G.R. No.
146322 December 6, 200 Avesco-AVNE Enterprises and, on petitioner Uypitchings instruction and
ERNESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC.,
vs.
ERNESTO QUIAMCO, respondent.
Honeste vivere, non alterum laedere et jus suum cuique tribuere. To live
virtuously, not to injure others and to give everyone his due. These
supreme norms of justice are the underlying principles of law and order in
society. We reaffirm them in this petition for review on certiorari assailing
the July 26, 2000 decision1 and October 18, 2000 resolution of the Court of
Appeals (CA) in CA-G.R. CV No. 47571.
In 1982, respondent Ernesto C. Quiamco was approached by Juan
Davalan,2 Josefino Gabutero and Raul Generoso to amicably settle the civil
aspect of a criminal case for robbery 3 filed by Quiamco against them. They
surrendered to him a red Honda XL-100 motorcycle and a photocopy of its
certificate of registration. Respondent asked for the original certificate of
registration but the three accused never came to see him again.
Meanwhile, the motorcycle was parked in an open space inside
respondents business establishment, Avesco-AVNE Enterprises, where it
was visible and accessible to the public.
It turned out that, in October 1981, the motorcycle had been sold on
installment basis to Gabutero by petitioner Ramas Uypitching Sons, Inc., a
family-owned corporation managed by petitioner Atty. Ernesto Ramas
Uypitching. To secure its payment, the motorcycle was mortgaged to
petitioner corporation.4
When Gabutero could no longer pay the installments, Davalan assumed
the obligation and continued the payments. In September 1982, however,
Davalan stopped paying the remaining installments and told petitioner
corporations collector, Wilfredo Verao, that the motorcycle had allegedly
been "taken by respondents men."
Nine years later, on January 26, 1991, petitioner Uypitching, accompanied
by policemen,5 went to Avesco-AVNE Enterprises to recover the motorcycle.
The leader of the police team, P/Lt. Arturo Vendiola, talked to the clerk in
charge and asked for respondent. While P/Lt. Vendiola and the clerk were
talking, petitioner Uypitching paced back and forth inside the
establishment uttering "Quiamco is a thief of a motorcycle."
On learning that respondent was not in Avesco-AVNE Enterprises, the
policemen left to look for respondent in his residence while petitioner
Uypitching stayed in the establishment to take photographs of the
motorcycle. Unable to find respondent, the policemen went back to
over the clerks objection, took the motorcycle.
On February 18, 1991, petitioner Uypitching filed a criminal complaint for
qualified theft and/or violation of the Anti-Fencing Law 6 against respondent
in the Office of the City Prosecutor of Dumaguete City. 7 Respondent moved
for dismissal because the complaint did not charge an offense as he had
neither stolen nor bought the motorcycle. The Office of the City Prosecutor
dismissed the complaint8 and denied petitioner Uypitchings subsequent
motion for reconsideration.
Respondent filed an action for damages against petitioners in the RTC of
Dumaguete City, Negros Oriental, Branch 37.9 He sought to hold the
petitioners liable for the following: (1) unlawful taking of the motorcycle;
(2) utterance of a defamatory remark (that respondent was a thief) and (3)
precipitate filing of a baseless and malicious complaint. These acts
humiliated and embarrassed the respondent and injured his reputation and
integrity.
On July 30, 1994, the trial court rendered a decision 10 finding that
petitioner Uypitching was motivated with malice and ill will when he called
respondent a thief, took the motorcycle in an abusive manner and filed a
baseless complaint for qualified theft and/or violation of the Anti-Fencing
Law. Petitioners acts were found to be contrary to Articles 19 11 and 2012 of
the Civil Code. Hence, the trial court held petitioners liable to respondent
for P500,000 moral damages, P200,000 exemplary damages and P50,000
attorneys fees plus costs.
Petitioners appealed the RTC decision but the CA affirmed the trial courts
decision with modification, reducing the award of moral and exemplary
damages to P300,000 and P100,000, respectively.13 Petitioners sought
reconsideration but it was denied. Thus, this petition.
In their petition and memorandum, petitioners submit that the sole
(allegedly) issue to be resolved here is whether the filing of a complaint for
qualified theft and/or violation of the Anti-Fencing Law in the Office of the
City Prosecutor warranted the award of moral damages, exemplary
damages, attorneys fees and costs in favor of respondent.
Petitioners suggestion is misleading. They were held liable for damages
not only for instituting a groundless complaint against respondent but also
for making a slanderous remark and for taking the motorcycle from
respondents establishment in an abusive manner.
Correctness of the Findings of the RTC and CA
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As they never questioned the findings of the RTC and CA that malice and ill
will attended not only the public imputation of a crime to respondent 14 but
also the taking of the motorcycle, petitioners were deemed to have
accepted the correctness of such findings. This alone was sufficient to hold
petitioners liable for damages to respondent.
Nevertheless, to address petitioners concern, we also find that the trial
and appellate courts correctly ruled that the filing of the complaint was
tainted with malice and bad faith. Petitioners themselves in fact described
their action as a "precipitate act." 15 Petitioners were bent on portraying
respondent as a thief. In this connection, we quote with approval the
following findings of the RTC, as adopted by the CA:
x x x There was malice or ill-will [in filing the complaint before the
City Prosecutors Office] because Atty. Ernesto Ramas Uypitching
knew or ought to have known as he is a lawyer, that there was no
probable cause at all for filing a criminal complaint for qualified
theft and fencing activity against [respondent]. Atty. Uypitching
had no personal knowledge that [respondent] stole the motorcycle
in question. He was merely told by his bill collector ([i.e.] the bill
collector of Ramas Uypitching Sons, Inc.)[,] Wilfredo Verao[,] that
Juan Dabalan will [no longer] pay the remaining installment(s) for
the motorcycle because the motorcycle was taken by the men of
[respondent]. It must be noted that the term used by Wilfredo
Verao in informing Atty. Ernesto Ramas Uypitching of the refusal
of Juan Dabalan to pay for the remaining installment was
[]taken[], not []unlawfully taken[] or stolen. Yet, despite the as well as public morals, and transgressed the proper norms of human
double hearsay, Atty. Ernesto Ramas Uypitching not only executed
the [complaint-affidavit] wherein he named [respondent] as the
suspect of the stolen motorcycle but also charged [respondent] of
qualified theft and fencing activity before the City [Prosecutors]
Office of Dumaguete. The absence of probable cause necessarily
signifies the presence of malice. What is deplorable in all these is
that Juan Dabalan, the owner of the motorcycle, did not accuse
[respondent] or the latters men of stealing the motorcycle[,] much
less bother[ed] to file a case for qualified theft before the
authorities. That Atty. Uypitchings act in charging [respondent]
with qualified theft and fencing activity is tainted with malice is
also shown by his answer to the question of Cupid Gonzaga 16
[during one of their conversations] - "why should you still file a
complaint? You have already recovered the motorcycle"[:] "Aron
motagam ang kawatan ug motor." ("To teach a lesson to the thief
of motorcycle.")17
Moreover, 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. We see no compelling reason to reverse
the findings of the RTC and the CA.
Petitioners Abused Their Right of Recovery as Mortgagee(s)
Petitioners claim that they should not be held liable for petitioner
corporations exercise of its right as seller-mortgagee to recover the
mortgaged vehicle preliminary to the enforcement of its right to foreclose
on the mortgage in case of default. They are clearly mistaken.
True, a mortgagee may take steps to recover the mortgaged property to
enable it to enforce or protect its foreclosure right thereon. There is,
however, a well-defined procedure for the recovery of possession of
mortgaged property: if a mortgagee is unable to obtain possession of a
mortgaged property for its sale on foreclosure, he must bring a civil action
either to recover such possession as a preliminary step to the sale, or to
obtain judicial foreclosure.18
Petitioner corporation failed to bring the proper civil action necessary to
acquire legal possession of the motorcycle. Instead, petitioner Uypitching
descended on respondents establishment with his policemen and ordered
the seizure of the motorcycle without a search warrant or court order.
Worse, in the course of the illegal seizure of the motorcycle, petitioner
Uypitching even mouthed a slanderous statement.
No doubt, petitioner corporation, acting through its co-petitioner
Uypitching, blatantly disregarded the lawful procedure for the enforcement
of its right, to the prejudice of respondent. Petitioners acts violated the law
relations.
The basic principle of human relations, embodied in Article 19 of the Civil
Code, provides:
Art. 19. Every person must in the exercise of his rights and in the
performance of his duties, act with justice, give every one his due,
and observe honesty and good faith.
Article 19, also known as the "principle of abuse of right," prescribes that a
person should not use his right unjustly or contrary to honesty and good
faith, otherwise he opens himself to liability.19 It seeks to preclude the use
of, or the tendency to use, a legal right (or duty) as a means to unjust
ends.
There is an abuse of right when it is exercised solely to prejudice or injure
another.20 The exercise of a right must be in accordance with the purpose
for which it was established and must not be excessive or unduly harsh;
there must be no intention to harm another. 21 Otherwise, liability for
damages to the injured party will attach.
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In this case, the manner by which the motorcycle was taken at petitioners
instance was not only attended by bad faith but also contrary to the
procedure laid down by law. Considered in conjunction with the defamatory
statement, petitioners exercise of the right to recover the mortgaged
vehicle was utterly prejudicial and injurious to respondent. On the other
hand, the precipitate act of filing an unfounded complaint could not in any
way be considered to be in accordance with the purpose for which the right
to prosecute a crime was established. Thus, the totality of petitioners
actions showed a calculated design to embarrass, humiliate and publicly
ridicule respondent. Petitioners acted in an excessively harsh fashion to the
prejudice of respondent. Contrary to law, petitioners willfully caused
damage to respondent. Hence, they should indemnify him. 22
Before us are two petitions for review on certiorari under Rule 45 of the
Rules of Court separately filed by the Hongkong and Shanghai Banking
Corporation Limited (HSBANK) and HSBC International Trustee Limited
(HSBC TRUSTEE). They seek the reversal of the consolidated Decision, 1
dated August 14, 2003, of the Court of Appeals (CA) in CA-G.R. SP Nos.
75756 and 75757, which dismissed the petitions for certiorari of herein
petitioners assailing the Order, dated May 15, 2002, of the Regional Trial
Court, Branch 44, Bacolod City (RTC) in Civil Case No. 01-11372 that denied
their respective motions to dismiss the amended complaint of respondent
Cecilia Diez Catalan.
The factual antecedents are as follows:

WHEREFORE, the petition is hereby DENIED. The July 26, 2000 decision On January 29, 2001, respondent filed before the RTC, a complaint
and October 18, 2000 resolution of the Court of Appeals in CA-G.R. CV No. for a sum of money with damages against petitioner HSBANK,
47571 are AFFIRMED. docketed as Civil Case No. 01-11372, due to HSBANKs alleged
wanton refusal to pay her the value of five HSBANK checks issued
Triple costs against petitioners, considering that petitioner Ernesto Ramas by Frederick Arthur Thomson (Thomson) amounting to
Uypitching is a lawyer and an officer of the court, for his improper HK$3,200,000.00.2
behavior.
On February 7, 2001, summons was served on HSBANK at the Enterprise
SO ORDERED. Center, Tower I, Ayala Avenue corner Paseo de Roxas St., Makati City. 3
HSBANK filed a Motion for Extension of Time to File Answer or Motion to
Dismiss dated February 21, 2001.4 Then, it filed a Motion to Dismiss, dated
March 8, 2001, on the grounds that (a) the RTC has no jurisdiction over the
subject matter of the complaint; (b) the RTC has not acquired jurisdiction
for failure of the plaintiff to pay the correct filing or docket fees; (c) the RTC
has no jurisdiction over the person of HSBANK; (d) the complaint does not
G.R. No. 159590 October 18, 2004 state a cause of action against HSBANK; and (e) plaintiff engages in forum-
shopping.5
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED,
vs. On September 10, 2001, Catalan filed an Amended Complaint impleading
CECILIA DIEZ CATALAN, respondent. petitioner HSBC TRUSTEE as co-defendant and invoking Article 19 of the
Civil Code as basis for her cause of action.6
x----------------------------x
The Amended Complaint alleges:
G.R. No. 159591 October 18, 2004
Defendants HSBANK and HSBC TRUSTEE, doing business in the
HSBC INTERNATIONAL TRUSTEE LIMITED, petitioner, Philippines, are corporations duly organized under the laws of the
vs. British Virgin Islands with head office at 1 Grenville Street, St.
CECILIA DIEZ CATALAN, respondent. Helier Jersey, Channel Islands and with branch offices at Level 12,
1 Queens Road Central, Hongkong and may be served with
summons and other court processes through their main office in
DECISION Manila with address at HSBC, the Enterprise Center, Tower 1, Ayala
Avenue corner Paseo de Roxas Street, Makati City.
AUSTRIA-MARTINEZ, J.:

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Sometime in March 1997, Thomson issued five HSBANK checks payable to
Catalan, to wit:
CHECK NO. DATE AMOUNT
807852 Mar. 15, 1997 $600,000.00
807853 Mar. 17, 1997 800,000.00
807854 Mar. 17, 1997 600,000.00
807855 Mar. 22, 1997 600,000.00
807856 Mar. 23, 1997 600,000.00
TOTAL $3,200,000.00
The checks when deposited were returned by HSBANK purportedly for
reason of "payment stopped" pending confirmation, despite the fact that
the checks were duly funded. On March 18, 1997, Thomson wrote a letter
to a certain Ricky Sousa7 of HSBANK confirming the checks he issued to
Catalan and requesting that all his checks be cleared. On March 20, 1997,
Thomson wrote another letter to Sousa of HSBANK requesting an advice in
writing to be sent to the Philippine National Bank, through the fastest
means, that the checks he previously issued to Catalan were already
cleared. Thereafter, Catalan demanded that HSBANK make good the
checks issued by Thomson. On May 16, 1997, Marilou A. Lozada, personal
secretary and attorney-in-fact of Thomson, wrote a letter to Sousa of
HSBANK informing him that HSBANKs failure to clear all the checks had
saddened Thomson and requesting that the clearing of the checks be
facilitated. Subsequently, Thomson died and Catalan forwarded her
demand to HSBC TRUSTEE. Catalan sent photocopies of the returned
checks to HSBC TRUSTEE. Not satisfied, HSBC TRUSTEE through deceit and
trickery, required Catalan, as a condition for the acceptance of the checks,
to submit the original copies of the returned checks, purportedly, to hasten
payment of her claim. HSBC TRUSTEE succeeded in its calculated
deception because on April 21, 1999, Catalan and her former counsel went
to Hongkong at their own expense to personally deliver the originals of the
returned checks to the officers of HSBC TRUSTEE, anxious of receiving the
money value of the checks but HSBC TRUSTEE despite receipt of the
original checks, refused to pay Catalans claim. Having seen and received
the original of the checks, upon its request, HSBC TRUSTEE is deemed to
have impliedly accepted the checks. Moreover, the refusal of HSBANK and
HSBC TRUSTEE to pay the checks is equivalent to illegal freezing of ones
deposit. On the assurance of HSBC TRUSTEE that her claim will soon be
paid, as she was made to believe that payments of the checks shall be
made by HSBC TRUSTEE "upon sight," the unsuspecting Catalan left the
originals of the checks with HSBC TRUSTEE and was given only an
acknowledgment receipt. Catalan made several demands and after several
more follow ups, on August 16, 1999, Phoenix Lam, Senior Vice President
of HSBC TRUSTEE, in obvious disregard of her valid claim, informed Catalan
that her claim is disapproved. No reason or explanation whatsoever was
made why her claim was disapproved, neither were the checks returned to
her. Catalan appealed for fairness and understanding, in the hope that
HSBC TRUSTEE would act fairly and justly on her claim but these demands
were met by a stonewall of silence. On June 9, 2000, Catalan through
counsel sent a last and final demand to HSBC TRUSTEE to remit the
amount covered by the checks but despite receipt of said letter, no
payment was made. Clearly, the act of the HSBANK and HSBC TRUSTEE in
refusing to honor and pay the checks validly issued by Thomson violates
the abuse of rights principle under Article 19 of the Civil Code which
requires that everyone must act with justice, give everyone his due and
observe honesty and good faith. The refusal of HSBANK and HSBC
TRUSTEE to pay the checks without any valid reason is intended solely to
prejudice and injure Catalan. When they declined payment of the checks
despite instructions of the drawer, Thomson, to honor them, coupled with
the fact that the checks were duly funded, they acted in bad faith, thus
causing damage to Catalan. A person may not exercise his right unjustly or
in a manner that is not in keeping with honesty or good faith, otherwise he
opens himself to liability for abuse of right.8
Catalan prays that HSBANK and HSBC TRUSTEE be ordered to pay
P20,864,000.00 representing the value of the five checks at the rate of
P6.52 per HK$1 as of January 29, 2001 for the acts of HSBANK and HSBC
TRUSTEE in refusing to pay the amount justly due her, in addition to moral
and exemplary damages, attorneys fees and litigation expenses. 9
On October 2, 2001, HSBANK filed a Motion to Dismiss Amended Complaint
on the grounds that: (a) the RTC has no jurisdiction over the subject matter
of the complaint since the action is a money claim for a debt contracted by
Thomson before his death which should have been filed in the estate or
intestate proceedings of Thomson; (b) Catalan engages in forum shopping
by filing the suit and at the same time filing a claim in the probate
proceeding filed with another branch of the RTC; (c) the amended
complaint states no cause of action against HSBANK since it has no
obligation to pay the checks as it has not accepted the checks and Catalan
did not re-deposit the checks or make a formal protest; (d) the RTC has not
acquired jurisdiction over the person of HSBANK for improper service of
summons; and, (e) it did not submit to the jurisdiction of the RTC by filing a
motion for extension of time to file a motion to dismiss. 10
Meanwhile, on October 17, 2001, summons for HSBC TRUSTEE was
tendered to the In House Counsel of HSBANK (Makati Branch) at the
Enterprise Center, Tower 1, Ayala Avenue corner Paseo de Roxas, Makati.
Without submitting itself to the jurisdiction of the RTC, HSBC TRUSTEE filed
a Special Appearance for Motion to Dismiss Amended Complaint, dated
October 29, 2001, questioning the jurisdiction of the RTC over it. 11 HSBC
TRUSTEE alleges that tender of summons through HSBANK Makati did not
4 | Page
confer upon the RTC jurisdiction over it because: (a) it is a corporation
separate and distinct from HSBANK; (b) it does not hold office at the
HSBANK Makati or in any other place in the Philippines; (c) it has not
authorized HSBANK Makati to receive summons for it; and, (d) it has no
resident agent upon whom summons may be served because it does not
transact business in the Philippines.
Subsequently, HSBC TRUSTEE filed a Submission, dated November 15,
2001, attaching the Affidavit executed in Hongkong by Phoenix Lam, Senior
Vice-President of HSBC TRUSTEE, attesting to the fact that: 1) HSBC
TRUSTEE has not done nor is it doing business in the Philippines; 2) it does
not maintain any office in Makati or anywhere in the Philippines; 3) it has
not appointed any agent in Philippines; and 4) HSBANK Makati has no
authority to receive any summons or court processes for HSBC TRUSTEE. 12
On May 15, 2002, the RTC issued an Order denying the two motions to
dismiss.13 The RTC held that it has jurisdiction over the subject matter of
the action because it is an action for damages under Article 19 of the Civil
Code for the acts of unjustly refusing to honor the checks issued by
Thomson and not a money claim against the estate of Thomson; that
Catalan did not engage in forum-shopping because the elements thereof
are not attendant in the case; that the question of cause of action should
be threshed out or ventilated during the proceedings in the main action
and after the plaintiff and defendants have adduced evidence in their
favor; that it acquired jurisdiction over the person of defendants because
the question of whether a foreign corporation is doing business or not in
the Philippines cannot be a subject of a Motion to Dismiss but should be
ventilated in the trial on the merits; and defendants voluntarily submitted
to the jurisdiction of the RTC setting up in their Motions to Dismiss other
grounds aside from lack of jurisdiction.
HSBANK and HSBC TRUSTEE filed separate motions for reconsideration 14
but both proved futile as they were denied by the RTC in an Order dated
December 20, 2002.15
On February 21, 2003, Catalan moved to declare HSBANK and HSBC
TRUSTEE in default for failure to file their answer to the amended
complaint.
On March 5, 2003, HSBANK and HSBC TRUSTEE filed separate petitions for
certiorari and/or prohibition with the CA, docketed as CA-G.R. SP Nos.
7575616 and 75757,17 respectively.
Subsequently, HSBANK and HSBC TRUSTEE filed before the RTC separate
Answers ad cautelam, both dated March 18, 2003, as a "precaution against
being declared in default and without prejudice to the separate petitions
for certiorari and/or prohibition then pending with the CA."18
Meanwhile, the two petitions for certiorari before the CA were consolidated
and after responsive pleadings were filed, the cases were deemed
submitted for decision.
In a consolidated Decision dated August 14, 2003, the CA dismissed the
two petitions for certiorari.19 The CA held that the filing of petitioners
answers before the RTC rendered moot and academic the issue of the
RTCs lack of jurisdiction over the person of the petitioners; that the RTC
has jurisdiction over the subject matter since it is one for damages under
Article 19 of the Civil Code for the alleged unjust acts of petitioners and not
a money claim against the estate of Thomson; and, that the amended
complaint states a cause of action under Article 19 of the Civil Code which
could merit a favorable judgment if found to be true. The CA noted that
Catalan may have prayed for payment of the value of the checks but
ratiocinated that she merely used the value as basis for the computation of
the damages.
Hence, the present petitions.
In G.R. No. 159590, HSBANK submits the following assigned errors:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN
HOLDING THAT THE COURT A QUO, ACTING AS AN (SIC)
REGULAR COURT, HAS JURISDICTION OVER THE AMENDED
COMPLAINT SEEKING TO ORDER HSBC TRUSTEE, THE
EXECUTOR OF THE DECEASED FREDERICK ARTHUR
THOMSON, TO PAY SUBJECT CHECKS ISSUED BY THE LATE
FREDERICK ARTHUR THOMSON, ADMITTEDLY IN PAYMENT
OF HIS INDEBTEDNESS TO CATALAN.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN
HOLDING THAT THE AMENDED COMPLAINT DOES NOT SEEK
TO ORDER HSBANK AND HSBC INTERNATIONAL TRUSTEE
LIMITED TO PAY THE OBLIGATION OF THE (SIC) FREDERICK
ARTHUR THOMSON AS EVIDENCED BY THE CHECKS, BUT
PRAYS FOR DAMAGES EQUIVALENT OR COMPUTED ON THE
BASIS OF THE VALUE OF THE CHECKS BECAUSE THE
DEFENDANTS FAILED TO COMPLY WITH THE MANDATES OF
ARTICLE 19 OF THE NEW CIVIL CODE.
III.
5 | Page
 THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN
HOLDING THAT ALLEGATIONS IN THE AMENDED
COMPLAINT MAKE OUT A CAUSE OF ACTION WHICH COULD
MERIT A FAVORABLE JUDGMENT IF FOUND TO BE TRUE, OR
IN NOT HOLDING THAT THE AMENDED COMPLAINT STATES
NO CAUSE OF ACTION AGAINST HSBANK, AS DRAWEE
BANK.
IV.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN
DISREGARDING THE FACT THAT CATALAN ENGAGED IN
FORUM SHOPPING BY FILING THE AMENDED COMPLAINT
WHILE HER PETITION FOR THE PROBATE OF THE SUPPOSED
WILL OF THE DECEASED FREDERICK ARTHUR THOMSON IS
PENDING WITH ANOTHER BRANCH OF THE COURT A QUO.
V.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN
HOLDING THAT HSBANK HAD SUBMITTED TO THE
JURISDICTION OF THE COURT A QUO BY SUBMITTING AN
ANSWER TO THE AMENDED COMPLAINT.20
In G.R. No. 159591, HSBC TRUSTEE also assigns the foregoing first, second
and fifth errors as its own.21 In addition, it claims that:
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT
ORDERING THE DISMISSAL OF THE AMENDED COMPLAINT AGAINST
HSBC TRUSTEE DESPITE THE FACT IT HAS NOT BEEN DULY SERVED
WITH SUMMONS.22
HSBANK and HSBC TRUSTEE contend in common that Catalan has no cause
of action for abuse of rights under Article 19 of the Civil Code; that her
complaint, under the guise of a claim for damages, is actually a money
claim against the estate of Thomson arising from checks issued by the
latter in her favor in payment of indebtedness.
HSBANK claims that the money claim should be dismissed on the ground of
forum-shopping since Catalan also filed a petition for probate of the
alleged last will of Thomson before RTC, Branch 48, Bacolod City, docketed
as Spec. Proc No. 00-892. In addition, HSBANK imputes error upon the CA
in holding that by filing an answer to the amended complaint, petitioners
are estopped from questioning the jurisdiction of the RTC.
HSBC TRUSTEE maintains that the RTC did not acquire jurisdiction over it
for improper service of summons.
In her Comment, Catalan insists that her complaint is one for damages
under Article 19 of the Civil Code for the wanton refusal to honor and pay
the value of five checks issued by the Thomson amounting to
HK$3,200,000.00. She argues that the issue of jurisdiction has been
rendered moot by petitioners participation in the proceedings before the
RTC.
Succinctly, the issues boil down to the following:
1) Does the complaint state a cause of action?
2) Did Catalan engage in forum-shopping by filing the complaint for
damages when she also filed a petition for probate of the alleged
last will of Thomson with another branch of the RTC? and,
3) Did the RTC acquire jurisdiction over HSBANK and HSBC
TRUSTEE? Corollary thereto, did the filing of the answer before the
RTC render the issue of lack of jurisdiction moot and academic?
We shall resolve the issue in seriatim.
Does the complaint state a cause of action against HSBANK and HSBC
TRUSTEE?
The elementary test for failure to state a cause of action is whether the
complaint alleges facts which if true would justify the relief demanded.
Stated otherwise, may the court render a valid judgment upon the facts
alleged therein?23 The inquiry is into the sufficiency, not the veracity of the
material allegations.24 If the allegations in the complaint furnish sufficient
basis on which it can be maintained, it should not be dismissed regardless
of the defense that may be presented by the defendants. 25
Catalan anchors her complaint for damages on Article 19 of the Civil Code.
It speaks of the fundamental principle of law and human conduct that a
person "must, in the exercise of his rights and in the performance of his
duties, act with justice, give every one his due, and observe honesty and
good faith." It sets the standards which may be observed not only in the
exercise of ones rights but also in the performance of ones duties. 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. 26
But a right, though by itself legal because recognized or granted by law as
such, may nevertheless become the source of some illegality. 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. 27 There is an abuse of right when it is
exercised for the only purpose of prejudicing or injuring another. The
6 | Page
exercise of a right must be in accordance with the purpose for which it was
established, and must not be excessive or unduly harsh; there must be no
intention to injure another.28
Thus, in order to be liable under the abuse of rights principle, three
elements must concur, to wit: (a) that there is a legal right or duty; (b)
which is exercised in bad faith; and (c) for the sole intent of prejudicing or
injuring another.29
In this instance, after carefully examining the amended complaint, we are
convinced that the allegations therein are in the nature of an action based
on tort under Article 19 of the Civil Code. It is evident that Catalan is suing
HSBANK and HSBC TRUSTEE for unjustified and willful refusal to pay the
value of the checks.
HSBANK is being sued for unwarranted failure to pay the checks
notwithstanding the repeated assurance of the drawer Thomson as to the
authenticity of the checks and frequent directives to pay the value thereof
to Catalan. Her allegations in the complaint that the gross inaction of
HSBANK on Thomsons instructions, as well as its evident failure to inform
Catalan of the reason for its continued inaction and non-payment of the
checks, smack of insouciance on its part, are sufficient statements of clear
abuse of right for which it may be held liable to Catalan for any damages
she incurred resulting therefrom. HSBANKs actions, or lack thereof,
prevented Catalan from seeking further redress with Thomson for the
recovery of her claim while the latter was alive.
HSBANK claims that Catalan has no cause of action because under Section
189 of the Negotiable Instruments Law, "a check of itself does not operate
as an assignment of any part of the funds to the credit of the drawer with
the bank, and the bank is not liable to the holder unless and until it accepts
or certifies it." However, HSBANK is not being sued on the value of the
check itself but for how it acted in relation to Catalans claim for payment
despite the repeated directives of the drawer Thomson to recognize the
check the latter issued. Catalan may have prayed that she be paid the
value of the checks but it is axiomatic that what determines the nature of
an action, as well as which court has jurisdiction over it, are the allegations
of the complaint, irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted therein. 30
Anent HSBC TRUSTEE, it is being sued for the baseless rejection of
Catalans claim. When Catalan parted with the checks as a requirement for
the processing of her claim, even going to the extent of traveling to
Hongkong to deliver personally the checks, HSBC TRUSTEE summarily
disapproved her claim with nary a reason. HSBC TRUSTEE gave no heed to
Catalans incessant appeals for an explanation. Her pleas fell on deaf and
uncaring corporate ears. Clearly, HSBC TRUSTEEs acts are anathema to
the prescription for human conduct enshrined in Article 19 of the Civil
Code.
Did Catalan engage in forum-shopping?
It has been held that forum-shopping exists where a litigant sues the same
party against whom another action or actions for the alleged violation of
the same right and the enforcement of the same relief is/are still pending,
the defense of litis pendentia in one case is a bar to the others; and, a final
judgment in one would constitute res judicata and thus would cause the
dismissal of the rest.31
Thus, there is forum-shopping when there exist: a) identity of parties, or at
least such parties as represent the same interests in both actions, b)
identity of rights asserted and relief prayed for, the relief being founded on
the same facts, and c) the identity of the two preceding particulars is such
that any judgment rendered in the pending case, regardless of which party
is successful would amount to res judicata in the other. 32
Applying the foregoing requisites to the case before us in relation to Spec.
Proc No. 00-892, the probate proceeding brought by Catalan before RTC,
Branch 48, Bacolod City, it is obvious that forum-shopping does not exist.
There is no identity of parties. HSBANK is not a party in the probate
proceeding. HSBC TRUSTEE is only a party in the probate proceeding
because it is the executor and trustee named in the Hongkong will of
Thomson. HSBC TRUSTEE is representing the interest of the estate of
Thomson and not its own corporate interest.
With respect to the second and third requisites, a scrutiny of the entirety of
the allegations of the amended complaint in this case reveals that the
rights asserted and reliefs prayed for therein are different from those
pleaded in the probate proceeding, such that a judgment in one case
would not bar the prosecution of the other case. Verily, there can be no
forum-shopping where in one proceeding a party raises a claim for
damages based on tort and, in another proceeding a party seeks the
allowance of an alleged last will based on ones claim as an heir. After all,
the merits of the action for damages is not to be determined in the probate
proceeding and vice versa. Undeniably, the facts or evidence as would
support and establish the two causes of action are not the same. 33
Consequently, HSBANKs reliance on the principle of forum-shopping is
clearly misplaced.
Did the RTC acquire jurisdiction over HSBANK and HSBC TRUSTEE?
7 | Page
The Rules of Court provides that a court generally acquires jurisdiction over
a person through either a valid service of summons in the manner required
by law or the persons voluntary appearance in court.34
In holding that it acquired jurisdiction over HSBANK and HSBC TRUSTEE,
the RTC held that both voluntarily submitted to the jurisdiction of the court
by setting up in their Motions to Dismiss other grounds aside from lack of
jurisdiction. On the other hand, the CA ruled that HSBANK and HSBC
TRUSTEE are estopped from challenging the jurisdiction of the RTC because
they filed their respective answers before the RTC.
We find that both lower courts overlooked Section 20 of Rule 14 of the
1997 Rules of Civil Procedure which provides that "the inclusion in a motion
to dismiss of other grounds aside from lack of jurisdiction over the person
of the defendant shall not be deemed a voluntary appearance."
Nonetheless, such omission does not aid HSBANKs case.
It must be noted that HSBANK initially filed a Motion for Extension of Time
to File Answer or Motion to Dismiss. 35 HSBANK already invoked the RTCs
jurisdiction over it by praying that its motion for extension of time to file
answer or a motion to dismiss be granted. The Court has held that the
filing of motions seeking affirmative relief, such as, to admit answer, for
additional time to file answer, for reconsideration of a default judgment,
and to lift order of default with motion for reconsideration, are considered
voluntary submission to the jurisdiction of the court. 36 Consequently,
HSBANKs expressed reservation in its Answer ad cautelam that it filed the
same "as a mere precaution against being declared in default, and without
prejudice to the Petition for Certiorari and/or Prohibition xxx now pending
before the Court of Appeals" 37 to assail the jurisdiction of the RTC over it is
of no moment. Having earlier invoked the jurisdiction of the RTC to secure
affirmative relief in its motion for additional time to file answer or motion to
dismiss, HSBANK, effectively submitted voluntarily to the jurisdiction of the
RTC and is thereby estopped from asserting otherwise, even before this
Court.
In contrast, the filing by HSBC TRUSTEE of a motion to dismiss cannot be
considered a voluntary submission to the jurisdiction of the RTC. It was a
conditional appearance, entered precisely to question the regularity of the
service of summons. It is settled that a party who makes a special
appearance in court challenging the jurisdiction of said court, e.g.,
invalidity of the service of summons, cannot be considered to have
submitted himself to the jurisdiction of the court. 38 HSBC TRUSTEE has
been consistent in all its pleadings in assailing the service of summons and
the jurisdiction of the RTC over it. Thus, HSBC TRUSTEE cannot be declared
in estoppel when it filed an Answer ad cautelam before the RTC while its
petition for certiorari was pending before the CA. Such answer did not
render the petition for certiorari before the CA moot and academic. The
Answer of HSBC TRUSTEE was only filed to prevent any declaration that it
had by its inaction waived the right to file responsive pleadings.
Admittedly, HSBC TRUSTEE is a foreign corporation, organized and existing
under the laws of the British Virgin Islands. For proper service of summons
on foreign corporations, Section 12 of Rule 14 of the Revised Rules of Court
provides:
SEC. 12. Service upon foreign private juridical entity. When the
defendant is a foreign private juridical entity which has transacted
business in the Philippines, service may be made on its resident
agent designated in accordance with law for that purpose, or if
there be no such agent, on the government official designated by
law to that effect, or on any of its officers or agents within the
Philippines.
In French Oil Mill Machinery Co., Inc. vs. Court of Appeals, 39 we had
occasion to rule that it is not enough to merely allege in the complaint that
a defendant foreign corporation is doing business. For purposes of the rule
on summons, the fact of doing business must first be "established by
appropriate allegations in the complaint" and the court in determining such
fact need not go beyond the allegations therein.40
The allegations in the amended complaint subject of the present cases did
not sufficiently show the fact of HSBC TRUSTEEs doing business in the
Philippines. It does not appear at all that HSBC TRUSTEE had performed
any act which would give the general public the impression that it had
been engaging, or intends to engage in its ordinary and usual business
undertakings in the country. Absent from the amended complaint is an
allegation that HSBC TRUSTEE had performed any act in the country that
would place it within the sphere of the courts jurisdiction.
We have held that a general allegation, standing alone, that a party is
doing business in the Philippines does not make it so; a conclusion of fact
or law cannot be derived from the unsubstantiated assertions of parties
notwithstanding the demands of convenience or dispatch in legal actions,
otherwise, the Court would be guilty of sorcery; extracting substance out of
nothingness.41
Besides, there is no allegation in the amended complaint that HSBANK is
the domestic agent of HSBC TRUSTEE to warrant service of summons upon
it. Thus, the summons tendered to the In House Counsel of HSBANK
(Makati Branch) for HSBC TRUSTEE was clearly improper.
There being no proper service of summons, the RTC cannot take
cognizance of the case against HSBC TRUSTEE for lack of jurisdiction over
it. Any proceeding undertaken by the RTC is therefore null and void. 42
8 | Page
Accordingly, the complaint against HSBC TRUSTEE should have been
dismissed for lack of jurisdiction over it.
WHEREFORE, the petition in G.R. No. 159590 is DENIED. The Decision of
the Court of Appeals, dated August 14, 2003, in CA-G.R. SP No. 75757
dismissing the petition for certiorari of the Hongkong and Shanghai
Banking Corporation Limited is AFFIRMED.
The petition in G.R. No. 159591 is GRANTED. The Decision of the Court of
Appeals, dated August 14, 2003, in CA-G.R. SP No. 75756 dismissing the
petition for certiorari of the HSBC International Trustee Limited is
REVERSED and SET ASIDE. The Regional Trial Court, Branch 44, Bacolod
City is declared without jurisdiction to take cognizance of Civil Case No. 01-
11372 against the HSBC International Trustee Limited, and all its orders
and issuances with respect to the latter are hereby ANNULLED and SET
ASIDE. The said Regional Trial Court is hereby ORDERED to DESIST from
maintaining further proceedings against the HSBC International Trustee
Limited in the case aforestated.
SO ORDERED.
G.R. No. 158253 March 2, 2007
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT
OF PUBLIC WORKS AND HIGHWAYS, COMMISSION ON AUDIT and
THE NATIONAL TREASURER, Petitioner,
vs.
CARLITO LACAP, doing business under the name and style CARWIN
CONSTRUCTION AND CONSTRUCTION SUPPLY, Respondent.
DECISION
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court assailing the Decision 1 dated April 28, 2003 of the
Court of Appeals (CA) in CA-G.R. CV No. 56345 which affirmed with
modification the Decision2 of the Regional Trial Court, Branch 41, San
Fernando, Pampanga (RTC) in Civil Case No. 10538, granting the complaint
for Specific Performance and Damages filed by Carlito Lacap (respondent)
against the Republic of the Philippines (petitioner).
The factual background of the case is as follows:
The District Engineer of Pampanga issued and duly published an "Invitation
To Bid" dated January 27, 1992. Respondent, doing business under the
name and style Carwin Construction and Construction Supply (Carwin
Construction), was pre-qualified together with two other contractors. Since
respondent submitted the lowest bid, he was awarded the contract for the
concreting of Sitio 5 Bahay Pare.3 On November 4, 1992, a Contract
Agreement was executed by respondent and petitioner. 4 On September 25,
1992, District Engineer Rafael S. Ponio issued a Notice to Proceed with the
concreting of Sitio 5 Bahay Pare.5 Accordingly, respondent undertook the
works, made advances for the purchase of the materials and payment for
labor costs.6
On October 29, 1992, personnel of the Office of the District Engineer of San
Fernando, Pampanga conducted a final inspection of the project and found
it 100% completed in accordance with the approved plans and
specifications. Accordingly, the Office of the District Engineer issued
Certificates of Final Inspection and Final Acceptance. 7
Thereafter, respondent sought to collect payment for the completed
project.8 The DPWH prepared the Disbursement Voucher in favor of
petitioner.9 However, the DPWH withheld payment from respondent after
the District Auditor of the Commission on Audit (COA) disapproved the final
release of funds on the ground that the contractors license of respondent
had expired at the time of the execution of the contract. The District
Engineer sought the opinion of the DPWH Legal Department on whether
the contracts of Carwin Construction for various Mount Pinatubo
9 | Page
rehabilitation projects were valid and effective although its contractors
license had already expired when the projects were contracted. 10
In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III of
the DPWH Legal Department opined that since Republic Act No. 4566 (R.A.
No. 4566), otherwise known as the Contractors License Law, does not
provide that a contract entered into after the license has expired is void
and there is no law which expressly prohibits or declares void such
contract, the contract is enforceable and payment may be paid, without
prejudice to any appropriate administrative liability action that may be
imposed on the contractor and the government officials or employees
concerned.11
In a Letter dated July 4, 1994, the District Engineer requested clarification
from the DPWH Legal Department on whether Carwin Construction should
be paid for works accomplished despite an expired contractors license at
the time the contracts were executed.12
In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III of the
Legal Department, recommended that payment should be made to Carwin
Construction, reiterating his earlier legal opinion. 13 Despite such
recommendation for payment, no payment was made to respondent.
Thus, on July 3, 1995, respondent filed the complaint for Specific
Performance and Damages against petitioner before the RTC.14
On September 14, 1995, petitioner, through the Office of the Solicitor
General (OSG), filed a Motion to Dismiss the complaint on the grounds that
the complaint states no cause of action and that the RTC had no
jurisdiction over the nature of the action since respondent did not appeal
to the COA the decision of the District Auditor to disapprove the claim. 15
Following the submission of respondents Opposition to Motion to Dismiss, 16
the RTC issued an Order dated March 11, 1996 denying the Motion to
Dismiss.17 The OSG filed a Motion for Reconsideration 18 but it was likewise
denied by the RTC in its Order dated May 23, 1996. 19
On August 5, 1996, the OSG filed its Answer invoking the defenses of non-
exhaustion of administrative remedies and the doctrine of non-suability of
the State.20
Following trial, the RTC rendered on February 19, 1997 its Decision, the
dispositive portion of which reads as follows:
WHEREFORE, in view of all the foregoing consideration, judgment is hereby
rendered in favor of the plaintiff and against the defendant, ordering the
latter, thru its District Engineer at Sindalan, San Fernando, Pampanga, to
pay the following:
a) P457,000.00 representing the contract for the concreting project of
Sitio 5 road, Bahay Pare, Candaba, Pampanga plus interest at 12% from
demand until fully paid; and
b) The costs of suit.
SO ORDERED.21
The RTC held that petitioner must be required to pay the contract price
since it has accepted the completed project and enjoyed the benefits
thereof; to hold otherwise would be to overrun the long standing and
consistent pronouncement against enriching oneself at the expense of
another.22
Dissatisfied, petitioner filed an appeal with the CA. 23 On April 28, 2003, the
CA rendered its Decision sustaining the Decision of the RTC. It held that
since the case involves the application of the principle of estoppel against
the government which is a purely legal question, then the principle of
exhaustion of administrative remedies does not apply; that by its actions
the government is estopped from questioning the validity and binding
effect of the Contract Agreement with the respondent; that denial of
payment to respondent on purely technical grounds after successful
completion of the project is not countenanced either by justice or equity.
The CA rendered herein the assailed Decision dated April 28, 2003, the
dispositive portion of which reads:
WHEREFORE, the decision of the lower court is hereby AFFIRMED with
modification in that the interest shall be six percent (6%) per annum
computed from June 21, 1995.
SO ORDERED.24
Hence, the present petition on the following ground:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT HAS
NO CAUSE OF ACTION AGAINST PETITIONER, CONSIDERING THAT:
(a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE REMEDIES; AND
10 | P a g e
(b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE PRIMARY
JURISDICTION TO RESOLVE RESPONDENTS MONEY CLAIM AGAINST THE
GOVERNMENT.25
Petitioner contends that respondents recourse to judicial action was
premature since the proper remedy was to appeal the District Auditors
disapproval of payment to the COA, pursuant to Section 48, Presidential
Decree No. 1445 (P.D. No. 1445), otherwise known as the Government
Auditing Code of the Philippines; that the COA has primary jurisdiction to
resolve respondents money claim against the government under Section
2(1),26 Article IX of the 1987 Constitution and Section 26 27 of P.D. No. 1445;
that non-observance of the doctrine of exhaustion of administrative
remedies and the principle of primary jurisdiction results in a lack of cause
of action.
Respondent, on the other hand, in his Memorandum 28 limited his discussion
to Civil Code provisions relating to human relations. He submits that equity
demands that he be paid for the work performed; otherwise, the mandate
of the Civil Code provisions relating to human relations would be rendered
nugatory if the State itself is allowed to ignore and circumvent the
standard of behavior it sets for its inhabitants.
The present petition is bereft of merit.
The general rule is that before a party may seek the intervention of the
court, he should first avail of all the means afforded him by administrative
processes.29 The issues which administrative agencies are authorized to
decide should not be summarily taken from them and submitted to a court
without first giving such administrative agency the opportunity to dispose
of the same after due deliberation.30
Corollary to the doctrine of exhaustion of administrative remedies is the
doctrine of primary jurisdiction; that is, courts cannot or will not determine
a controversy involving a question which is within the jurisdiction of the
administrative tribunal prior to the resolution of that question by the
administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience and
services of the administrative tribunal to determine technical and intricate
matters of fact.31
Nonetheless, the doctrine of exhaustion of administrative remedies and the
corollary doctrine of primary jurisdiction, which are based on sound public
policy and practical considerations, are not inflexible rules. There are many
accepted exceptions, such as: (a) where there is estoppel on the part of
the party invoking the doctrine; (b) where the challenged administrative
act is patently illegal, amounting to lack of jurisdiction; (c) where there is
unreasonable delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively small so as to
make the rule impractical and oppressive; (e) where the question involved
is purely legal and will ultimately have to be decided by the courts of
justice;32 (f) where judicial intervention is urgent; (g) when its application
may cause great and irreparable damage; (h) where the controverted acts
violate due process; (i) when the issue of non-exhaustion of administrative
remedies has been rendered moot;33 (j) when there is no other plain,
speedy and adequate remedy; (k) when strong public interest is involved;
and, (l) in quo warranto proceedings.34 Exceptions (c) and (e) are applicable
to the present case.
Notwithstanding the legal opinions of the DPWH Legal Department
rendered in 1993 and 1994 that payment to a contractor with an expired
contractors license is proper, respondent remained unpaid for the
completed work despite repeated demands. Clearly, there was
unreasonable delay and official inaction to the great prejudice of
respondent.
Furthermore, whether a contractor with an expired license at the time of
the execution of its contract is entitled to be paid for completed projects,
clearly is a pure question of law. It does not involve an examination of the
probative value of the evidence presented by the parties. There is a
question of law when the doubt or difference arises as to what the law is on
a certain state of facts, and not as to the truth or the falsehood of alleged
facts.35 Said question at best could be resolved only tentatively by the
administrative authorities. The final decision on the matter rests not with
them but with the courts of justice. Exhaustion of administrative remedies
does not apply, because nothing of an administrative nature is to be or can
be done.36 The issue does not require technical knowledge and experience
but one that would involve the interpretation and application of law.
Thus, while it is undisputed that the District Auditor of the COA
disapproved respondents claim against the Government, and, under
Section 4837 of P.D. No. 1445, the administrative remedy available to
respondent is an appeal of the denial of his claim by the District Auditor to
the COA itself, the Court holds that, in view of exceptions (c) and (e)
narrated above, the complaint for specific performance and damages was
not prematurely filed and within the jurisdiction of the RTC to resolve,
despite the failure to exhaust administrative remedies. As the Court aptly
stated in Rocamora v. RTC-Cebu (Branch VIII): 38
The plaintiffs were not supposed to hold their breath and wait until the
Commission on Audit and the Ministry of Public Highways had acted on the
claims for compensation for the lands appropriated by the government.
11 | P a g e
The road had been completed; the Pope had come and gone; but the Art. 22. Every person who through an act of performance by another, or
plaintiffs had yet to be paid for the properties taken from them. Given this any other means, acquires or comes into possession of something at the
official indifference, which apparently would continue indefinitely, the expense of the latter without just or legal ground, shall return the same to
private respondents had to act to assert and protect their interests. 39 him.

