appellee, the latter's relatives, accompanied by policemen and
constabulary soldiers, arrived at the place and tried to intimidate him; that in view
of his continued refusal they brought him down to Sison where he was allowed to
go home; that thereupon his parents placed him under the custody of Mayor
Madriaga of the neighboring town of Rosario where he stayed from May 1, to June,
1955; that sometime during the month of June, Adolfo Dagawan sought Rodrigo on
the pretext that he was going to tell him something important and was able to lure
him to a secluded place where he was made to sign an application for a marriage
license; that because of his non-appearance before a notary public, the latter
refused to acknowledge the application.
"With respect to Maximino Quinit the evidence for appellants tends to show that he
had never agreed to have his son marry appellee nor to give a dowry to the latter;
that he did not go with appellee and Rodrigo to Colorado Falls and that he did not
concoct, much less carry out any plan to have his son satisfy his lust and then get
rid of appellee." .
The court of first instance sustained plaintiff's pretense, but the Court of Appeals
considered her evidence unworthy of credence, and, hence, absolved Maximino Quinit.
Plaintiff maintains that the Court of Appeals had erred in the appreciation of the
evidence, but the findings of said Court on the credibility of said evidence are beyond our
power of review on appeal by certiorari and, consequently, conclusive upon us.
It is next urged that said Court had also erred in not awarding moral damages to plaintiff,
who insists that moral damages for breach of promise to marry are collectible under our
laws, but this question has already been settled adversely to plaintiff's pretense in
Hermosisima vs. Court of Appeals, L-14628 (September 30, 1960).1wph1.t
The appealed decision of the Court of Appeals is hereby affirmed, therefore, without
special pronouncement as to cost. It is so ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes and De
Leon, J.J., concur.
Dizon, J., took no part.

BREACH OF PROMISE TO MARRYBEATRIZ GALANG vs.THE HON. COURT OF

APPEALS ET AL.G.R. No.L-17248 January 29, 1962Facts:
Rodrigo courted Beatriz in 1953 and they, thereafter, became engaged, albeit
Rodrigo'smother was opposed to their marriage; that on April 15, 1955 Rodrigo and his
father went to herhouse and her marriage with Rodrigo were arranged, with the
concurrence of her mother, appellantMaximino Quinit having agreed to give dowry and
to defray the expenses of the marriage, with theexception of the wedding dress of
appellee; that they agreed to have the marriage celebrated inBaguio, for which reason
on April 27, 1955, appellee, Rodrigo and the latter's father left for Baguio;that upon
arriving at Colorado Falls, however, Maximino made them alight from the bus and
tookthem to the house of Adolfo Dagawan with whom Maximino agreed that appellee
and Rodrigo would stay in said house, Maximino to pay P5.00 daily for their lodging and
asked Dagawan to makeall arrangements for their wedding in Baguio and to act as their
sponsor; that after making thesearrangements Maximino left, while appellee and Rodrigo
remained in Dagawan's house where theylived as husband and wife until May 9, that on
May 7, appellee and Rodrigo, accompanied byDagawan, went to Baguio to secure a
marriage license but failed because Rodrigo did not have aresidence certificate, although
both prospective contracting parties signed the correspondingapplication; that on May 9,
on the pretext that he going to their hometown to get his residencecertificate, Rodrigo
left Colorado Falls and never returned; that when appellee returned to theirhometown
(Sison, Pangasinan), she found out that Rodrigo's parents had sprinted him
awaybecause, in their opinion, appellee's reputation was unsavory.

The Court of First Instance sustained plaintiff's pretense, but the Court of Appealsconsid
ered her evidence unworthy of credence, and, hence, absolved Maximino Quinit.
Issues:
Whether or not Rodrigo and Maximo Quinit are liable for damages due to the alleged
breachof promise to marry?
Ruling:
The Supreme Court affirmed the decision of the Court of Appeals for the reason that
merebreach of promise to marry is not an actionable wrong.In the light of the clear and
manifest intentof our law making body not to sanction actions for breach of promise to
marry, the award of moraldamages made by the Court of First Instance is, accordingly,
untenable.

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 Decision 1of
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
complaint 2 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 Baaga, 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 Order 4 embodying the stipulated
facts which the parties had agreed upon, to wit:
1. That the plaintiff is single and resident (sic) of Baaga, 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
decision 5 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 Baaga,
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 CAG.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 Baaga,
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
Baaga, 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, inMedina
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 article 31 in the Code. The example given by the Code Commission is correct, if there
wasseduction, 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.

219 SCRA 115 Civil Law Torts and Damages Breach of promise to Marry Article 21 of the Civil
Code
In August 1986, while working as a waitress in Dagupan City, Pangasinan, Marilou Gonzales, then 21
years old, met Gashem Shookat Baksh, a 29 year old exchange student from Iran who was studying
medicine in Dagupan. The two got really close and intimate. On Marilous account, she said that Gashem
later offered to marry her at the end of the semester. Marilou then introduced Gashem to her parents
where they expressed their intention to get married. Marilous parents then started inviting sponsors and
relatives to the wedding. They even started looking for animals to slaughter for the occasion.
Meanwhile, Marilou started living with Gashem in his apartment where they had sexual intercourse. But in
no time, their relationship went sour as Gashem began maltreating Marilou. Gashem eventually revoked
his promise of marrying Marilou and he told her that he is already married to someone in Bacolod City. So
Marilou went home and later sued Gashem for damages.
The trial court ruled in favor of Marilou and awarded her P20k in moral damages. The Court of Appeals
affirmed the decision of the trial court.
On appeal, Gashem averred that he never proposed marriage to Marilou and that he cannot be adjudged
to have violated Filipino customs and traditions since he, being an Iranian, was not familiar with Filipino
customs and traditions.
ISSUE: Whether or not the Court of Appeals is correct.
HELD: Yes. Gashem is liable to pay for damages in favor of Marilou not really because of his breach of
promise to marry her but based on Article 21 of the Civil Code which provides:
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.

Breach of promise to marry is not an actionable wrong per se. In this case, it is the deceit and fraud
employed by Gashem that constitutes a violation of Article 21 of the Civil Code. His promise of marrying
Marilou was a deceitful scheme to lure her into sexual congress. As found by the trial court, Marilou was
not a woman of loose morals. She was a virgin before she met Gashem. She would not have surrendered
herself to Gashem had Gashem not promised to marry her. Gashems blatant disregard of Filipino
traditions on marriage and on the reputation of Filipinas is contrary to morals, good customs, and public
policy. As a foreigner who is enjoying the hospitality of our country and even taking advantage of the

opportunity to study here he is expected to respect our traditions. Any act contrary will render him liable
under Article 21 of the Civil Code.
The Supreme Court also elucidated that Article 21 was meant to expand the concepts of torts and quasi
delict. It is meant to cover situations such as this case where the breach complained of is not strictly
covered by existing laws. It was meant as a legal remedy for the untold number of moral wrongs which is
impossible for human foresight to specifically enumerate and punish in the statute books such as the
absence of a law penalizing a the breach of promise to marry.
The Supreme Court however agreed with legal luminaries that if the promise to marry was made and
there was carnal knowledge because of it, then moral damages may be recovered (presence of moral or
criminal seduction), Except if there was mutual lust; or if expenses were made because of the promise
(expenses for the wedding), then actual damages may be recovered

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-20089

December 26, 1964

BEATRIZ P. WASSMER, plaintiff-appellee,

vs.
FRANCISCO X. VELEZ, defendant-appellant.
Jalandoni & Jamir for defendant-appellant.
Samson S. Alcantara for plaintiff-appellee.
BENGZON, J.P., J.:
The facts that culminated in this case started with dreams and hopes, followed by appropriate planning and serious
endeavors, but terminated in frustration and, what is worse, complete public humiliation.

Francisco X. Velez and Beatriz P. Wassmer, following their mutual promise of love, decided to get married and set
September 4, 1954 as the big day. On September 2, 1954 Velez left this note for his bride-to-be:
Dear Bet
Will have to postpone wedding My mother opposes it. Am leaving on the Convair today.
Please do not ask too many people about the reason why That would only create a scandal.
Paquing
But the next day, September 3, he sent her the following telegram:
NOTHING CHANGED REST ASSURED RETURNING VERY SOON APOLOGIZE MAMA PAPA
LOVE .
PAKING
Thereafter Velez did not appear nor was he heard from again.
Sued by Beatriz for damages, Velez filed no answer and was declared in default. Plaintiff adduced evidence before
the clerk of court as commissioner, and on April 29, 1955, judgment was rendered ordering defendant to pay plaintiff
P2,000.00 as actual damages; P25,000.00 as moral and exemplary damages; P2,500.00 as attorney's fees; and the
costs.
On June 21, 1955 defendant filed a "petition for relief from orders, judgment and proceedings and motion for new
trial and reconsideration." Plaintiff moved to strike it cut. But the court, on August 2, 1955, ordered the parties and
their attorneys to appear before it on August 23, 1955 "to explore at this stage of the proceedings the possibility of
arriving at an amicable settlement." It added that should any of them fail to appear "the petition for relief and the
opposition thereto will be deemed submitted for resolution."
On August 23, 1955 defendant failed to appear before court. Instead, on the following day his counsel filed a motion
to defer for two weeks the resolution on defendants petition for relief. The counsel stated that he would confer with
defendant in Cagayan de Oro City the latter's residence on the possibility of an amicable element. The court
granted two weeks counted from August 25, 1955.
Plaintiff manifested on June 15, 1956 that the two weeks given by the court had expired on September 8, 1955 but
that defendant and his counsel had failed to appear.
Another chance for amicable settlement was given by the court in its order of July 6, 1956 calling the parties and
their attorneys to appear on July 13, 1956. This time. however, defendant's counsel informed the court that chances
of settling the case amicably were nil.
On July 20, 1956 the court issued an order denying defendant's aforesaid petition. Defendant has appealed to this
Court. In his petition of June 21, 1955 in the court a quo defendant alleged excusable negligence as ground to set
aside the judgment by default. Specifically, it was stated that defendant filed no answer in the belief that an amicable
settlement was being negotiated.
A petition for relief from judgment on grounds of fraud, accident, mistake or excusable negligence, must be duly
supported by an affidavit of merits stating facts constituting a valid defense. (Sec. 3, Rule 38, Rules of Court.)
Defendant's affidavit of merits attached to his petition of June 21, 1955 stated: "That he has a good and valid
defense against plaintiff's cause of action, his failure to marry the plaintiff as scheduled having been due to fortuitous
event and/or circumstances beyond his control." An affidavit of merits like this stating mere conclusions or opinions

instead of facts is not valid. (Cortes vs. Co Bun Kim, L-3926, Oct. 10, 1951; Vaswani vs. P. Tarrachand Bros., L15800, December 29, 1960.)
Defendant, however, would contend that the affidavit of merits was in fact unnecessary, or a mere surplusage,
because the judgment sought to be set aside was null and void, it having been based on evidence adduced before
the clerk of court. In Province of Pangasinan vs. Palisoc, L-16519, October 30, 1962, this Court pointed out that the
procedure of designating the clerk of court as commissioner to receive evidence is sanctioned by Rule 34 (now Rule
33) of the Rules of Court. Now as to defendant's consent to said procedure, the same did not have to be obtained
for he was declared in default and thus had no standing in court (Velez vs. Ramas, 40 Phil. 787; Alano vs. Court of
First Instance, L-14557, October 30, 1959).
In support of his "motion for new trial and reconsideration," defendant asserts that the judgment is contrary to law.
The reason given is that "there is no provision of the Civil Code authorizing" an action for breach of promise to
marry. Indeed, our ruling in Hermosisima vs. Court of Appeals (L-14628, Sept. 30, 1960), as reiterated in Estopa vs.
Biansay (L-14733, Sept. 30, 1960), is that "mere breach of a promise to marry" is not an actionable wrong. We
pointed out that Congress deliberately eliminated from the draft of the new Civil Code the provisions that would have
it so.
It must not be overlooked, however, that the extent to which acts not contrary to law may be perpetrated with
impunity, is not limitless for Article 21 of said Code provides that "any person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the
damage."
The record reveals that on August 23, 1954 plaintiff and defendant applied for a license to contract marriage, which
was subsequently issued (Exhs. A, A-1). Their wedding was set for September 4, 1954. Invitations were printed and
distributed to relatives, friends and acquaintances (Tsn., 5; Exh. C). The bride-to-be's trousseau, party drsrses and
other apparel for the important occasion were purchased (Tsn., 7-8). Dresses for the maid of honor and the flower
girl were prepared. A matrimonial bed, with accessories, was bought. Bridal showers were given and gifts received
(Tsn., 6; Exh. E). And then, with but two days before the wedding, defendant, who was then 28 years old,: simply left
a note for plaintiff stating: "Will have to postpone wedding My mother opposes it ... " He enplaned to his home city
in Mindanao, and the next day, the day before the wedding, he wired plaintiff: "Nothing changed rest assured
returning soon." But he never returned and was never heard from again.
Surely this is not a case of mere breach of promise to marry. As stated, mere breach of promise to marry is not an
actionable wrong. But to formally set a wedding and go through all the above-described preparation and publicity,
only to walk out of it when the matrimony is about to be solemnized, is quite different. This is palpably and
unjustifiably contrary to good customs for which defendant must be held answerable in damages in accordance with
Article 21 aforesaid.
Defendant urges in his afore-stated petition that the damages awarded were excessive. No question is raised as to
the award of actual damages. What defendant would really assert hereunder is that the award of moral and
exemplary damages, in the amount of P25,000.00, should be totally eliminated.
Per express provision of Article 2219 (10) of the New Civil Code, moral damages are recoverable in the cases
mentioned in Article 21 of said Code. As to exemplary damages, defendant contends that the same could not be
adjudged against him because under Article 2232 of the New Civil Code the condition precedent is that "the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." The argument is devoid of
merit as under the above-narrated circumstances of this case defendant clearly acted in a "wanton ... , reckless
[and] oppressive manner." This Court's opinion, however, is that considering the particular circumstances of this
case, P15,000.00 as moral and exemplary damages is deemed to be a reasonable award.
PREMISES CONSIDERED, with the above-indicated modification, the lower court's judgment is hereby affirmed,
with costs.

Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal, and Zaldivar,
JJ.,concur.

FACTS:
On August 23, 1954 plaintiff and defendant applied for a license to contract marriage, which was
subsequently issued. Their wedding was set for September 4, 1954. Invitations were printed and
distributed to relatives, friends and acquaintances. The bride-to-be's trousseau, party dresses
and other apparel for the important occasion were purchased. Dresses for the maid of honor and
the flower girl were prepared. A matrimonial bed, with accessories, was bought. Bridal showers
were given and gifts received. And then, with but two days before the wedding, defendant, who
was then 28 years old,: simply left a note for plaintiff stating: "Will have to postpone wedding
My mother opposes it ... " He enplaned to his home city in Mindanao, and the next day, the day
before the wedding, he wired plaintiff: "Nothing changed rest assured returning soon." But he
never returned and was never heard from again.

ISSUE:
Whether or not breach of promise to marry is an actionable wrong?

HELD:
Mere breach of promise to marry is not an actionable wrong. But to formally set a wedding and
go through all the preparation and publicity, only to walk out of it when the matrimony is about
to be solemnized, is quite different. This is palpably and unjustifiably contrary to good customs
for which defendant must be held answerable in damages in accordance with Article 21 of the
Civil Code

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION

SHINRYO
(PHILIPPINES)
COMPANY, INC.,

G.R. No. 172525

Present:

Petitioner,
CARPIO, J., Chairperson,
VELASCO, JR.,**
- versus -

LEONARDO-DE
CASTRO,***
PERALTA, and
MENDOZA, JJ.

RRN INCORPORATED,*
Respondent.

Promulgated:
October 20, 2010

x-----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules
of Court, praying that the Decision[1] of the Court of Appeals (CA) dated
February 22, 2006, affirming the Decision of the Construction Industry
Arbitration Commission (CIAC), and the CA Resolution [2] dated April 26, 2006,
denying herein petitioner's motion for reconsideration, be reversed and set
aside.
The facts, as accurately narrated in the CA Decision, are as follows.
Petitioner Shinryo (Philippines) Company, Inc. (hereinafter
petitioner) is a domestic corporation organized under Philippine
laws. Private respondent RRN Incorporated (hereinafter respondent)
is likewise a domestic corporation organized under Philippine laws.

Respondent filed a claim for arbitration against petitioner before

CIAC for recovery of unpaid account which consists of unpaid
portions of the sub-contract, variations and unused materials in the
total sum of P5,275,184.17 and legal interest in the amount
of P442,014.73. Petitioner filed a counterclaim for overpayment in
the amount of P2,512,997.96.

The parties admitted several facts before the CIAC. It was shown
that petitioner and respondent executed an Agreement and
Conditions of Sub-contract (hereafter Agreement signed on June 11,
1996 and June 14, 1996, respectively. Respondent signified its
willingness to accept and perform for petitioner in any of its
projects, a part or the whole of the works more particularly
described in Conditions of Sub-Contract and other Sub-contract
documents.

On June 11, 2002, the parties executed a Supply of Manpower,

Tools/Equipment, Consumables for the Electrical Works-Power and
Equipment Supply, Bus Duct Installation for the Phillip Morris
Greenfield Project (hereafter Project) covered by Purchase Order
Nos. 4501200300-000274 and 4501200300-000275 amounting
to P15,724,000.00 and P9,276,000.00 respectively, or a total
amount of P25,000,000.00. The parties also agreed that respondent
will perform variation orders in the Project. In connection with the

Project, petitioner
respondent.

supplied

manpower

chargeable

against

Respondent was not able to finish the entire works with petitioner
due to financial difficulties. Petitioner paid respondent a total
amount of P26,547,624.76. On June 25, 2005 [should read 2003],
respondent, through its former counsel sent a letter to petitioner
demanding for the payment of its unpaid balance amounting
to P5,275,184.17. Petitioner claimed material back charges in the
amount of P4,063,633.43. On September 26, 2003, respondent only
acknowledged P2,371,895.33 as material back charges. Thereafter,
on October 16, 2003, respondent sent another letter to petitioner for
them to meet and settle their dispute.

On January 8, 2004, respondent sent another letter to petitioner

regarding the cost of equipment rental and the use of
scaffolding. Thereafter, on August 12, 2004, petitioner sent a letter
to respondent denying any unpaid account and the failure in their
negotiations for amicable settlement.

On September 3, 2004, respondent, through its new counsel,

advised petitioner of their intention to submit the matter to
arbitration. Thereafter, their dispute was submitted to arbitration.
During the preliminary conference, the parties agreed in their Terms
of Reference to resolve eight issues, to wit:

1.
What should be the basis in evaluating the
variation cost?

1.1 How much is the variation cost?

2.
Is the Respondent (petitioner in the instant case)
justified in charging claimant (herein respondent) the
equipment rental fee and for the use of the

scaffoldings? If so, how much should be charged to

Claimant?

3.
What should be the basis in evaluating the total
cost of materials supplied by Respondent to the Project
which is chargeable to Claimant?

3.1 How much is the total cost of materials supply

chargeable to Claimant?

4.
How much is the value of the remaining works left
undone by the Claimant in the project?

5.
Is the Claimant's claim for inventory of excess
materials valid? If so, how much is the value thereof?

6.
Is the Respondent entitled to its claim for an
overpayment in the amount of P2,512,997.96?

7.
Is Claimant entitled to its claim for interest? If so,
how much?

8.
Who between the parties shall bear the cost of
Arbitration?

The CIAC rendered the assailed decision after the presentation of

the parties' evidence. [The dispositive portion of said decision reads
as follows:

WHEREFORE, judgment is hereby rendered in favor of the claimant and

respondent is ordered to pay claimant its unpaid account in the sum
of P3,728,960.54 plus legal interest of 6% reckoned from June 25, 2003
up to the filing of the case on October 11, 2004 and 12%
of P3,728,960.54 from the finality of the judgment until fully paid and

arbitration cost of P104,333.82 representing claimant's share of the

arbitration cost which respondent should reimburse.

SO ORDERED.]

Petitioner accepts the ruling of the CIAC only in Issue No. 1 and
Sub-Issue No. 1.1 and in Issue No. 2 in so far as the amount
of P440,000.00 awarded as back charges for the use of scaffoldings.
x x x[3]

On February 22, 2006, the CA promulgated the assailed Decision affirming

the decision of the CIAC. The CA upheld the CIAC ruling that petitioner failed
to adduce sufficient proof that the parties had an agreement regarding
charges for respondent's use of the manlift. As to the other charges for
materials, the CA held that the evidence on record amply supports the CIAC
findings. Petitioner moved for reconsideration of said ruling, but the same
was denied per Resolution dated April 26, 2006.

Hence, this petition where it is alleged that:

I.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
REVERSIBLE ERROR WHEN IT DENIED PETITIONER'S CLAIM FOR
MANLIFT EQUIPMENT RENTAL IN THE AMOUNT OF P511,000.00
DESPITE EVIDENCE ON RECORD THAT RESPONDENT RRN ACTUALLY
USED AND BENEFITED FROM THE MANLIFT EQUIPMENT.

II.
IN
RENDERING
THE
QUESTIONED
DECISION
AND
QUESTIONED RESOLUTION, THE HONORABLE COURT OF APPEALS
HAS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH
LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE HONORABLE
SUPREME COURT.

III.
THE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE
ERROR IN AFFIRMING THE CIAC AWARD FOR THE VALUE OF
INVENTORIED MATERIALS CONSIDERING THAT:

A. RESPONDENT RRN ADMITTED THE VALIDITY OF THE

DEDUCTIONS ON ACCOUNT OF MATERIAL SUPPLY, WHICH
INCLUDED THE INVENTORIED MATERIALS.

B. RESPONDENT RRN HAS NO BASIS TO CLAIM BECAUSE

ENGR. BONIFACIO ADMITTED THAT RESPONDENT RRN
FAILED TO ESTABLISH WHETHER THE MATERIALS CAME
FROM RESPONDENT RRN OR FROM PETITIONER AND THAT
IT WAS PETITIONER THAT ACTUALLY INSTALLED THE SAID
MATERIALS AS PART OF REMAINING WORKS THAT
PETITIONER TOOK OVER FROM RESPONDENT RRN.

C. THE CLAIM FOR THE VALUE OF INVENTORIED

MATERIALS IS A DOUBLE CLAIM OR DOUBLE ENTRY
BECAUSE IN THE COMPUTATION OF THE FINAL ACCOUNT,
RESPONDENT RRN WAS CREDITED THE FULL CONTRACT
PRICE AND THE COST OF VARIATIONS, WHICH INCLUDED
THE INVENTORIED MATERIALS.

IV.
IN
RENDERING
THE
QUESTIONED
DECISION
AND
QUESTIONED RESOLUTION, THE COURT OF APPEALS COMMITTED A
GRAVE REVERSIBLE ERROR IN THAT IT COMPLETELY DISREGARDED
THE PROVISION OF THE SUBCONTRACT, WHICH ALLOWED PAYMENT
OF ACTUAL COST INCURRED BY PETITIONER IN COMPLETING THE
REMAINING WORKS THAT PRIVATE RESPONDENT ADMITTEDLY FAILED
TO COMPLETE.

V.
THE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE
ERROR WHEN IT COMPLETELY DISREGARDED THE EVIDENCE ON
ACTUAL COST INCURRED BY PETITIONER IN COMPLETING THE
REMAINING WORKS.

VI.
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR WHEN IT AFFIRMED THE CIAC AWARD FOR INTERESTS AND
ARBITRATION COSTS IN FAVOR OF RESPONDENT RRN.[4]

The petition is bereft of merit.

Despite petitioner's attempts to make it appear that it is advancing

questions of law, it is quite clear that what petitioner seeks is for this Court
to recalibrate the evidence it has presented before the CIAC. It insists that
its evidence sufficiently proves that it is entitled to payment for
respondent's use of its manlift equipment, and even absent proof of the
supposed agreement on the charges petitioner may impose on respondent
for the use of said equipment, respondent should be made to pay based on
the principle of unjust enrichment. Petitioner also questions the amounts
awarded by the CIAC for inventoried materials, and costs incurred by
petitioner for completing the work left unfinished by respondent.

