G.R. No.
134239 May 26, 2005 As regards Lot 2948-B of the Daleon brothers, the Villafuertes were not as lucky.
REYNALDO VILLAFUERTE and PERLITA T. VILLAFUERTE, petitioners,
vs.
HON. COURT OF APPEALS, EDILBERTO DE MESA and GONZALO DALEON, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-
G.R. CV No. 41871 which affirmed, with modification, the decision 2 of the Regional Trial
Court, Branch 55, Lucena City, in Civil Case No. 90-11 entitled, "Reynaldo C. Villafuerte and
Perlita Tan Villafuerte v. Edilberto De Mesa and Gonzalo Daleon."
The facts, as established by the Court of Appeals, follow:
Appelees – the spouses Reynaldo C. Villafuerte and Perlita Tan-Villafuerte –
operated a gasoline station known as Peewee's Petron Powerhouse Service
Station and General Merchandise on the premises of three (3) adjoining lots at
the corner of Gomez Street and Quezon Avenue in Lucena City. One of these lots,
Lot No. 2948-A with an area of 575 square meters, is owned by several persons,
one of whom is appellant Edilberto de Mesa, while the other lot, Lot 2948-B with
an area of 290 square meters, is owned by appellant Gonzalo Daleon and his
brother Federico A. Daleon. The remaining lot belongs to Mrs. Anicia Yap-Tan,
mother of appellee Perlita Tan-Villafuerte.
Appellants Edilberto de Mesa and Gonzalo Daleon acquired their respective lots
subject to the lease by Petrophil Corporation which had built thereon the
gasoline station being managed by the Villafuerte couple. When the lease of
Petrophil Corporation expired on December 31, 1988, the Villafuertes obtained a
new lease on Lot No. 2948-A from appellant Edilberto de Mesa for a period
expiring on December 31, 1989, thus:.
"1 – This lease will be for a period of one (1) year only, from January 1, 1989 and
will terminate on the 31stof December 1989 at a monthly rental of FOUR
THOUSAND PESOS (P4,000.00)." (Exhibit "1-A-1" De Mesa).
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For, instead of obtaining a lease renewal, what they received were demand
letters from the brothers' counsel ordering them to vacate the premises. Instead
of complying therewith, the Villafuertes simply ignored the demand and
continued operating the gas station (Exhibits "3-B", "3-C" and "3-F", Daleon).
On May 9, 1989, in the Office of the Barangay Captain of Barangay Tres, Lucena
City, a complaint for ejectment was filed by Gonzalo Daleon against the
Villafuertes (Exhibit "6", Daleon). Evidently, no settlement was reached thereat,
as shown by a certification to file action issued by the lupon.
With their problem with the Daleon brothers far from over, the Villafuertes were
apt for another one; their lease contract with Edilberto de Mesa was not
renewed when it expired on December 31, 1989. Nonetheless, and duplicating
what they had done in the case of the property of the Daleon brothers, the
spouses continued to operate their gasoline station and other businesses on the
lot of de Mesa despite the latter's demand to vacate.
What transpired next lays at the core of the instant controversy.
It appears that in the early morning of February 1, 1990, appellants Edilberto de
Mesa and Gonzalo Daleon, with the aid of several persons and without the
knowledge of the Villafuertes, caused the closure of the latter's gasoline station
by constructing fences around it.
The following day – February 2, 1990 – the Villafuertes countered with a
complaint for damages with preliminary mandatory injunction against both
Edilberto de Mesa and Gonzalo Daleon. Docketed in the court below as Civil Case
No. 90-11, the complaint seeks vindication for the alleged malicious and unlawful
fencing of the plaintiffs' business premises (Records, pp. 1-6).
Invoking their status as owners of the withheld premises, the defendants
admitted in their respective answers having caused the fencing of the plaintiffs'
gasoline station thereat but reasoned out that they did so on account of the
plaintiffs' refusal to vacate the same despite demands.
After hearing the parties in connection with the plaintiffs' application for a writ
of preliminary mandatory injunction, the lower court, in its order of May 23,
1990, ruled that with the expiration of the lease on the defendants' property, the
 plaintiffs have no more right to stay thereon and, therefore, cannot pretend to Banking Corporation) for additional loan availed of to
have a clear and unmistakable right to an injunctive writ and accordingly denied pay off products acquired on credit from Petron Corp.
their application therefore (Rec., p. 186). In a subsequent order of July 30, 1990, but were held inside gas station
the same court denied the Villafuertes' motion for reconsideration (Rec., p. 237).
TOTAL -- P2,176,293.44
Later, with leave of court, the Villafuertes amended their complaint to allege,
among others, that the complained acts of the defendants cost them the The amended complaint thus prayed for the following reliefs:
following items of actual damages:
"WHEREFORE, it is respectfully prayed of this Hon. Court that judgment be
rendered in favor of the plaintiffs:
a) Daily Sales (4000-5000 lts.) at .35¢lt.
mark-up, P1,750 x 270 days P472,500.00
A - Immediately ordering the issuance of a writ of preliminary mandatory
b) Storage Fee of POL (Petroleum, Oil & Lubricants) injunction against the defendants commanding them and any person acting in
Recom 4 at 5% for 100,000 lts. their behalf to forthwith remove the fence they have constructed around the
= 5000 lts. X 3 quarters x P6.00/lt. 90,000.00 premises in question, and after trial making the said injunction permanent.
c) Tires, Batteries, Accessories (TBA) Gen. Merchandise
Sales, P50,000/mo. 20% mark-Up = P10,000 x 9 months 90,000.00 B - Ordering the defendants to pay jointly and severally the plaintiffs the
d) Hauling of Petroleum products for Peewee's Petron following:
Powerhouse, 2 trips weekly, P1,500 X 8 trips/mo. X 9
months 108,000.00 1) Moral damages equivalent to not less than P200,000.00;
e) Hauling of Petroleum products for military
7 trips/qtr., P1,500/trip x 21 (3 qtrs.) 31,500.00 2) Exemplary damages in the amount of P50,000.00;

f) Balloon Business (Sunshine Balloons)