On the question of whether a contractor with an expired license is entitled
to be paid for completed projects, Section 35 of R.A. No. 4566 explicitly
provides:
SEC. 35. Penalties. Any contractor who, for a price, commission, fee or
wage, submits or attempts to submit a bid to construct, or contracts to or
undertakes to construct, or assumes charge in a supervisory capacity of a
construction work within the purview of this Act, without first securing a
license to engage in the business of contracting in this country; or who
shall present or file the license certificate of another, give false evidence of
any kind to the Board, or any member thereof in obtaining a certificate or
license, impersonate another, or use an expired or revoked certificate or
license, shall be deemed guilty of misdemeanor, and shall, upon
conviction, be sentenced to pay a fine of not less than five hundred pesos
but not more than five thousand pesos. (Emphasis supplied)
The "plain meaning rule" or verba legis in statutory construction is that if
the statute is clear, plain and free from ambiguity, it must be given its
literal meaning and applied without interpretation. 40 This rule derived from
the maxim Index animi sermo est (speech is the index of intention) rests
on the valid presumption that the words employed by the legislature in a
statute correctly express its intention or will and preclude the court from
construing it differently. The legislature is presumed to know the meaning
of the words, to have used words advisedly, and to have expressed its
intent by use of such words as are found in the statute. 41 Verba legis non
est recedendum, or from the words of a statute there should be no
departure.42
This article 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, x x x designed to indicate certain norms that spring from the
fountain of good conscience, x x x guides 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." 43 The rules
thereon apply equally well to the Government. 44 Since respondent had
rendered services to the full satisfaction and acceptance by petitioner,
then the former should be compensated for them. To allow petitioner to
acquire the finished project at no cost would undoubtedly constitute unjust
enrichment for the petitioner to the prejudice of respondent. Such unjust
enrichment is not allowed by law.
WHEREFORE, the present petition is DENIED for lack of merit. The assailed
Decision of the Court of Appeals dated April 28, 2003 in CA-G.R. CV No.
56345 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.

The wordings of R.A. No. 4566 are clear. It does not declare, expressly or
impliedly, as void contracts entered into by a contractor whose license had
already expired. Nonetheless, such contractor is liable for payment of the
fine prescribed therein. Thus, respondent should be paid for the projects he
completed. Such payment, however, is without prejudice to the payment of
the fine prescribed under the law.

Besides, Article 22 of the Civil Code which embodies the maxim Nemo ex
alterius incommode debet lecupletari (no man ought to be made rich out of
anothers injury) states: G.R. No. 135306 January 28, 2003