As reiterated by the Court in IBEX International, Inc. v. Government

Service Insurance System,[5] to wit:

It is settled that findings of fact of quasi-judicial bodies,

which have acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded not only
respect, but also finality, especially when affirmed by the
Court
of
Appeals. In
particular,
factual findings
of
construction arbitrators are final and conclusive and not
reviewable
by
this
Court
on
appeal.
This rule, however, admits of certain exceptions. In Uniwide Sales
Realty and Resources Corporation v. Titan-Ikeda Construction and
Development Corporation, we said:

In David v. Construction Industry and Arbitration Commission, we ruled that, as

exceptions, factual findings of construction arbitrators may be reviewed by this Court
when the petitioner proves affirmatively that: (1) the award was procured by corruption,
fraud or other undue means; (2) there was evident partiality or corruption of the
arbitrators or any of them; (3) the arbitrators were guilty of misconduct in refusing to
hear evidence pertinent and material to the controversy; (4) one or more of the arbitrators
were disqualified to act as such under Section nine of Republic Act No. 876 and willfully

refrained from disclosing such disqualifications or of any other misbehavior by which the
rights of any party have been materially prejudiced; or (5) the arbitrators exceeded their
powers, or so imperfectly executed them, that a mutual, final and definite award upon the
subject
matter
submitted
to
them
was
not
made.
Other recognized exceptions are as follows: (1) when there is a very clear showing of
grave abuse of discretion resulting in lack or loss of jurisdiction as when a party was
deprived of a fair opportunity to present its position before the Arbitral Tribunal or when
an award is obtained through fraud or the corruption of arbitrators, (2) when the findings
of the Court of Appeals are contrary to those of the CIAC, and (3) when a party is
deprived of administrative due process.[6]

A perusal of the records would reveal that none of the aforementioned

circumstances, which would justify exemption of this case from the general
rule, are present here.Such being the case, the Court, not being a trier of
facts, is not duty-bound to examine, appraise and analyze anew the
evidence presented before the arbitration body. [7]

Petitioner's reliance on the principle of unjust enrichment is likewise

misplaced. The ruling of the Court in University of the Philippines v. Philab
Industries, Inc.[8] is highly instructive, thus:

Unjust enrichment claims do not lie simply because one party

benefits from the efforts or obligations of others, but instead it must
be shown that a party was unjustly enriched in the sense that the
term unjustly could mean illegally or unlawfully.

Moreover, to substantiate a claim for unjust enrichment, the

claimant must unequivocally prove that another party knowingly
received something of value to which he was not entitled and that
the state of affairs are such that it would be unjust for the person to
keep the benefit. Unjust enrichment is a term used to depict result
or effect of failure to make remuneration of or for property or
benefits received under circumstances that give rise to legal or
equitable obligation to account for them; to be entitled to
remuneration, one must confer benefit by mistake, fraud, coercion,

or request. Unjust enrichment is not itself a theory of

reconvey. Rather, it is a prerequisite for the enforcement of the
doctrine of restitution.

Article 22 of the New Civil Code reads:

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.

In order that accion in rem verso may prosper, the essential

elements must be present: (1) that the defendant has been
enriched, (2) that the plaintiff has suffered a loss, (3) that the
enrichment of the defendant is without just or legal ground, and
(4) that the plaintiff has no other action based on contract,
quasi-contract, crime or quasi-delict.

An accion in rem verso is considered merely an auxiliary action,

available only when there is no other remedy on contract, quasicontract, crime, and quasi-delict. If there is an obtainable action
under any other institution of positive law, that action must be
resorted to, and the principle of accion in rem verso will not lie.[9]

As found by both the CIAC and affirmed by the CA, petitioner failed to
prove that respondent's free use of the manlift was without legal ground
based on the provisions of their contract. Thus, the third requisite, i.e., that
the enrichment of respondent is without just or legal ground, is missing. In

addition, petitioner's claim is based on contract, hence, the fourth requisite

that the plaintiff has no other action based on contract, quasi-contract,
crime or quasi-delict is also absent. Clearly, the principle of unjust
enrichment is not applicable in this case.
The other issues raised by petitioner all boil down to whether the CIAC
or the CA erred in rejecting its claims for costs of some materials.

Again, these issues are purely factual and cannot be properly addressed in
this petition for review on certiorari. In Hanjin Heavy Industries and
Construction Co., Ltd. v. Dynamic Planners and Construction Corp.,[10] it was
emphasized that mathematical computations, the propriety of arbitral
awards, claims for other costs and abandonment are factual
questions. Since the discussions of the CIAC and the CA in their respective
Decisions show that its factual findings are supported by substantial
evidence, there is no reason why this Court should not accord finality to said
findings. Verily, to accede to petitioner's request for a recalibration of its
evidence, which had been thoroughly studied by both the CIAC and the CA
would result in negating the objective of Executive Order No. 1008, which
created an arbitration body to ensure the prompt and efficient settlement of
disputes in the construction industry. Thus, the Court held in Uniwide Sales
Realty and Resources Corporation v. Titan-Ikeda Construction and
Development Corporation,[11]that:

x x x The Court will not review the factual findings of an arbitral

tribunal upon the artful allegation that such body had
"misapprehended facts" and will not pass upon issues which are, at
bottom, issues of fact, no matter how cleverly disguised they might
be as "legal questions." The parties here had recourse to arbitration
and chose the arbitrators themselves; they must have had
confidence in such arbitrators. The Court will not, therefore, permit
the parties to relitigate before it the issues of facts previously
presented and argued before the Arbitral Tribunal, save only where a
clear showing is made that, in reaching its factual conclusions, the
Arbitral Tribunal committed an error so egregious and hurtful to one
party as to constitute a grave abuse of discretion resulting in lack or
loss of jurisdiction.[12]

As discussed above, there is nothing in the records that point to any

grave abuse of discretion committed by the CIAC.

The awards for interests and arbitration costs are, likewise, correct as they
are in keeping with prevailing jurisprudence. [13]

IN VIEW OF THE FOREGOING, the Petition is DENIED. The Decision of the

Court of Appeals dated February 22, 2006 and its Resolution dated April 26,
2006 areAFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

PRESBITERO J. VELASCO, JR. TERESITA J. LEONARDO-DE CASTRO

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.

ANTONIO T. CARPIO
Associate Justice
Second Division, Chairperson
CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 160600

January 15, 2014

DOMINGO GONZALO, Petitioner,

vs.
JOHN TARNATE, JR., Respondent.
DECISION
BERSAMIN, J.:
The doctrine of in pari delicto which stipulates that the guilty parties to an illegal contract are not entitled to any
relief, cannot prevent a recovery if doing so violates the public policy against unjust enrichment.
Antecedents
After the Department of Public Works and Highways (DPWH) had awarded on July 22, 1997 the contract for the
improvement of the Sadsadan-Maba-ay Section of the Mountain Province-Benguet Road in the total amount of 7
014 963 33 to his company, Gonzalo Construction, petitioner Domingo Gonzalo (Gonzalo) subcontracted to
1

respondent John Tarnate, Jr. (Tarnate) on October 15, 1997, the supply of materials and labor for the project under
the latter s business known as JNT Aggregates. Their agreement stipulated, among others, that Tarnate would pay
to Gonzalo eight percent and four percent of the contract price, respectively, upon Tarnate s first and second billing
in the project.
2

In furtherance of their agreement, Gonzalo executed on April 6, 1999 a deed of assignment whereby he, as the
contractor, was assigning to Tarnate an amount equivalent to 10% of the total collection from the DPWH for the
project. This 10% retention fee (equivalent to P233,526.13) was the rent for Tarnates equipment that had been
utilized in the project. In the deed of assignment, Gonzalo further authorized Tarnate to use the official receipt of
Gonzalo Construction in the processing of the documents relative to the collection of the 10% retention fee and in
encashing the check to be issued by the DPWH for that purpose. The deed of assignment was submitted to the
DPWH on April 15, 1999. During the processing of the documents for the retention fee, however, Tarnate learned
that Gonzalo had unilaterally rescinded the deed of assignment by means of an affidavit of cancellation of deed of
assignment dated April 19, 1999 filed in the DPWH on April 22, 1999; and that the disbursement voucher for the
10% retention fee had then been issued in the name of Gonzalo, and the retention fee released to him.
3

Tarnate demanded the payment of the retention fee from Gonzalo, but to no avail. Thus, he brought this suit against
Gonzalo on September 13, 1999 in the Regional Trial Court (RTC) in Mountain Province to recover the retention fee
of P233,526.13, moral and exemplary damages for breach of contract, and attorneys fees.
6

In his answer, Gonzalo admitted the deed of assignment and the authority given therein to Tarnate, but averred that
the project had not been fully implemented because of its cancellation by the DPWH, and that he had then revoked
the deed of assignment. He insisted that the assignment could not stand independently due to its being a mere
product of the subcontract that had been based on his contract with the DPWH; and that Tarnate, having been fully
aware of the illegality and ineffectuality of the deed of assignment from the time of its execution, could not go to
court with unclean hands to invoke any right based on the invalid deed of assignment or on the product of such
deed of assignment.
7

Ruling of the RTC

On January 26, 2001, the RTC, opining that the deed of assignment was a valid and binding contract, and that
Gonzalo must comply with his obligations under the deed of assignment, rendered judgment in favor of Tarnate as
follows:
WHEREFORE, premises considered and as prayed for by the plaintiff, John Tarnate, Jr. in his Complaint for Sum of
Money, Breach of Contract With Damages is hereby RENDERED in his favor and against the above-named
defendant Domingo Gonzalo, the Court now hereby orders as follows:
1. Defendant Domingo Gonzalo to pay the Plaintiff, John Tarnate, Jr., the amount of TWO HUNDRED
THIRTY THREE THOUSAND FIVE HUNDRED TWENTY SIX and 13/100 PESOS (P233,526.13)
representing the rental of equipment;
2. Defendant to pay Plaintiff the sum of THIRTY THOUSAND (P30,000.00) PESOS by way of reasonable
Attorneys Fees for having forced/compelled the plaintiff to litigate and engage the services of a lawyer in
order to protect his interest and to enforce his right. The claim of the plaintiff for attorneys fees in the amount
of FIFTY THOUSAND PESOS (P50,000.00) plus THREE THOUSAND PESOS (P3,000.00) clearly appears
to be unconscionable and therefore reduced to Thirty Thousand Pesos (P30,000.00) as aforestated making
the same to be reasonable;
3. Defendant to pay Plaintiff the sum of FIFTEEN THOUSAND PESOS (P15,000.00) by way of litigation
expenses;
4. Defendant to pay Plaintiff the sum of TWENTY THOUSAND PESOS (P20,000.00) for moral damages and
for the breach of contract; and
5. To pay the cost of this suit.

Award of exemplary damages in the instant case is not warranted for there is no showing that the defendant acted in
a wanton, fraudulent, reckless, oppressive or malevolent manner analogous to the case of Xentrex Automotive, Inc.
vs. Court of Appeals, 291 SCRA 66.
8

Gonzalo appealed to the Court of Appeals (CA).

Decision of the CA
On February 18, 2003, the CA affirmed the RTC.

Although holding that the subcontract was an illegal agreement due to its object being specifically prohibited by
Section 6 of Presidential Decree No. 1594; that Gonzalo and Tarnate were guilty of entering into the illegal contract
in violation of Section 6 of Presidential Decree No. 1594; and that the deed of assignment, being a product of and
dependent on the subcontract, was also illegal and unenforceable, the CA did not apply the doctrine of in pari
delicto, explaining that the doctrine applied only if the fault of one party was more or less equivalent to the fault of
the other party. It found Gonzalo to be more guilty than Tarnate, whose guilt had been limited to the execution of the
two illegal contracts while Gonzalo had gone to the extent of violating the deed of assignment. It declared that the
crediting of the 10% retention fee equivalent to P233,256.13 to his account had unjustly enriched Gonzalo; and
ruled, accordingly, that Gonzalo should reimburse Tarnate in that amount because the latters equipment had been
utilized in the project.
Upon denial of his motion for reconsideration, Gonzalo has now come to the Court to seek the review and reversal
of the decision of the CA.
10

Issues
Gonzalo contends that the CA erred in affirming the RTC because: (1) both parties were in pari delicto; (2) the deed
of assignment was void; and (3) there was no compliance with the arbitration clause in the subcontract.
Gonzalo submits in support of his contentions that the subcontract and the deed of assignment, being specifically
prohibited by law, had no force and effect; that upon finding both him and Tarnate guilty of violating the law for
executing the subcontract, the RTC and the CA should have applied the rule of in pari delicto, to the effect that the
law should not aid either party to enforce the illegal contract but should leave them where it found them; and that it
was erroneous to accord to the parties relief from their predicament.
11

Ruling
We deny the petition for review, but we delete the grant of moral damages, attorneys fees and litigation expenses.
There is no question that every contractor is prohibited from subcontracting with or assigning to another person any
contract or project that he has with the DPWH unless the DPWH Secretary has approved the subcontracting or
assignment. This is pursuant to Section 6 of Presidential Decree No. 1594, which provides:
Section 6. Assignment and Subcontract. The contractor shall not assign, transfer, pledge, subcontract or make any
other disposition of the contract or any part or interest therein except with the approval of the Minister of Public
Works, Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case
may be. Approval of the subcontract shall not relieve the main contractor from any liability or obligation under his
contract with the Government nor shall it create any contractual relation between the subcontractor and the
Government.
Gonzalo, who was the sole contractor of the project in question, subcontracted the implementation of the project to
Tarnate in violation of the statutory prohibition. Their subcontract was illegal, therefore, because it did not bear the
approval of the DPWH Secretary. Necessarily, the deed of assignment was also illegal, because it sprung from the
subcontract. As aptly observed by the CA:

x x x. The intention of the parties in executing the Deed of Assignment was merely to cover up the illegality of the
sub-contract agreement. They knew for a fact that the DPWH will not allow plaintiff-appellee to claim in his own
name under the Sub-Contract Agreement.
Obviously, without the Sub-Contract Agreement there will be no Deed of Assignment to speak of. The illegality of the
Sub-Contract Agreement necessarily affects the Deed of Assignment because the rule is that an illegal agreement
cannot give birth to a valid contract. To rule otherwise is to sanction the act of entering into transaction the object of
which is expressly prohibited by law and thereafter execute an apparently valid contract to subterfuge the illegality.
The legal proscription in such an instance will be easily rendered nugatory and meaningless to the prejudice of the
general public.
12