3) Attorney's fee in the amount of P60,000.00 plus twenty-five percent (25%) of
P50,000.00 capital, P6,000/mo. Income
the amount of damages to which plaintiffs are entitled; and
TOTAL LOSS 200,000.00
g) Uncollected Debts 619,030.61 4) Litigation expenses in this instance in the amount of P10,000.00
h) Uncollected Checks 37,449.05
i) Merchandise Inventory as of July 25, 1990, C - Requiring the defendants to pay jointly and severally actual damages
P141,036.50 value, 50% damaged 70,518.25 representing unrealized income and profits as well as losses referred to in
paragraphs 10 and 12 hereof in such amount as may be shown in evidence during
j) Damaged Office Equipments 30,000.00 the hearing.
k) Stampitas (Religious Articles) and other
Hermana Fausta Memorial Foundation, Inc. D - Granting the plaintiffs such other just and equitable remedies to which they
printed matters entrusted in my care, may be entitled under the law and equity." (Orig. Rec., pp. 292-293).
totally damaged by rain and termites 5,000.00
l) Products lost in 4 underground tanks 249,805.00 As later events disclosed, the defendants resumed possession of the premises in
question on January 25, 1991 (Rec., p. 333). Four (4) days later, they obtained a
m) Interest payments to RCBC (Rizal Commercial 172,490.53
judgment by compromise from the Municipal Trial Court in Cities, Lucena City in
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 connection with the suit for ejectment they earlier filed thereat against Petrophil
Corporation. In that judgment, Petrophil bound itself to remove the materials
and equipment related to the operation of the gasoline station on the subject
premises. (Rec., pp. 355-356).
After the parties herein had presented their respective evidence, the lower court
came out with the decision now under review. Dated November 13, 1990, the
decision dispositively reads:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
ordering the defendants Edliberto de Mesa and Gonzalo Daleon to pay,
jointly and severally, plaintiffs the following:
1. Actual damages in the total amount of TWO MILLION ONE HUNDRED
SEVENTY SIX THOUSAND AND TWO HUNDRED NINETY THREE PESOS
AND FORTY FOUR CENTAVOS (P2,176,293.44);
2. Moral damages in the amount of P200,000.00;
3. Exemplary damages in the amount of P50,000.00;
4. P50,000.00, as and for attorney's fees; and
5. Costs of suit.
SO ORDERED" (Rec., pp. 408-414).[3]
The trial court ruled that with the continued occupation by petitioners of the two lots
belonging to private respondents, despite the expiration of the lease contracts over the
same, petitioners had become "undesirable lessees."4 However, it was improper for
private respondents to resort to fencing their properties in order to remove petitioners
from the premises in the light of the clear provision of the Civil Code on the matter, to
wit:
Art. 536. In no case may possession be acquired through force or intimidation as
long as there is a possessor who objects thereto. He who believes that he has an
action or a right to deprive another of the holding of a thing, must invoke the aid
of the competent court, if the holder should refuse to deliver the thing.
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Having disregarded the plain requirement of the law, private respondents were held
accountable to petitioners for the various damages prayed for by petitioners in their
amended complaint.
In due time, private respondents filed their respective appeals before the Court of
Appeals which affirmed, with modification, the decision of the trial court. The dispositive
portion of the appellate court's decision reads:
WHEREFORE, the decision appealed from is MODIFIED by holding the appellants
jointly and severally liable to the appellees for P50,000.00 as exemplary damages
and for P27,000.00 as actual damages, itemized as follows:
1. detention of the records: P7,000.00;
2. detention of the merchandise: P10,000.00;
3. value of the damaged merchandise and religious items: P5,000; and
4. detention of offices equipment: P5,000.00,
and by holding the appellees jointly and severally liable for rental to appellants
Edilberto de Mesa and Gonzalo Daleon in the amount of P5,500.00 and
P39,000.00, respectively.
The deficiency in the payment of the docket fees, to be computed by the clerk of court of
the lower court, shall constitute a lien on this judgment. 5
In adjudging private respondents liable for damages, the Court of Appeals substantially
ruled that:
1. Private respondents could not invoke the doctrine of self-help contained in
6
Article 429 of the Civil Code reasoning that the doctrine finds no application
when occupation was effected through lawful means such as in this case where
petitioners' possession of the lots owned by private respondents was effected
through lease agreements;
2. Petitioners' continued unauthorized occupation of private respondents'
properties may have been illegal, however, it was incumbent upon private
 respondents to abide by the express provision of Article 536 of the Civil Code
requiring recourse to the proper court prior to ousting petitioners from their
(private respondents') lots;
3. On the matter of insufficient docket fees paid by petitioners during the
institution of this action, the Court of Appeals declared that "whatever deficiency
there may be in the docket fees can be levied from the amount that may be
awarded the appellees (petitioners herein)"7 and that private respondents were
already estopped from assailing the jurisdiction of the trial court;
4. Private respondents could not invoke the principle of damnum absque
injuria as this doctrine only applies "when the loss or damage does not constitute
a violation of a legal right or amounts to a legal wrong"8 and not to this case
where private respondents clearly violated the law by unilaterally displacing
petitioners from the subject premises;
5. On the issue of actual damages, the appellate court substantially reduced the
amount of actual damages awarded by the court a quo upon the ground that
petitioners failed to substantiate their claims thereto except for the detention of
petitioners' records of their receivables, various merchandise, damaged goods,
religious items, and office equipment;
6. As for the propriety of awarding moral damages to petitioners, the Court of
Appeals held that petitioners are not entitled to this form of damage as this case
does not fall within Article 2219 of the Civil Code;
7. Although Article 2219 of the Civil Code encompasses incidents which may fall
within the purview of Article 21 of the Civil Code, the latter, being a rule based
on equity, necessitates the claimant to come to court with clean hands which
cannot be said of petitioners who continued to occupy the lands belonging to
private respondents without the authority of a subsisting lease agreement;
8. Private respondents are nevertheless liable for exemplary damages for having
taken the law into their own hands by fencing the premises of the Petron
gasoline station operated by petitioners instead of seeking redress from the
proper court as mandated by Article 536 of the Civil Code; and
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9. Petitioners are liable to pay private respondents for the unpaid rentals from
the time the lease agreements over the subject properties expired until 01
February 1990 when private respondents constructed the fence.
Dissatisfied with the ruling of the Court of Appeals, petitioners are now before us raising,
in the main, the issue of whether the appellate court erred in substantially reducing the
amount of damages earlier awarded to them by the trial court.
Petitioners insist that the appellate court "resorted to assumptions, inferences, surmises
and conjectures in disallowing certain items of actual damages like lost petroleum
products valued at P249,805.00, loss of value of merchandise detained for a quite a long
time (sic) in the fenced premises and uncollected debts as against the positive testimony
of petitioner Perlita Villafuerte which remained unrebutted and uncontested even on
appeal."9They also allege that the list of unrealized income, collectibles and damages
prepared by petitioner Perlita was based and ably supported by documents.
Petitioners also maintain that the Court of Appeals erred in finding that they came to
court with "unclean hands," thus, depriving them of entitlement to moral damages.
According to petitioners, their continued occupation of private respondents' properties
was based on their belief that their lease contract with private respondent De Mesa was
modified and extended whereas private respondent Daleon had verbally agreed to allow
them to continue with their possession of his lot for as long as the Petron Corporation's
equipment remain in the premises.
Finally, petitioners argue that the trial court was correct in awarding in their favor
attorney's fees in the amount of P50,000.00 as they were compelled to engage the
services of counsel in order to seek vindication from the arbitrary action of private
respondents.
After a considered review of the records of this case, we resolve to affirm, with
modification, the decision of the Court of Appeals.
Both the trial court and the Court of Appeals concluded that the lease contracts between
petitioners and private respondents over the latter's respective lots had already expired.
There was also a congruence of findings that it was wrong for private respondents to
fence their properties thereby putting to a halt the operation of petitioners' gasoline
station. To this, we agree.
Article 536 of the Civil Code previously quoted explicitly provides for the proper recourse Atty. CAMALIGAN:
of one who claims to be entitled to the possession of a thing. When private respondents
personally took it upon themselves to evict petitioners from their properties, which act May I ask that this List of Unrealized Income, Collectibles and Damages
was in clear contravention of the law, they became liable "for all the necessary and from Febrauary 1, 1990 to October 30, 1990 be marked as Exhibit AA.
natural consequences of [their] illegal act."10
...
As expected, petitioners instituted this action praying that private respondents be held
liable for actual damages, moral damages, exemplary damages, attorney's fees, and costs Q: Will you explain to the court why this list you made is up to October 30, 1990?
of litigation. We shall resolve their right to these damages in seriatim.
A: I prepared this list until October 10, 1990 in preparation for our first hearing
Actual or compensatory damages are those awarded in order to compensate a party for sometime in November, sir.
an injury or loss he suffered. They arise out of a sense of natural justice and are aimed at
repairing the wrong done.11 Except as provided by law or by stipulation, a party is entitled
Q: I am calling your attention to No. 1 which is I quote, "Daily Sales (4,000 to
to an adequate compensation only for such pecuniary loss as he has duly proven.12 It is
5,000 liters) at P0.035 per liter mark up – P1,750.00 by 270 days amounting to
hornbook doctrine that to be able to recover actual damages, the claimant bears the onus
P472,500.00" will you explain to the court how you incurred this damage?
of presenting before the court actual proof of the damages alleged to have been suffered,
thus:
(A): After the closure of our gasoline station that was February 1, 1990 and then
until September, 1990 is nine (9) months and that is 270 days. I went thru my
A party is entitled to an adequate compensation for such pecuniary loss actually
sales for January and the average sales (is) 4,000 to 5,000 liters and so for our
suffered by him as he has duly proved. Such damages, to be recoverable, must
daily sales of 4,000 to 5,000 liters sale at P0.35 centavos mark-up, I got P1,750.00
not only be capable of proof, but must actually be proved with a reasonable
daily so that is times 270 days until September 1990, the total is P472,500.00, sir.
degree of certainty. We have emphasized that these damages cannot be
presumed and courts, in making an award must point out specific facts which
COURT: That is gross?
could afford a basis for measuring whatever compensatory or actual damages
are borne.13
A: Yes, your Honor.
We have exhaustively perused the records of this case and thus conclude that petitioners
have miserably failed to proffer evidence capable of sustaining their plea for actual COURT: What about the net income to be realized?
damages. We note that when petitioner Perlita was directly examined with respect to her
unrealized income14 for the following matters, namely: daily sales of various petroleum A: Your Honor, we will deduct from here the salaries and wages of the gasoline
products;15 storage fee of RECOM IV's petroleum, oil, and lubricants;16 sales of tires, boys and electric bill, maybe P0.25 centavos per liter.
batteries, accessories, and general merchandise;17 hauling of petroleum products for
Peewee's Petron Powerhouse by the gasoline tankers owned by petitioners;18 hauling of COURT: Proceed.
petroleum products for the military;19 and petitioner Perlita's balloon business which she
20
conducted within the premises of the fenced gasoline station, she repeatedly testified Q: Is the mark-up of P0.35 centavos per liter thru (sic), irrespective of amount of
that she arrived at these claimed amounts based on the average of her sales for the gasoline or value of gasoline per liter?
month of January 1990, the number of trips undertaken by their tankers, and average
volume of the gasoline deposit for RECOM IV. Her testimony on these matters went as A: We have different kinds of petroleum products, extra, regular and diesel and
follows: the average mark-up is thirty-five (35) centavos.