12 | P a g e
MVRS PUBLICATIONS, INC., MARS C. LACONSAY, MYLA C. AGUJA
and AGUSTINO G. BINEGAS, JR., petitioners,
vs.
ISLAMIC DA'WAH COUNCIL OF THE PHILIPPINES, INC.,
ABDULRAHMAN R.T. LINZAG, IBRAHIM F.P. ARCILLA, ABDUL RASHID
DE GUZMAN, AL-FARED DA SILVA and IBRAHIM B.A. JUNIO,
respondents.
BELLOSILLO, J.:
I may utterly detest what you write, but I shall fight to the death to
make it possible for you to continue writing it.
Voltaire
VOLTAIRE'S PONTIFICAL VERSE bestirs once again the basic liberties to free
speech and free press liberties that belong as well, if not more, to those
who question, who do not conform, who differ. For the ultimate good which
we all strive to achieve for ourselves and our posterity can better be
reached by a free exchange of ideas, where the best test of truth is the
power of the thought to get itself accepted in the competition of the free
market not just the ideas we desire, but including those thoughts we
despise.1
ISLAMIC DA'WAH COUNCIL OF THE PHILIPPINES, INC., a local federation of
more than seventy (70) Muslim religious organizations, and individual
Muslims ABDULRAHMAN R.T. LINZAG, IBRAHIM F.P. ARCILLA, ABDUL RASHID
DE GUZMAN, AL-FARED DA SILVA and IBRAHIM B.A. JUNIO, filed in the
Regional Trial Court of Manila a complaint for damages in their own behalf
and as a class suit in behalf of the Muslim members nationwide against
MVRS PUBLICATIONS, INC., MARS C. LACONSAY, MYLA C. AGUJA and
AGUSTINO G. BINEGAS, JR., arising from an article published in the 1
August 1992 issue of Bulgar, a daily tabloid. The article reads:
"ALAM BA NINYO?
Na ang mga baboy at kahit anong uri ng hayop sa Mindanao ay
hindi kinakain ng mga Muslim?
Para sa kanila ang mga ito ay isang sagradong bagay. Hindi nila ito
kailangang kainin kahit na sila pa ay magutom at mawalan ng
ulam sa tuwing sila ay kakain. Ginagawa nila itong Diyos at
sinasamba pa nila ito sa tuwing araw ng kanilang pangingilin
lalung-lalo na sa araw na tinatawag nilang 'Ramadan'."
The complaint alleged that the libelous statement was insulting and
damaging to the Muslims; that these words alluding to the pig as the God
of the Muslims was not only published out of sheer ignorance but with
intent to hurt the feelings, cast insult and disparage the Muslims and Islam,
as a religion in this country, in violation of law, public policy, good morals
and human relations; that on account of these libelous words Bulgar
insulted not only the Muslims in the Philippines but the entire Muslim
world, especially every Muslim individual in non-Muslim countries.
MVRS PUBLICATIONS, INC., and AGUSTINO G. BINEGAS, JR., in their
defense, contended that the article did not mention respondents as the
object of the article and therefore were not entitled to damages; and, that
the article was merely an expression of belief or opinion and was published
without malice nor intention to cause damage, prejudice or injury to
Muslims.2
On 30 June 1995 the trial court dismissed the complaint holding that the
plaintiffs failed to establish their cause of action since the persons
allegedly defamed by the article were not specifically identified
It must be noted that the persons allegedly defamed, the herein
plaintiffs, were not identified with specificity. The subject article
was directed at the Muslims without mentioning or identifying the
herein plaintiffs x x x. It is thus apparent that the alleged libelous
article refers to the larger collectivity of Muslims for which the
readers of the libel could not readily identify the personalities of
the persons defamed. Hence, it is difficult for an individual Muslim
member to prove that the defamatory remarks apply to him. The
evidence presented in this case failed to convince this court that,
indeed, the defamatory remarks really applied to the herein
plaintiffs.3
On 27 August 1998 the Court of Appeals reversed the decision of the trial
court. It opined that it was "clear from the disputed article that the
defamation was directed to all adherents of the Islamic faith. It stated that
pigs were sacred and idolized as god by members of the Muslim religion.
This libelous imputation undeniably applied to the plaintiff-appellants who
are Muslims sharing the same religious beliefs." It added that the suit for
damages was a "class suit" and that ISLAMIC DA'WAH COUNCIL OF THE
PHILIPPINES, INC.'s religious status as a Muslim umbrella organization gave
it the requisite personality to sue and protect the interests of all Muslims. 4
Hence, the instant petition for review assailing the findings of the appellate
court (a) on the existence of the elements of libel, (b) the right of
respondents to institute the class suit, and, (c) the liability of petitioners for
moral damages, exemplary damages, attorney's fees and costs of suit.
13 | P a g e
Defamation, which includes libel and slander, means the offense of injuring
a person's character, fame or reputation through false and malicious
statements.5 It is that which tends to injure reputation or to diminish the
esteem, respect, good will or confidence in the plaintiff or to excite
derogatory feelings or opinions about the plaintiff. 6 It is the publication of
anything which is injurious to the good name or reputation of another or
tends to bring him into disrepute. 7 Defamation is an invasion of a relational
interest since it involves the opinion which others in the community may
have, or tend to have, of the plaintiff.8
It must be stressed that words which are merely insulting are not
actionable as libel or slander per se, and mere words of general abuse
however opprobrious, ill-natured, or vexatious, whether written or spoken,
do not constitute a basis for an action for defamation in the absence of an
allegation for special damages.9 The fact that the language is offensive to
the plaintiff does not make it actionable by itself. 10
Declarations made about a large class of people cannot be interpreted to
advert to an identified or identifiable individual. Absent circumstances
specifically pointing or alluding to a particular member of a class, no
member of such class has a right of action 11 without at all impairing the
equally demanding right of free speech and expression, as well as of the
press, under the Bill of Rights.12 Thus, in Newsweek, Inc. v. Intermediate
Appellate Court,13 we dismissed a complaint for libel against Newsweek,
Inc., on the ground that private respondents failed to state a cause of
action since they made no allegation in the complaint that anything
contained in the article complained of specifically referred to any of them.
Private respondents, incorporated associations of sugarcane planters in
Negros Occidental claiming to have 8,500 members and several individual
members, filed a class action suit for damages in behalf of all sugarcane
planters in Negros Occidental. The complaint filed in the Court of First
Instance of Bacolod City alleged that Newsweek, Inc., committed libel
against them by the publication of the article "Island of Fear" in its weekly
newsmagazine allegedly depicting Negros Province as a place dominated
by wealthy landowners and sugar planters who not only exploited the
impoverished and underpaid sugarcane workers but also brutalized and
killed them with impunity. Private respondents alleged that the article
showed a deliberate and malicious use of falsehood, slanted presentation
and/or misrepresentation of facts intended to put the sugarcane planters in
a bad light, expose them to public ridicule, discredit and humiliation in the
Philippines and abroad, and make them the objects of hatred, contempt
and hostility of their agricultural workers and of the public in general. We
ratiocinated
x x x where the defamation is alleged to have been directed at a
group or class, it is essential that the statement must be so
sweeping or all-embracing as to apply to every individual in that
group or class, or sufficiently specific so that each individual in the
class or group can prove that the defamatory statement
specifically pointed to him, so that he can bring the action
separately, if need be x x x x The case at bar is not a class suit. It
is not a case where one or more may sue for the benefit of all, or
where the representation of class interest affected by the judgment
or decree is indispensable to make each member of the class an
actual party. We have here a case where each of the plaintiffs has a
separate and distinct reputation in the community. They do not
have a common or general interest in the subject matter of the
controversy.
In the present case, there was no fairly identifiable person who was
allegedly injured by the Bulgar article. Since the persons allegedly
defamed could not be identifiable, private respondents have no individual
causes of action; hence, they cannot sue for a class allegedly disparaged.
Private respondents must have a cause of action in common with the class
to which they belong to in order for the case to prosper.
An individual Muslim has a reputation that is personal, separate and
distinct in the community. Each Muslim, as part of the larger Muslim
community in the Philippines of over five (5) million people, belongs to a
different trade and profession; each has a varying interest and a divergent
political and religious view some may be conservative, others liberal. A
Muslim may find the article dishonorable, even blasphemous; others may
find it as an opportunity to strengthen their faith and educate the non-
believers and the "infidels." There is no injury to the reputation of the
individual Muslims who constitute this community that can give rise to an
action for group libel. Each reputation is personal in character to every
person. Together, the Muslims do not have a single common reputation
that will give them a common or general interest in the subject matter of
the controversy.
In Arcand v. The Evening Call Publishing Company,14 the United States
Court of Appeals held that one guiding principle of group libel is that
defamation of a large group does not give rise to a cause of action on the
part of an individual unless it can be shown that he is the target of the
defamatory matter.
The rule on libel has been restrictive. In an American case, 15 a person had
allegedly committed libel against all persons of the Jewish religion. The
Court held that there could be no libel against an extensive community in
common law. In an English case, where libel consisted of allegations of
immorality in a Catholic nunnery, the Court considered that if the libel were
on the whole Roman Catholic Church generally, then the defendant must
be absolved.16 With regard to the largest sectors in society, including
religious groups, it may be generally concluded that no criminal action at
the behest of the state, or civil action on behalf of the individual, will lie.
14 | P a g e
In another case, the plaintiffs claimed that all Muslims, numbering more
than 600 million, were defamed by the airing of a national television
broadcast of a film depicting the public execution of a Saudi Arabian
princess accused of adultery, and alleging that such film was "insulting and
defamatory" to the Islamic religion.17 The United States District Court of the
Northern District of California concluded that the plaintiffs' prayer for $20
Billion in damages arising from "an international conspiracy to insult,
ridicule, discredit and abuse followers of Islam throughout the world, Arabs
and the Kingdom of Saudi Arabia" bordered on the "frivolous," ruling that
the plaintiffs had failed to demonstrate an actionable claim for defamation.
The California Court stressed that the aim of the law on defamation was to
protect individuals; a group may be sufficiently large that a statement
concerning it could not defame individual group members. 18
Philip Wittenberg, in his book "Dangerous Words: A Guide to the Law of
Libel,"19 discusses the inappropriateness of any action for tortious libel
involving large groups, and provides a succinct illustration:
There are groupings which may be finite enough so that a
description of the body is a description of the members. Here the
problem is merely one of evaluation. Is the description of the
member implicit in the description of the body, or is there a
possibility that a description of the body may consist of a variety of
persons, those included within the charge, and those excluded
from it?
A general charge that the lawyers in the city are shysters would
obviously not be a charge that all of the lawyers were shysters. A
charge that the lawyers in a local point in a great city, such as
Times Square in New York City, were shysters would obviously not
include all of the lawyers who practiced in that district; but a
statement that all of the lawyers who practiced in a particular
building in that district were shysters would be a specific charge,
so that any lawyer having an office within that building could sue.
If the group is a very large one, then the alleged libelous statement is
considered to have no application to anyone in particular, since one might
as well defame all mankind. Not only does the group as such have no
action; the plaintiff does not establish any personal reference to himself. 20
At present, modern societal groups are both numerous and complex. The
same principle follows with these groups: as the size of these groups
increases, the chances for members of such groups to recover damages on
tortious libel become elusive. This principle is said to embrace two (2)
important public policies: first, where the group referred to is large, the
courts presume that no reasonable reader would take the statements as so
literally applying to each individual member; and second, the limitation on
liability would satisfactorily safeguard freedom of speech and expression,
as well as of the press, effecting a sound compromise between the
conflicting fundamental interests involved in libel cases. 21
In the instant case, the Muslim community is too vast as to readily
ascertain who among the Muslims were particularly defamed. The size of
the group renders the reference as indeterminate and generic as a similar
attack on Catholics, Protestants, Buddhists or Mormons would do. The word
"Muslim" is descriptive of those who are believers of Islam, a religion
divided into varying sects, such as the Sunnites, the Shiites, the Kharijites,
the Sufis and others based upon political and theological distinctions.
"Muslim" is a name which describes only a general segment of the
Philippine population, comprising a heterogeneous body whose
construction is not so well defined as to render it impossible for any
representative identification.
The Christian religion in the Philippines is likewise divided into different
sects: Catholic, Baptist, Episcopalian, Presbyterian, Lutheran, and other
groups the essence of which may lie in an inspired charlatan, whose
temple may be a corner house in the fringes of the countryside. As with the
Christian religion, so it is with other religions that represent the nation's
culturally diverse people and minister to each one's spiritual needs. The
Muslim population may be divided into smaller groups with varying
agenda, from the prayerful conservative to the passionately radical. These
divisions in the Muslim population may still be too large and ambiguous to
provide a reasonable inference to any personality who can bring a case in
an action for libel.
The foregoing are in essence the same view scholarly expressed by Mr.
Justice Reynato S. Puno in the course of the deliberations in this case. We
extensively reproduce hereunder his comprehensive and penetrating
discussion on group libel
Defamation is made up of the twin torts of libel and slander the
one being, in general, written, while the other in general is oral. In
either form, defamation is an invasion of the interest in reputation
and good name. This is a "relational interest" since it involves the
opinion others in the community may have, or tend to have of the
plaintiff.
The law of defamation protects the interest in reputation the
interest in acquiring, retaining and enjoying one's reputation as
good as one's character and conduct warrant. The mere fact that
the plaintiff's feelings and sensibilities have been offended is not
enough to create a cause of action for defamation. Defamation
requires that something be communicated to a third person that
may affect the opinion others may have of the plaintiff. The
unprivileged communication must be shown of a statement that
15 | P a g e
would tend to hurt plaintiff's reputation, to impair plaintiff's
standing in the community.
Although the gist of an action for defamation is an injury to
reputation, the focus of a defamation action is upon the allegedly
defamatory statement itself and its predictable effect upon third
persons. A statement is ordinarily considered defamatory if it
"tend[s] to expose one to public hatred, shame, obloquy,
contumely, odium, contempt, ridicule, aversion, ostracism,
degradation or disgracex x x." The Restatement of Torts defines a
defamatory statement as one that "tends to so harm the
reputation of another as to lower him in the estimation of the
community or to deter third persons from associating or dealing
with him."
Consequently as a prerequisite to recovery, it is necessary for the
plaintiff to prove as part of his prima facie case that the defendant
(1) published a statement that was (2) defamatory (3) of and
concerning the plaintiff.
The rule in libel is that the action must be brought by the person
against whom the defamatory charge has been made. In the
American jurisdiction, no action lies by a third person for damages
suffered by reason of defamation of another person, even though
the plaintiff suffers some injury therefrom. For recovery in
defamation cases, it is necessary that the publication be "of and
concerning the plaintiff." Even when a publication may be clearly
defamatory as to somebody, if the words have no personal
application to the plaintiff, they are not actionable by him. If no one
is identified, there can be no libel because no one's reputation has
been injured x x x x
In fine, in order for one to maintain an action for an alleged
defamatory statement, it must appear that the plaintiff is the
person with reference to whom the statement was made. This
principle is of vital importance in cases where a group or class is
defamed since, usually, the larger the collective, the more difficult
it is for an individual member to show that he was the person at
whom the defamation was directed.
If the defamatory statements were directed at a small, restricted
group of persons, they applied to any member of the group, and an
individual member could maintain an action for defamation. When
the defamatory language was used toward a small group or class,
including every member, it has been held that the defamatory
language referred to each member so that each could maintain an
action. This small group or class may be a jury, persons engaged in
certain businesses, professions or employments, a restricted
subdivision of a particular class, a society, a football team, a
family, small groups of union officials, a board of public officers, or
engineers of a particular company.
In contrast, if defamatory words are used broadly in respect to a
large class or group of persons, and there is nothing that points, or
by proper colloquium or innuendo can be made to apply, to a
particular member of the class or group, no member has a right of
action for libel or slander. Where the defamatory matter had no
special, personal application and was so general that no individual
damages could be presumed, and where the class referred to was
so numerous that great vexation and oppression might grow out of
the multiplicity of suits, no private action could be maintained. This
rule has been applied to defamatory publications concerning
groups or classes of persons engaged in a particular business,
profession or employment, directed at associations or groups of
association officials, and to those directed at miscellaneous groups
or classes of persons.
Distinguishing a small group which if defamed entitles all its
members to sue from a large group which if defamed entitles no
one to sue is not always so simple. Some authorities have noted
that in cases permitting recovery, the group generally has twenty
five (25) or fewer members. However, there is usually no
articulated limit on size. Suits have been permitted by members of
fairly large groups when some distinguishing characteristic of the
individual or group increases the likelihood that the statement
could be interpreted to apply individually. For example, a single
player on the 60 to 70 man Oklahoma University football team was
permitted to sue when a writer accused the entire team of taking
amphetamines to "hop up" its performance; the individual was a
fullback, i.e., a significant position on the team and had played in
all but two of the team's games.
A prime consideration, therefore, is the public perception of the
size of the group and whether a statement will be interpreted to
refer to every member. The more organized and cohesive a group,
the easier it is to tar all its members with the same brush and the
more likely a court will permit a suit from an individual even if the
group includes more than twenty five (25) members. At some
point, however, increasing size may be seen to dilute the harm to
individuals and any resulting injury will fall beneath the threshold
for a viable lawsuit.
x x x x There are many other groupings of men than those that are
contained within the foregoing group classifications. There are all
the religions of the world, there are all the political and ideological
beliefs; there are the many colors of the human race. Group
16 | P a g e
 defamation has been a fertile and dangerous weapon of attack on
various racial, religious and political minorities. Some states,
therefore, have passed statutes to prevent concerted efforts to
harass minority groups in the United States by making it a crime to
circulate insidious rumors against racial and religious groups. Thus
far, any civil remedy for such broadside defamation has been
lacking.
There have been numerous attempts by individual members to
seek redress in the courts for libel on these groups, but very few
have succeeded because it felt that the groups are too large and
poorly defined to support a finding that the plaintiff was singled out
for personal attack x x x x (citations omitted).
Our conclusion therefore is that the statements published by petitioners in
the instant case did not specifically identify nor refer to any particular
individuals who were purportedly the subject of the alleged libelous
publication. Respondents can scarcely claim to having been singled out for
social censure pointedly resulting in damages.
A contrary view is expressed that what is involved in the present case is an
intentional tortious act causing mental distress and not an action for libel.
That opinion invokes Chaplinsky v. New Hampshire22 where the U.S.
Supreme Court held that words heaping extreme profanity, intended
merely to incite hostility, hatred or violence, have no social value and do
not enjoy constitutional protection; and Beauharnais v. Illinois23 where it
was also ruled that hate speech which denigrates a group of persons
identified by their religion, race or ethnic origin defames that group and
the law may validly prohibit such speech on the same ground as
defamation of an individual.
We do not agree to the contrary view articulated in the immediately
preceding paragraph. Primarily, an "emotional distress" tort action is
personal in nature, i.e., it is a civil action filed by an individual24 to assuage
the injuries to his emotional tranquility due to personal attacks on his
character. It has no application in the instant case since no particular
individual was identified in the disputed article of Bulgar. Also, the
purported damage caused by the article, assuming there was any, falls
under the principle of relational harm which includes harm to social
relationships in the community in the form of defamation; as distinguished
from the principle of reactive harm which includes injuries to individual
emotional tranquility in the form of an infliction of emotional distress. In
their complaint, respondents clearly asserted an alleged harm to the
standing of Muslims in the community, especially to their activities in
propagating their faith in Metro Manila and in other non-Muslim
communities in the country.25 It is thus beyond cavil that the present case
falls within the application of the relational harm principle of tort actions
for defamation, rather than the reactive harm principle on which the
concept of emotional distress properly belongs.
Moreover, under the Second Restatement of the Law, to recover for the
intentional infliction of emotional distress the plaintiff must show that: (a)
The conduct of the defendant was intentional or in reckless disregard of
the plaintiff; (b) The conduct was extreme and outrageous; (c) There was a
causal connection between the defendant's conduct and the plaintiff's
mental distress; and, (d) The plaintiff's mental distress was extreme and
severe.26
"Extreme and outrageous conduct" means conduct that is so outrageous in
character, and so extreme in degree, as to go beyond all possible bounds
of decency, and to be regarded as atrocious, and utterly intolerable in
civilized society. The defendant's actions must have been so terrifying as
naturally to humiliate, embarrass or frighten the plaintiff. 27 Generally,
conduct will be found to be actionable where the recitation of the facts to
an average member of the community would arouse his resentment
against the actor, and lead him or her to exclaim, "Outrageous!" as his or
her reaction.28
"Emotional distress" means any highly unpleasant mental reaction such as
extreme grief, shame, humiliation, embarrassment, anger, disappointment,
worry, nausea, mental suffering and anguish, shock, fright, horror, and
chagrin.29 "Severe emotional distress," in some jurisdictions, refers to any
type of severe and disabling emotional or mental condition which may be
generally recognized and diagnosed by professionals trained to do so,
including posttraumatic stress disorder, neurosis, psychosis, chronic
depression, or phobia.30 The plaintiff is required to show, among other
things, that he or she has suffered emotional distress so severe that no
reasonable person could be expected to endure it; severity of the distress
is an element of the cause of action, not simply a matter of damages.31
Any party seeking recovery for mental anguish must prove more than mere
worry, anxiety, vexation, embarrassment, or anger. Liability does not arise
from mere insults, indignities, threats, annoyances, petty expressions, or
other trivialities. In determining whether the tort of outrage had been
committed, a plaintiff is necessarily expected and required to be hardened
to a certain amount of criticism, rough language, and to occasional acts
and words that are definitely inconsiderate and unkind; the mere fact that
the actor knows that the other will regard the conduct as insulting, or will
have his feelings hurt, is not enough.32
Hustler Magazine v. Falwell33 illustrates the test case of a civil action for
damages on intentional infliction of emotional distress. A parody appeared
in Hustler magazine featuring the American fundamentalist preacher and
evangelist Reverend Jerry Falwell depicting him in an inebriated state
having an incestuous, sexual liaison with his mother in an outhouse. Falwell
17 | P a g e
sued Hustler and its publisher Larry Flynt for damages. The United States
District Court for the Western District of Virginia ruled that the parody was
not libelous, because no reasonable reader would have understood it as a
factual assertion that Falwell engaged in the act described. The jury,
however, awarded $200,000 in damages on a separate count of
"intentional infliction of emotional distress," a cause of action that did not
require a false statement of fact to be made. The United States Supreme
Court in a unanimous decision overturned the jury verdict of the Virginia
Court and held that Reverend Falwell may not recover for intentional
infliction of emotional distress. It was argued that the material might be
deemed outrageous and may have been intended to cause severe
emotional distress, but these circumstances were not sufficient to
overcome the free speech rights guaranteed under the First Amendment of
the United States Constitution. Simply stated, an intentional tort causing
emotional distress must necessarily give way to the fundamental right to
free speech.
It must be observed that although Falwell was regarded by the U.S. High
Court as a "public figure," he was an individual particularly singled out or
identified in the parody appearing on Hustler magazine. Also, the
emotional distress allegedly suffered by Reverend Falwell involved a
reactive interest an emotional response to the parody which supposedly
injured his psychological well-being.
Verily, our position is clear that the conduct of petitioners was not extreme
or outrageous. Neither was the emotional distress allegedly suffered by
respondents so severe that no reasonable person could be expected to
endure it. There is no evidence on record that points to that result.
Professor William Prosser, views tort actions on intentional infliction of
emotional distress in this manner34
There is virtually unanimous agreement that such ordinary
defendants are not liable for mere insult, indignity, annoyance, or
even threats, where the case is lacking in other circumstances of
aggravation. The reasons are not far to seek. Our manners, and
with them our law, have not yet progressed to the point where we
are able to afford a remedy in the form of tort damages for all
intended mental disturbance. Liability of course cannot be
extended to every trivial indignity x x x x The plaintiff must
necessarily be expected and required to be hardened to a certain
amount of rough language, and to acts that are definitely
inconsiderate and unkind x x x The plaintiff cannot recover merely
because of hurt feelings.
Professor Calvert Magruder reinforces Prosser with this succinct
observation, viz:35
There is no occasion for the law to intervene in every case where
someone's feelings are hurt. There must still be freedom to express
an unflattering opinion, and some safety valve must be left through
which irascible tempers may blow off relatively harmless steam.
Thus, it is evident that even American courts are reluctant to adopt a rule
of recovery for emotional harm that would "open up a wide vista of
litigation in the field of bad manners," an area in which a "toughening of
the mental hide" was thought to be a more appropriate remedy. 36 Perhaps
of greater concern were the questions of causation, proof, and the ability to
accurately assess damages for emotional harm, each of which continues to
concern courts today.37
In this connection, the doctrines in Chaplinsky and Beauharnais had largely
been superseded by subsequent First Amendment doctrines. Back in
simpler times in the history of free expression the Supreme Court appeared
to espouse a theory, known as the Two-Class Theory, that treated certain
types of expression as taboo forms of speech, beneath the dignity of the
First Amendment. The most celebrated statement of this view was
expressed in Chaplinsky:
There are certain well-defined and narrowly limited classes of
speech, the prevention and punishment of which have never been
thought to raise any Constitutional problem. These include the
lewd and obscene, the profane, the libelous, and the insulting or
"fighting" words those which by their very utterance inflict injury
or tend to incite an immediate breach of the peace. It has been
well observed that such utterances are no essential part of any
exposition of ideas, and are of such slight social value as a step to
truth that any benefit that may be derived from them is clearly
outweighed by the social interest in order and morality.
Today, however, the theory is no longer viable; modern First Amendment
principles have passed it by. American courts no longer accept the view
that speech may be proscribed merely because it is "lewd," "profane,"
"insulting" or otherwise vulgar or offensive. 38 Cohen v. California39 is
illustrative: Paul Robert Cohen wore a jacket bearing the words "Fuck the
Draft" in a Los Angeles courthouse in April 1968, which caused his eventual
arrest. Cohen was convicted for violating a California statute prohibiting
any person from "disturb[ing] the peace x x x by offensive conduct." The
U.S. Supreme Court conceded that Cohen's expletive contained in his
jacket was "vulgar," but it concluded that his speech was nonetheless
protected by the right to free speech. It was neither considered an
"incitement" to illegal action nor "obscenity." It did not constitute insulting
or "fighting" words for it had not been directed at a person who was likely
to retaliate or at someone who could not avoid the message. In other
words, no one was present in the Los Angeles courthouse who would have
18 | P a g e
regarded Cohen's speech as a direct personal insult, nor was there any
danger of reactive violence against him.
No specific individual was targeted in the allegedly defamatory words
printed on Cohen's jacket. The conviction could only be justified by
California's desire to exercise the broad power in preserving the cleanliness
of discourse in the public sphere, which the U.S. Supreme Court refused to
grant to the State, holding that no objective distinctions can be made
between vulgar and nonvulgar speech, and that the emotive elements of
speech are just as essential in the exercise of this right as the purely
cognitive. As Mr. Justice Harlan so eloquently wrote: "[O]ne man's vulgarity
is another man's lyric x x x words are often chosen as much for their
emotive as their cognitive force."40 With Cohen, the U.S. Supreme Court
finally laid the Constitutional foundation for judicial protection of
provocative and potentially offensive speech.
Similarly, libelous speech is no longer outside the First Amendment
protection. Only one small piece of the Two-Class Theory in Chaplinsky
survives U.S. courts continue to treat "obscene" speech as not within the
protection of the First Amendment at all. With respect to the "fighting
words" doctrine, while it remains alive it was modified by the current
rigorous clear and present danger test. 41 Thus, in Cohen the U.S. Supreme
Court in applying the test held that there was no showing that Cohen's
jacket bearing the words "Fuck the Draft" had threatened to provoke
imminent violence; and that protecting the sensibilities of onlookers was
not sufficiently compelling interest to restrain Cohen's speech.
Beauharnais, which closely followed the Chaplinsky doctrine, suffered the
same fate as Chaplinsky. Indeed, when Beauharnais was decided in 1952,
the Two-Class Theory was still flourishing. While concededly the U.S. High
Tribunal did not formally abandon Beauharnais, the seminal shifts in U.S.
constitutional jurisprudence substantially undercut Beauharnais and
seriously undermined what is left of its vitality as a precedent. Among the
cases that dealt a crushing impact on Beauharnais and rendered it almost
certainly a dead letter case law are Brandenburg v. Ohio,42 and, again,
Cohen v. California.43 These decisions recognize a much narrower set of
permissible grounds for restricting speech than did Beauharnais.44
In Brandenburg, appellant who was a leader of the Ku Klux Klan was
convicted under the Ohio Criminal Syndicalism Statute for advocating the
necessity, duty and propriety of crime, sabotage, violence, or unlawful
methods of terrorism as a means of accomplishing industrial or political
reforms; and for voluntarily assembling with a group formed to teach or
advocate the doctrines of criminal syndicalism. Appellant challenged the
statute and was sustained by the U.S. Supreme Court, holding that the
advocacy of illegal action becomes punishable only if such advocacy is
directed to inciting or producing imminent lawless action and is likely to
incite or produce such action.45 Except in unusual instances, Brandenburg
protects the advocacy of lawlessness as long as such speech is not
translated into action.
The importance of the Brandenburg ruling cannot be overemphasized. Prof.
Smolla affirmed that "Brandenburg must be understood as overruling
Beauharnais and eliminating the possibility of treating group libel under
the same First Amendment standards as individual libel." 46 It may well be
considered as one of the lynchpins of the modern doctrine of free speech,
which seeks to give special protection to politically relevant speech.
In any case, respondents' lack of cause of action cannot be cured by the
filing of a class suit. As correctly pointed out by Mr. Justice Jose C. Vitug
during the deliberations, "an element of a class suit is the adequacy of
representation. In determining the question of fair and adequate
representation of members of a class, the court must consider (a) whether
the interest of the named party is coextensive with the interest of the other
members of the class; (b) the proportion of those made parties as it so
bears to the total membership of the class; and, (c) any other factor
bearing on the ability of the named party to speak for the rest of the
class.47
The rules require that courts must make sure that the persons intervening
should be sufficiently numerous to fully protect the interests of all
concerned. In the present controversy, Islamic Da'wah Council of the
Philippines, Inc., seeks in effect to assert the interests not only of the
Muslims in the Philippines but of the whole Muslim world as well. Private
respondents obviously lack the sufficiency of numbers to represent such a
global group; neither have they been able to demonstrate the identity of
their interests with those they seek to represent. Unless it can be shown
that there can be a safe guaranty that those absent will be adequately
represented by those present, a class suit, given its magnitude in this
instance, would be unavailing."48
Likewise on the matter of damages, we agree that "moral damages may be
recovered only if the plaintiff is able to satisfactorily prove the existence of
the factual basis for the damages and its causal connection with the acts
complained of,49 and so it must be, as moral damages although incapable
of pecuniary estimation are designed not to impose a penalty but to
compensate for injury sustained and actual damages suffered. 50 Exemplary
damages, on the other hand, may only be awarded if claimant is able to
establish his right to moral, temperate, liquidated or compensatory
damages.51 Unfortunately, neither of the requirements to sustain an award
for either of these damages would appear to have been adequately
established by respondents."
In a pluralistic society like the Philippines where misinformation about
another individual's religion is as commonplace as self-appointed critics of
government, it would be more appropriate to respect the fair criticism of
19 | P a g e
religious principles, including those which may be outrageously appalling,
immensely erroneous, or those couched as fairly informative comments.
The greater danger in our society is the possibility that it may encourage
the frequency of suits among religious fundamentalists, whether Christian,
Muslim, Hindu, Buddhist, Jewish, or others. This would unnecessarily make
the civil courts a battleground to assert their spiritual ideas, and advance
their respective religious agenda.
It need not be stressed that this Court has no power to determine which is
proper religious conduct or belief; neither does it have the authority to rule
on the merits of one religion over another, nor declare which belief to
uphold or cast asunder, for the validity of religious beliefs or values are
outside the sphere of the judiciary. Such matters are better left for the
religious authorities to address what is rightfully within their doctrine and
realm of influence. Courts must be viewpoint-neutral when it comes to
religious matters if only to affirm the neutrality principle of free speech
rights under modern jurisprudence where "[a]ll ideas are treated equal in
the eyes of the First Amendment even those ideas that are universally
condemned and run counter to constitutional principles." 52 Under the right
to free speech, "there is no such thing as a false idea. However pernicious
an opinion may seem, we depend for its correction not on the conscience
of judges and juries but on the competition of other ideas." 53 Denying
certiorari and affirming the appellate court decision would surely create a
chilling effect on the constitutional guarantees of freedom of speech, of
expression, and of the press.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court
of Appeals dated 27 August 1998 is REVERSED and SET ASIDE, and the
Decision of the RTC-Br. 4, Manila, dismissing the complaint for lack of merit,
is REINSTATED and AFFIRMED. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 156841. June 30, 2005]
GF EQUITY, INC., petitioner, vs. ARTURO VALENZONA, respondent.
DECISION
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
20 | P a g e
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 3rd 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 caveat notwithstanding, 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.[4] (Emphasis supplied)
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.
21 | P a g e
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
said to be immoral, unlawful, or contrary 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 well-versed 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-
22 | P a g e
termination dependent exclusively upon the uncontrolled 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 the abuse 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 pre-termination, 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
23 | P a g e
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
24 | P a g e
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.
G.R. No. 149241 August 24, 2009
DART PHILIPPINES, INC., Petitioner,
vs.
SPOUSES FRANCISCO and ERLINDA CALOGCOG, Respondents.
NACHURA, J.:
Petitioner assails in this Rule 45 petition the February 28, 2001 Decision1
and the July 30, 2001 Resolution2 of the Court of Appeals (CA) in CA-G.R.
CV. No. 52474. The facts and proceedings that led to the filing of the
instant petition are pertinently narrated below.
Engaged in the business of manufacturing or importing into the Philippines
Tupperware products and marketing the same under a direct selling
distribution system,3 petitioner entered into a Distributorship Agreement
with respondents on March 3, 1986.4 The agreement was to expire on
March 31, 1987 but was subject to an automatic renewal clause for two
one-year terms.5 On April 1, 1991, the parties again executed another
Distributorship Agreement6 which was to expire on March 31, 1992 but
renewable on a yearly basis upon terms and conditions mutually agreed
upon in writing by the parties.7
Following the expiration of the agreement, petitioner, on April 30, 1992,
informed respondents that, due to the latters several violations thereof, it
would no longer renew the same.8 Respondents then made a handwritten
promise for them to observe and comply with the terms and conditions
thereof.9 This convinced petitioner to extend, on July 24, 1992, the period
of the distributorship up to September 30, 1992.10
In the meantime, on July 2, 1992, petitioner subjected respondents
account to an audit review.11 In September 1992, petitioner informed
respondents that it had engaged the services of an auditing firm and that it
was again subjecting respondents account to an audit review.12 Objecting
to the second audit,13 respondents disallowed the auditing firm from
inspecting their books and records. As a result, petitioner only accepted
respondents purchase orders on pre-paid basis.141avvphi1
On September 29, 1992, a day before the expiry of the Distributorship
Agreement, respondents filed before the Regional Trial Court (RTC) of Pasig
City a Complaint for damages with application for a writ of injunction
and/or restraining order docketed as Civil Case No. 62444.15 They alleged
that petitioner abused its right when it caused the audit of their account
and when it only honored their orders if they were pre-paid, thereby
causing damages to them of around P1.3M.16
On November 12, 1992, the trial court issued a writ of preliminary
injunction and directed petitioner to observe the terms and conditions of
the Distributorship Agreement and to honor, deliver and fulfill its
obligations in effecting deliveries of Tupperware products to
respondents.17 In the subsequent certiorari proceedings before the
appellate court docketed as CA-G.R. SP No. 29560, the CA ruled that the
Distributorship Agreement already expired; thus, the trial court committed
grave abuse of discretion in granting the writ of preliminary injunction
which had the effect of enforcing a contract that had long expired.18
Respondents then moved before the trial court, on June 14, 1993, for the
admission of their Supplemental Complaint,19 in which they alleged that
petitioner refused to award benefits to the members of respondents sales
force and coerced the said members to transfer to another distributor; that
petitioner refused to comply with Sections 8 and 920 of the Distributorship
Agreement by not paying respondents the value of the products on hand
and in their custody, and by not effecting the transfer of their good will to
the absorbing distributor; and that petitioner, by its actions which resulted
in the loss of respondents sales force, had made inutile respondents
investment in their building. Respondents thus prayed for additional actual
damages, specifically P4,495,000.00 for the good will, P1M for the products
on hand, and P3M for the cost of the building.
Expectedly, petitioner opposed the admission of the supplemental
complaint.21 Amid the protestations of petitioner, the trial court admitted
25 | P a g e
the supplemental complaint22 and ordered the former to file its
supplemental answer.23
After trial on the merits, the RTC rendered its Decision24 on November 27,
1995. It ruled, among others, that the second audit was unreasonable and
was only made to harass respondents; that the shift from credit to pre-paid
basis in the purchase orders of respondents was another act of
harassment; that petitioner had no valid reason to refuse the renewal of
the distributorship agreement; and that petitioner abused its rights under
the said agreement. It then concluded that because of petitioners
unjustified acts, respondents suffered damages, among which were the
salaries paid to the internal auditors during the first audit, the good will
money, the value of the warehouse, moral and exemplary damages, and
attorneys fees. The dispositive portion of the RTC decision reads:
WHEREFORE, judgment is hereby rendered dismissing for lack of merit
[respondents] claims for payment of items subject of credit memoranda,
and for products alleged to be on hand at the termination of the
[distributorship] agreement. On [respondents] other claims, judgment is
hereby rendered, as follows:
1. Ordering the [petitioner] to pay [respondents] the amount of P23,500.17
representing the salaries of internal auditors engaged by the [petitioner] to
conduct an audit on [respondents] financial records;
2. Ordering the [petitioner] to pay [respondents] the sum of P4,495,000.00
representing "goodwill" money which [respondents] failed to realize;
3. Ordering the [petitioner] to pay [respondents] the sum of P1,000,000.00
as reasonable compensation to the [respondents] for acquiring a lot and
constructing thereon a structure to serve as storage, assembly place and
warehouse for [petitioners] products;
4. Ordering the [petitioner] to pay [respondents] the sum of P500,000.00
as moral damages and another P500,000.00 as and by way of exemplary
damages; and
5. Ordering the [petitioner] to pay [respondents] the sum of P100,000.00
as attorneys fees, plus P2,000.00 per Court appearance.
[Petitioners] counterclaims are hereby dismissed for lack of merit.
Costs against the [petitioner].
SO ORDERED.25
Aggrieved, petitioner timely interposed its appeal. In the assailed February
28, 2001 Decision,26 the appellate court affirmed with modification the
ruling of the trial court and disposed of the appeal as follows:
WHEREFORE, in view of the foregoing, the assailed decision of the court a
quo is hereby AFFIRMED WITH MODIFICATION, the award for moral
damages is hereby REDUCED to P100,000.00 and the award for exemplary
damages is hereby REDUCED to P50,000.00. The award of P1,000,000.00
as reasonable compensation for the acquisition of the lot and construction
of the building is hereby DELETED.
SO ORDERED.27
Since its motion for reconsideration was subsequently denied by the
appellate court in the further assailed July 30, 2001 Resolution,28
petitioner instituted the instant petition for review on certiorari, raising the
following grounds:
1. The Court of Appeals committed an error in affirming the decision of the
trial court admitting the supplemental complaint thereby taking
cognizance of the issues raised and rendering judgment thereon.
2. The Court of Appeals committed an error in affirming the decision of the
trial court holding petitioner liable to pay respondents the "goodwill
money" they allegedly failed to realize.
3. While petitioner lauds the Court of Appeals decision deleting the trial
courts award of P1,000,000.00 by way of compensation for the alleged
acquisition of the lot and construction of the building, and appreciates the
reduction of the trial courts awards on the alleged moral damages and
exemplary damages, the Court of Appeals still erred in not totally
dismissing respondents claims for damages including attorneys fees.
4. The Court of Appeals committed an error in not finding for the petitioner
and in not awarding damages in favor of petitioner by way of reasonable
attorneys fees.29
The primordial issue to be resolved by the Court in the instant case is
whether petitioner abused its rights under the distributorship agreement
when it conducted an audit of respondents account, when it accepted
respondents purchase orders only if they were on a pre-paid basis, and
when it refused to renew the said distributorship agreement.
Preliminarily, the Court admits that, ordinarily, it will not review the
findings of fact made by the appellate court. However, jurisprudence lays
down several exceptions, among which are the following which obtain in
this case: when the judgment is based on a misapprehension of facts and
26 | P a g e
when the appellate court manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, could justify a
different conclusion.30 Thus, the Court finds it imperative to evaluate, as in
fact it had reviewed, the records of the case, including the evidence
adduced during the trial, in relation to the arguments of the parties and the
applicable law and jurisprudence.
Under Article 19 of the Civil Code, every person must, in the exercise of his
rights and in the performance of his duties, act with justice, give everyone
his due, and observe honesty and good faith. To find the existence of abuse
of right under the said article, the following elements must be present: (1)
there is a legal right or duty; (2) which is exercised in bad faith; (3) for the
sole intent of prejudicing or injuring another.31 Accordingly, the exercise of
a right shall always be in accordance with the purpose for which it has
been established, and must not be excessive or unduly harshthere must
be no intention to injure another.32 A person will be protected only when
he acts in the legitimate exercise of his right, that is, when he acts with
prudence and in good faith, not when he acts with negligence or abuse.33
Malice or bad faith is at the core of Article 19 of the Civil Code. Good faith
refers to the state of mind which is manifested by the acts of the individual
concerned. It consists of the intention to abstain from taking an
unconscionable and unscrupulous advantage of another. It is presumed.
Thus, he who alleges bad faith has the duty to prove the same.34 Bad faith
does not simply connote bad judgment or simple negligence; it involves a
dishonest purpose or some moral obloquy and conscious doing of a wrong,
a breach of known duty due to some motives or interest or ill will that
partakes of the nature of fraud. 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.35
At the crux of this controversy, therefore, is whether petitioner acted in
bad faith or intended to injure respondents when it caused the auditing of
the latters account, when it implemented the pre-paid basis in treating the
latters orders, and when it refused to renew the distributorship
agreement.
The Court rules in the negative. We note that in the written
correspondence of petitioner to respondents on April 30, 1992 informing
the latter of the non-renewal of the distributorship agreement, petitioner
already pointed out respondents violations of the agreement. The letter
pertinently reads:
We found that you have committed the following acts which are contrary to
provisions of Section 2(f) of our Agreement:
(a) You submitted several "Vanguard Reports" containing false statements
of the sales performance of your units. A comparison of the reports you
submitted to our office with that actually reported by your managers show
that the sales of your units are actually much lower than that reported to
Tupperware (Exhibits "G," "H," "I," "J," "L," "O," "P," "Q," and "R.")
(b) The unauthorized alteration of the mechanics of "Nans Challenge,"
which is a Tupperware company sponsored promotion campaign. The
documentary evidence furnished us, Exhibit "E," shows that the amount of
target party averages were increased by you.
(c) Charging the managers for accounts of their dealers and for overdue
kits (Exhibits "C" and "D").36
The correspondence prompted respondents to make a handwritten promise
that they would observe and comply with the terms and conditions of the
distributorship agreement.37 This promise notwithstanding, petitioner was
not barred from exercising its right in the agreement to conduct an audit
review of respondents account. Thus, an audit was made in July 1992. In
September 1992, petitioner informed respondents that it was causing the
conduct of a second audit review. And as explained in petitioners
September 11, 1992 correspondence to respondents, the second audit was
intended to cover the period not subject of the initial audit (the period prior
to January 1 to June 30, 1992, and the period from July 1, 1992 to
September 1992).38 Because respondents objected to the second audit,
petitioner exercised its option under the agreement to vary the manner in
which orders are processedthis time, instead of the usual credit
arrangement, petitioner only admitted respondents purchase orders on
pre-paid basis. It may be noted that petitioner still processed respondents
orders and that the pre-paid basis was only implemented during the last
month of the agreement, in September 1992. With the expiry of the
distributorship agreement on September 30, 1992, petitioner no longer
acceded to a renewal of the same.
From these facts, we find that bad faith cannot be attributed to the acts of
petitioner. Petitioners exercise of its rights under the agreement to
conduct an audit, to vary the manner of processing purchase orders, and
to refuse the renewal of the agreement was supported by legitimate
reasons, principally, to protect its own business. The exercise of its rights
was not impelled by any evil motive designed, whimsically and
capriciously, to injure or prejudice respondents. The rights exercised were
all in accord with the terms and conditions of the distributorship
agreement, which has the force of law between them.39 Clearly, petitioner
could not be said to have committed an abuse of its rights. It may not be
amiss to state at this juncture that a complaint based on Article 19 of the
Civil Code must necessarily fail if it has nothing to support it but innuendos
and conjectures.40
27 | P a g e
Given that petitioner has not abused its rights, it should not be held liable
for any of the damages sustained by respondents. The law affords no
remedy for damages resulting from an act which does not amount to a
legal wrong. Situations like this have been appropriately denominated
damnum absque injuria.41 To this end, the Court reverses and sets aside
the trial and appellate courts rulings. Nevertheless, the Court sustains the
trial courts order for the reimbursement by petitioner to respondents of
P23,500.17, with 12% interest per annum, computed from the filing of the
original complaint up to actual payment, representing the salaries of the
internal auditors, because, first, the award was never questioned by
petitioner, and second, petitioner was the one which engaged the services
of the auditors.
As regards petitioners claim for attorneys fees, the Court cannot grant the
same. We emphasized in prior cases that no premium should be placed on
the right to litigate. Attorneys fees are not to be awarded every time a
party wins a suit. Even when a claimant is compelled to litigate or to incur
expenses to protect his rights, still attorneys fees may not be awarded
where there is no sufficient showing of bad faith in a partys persistence in
a case other than an erroneous conviction of the righteousness of his
cause.42
With the above disquisition, the Court finds no compelling reason to
resolve the other issues raised in the petition.
WHEREFORE, premises considered, the petition is GRANTED. The decisions
of the Regional Trial Court of Pasig City in Civil Case No. 62444 and of the
Court of Appeals in CA-G.R. CV. No. 52474 are REVERSED and SET ASIDE.
Petitioner is ORDERED to pay respondents P23,500.17 with interest at 12%
per annum computed from the date of filing of the original complaint.
SO ORDERED.
G.R. No. 200114, August 24, 2015
SOCIAL SECURITY SYSTEM, Petitioner, v. DEBBIE UBAA,
Respondent.
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails: 1) the July 29, 2011
Decision2 of the Court of Appeals (CA) denying the Petition for Certiorari in
CA-G.R. SP No. 110006 and affirming the March 6, 2007 Order3 of the
Regional Trial Court (RTC) of Daet, Camarines Norte, Branch 39 in Civil Case
No. 7304; and 2) the CA's January 10, 2012 Resolution4 denying
petitioner's Motion for Reconsideration of the herein assailed Decision.
Factual Antecedents
On December 26, 2002, respondent Debbie Ubana filed a civil case for
damages against the DBP Service Corporation, petitioner Social Security
System (SSS), and the SSS Retirees Association5 before the RTC of Daet,
Camarines Norte. The case was docketed as Civil Case No. 7304 and
assigned to RTC Branch 39.
In her Complaint,6 respondent alleged that in July 1995, she applied for
employment with the petitioner. However, after passing the examinations
and accomplishing all the requirements for employment, she was instead
referred to DBP Service Corporation for "transitory employment." She took
the pre-employment examination given by DBP Service Corporation and
passed the same. On May 20, 1996, she was told to report for training to
SSS, Naga City branch, for immediate deployment to SSS Daet branch. On
May 28, 1996, she was made to sign a six-month Service Contract
Agreement7 by DBP Service Corporation, appointing her as clerk for
assignment with SSS Daet branch effective May 27, 1996, with a daily
wage of only P171.00. She was assigned as "Frontliner" of the SSS
Members Assistance Section until December 15, 1999. From December 16,
1999 to May 15, 2001, she was assigned to the Membership Section as
Data Encoder. On December 16, 2001, she was transferred to the SSS
Retirees Association as Processor at the Membership Section until her
resignation on August 26, 2002. As Processor, she was paid only P229.00
daily or P5,038.00 monthly, while a regular SSS Processor receives a
monthly salary of P18,622.00 or P846.45 daily wage. Her May 28, 1996
Service Contract Agreement with DBP Service Corporation was never
renewed, but she was required to work for SSS continuously under different
assignments with a maximum daily salary of only P229.00; at the same
time, she was constantly assured of being absorbed into the SSS plantilla.
Respondent claimed she was qualified for her position as Processor, having
completed required training and passed the SSS qualifying examination for
28 | P a g e
Computer Operations Course given by the National Computer Institute, U.P.
Diliman from May 16 to June 10, 2001, yet she was not given the proper
salary. Because of the oppressive and prejudicial treatment by SSS, she
was forced to resign on August 26, 2002 as she could no longer stand
being exploited, the agony of dissatisfaction, anxiety, demoralization, and
injustice. She asserted that she dedicated six years of her precious time
faithfully serving SSS, foregoing more satisfying employment elsewhere,
yet she was merely exploited and given empty and false promises; that
defendants conspired to exploit her and violate civil service laws and
regulations and Civil Code provisions on Human Relations, particularly
Articles 19, 20, and 21.8 As a result, she suffered actual losses by way of
unrealized income, moral and exemplary damages, attorney's fees and
litigation expenses.
Respondent prayed for an award of P572,682.67 actual damages
representing the difference between the legal and proper salary she should
have received and the actual salary she received during her six-year stint
with petitioner; P300,000.00 moral damages; exemplary damages at the
discretion of the court; P20,000.00 attorney's fees and P1,000.00
appearance fees; and other just and equitable relief.
Petitioner and its co-defendants SSS Retirees Association and DBP Service
Corporation filed their respective motions to dismiss, arguing that the
subject matter of the case and respondent's claims arose out of employer-
employee relations, which are beyond the RTC's jurisdiction and properly
cognizable by the National Labor Relations Commission (NLRC).
Respondent opposed the motions to dismiss, arguing that pursuant to civil
service rules and regulations, service contracts such as her Service
Contract Agreement with DBP Service Corporation should cover only a)
lump sum work or services such as janitorial, security or consultancy
services, and b) piece work or intermittent jobs of short duration not
exceeding six months on a daily basis.9 She posited that her service
contract involved the performance of sensitive work, and not merely
janitorial, security, consultancy services, or work of intermittent or short
duration. In fact, she was made to work continuously even after the lapse
of her 6-month service contract. Citing Civil Service Commission
Memorandum Circular No. 40, respondent contended that the performance
of functions outside of the nature provided in the appointment and
receiving salary way below that received by regular SSS employees
amount to an abuse of rights; and that her cause of action is anchored on
the provisions of the Civil Code on Human Relations.
Ruling of the Regional Trial Court
On October 1, 2003, the RTC issued an Order10 dismissing respondent's
complaint for lack of jurisdiction, stating that her claim for damages "has a
reasonable causal connection with her employer-employee relations with
the defendants"11 and "is grounded on the alleged fraudulent and
malevolent manner by which the defendants conspired with each other in
exploiting [her], which is a clear case of unfair labor practice,"12 falling
under the jurisdiction of the Labor Arbiter of the NLRC. Thus, it
decreed:cralawlawlibrary
WHEREFORE, premises considered, the aforementioned Motion to Dismiss
the complaint of the herein plaintiff for lack of jurisdiction is hereby
GRANTED. The above-entitled complaint is hereby DISMISSED.
SO ORDERED.13
Respondent moved for reconsideration. On March 6, 2007, the RTC issued
another Order14 granting respondent's motion for reconsideration. The
trial court held:cralawlawlibrary
Section 2(1), Art. K-B, 1987 Constitution, expressly provides that "the civil
service embraces all branches, subdivisions, instrumentalities, and
agencies of the government, including government-owned or controlled
corporation[s] with original charters." Corporations with original charters
are those which have been created by special law[s] and not through the
general corporation law. In contrast, labor law claims against government-
owned and controlled corporations without original charters fall within the
jurisdiction of the Department of Labor and Employment and not the Civil
Service Commission. (Light Rail Transit Authority vs. Perfecto Venus, March
24, 2006.)
Having been created under an original charter, RA No. 1161 as amended
by R.A. 8282, otherwise known as the Social Security Act of 1997, the SSS
is governed by the provision[s] of the Civil Service Commission. However,
since the SSS denied the existence of an employer-employee relationship,
and the case is one for Damages, it is not the Civil Service Commission
that has jurisdiction to try the case, but the regular courts.
A perusal of the Complaint filed by the plaintiff against the defendant SSS
clearly shows that the case is one for Damages.
Paragraph 15 of her complaint states, thus:
xxx. Likewise, they are contrary to the Civil Code provisions on human
relations which [state], among others, that Every person, must in the
exercise of his rights and in the performance of his duties, act with justice,
give everyone his due and observe honesty and good faith (Article 19) and
that Every person who, contrary to law, willfully or negligently [causes]
damages to another, shall indemnify the latter for the same. (Art. 20)
"Article 19 provides a rule of conduct that is consistent with an orderly and
harmonious relationship between and among men and women It codifies
29 | P a g e
the concept of what is justice and fair play so that abuse of right by a
person will be prevented. Art. 20 speaks of general sanction for all other
provisions of law which do not especially provide their own sanction. Thus,
anyone, who, whether willfully or negligently, in the exercise of his legal
right or duty, causes damage to another, shall indemnify his or her victim
for injuries suffered thereby." (Persons and Family Relations, Sta. Maria,
Melencio, Jr. (2004) pp. 31-32.)
Wherefore, all premises considered, the Motion for Reconsideration is
hereby GRANTED. The case against defendant Social Security System
represented by its President is hereby reinstated in the docket of active
civil cases of this court.
SO ORDERED.15 [Italics in the original]
Petitioner moved for reconsideration, but the RTC stood its ground in its
June 24, 2009 Order16cralawrednad
Ruling of the Court of Appeals
In a Petition for Certiorari17 filed with the CA and docketed as CA-G.R. SP
No. 110006, petitioner sought a reversal of the RTC's June 24, 2009 and
March 6, 2007 Orders and the reinstatement of its original October 1, 2003
Order dismissing Civil Case No. 7304, insisting that the trial court did not
have jurisdiction over respondent's claims for "unrealized salary income"
and other damages, which constitute a labor dispute cognizable only by
the labor tribunals. Moreover, it claimed that the assailed Orders of the
trial court were issued with grave abuse of discretion. It argued that the
trial court gravely erred in dismissing the case only as against its co-
defendants DBP Service Corporation and SSS Retirees Association and
maintaining the charge against it, considering that its grounds for seeking
dismissal are similar to those raised by the two. It maintained that DBP
Service Corporation and SSS Retirees Association are legitimate
independent job contractors engaged by it to provide manpower services
since 2001, which thus makes respondent an employee of these two
entities and not of SSS; and that since it is not the respondent's employer,
then there is no cause of action against it.
On July 29, 2011, the CA issued the assailed Decision containing the
following pronouncement: Hence, petitioner seeks recourse before this
Court via this Petition for Certiorari challenging the RTC Orders. For the
resolution of this Court is the sole issue of: WHETHER OR NOT THE RTC HAS
JURISDICTION TO HEAR AND DECIDE CIVIL CASE NO. 7304.
The petition is devoid of merits.
The rule is that, the nature of an action and the subject matter thereof, as
well as, which court or agency of the government has jurisdiction over the
same, are determined by the material allegations of the complaint in
relation to the law involved and the character of the reliefs prayed for,
whether or not the complainant/plaintiff is entitled to any or all of such
reliefs. A prayer or demand for relief is not part of the petition of the cause
of action; nor does it enlarge the cause of action stated or change the legal
effect of what is alleged. In determining which body has jurisdiction over a
case, the better policy is to consider not only the status or relationship of
the parties but also the nature of the action that is the subject of their
controversy.
A careful perusal of Ubana's Complaint in Civil Case No. 7304 unveils that
Ubana's claim is rooted on the principle of abuse of right laid in the New
Civil Code. She was claiming damages based on the alleged exploitation
[perpetrated] by the defendants depriving her of her rightful income. In
asserting that she is entitled to the damages claimed, [she] invoked not
the provisions of the Labor Code or any other labor laws but the provisions
on human relations under the New Civil Code. Evidently, the determination
of the respective rights of the parties herein, and the ascertainment
whether there were abuses of such rights, do not call for the application of
the labor laws but of the New Civil Code. Apropos thereto, the resolution of
the issues raised in the instant complaint does not require the expertise
acquired by labor officials. It is the courts of general jurisdiction, which is
the RTC in this case, which has the authority to hear and decide Civil Case
No. 7304.
Not every dispute between an employer and employee involves matters
that only labor arbiters and the NLRC can resolve in the exercise of their
adjudicatory or quasi-judicial powers. Where the claim to the principal
relief sought is to be resolved not by reference to the Labor Code or other
labor relations statute or a collective bargaining agreement but by the
general civil law, the jurisdiction over the dispute belongs to the regular
courts of justice and not to the Labor Arbiter and the NLRC. In such
situations, [resolution] of the dispute requires expertise, not in labor
management relations nor in wage structures and other terms and
conditions of employment, but rather in the application of the general civil
law. Clearly, such claims fall outside the area of competence or expertise
ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for
granting jurisdiction over such claims to these agencies disappears.
It is the character of the principal relief sought that appears essential in
this connection. Where such principal relief is to be granted under labor
legislation or a collective bargaining agreement, the case should fall within
the jurisdiction of the Labor Arbiter and the NLRC, even though a claim for
damages might be asserted as an incident to such claim.
The pivotal question is whether the Labor Code has any relevance to the
principal relief sought in the complaint. As pointed out earlier, Ubana did
not seek refuge from the Labor Code in asking for the award of damages. It
30 | P a g e
was the transgression of Article[s] 19 and 20 of the New Civil Code that she
was insisting in wagering this case. The primary relief sought herein is for
moral and exemplary damages for the abuse of rights. The claims for
actual damages for unrealized income are the natural consequence for
abuse of such rights.
While it is true that labor arbiters and the NLRC have jurisdiction to award
not only reliefs provided by labor laws, but also damages governed by the
Civil Code, these reliefs must still be based on an action that has a
reasonable causal connection with the Labor Code, other labor statutes, or
collective bargaining agreements. Claims for damages under paragraph 4
of Article 217 must have a reasonable causal connection with any of the
claims provided for in the article in order to be cognizable by the labor
arbiter. Only if there is such a connection with the other claims can the
claim for damages be considered as arising from employer-employee
relations. In the present case, Ubana's claim for damages is not related to
any other claim under Article 217, other labor statutes, or collective
bargaining agreements.
All told, it is ineluctable that it is the regular courts that has [sic]
jurisdiction to hear and decide Civil Case No. 7304. In Tolosa v. NLRC,18 the
Supreme Court held that, "[i]t is not the NLRC but the regular courts that
have jurisdiction over action for damages, in which the employer-employee
relations is merely incidental, and in which the cause of action proceeds
from a different source of obligation such as tort. Since petitioner's claim
for damages is predicated on a quasi-delict or tort that has no reasonable
causal connection with any of the claims provided for in Article 217, other
labor statutes or collective bargaining agreements, jurisdiction over the
action lies with the regular courts not with the NLRC or the labor arbiters."
The same rule applies in this case.
WHEREFORE, premises considered, the instant petition is DENIED and the
Order dated March 6, 2007 of the Regional Trial Court, Branch 39 of Daet,
Camarines Norte in Civil Case No. 7304 is hereby AFFIRMED.
SO ORDERED.19
Petitioner filed a Motion for Reconsideration,20 but the CA denied the same
in its January 10, 2012 Resolution.21 Hence, the present Petition.
Issue
Petitioner simply submits that the assailed CA dispositions are contrary to
law and jurisprudence.
Petitioner's Arguments
Praying that the assailed CA dispositions be set aside and that the RTC's
October 1, 2003 Order dismissing Civil Case No. 7304 be reinstated,
petitioner essentially maintains in its Petition and Reply22 that
respondent's claims arose from and are in fact centered on her previous
employment. It maintains that there is a direct causal connection between
respondent's claims and her employment, which brings the subject matter
within the jurisdiction of the NLRC. Petitioner contends that respondent's
other claims are intimately intertwined with her claim of actual damages
which are cognizable by the NLRC. Moreover, petitioner alleges that its
existing manpower services agreements with DBP Service Corporation and
SSS Retirees Association are legitimate; and that some of respondent's
claims may not be entertained since these pertain to benefits enjoyed by
government employees, not by employees contracted via legitimate
manpower service providers. Finally, petitioner avers that the nature and
character of the reliefs prayed for by the respondent are directly within the
jurisdiction not of the courts, but of the labor tribunals.
Respondent's Arguments
In her Comment,23 respondent maintains that her case is predicated not
on labor laws but on Articles 19 and 20 of the Civil Code for petitioner's act
of exploiting her and enriching itself at her expense by not paying her the
correct salary commensurate to the position she held within SSS. Also,
since there is no employer-employee relationship between her and
petitioner, as the latter itself admits, then her case is not cognizable by the
Civil Service Commission (CSC) either; that since the NLRC and the CSC
have no jurisdiction over her case, then it is only the regular courts which
can have jurisdiction over her claims. She argues that the CA is correct in
ruling that her case is rooted in the principle of abuse of rights under the
Civil Code; and that the Petition did not properly raise issues of law.
Our Ruling
The Court denies the Petition.
In Home Development Mutual Fund v. Commission on Audit,24 it was held
that while they performed the work of regular government employees, DBP
Service Corporation personnel are not government personnel, but
employees of DBP Service Corporation acting as an independent
contractor. Applying the foregoing pronouncement to the present case, it
can be said that during respondent's stint with petitioner, she never
became an SSS employee, as she remained an employee of DBP Service
Corporation and SSS Retirees Association - the two being independent
contractors with legitimate service contracts with SSS.
Indeed, "[i]n legitimate job contracting, no employer-employee relation
exists between the principal and the job contractor's employees. The
31 | P a g e
principal is responsible to the job contractor's employees only for the
proper payment of wages."25cralawredcralawrednad
In her Complaint, respondent acknowledges that she is not petitioner's
employee, but that precisely she was promised that she would be absorbed
into the SSS plantilla after all her years of service with SSS; and that as
SSS Processor, she was paid only P229.00 daily or P5,038.00 monthly,
while a regular SSS Processor receives a monthly salary of P18,622.00, or
P846.45 daily wage. In its pleadings, petitioner denied the existence of an
employer-employee relationship between it and respondent; in fact, it
insists on the validity of its service agreements with DBP Service
Corporation and SSS Retirees Association - meaning that the latter, and not
SSS, are respondent's true employers. Since both parties admit that there
is no employment relation between them, then there is no dispute
cognizable by the NLRC. Thus, respondent's case is premised on the claim
that in paying her only P229.00 daily - or P5,038.00 monthly - as against a
monthly salary of P18,622.00, or P846.45 daily wage, paid to a regular SSS
Processor at the time, petitioner exploited her, treated her unfairly, and
unjustly enriched itself at her expense.
For Article 217 of the Labor Code to apply, and in order for the Labor
Arbiter to acquire jurisdiction over a dispute, there must be an employer-
employee relation between the parties thereto.chanrobleslaw
x x x It is well settled in law and jurisprudence that where no employer-
employee relationship exists between the parties and no issue is involved
which may be resolved by reference to the Labor Code, other labor
statutes or any collective bargaining agreement, it is the Regional Trial
Court that has jurisdiction, x x x The action is within the realm of civil law
hence jurisdiction over the case belongs to the regular courts. While the
resolution of the issue involves the application of labor laws, reference to
the labor code was only for the determination of the solidary liability of the
petitioner to the respondent where no employer-employee relation exists.
Article 217 of the Labor Code as amended vests upon the labor arbiters
exclusive original jurisdiction only over the
following:ChanRoblesvirtualLawlibrary
1. Unfair labor practices;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims, arising from employer- employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable
jurisdictional requisite x x x.26
Since there is no employer-employee relationship between the parties
herein, then there is no labor dispute cognizable by the Labor Arbiters or
the NLRC.
There being no employer-employee relation or any other definite or direct
contract between respondent and petitioner, the latter being responsible to
the former only for the proper payment of wages, respondent is thus
justified in filing a case against petitioner, based on Articles 19 and 20 of
the Civil Code, to recover the proper salary due her as SSS Processor. At
first glance, it is indeed unfair and unjust that as, Processor who has
worked with petitioner for six long years, she was paid only P5,038.00
monthly, or P229.00 daily, while a regular SSS employee with the same
designation and who performs identical functions is paid a monthly salary
of P18,622.00, or P846.45 daily wage. Petitioner may not hide under its
service contracts to deprive respondent of what is justly due her. As a vital
government entity charged with ensuring social security, it should lead in
setting the example by treating everyone with justice and fairness. If it
cannot guarantee the security of those who work for it, it is doubtful that it
can even discharge its directive to promote the social security of its
members in line with the fundamental mandate to promote social justice
and to insure the well-being and economic security of the Filipino people.
In this jurisdiction, the "long honored legal truism of 'equal pay for equal
work'" has been "impregnably institutionalized;" "[p]ersons who work with
substantially equal qualifications, skill, effort and responsibility, under
similar conditions, should be paid similar salaries."27 "That public policy
abhors inequality and discrimination is beyond contention. Our Constitution
and laws reflect the policy against these evils. The Constitution in the
Article on Social Justice and Human Rights exhorts Congress to 'give
highest priority to the enactment of measures that protect and enhance
the right of all people to human dignity, reduce social, economic, and
political inequalities.' The very broad Article 19 of the Civil Code requires
every person, 'in the exercise of his rights and in the performance of his
duties, [to] act with justice, give everyone his due, and observe honesty
and good faith'."28cralawrednad
32 | P a g e
WHEREFORE, the Petition is DENIED. The assailed July 29, 2011 Decision
and January 10, 2012 Resolution of the Court of Appeals in CA-G.R. SP No.
110006 are AFFIRMED. The case is ordered remanded with dispatch to the
Regional Trial Court of Daet, Camarines Norte, Branch 39, for continuation
of proceedings.
SO ORDERED.
This is a petition for review on certiorari to set aside the Resolution1 dated
December 28, 1999 dismissing the petition for certiorari and the
Resolution2 dated August 24, 2000 denying the motion for reconsideration,
both issued by the Regional Trial Court of Capas, Tarlac, Branch 66, in
Special Civil Action No. 17-C (99).
The Facts