Under Article 1409 (1) of the Civil Code, a contract whose cause, object or purpose is contrary to law is a void or
inexistent contract. As such, a void contract cannot produce a valid one. To the same effect is Article 1422 of the
Civil Code, which declares that "a contract, which is the direct result of a previous illegal contract, is also void and
inexistent."
13

We do not concur with the CAs finding that the guilt of Tarnate for violation of Section 6 of Presidential Decree No.
1594 was lesser than that of Gonzalo, for, as the CA itself observed, Tarnate had voluntarily entered into the
agreements with Gonzalo. Tarnate also admitted that he did not participate in the bidding for the project because
he knew that he was not authorized to contract with the DPWH. Given that Tarnate was a businessman who had
represented himself in the subcontract as "being financially and organizationally sound and established, with the
necessary personnel and equipment for the performance of the project," he justifiably presumed to be aware of the
illegality of his agreements with Gonzalo. For these reasons, Tarnate was not less guilty than Gonzalo.
14

15

16

According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal contract cannot recover from one
another and are not entitled to an affirmative relief because they are in pari delicto or in equal fault. The doctrine of
in pari delicto is a universal doctrine that holds that no action arises, in equity or at law, from an illegal contract; no
suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the
money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief
of any kind will be given to one against the other.
17

Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An accepted exception arises when
its application contravenes well-established public policy. In this jurisdiction, public policy has been defined as "that
principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to
the public or against the public good."
1wphi1

18

19

Unjust enrichment exists, according to Hulst v. PR Builders, Inc., "when a person unjustly retains a benefit at the
loss of another, or when a person retains money or property of another against the fundamental principles of justice,
equity and good conscience." The prevention of unjust enrichment is a recognized public policy of the State, for
Article 22 of the Civil Code explicitly provides that "[e]very 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." It is well to note that Article 22 "is part of the chapter of the Civil Code on
Human Relations, the provisions of which were formulated as basic principles to be observed for the rightful
relationship between human beings and for the stability of the social order; designed to indicate certain norms that
spring from the fountain of good conscience; 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."
20

21

There is no question that Tarnate provided the equipment, labor and materials for the project in compliance with his
obligations under the subcontract and the deed of assignment; and that it was Gonzalo as the contractor who
received the payment for his contract with the DPWH as well as the 10% retention fee that should have been paid to
Tarnate pursuant to the deed of assignment. Considering that Gonzalo refused despite demands to deliver to
Tarnate the stipulated 10% retention fee that would have compensated the latter for the use of his equipment in the
project, Gonzalo would be unjustly enriched at the expense of Tarnate if the latter was to be barred from recovering
because of the rigid application of the doctrine of in pari delicto. The prevention of unjust enrichment called for the
exception to apply in Tarnates favor. Consequently, the RTC and the CA properly adjudged Gonzalo liable to pay
Tarnate the equivalent amount of the 10% retention fee (i.e., P233,526.13).
22

Gonzalo sought to justify his refusal to turn over the P233,526.13 to Tarnate by insisting that he (Gonzalo) had a
debt of P200,000.00 to Congressman Victor Dominguez; that his payment of the 10% retention fee to Tarnate was
conditioned on Tarnate paying that debt to Congressman Dominguez; and that he refused to give the 10% retention
fee to Tarnate because Tarnate did not pay to Congressman Dominguez. His justification was unpersuasive,
however, because, firstly, Gonzalo presented no proof of the debt to Congressman Dominguez; secondly, he did not
competently establish the agreement on the condition that supposedly bound Tarnate to pay to Congressman
Dominguez; and, thirdly, burdening Tarnate with Gonzalos personal debt to Congressman Dominguez to be paid
first by Tarnate would constitute another case of unjust enrichment.
23

24

The Court regards the grant of moral damages, attorneys fees and litigation expenses to Tarnate to be
inappropriate. We have ruled that no damages may be recovered under a void contract, which, being nonexistent,
produces no juridical tie between the parties involved. It is notable, too, that the RTC and the CA did not spell out
the sufficient factual and legal justifications for such damages to be granted.
25

Lastly, the letter and spirit of Article 22 of the Civil Code command Gonzalo to make a full reparation or
compensation to Tarnate. The illegality of their contract should not be allowed to deprive Tarnate from being fully
compensated through the imposition of legal interest. Towards that end, interest of 6% per annum reckoned from
September 13, 1999, the time of the judicial demand by Tarnate, is imposed on the amount of P233,526.13. Not to
afford this relief will make a travesty of the justice to which Tarnate was entitled for having suffered too long from
Gonzalos unjust enrichment.
WHEREFORE, we AFFIRM the decision promulgated on February 18, 2003, but DELETE the awards of moral
damages, attorneys fees and litigation expenses; IMPOSE legal interest of 6% per annum on the principal
oLP233,526.13 reckoned from September 13, 1999; and DIRECT the petitioner to pay the costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

BIENVENIDO L. REYES
Associate Justice
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice

SO ORDERED. (Record on Appeal, pp. 344-346).

The above decision was appealed to the Court of Appeals and in its decision 1 dated October 29,1980, said court
affirmed the decision of the lower court in toto. Hence, the instant petition for review.
Petitioner contends that (a) a separate action involving the assets, properties and record of an insolvent bank in the
process of liquidation in the Court of First Instance of Manila cannot be maintained in another court; (b) a public
instrument celebrated with all the requisites under the safeguard of a notarial certificate is evidence of a high
character and to overcome its recitals, it is incumbent upon the party challenging it to prove his claim with clear,
convincing and more than merely preponderant evidence; (c) respondent Rufina Telosa has no factual, valid and
legal basis to ask for the reformation of the real estate mortgage contract, but even assuming that she has, her
cause of action to reform had already prescribed; (d) moral damages to warrant recovery, must be alleged in the
complaint and duly proved; (e) the reason for awarding attorney's fees and litigation expenses must be stated in the
decision and (f) there is no legal and factual basis for the application of Article 24 of the New Civil Code in the
instant case.
On the issue of jurisdiction, this Court ruled in the case of Hernandez vs. Rural Bank of Lucena, Inc. (G.R. No. L29791, January 10, 1978, 81 SCRA 75) that if there is a judicial liquidation of an insolvent bank, all claims against
the bank should be filed in the liquidation proceeding.
The fact that the insolvent bank is forbidden to do business, that its assets are turned over to the
superintendent of Banks, as a receiver, for conversion into cash, and that its liquidation is
undertaken with judicial intervention means that, as far as lawful and practicable, all claims against
the insolvent bank should be filed in the liquidation proceeding. The judicial liquidation is intended to

prevent multiplicity of actions against the insolvent bank. The lawmaking body contemplated that for
convenience only one court, if possible, should pass upon the claims against the insolvent bank and
that the liquidation court should assist the Superintendent of Banks and control his operations. In the
course of the liquidation, contentious cases might arise wherein a full-dress hearing would be
required and legal issues would have to be resolved. Hence, it would be necessary in justice to all
concerned that a Court of First Instance should assist and supervise the liquidation and should act
as umpire and arbitrator in the allowance and disallowance of claims. The judicial liquidation is a
pragmatic arrangement designed to establish due process and orderliness in the liquidation of the
bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness. (81 SCRA 77)
With the foregoing ruling, the more proper procedure would be to set aside the decision rendered by the Court of
First Instance of Quezon and consequently dismiss the case without prejudice to the right of the private respondents
to take up with the liquidation court, the Court of First Instance of Manila, the settlement of their mortgage obligation.
However, taking into consideration the circumstances of the case and in the interest of justice We are constrained to
deviate from this procedure. To order the private respondents to refile and relitigate their case before the liquidation
court would be an exercise in futility. It would mean another several years of trial and additional expenses to private
respondents who are admittedly living in poverty. Incidentally, the property in question is the only property of private
respondents. We have carefully reviewed the records of the case and We are convinced as were the trial court and
the appellate court that the amount of loan actually obtained by the deceased Telosa was only P300.00 and not the
P5,000.00 as claimed by petitioner. This fact was established by the following evidence:
(a) Exhibit "E" the receipt signed by the deceased dated December 2, 1960 showing the amount of
loan to be only P300.00.
(b) The oral testimony of Rufina Telosa, wife of the deceased;
(c) The testimony of Ponciano Mendoza who was with the deceased at the time of the transactions
and who categorically testified that the amount of the loan was P300.00 in six P50.00 bills but that
Carlos Telosa was made to sign blank forms by the bank.
Needless to state in this regard this particular transaction was one of the fraudulent and anomalous transactions
involving the officers of the Rural Bank of Lucena, Inc. The latter took advantage of the very limited education of
Carlos Telosa.
The records further show that private respondents made payment in the amount of P400.00 on January 4, 1966 and
P11.25 on April 18, 1972 to the Rural Bank of Lucena. This constituted full payment of the principal loan of P300.00
and the interest thereon.
Anent the issue of prescription, suffice it to state that private respondents filed their complaint well within the ten (10)
year prescriptive period to bang an action for reformation of an instrument. After discovering the fraudulent
transaction on March 14, 1972, private respondents allowed only 14 days to pass before filing their complaint,
Petitioner alleges that the trial court did not state in its decision why it was awarding attorney's fees. The allegation
is not correct. A cursory reading of the decision would show that the reason for the award of attorney's fees is
contained in the decision, hereinbelow quoted:
As a second cause of action, plaintiffs assert that the mortgage contract in question was executed
without the knowledge and marital consent of the wife, plaintiff Rufina Telosa, hence voidable,
insofar as her conjugal share is concerned. Plaintiffs further assess moral damages in the amount of
P5,000.00, attorney's fees of P2,000.00 and litigation expenses of P75.00 per hearing of this case.
(Brief for private respondents-appellees, p. 44; Record on Appeal, p. 325).
Clearly the circumstances show that the award of attorney's fees is proper and just.

The decision also made findings that the bank acted fraudulently. It was the bank, represented by petitioner, thru its
fraudulent acts which compelled private respondents to litigate and incur litigation expenses.
Incidentally the ratification by the wife cures any defect the contract may have had.
Petitioner further alleges that moral damages should not have been granted because private respondents did not
duly allege the same in the complaint. The lower court granted the same because of private respondents' prayer for
general relief which includes moral damages. Private respondents had proven that they suffered mental anguish,
serious anxiety and moral shock as a consequence of the fraudulent act of the Rural Bank of Lucena, Inc. This is
expressly allowed by Art. 2217 of the New Civil Code.
Going back to the issue of jurisdiction, it must be emphasized that at the time the present action was instituted to
enjoin the foreclosure of the real estate mortgage under consideration, what must have prompted herein private
respondents to seek redress from the Court of First Instance of Quezon was the authority of said court to exercise
its injunctive relief. The Court of First Instance having territorial jurisdiction of the acts sought to be enjoined, the
Court of First Instance of Quezon, must take cognizance of the case.
Finally, even Our ruling in the cited Hernandez versus Rural Bank case admits of exception. It says "as far as lawful
and practicable all claims against the insolvent bank should be filed in the liquidation proceeding." This case should
be one of them.
WHEREFORE, the petition is DENIED. The appealed decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Fernan, C.J., Melencio-Herrera, Cruz, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes, Grio-Aquino,
Medialdea and Regalado, JJ., concur.
Gutierrez, Jr., J., concur in the result.
Narvasa, J., is on leave.