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 ...
Q: Calling your attention to No. 2 in the list which refers to storage fee of
petroleum, oil and lubricant from RECOM IV amounting to a total of ninety
thousand pesos (P90,000.00) will you kindly explain how you arrived at this
amount?
A: The military, PC/INP RECOM IV which is stationed at Camp Nakar has entered
into an agreement with us to deposit their petroleum, oil and lubricant for every
quarter, sir.
Q: Under what condition was that deposit made for?
A: That they will be able to withdraw the said products for a certain storage fee,
sir, and the storage fee is 5% which would cover disposing the products and also
certain percent of evaporation.
COURT: Five percent of what?
A: Five percent of the number of liters deposited with us so that if they deposited
one hundred thousand (100,000) liters we are paid in terms of gasoline also, five
thousand (5,000) liters.
Q: What was the average volume of deposit made by the RECOM IV?
A: It is on a quarterly basis, that is one hundred thousand (100,000) liters
quarterly, sir.
Q: On item 3 referring to tires, batteries, accessories, general merchandise is
listed an amount of ninety thousand (P90,000.00) pesos as your losses, will you
please explain how you incurred such losses?
A: Aside from petroleum products we also sell accessories for the motoring
public and they are in kinds like tires, batteries and some additives, how do you
realize income out of this? (sic)
Noticeably, petitioner Perlita's testimony was replete with claims that her unrealized
A: We have 20% mark-up on the merchandise and last January 1990 I average
income, as far as these items were concerned, were based on the "average." Except,
fifty thousand (P50,000.00) pesos gross income on the general merchandise so
however, for the record of daily petroleum sales for the month of January
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for 20% mark-up that is more or less ten thousand (P10,000.00) pesos and for
nine (9) months that is ninety thousand (P90,000.00) pesos, sir.
Q: In item No. 4 appearing in your list you listed a total amount of one hundred
eight thousand (P108,000.00) pesos, for hauling of petroleum products for
Peewee's Petron Powerhouse, will you explain to the court this hauling?
A: My husband and I run a fleet of gasoline tankers and they are hauling
petroleum products for our gasoline stations and for the military accounts. We
average two (2) deliveries every week so this is already a net of one thousand
five hundred (P1,500.00) pesos per delivery. It is two thousand eight hundred
(P2,800.00) pesos per delivery and deducting the salaries of the drivers, the fuel
consumption and the depreciation of the tankers, we incur a net of one thousand
five hundred (P1,500.00) pesos per trip. Every month we incur at least eight (8)
trips and that is one thousand five hundred (P1,500.00) pesos times eight (8)
trips times nine (9) months and I got one hundred eight thousand (P108,000.00)
pesos total.
Q: Do you own them?
A: Yes, sir.
Q: In item No. 6 you listed Balloon Business under Sunshine Balloon, you have
given a total amount of two hundred thousand (P200,000.00) pesos as your
losses here, will you please explain to the Court how you incurred these losses?
...
A: Inside the gasoline station we also operate a balloon business and we have
invested fifty thousand capital on this balloon business. This business has been
thriving for several years and we usually incur six (6) thousand monthly income
from said business, sir. Now that the gasoline station was closed with all the
equipments of the balloon business inside also, we have totally lost the market
for the balloon business and I feel that two hundred thousand (P200,000.00)
pesos would have to be paid for the total loss of the business. 21
1990,22 petitioners failed to present any evidence that would sufficiently establish their
mean income from these business undertakings. In the absence of any corroborative
proof, this Court is not bound to award in petitioners' favor the actual damages for items
a, b, c, d, e, and f of her alleged unrealized income. Nor can we give premium on the
summary of daily petroleum sales for January 1990 prepared by petitioner Perlita as the
same is not supported by any competent evidence; at best, said exhibit is self-serving.
Anent the actual damages claimed for the deterioration of the items which remained
inside petitioners' office, petitioner Perlita testified that when they were able to retrieve
the merchandise from the gasoline station, they noticed that most of them were already
defective and so they "valued"23 the damages thereto at seventy (70%) of their total
value. As for the items entrusted to her by the Hermana Fausta Memorial Foundation of
which she was the executive vice president at that time, petitioner Perlita alleged that the
amount of five thousand pesos represents the production cost of these materials which
the foundation purportedly paid to Imprenta Lucentina. As regards the amount
of P30,000.00 sought as actual damages for the damaged office equipment, petitioner
Perlita stated before the trial court that she arrived at this figure after computing the
acquisition costs of these equipment which she "approximated"24 to be P35,000.00.
Evidently, in establishing the amount of actual damages for the merchandise inventory,
office equipment, and materials owned by the Hermana Fausta Memorial Foundation,
petitioners relied solely on their own assessment of the prices of these items as well as
the damage thereto purportedly occasioned by the fencing of the gasoline station. This is
clearly demonstrated by the inconsistent stance of petitioner Pertlita with regard to the
percentage of damaged merchandise stored in the gasoline station, thus:
ATTY. CAMALIGAN:
Q: I noticed that the total appearing on page 3 of your merchandize inventory is
one hundred forty one thousand thirty six pesos and fifty centavos (P141,036.50)
only while in your list, it is ninety eight thousand seven hundred twenty five
pesos and fifty five centavos (P98,725.55), will you please explain the same?
WITNESS:
A: This list with the total amount of one hundred forty one thousand thirty six
pesos and fifty centavos (P141,036.50) represent the total value of all the
merchandize but then the reason why we have the ninety eight thousand seven
hundred twenty five pesos and fifty five centavos (P98,725.55) figure is, this
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represents seventy percent (70%) of the total amount because when we
retrieved the merchandize, we noticed that most of them are already defective,
so we valued the damages only seventy percent (70%) of the total value because
some of them could still be sold, sir.
ATTY. CAMALIGAN:
Q: I noticed there is a correction in Item No. 9 from ninety percent (90%) to
seventy percent (70%). When did you make that correction?
A: Only last December 30, 1990 after we have retrieved all the merchandize. I
prepared this list on October 31, 1990 not realizing the extent of the real
damages to the merchandize but when we retrieved them last December 29 and
upon inspection, most of the motor oil have already leaked because of the
plastics that were exposed to sun and rain, so we changed the estimate to
seventy percent (70%), sir.25
Such arbitrary estimations run afoul with our consistent pronouncement that actual or
compensatory damages cannot be presumed but must be proved with reasonable degree
of certainty.26 A court cannot simply rely on speculation, conjecture or guesswork as to
the fact and amount of damages, but is required to depend upon competent proof that
the claimant had suffered and on evidence of the actual amount thereof.27 Failing in this
regard, we resolve to delete the award of actual damages rendered by the Court of
Appeals with respect to these items.
Similarly, we rule that petitioners are not entitled to the total amount of the 17 checks
issued in their favor by their customers and to the amount of uncollected debts owed to
them by their patrons. Petitioners maintain that their customers were used to coming to
their gasoline station in order to settle their obligations but were prevented from doing
after the 01 February 1990 incident. They therefore would like to hold private
respondents accountable for these receivables. This, we can not grant.
The records indicate that petitioners filed before the trial court a motion to allow them to
enter the gasoline station subject of this dispute in order to make an inventory of their
property that were locked inside and to remove those they needed for their personal
use.28 Among the items removed from the gasoline station were the receipts evidencing
petitioners' receivables from their customers29 as well as the 17 uncollected
checks.30 Obviously, after the court-approved ocular inspection conducted on 24 July 1990
and 25 July 1990, petitioners were already in possession of the evidences of credit of their
customers. There was nothing, not even the closure of their gasoline station, which stood
in the way of petitioners' exerting earnest efforts in going after their debtors.
Petitioners likewise seek to be compensated for the value of the petroleum products
allegedly lost from the four underground tanks between the period 01 February 1990
until 25 July 1990 when an ocular inspection was conducted within the disputed property.
According to petitioners, after they compared the volume of the tanks' contents as of the
evening of 31 January 1990 with the dipstick reading on 25 July 1990, they discovered
that they had lost thousands of liters of petroleum products. On this point, we quote with
approval the conclusion of the Court of Appeals, to wit:
The appellees31 failed to adduce convincing evidence that appellants are the
ones responsible for the loss of the petroleum products in the four (4)
underground tanks (item "1," paragraph 10 of Amended Complaint). Although
the premises which were fenced by the appellants 32 adjoin the lot of Perlita's
mother and are even secured by appellees' guard, the appellees did not present
anyone to testify on the fact of loss of said gasoline products. Instead, they chose
to rely on Perlita's bare assertion that she lost P249,805.00 in terms of petroleum
products that allegedly disappeared. The sheer volume of the missing fuel makes
it difficult for the pilferer to commit the deed without attracting attention. An
unsubstantiated claim of loss, more so of such a dimension, cannot merit an
award therefor.33
Finally, with respect to the interest payments to the Rizal Commercial Banking
Corporation (RCBC), petitioners maintain that because of the fencing of their
gasoline station on 01 February 1990, they were forced to obtain a loan from
RCBC in order to pay off their obligations to different suppliers. This contention
was effectively refuted by petitioner Perlita herself when, during her re-direct
examination, she admitted that the loan granted by the RCBC was intended
for all the businesses that she and her husband, petitioner Reynaldo, were
maintaining.34 It would, therefore, be iniquitous to charge private respondents
for the interest payments for this loan the proceeds of which were utilized to
finance petitioners' various businesses and not solely the settlement of
petitioners' obligations to the suppliers of Peewee's Petron Powerhouse. In the
absence of actual proof as to how much of the RCBC loan was really used to pay
the creditors of the closed gasoline station, this Court can not affirm petitioners'
right to be compensated for the amount of interest payments they have made to
the RCBC.
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We find, however, that an award of temperate damages to petitioners is in order. In lieu
of actual damages, temperate damages, which are more than nominal but less than
compensatory damages, may be awarded where the court finds that some pecuniary loss
had been suffered by the claimant but its amount cannot be proved with certainty.
Undoubtedly, pecuniary loss had been inflicted upon petitioners in this case, however,
due to the insufficiency of evidence before us, we cannot place its amount with certainty.
In this regard, we find the amount of P50,000.00 to be sufficient.
Petitioners also assail the removal by the Court of Appeals of the moral damages
previously ordered by the trial court. They argue that contrary to the findings of the
appellate court, they came to court with "clean hands" as they believed that the lease
contract with private respondent De Mesa was modified and extended. At the same time,
they contend that they had a verbal understanding with private respondent Daleon
wherein the latter permitted them to remain in his lot for as long as Petron Corporation
was not removing its equipment. Further, petitioners contend that under Article 2219 of
the Civil Code, this Court had awarded moral damages in instances where the claimants
were victims of capricious, wanton, oppressive, malicious, and arbitrary acts such as
petitioners in this case. On this issue, we agree in the findings of the Court of Appeals
that:
The Court must have to disallow the lower court's award of moral damages. The
concept of moral damages, as announced in Article 2217 of the Civil Code, is
designed to compensate the complainant for his physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation and similar injury occasioned by the defendant's
wrongful act or omission. Article 2219 of the same Code specifies the cases
where moral damages may be awarded, to wit:
Art. 2219. Moral damages may be recovered in the following and
analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
 (5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29,
30, 32, 34, and 35.
The parents of the female seduced, abducted, raped or abused, referred
to in No. 3 of this article, may also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may
bring the action mentioned in No. 9 of this article, in the order named.
fencing their properties under the claim that they own the same brazenly violates the law
and circumvents the proper procedure which should be obtained before the court.
This Court likewise adopts the conclusion reached by the Court of Appeals that petitioners
do not deserve the award of attorney's fees for it was precisely their unfounded
insistence to stay on private respondents' properties that precipitated this suit.
WHEREFORE, the Decision of the Court of Appeals dated 31 March 1998, which modified
the Decision dated 13 November 1992 of the Regional Trial Court, Branch 55, Lucena City,
and its Resolution of 17 June 1993 denying reconsideration are hereby MODIFIED as
follows:
1. The award of Twenty-Seven Thousand Pesos (P27,000.00) as actual damages
in favor of petitioners Reynaldo and Perlita Villafuerte is deleted; and
2. Private respondents Edilberto De Mesa and Gonzalo Daleon are held jointly
and severally liable to pay petitioners the amount of Fifty Thousand Pesos
(P50,000.00) as temperate damages.