Two vehicles, one driven by respondent Mario Llavore Laroya ("Laroya" for
brevity) and the other owned by petitioner Roberto Capitulo ("Capitulo" for
brevity) and driven by petitioner Avelino Casupanan ("Casupanan" for
brevity), figured in an accident. As a result, two cases were filed with the
Municipal Circuit Trial Court ("MCTC" for brevity) of Capas, Tarlac. Laroya
filed a criminal case against Casupanan for reckless imprudence resulting
in damage to property, docketed as Criminal Case No. 002-99. On the other
hand, Casupanan and Capitulo filed a civil case against Laroya for quasi-
delict, docketed as Civil Case No. 2089.

When the civil case was filed, the criminal case was then at its preliminary
investigation stage. Laroya, defendant in the civil case, filed a motion to
dismiss the civil case on the ground of forum-shopping considering the
pendency of the criminal case. The MCTC granted the motion in the Order
of March 26, 1999 and dismissed the civil case.

On Motion for Reconsideration, Casupanan and Capitulo insisted that the

civil case is a separate civil action which can proceed independently of the
criminal case. The MCTC denied the motion for reconsideration in the Order
of May 7, 1999. Casupanan and Capitulo filed a petition for certiorari under
Rule 65 before the Regional Trial Court ("Capas RTC" for brevity) of Capas,
Tarlac, Branch 66,3 assailing the MCTCs Order of dismissal.