G.R. No. 120706. January 31, 2000]

RODRIGO CONCEPCION, petitioner, vs. COURT OF APPEALS and SPS. NESTOR
NICOLAS and ALLEM NICOLAS, respondents.
DECISION
BELLOSILLO, J.:
Petitioner Rodrigo Concepcion assails in this petition for review on certiorari the Decision of the
Court of Appeals dated 12 December 1994 which affirmed the decision of the Regional Trial Court
of Pasig City ordering him to pay respondent spouses Nestor Nicolas and Allem Nicolas the sums
of P50,000.00 for moral damages, P25,000.00 for exemplary damages and P10,000.00 for attorneys
fees, plus the costs of suit. Petitioner claims absence of factual and legal basis for the award of
damages.
*

The courts a quo found that sometime in 1985 the spouses Nestor Nicolas and Allem Nicolas
resided at No. 51 M. Concepcion St., San Joaquin, Pasig City, in an apartment leased to them by the
owner thereof, Florence "Bing" Concepcion, who also resided in the same compound where the
apartment was located. Nestor Nicolas was then engaged in the business of supplying government
agencies and private entities with office equipment, appliances and other fixtures on a cash
purchase or credit basis. Florence Concepcion joined this venture by contributing capital on
condition that after her capital investment was returned to her, any profit earned would be divided
equally between her and Nestor. Jksm
Sometime in the second week of July 1985 Rodrigo Concepcion, brother of the deceased husband
of Florence, angrily accosted Nestor at the latters apartment and accused him of conducting an
adulterous relationship with Florence. He shouted, "Hoy Nestor, kabit ka ni Bing! x x x Binigyan ka
pa pala ni Bing Concepcion ng P100,000.00 para umakyat ng Baguio. Pagkaakyat mo at ng asawa
mo doon ay bababa ka uli para magkasarilinan kayo ni Bing."
[1]

To clarify matters, Nestor went with Rodrigo, upon the latters dare, to see some relatives of the
Concepcion family who allegedly knew about the relationship. However, those whom they were
able to see denied knowledge of the alleged affair. The same accusation was hurled by Rodrigo
against Nestor when the two (2) confronted Florence at the terrace of her residence. Florence
denied the imputations and Rodrigo backtracked saying that he just heard the rumor from a relative.
Thereafter, however, Rodrigo called Florence over the telephone reiterating his accusation and
threatening her that should something happen to his sick mother, in case the latter learned about the
affair, he would kill Florence. Chief
As a result of this incident, Nestor Nicolas felt extreme embarrassment and shame to the extent that
he could no longer face his neighbors. Florence Concepcion also ceased to do business with him by
not contributing capital anymore so much so that the business venture of the Nicolas spouses
declined as they could no longer cope with their commitments to their clients and customers. To
make matters worse, Allem Nicolas started to doubt Nestors fidelity resulting in frequent bickerings
and quarrels during which Allem even expressed her desire to leave her husband. Consequently,
Nestor was forced to write Rodrigo demanding public apology and payment of damages. Rodrigo
pointedly ignored the demand, for which reason the Nicolas spouses filed a civil suit against him
for damages.
In his defense, Rodrigo denied that he maligned Nestor by accusing him publicly of being
Florence's lover. He reasoned out that he only desired to protect the name and reputation of the
Concepcion family which was why he sought an appointment with Nestor through Florence's son
Roncali to ventilate his feelings about the matter. Initially, he discussed with Nestor certain aspects
of the joint venture in a friendly and amiable manner, and then only casually asked the latter about
his rumored affair with his sister-in-law.
In contesting the decision of the appellate court, petitioner Rodrigo Concepcion raises the following
issues: (a) whether there is basis in law for the award of damages to private respondents, the

Nicolas spouses; and, (b) whether there is basis to review the facts which are of weight and
influence but which were overlooked and misapplied by the respondent appellate court. Esm
Petitioner argues that in awarding damages to private respondents, the Court of Appeals was
without legal basis to justify its verdict. The alleged act imputed to him by respondent spouses does
not fall under Arts. 26 and 2219 of the Civil Code since it does not constitute libel, slander, or any
other form of defamation. Neither does it involve prying into the privacy of anothers residence or
meddling with or disturbing the private life or family relation of another. Petitioner also insists that
certain facts and circumstances of the case were manifestly overlooked, misunderstood or glossed
over by respondent court which, if considered, would change the verdict. Impugning the credibility
of the witnesses for private respondents and the manner by which the testimonial evidence was
analyzed and evaluated by the trial court, petitioner criticized the appellate court for not taking into
account the fact that the trial judge who penned the decision was in no position to observe firsthand the demeanor of the witnesses of respondent spouses as he was not the original judge who
heard the case. Thus, his decision rendered was flawed. Esmsc
[2]

[3]

The Court has ruled often enough that its jurisdiction in a petition for review on certiorari under
Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless
the factual findings complained of are devoid of support by the evidence on record or the assailed
judgment is based on misapprehension of facts. The reason behind this is that the Supreme Court
respects the findings of the trial court on the issue of credibility of witnesses, considering that it is
in a better position to decide the question, having heard the witnesses themselves and observed
their deportment and manner of testifying during the trial. Thus it accords the highest respect, even
finality, to the evaluation made by the lower court of the testimonies of the witnesses presented
before it. Esmmis
[4]

[5]

The Court is also aware of the long settled rule that when the issue is on the credibility of
witnesses, appellate courts will not generally disturb the findings of the trial court; however, its
factual findings may nonetheless be reversed if by the evidence on record or lack of it, it appears
that the trial court erred. In this respect, the Court is not generally inclined to review the findings
of fact of the Court of Appeals unless its findings are erroneous, absurd, speculative, conjectural,
conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the trial
court of origin. This rule of course cannot be unqualifiedly applied to a case where the judge who
penned the decision was not the one who heard the case, because not having heard the testimonies
himself, the judge would not be in a better position than the appellate courts to make such
determination.
[6]

[7]

[8]

However, it is also axiomatic that the fact alone that the judge who heard the evidence was not the
one who rendered the judgment but merely relied on the record of the case does not render his
judgment erroneous or irregular. This is so even if the judge did not have the fullest opportunity to
weigh the testimonies not having heard all the witnesses speak nor observed their deportment and
manner of testifying. Thus the Court generally will not find any misapprehension of facts as it can
be fairly assumed under the principle of regularity of performance of duties of public officers that

the transcripts of stenographic notes were thoroughly scrutinized and evaluated by the judge
himself.
Has sufficient reason then been laid before us by petitioner to engender doubt as to the factual
findings of the court a quo? We find none. A painstaking review of the evidence on record
convinces us not to disturb the judgment appealed from. The fact that the case was handled by
different judges brooks no consideration at all, for preponderant evidence consistent with their
claim for damages has been adduced by private respondents as to foreclose a reversal. Otherwise,
everytime a Judge who heard a case, wholly or partially, dies or lives the service, the case cannot be
decided and a new trial will have to be conducted. That would be absurb; inconceivable. Esmso
According to petitioner, private respondents evidence is inconsistent as to time, place and persons
who heard the alleged defamatory statement. We find this to be a gratuitous observation, for the
testimonies of all the witnesses for the respondents are unanimous that the defamatory incident
happened in the afternoon at the front door of the apartment of the Nicolas spouses in the presence
of some friends and neighbors, and later on, with the accusation being repeated in the presence of
Florence, at the terrace of her house. That this finding appears to be in conflict with the allegation
in the complaint as to the time of the incident bears no momentous significance since an allegation
in a pleading is not evidence; it is a declaration that has to be proved by evidence. If evidence
contrary to the allegation is presented, such evidence controls, not the allegation in the pleading
itself, although admittedly it may dent the credibility of the witnesses. But not in the instant
case. Msesm
It is also argued by petitioner that private respondents failed to present as witnesses the persons
they named as eyewitnesses to the incident and that they presented instead one Romeo Villaruel
who was not named as a possible witness during the pre-trial proceedings. Charging that Villaruels
testimony is not credible and should never have been accorded any weight at all, petitioner
capitalizes on the fact that a great distance separates Villaruels residence and that of private
respondents as reflected in their house numbers, the formers number being No. 223 M. Concepcion
St., while that of the Nicolas spouses, No. 51 along the same street. This being so, petitioner
concludes, Villaruel could not have witnessed the ugly confrontation between Rodrigo and Nestor.
It appears however from Villaruels testimony that at the time of the incident complained of, he was
staying in an apartment inside the compound adjacent to that of the Nicolas spouses. Whether his
apartment was then numbered 223 is not stated. What is definite and clear is his statement that he
and Nestor Nicolas were neighbors on 14 July 1985.
There are other inconsistencies pointed out by petitioner in the testimonial evidence of private
respondents but these are not of such significance as to alter the finding of facts of the lower court.
Minor inconsistencies even guarantee truthfulness and candor, for they erase any suspicion of a
rehearsed testimony. Inconsistencies in the testimonies of witnesses with on minor details and
collateral matters do not affect the substance of their testimonies.
[9]

[10]

All told, these factual findings provide enough basis in law for the award of damages by the Court
of Appeals in favor of respondents. We reject petitioners posture that no legal provision supports
such award, the incident complained of neither falling under Art. 2219 nor Art. 26 of the Civil
Code. It does not need further elucidation that the incident charged of petitioner was no less than an
invasion on the right of respondent Nestor as a person. The philosophy behind Art. 26 underscores
the necessity for its inclusion in our civil law. The Code Commission stressed in no uncertain terms
that the human personality must be exalted. The sacredness of human personality is a concomitant
consideration of every plan for human amelioration. The touchstone of every system of law, of the
culture and civilization of every country, is how far it dignifies man. If the statutes insufficiently
protect a person from being unjustly humiliated, in short, if human personality is not exalted - then
the laws are indeed defective. Thus, under this article, the rights of persons are amply protected,
and damages are provided for violations of a persons dignity, personality, privacy and peace of
mind. Exsm
[11]

It is petitioners position that the act imputed to him does not constitute any of those enumerated in
Arts 26 and 2219. In this respect, the law is clear. The violations mentioned in the codal provisions
are not exclusive but are merely examples and do not preclude other similar or analogous acts.
Damages therefore are allowable for actions against a persons dignity, such as profane, insulting,
humiliating, scandalous or abusive language. Under Art. 2217 of the Civil Code, moral damages
which include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury, although incapable of
pecuniary computation, may be recovered if they are the proximate result of the defendants
wrongful act or omission.
[12]

There is no question that private respondent Nestor Nicolas suffered mental anguish, besmirched
reputation, wounded feelings and social humiliation as a proximate result of petitioners abusive,
scandalous and insulting language. Petitioner attempted to exculpate himself by claiming that he
made an appointment to see Nestor through a nephew, Roncali, the son of Florence, so he could
talk with Nestor to find out the truth about his rumored illicit relationship with Florence. He said
that he wanted to protect his nephews and nieces and the name of his late brother (Florences
husband). How he could be convinced by some way other than a denial by Nestor, and how he
would protect his nephews and nieces and his familys name if the rumor were true, he did not say.
Petitioner admitted that he had already talked with Florence herself over the telephone about the
issue, with the latter vehemently denying the alleged immoral relationship. Yet, he could not let the
matter rest on the strength of the denial of his sister-in-law. He had to go and confront Nestor, even
in public, to the latter's humiliation. Kyle
[13]

Testifying that until that very afternoon of his meeting with Nestor he never knew respondent, had
never seen him before, and was unaware of his business partnership with Florence, his subsequent
declarations on the witness stand however belie this lack of knowledge about the business venture
for in that alleged encounter he asked Nestor how the business was going, what were the collection
problems, and how was the money being spent. He even knew that the name of the business, Floral
Enterprises, was coined by combining the first syllables of the name Florence and Allem, the name

of Nestors wife. He said that he casually asked Nestor about the rumor between him and Florence
which Nestor denied. Not content with such denial, he dared Nestor to go with him to speak to his
relatives who were the source of his information. Nestor went with him and those they were able to
talk to denied the rumor. Kycalr
We cannot help noting this inordinate interest of petitioner to know the truth about the rumor and
why he was not satisfied with the separate denials made by Florence and Nestor. He had to confront
Nestor face to face, invade the latters privacy and hurl defamatory words at him in the presence of
his wife and children, neighbors and friends, accusing him - a married man - of having an
adulterous relationship with Florence. This definitely caused private respondent much shame and
embarrassment that he could no longer show himself in his neighborhood without feeling distraught
and debased. This brought dissension and distrust in his family where before there was none. This
is why a few days after the incident, he communicated with petitioner demanding public apology
and payment of damages, which petitioner ignored. Calrky
If indeed the confrontation as described by private respondents did not actually happen, then there
would have been no cause or motive at all for them to consult with their lawyer, immediately
demand an apology, and not obtaining a response from petitioner, file an action for damages against
the latter. That they decided to go to court to seek redress bespeaks of the validity of their claim. On
the other hand, it is interesting to note that while explaining at great length why Florence
Concepcion testified against him, petitioner never advanced any reason why the Nicolas spouses,
persons he never knew and with whom he had no dealings in the past, would sue him for damages.
It also has not escaped our attention that, faced with a lawsuit by private respondents, petitioner
sent his lawyer, a certain Atty. Causapin, to talk not to the Nicolas spouses but to Florence, asking
her not to be involved in the case, otherwise her name would be messily dragged into it. Quite
succinctly, Florence told the lawyer that it was not for her to decide and that she could not do
anything about it as she was not a party to the court case.
WHEREFORE, in light of the foregoing premises, the assailed Decision of the Court of Appeals
affirming the judgment of the Regional Trial Court of Pasig City, Br. 167, holding Rodrigo
Concepcion liable to the spouses Nestor Nicolas and Allem Nicolas for P50,000.00 as moral
damages, P25,000.00 for exemplary damages, P10,000.00 for attorney's fees, plus costs of suit, is
AFFIRMED. Mesm
SO ORDERED.