The remainder of the same Decision and Resolution of the Court of Appeals are hereby
Noticeably, none of the foregoing instances has any relevant bearing to the case
AFFIRMED. No costs.
at bench. While Article 2219 comprehends the situation in Article 21 of the Code,
whereunder "[A]ny person who willfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall SO ORDERED.
compensate the latter for the damages," the appellees cannot benefit from it.
The right to recover moral damages under Article 21 is based on equity, and Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
those who come to court to demand equity must come with clean hands Tinga, J., out of the country.
(Garciano v. Court of Appeals, 212 SCRA 436 citing Padilla, CIVIL CODE
ANNOTATED, Vol. 1, 1975 Ed., p. 87). The appellees knew that their lease had
expired. Yet, despite such awareness, they persisted in their unauthorized
occupancy of appellants' property. Being partly responsible for their present
predicament which is very much within their power to avoid, appellees cannot Footnotes
35
receive compensation for whatever mental anguish or suffering they went thru.
1
Penned by then Associate Justice Cancio C. Garcia (now a member of this Court)
Similarly, we uphold the award of P50,000.00 as exemplary damages in order to deter with Associate Justices Conchita Carpio Morales (now also a member of this
similarly minded individuals from pursuing the course of action taken by private Court) and Portia Aliño Hormachuelos concurring.
respondents. The law on this matter is clear: "(h)e who believes himself entitled to
deprive another of the possession of a thing, so long as the possessor refuses delivery, 2
Penned by Judge Eleuterio F. Guerrero.
must request the assistance of the proper authority."36 Petitioners' arbitrary conduct of

9|P age
 3
Rollo, pp. 22-27. G.R. No. 186976, December 07, 2016

4
Records, p. 413. PRYCE PROPERTIES CORPORATION, Petitioner, v. SPOUSES SOTERO OCTOBRE, JR. AND
HENRISSA A. OCTOBRE, AND CHINA BANKING CORPORATION, Respondents.
5
Rollo, p. 37.
DECISION
6
Article 429 of the Civil Code provides: "The owner or lawful possessor of a thing
has the right to exclude any person from the enjoyment and disposal thereof. For JARDELEZA, J.:
this purpose, he may use such force as may be reasonably necessary to repel or
prevent an actual or threatened unlawful physical invasion or usurpation of his The primary question is whether a breach of contract automatically triggers the award of
property." actual or compensatory damages.
7
Rollo, p. 30; citing the case of Pantranco North Express, Inc. v. Court of I
Appeals, G.R. No. 105180, 05 July 1993, 224 SCRA 477.
On July 22, 1997, respondent Spouses Sotero Octobre, Jr. and Henrissa A. Octobre
8
Ibid.; citing Globe Mackay and Radio Corporation v. Court of Appeals, G.R. No. (Spouses Octobre) signed a Reservation Agreement with petitioner Pryce Properties
81262, 25 August 1989, 176 SCRA 778. Corporation (Pryce) for the purchase of two lots with a total of 742 square meters located
in Puerto Heights Village, Puerto Heights, Cagayan de Oro City. 1 The parties subsequently
9
Rollo, p. 10; Petition for Review, p. 8. executed a Contract to Sell over the lot for the price of P2,897,510.00 on January 7, 1998. 2