The Trial Courts Ruling

The Capas RTC rendered judgment on December 28, 1999 dismissing the
petition for certiorari for lack of merit. The Capas RTC ruled that the order
of dismissal issued by the MCTC is a final order which disposes of the case
and therefore the proper remedy should have been an appeal. The Capas
RTC further held that a special civil action for certiorari is not a substitute
for a lost appeal. Finally, the Capas RTC declared that even on the premise
that the MCTC erred in dismissing the civil case, such error is a pure error
of judgment and not an abuse of discretion.
G.R. No. 145391 August 26, 2002
Casupanan and Capitulo filed a Motion for Reconsideration but the Capas
AVELINO CASUPANAN and ROBERTO CAPITULO, petitioners, RTC denied the same in the Resolution of August 24, 2000.
vs.
MARIO LLAVORE LAROYA, respondent. Hence, this petition.
33 | P a g e

The Issue
The petition premises the legal issue in this wise:
"In a certain vehicular accident involving two parties, each one of them
may think and believe that the accident was caused by the fault of the
other. x x x [T]he first party, believing himself to be the aggrieved party,
opted to file a criminal case for reckless imprudence against the second
party. On the other hand, the second party, together with his operator,
believing themselves to be the real aggrieved parties, opted in turn to file
a civil case for quasi-delict against the first party who is the very private
complainant in the criminal case."4
Thus, the issue raised is whether an accused in a pending criminal case for
reckless imprudence can validly file, simultaneously and independently, a
separate civil action for quasi-delict against the private complainant in the
criminal case.
The Courts Ruling
Casupanan and Capitulo assert that Civil Case No. 2089, which the MCTC
dismissed on the ground of forum-shopping, constitutes a counterclaim in
the criminal case. Casupanan and Capitulo argue that if the accused in a
criminal case has a counterclaim against the private complainant, he may
file the counterclaim in a separate civil action at the proper time. They
contend that an action on quasi-delict is different from an action resulting
from the crime of reckless imprudence, and an accused in a criminal case
can be an aggrieved party in a civil case arising from the same incident.
They maintain that under Articles 31 and 2176 of the Civil Code, the civil
case can proceed independently of the criminal action. Finally, they point
out that Casupanan was not the only one who filed the independent civil
action based on quasi-delict but also Capitulo, the owner-operator of the
vehicle, who was not a party in the criminal case.
In his Comment, Laroya claims that the petition is fatally defective as it
does not state the real antecedents. Laroya further alleges that Casupanan
and Capitulo forfeited their right to question the order of dismissal when
they failed to avail of the proper remedy of appeal. Laroya argues that
there is no question of law to be resolved as the order of dismissal is
already final and a petition for certiorari is not a substitute for a lapsed
appeal.
In their Reply, Casupanan and Capitulo contend that the petition raises the
legal question of whether there is forum-shopping since they filed only one
action - the independent civil action for quasi-delict against Laroya.
Nature of the Order of Dismissal
The MCTC dismissed the civil action for quasi-delict on the ground of
forum-shopping under Supreme Court Administrative Circular No. 04-94.
The MCTC did not state in its order of dismissal5 that the dismissal was
with prejudice. Under the Administrative Circular, the order of dismissal is
without prejudice to refiling the complaint, unless the order of dismissal
expressly states it is with prejudice.6 Absent a declaration that the
dismissal is with prejudice, the same is deemed without prejudice. Thus,
the MCTCs dismissal, being silent on the matter, is a dismissal without
prejudice.
Section 1 of Rule 417 provides that an order dismissing an action without
prejudice is not appealable. The remedy of the aggrieved party is to file a
special civil action under Rule 65. Section 1 of Rule 41 expressly states that
"where the judgment or final order is not appealable, the aggrieved party
may file an appropriate special civil action under Rule 65." Clearly, the
Capas RTCs order dismissing the petition for certiorari, on the ground that
the proper remedy is an ordinary appeal, is erroneous.
Forum-Shopping
The essence of forum-shopping is the filing of multiple suits involving the
same parties for the same cause of action, either simultaneously or
successively, to secure a favorable judgment.8 Forum-shopping is present
when in the two or more cases pending, there is identity of parties, rights
of action and reliefs sought.9 However, there is no forum-shopping in the
instant case because the law and the rules expressly allow the filing of a
separate civil action which can proceed independently of the criminal
action.
Laroya filed the criminal case for reckless imprudence resulting in damage
to property based on the Revised Penal Code while Casupanan and
Capitulo filed the civil action for damages based on Article 2176 of the Civil
Code. Although these two actions arose from the same act or omission,
they have different causes of action. The criminal case is based on culpa
criminal punishable under the Revised Penal Code while the civil case is
based on culpa aquiliana actionable under Articles 2176 and 2177 of the
Civil Code. These articles on culpa aquiliana read:
"Art. 2176. 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.
34 | P a g e
Art. 2177. Responsibility for fault or negligence under the preceding article
is entirely separate and distinct from the civil liability arising from
negligence under the Penal Code. But the plaintiff cannot recover damages
twice for the same act or omission of the defendant."
Any aggrieved person can invoke these articles provided he proves, by
preponderance of evidence, that he has suffered damage because of the
fault or negligence of another. Either the private complainant or the
accused can file a separate civil action under these articles. There is
nothing in the law or rules that state only the private complainant in a
criminal case may invoke these articles.
Moreover, paragraph 6, Section 1, Rule 111 of the 2000 Rules on Criminal
Procedure ("2000 Rules" for brevity) expressly requires the accused to
litigate his counterclaim in a separate civil action, to wit:
"SECTION 1. Institution of criminal and civil actions. (a) x x x.
No counterclaim, cross-claim or third-party complaint may be filed by the
accused in the criminal case, but any cause of action which could have
been the subject thereof may be litigated in a separate civil action."
(Emphasis supplied)
Since the present Rules require the accused in a criminal action to file his
counterclaim in a separate civil action, there can be no forum-shopping if
the accused files such separate civil action.
Filing of a separate civil action
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure ("1985 Rules"
for brevity), as amended in 1988, allowed the filing of a separate civil
action independently of the criminal action provided the offended party
reserved the right to file such civil action. Unless the offended party
reserved the civil action before the presentation of the evidence for the
prosecution, all civil actions arising from the same act or omission were
deemed "impliedly instituted" in the criminal case. These civil actions
referred to the recovery of civil liability ex-delicto, the recovery of damages
for quasi-delict, and the recovery of damages for violation of Articles 32, 33
and 34 of the Civil Code on Human Relations.
Thus, to file a separate and independent civil action for quasi-delict under
the 1985 Rules, the offended party had to reserve in the criminal action the
right to bring such action. Otherwise, such civil action was deemed
"impliedly instituted" in the criminal action. Section 1, Rule 111 of the 1985
Rules provided as follows:
"Section 1. Institution of criminal and civil actions. When a criminal
action is instituted, the civil action for the recovery of civil liability is
impliedly instituted with the criminal action, unless the offended party
waives the action, reserves his right to institute it separately, or institutes
the civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the Revised Penal
Code, and damages under Articles 32, 33, 34 and 2176 of the Civil Code of
the Philippines arising from the same act or omission of the accused.
A waiver of any of the civil actions extinguishes the others. The institution
of, or the reservation of the right to file, any of said civil actions separately
waives the others.
The reservation of the right to institute the separate civil actions shall be
made before the prosecution starts to present its evidence and under
circumstances affording the offended party a reasonable opportunity to
make such reservation.
In no case may the offended party recover damages twice for the same act
or omission of the accused.
x x x." (Emphasis supplied)
Section 1, Rule 111 of the 1985 Rules was amended on December 1, 2000
and now provides as follows:
"SECTION 1. Institution of criminal and civil actions. (a) When a criminal
action is instituted, the civil action for the recovery of civil liability arising
from the offense charged shall be deemed instituted with the criminal
action unless the offended party waives the civil action, reserves the right
to institute it separately or institutes the civil action prior to the criminal
action.
The reservation of the right to institute separately the civil action shall be
made before the prosecution starts presenting its evidence and under
circumstances affording the offended party a reasonable opportunity to
make such reservation.
xxx
(b) x x x
Where the civil action has been filed separately and trial thereof has not
yet commenced, it may be consolidated with the criminal action upon
application with the court trying the latter case. If the application is
granted, the trial of both actions shall proceed in accordance with section 2
35 | P a g e
of this rule governing consolidation of the civil and criminal actions."
(Emphasis supplied)
Under Section 1 of the present Rule 111, what is "deemed instituted" with
the criminal action is only the action to recover civil liability arising from
the crime or ex-delicto. All the other civil actions under Articles 32, 33, 34
and 2176 of the Civil Code are no longer "deemed instituted," and may be
filed separately and prosecuted independently even without any
reservation in the criminal action. The failure to make a reservation in the
criminal action is not a waiver of the right to file a separate and
independent civil action based on these articles of the Civil Code. The
prescriptive period on the civil actions based on these articles of the Civil
Code continues to run even with the filing of the criminal action. Verily, the
civil actions based on these articles of the Civil Code are separate, distinct
and independent of the civil action "deemed instituted" in the criminal
action.10
Under the present Rule 111, the offended party is still given the option to
file a separate civil action to recover civil liability ex-delicto by reserving
such right in the criminal action before the prosecution presents its
evidence. Also, the offended party is deemed to make such reservation if
he files a separate civil action before filing the criminal action. If the civil
action to recover civil liability ex-delicto is filed separately but its trial has
not yet commenced, the civil action may be consolidated with the criminal
action. The consolidation under this Rule does not apply to separate civil
actions arising from the same act or omission filed under Articles 32, 33,
34 and 2176 of the Civil Code.11
Suspension of the Separate Civil Action
Under Section 2, Rule 111 of the amended 1985 Rules, a separate civil
action, if reserved in the criminal action, could not be filed until after final
judgment was rendered in the criminal action. If the separate civil action
was filed before the commencement of the criminal action, the civil action,
if still pending, was suspended upon the filing of the criminal action until
final judgment was rendered in the criminal action. This rule applied only to
the separate civil action filed to recover liability ex-delicto. The rule did not
apply to independent civil actions based on Articles 32, 33, 34 and 2176 of
the Civil Code, which could proceed independently regardless of the filing
of the criminal action.
The amended provision of Section 2, Rule 111 of the 2000 Rules continues
this procedure, to wit:
"SEC. 2. When separate civil action is suspended. After the criminal
action has been commenced, the separate civil action arising therefrom
cannot be instituted until final judgment has been entered in the criminal
action.
If the criminal action is filed after the said civil action has already been
instituted, the latter shall be suspended in whatever stage it may be found
before judgment on the merits. The suspension shall last until final
judgment is rendered in the criminal action. Nevertheless, before judgment
on the merits is rendered in the civil action, the same may, upon motion of
the offended party, be consolidated with the criminal action in the court
trying the criminal action. In case of consolidation, the evidence already
adduced in the civil action shall be deemed automatically reproduced in
the criminal action without prejudice to the right of the prosecution to
cross-examine the witnesses presented by the offended party in the
criminal case and of the parties to present additional evidence. The
consolidated criminal and civil actions shall be tried and decided jointly.
During the pendency of the criminal action, the running of the period of
prescription of the civil action which cannot be instituted separately or
whose proceeding has been suspended shall be tolled.
x x x." (Emphasis supplied)
Thus, Section 2, Rule 111 of the present Rules did not change the rule that
the separate civil action, filed to recover damages ex-delicto, is suspended
upon the filing of the criminal action. Section 2 of the present Rule 111 also
prohibits the filing, after commencement of the criminal action, of a
separate civil action to recover damages ex-delicto.
When civil action may proceed independently
The crucial question now is whether Casupanan and Capitulo, who are not
the offended parties in the criminal case, can file a separate civil action
against the offended party in the criminal case. Section 3, Rule 111 of the
2000 Rules provides as follows:
"SEC 3. When civil action may proceed independently. - In the cases
provided in Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines,
the independent civil action may be brought by the offended party. It shall
proceed independently of the criminal action and shall require only a
preponderance of evidence. In no case, however, may the offended party
recover damages twice for the same act or omission charged in the
criminal action." (Emphasis supplied)
Section 3 of the present Rule 111, like its counterpart in the amended 1985
Rules, expressly allows the "offended party" to bring an independent civil
action under Articles 32, 33, 34 and 2176 of the Civil Code. As stated in
36 | P a g e
Section 3 of the present Rule 111, this civil action shall proceed
independently of the criminal action and shall require only a
preponderance of evidence. In no case, however, may the "offended party
recover damages twice for the same act or omission charged in the
criminal action."
There is no question that the offended party in the criminal action can file
an independent civil action for quasi-delict against the accused. Section 3
of the present Rule 111 expressly states that the "offended party" may
bring such an action but the "offended party" may not recover damages
twice for the same act or omission charged in the criminal action. Clearly,
Section 3 of Rule 111 refers to the offended party in the criminal action,
not to the accused.
Casupanan and Capitulo, however, invoke the ruling in Cabaero vs.
Cantos12 where the Court held that the accused therein could validly
institute a separate civil action for quasi-delict against the private
complainant in the criminal case. In Cabaero, the accused in the criminal
case filed his Answer with Counterclaim for malicious prosecution. At that
time the Court noted the "absence of clear-cut rules governing the
prosecution on impliedly instituted civil actions and the necessary
consequences and implications thereof." Thus, the Court ruled that the trial
court should confine itself to the criminal aspect of the case and disregard
any counterclaim for civil liability. The Court further ruled that the accused
may file a separate civil case against the offended party "after the criminal
case is terminated and/or in accordance with the new Rules which may be
promulgated." The Court explained that a cross-claim, counterclaim or
third-party complaint on the civil aspect will only unnecessarily complicate
the proceedings and delay the resolution of the criminal case.
Paragraph 6, Section 1 of the present Rule 111 was incorporated in the
2000 Rules precisely to address the lacuna mentioned in Cabaero. Under
this provision, the accused is barred from filing a counterclaim, cross-claim
or third-party complaint in the criminal case. However, the same provision
states that "any cause of action which could have been the subject (of the
counterclaim, cross-claim or third-party complaint) may be litigated in a
separate civil action." The present Rule 111 mandates the accused to file
his counterclaim in a separate civil actiosn which shall proceed
independently of the criminal action, even as the civil action of the
offended party is litigated in the criminal action.
Conclusion
Under Section 1 of the present Rule 111, the independent civil action in
Articles 32, 33, 34 and 2176 of the Civil Code is not deemed instituted with
the criminal action but may be filed separately by the offended party even
without reservation. The commencement of the criminal action does not
suspend the prosecution of the independent civil action under these
articles of the Civil Code. The suspension in Section 2 of the present Rule
111 refers only to the civil action arising from the crime, if such civil action
is reserved or filed before the commencement of the criminal action.
Thus, the offended party can file two separate suits for the same act or
omission. The first a criminal case where the civil action to recover civil
liability ex-delicto is deemed instituted, and the other a civil case for quasi-
delict - without violating the rule on non-forum shopping. The two cases
can proceed simultaneously and independently of each other. The
commencement or prosecution of the criminal action will not suspend the
civil action for quasi-delict. The only limitation is that the offended party
cannot recover damages twice for the same act or omission of the
defendant. In most cases, the offended party will have no reason to file a
second civil action since he cannot recover damages twice for the same
act or omission of the accused. In some instances, the accused may be
insolvent, necessitating the filing of another case against his employer or
guardians.
Similarly, the accused can file a civil action for quasi-delict for the same act
or omission he is accused of in the criminal case. This is expressly allowed
in paragraph 6, Section 1 of the present Rule 111 which states that the
counterclaim of the accused "may be litigated in a separate civil action."
This is only fair for two reasons. First, the accused is prohibited from
setting up any counterclaim in the civil aspect that is deemed instituted in
the criminal case. The accused is therefore forced to litigate separately his
counterclaim against the offended party. If the accused does not file a
separate civil action for quasi-delict, the prescriptive period may set in
since the period continues to run until the civil action for quasi-delict is
filed.
Second, the accused, who is presumed innocent, has a right to invoke
Article 2177 of the Civil Code, in the same way that the offended party can
avail of this remedy which is independent of the criminal action. To disallow
the accused from filing a separate civil action for quasi-delict, while
refusing to recognize his counterclaim in the criminal case, is to deny him
due process of law, access to the courts, and equal protection of the law.
Thus, the civil action based on quasi-delict filed separately by Casupanan
and Capitulo is proper. The order of dismissal by the MCTC of Civil Case No.
2089 on the ground of forum-shopping is erroneous.
We make this ruling aware of the possibility that the decision of the trial
court in the criminal case may vary with the decision of the trial court in
the independent civil action. This possibility has always been recognized
ever since the Civil Code introduced in 1950 the concept of an independent
civil action under Articles 32, 33, 34 and 2176 of the Code. But the law
37 | P a g e
itself, in Article 31 of the Code, expressly provides that the independent
civil action "may proceed independently of the criminal proceedings and
regardless of the result of the latter." In Azucena vs. Potenciano,13 the
Court declared:
"x x x. There can indeed be no other logical conclusion than this, for to
subordinate the civil action contemplated in the said articles to the result
of the criminal prosecution whether it be conviction or acquittal would
render meaningless the independent character of the civil action and the
clear injunction in Article 31 that this action 'may proceed independently of
the criminal proceedings and regardless of the result of the latter."
More than half a century has passed since the Civil Code introduced the
concept of a civil action separate and independent from the criminal action
although arising from the same act or omission. The Court, however, has
yet to encounter a case of conflicting and irreconcilable decisions of trial
courts, one hearing the criminal case and the other the civil action for
quasi-delict. The fear of conflicting and irreconcilable decisions may be
more apparent than real. In any event, there are sufficient remedies under
the Rules of Court to deal with such remote possibilities.
One final point. The Revised Rules on Criminal Procedure took effect on
December 1, 2000 while the MCTC issued the order of dismissal on
December 28, 1999 or before the amendment of the rules. The Revised
Rules on Criminal Procedure must be given retroactive effect considering
the well-settled rule that -
"x x x statutes regulating the procedure of the court will be construed as
applicable to actions pending and undetermined at the time of their
passage. Procedural laws are retroactive in that sense and to that
extent."14
WHEREFORE, the petition for review on certiorari is hereby GRANTED. The
Resolutions dated December 28, 1999 and August 24, 2000 in Special Civil
Action No. 17-C (99) are ANNULLED and Civil Case No. 2089 is REINSTATED.
SO ORDERED.
G.R. No. 119771 April 24, 1998
SAN ILDEFONSO LINES, INC., and EDUARDO JAVIER, petitioners,
vs.
COURT OF APPEALS (Thirteenth Division) and PIONEER INSURANCE
and SURETY CORPORATION, respondents.
At around 3:30 in the afternoon of June 24, 1991, a Toyota Lite Ace Van
being driven by its owner Annie U. Jao and a passenger bus of herein
petitioner San Ildefonso Lines, Inc. (hereafter, SILI) figured in a vehicular
mishap at the intersection of Julia Vargas Avenue and Rodriguez Lanuza
Avenue in Pasig, Metro Manila, totally wrecking the Toyota van and injuring
Ms. Jao and her two (2) passengers in the process.
A criminal case was thereafter filed with the Regional Trial Court of Pasig on
September 18, 1991 charging the driver of the bus, herein petitioner
Eduardo Javier, with reckless imprudence resulting in damage to property
with multiple physical injuries.
About four (4) months later, or on January 13, 1992, herein private
respondent Pioneer Insurance and Surety Corporation (PISC), as insurer of
the van and subrogee, filed a case for damages against petitioner SILI with
the Regional Trial Court of Manila, seeking to recover the sums it paid the
assured under a motor vehicle insurance policy as well as other damages,
totaling P564,500.00 (P454,000.00 as actual/compensatory damages;
P50,000.00 as exemplary damages; P50,000.00 as attorney's fees;
P10,000.00 as litigation expenses; and P500.00 as appearance fees.) 1
With the issues having been joined upon the filing of the petitioners'
answer to the complaint for damages and after submission by the parties
of their respective pre-trial briefs, petitioners filed on September 18, 1992
a Manifestation and Motion to Suspend Civil Proceedings grounded on the
pendency of the criminal case against petitioner Javier in the Pasig RTC and
the failure of respondent PISC to make a reservation to file a separate
damage suit in said criminal action. This was denied by the Manila Regional
Trial Court in its Order dated July 21, 1993, 2 ruling thus:
Answering the first question thus posed, the court holds that plaintiff may
legally institute the present civil action even in the absence of a
reservation in the criminal action. This is so because it falls among the very
exceptions to the rule cited by the movant.
It is true that the general rule is that once a criminal action has been
instituted, then civil action based thereon is deemed instituted together
with the criminal action, such that if the offended party did not reserve the
filing of the civil action when the criminal action was filed, then such filing
of the civil action is therefore barred; on the other hand, if there was such
reservation, still the civil action cannot be instituted until final judgment
has been rendered in the criminal action;
But, this rule (Section 2, Rule 111, Revised Rules of Court) is subject to
exemptions, the same being those provided for in Section 3 of the same
rule which states:
38 | P a g e

Sec. 3. When civil action may proceed independently. In the cases
provided for in Articles 32, 33, 34 and 2176 of the Civil Code of the
Philippines, the independent civil action which was been reserved may be
brought by the offended party, shall proceed independently of the criminal
action, and shall require only a preponderance of evidence.
Besides, the requirement in Section 2 of Rule 111 of the former Rules on
Criminal Procedure that there be a reservation in the criminal case of the
right to institute an independent civil action has been declared as not in
accordance with law. It is regarded as an unauthorized amendment to our
substantive law, i.e., the Civil Code which does not require such
reservation. In fact, the reservation of the right to file an independent civil
action has been deleted from Section 2, Rule 111 of the 1985 Rules on
Criminal Procedure, in consonance with the decisions of this Court
declaring such requirement of a reservation as ineffective. (Bonite vs.
Zosa, 162 SCRA 180).
Further, the Court rules that a subrogee-plaintiff may institute and
prosecute the civil action, it being allowed by Article 2207 of the Civil
Code.
After their motion for reconsideration of said July 21, 1993 Order was
denied, petitioners elevated the matter to this Court via petition for
certiorari which was, however, referred to public respondent Court of
Appeals for disposition. On February 24, 1995, a decision adverse to
petitioners once again was rendered by respondent court, upholding the
assailed Manila Regional Trial Court Order in this wise:
A separate civil action lies against the offender in a criminal act, whether
or not he is criminally prosecuted and found guilty or acquitted, provided
that the offended party is not allowed (if the tortfeasor is actually charged
also criminally), to recover damages on both scores, and would be entitled
in such eventuality only to the bigger award of the two, assuming the
awards made in the two cases vary.
To subordinate the civil action contemplated in the said articles to the
result of the criminal prosecution whether it be conviction or acquittal
would render meaningless the independent character of the civil action
and the clear injunction in Art. 31, that this action may proceed
independently of the criminal proceedings and regardless of the result of
the latter.
In Yakult Phil. vs. CA, the Supreme Court said:
Even if there was no reservation in the criminal case and that the civil
action was not filed before the filing of the criminal action but before the
prosecution presented evidence in the criminal action, and the judge
handling the criminal case was informed thereof, then the actual filing of
the civil action is even far better than a compliance with the requirement
of an express reservation that should be made by the offended party
before the prosecution presented its evidence.
The purpose of this rule requiring reservation is to prevent the offended
party from recovering damages twice for the same act or omission.
Substantial compliance with the reservation requirement may, therefore,
be made by making a manifestation in the criminal case that the private
respondent has instituted a separate and independent civil action for
damages.
Oft-repeated is the dictum that courts should not place undue importance
on technicalities when by so doing substantial justice is sacrificed. While
the rules of procedure require adherence, it must be remembered that said
rules of procedure are intended to promote, not defeat, substantial justice,
and therefore, they should not be applied in a very rigid and technical
sense.
Hence, this petition for review after a motion for reconsideration of said
respondent court judgment was denied.
The two (2) crucial issues to be resolved, as posited by petitioners, are:
1) If a criminal case was filed, can an independent civil action based
on quasi-delict under Article 2176 of the Civil Code be filed if no
reservation was made in the said criminal case?
2) Can a subrogee of an offended party maintain an independent civil
action during the pendency of a criminal action when no reservation of the
right to file an independent civil action was made in the criminal action and
despite the fact that the private complainant is actively participating
through a private prosecutor in the aforementioned criminal case?
We rule for petitioners.
On the chief issue of "reservation", at the fore is Section 3, Rule 111 of the
Rules of Court which reads:
Sec. 3. When civil action may proceed independently. In the cases
provided for in Articles 32, 33, 34 and 2176 of the Civil Code of the
Philippines, the independent civil action which has been reserved may be
brought by the offended party, shall proceed independently of the criminal
action, and shall require only a preponderance of evidence.
39 | P a g e
There is no dispute that these so-called "independent civil actions" based
on the aforementioned Civil Code articles are the exceptions to the
primacy of the criminal action over the civil action as set forth in Section 2
of Rule 111. 3 However, it is easily deducible from the present wording of
Section 3 as brought about by the 1988 amendments to the Rules on
Criminal Procedure particularly the phrase ". . . which has been
reserved" that the "independent" character of these civil actions does
not do away with the reservation requirement. In other words, prior
reservation is a condition sine qua non before any of these independent
civil actions can be instituted and thereafter have a continuous
determination apart from or simultaneous with the criminal action. That
this should now be the controlling procedural rule is confirmed by no less
than retired Justice Jose Y. Feria, remedial law expert and a member of the
committee which drafted the 1988 amendments, whose learned
explanation on the matter was aptly pointed out by petitioners, to wit:
The 1988 amendment expands the scope of the civil action which his
deemed impliedly instituted with the criminal action unless waived,
reserved or previously instituted. . . .
Under the present Rule as amended, such a civil action includes not only
recovery of indemnity under the Revised Penal Code and damages under
Articles 32, 33, 34 of the Civil Code of the Philippines, but also damages
under Article 2176 of the said code. . . .
Objections were raised to the inclusion in this Rule of quasi-delicts under
Article 2176 of the Civil Code of the Philippines. However, in view of Article
2177 of the said code which provides that the offended party may not
recover twice for the same act or omission of the accused, and in line with
the policy of avoiding multiplicity of suits, these objections were overruled.
In any event, the offended party is not precluded from filing a civil action to
recover damages arising from quasi-delict before the institution of the
criminal action, or from reserving his right to file such a separate civil
action, just as he is not precluded from filing a civil action for damages
under Articles 32, 33 and 34 before the institution of the criminal action, or
from reserving his right to file such a separate civil action. It is only in
those cases where the offended party has not previously filed a civil action
or has not reserved his right to file a separate civil action that his civil
action is deemed impliedly instituted with the criminal action.
It should be noted that while it was ruled in Abella vs. Marave (57 SCRA
106) that a reservation of the right to file an independent civil action is not
necessary, such a reservation is necessary under the amended rule.
Without such reservation, the civil action is deemed impliedly instituted
with the criminal action, unless previously waived or instituted. (Emphasis
ours, Justice Jose Y. Feria [Ret.], 1988 Amendments to the 1985 Rules on
Criminal Procedure, a pamphlet, published by Central Lawbook Publishing
Co., Inc., Philippine Legal Studies, Series No. 3, 5-6). 4
Sharing the same view on the indispensability of a prior reservation is Mr.
Justice Florenz D. Regalado, whose analysis of the historical changes in
Rule 111 since the 1964 Rules of Court is equally illuminating. Thus,
1. Under Rule 111 of the 1964 Rules of Court, the civil liability arising
from the offense charged was impliedly instituted with the criminal action,
unless such civil action was expressly waived or reserved. The offended
party was authorized to bring an independent civil action in the cases
provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code provided
such right was reserved.
In the 1985 Rules on Criminal Procedure, the same Rule 111 thereof
reiterated said provision on the civil liability arising from the offense
charged. The independent civil actions, however, were limited to the cases
provided for in Articles 32, 33 and 34 of the Civil Code, obviously because
the actions contemplated in Articles 31 and 2177 of said Code are not
liabilities ex-delicto. Furthermore, no reservation was required in order the
civil actions in said Articles 32, 33 and 34 may be pursued separately.
2. The present amendments introduced by the Supreme Court have
the following notable features on this particular procedural aspect, viz:
a. The civil action which is impliedly instituted with the criminal
action, barring a waiver, reservation or prior institution thereof, need not
arise from the offense charged, as the phrase "arising from the offense
charged" which creates that nexus has been specifically eliminated.
b. The independent civil actions contemplated in the present Rule 111
include the quasi-delicts provided for in Art. 2176 of the Civil Code, in
addition to the cases provided in Arts. 32, 33 and 34 thereof. It is
necessary, however, that the civil liability under all the said articles arise
"from the same act or omission of the accused." Furthermore, a reservation
of the right to institute these separate civil actions is again required
otherwise, said civil actions are impliedly instituted with the criminal
action, unless the former are waived or filed ahead of the criminal action.
(Emphasis supplied.) 5
In fact, a deeper reading of the "Yakult Phils. vs. CA" case 6 relied upon by
respondent court reveals an acknowledgment of the reservation
requirement. After recognizing that the civil case instituted by private
respondent therein Roy Camaso (represented by his father David Camaso)
against petitioner Yakult Phils. (the owner of the motorcycle that
sideswiped Roy Camaso, only five years old at the time of the accident)
40 | P a g e
and Larry Salvado (the driver of the motorcycle) during the pendency of
the criminal case against Salvado for reckless imprudence resulting to
slight physical injuries, as one based on tort, this Court said:
The civil liability sought arising from the act or omission of the accused in
this case is a quasi-delict as defined under Article 2176 of the Civil Code as
follows:
purpose of the reservation is, to borrow the words of the Court in "Caos v.
Peralta": 8
. . . to avoid multiplicity of suits, to guard against oppression and abuse, to
prevent delays, to clear congested dockets, to simplify the work of the trial
court; in short, the attainment of justice with the least expense and
vexation to the parties-litigants.

xxx xxx xxx
The aforecited rule [referring to the amended Section l, Rule 111]
requiring, such previous reservation also covers quasi-delict as defined
under Article 2176 of the Civil Code arising from the same act or omission
of the accused (emphasis supplied).
But what prompted the Court to validate the institution and non-
suspension of the civil case involved in "Yakult" was the peculiar facts
attendant therein. Thus,
Although the separate civil action filed in this case was without previous
reservation in the criminal case, nevertheless since it was instituted before
the prosecution presented evidence in the criminal action, and the judge
handling the criminal case was informed thereof, then the actual filing of
the civil action is even far better than a compliance with the requirement
of an express reservation that should be made by the offended party
before the prosecution presents its evidence.
Clearly then, private respondent PISC, as subrogee under Article 2207 of
the Civil Code, 9 is not exempt from the reservation requirement with
respect to its damages suit based on quasi-delict arising from the same act
or ommission of petitioner Javier complained of in the criminal case. As
private respondent PISC merely stepped into the shoes of Ms. Jao (as
owner of the insured Toyota van), then it is bound to observe the
procedural requirements which Ms. Jao ought to follow had she herself
instituted the civil case.
WHEREFORE, premises considered, the assailed decision of the Court of
Appeals dated February 24, 1995 and the Resolution dated April 3, 1995
denying the motion for reconsideration thereof are hereby REVERSED and
SET ASIDE. The "MANIFESTATION AND MOTION TO SUSPEND CIVIL
PROCEEDINGS" filed by petitioners is GRANTED.
SO ORDERED.

The distinct factual scenario in "Yakult" simply does not obtain in this case.
No satisfactory proof exists to show that private respondent PISC's damage
suit was instituted before the prosecution presented its evidence in the
criminal case pending in the Pasig Regional Trial Court. Neither is there any
indication that the judge presiding over the criminal action has been made
aware of the civil case. It is in this light that reliance on the "Yakult" case is
indeed misplaced.