G.R. No. 120706 January 31, 2000

RODRIGO CONCEPCION, petitioner,

vs.
COURT OF APPEALS and SPS. NESTOR NICOLAS and ALLEM NICOLAS, respondents.
Facts:
Nestor Nicolas and Allem Nicolas, the respondents, resided in an apartment leased to them by
the owner thereof, Florence BingConcepcion. The Nicolas spouses were engaged in business
of supplying office equipment appliances and other fixtures, and Florence Concepcion joined this
venture by contributing capital to the business and sharing with the earned profit thereafter.
Sometime in the second week of July 1985, petitioner Rodrigo Concepcion, brother of the
deceased husband of Florence, angrily accosted Nestor at his apartment and accused him of
conducting an adulterous relationship with Florence. To clarify matters, Nestor went with Rodrigo
to see some members of Conception family to clarify everything, but the family members
including Florence denied knowledge of such affair. Thereafter, however, Rodrigo called Florence
over the phone reiterating his accusation and gave some death threats to her.
As a result of the incident, Nestor Nicolas felt extreme embarrassment and shame. Florence
Concepcion also ceased to do business with him by not contributing capital anymore so much so
that the business venture of the Nicolas spouses declined. Additionally, Allem Nicolas started to
doubt Nestors fidelity. As such, petitioned Rodrigo to express a public apology and pay the
damages. Rodrigo ignored the demand, which caused the Nicolas spouses to file a civil suit
against him for damages.
Issues:
1. Whether there is basis to review the facts which are of weight and influence by which were
overlooked and misapplied by the respondent appellate court.
2. Whether there is basis in law for the award of damages to private respondents, the Nicolas
spouses.
Held:
1. Yes.
Originally, petitioner alleged that certain facts and circumstances of the case were manifestly
overlooked by respondent court on the grounds that the trial judge who penned the decision was
in no position to observe first-hand the demeanor of the witnesses of respondent spouses as he
was not the original judge who heard the case.
The Supreme Court contends that petitioner did not give any sufficient reason to engender doubt
as to the factual findings of the court. The fact that the case was handled by different judges
brooks no consideration at all. The Supreme Court accords the highest respect to the evaluation
made by the lower court of the testimonies of the witnesses presented before it, and that it can
be fairly assumed under the performance of duties of public officers that the transcripts of
stenographic notes were thoroughly scrutinized and evaluated by the judge himself.
2. Yes.
Petitioner originally claimed that the lower courts were without legal basis to justify its verdict as
it does not fall under Arts. 26 and 2219 of Civil Code since it does not constitute libel, slander, or
any other form of defamation, nor involve prying into privacy of anothers residence or meddling
with or disturbing the private life or family relation of another.
The Supreme Court rejected the petitioners contention that no legal provision supports such
award for damages. It is understandable that the incident charged of petitioner was no less than
an invasion of right of the respondent, Nestor, as a person. Under this article, the rights of
persons are protected, and damages are provided for violations thereof. The violations
mentioned in the codal provisions are not exclusive but are merely examples and do not preclude
other similar or analogous acts. Due to the incident, respondent Nestor Nicolas suffered mental

anguish, besmirched reputation, wounded feelings and social humiliation as a proximate result of
petitioners abusive, scandalous and insulting language. As such, the Supreme Court held that
the incident clearly falls under the aforementioned articles and the person who violated those
rights should be liable of the damages.
WHEREFORE, in light of the foregoing premises, the assailed Decision of the Court of Appeals
affirming the judgment of the Regional Trial Court of Pasig City, Br. 167, holding Rodrigo
Concepcion liable to the spouses Nestor Nicolas and Allem Nicolas for F50,000.00 as moral
damages, P25,000.00 for exemplary damages, P10,000.00 for attorneys fees, plus costs of suit,
is AFFIRMED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 125704 August 28, 1998

PHILEX MINING CORPORATION, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, COURT OF APPEALS, and THE COURT OF TAX
APPEALS,respondents.

ROMERO, J.:
affirming the Court of
Tax Appeals decision in CTA Case No. 4872 dated March 16, 1995 ordering it to pay the amount of P110,677,668.52 as
excise tax liability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from
August 6, 1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977.
Petitioner Philex Mining Corp. assails the decision of the Court of Appeals promulgated on April 8, 1996 in CA-G.R. SP No. 36975

The facts show that on August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax liabilities for the 2nd,
3rd and 4th quarter of 1991 as well as the 1st and 2nd quarter of 1992 in the total amount of P123,821.982.52
computed as follows:
PERIOD COVERED BASIC TAX 25% SURCHARGE INTEREST TOTAL EXCISE
TAX DUE
2nd Qtr., 1991 12,911,124.60 3,227,781.15 3,378,116.16 19,517,021.91
3rd Qtr., 1991 14,994,749.21 3,748,687.30 2,978,409.09 21,721,845.60
4th Qtr., 1991 19,406,480.13 4,851,620.03 2,631,837.72 26,889,937.88

47,312,353.94 11,828,088.48 8,988,362.97 68,128,805.39

1st Qtr., 1992 23,341,849.94 5,835,462.49 1,710,669.82 30,887,982.25
2nd Qtr., 1992 19,671,691.76 4,917,922.94 215,580.18 24,805,194.88

43,013,541.70 10,753,385.43 1,926,250.00 55,693,177.13

90,325,895.64 22,581,473.91 10,914,612.97 123,821,982.52

========= ========= ========= =========

In a letter dated August 20, 1992, 4 Philex protested the demand for payment of the tax liabilities stating that it has
pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of
P119,977,037.02 plus interest. Therefore these claims for tax credit/refund should be applied against the tax liabilities,
citing our ruling inCommissioner of Internal Revenue v. Itogon-Suyoc Mines, Inc. 5
In reply, the BIR, in a letter dated September 7, 1992, 6 found no merit in Philex's position. Since these pending claims
have not yet been established or determined with certainty, it follows that no legal compensation can take place. Hence,
the BIR reiterated its demand that Philex settle the amount plus interest within 30 days from the receipt of the letter.

In view of the BIR's denial of the offsetting of Philex's claim for VAT input credit/refund against its excise tax
obligation, Philex raised the issue to the Court of Tax Appeals on November 6, 1992. 7 In the course of the
proceedings, the BIR issued Tax Credit Certificate SN 001795 in the amount of P13,144,313.88 which, applied to the total
tax liabilities of Philex of P123,821,982.52; effectively lowered the latter's tax obligation to P110,677,688.52.
Despite the reduction of its tax liabilities, the CTA still ordered Philex to pay the remaining balance of
P110,677,688.52 plus interest, elucidating its reason, to wit:
Thus, for legal compensation to take place, both obligations must be liquidated and demandable.
"Liquidated" debts are those where the exact amount has already been determined (PARAS, Civil
Code of the Philippines, Annotated, Vol. IV, Ninth Edition, p. 259). In the instant case, the claims of
the Petitioner for VAT refund is still pending litigation, and still has to be determined by this Court
(C.T.A. Case No. 4707). A fortiori, the liquidated debt of the Petitioner to the government cannot,
therefore, be set-off against the unliquidated claim which Petitioner conceived to exist in its favor
(see Compaia General de Tabacos vs. French and Unson, No. 14027, November 8, 1918, 39 Phil.
34). 8
Moreover, the Court of Tax Appeals ruled that "taxes cannot be subject to set-off on compensation since claim for taxes is
not a debt or contract." 9 The dispositive portion of the CTA decision 10 provides:

In all the foregoing, this Petition for Review is hereby DENIED for lack of merit and Petitioner is
hereby ORDERED to PAY the Respondent the amount of P110,677,668.52 representing excise tax
liability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual
interest from August 6, 1994 until fully paid pursuant to Section 248 and 249 of the Tax Code, as
amended.
Aggrieved with the decision, Philex appealed the case before the Court of Appeals docketed as CA-GR. CV No.
36975. 11 Nonetheless, on April 8, 1996, the Court of Appeals a Affirmed the Court of Tax Appeals observation. The
pertinent portion of which reads: 12
WHEREFORE, the appeal by way of petition for review is hereby DISMISSED and the decision
dated March 16, 1995 is AFFIRMED.
Philex filed a motion for reconsideration which was, nevertheless, denied in a Resolution dated July 11, 1996.

13

However, a few days after the denial of its motion for reconsideration, Philex was able to obtain its VAT input credit/refund
not only for the taxable year 1989 to 1991 but also for 1992 and 1994, computed as follows: 14

Period Covered Tax Credit Date

By Claims For Certificate of
VAT refund/credit Number Issue Amount
1994 (2nd Quarter) 007730 11 July 1996 P25,317,534.01
1994 (4th Quarter) 007731 11 July 1996 P21,791,020.61
1989 007732 11 July 1996 P37,322,799.19
1990-1991 007751 16 July 1996 P84,662,787.46
1992 (1st-3rd Quarter) 007755 23 July 1996 P36,501,147.95
In view of the grant of its VAT input credit/refund, Philex now contends that the same should, ipso jure, off-set its
excise tax liabilities 15 since both had already become "due and demandable, as well as fully liquidated;" 16 hence, legal
compensation can properly take place.
We see no merit in this contention.
In several instances prior to the instant case, we have already made the pronouncement that taxes cannot be
subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors
of each other. 17 There is a material distinction between a tax and debt. Debts are due to the Government in its corporate
capacity, while taxes are due to the Government in its sovereign capacity. 18 We find no cogent reason to deviate from the
aforementioned distinction.
Prescinding from this premise, in Francia v. Intermediate Appellate Court, 19 we categorically held that taxes cannot be
subject to set-off or compensation, thus:
We have consistently ruled that there can be no off-setting of taxes against the claims that the
taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that
the government owes him an amount equal to or greater than the tax being collected. The collection
of a tax cannot await the results of a lawsuit against the government.
The ruling in Francia has been applied to the subsequent case of Caltex Philippines, Inc. v. Commission on
Audit,20 which reiterated that:
. . . a taxpayer may not offset taxes due from the claims that he may have against the government.
Taxes cannot be the subject of compensation because the government and taxpayer are not
mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand,
contract or judgment as is allowed to be set-off.
Further, Philex's reliance on our holding in Commissioner of Internal Revenue v. Itogon-Suyoc Mines Inc., wherein
we ruled that a pending refund may be set off against an existing tax liability even though the refund has not yet
been approved by the Commissioner, 21 is no longer without any support in statutory law.
It is important to note, that the premise of our ruling in the aforementioned case was anchored on Section 51 (d) of
the National Revenue Code of 1939. However, when the National Internal Revenue Code of 1977 was enacted, the
same provision upon which the Itogon-Suyoc pronouncement was based was omitted. 22 Accordingly, the doctrine
enunciated in Itogon-Suyoc cannot be invoked by Philex.

Despite the foregoing rulings clearly adverse to Philex's position, it asserts that the imposition of surcharge and
interest for the non-payment of the excise taxes within the time prescribed was unjustified. Philex posits the theory
that it had no obligation to pay the excise tax liabilities within the prescribed period since, after all, it still has pending
claims for VAT input credit/refund with BIR. 23
We fail to see the logic of Philex's claim for this is an outright disregard of the basic principle in tax law that taxes are the
lifeblood of the government and so should be collected without unnecessary hindrance. 24 Evidently, to countenance
Philex's whimsical reason would render ineffective our tax collection system. Too simplistic, it finds no support in law or in
jurisprudence.