10
Municipality of Moncada v. Cajuigan, No. 7048, 12 January 1912, 21 Phil. 194. On February 4, 2004, Pryce issued a certification that Spouses Octobre had fully paid the
purchase price and amortization interests, as well as the transfer fees and other charges
11
Terminal Facilities and Services Corporation v. Philippine Ports Authority, G.R. in relation to the property, amounting to a total of P4,292,297.92. 3 But Pryce had yet to
Nos. 135639 and 135826, 27 February 2002, 378 SCRA 82. deliver the certificates of title, which prompted Spouses Octobre to formally demand its
delivery. Despite repeated demands, Pryce failed to comply. 4 Thus, on May 18, 2004,
Spouses Octobre filed a complaint before the Housing and Land Use Regulatory Board
G.R. No. 186976, December 07, 2016 - PRYCE PROPERTIES CORPORATION, Petitioner, v. (HLURB), Regional Office No. 10 for specific performance, revocation of certificate of
SPOUSES SOTERO OCTOBRE, JR. AND HENRISSA A. OCTOBRE, AND CHINA BANKING registration, refund of payments, damages and attorney's fees. 5
CORPORATION, Respondents.
It appears that the reason why Pryce was unable to deliver the titles to Spouses Octobre is
because it had previously transferred custody of the titles, along with others pertaining to
the same development project, to China Banking Corporation (China Bank) as part of the
Deed of Assignment6 executed on June 27, 1996.7 Under this deed, Pryce agreed to assign
and transfer its accounts receivables, in the form of contracts to sell, in the Puerto Heights
development project to China Bank as security for the P200 Million credit facility
extended by the latter. Pryce obligated itself to deliver to China Bank the "contracts to sell
and the corresponding owner's duplicate copies of the transfer certificates of title, tax
THIRD DIVISION
declaration, real estate tax receipts and all other documents and papers" 8 relating to the
assigned receivables until such receivables are paid or repurchased by Pryce. The titles to
10 | P a g e
the lots purchased by Spouses Octobre were among those held in custody by China
Bank.9 When Pryce defaulted in its loan obligations to China Bank sometime in May 2002,
China Bank refused to return the titles to Pryce.10 For this reason, China Bank was also
impleaded in the HLURB complaint.
The HLURB Arbiter rendered a Decision11 dated March 31, 2005 finding that Spouses
Octobre had no cause of action against China Bank and rescinding the contract between
Pryce and Spouses Octobre. It ordered Pryce to refund the payments made by the
spouses with legal interest and to pay the latter compensatory damages amounting to
P30,000.00, attorney's fees and costs of suit.12
On appeal, the HLURB Board of Commissioners modified the Decision by ordering Pryce to
pay the redemption value to China Bank so that the latter may release the titles covering
the lots purchased by Spouses Octobre. In default thereof, Pryce shall refund the
payments with legal interest. The HLURB Board upheld the grant of compensatory
damages, attorney's fees and costs to Spouses Octobre. 13 Pryce moved for
reconsideration and to stay the proceedings on account of Pryce's ongoing corporate
rehabilitation.14 The HLURB Board, however, denied Pryce's motion considering that the
stay order of the rehabilitation court had already been reversed by the Court of
15
Appeals.
Thereafter, Pryce appealed the case to the Office of the President, which affirmed 16 in full
the HLURB Board's Decision. Undeterred, Pryce elevated the case to the Court of Appeals
which denied the petition for review and affirmed the Office of the President's Decision.
The Court of Appeals found that Pryce acted in bad faith because it "did not disclose [that
the titles were in the custody of China Bank] to respondents Spouses Octobre until the
latter demanded delivery of the titles."17 The Court of Appeals held that Pryce's
contractual breach justified the award of compensatory damages as well as the payment
of attorney's fees and costs of suit.18
Pryce is now before this Court primarily arguing that the Court of Appeals erred in
upholding the award of compensatory damages because Spouses Octobre failed to
present competent proof of the actual amount of loss. 19 It also questions the award of
attorney's fees and litigation costs because there was allegedly no finding of bad
20
faith. Additionally, as side issues, Pryce questions the Court of Appeals' finding that the
stay order had been reversed and its decision to uphold the finding by the HLURB Board
and Office of the President that the subject properties were mortgaged to China Bank. 21
11 | P a g e
In response, Spouses Octobre maintain that the award of compensatory damages,
attorney's fees and costs were proper because they were forced to litigate to enforce
their contractual right as a result of Pryce's breach. 22 With respect to the stay order,
Spouses Octobre cite this Court's February 4, 2008 Decision in G.R. No. 172302 23 which
affirmed the appellate court's reversal of the stay order. Finally, Spouses Octobre note
that the characterization of the Deed of Assignment as a mortgage came from Pryce's
own appeal memorandum filed with the HLURB Board, and that, in any event, whether it
is an assignment or mortgage, the decisive fact is that the titles were delivered by Pryce to
China Bank.24
In its comment, China Bank insists that Pryce only has itself to blame for failing to comply
with its obligation to remit the payments received from the various contracts to sell,
including its obligation to Spouses Octobre. Under the Deed of Assignment, China Bank is
entitled to hold custody of the titles surrendered by Pryce until the assigned receivables
are paid or repurchased by Pryce, which to date the latter has failed to do. 25cralawred
II
Article 2199 of the Civil Code defines actual or compensatory damages:26
Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages. (Emphasis supplied.)
To be entitled to compensatory damages, the amount of loss must therefore be capable
of proof and must be actually proven with a reasonable degree of certainty, premised
upon competent proof or the best evidence obtainable. The burden of proof of the
damage suffered is imposed on the party claiming the same, who should adduce the best
evidence available in support thereof.27 Its award must be based on the evidence
presented, not on the personal knowledge of the court; and certainly not on flimsy,
remote, speculative and non-substantial proof.28
It is clear that the amount paid by Spouses Octobre to Pryce as purchase price for the lots
has been adequately proved. There is no dispute that Spouses Octobre are entitled to
such amount with legal interest. The issue being raised by Pryce is only with respect to the
P30,000.00 awarded as compensatory damages.29
The records of this case are bereft of any evidentiary basis for the award of P30,000.00 as
compensatory damages. When the HLURB Arbiter initially awarded the amount, it merely
mentioned that "[Spouses Octobre] are entitled to compensatory damages, which is just
and equitable in the circumstances, even against an obligor in good faith since said
damages are the natural and probable consequences of the contractual breach
committed."30 On the other hand, the Court of Appeals justified the award of
compensatory damages by stating that "it is undisputed that petitioner Pryce committed
breach of contract in failing to deliver the titles to respondents [Spouses] Octobre which
necessitated the award of compensatory damages."31 In their comment, Spouses Octobre
emphasized that they were "forced to litigate and seek the intervention of the courts
because of Pryce's failure to comply with its contractual and legal obligation"32 without so
much as mentioning any proof that would tend to prove any pecuniary loss they suffered.
In the absence of adequate proof, compensatory damages should not have been
awarded. Nonetheless, we find that nominal damages, in lieu of compensatory damages,
are proper in this case. Under Article 2221, nominal damages may be awarded in order
that the plaintiff’s right, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered. Nominal damages are "recoverable where a legal right is technically violated and
must be vindicated against an invasion that has produced no actual present loss of any
kind or where there has been a breach of contract and no substantial injury or actual
33
damages whatsoever have been or can be shown." So long as there is a violation of the
right of the plaintiff—whether based on law, contract, or other sources of obligations 34—
an award of nominal damages is proper.35 Proof of bad faith is not required.36 The HLURB
Arbiter and the Court of Appeals appear to have confused nominal damages with
compensatory damages, since their justifications more closely fit the former.
It is undisputed that Pryce failed to deliver the titles to the lots subject of the Contract to
Sell even as Spouses Octobre had already fully settled the purchase price. Its inability to
deliver the titles despite repeated demands undoubtedly constitutes a violation of
Spouses Octobre's right under their contract. That Pryce had transferred custody of the
titles to China Bank pursuant to a Deed of Assignment is irrelevant, considering that
Spouses Octobre were not privy to such agreement.
In fine, contractual breach is sufficient to justify an award for nominal damages but not
compensatory damages.
III
Pryce questions the award of attorney's fees and costs of suit because no exemplary
damages were awarded. This contention, however, is clearly unmeritorious because
12 | P a g e
under Article 2208,37 the award of exemplary damages is just one of 11 instances where
attorney's fees and expenses of litigation are recoverable.
Article 2208(2) allows the award of attorney's fees when the defendant's act or omission
has compelled the plaintiff to litigate with third persons or to incur expenses to protect
his interest. The Court has interpreted that this provision requires a showing of bad faith
38
and not mere erroneous conviction of the righteousness of a defendant's cause. In this
case, the Court of Appeals found that Pryce acted in bad faith when it did not disclose to
Spouses Octobre the fact that the certificates of title to the properties purchased were in
the custody of China Bank until Spouses Octobre had fully paid the price and had
demanded delivery of the titles. We agree with this finding and therefore sustain the
award of attorney's fees and costs of suit in favor of Spouses Octobre.
IV
The other side issues raised by Pryce shall be disposed of swiftly since they have no
substantial bearing on the merits of this case. As admitted by Pryce itself, "it is not the
entire Decision that is being assailed"39 but only the portion regarding the award of
compensatory damages, attorney's fees and costs of suit.
A
When the stay order being invoked by Pryce was reversed and set aside at the first
instance by the Court of Appeals in CA-G.R. SP No. 88479, that stay order was
automatically deemed vacated.40 By reversing the stay order of the rehabilitation court,
the Court of Appeals effectively enjoined the execution of such order as allowed by the
2000 Interim Rules of Procedure on Corporate Rehabilitation41 (which was then in effect
when Pryce filed its petition for rehabilitation in 2004). We affirmed the Court of Appeals'
decision to set aside the stay order in the Decision dated February 4, 2008 42 and
Resolution dated June 16, 2008.43 Although we later reconsidered the Decision on
February 18, 2014,44 the same does not affect the validity of the proceedings already
conducted before the HLURB, Office of the President, and Court of Appeals during the
intermediate period that the stay order was vacated. Neither does it affect our resolution
of this petition for review because under the Financial Rehabilitation and Insolvency Act
of 201045 (FRIA), the stay order shall not apply to cases already pending appeal in the
Supreme Court.46 Section 146 of the FRIA expressly allows the application of its provisions
to pending rehabilitation cases, except to the extent that their application would not be
feasible or would work injustice.47
 10
B Id. at 175-176.

11
The characterization of the Deed of Assignment between Pryce and China Bank as either Id. at 97-99.
an assignment of receivables or a mortgage of real property is irrelevant to Pryce's
obligation to Spouses Octobre. The principal reason why Pryce raises this argument is to 12
Id. at 99.
elude the applicability of Section 18 of Presidential Decree No. 957. 48 But Spouses
Octobre's claim is precisely premised on its contract with Pryce, not this specific provision 13
Id. at 93
of law. Hence, even if the provision is inapplicable, Pryce's contractual liability to deliver
the titles to Spouses Octobre remains. 14
Id. at 17.

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of 15
Id. at 90.
Appeals in CA-G.R. SP N9. 103615 are MODIFIED in that nominal damages in the amount
of P30,000.00 are awarded in lieu of compensatory damages. 16
Id. at 86-91.
SO ORDERED. cralawlawlibrary 17
Id. at 23.
Velasco, Jr., (Chairperson), Peralta, Perez and Reyes, JJ., concur. 18
Id.
Endnotes: 19
Rollo, pp. 41-43.