Now that the necessity of a prior reservation is the standing rule that shall
govern the institution of the independent civil actions referred to in Rule
111 of the Rules of Court, past pronouncements that view the reservation
requirement as an "unauthorized amendment" to substantive law i.e.,
the Civil Code, should no longer be controlling. There must be a renewed
adherence to the time-honored dictum that procedural rules are designed,
not to defeat, but to safeguard the ends of substantial justice. And for this
noble reason, no less than the Constitution itself has mandated this Court
to promulgate rules concerning the enforcement of rights with the end in
view of providing a simplified and inexpensive procedure for the speedy
disposition of cases which should not diminish, increase or modify
substantive rights. 7 Far from altering substantive rights, the primary
41 | P a g e

G.R. No. 157547 February 23, 2011
HEIRS OF EDUARDO SIMON, Petitioners,
vs.
ELVIN* CHAN AND THE COURT OF APPEALS, Respondent.
There is no independent civil action to recover the civil liability arising from
the issuance of an unfunded check prohibited and punished under Batas
Pambansa Bilang 22 (BP 22).
Antecedents
On July 11, 1997, the Office of the City Prosecutor of Manila filed in the
Metropolitan Trial Court of Manila (MeTC) an information charging the late
Eduardo Simon (Simon) with a violation of BP 22, docketed as Criminal
Case No. 275381 entitled People v. Eduardo Simon. The accusatory portion
reads:
That sometime in December 1996 in the City of Manila, Philippines, the
said accused, did then and there willfully, unlawfully and feloniously make
or draw and issue to Elvin Chan to apply on account or for value Landbank
Check No. 0007280 dated December 26, 1996 payable to cash in the
amount of P336,000.00 said accused well knowing that at the time of issue
she/he/they did not have sufficient funds in or credit with the drawee bank
for payment of such check in full upon its presentment, which check when
presented for payment within ninety (90) days from the date thereof was
subsequently dishonored by the drawee bank for Account Closed and
despite receipt of notice of such dishonor, said accused failed to pay said
Elvin Chan the amount of the check or to make arrangement for full
payment of the same within five (5) banking days after receiving said
notice.
CONTRARY TO LAW. 1
More than three years later, or on August 3, 2000, respondent Elvin Chan
commenced in the MeTC in Pasay City a civil action for the collection of the
principal amount of P336,000.00, coupled with an application for a writ of
preliminary attachment (docketed as Civil Case No. 915-00).2 He alleged in
his complaint the following:
xxx
2. Sometime in December 1996 defendant employing fraud, deceit, and
misrepresentation encashed a check dated December 26, 1996 in the
amount of P336,000.00 to the plaintiff assuring the latter that the check is
duly funded and that he had an existing account with the Land Bank of the
Philippines, xerox copy of the said check is hereto attached as Annex "A";
3. However, when said check was presented for payment the same was
dishonored on the ground that the account of the defendant with the Land
Bank of the Philippines has been closed contrary to his representation that
he has an existing account with the said bank and that the said check was
duly funded and will be honored when presented for payment;
4. Demands had been made to the defendant for him to make good the
payment of the value of the check, xerox copy of the letter of demand is
hereto attached as Annex "B", but despite such demand defendant refused
and continues to refuse to comply with plaintiffs valid demand;
5. Due to the unlawful failure of the defendant to comply with the plaintiffs
valid demands, plaintiff has been compelled to retain the services of
counsel for which he agreed to pay as reasonable attorneys fees the
amount of P50,000.00 plus additional amount of P2,000.00 per
appearance.
ALLEGATION IN SUPPORT OF PRAYER
FOR PRELIMINARY ATTACHMENT
6. The defendant as previously alleged has been guilty of fraud in
contracting the obligation upon which this action is brought and that there
is no sufficient security for the claims sought in this action which fraud
consist in the misrepresentation by the defendant that he has an existing
account and sufficient funds to cover the check when in fact his account
was already closed at the time he issued a check;
7. That the plaintiff has a sufficient cause of action and this action is one
which falls under Section 1, sub-paragraph (d), Rule 57 of the Revised
Rules of Court of the Philippines and the amount due the plaintiff is as
42 | P a g e
much as the sum for which the plaintiff seeks the writ of preliminary
attachment;
8. That the plaintiff is willing and able to post a bond conditioned upon the
payment of damages should it be finally found out that the plaintiff is not
entitled to the issuance of a writ of preliminary attachment.3
On August 9, 2000, the MeTC in Pasay City issued a writ of preliminary
attachment, which was implemented on August 17, 2000 through the
sheriff attaching a Nissan vehicle of Simon.4
On August 17, 2000, Simon filed an urgent motion to dismiss with
application to charge plaintiffs attachment bond for damages,5 pertinently
averring:
xxx
On the ground of litis pendentia, that is, as a consequence of the pendency
of another action between the instant parties for the same cause before
the Metropolitan Trial Court of Manila, Branch X (10) entitled "People of the
Philippines vs. Eduardo Simon", docketed thereat as Criminal Case No.
275381-CR, the instant action is dismissable under Section 1, (e), Rule 16,
1997 Rules of Civil Procedure, xxx
xxx
While the instant case is civil in nature and character as
contradistinguished from the said Criminal Case No. 915-00 in the
Metropolitan Trial Court of Manila, Branch X (10), the basis of the instant
civil action is the herein plaintiffs criminal complaint against defendant
arising from a charge of violation of Batas Pambansa Blg. 22 as a
consequence of the alleged dishonor in plaintiffs hands upon presentment
for payment with drawee bank a Land Bank Check No. 0007280 dated
December 26, 1996 in the amount of P336,000- drawn allegedly issued to
plaintiff by defendant who is the accused in said case, a photocopy of the
Criminal information filed by the Assistant City Prosecutor of Manila on June
11, 1997 hereto attached and made integral part hereof as Annex "1".
It is our understanding of the law and the rules, that, "when a criminal
action is instituted, the civil action for recovery of civil liability arising from
the offense charged is impliedly instituted with the criminal action, unless
the offended party expressly waives the civil action or reserves his right to
institute it separately xxx.
On August 29, 2000, Chan opposed Simons urgent motion to dismiss with
application to charge plaintiffs attachment bond for damages, stating:
1. The sole ground upon which defendant seeks to dismiss plaintiffs
complaint is the alleged pendency of another action between the same
parties for the same cause, contending among others that the pendency of
Criminal Case No. 275381-CR entitled "People of the Philippines vs.
Eduardo Simon" renders this case dismissable;
2. The defendant further contends that under Section 1, Rule 111 of the
Revised Rules of Court, the filing of the criminal action, the civil action for
recovery of civil liability arising from the offense charged is impliedly
instituted with the criminal action which the plaintiff does not contest;
however, it is the submission of the plaintiff that an implied reservation of
the right to file a civil action has already been made, first, by the fact that
the information for violation of B.P. 22 in Criminal Case No. 2753841 does
not at all make any allegation of damages suffered by the plaintiff nor is
there any claim for recovery of damages; on top of this the plaintiff as
private complainant in the criminal case, during the presentation of the
prosecution evidence was not represented at all by a private prosecutor
such that no evidence has been adduced by the prosecution on the
criminal case to prove damages; all of these we respectfully submit
demonstrate an effective implied reservation of the right of the plaintiff to
file a separate civil action for damages;
3. The defendant relies on Section 3 sub-paragraph (a) Rule 111 of the
Revised Rules of Court which mandates that after a criminal action has
been commenced the civil action cannot be instituted until final judgment
has been rendered in the criminal action; however, the defendant
overlooks and conveniently failed to consider that under Section 2, Rule
111 which provides as follows:
In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil
Code of the Philippines, an independent civil action entirely separate and
distinct from the criminal action, may be brought by the injured party
during the pendency of criminal case provided the right is reserved as
required in the preceding section. Such civil action shall proceed
independently of the criminal prosecution, and shall require only a
preponderance of evidence.
In as much as the case is one that falls under Art. 33 of the Civil Code of
the Philippines as it is based on fraud, this action therefore may be
prosecuted independently of the criminal action;
4. In fact we would even venture to state that even without any reservation
at all of the right to file a separate civil action still the plaintiff is authorized
to file this instant case because the plaintiff seeks to enforce an obligation
which the defendant owes to the plaintiff by virtue of the negotiable
instruments law. The plaintiff in this case sued the defendant to enforce his
liability as drawer in favor of the plaintiff as payee of the check. Assuming
43 | P a g e
the allegation of the defendant of the alleged circumstances relative to the
issuance of the check, still when he delivered the check payable to bearer
to that certain Pedro Domingo, as it was payable to cash, the same may be
negotiated by delivery by who ever was the bearer of the check and such
negotiation was valid and effective against the drawer;
5. Indeed, assuming as true the allegations of the defendant regarding the
circumstances relative to the issuance of the check it would be entirely
impossible for the plaintiff to have been aware that such check was
intended only for a definite person and was not negotiable considering that
the said check was payable to bearer and was not even crossed;
6. We contend that what cannot be prosecuted separate and apart from
the criminal case without a reservation is a civil action arising from the
criminal offense charged. However, in this instant case since the liability of
the defendant are imposed and the rights of the plaintiff are created by the
negotiable instruments law, even without any reservation at all this instant
action may still be prosecuted;
7. Having this shown, the merits of plaintiffs complaint the application for
damages against the bond is totally without any legal support and perforce
should be dismissed outright.6
On October 23, 2000, the MeTC in Pasay City granted Simons urgent
motion to dismiss with application to charge plaintiffs attachment bond for
damages,7 dismissing the complaint of Chan because:
xxx
After study of the arguments of the parties, the court resolves to GRANT
the Motion to Dismiss and the application to charge plaintiffs bond for
damages.
For "litis pendentia" to be a ground for the dismissal of an action, the
following requisites must concur: (a) identity of parties or at least such as
to represent the same interest in both actions; (b) identity of rights
asserted and relief prayed for, the relief being founded on the same acts;
and (c) the identity in the two (2) cases should be such that the judgment,
which may be rendered in one would, regardless of which party is
successful, amount to res judicata in the other. xxx
A close perusal of the herein complaint denominated as "Sum of Money"
and the criminal case for violation of BP Blg. 22 would readily show that
the parties are not only identical but also the cause of action being
asserted, which is the recovery of the value of Landbank Check No.
0007280 in the amount of P336,000.00. In both civil and criminal cases,
the rights asserted and relief prayed for, the reliefs being founded on the
same facts, are identical.
Plaintiffs claim that there is an effective implied waiver of his right to
pursue this civil case owing to the fact that there was no allegation of
damages in BP Blg. 22 case and that there was no private prosecutor
during the presentation of prosecution evidence is unmeritorious. It is basic
that when a complaint or criminal Information is filed, even without any
allegation of damages and the intention to prove and claim them, the
offended party has the right to prove and claim for them, unless a waiver
or reservation is made or unless in the meantime, the offended party has
instituted a separate civil action. xxx The over-all import of the said
provision conveys that the waiver which includes indemnity under the
Revised Penal Code, and damages arising under Articles 32, 33, and 34 of
the Civil Code must be both clear and express. And this must be logically
so as the primordial objective of the Rule is to prevent the offended party
from recovering damages twice for the same act or omission of the
accused.
Indeed, the evidence discloses that the plaintiff did not waive or made a
reservation as to his right to pursue the civil branch of the criminal case for
violation of BP Blg. 22 against the defendant herein. To the considered view
of this court, the filing of the instant complaint for sum of money is indeed
legally barred. The right to institute a separate civil action shall be made
before the prosecution starts to present its evidence and under
circumstances affording the offended party a reasonable opportunity to
make such reservation. xxx
Even assuming the correctness of the plaintiffs submission that the herein
case for sum of money is one based on fraud and hence falling under
Article 33 of the Civil Code, still prior reservation is required by the Rules,
to wit:
"In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil
Code of the Philippines, an independent civil action entirely separate and
distinct from the criminal action, may be brought by the injured party
during the pendency of criminal case provided the right is reserved as
required in the preceding section. Such civil action shall proceed
independently of the criminal prosecution, and shall require only a
preponderance of evidence."
xxx
WHEREFORE, premises considered, the court resolves to:
1. Dismiss the instant complaint on the ground of "litis pendentia";
44 | P a g e
2. Dissolve/Lift the Writ of Attachment issued by this court on August 14,
2000;
3. Charge the plaintiffs bond the amount of P336,000.00 in favor of the
defendant for the damages sustained by the latter by virtue of the
implementation of the writ of attachment;
4. Direct the Branch Sheriff of this Court to RESTORE with utmost dispatch
to the defendants physical possession the vehicle seized from him on
August 16, 2000; and
5. Direct the plaintiff to pay the defendant the sum of P5,000.00 by way of
attorneys fees.
SO ORDERED.
Chans motion for reconsideration was denied on December 20, 2000,8 viz:
Considering that the plaintiffs arguments appear to be a mere repetition of
his previous submissions, and which submissions this court have already
passed upon; and taking into account the inapplicability of the ratio
decidendi in the Tactaquin vs. Palileo case which the plaintiff cited as
clearly in that case, the plaintiff therein expressly made a reservation to
file a separate civil action, the Motion for Reconsideration is DENIED for
lack of merit.
SO ORDERED.
On July 31, 2001, the Regional Trial Court (RTC) in Pasay City upheld the
dismissal of Chans complaint, disposing:9
WHEREFORE, finding no error in the appealed decision, the same is hereby
AFFIRMED in toto.
SO ORDERED.
On September 26, 2001, Chan appealed to the Court of Appeals (CA) by
petition for review,10 challenging the propriety of the dismissal of his
complaint on the ground of litis pendentia.
In his comment, 11 Simon countered that Chan was guilty of bad faith and
malice in prosecuting his alleged civil claim twice in a manner that caused
him (Simon) utter embarrassment and emotional sufferings; and that the
dismissal of the civil case because of the valid ground of litis pendentia
based on Section 1 (e), Rule 16 of the 1997 Rules of Civil Procedure was
warranted.
On June 25, 2002, the CA promulgated its assailed decision,12 overturning
the RTC, viz:
xxx
As a general rule, an offense causes two (2) classes of injuries. The first is
the social injury produced by the criminal act which is sought to be
repaired through the imposition of the corresponding penalty, and the
second is the personal injury caused to the victim of the crime which injury
is sought to be compensated through indemnity which is also civil in
nature. Thus, "every person criminally liable for a felony is also civilly
liable."
The offended party may prove the civil liability of an accused arising from
the commission of the offense in the criminal case since the civil action is
either deemed instituted with the criminal action or is separately
instituted.
Rule 111, Section 1 of the Revised Rules of Criminal Procedure, which
became effective on December 1, 2000, provides that:
(a) When a criminal action is instituted, the civil action for the recovery of
civil liability arising from the offense charged shall be deemed instituted
with the criminal action unless the offended party waives the civil action,
reserves the right to institute it separately or institute the civil action prior
to the criminal action.
Rule 111, Section 2 further states:
After the criminal action has been commenced, the separate civil action
arising therefrom cannot be instituted until final judgment has been
entered in the criminal action.
However, with respect to civil actions for recovery of civil liability under
Articles 32, 33, 34 and 2176 of the Civil Code arising from the same act or
omission, the rule has been changed.
In DMPI Employees Credit Association vs. Velez, the Supreme Court
pronounced that only the civil liability arising from the offense charged is
deemed instituted with the criminal action unless the offended party
waives the civil action, reserves his right to institute it separately, or
institutes the civil action prior to the criminal action. Speaking through
Justice Pardo, the Supreme Court held:
"There is no more need for a reservation of the right to file the
independent civil action under Articles 32, 33, 34 and 2176 of the Civil
Code of the Philippines. The reservation and waiver referred to refers only
45 | P a g e
to the civil action for the recovery of the civil liability arising from the
offense charged. This does not include recovery of civil liability under
Articles 32, 33, 34, and 2176 of the Civil Code of the Philippines arising
from the same act or omission which may be prosecuted separately
without a reservation".
Rule 111, Section 3 reads:
Sec. 3. When civil action may proceed independently. In the cases provided
in Articles 32, 33, 34, and 2176 of the Civil Code of the Philippines, the
independent civil action may be brought by the offended party. It shall
proceed independently of the criminal action and shall require only a
preponderance of evidence. In no case, however, may the offended party
recover damages twice for the same act or omission charged in the
criminal action.
The changes in the Revised Rules on Criminal Procedure pertaining to
independent civil actions which became effective on December 1, 2000 are
applicable to this case.
Procedural laws may be given retroactive effect to actions pending and
undetermined at the time of their passage. There are no vested rights in
the rules of procedure. xxx
Thus, Civil Case No. CV-94-124, an independent civil action for damages on
account of the fraud committed against respondent Villegas under Article
33 of the Civil Code, may proceed independently even if there was no
reservation as to its filing."
It must be pointed that the abovecited case is similar with the instant suit.
The complaint was also brought on allegation of fraud under Article 33 of
the Civil Code and committed by the respondent in the issuance of the
check which later bounced. It was filed before the trial court, despite the
pendency of the criminal case for violation of BP 22 against the
respondent. While it may be true that the changes in the Revised Rules on
Criminal Procedure pertaining to independent civil action became effective
on December 1, 2000, the same may be given retroactive application and
may be made to apply to the case at bench, since procedural rules may be
given retroactive application. There are no vested rights in the rules of
procedure.
In view of the ruling on the first assigned error, it is therefore an error to
adjudge damages in favor of the petitioner.
WHEREFORE, the petition is hereby GRANTED. The Decision dated July 13,
2001 rendered by the Regional Trial Court of Pasay City, Branch 108
affirming the dismissal of the complaint filed by petitioner is hereby
REVERSED and SET ASIDE. The case is hereby REMANDED to the trial court
for further proceedings.
SO ORDERED.
On March 14, 2003, the CA denied Simons motion for reconsideration.13
Hence, this appeal, in which the petitioners submit that the CA erroneously
premised its decision on the assessment that the civil case was an
independent civil action under Articles 32, 33, 34, and 2176 of the Civil
Code; that the CAs reliance on the ruling in DMPI Employees Credit
Cooperative Inc. v. Velez14 stretched the meaning and intent of the ruling,
and was contrary to Sections 1 and 2 of Rule 111 of the Rules of Criminal
Procedure; that this case was a simple collection suit for a sum of money,
precluding the application of Section 3 of Rule 111 of the Rules of Criminal
Procedure.15
In his comment,16 Chan counters that the petition for review should be
denied because the petitioners used the wrong mode of appeal; that his
cause of action, being based on fraud, was an independent civil action; and
that the appearance of a private prosecutor in the criminal case did not
preclude the filing of his separate civil action.
Issue
The lone issue is whether or not Chans civil action to recover the amount
of the unfunded check (Civil Case No. 915-00) was an independent civil
action.
Ruling
The petition is meritorious.
A
Applicable Law and Jurisprudence on the
Propriety of filing a separate civil action based on BP 22
The Supreme Court has settled the issue of whether or not a violation of BP
22 can give rise to civil liability in Banal v. Judge Tadeo, Jr.,17 holding:
xxx
Article 20 of the New Civil Code provides:
46 | P a g e
Every person who, contrary to law, wilfully or negligently causes damage
to another, shall indemnify the latter for the same.
Regardless, therefore, of whether or not a special law so provides,
indemnification of the offended party may be had on account of the
damage, loss or injury directly suffered as a consequence of the wrongful
act of another. The indemnity which a person is sentenced to pay forms an
integral part of the penalty imposed by law for the commission of a crime
(Quemel v. Court of Appeals, 22 SCRA 44, citing Bagtas v. Director of
Prisons, 84 Phil 692). Every crime gives rise to a penal or criminal action
for the punishment of the guilty party, and also to civil action for the
restitution of the thing, repair of the damage, and indemnification for the
losses (United States v. Bernardo, 19 Phil 265).
xxx
Civil liability to the offended party cannot thus be denied. The payee of the
check is entitled to receive the payment of money for which the worthless
check was issued. Having been caused the damage, she is entitled to
recompense.
Surely, it could not have been the intendment of the framers of Batas
Pambansa Blg. 22 to leave the offended private party defrauded and
empty-handed by excluding the civil liability of the offender, giving her
only the remedy, which in many cases results in a Pyrrhic victory, of having
to file a separate civil suit. To do so may leave the offended party unable to
recover even the face value of the check due her, thereby unjustly
enriching the errant drawer at the expense of the payee. The protection
which the law seeks to provide would, therefore, be brought to naught.
xxx
However, there is no independent civil action to recover the value of a
bouncing check issued in contravention of BP 22. This is clear from Rule
111 of the Rules of Court, effective December 1, 2000, which relevantly
provides:
Section 1. Institution of criminal and civil actions. - (a) When a criminal
action is instituted, the civil action for the recovery of civil liability arising
from the offense charged shall be deemed instituted with the criminal
action unless the offended party waives the civil action, reserves the right
to institute it separately or institutes the civil action prior to the criminal
action.
The reservation of the right to institute separately the civil action shall be
made before the prosecution starts presenting its evidence and under
circumstances affording the offended party a reasonable opportunity to
make such reservation.
When the offended party seeks to enforce civil liability against the accused
by way of moral, nominal, temperate, or exemplary damages without
specifying the amount thereof in the complaint or information, the filing
fees therefor shall constitute a first lien on the judgment awarding such
damages.
Where the amount of damages, other than actual, is specified in the
complaint or information, the corresponding filing fees shall be paid by the
offended party upon the filing thereof in court.
Except as otherwise provided in these Rules, no filing fees shall be required
for actual damages.
No counterclaim, cross-claim or third-party complaint may be filed by the
accused in the criminal case, but any cause of action which could have
been the subject thereof may be litigated in a separate civil action. (1a)
(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be
deemed to include the corresponding civil action. No reservation to file
such civil action separately shall be allowed.18
Upon filing of the aforesaid joint criminal and civil actions, the offended
party shall pay in full the filing fees based on the amount of the check
involved, which shall be considered as the actual damages claimed. Where
the complaint or information also seeks to recover liquidated, moral,
nominal, temperate or exemplary damages, the offended party shall pay
the filing fees based on the amounts alleged therein. If the amounts are
not so alleged but any of these damages are subsequently awarded by the
court, the filing fees based on the amount awarded shall constitute a first
lien on the judgment.
Where the civil action has been filed separately and trial thereof has not
yet commenced, it may be consolidated with the criminal action upon
application with the court trying the latter case. If the application is
granted, the trial of both actions shall proceed in accordance with section 2
of the Rule governing consolidation of the civil and criminal actions.
Section 3. When civil action may proceed independently. In the cases
provided in Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines,
the independent civil action may be brought by the offended party. It shall
proceed independently of the criminal action and shall require only a
preponderance of evidence. In no case, however, may the offended party
recover damages twice for the same act or omission charged in the
criminal action.
47 | P a g e

The aforequoted provisions of the Rules of Court, even if not yet in effect
when Chan commenced Civil Case No. 915-00 on August 3, 2000, are
nonetheless applicable. It is axiomatic that the retroactive application of
procedural laws does not violate any right of a person who may feel
adversely affected, nor is it constitutionally objectionable. The reason is
simply that, as a general rule, no vested right may attach to, or arise from,
procedural laws.19 Any new rules may validly be made to apply to cases
pending at the time of their promulgation, considering that no party to an
action has a vested right in the rules of procedure,20 except that in
criminal cases, the changes do not retroactively apply if they permit or
require a lesser quantum of evidence to convict than what is required at
the time of the commission of the offenses, because such retroactivity
would be unconstitutional for being ex post facto under the Constitution.21
Moreover, the application of the rule would not be precluded by the
violation of any assumed vested right, because the new rule was adopted
from Supreme Court Circular 57-97 that took effect on November 1, 1997.
Supreme Court Circular 57-97 states:
Any provision of law or Rules of Court to the contrary notwithstanding, the
following rules and guidelines shall henceforth be observed in the filing
and prosecution of all criminal cases under Batas Pambansa Blg. 22 which
penalizes the making or drawing and issuance of a check without funds or
credit:
1. The criminal action for violation of Batas Pambansa Blg. 22 shall be
deemed to necessarily include the corresponding civil action, and no
reservation to file such civil action separately shall be allowed or
recognized.22
2. Upon the filing of the aforesaid joint criminal and civil actions, the
offended party shall pay in full the filing fees based upon the amount of the
check involved which shall be considered as the actual damages claimed,
in accordance with the schedule of fees in Section 7 (a) and Section 8 (a),
Rule 141 of the Rules of Court as last amended by Administrative Circular
No. 11-94 effective August 1, 1994. Where the offended party further seeks
to enforce against the accused civil liability by way of liquidated, moral,
nominal, temperate or exemplary damages, he shall pay the corresponding
filing fees therefor based on the amounts thereof as alleged either in the
complaint or information. If not so alleged but any of these damages are
subsequently awarded by the court, the amount of such fees shall
constitute a first lien on the judgment.
3. Where the civil action has heretofore been filed separately and trial
thereof has not yet commenced, it may be consolidated with the criminal
action upon application with the court trying the latter case. If the
application is granted, the trial of both actions shall proceed in accordance
with the pertinent procedure outlined in Section 2 (a) of Rule 111
governing the proceedings in the actions as thus consolidated.
4. This Circular shall be published in two (2) newspapers of general
circulation and shall take effect on November 1, 1997.
The reasons for issuing Circular 57-97 were amply explained in Hyatt
Industrial Manufacturing Corporation v. Asia Dynamic Electrix
Corporation,23 thus:
xxx
We agree with the ruling of the Court of Appeals that upon filing of the
criminal cases for violation of B.P. 22, the civil action for the recovery of the
amount of the checks was also impliedly instituted under Section 1(b) of
Rule 111 of the 2000 Rules on Criminal Procedure. Under the present
revised Rules, the criminal action for violation of B.P. 22 shall be deemed to
include the corresponding civil action. The reservation to file a separate
civil action is no longer needed. The Rules provide:
Section 1. Institution of criminal and civil actions.
(a) x x x
(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be
deemed to include the corresponding civil action. No reservation to file
such civil action separately shall be allowed.
Upon filing of the aforesaid joint criminal and civil actions, the offended
party shall pay in full the filing fees based on the amount of the check
involved, which shall be considered as the actual damages claimed. Where
the complaint or information also seeks to recover liquidated, moral,
nominal, temperate or exemplary damages, the offended party shall pay
additional filing fees based on the amounts alleged therein. If the amounts
are not so alleged but any of these damages are subsequently awarded by
the court, the filing fees based on the amount awarded shall constitute a
first lien on the judgment.
Where the civil action has been filed separately and trial thereof has not
yet commenced, it may be consolidated with the criminal action upon
application with the court trying the latter case. If the application is
granted, the trial of both actions shall proceed in accordance with section 2
of this Rule governing consolidation of the civil and criminal
actions.1avvphi1
48 | P a g e
The foregoing rule was adopted from Circular No. 57-97 of this Court. It
specifically states that the criminal action for violation of B.P. 22 shall be
deemed to include the corresponding civil action. It also requires the
complainant to pay in full the filing fees based on the amount of the check
involved. Generally, no filing fees are required for criminal cases, but
because of the inclusion of the civil action in complaints for violation of B.P.
22, the Rules require the payment of docket fees upon the filing of the
complaint. This rule was enacted to help declog court dockets which are
filled with B.P. 22 cases as creditors actually use the courts as collectors.
Because ordinarily no filing fee is charged in criminal cases for actual
damages, the payee uses the intimidating effect of a criminal charge to
collect his credit gratis and sometimes, upon being paid, the trial court is
not even informed thereof. The inclusion of the civil action in the criminal
case is expected to significantly lower the number of cases filed before the
courts for collection based on dishonored checks. It is also expected to
expedite the disposition of these cases. Instead of instituting two separate
cases, one for criminal and another for civil, only a single suit shall be filed
and tried. It should be stressed that the policy laid down by the Rules is to
discourage the separate filing of the civil action. The Rules even prohibit
the reservation of a separate civil action, which means that one can no
longer file a separate civil case after the criminal complaint is filed in court.
The only instance when separate proceedings are allowed is when the civil
action is filed ahead of the criminal case. Even then, the Rules encourage
the consolidation of the civil and criminal cases. We have previously
observed that a separate civil action for the purpose of recovering the
amount of the dishonored checks would only prove to be costly,
burdensome and time-consuming for both parties and would further delay
the final disposition of the case. This multiplicity of suits must be avoided.
Where petitioners rights may be fully adjudicated in the proceedings
before the trial court, resort to a separate action to recover civil liability is
clearly unwarranted. In view of this special rule governing actions for
violation of B.P. 22, Article 31 of the Civil Code cited by the trial court will
not apply to the case at bar.24
The CAs reliance on DMPI Employees Credit Association v. Velez25 to give
due course to the civil action of Chan independently and separately of
Criminal Case No. 275381 was unwarranted. DMPI Employees, which
involved a prosecution for estafa, is not on all fours with this case, which is
a prosecution for a violation of BP 22. Although the Court has ruled that the
issuance of a bouncing check may result in two separate and distinct
crimes of estafa and violation of BP 22,26 the procedures for the recovery
of the civil liabilities arising from these two distinct crimes are different and
non-interchangeable. In prosecutions of estafa, the offended party may opt
to reserve his right to file a separate civil action, or may institute an
independent action based on fraud pursuant to Article 33 of the Civil
Code,27 as DMPI Employees has allowed. In prosecutions of violations of
BP 22, however, the Court has adopted a policy to prohibit the reservation
or institution of a separate civil action to claim the civil liability arising from
the issuance of the bouncing check upon the reasons delineated in Hyatt
Industrial Manufacturing Corporation, supra.
To repeat, Chans separate civil action to recover the amount of the check
involved in the prosecution for the violation of BP 22 could not be
independently maintained under both Supreme Court Circular 57-97 and
the aforequoted provisions of Rule 111 of the Rules of Court,
notwithstanding the allegations of fraud and deceit.
B
Aptness of the dismissal of the civil action
on the ground of litis pendentia
Did the pendency of the civil action in the MeTC in Manila (as the civil
aspect in Criminal Case No. 275381) bar the filing of Civil Case No. 915-00
in the MeTC in Pasay City on the ground of litis pendentia?
For litis pendentia to be successfully invoked as a bar to an action, the
concurrence of the following requisites is necessary, namely: (a) there
must be identity of parties or at least such as represent the same interest
in both actions; (b) there must be identity of rights asserted and reliefs
prayed for, the reliefs being founded on the same facts; and, (c) the
identity in the two cases should be such that the judgment that may be
rendered in one would, regardless of which party is successful, amount to
res judicata in respect of the other. Absent the first two requisites, the
possibility of the existence of the third becomes nil.28
A perusal of Civil Case No. 01-0033 and Criminal Case No. 275381
ineluctably shows that all the elements of litis pendentia are attendant.
First of all, the parties in the civil action involved in Criminal Case No.
275381 and in Civil Case No. 915-00, that is, Chan and Simon, are the
same. Secondly, the information in Criminal Case No. 275381 and the
complaint in Civil Case No. 915-00 both alleged that Simon had issued
Landbank Check No. 0007280 worth P336,000.00 payable to "cash,"
thereby indicating that the rights asserted and the reliefs prayed for, as
well as the facts upon which the reliefs sought were founded, were
identical in all respects. And, thirdly, any judgment rendered in one case
would necessarily bar the other by res judicata; otherwise, Chan would be
recovering twice upon the same claim.
It is clear, therefore, that the MeTC in Pasay City properly dismissed Civil
Case No. 915-00 on the ground of litis pendentia through its decision dated
October 23, 2000; and that the RTC in Pasay City did not err in affirming
the MeTC.
49 | P a g e