To be sure, we cannot allow Philex to refuse the payment of its tax liabilities on the ground that it has a pending tax
claim for refund or credit against the government which has not yet been granted. It must be noted that a
distinguishing feature of a tax is that it is compulsory rather than a matter of bargain. 25 Hence, a tax does not depend
upon the consent of the taxpayer. 26 If any taxpayer can defer the payment of taxes by raising the defense that it still has a
pending claim for refund or credit, this would adversely affect the government revenue system. A taxpayer cannot refuse
to pay his taxes when they fall due simply because he has a claim against the government or that the collection of the tax
is contingent on the result of the lawsuit it filed against the government. 27 Moreover, Philex's theory that would
automatically apply its VAT input credit/refund against its tax liabilities can easily give rise to confusion and abuse,
depriving the government of authority over the manner by which taxpayers credit and offset their tax liabilities.
Corollarily, the fact that Philex has pending claims for VAT input claim/refund with the government is immaterial for
the imposition of charges and penalties prescribed under Section 248 and 249 of the Tax Code of 1977. The
payment of the surcharge is mandatory and the BIR is not vested with any authority to waive the collection
thereof. 28 The same cannot be condoned for flimsy reasons, 29 similar to the one advanced by Philex in justifying its nonpayment of its tax liabilities.
Finally, Philex asserts that the BIR violated Section 106 (e) 30 of the National Internal Revenue Code of 1977, which
requires the refund of input taxes within 60 days, 31 when it took five years for the latter to grant its tax claim for VAT input
credit/refund. 32
In this regard, we agree with Philex. While there is no dispute that a claimant has the burden of proof to establish the
factual basis of his or her claim for tax credit or refund, 33 however, once the claimant has submitted all the required
documents it is the function of the BIR to assess these documents with purposeful dispatch. After all, since taxpayers owe
honestly to government it is but just that government render fair service to the taxpayers. 34
In the instant case, the VAT input taxes were paid between 1989 to 1991 but the refund of these erroneously paid taxes
was only granted in 1996. Obviously, had the BIR been more diligent and judicious with their duty, it could have granted
the refund earlier. We need not remind the BIR that simple justice requires the speedy refund of wrongly-held taxes. 35 Fair
dealing and nothing less, is expected by the taxpayer from the BIR in the latter's discharge of its function. As aptly held
inRoxas v. Court of Tax Appeals: 36

The power of taxation is sometimes called also the power to destroy. Therefore it should be
exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised
fairly, equally and uniformly, lest the tax collector kill the "hen that lays the golden egg" And, in order
to maintain the general public's trust and confidence in the Government this power must be used
justly and not treacherously.
Despite our concern with the lethargic manner by which the BIR handled Philex's tax claim, it is a settled rule that in
the performance of governmental function, the State is not bound by the neglect of its agents and officers. Nowhere
is this more true than in the field of taxation. 37 Again, while we understand Philex's predicament, it must be stressed
that the same is not a valid reason for the non-payment of its tax liabilities.
To be sure, this is not to state that the taxpayer is devoid of remedy against public servants or employees, especially
BIR examiners who, in investigating tax claims are seen to drag their feet needlessly. First, if the BIR takes time in
acting upon the taxpayer's claim for refund, the latter can seek judicial remedy before the Court of Tax Appeals in

the manner prescribed by law. 38 Second, if the inaction can be characterized as willful neglect of duty, then recourse
under the Civil Code and the Tax Code can also be availed of.
Art. 27 of the Civil Code provides:
Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or
neglects, without just cause, to perform his official duty may file an action for damages and other
relief against the latter, without prejudice to any disciplinary action that may be taken.
More importantly, Section 269 (c) of the National Internal Revenue Act of 1997 states:
xxx xxx xxx
(c) Wilfully neglecting to give receipts, as by law required for any sum collected in the performance
of duty or wilfully neglecting to perform, any other duties enjoyed by law.
Simply put, both provisions abhor official inaction, willful neglect and unreasonable delay in the performance of
official duties. 39 In no uncertain terms must we stress that every public employee or servant must strive to render service
to the people with utmost diligence and efficiency. Insolence and delay have no place in government service. The BIR,
being the government collecting arm, must and should do no less. It simply cannot be apathetic and laggard in rendering
service to the taxpayer if it wishes to remain true to its mission of hastening the country's development. We take judicial
notice of the taxpayer's generally negative perception towards the BIR; hence, it is up to the latter to prove its detractors
wrong.
In sum, while we can never condone the BIR's apparent callousness in performing its duties, still, the same cannot
justify Philex's non-payment of its tax liabilities. The adage "no one should take the law into his own hands" should
have guided Philex's action.
WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED. The assailed decision of the
Court of Appeals dated April 8, 1996 is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Kapunan and Purisima, JJ., concur.
Footnotes

PHILEX
GR
294 SCRA 687

MINING
No.

125704,

CORP.
August

v.
28,

CIR
1998

FACTS: Petitioner Philex Mining Corp. assails the decision of the Court of Appeals affirming the Court of
Tax Appeals decision ordering it to pay the amount of P110.7 M as excise tax liability for the period from
the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from 1994 until fully paid
pursuant to Sections 248 and 249 of the Tax Code of 1977. Philex protested the demand for payment of
the tax liabilities stating that it has pending claims for VAT input credit/refund for the taxes it paid for the
years 1989 to 1991 in the amount of P120 M plus interest. Therefore these claims for tax credit/refund
should be applied against the tax liabilities.
ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims of tax refund of the
petitioner?
HELD: No. Philex's claim is an outright disregard of the basic principle in tax law that taxes are the
lifeblood of the government and so should be collected without unnecessary hindrance. Evidently, to
countenance Philex's whimsical reason would render ineffective our tax collection system. Too simplistic, it
finds
no
support
in
law
or
in
jurisprudence.
To be sure, Philex cannot be allowed to refuse the payment of its tax liabilities on the ground that it has
a pending tax claim for refund or credit against the government which has not yet been granted.Taxes
cannot be subject to compensation for the simple reason that the government and the taxpayer are not
creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due
to the Government in its corporate capacity, while taxes are due to the Government in its sovereign
capacity. xxx There can be no off-setting of taxes against the claims that the taxpayer may have against
the government. A person cannot refuse to pay a tax on the ground that the government owes him an
amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of
a lawsuit against the government.

NORTH
GR
109 PHIL 511

CAMARINES
No.

LUMBER
L-12353,

CO.,
September

INC.

v.
30,

CIR
1960

FACTS: The petitioner sold more than 2M boardfeet of logs to General Lumber Co. with the agreement that
the latter would pay the sales taxes. The CIR, upon consultation officially advised the parties that the

bureau interposes no objection so long as the tax due shall be covered by a surety. General Lumber
complied, but later failed, with the surety, to pay the tax liabilities, and so the respondent collector
required the petitioner to pay thru a letter dated August 30, 1955. Twice did the petitioner filed a request
for reconsideration before finally submitting the denied request for appeal before the Court of Tax Appeals.
The CTA dismissed the appeal as it was clearly filed out of time. The petitioner had consumed thirty-three
days from the receipt of the demand, before filing the appeal. Petitioner argued that in computing the 30day period in perfecting the appeal the letter of the respondent Collector dated January 30, 1956, denying
the second request for reconsideration, should be considered as the final decision contemplated in Section
7, and not the letter of demand dated August 30, 1955.
ISSUE: Is the contention of the petitioner tenable?
HELD: No. This contention is untenable. We cannot countenance that theory that would make the
commencement of the statutory 30-day period solely dependent on the will of the taxpayer and place the
latter in a position to put off indefinitely and at his convenience the finality of a tax assessment. Such an
absurd procedure would be detrimental to the interest of the Government, for "taxes are the lifeblood of
the government, and their prompt and certain availability is an imperious need.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 195549

September 3, 2014

WILLAWARE PRODUCTS CORPORATION, Petitioner,

vs.
JESICHRIS MANUFACTURING CORPORATION, Respondent.
DECISION
PERALTA, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the
Decision dated November 24, 2010 and Resolution dated February 10, 2011 of the Court of Appeals (CA) in CAG.R. CV No. 86744.
1

The facts, as found by the Regional Trial Court (RTC), are as follows:
[Respondent] Jesichris Manufacturing Company ([respondent] for short) filed this present complaint for damages for
unfair competition with prayer for permanent injunction to enjoin [petitioner] Willaware Products Corporation
([petitioner] for short) from manufacturing and distributing plastic-made automotive parts similar to those of
[respondent].
[Respondent] alleged that it is a duly registeredpartnership engaged in the manufacture and distribution of plastic
and metal products, with principal office at No. 100 Mithi Street, Sampalukan, Caloocan City. Since its registration in
1992, [respondent] has been manufacturing in its Caloocan plant and distributing throughout the Philippines plasticmade automotive parts. [Petitioner], on the other hand, which is engaged in the manufacture and distribution of
kitchenware items made of plastic and metal has its office near that of [respondent]. [Respondent] further alleged
that in view of the physical proximity of [petitioners] office to [respondents] office, and in view of the fact that some
of the [respondents] employeeshad transferred to [petitioner], [petitioner] had developed familiarity with
[respondents] products, especially its plastic-made automotive parts.

That sometime in November 2000, [respondent] discovered that [petitioner] had been manufacturing and distributing
the same automotive parts with exactly similar design, same material and colors but was selling these products at a
lower price as [respondents] plastic-made automotive parts and to the same customers.
[Respondent] alleged that it had originated the use of plastic in place of rubber in the manufacture ofautomotive
underchassis parts such as spring eye bushing, stabilizer bushing, shock absorberbushing, center bearing
cushions, among others. [Petitioners] manufacture of the same automotive parts with plastic materialwas taken
from [respondents] idea of using plastic for automotive parts. Also, [petitioner] deliberately copied [respondents]
products all of which acts constitute unfair competition, is and are contrary to law, morals, good customs and public
policy and have caused [respondent] damages in terms oflost and unrealizedprofits in the amount of TWO MILLION
PESOS as of the date of [respondents] complaint.
Furthermore, [petitioners] tortuous conduct compelled [respondent] to institute this action and thereby to incur
expenses in the way of attorneys fees and other litigation expenses in the amount of FIVE HUNDRED THOUSAND
PESOS (P500,000.00).
In its Answer, [petitioner] denies all the allegations of the [respondent] except for the following facts: that it is
engaged in the manufacture and distribution of kitchenware items made of plastic and metal and that theres
physical proximity of [petitioners] office to [respondent]s office, and that someof [respondents] employees had
transferred to [petitioner] and that over the years [petitioner] had developed familiarity with [respondents] products,
especially its plastic made automotive parts.
As its Affirmative Defenses, [petitioner] claims that there can be no unfair competition as the plastic-made
automotive parts are mere reproductions of original parts and their construction and composition merely conforms to
the specificationsof the original parts of motor vehicles they intend to replace. Thus, [respondent] cannot claim that it
"originated" the use of plastic for these automotive parts. Even assuming for the sake of argument that [respondent]
indeed originated the use of these plastic automotive parts, it still has no exclusive right to use, manufacture and sell
these as it has no patent over these products. Furthermore, [respondent] is not the only exclusive manufacturer of
these plastic-made automotive parts as there are other establishments which were already openly selling them to
the public.
3

After trial on the merits, the RTC ruled in favor of respondent. It ruled that petitioner clearly invaded the rights or
interest of respondent by deliberately copying and performing acts amounting to unfair competition. The RTC further
opined that under the circumstances, in order for respondents property rights to be preserved, petitioners acts of
manufacturing similar plastic-made automotive parts such as those of respondents and the selling of the
sameproducts to respondents customers, which it cultivated over the years, will have to be enjoined. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, the court finds the defendant liable to plaintiff Two Million (P2,000,000.00)
Pesos, as actual damages, One Hundred Thousand (P100,000.00) Pesos as attorneys fees and One Hundred
Thousand (P100,000.00) Pesos for exemplary damages. The court hereby permanently [enjoins] defendant from
manufacturing the plastic-made automotive parts as those manufactured by plaintiffs.
SO ORDERED.

Thus, petitioner appealed to the CA.

On appeal, petitioner asserts that ifthere is no intellectual property protecting a good belonging to another,the
copying thereof for production and selling does not add up to unfair competition as competition is promoted by law
to benefit consumers. Petitioner further contends that it did not lure away respondents employees to get trade
secrets. It points out that the plastic spare parts sold by respondent are traded in the market and the copying of
these can be done by simplybuying a sample for a mold to be made.
Conversely, respondent averred that copyright and patent registrations are immaterial for an unfair competition case
to prosper under Article 28 of the Civil Code. It stresses that the characteristics of unfair competition are present in
the instant case as the parties are trade rivals and petitioners acts are contrary to good conscience for deliberately
copying its products and employing its former employees.

In a Decision dated November 24,2010, the CA affirmed with modification the ruling of the RTC. Relevant portions of
said decision read:
Despite the evidence showing thatWillaware took dishonest steps in advancing its business interest against
Jesichris, however, the Court finds no basis for the award by the RTC of actual damages. One is entitled to actual
damages as one has duly proven. The testimony of Quejada, who was engaged by Jesichris in 2001 to audit its
business, only revealed that there was a discrepancy between the sales of Jesichris from 2001 to 2002. No amount
was mentioned. As for Exhibit "Q," which is a copy of the comparative income statement of Jesichris for 1999-2002,
it shows the decline of the sales in 2002 in comparison with those made in 2001 but it does not disclose if this
pertains to the subject automotive parts or to the other products of Jesichris like plates.
In any event, it was clearly shown that there was unfair competition on the part of Willaware that prejudiced
Jesichris. It is only proper that nominal damages be awarded in the amount of Two Hundred Thousand Pesos
(P200,000.00) in order to recognize and vindicate Jesichris rights. The RTCs award of attorneys fees and
exemplary damages is also maintained.
xxxx
WHEREFORE, premises considered, the Decision dated April 15, 2003 of the Regional Trial Court of Caloocan City,
Branch 131, in Civil Case No. C-19771 is hereby MODIFIED. The award of Two Million Pesos (P2,000,000.00)
actual damages is deleted and in its place, Two Hundred Thousand Pesos nominal damages is awarded.
SO ORDERED.