20
1 Id. at 44-48.
Rollo, p. 14.
21
2 Id. at 48-54.
Id. at 86.
22
3 Id. at 196
Id.
23
4 Pryce Corporation v. Court of Appeals, G.R. No. 172302, February 4, 2008, 543 SCRA 657.
Rollo, p. 15.
24
5 Rollo, pp. 201-202.
Id.
25
6 cralawred Id. at 180.
Rollo, pp. 123-127.
26
7 For brevity, the term "compensatory damages" instead of "actual or compensatory
Id. at 173-175.
damages" is used to be consistent with the phraseology of the rulings a quo.
8
Id. at 124. 27
Oceaneering Contractors (Phil), Inc. v. Barretto, G.R. No. 184215, February 9, 2011, 642
9 SCRA 596, 606-607.
Id. at 175.

13 | P a g e
28
Adrian Wilson International Associates, Inc. v. TMX Philippines, Inc., G.R. No. 162608, xxx
July 26, 2010, 625 SCRA 321, 339.
38
The President of the Church of Jesus Christ of Latter Day Saints v. BTL Construction
29
Rollo, pp. 41-43. Corporation, G.R. No. 176439, January 15, 2014, 713 SCRA 455, 472-473; Oceaneering
Contractors (Phil), Inc. v. Barretto, supra note 27 at 610-611; ABS-CBN Broadcasting
30 Corporation v. Court of Appeals, G.R. No. 128690, January 21, 1999, 301 SCRA 572, 601-
Id. at 98.
602.
31
Id. at 23.
39
Rollo, p. 41.
32
Id. at 196.
40
See Lee v. Trocino, G.R. No. 164648, August 6, 2008, 561 SCRA 178, 198.
33
Francisco v. Ferrer, Jr., G.R. No. 142029, February 28, 2001, 353 SCRA 261, 267-268.
41
Citation omitted. Sec. 5, Rule 3, A.M. No. 00-8-10-SC, December 15, 2000.

34 42
CIVIL CODE, Art. 2222. Pryce Corporation v. Court of Appeals, supra note 23.

35 43
Almeda v. Cariño, G.R. No. 152143, January 13, 2003, 395 SCRA 144, 150. Pryce Corporation v. China Banking Corporation, G.R. No. 172302, February 18, 2014,
716 SCRA 207, 215.
36
Id. at 148-150.
44
Id.
37
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigatio, other
45
than judicial costs, cannot be recovered, except: ChanRoblesVirtualawlibrary Republic Act No. 10142.

46
(1) When exemplary damages are awarded; Republic Act No. 10142, Sec.18(a).
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
47
persons or to incur expenses to protect his interest; See also Financial Rehabilitation Rules of Procedure (2013), A.M. No. 12-12-11-SC, Rule
(3) In criminal cases of malicious prosecution against the plaintiff; 1, Sec. 2; and Majority Stockholders of Ruby Industrial Corporation v. Lim, G.R. No.
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff; 165887, June 6, 2011, 650 SCRA 461, 523.
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim; 48
Regulating the Sale of Subdivision Lots and Condominiums, Providing Penalties for
(6) In actions for legal support; Violations Thereof (1976).
(7) In actions for the recovery of wages of household helpers, laborers and skilled
workers; Sec. 18. Mortgages. No mortgage on any unit or lot shall be made by the owner
(8) In actions for indemnity under workmen's compensation and employer's liability laws; or developer without prior written approval of the Authority. Such approval shall
(9) In a separate civil action to recover civil liability arising from a crime; not be granted unless it is shown that the proceeds of the mortgage loan shall be
(10) When at least double judicial costs are awarded; used for the development of the condominium or subdivision project and
(11) In any other case where the court deems it just and equitable that attorney's fees effective measures have been provided to ensure such utilization. The loan value
and expenses of litigation should be recovered. of each lot or unit covered by the mortgage shall be determined and the buyer