Wherefore, we grant the petition for review on certiorari, and, accordingly,
we reverse and set aside the decision promulgated by the Court of Appeals
on June 25, 2002. We reinstate the decision rendered on October 23, 2000
by the Metropolitan Trial Court, Branch 45, in Pasay City.
Costs of suit to be paid by the respondent.
SO ORDERED.
G.R. No. 170071 March 9, 2011
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA,
MICAELA B. OCHOA and JOMAR B. OCHOA, Petitioners,
vs.
G & S TRANSPORT CORPORATION, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170125
G & S TRANSPORT CORPORATION, Petitioner,
vs.
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA,
MICAELA B. OCHOA and JOMAR B. OCHOA, Respondents.
DECISION
DEL CASTILLO, J.:
An accident which claimed the life of a passenger is the root of these two
petitions - one brought before us by the common carrier and the other by
the heirs of the deceased.
These consolidated Petitions for Review on Certiorari assail the Court of
Appeals (CA) Decision1 dated June 29, 2005 in CA-G.R. CV No. 75602
which affirmed with modification the December 21, 2001 Decision and
March 5, 2002 Order of the trial court. Likewise assailed is the Resolution2
dated October 12, 2005 denying the parties respective Motions for
Reconsideration thereto.
Factual Antecedents
Jose Marcial K. Ochoa (Jose Marcial) died on the night of March 10, 1995
while on board an Avis taxicab owned and operated by G & S Transport
Corporation (G & S), a common carrier. As narrated by the trial court, the
circumstances attending Jose Marcials death are as follows:
It appears that sometime in the evening of March 10, 1995, at the Manila
Domestic Airport, the late Jose Marcial K. Ochoa boarded and rode a
taxicab with Plate No. PKR-534, a passenger vehicle for hire owned and
operated by defendant corporation under the business name "Avis Coupon
Taxi" (Avis) and driven by its employee and authorized driver Bibiano
Padilla, Jr. on his way home to Teachers Village, Diliman, Quezon City.
At about 11:00 p.m., the taxicab was cruising along Epifanio delos Santos
Avenue [EDSA], in front of Camp Aguinaldo in Quezon City at high speed.
While going up the Boni Serrano (Santolan) fly-over, it overtook another
cab driven by Pablo Clave and tried to pass another vehicle, a ten-wheeler
cargo truck. Because of the narrow space between the left side railing of
the fly-over and the ten-wheeler truck, the Avis cab was unable to pass and
because of its speed, its driver (Padilla) was unable to control it. To avoid
colliding with the truck, Padilla turned the wheel to the left causing his
taxicab to ram the railing throwing itself off the fly-over and fell on the
middle surface of EDSA below. The forceful drop of the vehicle on the floor
of the road broke and split it into two parts. Both driver Padilla and
50 | P a g e
passenger Jose Marcial K. Ochoa were injured and rushed to the hospital.
At the East Avenue Medical Center, Ochoa was not as lucky as Padilla who
was alive. He was declared dead on arrival from the accident. The death
certificate issued by the Office of the Civil Registrar of Quezon City cited
the cause of his death as vehicular accident.3
On May 13, 1999, Jose Marcials wife, Ruby Bueno Ochoa, and his two
minor children, Micaela B. Ochoa and Jomar B. Ochoa (the heirs), through
counsel, sent G & S a letter4 demanding that the latter indemnify them for
Jose Marcials death, his loss of earning capacity, and funeral expenses in
the total amount of P15,000,000.00. As G & S failed to heed the same, the
heirs filed a Complaint5 for Damages before the Regional Trial Court (RTC)
of Pasig City which was raffled to Branch 164 of said court.
The heirs alleged that G & S, as a common carrier, is under legal obligation
to observe and exercise extraordinary diligence in transporting its
passengers to their destination safely and securely. However, G & S failed
to observe and exercise this extraordinary diligence because its employee
failed to transport Jose Marcial to his destination safely. They averred that
G & S is liable to them for having breached the contract of common
carriage. As an alternative cause of action, they asserted that G & S is
likewise liable for damages based on quasi-delict pursuant to Article 21806
in relation to Article 21767 of the Civil Code. The heirs thus prayed for G &
S to pay them actual damages, moral damages, exemplary damages, and
attorneys fees and expenses of litigation.
In its Answer With Compulsory Counterclaims,8 G & S claimed that Jose
Marcial boarded an Avis taxicab driven by its employee, Bibiano Padilla
(Padilla), at the Domestic Airport to bring him to Teachers Village in
Quezon City. While passing the Santolan fly-over, however, the Avis taxicab
was bumped by an on-rushing delivery van at the right portion causing the
taxicab to veer to the left, ram through the left side of the railings of the
fly-over and fall to the center of the island below. The taxicab was split into
two and Jose Marcial was thrown 10 meters away. G & S posited that the
proximate cause of Jose Marcials death is a
fortuitous event and/or the fault or negligence of the driver of the delivery
van that hit the taxicab. It likewise claimed that it exercised the diligence
required of a good father of a family in the selection and supervision of its
employees including Padilla. By way of compulsory counterclaim, G & S
sought to recover from the heirs the amount of P300,000.00 as attorneys
fees and costs of suit.
Ruling of the Regional Trial Court
On December 27, 2001, the trial court rendered a Decision9 finding the
vehicular mishap not caused by a fortuitous event but by the negligence of
Padilla. It likewise found the evidence adduced by G & S to show that it
exercised the diligence of a good father of a family in the selection and
supervision of its employees as insufficient. Hence, the trial court declared
G & S civilly liable to the heirs. However, for lack of receipts or any proof of
funeral expenses and other actual damages, the trial court denied the
heirs claim for actual damages. It also denied them moral and exemplary
damages for lack of legal basis. The dispositive portion of said Decision
reads:
WHEREFORE, defendant is hereby adjudged guilty of breach of contract of
carriage and is ordered to pay plaintiffs the following amounts:
1. P50,000.00 as civil indemnity for the death of deceased Jose Marcial K.
Ochoa;
2. P6,537,244.96 for the loss of earning capacity of the deceased;
3. P100,00.00 for attorneys fees;
4. And the cost of litigation.
SO ORDERED.10
G & S filed a Notice of Appeal11 while the heirs filed a Motion for Partial
Reconsideration.12 The heirs averred that they are entitled to moral
damages pursuant to Article 176413 in relation to Article 2206(3)14 of the
Civil Code. They also cited applicable jurisprudence providing that moral
damages are recoverable in a damage suit predicated upon a breach of
contract of carriage where the mishap results in the death of the
passenger. With respect to their claim for exemplary damages, the heirs
relied upon Article 2232 of the Civil Code which provides that in contracts
and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner. And, since Padilla was declared by the trial court to
have been grossly negligent in driving the taxicab, the heirs claimed that
they are likewise entitled to exemplary damages.
After G & S filed its Opposition (To Plaintiffs Motion for Partial
Reconsideration),15 the trial court issued an Order16 on March 5, 2002. It
found merit in the heirs Motion for Partial Reconsideration and thus
declared them entitled to moral and exemplary damages, viz:
WHEREFORE, the decision dated December 27, 2001 is hereby modified so
as to order defendant Corporation to pay plaintiffs the amount of
P300,000.00 as moral damages and P50,000.00 as exemplary damages.
The dispositive portion of said decision is hereby amended to read as
follows:
51 | P a g e

WHEREFORE, defendant is hereby adjudged guilty of breach of contract of
carriage and is ordered to pay plaintiffs the following amounts:
1. P50,000.00 as civil indemnity for the death of the deceased Jose Marcial
K. Ochoa;
2. P6,537,244.96 for the loss of earning capacity of the deceased.
3. P300,000.00 as moral damages;
4. P50,000.00 as exemplary damages;
5. P100,000.00 for attorneys fees;
6. And the costs of litigation.
SO ORDERED.17
Because of this, G & S filed another Notice of Appeal18 and same was
given due course by the trial court in an Order19 dated April 23, 2002.
Ruling of the Court of Appeals
Before the CA, G & S continued to insist that it exercised the diligence of a
good father of the family in the selection and supervision of its employees.
It averred that it has been carrying out not only seminars for its drivers
even before they were made to work, but also periodic evaluations for their
performance. Aside from these, it has also been conducting monthly check-
up of its automobiles and has regularly issued rules regarding the conduct
of its drivers. G & S claimed that it was able to establish a good name in
the industry and maintain a clientele.
In an effort to build up Padillas character as an experienced and careful
driver, G & S averred that: (1) before G & S employed Padilla, he was a
delivery truck driver of Inter Island Gas Service for 11 years; (2) Padilla has
been an employee of G & S from 1989 to 1996 and during said period,
there was no recorded incident of his being a negligent driver; (3) despite
his qualifications, G & S still required Padilla to submit an NBI clearance,
drivers license and police clearance; (4) Padillas being a good driver-
employee was manifest in his years of service with G & S, as in fact, he has
received congratulatory messages from the latter as shown by the inter-
office memos dated August 23, 1990 and February 1, 1993; and that (5)
Padilla attended a seminar at the Pope Pius Center sometime in December
1999 as part of the NAIA Taxi Operation Program.
G & S also argued that the proximate cause of Jose Marcials death is a
fortuitous event and/or the fault or negligence of another and not of its
employee. According to G & S, the collision was totally unforeseen since
Padilla had every right to expect that the delivery van would just overtake
him and not hit the right side of the taxicab. Therefore, what transpired
was beyond Padillas control. There was no negligence on his part but on
the part of the driver of the delivery van. For this reason, G & S opined that
it was not liable to the heirs.
On the other hand, the heirs maintained that Padilla was grossly negligent
in driving the Avis taxicab on the night of March 10, 1995. They claimed
that Padilla, while running at a very high speed, acted negligently when he
tried to overtake a ten-wheeler truck at the foot of the fly-over. This forced
him to swerve to the left and as a consequence, the Avis taxicab hit the
center of the railing and was split into two upon hitting the ground. The
manner by which Padilla drove the taxicab clearly showed that he acted
without regard to the safety of his passenger.
The heirs also averred that in order for a fortuitous event to exempt one
from liability, it is necessary that he has committed no negligence or
conduct that may have occasioned the loss. Thus, to be exempt from
liability for the death of Jose Marcial on this ground, G & S must clearly
show that the proximate cause of the casualty was entirely independent of
human will and that it was impossible to avoid. And since in the case at bar
it was Padillas inexcusable poor judgment, utter lack of foresight and
extreme negligence which were the immediate and proximate causes of
the accident, same cannot be considered to be due to a fortuitous event.
This is bolstered by the fact that the court trying the case for criminal
negligence arising from the same incident convicted Padilla for said
charge.20
At any rate, the heirs contended that regardless of whether G & S observed
due diligence in the selection of its employees, it should nonetheless be
held liable for the death of Jose Marcial pursuant to Article 1759 of the Civil
Code which provides:
ART. 1759 Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the formers
employees, although such employees may have acted beyond the scope of
their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
In sum, the heirs prayed that the appeal be dismissed for lack of merit and
the assailed Decision and Order of the trial court be affirmed in toto.
52 | P a g e

In a Decision21 dated June 29, 2005, the CA ruled in favor of the heirs. The
appellate court gave weight to their argument that in order for a fortuitous
event to exempt one from liability, it is necessary that he committed no
negligence or misconduct that may have occasioned the loss. In this case,
the CA noted that Padilla failed to employ reasonable foresight, diligence
and care needed to exempt G & S from liability for Jose Marcials death.
Said court also quoted pertinent portions of the MTC decision convicting
Padilla of reckless imprudence resulting in homicide to negate G & S claim
that the proximate cause of the accident was the fault of the driver of the
delivery van who allegedly hit the right side of the taxicab. And just like the
trial court, the CA found insufficient the evidence adduced by G & S to
support its claim that it exercised due diligence in the selection and
supervision of its employees.
With respect to the award of P6,537,244.96 for Jose Marcials loss of
earning capacity, the CA declared the same unwarranted. It found the
Certification22 issued by Jose Marcials employer, the United States Agency
for International Development (USAID) through its Chief of Human
Resources Division Jonas Cruz (Cruz), as self-serving, unreliable, and
biased. While said certification states that Jose Marcial was earning an
annual salary of P450,844.49 at the time of his untimely demise, the CA
noted that same is unsupported by competent evidence such as income
tax returns or receipts. This is in view of the ruling in People v. Ereo23
where it was held that "there must be unbiased proof of the deceaseds
average income." Anent moral damages, the CA found the award of
P300,000.00 excessive and thus reduced the same to P200,000.00 as to
make it proportionate to the award of exemplary damages which is
P50,000.00. The dispositive portion of said Decision reads:
WHEREFORE, the assailed Decision dated December 27, 2001 and Order
dated March 5, 2002 are AFFIRMED with the following MODIFICATION:
appellant is ordered to pay appellees the sum of P50,000.00 as civil
indemnity for the death of the deceased Jose Marcial K. Ochoa,
P200,000.00 as moral damages, P50,000.00 as exemplary damages,
P100,000.00 for attorneys fees and the costs of litigation. The trial courts
award of P6,537,244.96 for the loss of earning capacity of the deceased is
DELETED for lack of basis.
SO ORDERED.
Both parties moved for reconsideration24 but the CA denied their
respective motions for reconsideration in a Resolution25 dated October 12,
2005.
Hence, G & S and the heirs filed their respective Petitions for Review on
Certiorari before this Court. The heirs petition was docketed as G.R. No.
170071 and that of G & S as G.R. No. 170125. These petitions were later
consolidated pursuant to this Courts Resolution of November 21, 2005.26
G.R. No. 170125
G & S anchors its petition on the following grounds:
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING
THAT THE PROXIMATE CAUSE OF DEATH OF MR. JOSE MARCIAL K. OCHOA
WAS A FORTUITOUS EVENT AND/OR WAS DUE TO THE FAULT OR
NEGLIGENCE OF ANOTHER AND SHOULD THUS EXEMPT THE PETITIONER
FROM LIABILITY.
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT TAKING
NOTE OF THE FACT THAT THE PETITIONERS EMPLOYEE HAD BEEN
ACQUITTED OF THE CRIME OF RECKLESS IMPRUDENCE RESULTING (IN)
HOMICIDE.
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING
THE TESTIMONY OF A WITNESS WHO SURFACED MONTHS AFTER THE
INCIDENT WHILE DISREGARDING THAT OF AN EYEWITNESS WHO WAS
PRESENT AT THE TIME AND PLACE OF THE ACCIDENT.
IV. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT RULING
THAT THE PETITIONER EXERCISED THE DILIGENCE OF A GOOD FATHER OF A
FAMILY IN THE SELECTION AND SUPERVISION OF ITS EMPLOYEES
PARTICULARLY MR. BIBIANO PADILLA.27
G & S reiterates its arguments that the proximate cause of the accident is
a fortuitous event and/or the negligence of the driver of the delivery van
which bumped the right portion of its taxicab and, that it exercised the
diligence of a good father of a family in the selection and supervision of its
employees. It faults the CA when it overlooked the fact that the MTC
Decision convicting Padilla of reckless imprudence has already been
reversed on appeal by the RTC with Padilla having been accordingly
acquitted of the crime charged. Moreover, it claims that the appellate court
erred in according respect to the testimony of the lone prosecution
witness, Pablo Clave (Clave), when it concluded that Padilla was driving
negligently at the time of the accident. It asserts that Clave is not a
credible witness and so is his testimony. Thus, G & S prays that the
assailed CA Decision and Resolution be reversed and set aside.
On the other hand, the heirs posit that the determination of the issues
raised by G & S necessarily entails a re-examination of the factual findings
which this Court cannot do in this petition for review on certiorari. At any
rate, they maintain that the trial court itself is convinced of Claves
credibility. They stress the settled rule that the evaluation of the credibility
53 | P a g e
of witnesses is a matter that particularly falls within the authority of the
trial court because it had the opportunity to observe the demeanor of the
witnesses on the stand.
The heirs assert that fortuitous event was not the proximate cause of the
mishap. They point out that as correctly found by the trial court, Padilla
was running at an extremely high speed. This was why the impact was so
strong when the taxicab rammed the fly-over railings and was split into
two when it hit the ground. Also, while it is true that the MTC Decision in
the criminal case for reckless imprudence has been reversed by the RTC,
this does not excuse G & S from its liability to the heirs because its liability
arises from its breach of contract of carriage and from its negligence in the
selection and supervision of its employees. Also, since the acquittal of
Padilla is based on reasonable doubt, same does not in any way rule out
his negligence as this may merely mean that the prosecution failed to
meet the requisite quantum of evidence to sustain his conviction.
Therefore, G & S cannot bank on said acquittal to disprove its liability.
G.R. No. 170071
The heirs, on the other hand, advance the following grounds in support of
their petition:
THE COURT OF APPEALS MANIFESTLY AND GRAVELY ERRED IN COMPLETELY
DELETING THE TRIAL COURTS AWARD FOR THE LOSS OF EARNING
CAPACITY OF THE DECEASED.
THE COURT OF APPEALS MANIFESTLY AND GRAVELY ERRED IN REDUCING
THE TRIAL COURTS AWARD FOR MORAL DAMAGES.28
The focal point of the heirs petition is the CAs deletion of the award of
P6,537,244.96 for Jose Marcials loss of earning capacity as well as the
reduction of the award of moral damages from P300,000.00 to
P200,000.00.
The heirs aver that the appellate court gravely erred in relying upon Ereo
as said case is not on all fours with the present case. They contend that in
Ereo, this Court disallowed the award for loss of income because the only
proof presented was a handwritten statement of the victims spouse
stating the daily income of the deceased as a self-employed fish vendor.
The heirs argue that the reason why this Court declared said handwritten
statement as self-serving is because the one who prepared it, the
deceaseds wife, was also the one who would directly and personally
benefit from such an award.29 This cannot be said in the case at bar since
the same bias and personal interest cannot be attributed to Jose Marcials
employer, the USAID. Unlike in Ereo, USAID here does not stand to be
benefited by an award for Jose Marcials loss of earning capacity. Clearly,
the Certification issued by it is far from being self-serving. At any rate, the
heirs contend that Ereo has already been superseded by Pleyto v.
Lomboy30 where this Court held that in awarding damages for loss of
earning capacity, "mere testimonial evidence suffices to establish a basis
for which the court can make a fair and reasonable estimate of the loss of
earning capacity". In addition, the heirs point out that the authenticity and
accuracy of said Certification was neither questioned by G & S nor
discredited by any controverting evidence. In fact, its admission by the trial
court was not even assigned by G & S as an error in their appeal before the
CA.
As to the reduction of moral damages, the heirs claim that since the CA
agreed with the factual circumstances of the case as found by the trial
court, there is therefore no reason for it to alter the award of damages
arising from such factual circumstances. They aver that the CA may only
modify the damages awarded by the trial court when it is excessive and
scandalous as held in Meneses v. Court of Appeals.31 Here, they claim that
the award of moral damages in the amount of P300,000.00 cannot be
considered as excessive and unreasonable but only commensurate to the
sufferings caused by the incident to a wife who became a young widow at
the age of 33 and to two minor children who lost a father. Moreover, the
heirs aver that the CA should not have reduced the award of moral
damages just to make said amount proportionate to the exemplary
damages awarded. This is because there is no such rule which dictates that
the amount of moral damages should be proportionate to that of the
exemplary damages. The heirs pray that the assailed CA Decision and
Resolution be reversed and set aside insofar as they deleted the award for
loss of earning capacity and reduced the award for moral damages.
For its part, G & S avers that the Certification issued by USAID is self-
serving because the USAID officer who issued it has not been put on the
witness stand to validate the contents thereof. Moreover, said Certification
was not supported by competent evidence such as income tax returns and
receipts. G & S likewise finds the reduction of the award of moral damages
appropriate in view of the settled rule that moral damages are not meant
to enrich the complainant at the expense of the defendant. Hence, it prays
that the petition be dismissed for lack of merit.
Our Ruling
We shall first tackle the issues raised by G & S in its petition.
The first, third and fourth issues raised by G & S involve questions of fact
We have reviewed said issues and we find that the determination of the
first, third and fourth issues raised entails re-examination of the evidence
54 | P a g e
presented because they all involve questions of fact. In Microsoft
Corporation v. Maxicorp, Inc.,32 we held that:
Once it is clear that the issue invites a review of the evidence presented,
the question posed is one of fact. If the query requires a re-evaluation of
the credibility of witnesses, or the existence or relevance of surrounding
circumstances and their relation to each other, the issue in that query is
factual. Our ruling in Paterno v. Paterno is illustrative on this point:
Such questions as whether certain items of evidence should be accorded
probative value or weight, or rejected as feeble or spurious, or whether or
not the proof on one side or the other are clear and convincing and
adequate to establish a proposition in issue, are without doubt questions of
fact. Whether or not the body of proofs presented by a party, weighed and
analyzed in relation to contrary evidence submitted by adverse party, may
be said to be strong, clear and convincing; whether or not certain
documents presented by one side should be accorded full faith and credit
in the face of protests as to their spurious character by the other side;
whether or not inconsistencies in the body of proofs of a party are of such
a gravity as to justify refusing to give said proofs weight all these are
issues of fact. (Citations omitted)
In this case, the said three issues boil down to the determination of the
following questions: What is the proximate cause of the death of Jose
Marcial? Is the testimony of prosecution witness Clave credible? Did G & S
exercise the diligence of a good father of a family in the selection and
supervision of its employees? Suffice it to say that these are all questions
of fact which require this Court to inquire into the probative value of the
evidence presented before the trial court. As we have consistently held,
"[t]his Court is not a trier of facts. It is not a function of this court to
analyze or weigh evidence. When we give due course to such situations, it
is solely by way of exception. Such exceptions apply only in the presence
of extremely meritorious circumstances."33 Here, we note that although G
& S enumerated in its Consolidated Memorandum34 the exceptions35 to
the rule that a petition for review on certiorari should only raise questions
of law, it nevertheless did not point out under what exception its case falls.
And, upon review of the records of the case, we are convinced that it does
not fall under any. Hence, we cannot proceed to resolve said issues and
disturb the findings and conclusions of the CA with respect thereto. As we
declared in Diokno v. Cacdac:36
It is aphoristic that a re-examination of factual findings cannot be done
through a petition for review on certiorari under Rule 45 of the Rules of
Court because as earlier stated, this Court is not a trier of facts; it reviews
only questions of law. The Supreme Court is not duty-bound to analyze and
weigh again the evidence considered in the proceedings below. This is
already outside the province of the instant Petition for Certiorari. [Citations
omitted.]
There is a contract of carriage between G & S and Jose Marcial
What is clear from the records is that there existed a contract of carriage
between G & S, as the owner and operator of the Avis taxicab, and Jose
Marcial, as the passenger of said vehicle. As a common carrier, G & S "is
bound to carry [Jose Marcial] safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due
regard for all the circumstances."37 However, Jose Marcial was not able to
reach his destination safely as he died during the course of the travel. "In a
contract of carriage, it is presumed that the common carrier is at fault or is
negligent when a passenger dies or is injured. In fact, there is even no
need for the court to make an express finding of fault or negligence on the
part of the common carrier. This statutory presumption may only be
overcome by evidence that the carrier exercised extraordinary
diligence."38 Unfortunately, G & S miserably failed to overcome this
presumption. Both the trial court and the CA found that the accident which
led to Jose Marcials death was due to the reckless driving and gross
negligence of G & S driver, Padilla, thereby holding G & S liable to the
heirs of Jose Marcial for breach of contract of carriage.
The acquittal of Padilla in the criminal case is immaterial to the instant
case for breach of contract
This thus now leaves us with the remaining issue raised by G & S, that is,
whether the CA gravely erred in not taking note of the fact that Padilla has
already been acquitted of the crime of reckless imprudence resulting in
homicide, a charge which arose from the same incident subject of this
case.
Article 31 of the Civil Code provides, viz:
When the civil action is based on an obligation not arising from the act or
omission complained of as a felony, such civil action may proceed
independently of the criminal proceedings and regardless of the result of
the latter.
Thus, in Cancio, Jr. v. Isip,39 we declared:
In the instant case, it must be stressed that the action filed by petitioner is
an independent civil action, which remains separate and distinct from any
criminal prosecution based on the same act. Not being deemed instituted
in the criminal action based on culpa criminal, a ruling on the culpability of
the offender will have no bearing on said independent civil action based on
55 | P a g e
an entirely different cause of action, i.e., culpa contractual." (Emphasis
supplied; Citations omitted.)
In this case, the action filed by the heirs is primarily for the recovery of
damages arising from breach of contract of carriage allegedly committed
by G & S. Clearly, it is an independent civil action arising from contract
which is separate and distinct from the criminal action for reckless
imprudence resulting in homicide filed by the heirs against Padilla by
reason of the same incident. Hence, regardless of Padillas acquittal or
conviction in said criminal case, same has no bearing in the resolution of
the present case. There was therefore no error on the part of the CA when
it resolved this case without regard to the fact that Padilla has already
been acquitted by the RTC in the criminal case. Moreover, while the CA
quoted some portions of the MTC Decision in said criminal case, we
however find that those quoted portions were only meant to belie G & S
claim that the proximate cause of the accident was the negligence of the
driver of the delivery van which allegedly hit the Avis taxicab. Even without
those quoted portions, the appellate courts ultimate finding that it was
Padillas negligence which was the proximate cause of the mishap would
still be the same. This is because the CA has, in fact, already made this
declaration in the earlier part of its assailed Decision. The fact that the MTC
Decision from which the subject quoted portions were lifted has already
been reversed by the RTC is therefore immaterial.
In view of the foregoing, we deny G & S petition for lack of merit.
The denial by the CA of the heirs claim for lost earnings is unwarranted
Going now to the petition filed by the heirs, we note at the outset that the
issues of whether the CA erred in deleting the award for loss of earning
capacity and in reducing the award for moral damages made by the trial
court likewise raise questions of fact as they "involve an examination of
the probative value of the evidence presented by the parties".40 However,
we find that the heirs case falls under one of the exceptions because the
findings of the CA conflict with the findings of the RTC.41 Since the heirs
properly raised the conflicting findings of the lower courts, it is proper for
this Court to resolve such contradiction.42
In Ereo, we denied the claim for loss of income because the handwritten
estimate of the deceaseds daily income as a self-employed vendor was
not supported by competent evidence like income tax returns or receipts.
This was in view of the rule that compensation for lost income is in the
nature of damages and as such requires due proof of damages suffered.
We reiterated this rule in People v. Yrat43 where we likewise denied the
same claim because the only evidence presented to show that the
deceased was earning P50,000.00 a month was the testimony of the wife.
There we stated that for lost income due to death, there must be unbiased
proof of the deceaseds average income. Self-serving, hence, unreliable
statement is not enough. In People v. Caraig,44 we declared that
"documentary evidence should be presented to substantiate the claim for
damages for loss of earning capacity. By way of exception, damages
therefor may be awarded despite the absence of documentary evidence,
provided that there is testimony that the victim was either (1) self-
employed earning less than the minimum wage under current labor laws,
and judicial notice may be taken of the fact that in the victims line of work
no documentary evidence is available; or (2) employed as a daily-wage
worker earning less than the minimum wage under current labor laws".
However, we subsequently ruled in Pleyto v. Lomboy45 that "failure to
present documentary evidence to support a claim for loss of earning
capacity of the deceased need not be fatal to its cause. Testimonial
evidence suffices to establish a basis for which the court can make a fair
and reasonable estimate of the loss of earning capacity". Hence, we held
as sufficient to establish a basis for an estimate of damages for loss of
earning capacity the testimony of the victims widow that her husband was
earning a monthly income of P8,000.00. Later, in Victory Liner, Inc. v.
Gammad,46 after finding that the deceaseds earnings does not fall within
the exceptions laid down in Caraig, we deleted the award for compensatory
damages for loss of earning capacity as same was awarded by the lower
courts only on the basis of the husbands testimony that the deceased was
39 years of age and a Section Chief of the Bureau of Internal Revenue with
a salary of P83,088.00 per annum at the time of her death. This same rule
was also applied in the 2008 case of Licyayo v. People.47
In all of the cases mentioned except for Ereo, the sole basis for the claim
for loss of earning capacity were the testimonies of the claimants. This is
not the case here. Just like in Ereo where the testimony of the mother of
the deceased was accompanied by a handwritten estimate of her
daughters alleged income as a fish vendor, the testimony of Jose Marcials
wife that he was earning around P450,000.00 a year was corroborated by a
Certification issued by the USAID. However in Ereo, we declared as self-
serving the handwritten estimate submitted by the mother hence we
denied the claim for such award. Based on said ruling, the CA in this case
deleted the award for lost income after it found the USAID Certification to
be self-serving and unreliable.
We disagree. The CA sweepingly concluded that the USAID Certification is
self-serving and unreliable without elaborating on how it was able to arrive
at such a conclusion. A research on USAID reveals that it is the "principal
[United States] agency to extend assistance to countries recovering from
disaster, trying to escape poverty, and engaging in democratic reforms."48
It is an "independent federal government agency that receives over-all
foreign policy guidance from the Secretary of the State [of the United
States]."49 Given this background, it is highly improbable that such an
agency will issue a certification containing unreliable information regarding
56 | P a g e
an employees income. Besides, there exists a presumption that official
duty has been regularly performed.50 Absent any showing to the contrary,
it is presumed that Cruz, as Chief of Human Resources Division of USAID,
has regularly performed his duty relative to the issuance of said
certification and therefore, the correctness of its contents can be relied
upon. This presumption remains especially so where the authenticity, due
execution and correctness of said certification have not been put in issue
either before the trial court or the CA. As to its being self-serving, our
discussion on "self-serving evidence" in Heirs of Pedro Clemea y Zurbano
v. Heirs of Irene B. Bien51 is enlightening, viz:
Self-serving evidence, perhaps owing to its descriptive formulation, is a
concept much misunderstood. Not infrequently, the term is employed as a
weapon to devalue and discredit a party's testimony favorable to his
cause. That, it seems, is the sense in which petitioners are using it now.
This is a grave error. "Self-serving evidence" is not to be taken literally to
mean any evidence that serves its proponent's interest. The term, if used
with any legal sense, refers only to acts or declarations made by a party in
his own interest at some place and time out of court x x x. (Citations
omitted; emphasis supplied.)
Verily, the USAID certification cannot be said to be self-serving because it
does not refer to an act or declaration made out of court by the heirs
themselves as parties to this case.1awphi1
Clearly, the CA erred in deleting the award for lost income on the ground
that the USAID Certification supporting such claim is self-serving and
unreliable. On the contrary, we find said certification sufficient basis for the
court to make a fair and reasonable estimate of Jose Marcials loss of
earning capacity just like in Tamayo v. Seora52 where we based the
victims gross annual income on his pay slip from the Philippine National
Police. Hence, we uphold the trial courts award for Jose Marcials loss of
earning capacity.
While the trial court applied the formula generally used by the courts to
determine net earning capacity which is, to wit:
Net Earning Capacity = life expectancy* x (gross annual income -
reasonable living expenses),53
*Life expectancy = 2/3 (80 age of the deceased)
we, however, find incorrect the amount of P6,537, 244.96 arrived at. The
award should be P6,611,634.59 as borne out by the following computation:
Net earning capacity = 2 (80-3654)
3 x 450,844.4955-50%56
= 88
3 x 225,422.25
= 29.33 x 225,422.25
= P6, 611,634.59
The award of moral damages should be modified
While we deemed it proper to modify the amount of moral damages
awarded by the trial court as discussed below, we nevertheless agree with
the heirs that the CA should not have pegged said award in proportion to
the award of exemplary damages. Moral and exemplary damages are
based on different jural foundations.57 They are different in nature and
require separate determination.58 The amount of one cannot be made to
depend on the other.
In Victory Liner Inc. v. Gammad59 we awarded P100,000.00 by way of
moral damages to the husband and three children of the deceased, a 39-
year old Section Chief of the Bureau of Internal Revenue, to compensate
said heirs for the grief caused by her death. This is pursuant to the
provisions of Articles 1764 and 2206(3) which provide:
Art. 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Articles 2206
shall also apply to the death of a passenger caused by the breach of
contract by a common carrier.
Art. 2206. x x x
(3) The spouse, legitimate and illegitimate descendants and the
ascendants of the deceased may demand moral damages for mental
anguish by reason of the death of the deceased.
Here, there is no question that the heirs are likewise entitled to moral
damages pursuant to the above provisions, considering the mental anguish
suffered by them by reason of Jose Marcials untimely death, as can be
deduced from the following testimony of his wife Ruby:
Atty. Suarez:
Q: How would you describe Jose Marcial Ochoa?
(Ruby) A: My husband was a very loving husband, faithful husband, a very
[good] provider[.] I depended on him so much financially [and]
emotionally[.] He was practically my life then.
Q: How is he as a father?
57 | P a g e
A: A very good father, he is very committed to Micaela[. H]e has always
time for her[. H]e is a family man, so its really a great [loss] to me and to
Micaela.
Q: What was your reaction upon learning of your husbands death?
A: Immediately after I learned of his death, I tried very hard to keep a clear
mind for my little girl, she was 3 and she could not grasp what death is,
so I found [it] so hard to explain to her [at] that time what happened
[e]specially [because] she just talked to her father from the airport telling
her that he is coming home, tapos hindi na pala.
Q: How did it affect you?
A: It was a painful struggle everyday just to get up and move on when
someone who [you] really really love and [who] is important to you it is
very hard to move on and [it is even] harder to move on [when] I found out
that I was pregnant with my second child, parang tinabunan ka [ng] lahat
eh[. I]ts [too] hard to find happiness, youre pregnant, when you know
wala naman talagang father yung bata later on x x x
xxxx
Q: How did this affect your family?
Q: If you would assign that pain and suffering that you suffered as a result
of the death of your husband, what will be the monetary consideration?
A: I struggled with that kasi.I can honestly say no amount of money can
ever repay the [loss] that my children suffered, future nila yan eh, and my
son was not given a chance to get to know his father, so I cannot imagine
kung ano yung sinasabi nyong amount that will compensate the suffering
that I have to go through and my children will go through, yon and
mahirap bayaran.60
Under this circumstance, we thus find as sufficient and "somehow
proportional to and in approximation of the suffering inflicted"61 an award
of moral damages in an amount similar to that awarded in Victory which is
P100,000.00.
From the above discussion, we, thus, partly grant the heirs petition.
WHEREFORE, the petition for review on certiorari in G.R. No. 170071 is
PARTLY GRANTED while the petition in G.R. No. 170125 is DENIED. The
assailed Decision and Resolution dated June 29, 2005 and October 12,
2005 of the Court of Appeals in CA-G.R. CV No. 75602 are AFFIRMED with
the MODIFICATIONS that G & S is ordered to pay the heirs of Jose Marcial K.
Ochoa the sum of P6,611,634.59 for loss of earning capacity of the
deceased and P100,000.00 as moral damages.