Dissatisfied, petitioner moved for reconsideration. However, the same was denied for lack of merit by the CA in a
Resolution dated February 10, 2011.
Hence, the present Petition for Review wherein petitioner raises the following issues for our resolution:
(1) Whether or not there is unfair competition under human relations when the parties are not competitors
and there is actually no damage on the part of Jesichris?
(2) Consequently, if there is no unfair competition, should there be moral damages and attorneys fees?
(3) Whether or not the addition of nominal damages is proper although no rights have been established?
(4) If ever the right of Jesichris refersto its copyright on automotive parts, should it be considered in the light
of the said copyrights were considered to be void by no less than this Honorable Court in SC GR No.
161295?
(5) If the right involved is "goodwill" then the issue is: whether or not Jesichris has established "goodwill?"

In essence, the issue for our resolution is: whether or not petitioner committed acts amounting to unfair competition
under Article 28 of the Civil Code.
Prefatorily, we would like to stress that the instant case falls under Article 28 of the Civil Code on humanrelations,
and not unfair competition under Republic Act No. 8293, as the present suit is a damage suit and the products are
not covered by patent registration. A fortiori, the existence of patent registration is immaterial in the present case.
7

The concept of "unfair competition"under Article 28 is very much broader than that covered by intellectual property
laws. Under the present article, which follows the extended concept of "unfair competition" in American jurisdictions,
the term coverseven cases of discovery of trade secrets of a competitor, bribery of his employees,
misrepresentation of all kinds, interference with the fulfillment of a competitors contracts, or any malicious
interference with the latters business.
8

With that settled, we now come to the issue of whether or not petitioner committed acts amounting tounfair
competition under Article 28 of the Civil Code.
We find the petition bereft of merit.
Article 28 of the Civil Code provides that "unfair competition in agricultural, commercial or industrial enterprises or in
labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive or high-handed
method shall give rise to a right of action by the person who thereby suffers damage."
From the foregoing, it is clear thatwhat is being sought to be prevented is not competitionper sebut the use of unjust,
oppressive or high- handed methods which may deprive others of a fair chance to engage in business or to earn a
living. Plainly,what the law prohibits is unfair competition and not competition where the means usedare fair and
legitimate.
In order to qualify the competition as "unfair," it must have two characteristics: (1) it must involve an injury to a
competitor or trade rival, and (2) it must involve acts which are characterized as "contrary to good conscience," or
"shocking to judicial sensibilities," or otherwise unlawful; in the language of our law, these include force, intimidation,
deceit, machination or any other unjust, oppressive or high-handed method. The public injury or interest is a minor
factor; the essence of the matter appears to be a private wrong perpetrated by unconscionable means.
9

Here, both characteristics are present.

First, both parties are competitors or trade rivals, both being engaged in the manufacture of plastic-made
automotive parts. Second, the acts of the petitioner were clearly "contrary to good conscience" as petitioner
admitted having employed respondents formeremployees, deliberately copied respondents products and even
went to the extent of selling these products to respondents customers.
10

To bolster this point, the CA correctly pointed out that petitioners hiring of the former employees of respondent and
petitioners act of copying the subject plastic parts of respondent were tantamount to unfair competition, viz.:
The testimonies of the witnesses indicate that [petitioner] was in bad faith in competing with the business of
[respondent]. [Petitioners] acts can be characterized as executed with mischievous subtle calculation. To illustrate,
in addition to the findings of the RTC, the Court observes that [petitioner] is engaged in the production of plastic
kitchenware previous to its manufacturing of plasticautomotive spare parts, it engaged the services of the then mold
setter and maintenance operator of [respondent], De Guzman, while he was employed by the latter. De Guzman
was hired by [petitioner] in order to adjust its machinery since quality plastic automotive spare parts were not being
made. It baffles the Court why [petitioner] cannot rely onits own mold setter and maintenance operator to remedy its
problem. [Petitioners] engagement of De Guzman indicates that it is banking on his experience gained from working
for [respondent].
1wphi1

Another point we observe is that Yabut, who used to be a warehouse and delivery man of [respondent], was fired
because he was blamed of spying in favor of [petitioner]. Despite this accusation, he did not get angry. Later on, he
applied for and was hired by [petitioner] for the same position he occupied with [respondent]. These sequence of
events relating to his employment by [petitioner] is suspect too like the situation with De Guzman.
11

Thus, it is evident that petitioner isengaged in unfair competition as shown by his act of suddenly shifting his
business from manufacturing kitchenware to plastic-made automotive parts; his luring the employees of the
respondent to transfer to his employ and trying to discover the trade secrets of the respondent.
12

Moreover, when a person starts an opposing place of business, not for the sake of profit to himself, but regardless of
loss and for the sole purpose of driving his competitor out of business so that later on he can take advantage of the
effects of his malevolent purpose, he is guilty of wanton wrong. As aptly observed by the courta quo, the testimony
of petitioners witnesses indicate that it acted in bad faith in competing with the business of respondent, to wit:
[Petitioner], thru its General Manager, William Salinas, Jr., admitted that it was never engaged in the business of
plastic-made automotive parts until recently, year 2000:
13

Atty. Bautista: The business name of Willaware Product Corporation is kitchenware, it is (sic) not? Manufacturer of
kitchenware and distributor ofkitchenware, is it not? Mr. Salinas: Yes, sir. Atty. Bautista: And you said you have
known the [respondent] Jesichris Manufacturing Co., you have known it to be manufacturing plastic automotive
products, is it not? Mr. Salinas: Yes, sir. Atty. Bautista: In fact, you have been (sic) physically become familiar with
these products, plastic automotive products of Jesichris? Mr. Salinas: Yes, sir.
How [petitioner] was able to manufacture the same products, in terms of color, size, shape and composition as
those sold by Jesichris was due largely to the sudden transfer ofJesichris employees to Willaware.
Atty. Bautista: Since when have you been familiar with Jesichris Manufacturing Company?
Mr. Salinas: Since they transferred there (sic) our place.
Atty. Bautista: And that was in what year? Mr. Salinas: Maybe four (4) years. I dont know the exact date.
Atty. Bautista: And some of the employees of Jesichris Manufacturing Co. have transferred to your company, is it
not?
Mr. Salinas: Yes, sir.
Atty. Bautista: How many, more or less?
Mr. Salinas: More or less, three (3).
Atty. Bautista: And when, in what year or month did they transfer to you?
Mr. Salinas: First, November 1.
Atty. Bautista: Year 2000?
Mr. Salinas: Yes sir. And then the other maybe February, this year. And the other one, just one month ago.
That [petitioner] was clearly outto take [respondent] out of business was buttressed by the testimony of [petitioners]
witness, Joel Torres:
Q: Are you familiar with the [petitioner], Willaware Product Corporation?
A: Yes, sir.
Q: Will you kindly inform this court where is the office of this Willaware Product Corporation (sic)?
A: At Mithi Street, Caloocan City, sir.
Q: And Mr. Witness, sometime second Saturday of January 2001, will you kindly inform this court what unusual even
(sic) transpired between you and Mr. Salinas on said date?
A: There was, sir.
Q: What is that?
A: Sir, I was walking at that time together with my wife going to the market and then I passed by the place where
they were having a drinking spree, sir.
Q: You mentioned they, who were they who were drinking at that time?

A: I know one Jun Molina, sir.

Q: And who else was there?
A: William Salinas, sir.
Q: And will you kindly inform us what happened when you spotted upon them drinking?
A: Jun Molina called me, sir.
Q: And what happened after that?
A: At that time, he offered mea glass of wine and before I was able to drink the wine, Mr. Salinas uttered something,
sir.
Q: And what were those words uttered by Mr. Salinas to you?
A: "O, ano naapektuhan na kayo sa ginaya (sic) ko sa inyo?"
Q: And what did you do after that, after hearing those words?
A: And he added these words, sir. "sabihin mo sa amo mo, dalawang taon na lang pababagsakin ko na siya."
Q: Alright, hearing those words, will you kindly tell this court whom did you gather to be referred to as your "amo"?
A: Mr. Jessie Ching, sir.

14

In sum, petitioner is guilty of unfair competition under Article 28 of the Civil Code.
However, since the award of Two Million Pesos (P2,000,000.00) in actual damages had been deleted and in its
place Two Hundred Thousand Pesos (P200,000.00) in nominal damages is awarded, the attorney's fees should
concomitantly be modified and lowered to Fifty Thousand Pesos (P50,000.00).
WHEREFORE, the instant petition is DENIED. The Decision dated November 24, 2010 and Resolution dated
February 10, 2011 of the Court of Appeals in CA-G.R. CV No. 86744 are hereby AFFIRMED with MODIFICATION
that the award of attorney's fees be lowered to Fifty Thousand Pesos (P50,000.00).
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.
Associate Justice
LUCAS P. BERSAMIN*
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice
BIENVENIDO L. REYES
Associate Justice
ATT E S TATI O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court's Division.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairerson, Third Division
C E R TI F I C ATI O N
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court's Division.
ANTIONIO T. CARPIO
Acting Chief Justice

aption:
G.R. No. 195549
September 3, 2014
WILLAWARE PRODUCTS CORPORATION, Petitioner,
vs.
JESICHRIS MANUFACTURING CORPORATION, Respondent.
Facts:
Jesichris Manufacturing Company the respondent filed this present complaint for damages for unfair competition with
prayer for permanent injunction to enjoin Willaware Products Corporation the petitioner from manufacturing and
distributing plastic-made automotive parts similar to Jesichris Manufacturing Company. The respondent, alleged that it is a
duly registered partnership engaged in the manufacture and distribution of plastic and metal products, with principal office
at No. 100 Mithi Street, Sampalukan, Caloocan City. Since its registration in 1992, Jesichris Manufacturing Company has
been manufacturing in its Caloocan plant and distributing throughout the Philippines plastic-made automotive
parts. Willaware Products Corporation, on the other hand, which is engaged in the manufacture and distribution of
kitchenware items made of plastic and metal has its office near that of the Jesichris Manufacturing Company. Respondent
further alleged that in view of the physical proximity of petitioners office to respondents office, and in view of the fact that
some of the respondents employees had transferred to petitioner, petitioner had developed familiarity with respondents
products, especially its plastic-made automotive parts.
That sometime in November 2000, [respondent] discovered that [petitioner] had been manufacturing and distributing the
same automotive parts with exactly similar design, same material and colors but was selling these products at a lower
price as [respondents] plastic-made automotive parts and to the same customers.
Respondent alleged that it had originated the use of plastic in place of rubber in the manufacture of automotive under
chassis parts such as spring eye bushing, stabilizer bushing, shock absorber bushing, center bearing cushions, among
others. [Petitioners] manufacture of the same automotive parts with plastic material was taken from respondents idea of
using plastic for automotive parts. Also, [petitioner] deliberately copied [respondents] products all of which acts constitute
unfair competition, is and are contrary to law, morals, good customs and public policy and have caused [respondent]
damages in terms of lost and unrealized profits in the amount of 2,000,000 as of the date of respondents complaint.

Issue:
1. Whether or not there is unfair competition under human relations when the parties are not competitors and there is
actually no damage on the part of Jesichris?
2. Consequently, if there is no unfair competition, should there be moral damages and attorneys fees?
3. Whether or not the addition of nominal damages is proper although no rights have been established?

Held:
Article 28 of the Civil Code provides that "unfair competition in agricultural, commercial or industrial enterprises or in labor
through the use of force, intimidation, deceit, machination or any other unjust, oppressive or high-handed method shall
give rise to a right of action by the person who thereby suffers damage."
From the foregoing, it is clear that what is being sought to be prevented is not competition per se but the use of unjust,
oppressive or high handed methods which may deprive others of a fair chance to engage in business or to earn a living.
Plainly,what the law prohibits is unfair competition and not competition where the means use dare fair and legitimate.
In sum, petitioner is guilty of unfair competition under Article 28 of the Civil Code.
However, since the award of Two Million Pesos (P2,000,000.00) in actual damages had been deleted and in its place Two
Hundred Thousand Pesos (P200,000.00) in nominal damages is awarded, the attorney's fees should concomitantly be
modified and lowered to Fifty Thousand Pesos (P50,000.00).