14 | P a g e
 thereof, if any, shall be notified before the release of the loan. The buyer may, at
his option, pay his installment for the lot or unit directly to the mortgagee who
shall apply the payments to the corresponding mortgage indebtedness secured
by the particular lot or unit being paid for, with a view to enabling said buyer to
obtain title over the lot or unit promptly after full payment
thereto.chanroblesvirtuallawlibrary.
FIRST DIVISION
G.R. No. 182201, November 14, 2016
UNIVERSAL INTERNATIONAL INVESTMENT (BVI) LIMITED, Petitioner, v. RAY BURTON
DEVELOPMENT CORPORATION, Respondent.
G.R. No. 185815, November 14, 2016
UNIVERSAL INTERNATIONAL INVESTMENT (BVI) LIMITED, Petitioner, v. RAY BURTON
DEVELOPMENT CORPORATION, Respondent.
DECISION
SERENO, C.J.:
At bench is a review of the damage claims for contractual breach sought by petitioner
Universal International Investment (BVI) Limited (Universal) against respondent Ray
Burton Development Corporation (RBDC). In G.R. No. 185815, Universal contests the
Court of Appeals (CA) Decision and Resolution rejecting its demand for damages against
15 | P a g e
RBDC.1 Petitioner seeks damages for non-delivery of the properties it had purchased from
respondent and the titles thereto. In G.R. No. 182201, Universal assails the CA Decision
and Resolution, which affirmed the discharge of one of respondent's attached properties
meant to secure petitioner's claims for damages.2
FACTUAL ANTECEDENTS
RBDC owned and developed Elizabeth Place, a condominium located at H.V. De la Costa
St., Salcedo Village, Makati City. On 18 October 1996, respondent and petitioner entered
into separate Contracts to Sell3 covering the purchase of 10 condominium units and 10
parking slots in the building. In February 1999, petitioner paid respondent the full
purchase price of these properties amounting to P52,836,781.50. 4
Universal issued a letter dated 23 August 2000 to RBDC demanding the cancellation of the
sales transaction after the latter failed to deliver possession of the properties and reneged
on its obligation to transfer the Condominium Certificates of Title (CCTs) to petitioner's
name.5 On 6 August 2001, respondent sent a letter to Universal informing the latter that
the construction of the subject properties had been completed. 6 Several demand letters
followed.7
RBDC ultimately failed to satisfy the demand of Universal to deliver the properties.
Thereafter, petitioner discovered that the mother title to the lot of Elizabeth Place had
been mortgaged to China Banking Corporation (China Bank) since 31 July 1991. 8 Petitioner
found that a Mortgage Clearance from the Housing and Land Use Regulatory Board
(HLURB) had been issued on 17 October 19969 and the securities foreclosed by China
Bank on 18 May 2001.10
PROCEEDINGS BEFORE THE HLURB
On 29 May 2002, Universal filed with the Expanded National Capital Region Field Office
(ENCRFO) of the HLURB a Complaint for Specific Performance or Rescission of Contract
and Damages.11 To secure its claims, petitioner moved for the issuance of a writ of
preliminary attachment against the properties of RBDC. Universal imputed fraud to
respondent for concealing the mortgage with China Bank. On 3 June 2002, a Writ of
Attachment was issued by the ENCRFO.12
Universal sought the delivery of (1) the condominium units and (2) their CCTs. In the
event that delivery were to be proven impossible, it prayed for the rescission of the
Contracts to Sell with a refund of the purchase price plus the penalty interest stipulated
under Section 6 thereof. The contracts provide for a 1.5% monthly interest on the total
purchase price, computed from the date of cancellation of the sale until full refund of the
payments.
RBDC countered13 that Universal could not rightly demand delivery, for the latter had yet
to pay transfer charges under the Contracts to Sell. In the alternative, respondent claimed
that it had already delivered the properties when it sent a letter to petitioner on 6 August
2001.
As regards the CCTs, RBDC argued that petitioner should demand these from China Bank.
The CA summarized that contention of respondent in this wise:14
Moreover, RBDC claims that it was impeded from releasing the titles of Elizabeth Place to
the deserving buyers because Chinabank had illegally foreclosed the mortgage over
Elizabeth Place; that in fact, RBDC had instituted a case for delivery of titles before the
HLURB entitled "Ray Burton Development Corp. versus China Banking Corp." docketed as
HLURB REM 121401-11726; and that in a Judgment Upon Compromise dated August 1,
2002, HLURB directed Chinabank "to release the titles of all units in Elizabeth Place that
are now fully paid and those that will in the future be fully paid to their respective
buyers irrespective of who the seller is." RBDC asserted that Universal should instead
direct its claim for delivery of the titles of the properties to Chinabank. (Emphasis
supplied)
On 25 March 2003, the ENCRFO issued a Decision15 in favor of Universal. The former
found that petitioner had completed the payment of the total contract price of
P52,836,781.50 in February 1999. At that point, said the ENCRFO, the reciprocal
obligation of respondent to deliver possession of the properties and their CCTs became
due and demandable.
16
On 12 May 2003, RBDC filed a Petition for Review before the Board of Commissioners
(BOC) of the HLURB. Respondent also moved for the partial discharge17 of one of its
attached properties: the lot in Lapu-Lapu City with Transfer Certificate of Title (TCT) No. T-
29726.
RBDC reiterated its arguments below. Universal likewise echoed its earlier assertions, but
additionally claimed that respondent's Petition for Review lacked the appeal bond needed
to perfect an appeal.18
16 | P a g e
The BOC did not dismiss respondent's Petition for Review. Instead, on 10 October 2003, it
issued an Order19 directing the remand of the case to the ENCRFO so that the latter could
include China Bank in the proceedings. Universal moved for reconsideration, but to no
avail.20
The BOC did not rule upon the motion of RBDC for the discharge of its Lapu-Lapu City
21
property. Therefore, respondents filed a second Motion for Partial Discharge. In its
Resolution dated 29 June 2004, the BOC allowed the discharge of the Lapu-Lapu City
property owned by respondent, since the latter was willing to put up a counterbond. 22
PROCEEDINGS BEFORE THE OP
Universal successfully appealed its case before the Office of the President (OP). 23 In its
Decision dated 29 October 2004,24 the OP reversed the ruling of the BOC and held that
Universal had a right to rescind the Contracts to Sell, as well as to refund the purchase
price of the properties with the liquidated damages specified in Section 6 of the contracts.
Nonetheless, the OP maintained the validity of the discharge of the Lapu-Lapu City
property.25
PROCEEDINGS BEFORE THE CA
Universal assailed the discharge of the Lapu-Lapu City property via a Petition for Certiorari
under Rule 65 of the Rules of Court in CA-G.R. SP No. 89578. 26 In its Decision dated 25
June 2007 and Resolution dated 14 March 2008, the CA dismissed the action for lack of
merit. Anent the main controversy involving the non-delivery of the condominium units
27
and parking slots, RBDC filed a Petition for Review under Rule 43 of the Rules of Court in
CA-G.R. SP No. 89468. In both proceedings, the parties repeated their arguments a quo.
During the pendency of the case before the CA, Universal manifested 28that China Bank
had released the subject properties, and that petitioner had already obtained their CCTs
on 5 January 2005.
On account of this supervening event, RBDC moved that this case be considered moot and
academic.29
Universal responded that its acquisition of the condominium units from China Bank
resulted only in the partial satisfaction of the former's claims against RBDC. Petitioner
claimed before the CA that respondent must still pay for the damages specified in Section
6 of the Contracts to Sell on account of the latter's delayed delivery of the properties.
Universal also claimed compensation for property losses amounting to P19,646,483.72,
supposedly to cover the depreciation costs and expenses it had incurred for the release of
the properties from China Bank.
In its Decision dated 31 July 2007, which was maintained in its Resolution dated II
December 2008, the CA wholly denied Universal's entreaty for damages.
PROCEEDINGS BEFORE THIS COURT
The consolidated Petitions for Review on Certiorari filed by Universal under Rule 45 of the
Rules of Court, docketed as G.R. Nos. 182201 and 185815, collectively raise three points. 30
First, Universal contends that the CA gravely erred when the latter sustained the OP's
discharge of the Lapu-Lapu City property, notwithstanding the irregularities in the
proceedings below.
Second, Universal argues that because RBDC failed to attach an appeal bond when the
latter elevated the ENCRFO Decision to the BOC, that ruling had become final and
executory and can no longer be reviewed by the BOC, the OP, the CA, or this Court.
Third, petitioner claims that the CA gravely erred in refusing to award damages and
property losses. Petitioner seeks damages on account of the contractual breaches of
respondent consisting of the latter's failure to deliver the properties and to transfer their
CCTs to the name of Universal. Petitioner also narrates that RBDC concealed the mortgage
of the properties to China Bank.
RBDC stands by the validity of the partial discharge of its Lapu-Lapu City property. In the
main, it denies committing any breach of contract against Universal. Absent any
dereliction on its part, respondent claims that petitioner should not be awarded
damages.31
ISSUES
Given the developments in this case, this Court adjudges that the main issues to be
resolved are as follows:
I. Whether the CA incorrectly affirmed the discharge of the Lapu-Lapu City
property of RBDC
17 | P a g e
II. Whether the CA gravely erred in denying the demand of petitioner for the
liquidated damages specified in Section 6 of the Contracts to Sell
III. Whether the CA committed a grievous error in not granting the claims of
petitioner for losses amounting to P19,646,483.72
IV. Whether petitioner is entitled to damages on account of the contractual
breaches committed by respondent
RULING OF THE COURT
At the outset, this Court outrightly rejects the argument of Universal regarding the failure
of RBDC to attach an appeal bond when the latter elevated the ENCRFO Decision to the
BOC for being moot and academic. To recall, the appealed ENCRFO Decision required
RBDC to deliver the purchased properties and pay damages to Universal; and if that
delivery was no longer possible, to refund the purchase price plus interests thereon.
The properties and the titles thereto were finally delivered to Universal on 5 January
2005. Hence, its only existing claim in this case is for damages, which an appeal bond does
32
not secure under Section 3 (c), Rule XII of the 1996 HLURB Rules of Procedure. Since
interests, damages, and attorney's fees need not be covered by an appeal bond, that
controversy has come to an end with no practical and effective relief to be given to
petitioner.33
The Discharge of the Lapu-Lapu
City Property
Universal highlights the irregularities that supposedly attended the discharge of the Lapu-
Lapu City property owned by RBDC. First, the BOC Order dated 10 October 2003, which
did not rule upon the issue of the discharge, was improvidently modified by its Resolution
dated 29 June 2004. The Order was modified upon respondent's filing of a second Motion
for Partial Discharge, instead of a proper Motion for Reconsideration. Second, since the
BOC had directed the remand of the case to the ENCRFO, the former lost the jurisdiction
to order the discharge. Third, the discharge transpired without notice and hearing.
On the first infirmity, we hold that the CA did not exceed its jurisdiction when it sustained
the BOC Resolution dated 29 June 2004 granting the discharge, even if not through a
motion for reconsideration but via a second Motion for Partial Discharge. The second
Motion for Partial Discharge may very well take the place of a motion for reconsideration,
considering that it also sought the reconsideration of the BOC's failure to resolve the first
Motion for Partial Discharge. It is basic that the caption should not be the governing
factor, but rather the allegations contained in the motion or pleading, that should
determine the nature of the action.34
As regards the second and the third irregularities, this Court finds no justification for the
exercise of its discretionary power of appellate review. The CA, which heard the issues
under the framework of a special civil action for certiorari, has thoroughly explained the
purported irregularities. We quote with approval the following excerpt from the assailed
CA Decision:35
It is absurd to assume that the ENCRFO, a subordinate of the HLURB Board of
Commissioners, is the only agency that can discharge the writ of attachment it previously
issued. As the Board is the reviewing body of the entire HLURB, it definitely has the power