A: Yung effect kay Micaela, she [used] to be a gregarious child, yung happy SO ORDERED.
ganyan, but nung wala na yong father niya that time, [during] graduation
ng nursery that time naging very very [quiet] siya, so a lot of emotional
support from my own family was given to her at the time para makacope-
up siya sa loss kasi she is very close to the father.

Q: Financially, how did it affect you?

A: I had to make do of what was left by my husband, I couldnt also work so

much at the time because I was.and hirap eh, I cannot find enthusiasm in
what I do, tapos pregnant pa ako, and hirap talaga.

Q: How else did it affect you?

A: We had to move houses like we used to live in Quezon City at (the) time
of his death, tapos kinuha kami ni Gorjie my brother-in-law sa compound
nila para hindi [to] support us emotionally (at that time) kasi nga I was
pregnant and then I also decided to move (to make it easy for me) to
adjust yung lifestyle ng mga bata, because I cannot cope [here] financially
on my own[. N]ahihirapan na ako dito because the living expenses here are
quite high compared sa probinsiya so I decided to move.

58 | P a g e

G.R. No. 124498 October 5, 2001
EDDIE B. SABANDAL, petitioner,
vs.
HON. FELIPE S. TONGCO, Presiding Judge, Regional Trial Court,
Manila, Branch 42, and PHILIPPINES TODAY, respondents.
The case is a petition to suspend the criminal proceedings in the Regional
Trial Court, Manila, Branch 42,1 where petitioner Eddie B. Sabandal is
charged with eleven counts of violation of Batas Pambansa Bilang 22.2
The Facts
On February 18, 1989, Eddie B. Sabandal entered into a memorandum of
agreement on dealership with respondent Philippines Today, Inc. for the
distribution of the newspaper Philippines Today, (now Philippine Star) in
Bacolod City and in designated towns in Negros Occidental.3
Under the agreement, petitioner shall pay for an equivalent amount of one
month of deliveries in advance within the first seven days of the
succeeding month. Petitioner's allowable percentage of return shall be 10%
and be entitled to a rebate of P0.15 per copy sold.
After execution of the agreement, respondent Philippines Today, Inc. made
regular deliveries of the agreed copies of the newspaper to petitioner.
In order to make partial payments for the deliveries, on December 18,
1990 to April 15, 1991, petitioner issued to respondent several checks
amounting to ninety thousand (P90,000.00) pesos.
When respondent presented petitioner's checks to the drawee banks for
payment, the bank dishonored the checks for insufficiency of funds and/or
account closed. Consequently, respondent made oral and written demands
for petitioner to make good the checks. However, petitioner failed to pay
despite demands.
In December 1992, on the basis of a complaint-affidavit filed by respondent
Philippines Today, Inc., assistant city prosecutor of Manila Jacinto A. de los
Reyes, Jr. filed with the Regional Trial Court, Manila eleven informations for
violation of Batas Pambansa Bilang 22 against petitioner.4
Three years later, or on October 11, 1995, petitioner filed with the Regional
Trial Court, Negros Occidental at Himamaylan, a complaint against
Philippines Today, Inc. for specific performance, recovery of overpayment
and damages.5
On October 11, 1995, petitioner also filed with the Regional Trial Court,
Manila, Branch 42, a motion to suspend trial in the criminal cases against
him based on a prejudicial question.6
On November 27, 1995, the trial court denied petitioner's motion to
suspend trial based on a prejudicial question.7
On December 20, 1995, petitioner filed with the trial court a motion for
reconsideration of the denial.8
On January 9, 1996, the trial court denied the motion for reconsideration.9
Hence, this petition.10
The Issue
The issue raised is whether a prejudicial question exists to warrant the
suspension of the trial of the criminal cases for violation of Batas
Pambansa Bilang 22 against petitioner until after the resolution of the civil
action for specific performance, recovery of overpayment, and damages.
The Court's Ruling
The petition has no merit.
The two (2) essential elements of a prejudicial question are: (a) the civil
action involves an issue similar or intimately related to the issue raised in
the criminal action; and (b) the resolution of such issue determines
whether or not the criminal action may proceed.11
"A prejudicial question is defined as that which arises in a case the
resolution of which is a logical antecedent of the issue involved therein,
and the cognizance of which pertains to another tribunal. The prejudicial
question must be determinative of the case before the court but the
jurisdiction to try and resolve the question must be lodged in another court
or tribunal. It is a question based on a fact distinct and separate from the
59 | P a g e
crime but so intimately connected with it that it determines the guilt or
innocence of the accused."12
"For a civil action to be considered prejudicial to a criminal case as to
cause the suspension of the criminal proceedings until the final resolution
of the civil, the following requisites must be present: (1) the civil case
involves facts intimately related to those upon which the criminal
prosecution would be based; (2) in the resolution of the issue or issues
raised in the civil action, the guilt or innocence of the accused would
necessarily be determined; and (3) jurisdiction to try said question must be
lodged in another tribunal."13
If both civil and criminal cases have similar issues or the issue in one is
intimately related to the issues raised in the other, then a prejudicial
question would likely exist, provided the other element or characteristic is
satisfied.14 It must appear not only that the civil case involves the same
facts upon which the criminal prosecution would be based, but also that
the resolution of the issues raised in the civil action would be necessarily
determinative of the guilt or innocence of the accused.15 If the resolution
of the issue in the civil action will not determine the criminal responsibility
of the accused in the criminal action based on the same facts, or there is
no necessity "that the civil case be determined first before taking up the
criminal case," therefore, the civil case does not involve a prejudicial
question.16 Neither is there a prejudicial question if the civil and the
criminal action can, according to law, proceed independently of each
other.17
In this case, the issue in the criminal cases for violation of Batas Pambansa
Bilang 22 is whether the accused knowingly issued worthless checks. The
issue in the civil action for specific performance, overpayment, and
damages is whether complainant Sabandal overpaid his obligations to
Philippines Today, Inc. If, after trial in the civil case, petitioner is shown to
have overpaid respondent, it does not follow that he cannot be held liable
for the bouncing checks he issued, for the mere issuance of worthless
checks with knowledge of the insufficiency of funds to support the checks
is itself an offense.18
The lower court, therefore, did not err in ruling that the pendency of a civil
action for specific performance, overpayment, and damages did not pose a
prejudicial question in the criminal cases for violation of Batas Pambansa
Bilang 22.
Furthermore, the peculiar circumstances of the case clearly indicate that
the filing of the civil case was a ploy to delay the resolution of the criminal
cases. Petitioner filed the civil case three years after the institution of the
criminal charges against him. Apparently, the civil action was instituted as
an afterthought to delay the proceedings in the criminal cases.
Petitioner's claim of overpayment to respondent may be raised as a
defense during the trial of the cases for violation of Batas Pambansa Bilang
22 charged against him. The civil action for recovery of civil liability is
impliedly instituted with the filing of the criminal action.19 Hence,
petitioner may invoke all defenses pertaining to his civil liability in the
criminal action.20
The Fallo
WHEREFORE, the Court hereby DISMISSES the petition for lack of merit.
The Court directs the Regional Trial Court, Manila to proceed with the trial
of the criminal cases against petitioner with all judicious dispatch in
accordance with the Speedy Trial Act of 1998.21
No costs.
SO ORDERED.
G.R. No. 184861 June 30, 2009
DREAMWORK CONSTRUCTION, INC., Petitioner,
vs.
CLEOFE S. JANIOLA and HON. ARTHUR A. FAMINI, Respondents.
DECISION
VELASCO, JR., J.:
The Case
Petitioner Dreamwork Construction, Inc. seeks the reversal of the August
26, 2008 Decision1 in SCA No. 08-0005 of the Regional Trial Court (RTC),
Branch 253 in Las Pias City. The Decision affirmed the Orders dated
October 16, 20072 and March 12, 20083 in Criminal Case Nos. 55554-61
issued by the Metropolitan Trial Court (MTC), Branch 79 in Las Pias City.
The Facts
On October 18, 2004, petitioner, through its President, Roberto S.
Concepcion, and Vice-President for Finance and Marketing, Normandy P.
Amora, filed a Complaint Affidavit dated October 5, 20044 for violation of
Batas Pambansa Bilang 22 (BP 22) against private respondent Cleofe S.
Janiola with the Office of the City Prosecutor of Las Pias City. The case was
docketed as I.S. No. 04-2526-33. Correspondingly, petitioner filed a
criminal information for violation of BP 22 against private respondent with
the MTC on February 2, 2005 docketed as Criminal Case Nos. 55554-61,
entitled People of the Philippines v. Cleofe S. Janiola.
60 | P a g e
On September 20, 2006, private respondent, joined by her husband,
instituted a civil complaint against petitioner by filing a Complaint dated
August 20065 for the rescission of an alleged construction agreement
between the parties, as well as for damages. The case was filed with the
RTC, Branch 197 in Las Pias City and docketed as Civil Case No. LP-06-
0197. Notably, the checks, subject of the criminal cases before the MTC,
were issued in consideration of the construction agreement.
Thereafter, on July 25, 2007, private respondent filed a Motion to Suspend
Proceedings dated July 24, 20076 in Criminal Case Nos. 55554-61, alleging
that the civil and criminal cases involved facts and issues similar or
intimately related such that in the resolution of the issues in the civil case,
the guilt or innocence of the accused would necessarily be determined. In
other words, private respondent claimed that the civil case posed a
prejudicial question as against the criminal cases.
Petitioner opposed the suspension of the proceedings in the criminal cases
in an undated Comment/Opposition to Accuseds Motion to Suspend
Proceedings based on Prejudicial Question7 on the grounds that: (1) there
is no prejudicial question in this case as the rescission of the contract upon
which the bouncing checks were issued is a separate and distinct issue
from the issue of whether private respondent violated BP 22; and (2)
Section 7, Rule 111 of the Rules of Court states that one of the elements of
a prejudicial question is that "the previously instituted civil action involves
an issue similar or intimately related to the issue raised in the subsequent
criminal action"; thus, this element is missing in this case, the criminal
case having preceded the civil case.
Later, the MTC issued its Order dated October 16, 2007, granting the
Motion to Suspend Proceedings, and reasoned that:
Should the trial court declare the rescission of contract and the nullification
of the checks issued as the same are without consideration, then the
instant criminal cases for alleged violation of BP 22 must be dismissed. The
belated filing of the civil case by the herein accused did not detract from
the correctness of her cause, since a motion for suspension of a criminal
action may be filed at any time before the prosecution rests (Section 6,
Rule 111, Revised Rules of Court).8
In an Order dated March 12, 2008,9 the MTC denied petitioners Motion for
Reconsideration dated November 29, 2007.
Petitioner appealed the Orders to the RTC with a Petition dated May 13,
2008. Thereafter, the RTC issued the assailed decision dated August 26,
2008, denying the petition. On the issue of the existence of a prejudicial
question, the RTC ruled:
Additionally, it must be stressed that the requirement of a "previously" filed
civil case is intended merely to obviate delays in the conduct of the
criminal proceedings. Incidentally, no clear evidence of any intent to delay
by private respondent was shown. The criminal proceedings are still in
their initial stages when the civil action was instituted. And, the fact that
the civil action was filed after the criminal action was instituted does not
render the issues in the civil action any less prejudicial in character.10
Hence, we have this petition under Rule 45.
The Issue
WHETHER OR NOT THE COURT A QUO SERIOUSLY ERRED IN NOT
PERCEIVING GRAVE ABUSE OF DISCRETION ON THE PART OF THE INFERIOR
COURT, WHEN THE LATTER RULED TO SUSPEND PROCEEDINGS IN CRIM.
CASE NOS. 55554-61 ON THE BASIS OF "PREJUDICIAL QUESTION" IN CIVIL
CASE NO. LP-06-0197.11
The Courts Ruling
This petition must be granted.
The Civil Action Must Precede the Filing of the
Criminal Action for a Prejudicial Question to Exist
Under the 1985 Rules on Criminal Procedure, as amended by Supreme
Court Resolutions dated June 17, 1988 and July 7, 1988, the elements of a
prejudicial question are contained in Rule 111, Sec. 5, which states:
SEC. 5. Elements of prejudicial question. The two (2) essential elements
of a prejudicial question are: (a) the civil action involves an issue similar or
intimately related to the issue raised in the criminal action; and (b) the
resolution of such issue determines whether or not the criminal action may
proceed.
Thus, the Court has held in numerous cases12 that the elements of a
prejudicial question, as stated in the above-quoted provision and in Beltran
v. People,13 are:
The rationale behind the principle of prejudicial question is to avoid two
conflicting decisions. It has two essential elements: (a) the civil action
involves an issue similar or intimately related to the issue raised in the
criminal action; and (b) the resolution of such issue determines whether or
not the criminal action may proceed.
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On December 1, 2000, the 2000 Rules on Criminal Procedure, however,
became effective and the above provision was amended by Sec. 7 of Rule
111, which applies here and now provides:
SEC. 7. Elements of prejudicial question.The elements of a prejudicial
question are: (a) the previously instituted civil action involves an issue
similar or intimately related to the issue raised in the subsequent criminal
action, and (b) the resolution of such issue determines whether or not the
criminal action may proceed. (Emphasis supplied.)
Petitioner interprets Sec. 7(a) to mean that in order for a civil case to
create a prejudicial question and, thus, suspend a criminal case, it must
first be established that the civil case was filed previous to the filing of the
criminal case. This, petitioner argues, is specifically to guard against the
situation wherein a party would belatedly file a civil action that is related to
a pending criminal action in order to delay the proceedings in the latter.
On the other hand, private respondent cites Article 36 of the Civil Code
which provides:
Art. 36. Pre-judicial questions which must be decided before any criminal
prosecution may be instituted or may proceed, shall be governed by rules
of court which the Supreme Court shall promulgate and which shall not be
in conflict with the provisions of this Code. (Emphasis supplied.)
Private respondent argues that the phrase "before any criminal prosecution
may be instituted or may proceed" must be interpreted to mean that a
prejudicial question exists when the civil action is filed either before the
institution of the criminal action or during the pendency of the criminal
action. Private respondent concludes that there is an apparent conflict in
the provisions of the Rules of Court and the Civil Code in that the latter
considers a civil case to have presented a prejudicial question even if the
criminal case preceded the filing of the civil case.
We cannot agree with private respondent.
First off, it is a basic precept in statutory construction that a "change in
phraseology by amendment of a provision of law indicates a legislative
intent to change the meaning of the provision from that it originally
had."14 In the instant case, the phrase, "previously instituted," was
inserted to qualify the nature of the civil action involved in a prejudicial
question in relation to the criminal action. This interpretation is further
buttressed by the insertion of "subsequent" directly before the term
criminal action. There is no other logical explanation for the amendments
except to qualify the relationship of the civil and criminal actions, that the
civil action must precede the criminal action.
Thus, this Court ruled in Torres v. Garchitorena15 that:
Even if we ignored petitioners procedural lapse and resolved their petition
on the merits, we hold that Sandiganbayan did not abuse its discretion
amounting to excess or lack of jurisdiction in denying their omnibus motion
for the suspension of the proceedings pending final judgment in Civil Case
No. 7160. Section 6, Rule lll of the Rules of Criminal Procedure, as
amended, reads:
Sec. 6. Suspension by reason of prejudicial question. - A petition for
suspension of the criminal action based upon the pendency of a prejudicial
question in a civil action may be filed in the office of the prosecutor or the
court conducting the preliminary investigation. When the criminal action
has been filed in court for trial, the petition to suspend shall be filed in the
same criminal action at any time before the prosecution rests.
Sec. 7. Elements of prejudicial question. - The elements of a prejudicial
question are: (a) the previously instituted civil action involves an issue
similar or intimately related to the issue raised in the subsequent criminal
action, and (b) the resolution of such issue determines whether or not the
criminal action may proceed.
Under the amendment, a prejudicial question is understood in law as that
which must precede the criminal action and which requires a decision
before a final judgment can be rendered in the criminal action with which
said question is closely connected. The civil action must be instituted prior
to the institution of the criminal action. In this case, the Information was
filed with the Sandiganbayan ahead of the complaint in Civil Case No. 7160
filed by the State with the RTC in Civil Case No. 7160. Thus, no prejudicial
question exists. (Emphasis supplied.)
Additionally, it is a principle in statutory construction that "a statute should
be construed not only to be consistent with itself but also to harmonize
with other laws on the same subject matter, as to form a complete,
coherent and intelligible system."16 This principle is consistent with the
maxim, interpretare et concordare leges legibus est optimus interpretandi
modus or every statute must be so construed and harmonized with other
statutes as to form a uniform system of jurisprudence.171 a vv p h i l
In other words, every effort must be made to harmonize seemingly
conflicting laws. It is only when harmonization is impossible that resort
must be made to choosing which law to apply.
In the instant case, Art. 36 of the Civil Code and Sec. 7 of Rule 111 of the
Rules of Court are susceptible of an interpretation that would harmonize
both provisions of law. The phrase "previously instituted civil action" in Sec.
7 of Rule 111 is plainly worded and is not susceptible of alternative
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interpretations. The clause "before any criminal prosecution may be
instituted or may proceed" in Art. 36 of the Civil Code may, however, be
interpreted to mean that the motion to suspend the criminal action may be
filed during the preliminary investigation with the public prosecutor or
court conducting the investigation, or during the trial with the court
hearing the case.
This interpretation would harmonize Art. 36 of the Civil Code with Sec. 7 of
Rule 111 of the Rules of Court but also with Sec. 6 of Rule 111 of the Civil
Code, which provides for the situations when the motion to suspend the
criminal action during the preliminary investigation or during the trial may
be filed. Sec. 6 provides:
SEC. 6. Suspension by reason of prejudicial question.A petition for
suspension of the criminal action based upon the pendency of a prejudicial
question in a civil action may be filed in the office of the prosecutor or the
court conducting the preliminary investigation. When the criminal action
has been filed in court for trial, the petition to suspend shall be filed in the
same criminal action at any time before the prosecution rests.
Thus, under the principles of statutory construction, it is this interpretation
of Art. 36 of the Civil Code that should govern in order to give effect to all
the relevant provisions of law.
It bears pointing out that the circumstances present in the instant case
indicate that the filing of the civil action and the subsequent move to
suspend the criminal proceedings by reason of the presence of a
prejudicial question were a mere afterthought and instituted to delay the
criminal proceedings.
In Sabandal v. Tongco,18 we found no prejudicial question existed involving
a civil action for specific performance, overpayment, and damages, and a
criminal complaint for BP 22, as the resolution of the civil action would not
determine the guilt or innocence of the accused in the criminal case. In
resolving the case, we said:
Furthermore, the peculiar circumstances of the case clearly indicate that
the filing of the civil case was a ploy to delay the resolution of the criminal
cases. Petitioner filed the civil case three years after the institution of the
criminal charges against him. Apparently, the civil action was instituted as
an afterthought to delay the proceedings in the criminal cases.19
Here, the civil case was filed two (2) years after the institution of the
criminal complaint and from the time that private respondent allegedly
withdrew its equipment from the job site. Also, it is worth noting that the
civil case was instituted more than two and a half (2 ) years from the
time that private respondent allegedly stopped construction of the
proposed building for no valid reason. More importantly, the civil case
praying for the rescission of the construction agreement for lack of
consideration was filed more than three (3) years from the execution of the
construction agreement.
Evidently, as in Sabandal, the circumstances surrounding the filing of the
cases involved here show that the filing of the civil action was a mere
afterthought on the part of private respondent and interposed for delay.
And as correctly argued by petitioner, it is this scenario that Sec. 7 of Rule
111 of the Rules of Court seeks to prevent. Thus, private respondents
positions cannot be left to stand.
The Resolution of the Civil Case Is Not
Determinative of the Prosecution of the Criminal Action
In any event, even if the civil case here was instituted prior to the criminal
action, there is, still, no prejudicial question to speak of that would justify
the suspension of the proceedings in the criminal case.
To reiterate, the elements of a prejudicial question under Sec. 7 of Rule 111
of the Rules of Court are: (1) the previously instituted civil action involves
an issue similar or intimately related to the issue raised in the subsequent
criminal action; and (2) the resolution of such issue determines whether or
not the criminal action may proceed.
Petitioner argues that the second element of a prejudicial question, as
provided in Sec. 7 of Rule 111 of the Rules, is absent in this case. Thus,
such rule cannot apply to the present controversy.
Private respondent, on the other hand, claims that if the construction
agreement between the parties is declared null and void for want of
consideration, the checks issued in consideration of such contract would
become mere scraps of paper and cannot be the basis of a criminal
prosecution.
We find for petitioner.
It must be remembered that the elements of the crime punishable under
BP 22 are as follows:
(1) the making, drawing, and issuance of any check to apply for account or
for value;
(2) the knowledge of the maker, drawer, or issuer that at the time of issue
there are no sufficient funds in or credit with the drawee bank for the
payment of such check in full upon its presentment; and
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(3) the subsequent dishonor of the check by the drawee bank for
insufficiency of funds or credit, or dishonor for the same reason had not the
drawer, without any valid cause, ordered the bank to stop payment.20
Undeniably, the fact that there exists a valid contract or agreement to
support the issuance of the check/s or that the checks were issued for
valuable consideration does not make up the elements of the crime. Thus,
this Court has held in a long line of cases21 that the agreement
surrounding the issuance of dishonored checks is irrelevant to the
prosecution for violation of BP 22. In Mejia v. People,22 we ruled:
It must be emphasized that the gravamen of the offense charge is the
issuance of a bad check. The purpose for which the check was issued, the
terms and conditions relating to its issuance, or any agreement
surrounding such issuance are irrelevant to the prosecution and conviction
of petitioner. To determine the reason for which checks are issued, or the
terms and conditions for their issuance, will greatly erode the faith the
public reposes in the stability and commercial value of checks as currency
substitutes, and bring havoc in trade and in banking communities. The
clear intention of the framers of B.P. 22 is to make the mere act of issuing a
worthless check malum prohibitum.
Lee v. Court of Appeals23 is even more poignant. In that case, we ruled
that the issue of lack of valuable consideration for the issuance of checks
which were later on dishonored for insufficient funds is immaterial to the
success of a prosecution for violation of BP 22, to wit:
Third issue. Whether or not the check was issued on account or for value.
Petitioners claim is not feasible. We have held that upon issuance of a
check, in the absence of evidence to the contrary, it is presumed that the
same was issued for valuable consideration. Valuable consideration, in
turn, may consist either in some right, interest, profit or benefit accruing to
the party who makes the contract, or some forbearance, detriment, loss or
some responsibility, to act, or labor, or service given, suffered or
undertaken by the other side. It is an obligation to do, or not to do in favor
of the party who makes the contract, such as the maker or indorser.
In this case, petitioner himself testified that he signed several checks in
blank, the subject check included, in exchange for 2.5% interest from the
proceeds of loans that will be made from said account. This is a valuable
consideration for which the check was issued. That there was neither a pre-
existing obligation nor an obligation incurred on the part of petitioner when
the subject check was given by Bautista to private complainant on July 24,
1993 because petitioner was no longer connected with Unlad or Bautista
starting July 1989, cannot be given merit since, as earlier discussed,
petitioner failed to adequately prove that he has severed his relationship
with Bautista or Unlad.
At any rate, we have held that what the law punishes is the mere act of
issuing a bouncing check, not the purpose for which it was issued nor the
terms and conditions relating to its issuance. This is because the thrust of
the law is to prohibit the making of worthless checks and putting them into
circulation.24 (Emphasis supplied.)
Verily, even if the trial court in the civil case declares that the construction
agreement between the parties is void for lack of consideration, this would
not affect the prosecution of private respondent in the criminal case. The
fact of the matter is that private respondent indeed issued checks which
were subsequently dishonored for insufficient funds. It is this fact that is
subject of prosecution under BP 22.lawphil.net
Therefore, it is clear that the second element required for the existence of
a prejudicial question, that the resolution of the issue in the civil action
would determine whether the criminal action may proceed, is absent in the
instant case. Thus, no prejudicial question exists and the rules on it are
inapplicable to the case before us.
WHEREFORE, we GRANT this petition. We hereby REVERSE and SET ASIDE
the August 26, 2008 Decision in SCA No. 08-0005 of the RTC, Branch 253 in
Las Pias City and the Orders dated October 16, 2007 and March 12, 2008
in Criminal Case Nos. 55554-61 of the MTC, Branch 79 in Las Pias City. We
order the MTC to continue with the proceedings in Criminal Case Nos.
55554-61 with dispatch.
No costs.
SO ORDERED.
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