to overturn, revise or modify the ruling handed down by its subordinate. To rule
otherwise would render the appeal before the Board nugatory and irrelevant.
xxxx
As for the alleged lack of hearing, petitioner's filing of an Opposition to respondent's
motion for partial discharge before the HLURB Board sufficiently satisfies said
requirement. x x x.
Universal's Claim for Liquidated
Damages under Section 6 of the
Contracts to Sell
Proceeding to the main controversy of these consolidated cases, Universal asserts that
because RBDC failed to transfer possession of the properties, and their CCTs, petitioner-
buyer is entitled to damages by way of the interest specified in Section 6 of the Contracts
to Sell, viz:
SECTION 6. BREACH AND/OR VIOLATIONS OF THE CONTRACT.
This agreement shall be deemed cancelled, at the option of the BUYER, in the event that
SELLER, for the reasons of force majeure, decide not to continue with the Project or the
Project has been substantially delayed. In such a case, the BUYER shall be entitled to
refund all the payments made with interest at one-and-a-half (1 ½) percent per month
on the amount paid computed from the date of cancellation until the payments have
18 | P a g e
been fully refunded. Substantial delay is defined as six (6) months from date of estimated
date of completion. The parties agree that the estimated date of completion shall be
December 31, 1998. (Emphasis supplied)
RBDC counters that it cannot be considered in breach of the agreement, since Universal
failed to pay the transfer charges. The CA agreed with respondent's reasoning and thus
rejected petitioner's demand for liquidated damages. This Court concurs with the CA's
rejection of liquidated damages, but for a different reason.
If the terms of the contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control. 36 In this case, the
very words of Section 6 of the Contracts to Sell refer only to situations of (1) force
majeure or (2) substantial delay in the condominium project, Elizabeth Place.
Universal is not alleging either of these two circumstances. Rather, it is claiming damages
for RBDC's failure to deliver possession of the condominium units, parking slots, and their
CCTs. Hence, Section 6 of the Contracts to Sell is clearly inapplicable to petitioner's cause
of action.
The Demand of Universal to Recover
Losses amounting toP19,646,483.72
Universal reiterates its claims for actual damages based on the losses it suffered
amounting to P19,646,483.72. This amount represents the depreciation between the
P57,146,483.72 purchase price of the properties in 1996 and the P37,500,000 market
value of the properties appraised at the time that petitioner obtained the titles from
China Bank in 2005.37
Petitioner computes that the purchase price in 1996 totals P57,146,483.72, which is the
summation of the following amounts: P52,836,781.50 total contract price; P770,613.68
condominium dues, P368,881.63 real estate taxes, and the P3,170,206.91 expenses paid
to China Bank for the release of the properties. In effect, petitioner seeks to recover the
depreciation costs and the additional sums it paid to obtain the release of the properties
from China Bank. For lack of legal basis, the CA entirely rejected petitioner's claims for
losses.
Universal now seeks refuge under Article 2200 of the Civil Code to justify its claim for
damages:
ARTICLE 2200. Indemnification for damages shall comprehend not only the value of the
loss suffered, but also that of the profits which the obligee failed to obtain.
To adjudicate petitioner's claims, this Court looks into the fundamental elements in
recovering damages. In MEA Builders Inc. v. Court of Appeals,38 We defined damages as
follows:
In legal contemplation, the term "damages" is the sum of money which the law awards or
imposes as a pecuniary compensation, a recompense or satisfaction for an injury done or
a wrong sustained as a consequence either of a breach of a contractual obligation or a
tortuous act.
Based on the above definition, in order to recover damages, the claimant must prove (1)
an injury or a wrong sustained (2) as a consequence of a breach of contract or tort and (3)
caused by the party chargeable with a wrong.39 As Universal claims actual damages, it is
only entitled to such pecuniary loss as it has duly proved. 40
Losses Sustained by Universal
Petitioner cites Article 2200 of the Civil Code to support its claim for losses equivalent to a
P19,646,483.72 reduction in the market value of the condominium units. This provision
speaks of indemnification for lost profits that would have been obtained by the claimant if
not for the injury caused by the erring party.41 In the present case, however, Universal
does not even allege that it is marketing the properties for profit, either by lease or by
sale. Thus, Article 2200 cannot serve as the proper basis for recovering the value of the
condominium units.
In the alternative, assuming that the condominium units were utilized for profit, this Court
finds no iota of evidence as to the amount of profits that Universal would have earned
from the properties. To justify a grant of compensatory damages, it is necessary that the
actual amount of loss to be proved with a reasonable degree of certainty, premised upon
competent proof and the best evidence obtainable by the injured party. 42
We cannot consider as unearned profits the P19,646,483.72 difference between the total
contract price and the present market value of the properties. That conclusion
presupposes that Universal has (1) successfully marketed the properties (2) at a favorable
retail price that would allow it to recover its original investment. In National Power Corp.
v. Philipp Brothers Oceanic, Inc.,43 this Court explained that in order to recover actual
damages, the alleged unearned profits must not be conjectural or based on contingent
19 | P a g e
transactions. Speculative damages are too remote to be included in an accurate estimate
of damages.44
Breach of Contract by RBDC
Both parties entered into a contract to sell, not a contract of sale. In the former
45
agreement, ownership is reserved by the vendor. Upon full payment of the purchase
price, the resulting duties of RBDC as vendor are found in Section 3 of the subject
agreement, viz:
SECTION 3. TITLE AND OWNERSHIP OF UNIT.
a) Upon full payment of the BUYER of the above purchase price, including any and all
payments as provided herein, and upon full compliance by the BUYER of all his obligation
as contained in this contract, the SELLER shall deliver to the BUYER a Deed of Absolute
Sale conveying its rights, interests and title to the UNIT and the appurtenant undivided
interest in the common areas of the Project, and the corresponding Condominium
Certificate of Title. The BUYER shall give the SELLER reasonable time from date of
completion of the Project to secure the title to the UNIT. A copy of the Deed of Absolute
Sale is attached as Annex A. x x x. (Emphasis supplied)
RBDC only has two obligations specified by Section 3: (1) to deliver deeds of absolute sale;
and (2) to deliver the corresponding CCTs. Contrary to the demands of petitioner,
respondent did not have any contractual obligation to surrender possession of the
properties. Neither did the latter have to cause the transfer of the CCTs to petitioner's
name.
In Chua v. Court of Appeals,46 we explained the nature and the incidents of a contract to
sell as follows:
In a contract to sell, the obligation of the seller to sell becomes demandable only upon
the happening of the suspensive condition. In this case, the suspensive condition is the
full payment of the purchase price by Chua. Such full payment gives rise to Chua's right to
demand the execution of the contract of sale.
It is only upon the existence of the contract of sale that the seller becomes obligated to
transfer the ownership of the thing sold to the buyer.
xxxx
In the sale of real property, the seller is not obligated to transfer in the name of the
buyer a new certificate of title, but rather to transfer ownership of the real property.
There is a difference between transfer of the certificate of title in the name of the buyer,
and transfer of ownership to the buyer. The buyer may become the owner of the real
property even if the certificate of title is still registered in the name of the seller.
(Emphasis supplied)
Universal does not base its claim for damages on grounds supported by the Contracts to
Sell. Instead, it argues that respondent's failure to transfer the CCTs and convey
possession of the properties caused the depreciation of their market value. Hence, this
Court rules that petitioner's premise for its recovery of depreciation losses is misplaced. 47
Proximate Cause of Universal's
Losses
The act or omission of respondent must have been the proximate cause, as distinguished
from the remote cause, of the loss sustained by the claimant. 48 Proximate cause -
determined by a mixed consideration of logic, common sense, policy, and precedent 49 - is
that cause which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not have
occurred.50
Applying that definition to the case at bar, Universal must demonstrate that the breaches
of RBDC caused the depreciation of the condominium units; or conversely, that had
respondent performed its contractual obligations, the properties would not have
diminished in value.
Universal does not specify how RBDC's non-delivery of the properties resulted in the
depreciation of their value. Neither does petitioner prove that had it possessed the
properties, it could have avoided their decline in the real estate market. At most, it has
only been able to show that with the passage of time, its P57,146,483.72 investment in
1996 was reduced to P37,500,000 in 2005. Therefore, considering the dearth of proof of
causality in this case, this Court cannot justly exact the supposed P19,646,483.72
depreciated value of the 1 0 condominium units and 10 parking slots from RBDC.
Recovery from RBDC of Sums Paid
by Universal to China Bank
20 | P a g e
As mentioned above, Universal seeks to recover from RBDC the additional sums paid by
the former to obtain the release of the properties from China Bank. Respondent counters
that it should not be made to pay the P770,613.68 condominium dues, P368,881.63 real
estate taxes, and P3,170,206.91 expenses, given that China Bank was the one obliged by
the HLURB to release the condominium units.
We agree with RBDC. Respondent correctly argues that it is not chargeable for the alleged
expense items. Clearly - and logically - the HLURB did not require any additional payment
for the fully paid buyers of the condominium units. Hence, Universal should not have paid
any additional amount to China Bank. In the final Judgment Upon Compromise dated 1
August 2002, the HLURB directed the bank to release the titles to all the units without
qualification:51
The affidavits of undertaking of the mortgagee bank are requirements in the issuance of a
clearance to mortgage as provided for under Section 18 of Presidential Decree No. 957 for
the protection of the buyers.
It is clear from the affidavits that the mortgagee bank undertook to cancel/release the
mortgage to fully paid units notwithstanding the nonpayment of the total mortgage loan
incurred by the mortgagor. The mortgagee bank has to abide by this undertaking.
Moreover, Section 25 of Presidential Decree No. 957 substantially provides that the titles
to fully paid condominium units should be secured and delivered to the buyers.
Therefore, the China Banking Corporation should release the titles to all fully paid
condominium units to the buyers whether they are its buyers or the buyers of Ray Burton
Development Corporation or Mercantile Investment Company, Inc.
Given that the sums expended by Universal should not have been incurred in the first
place, this Court finds no just reason for petitioner to demand the payment of the
expenses, association dues, and realty taxes from RBDC. Notably, as regards the payment
of association dues and realty taxes, the Contracts to Sell provide that these shall not be
shouldered by respondent seller.52
Universal's Entitlement to Damages
on Account of RBDC's Breaches
As discussed. respondent had two obligations specified in Section 3 of the Contracts to
Sell: ( 1) to deliver the deeds of absolute sale; and (2) to give the corresponding CCTs.
RBDC admittedly failed to perform these obligations, but invoked the excuse that
Universal had defaulted on the payment of transfer charges under Section 5(a) of the
Contracts to Sell. The provision reads as follows:53
SECTION 5. TAXES ASSESSMENTS AND EXPENSES.
a) Documentary stamp taxes, registration fees, taxes and assessments on transfer of real
properties and other necessary and incidental expenses and all other forms of taxes as
imposed by the government related to the acquisition of the property as well as other
expenses that may be incurred in connection with the execution of the Absolute Deed of
Sale and the conveyance/transfer of Title to the BUYER, shall be for the sole account and
responsibility of the BUYER.
In the event the SELLER agrees to handle the registration of the Deed of Sale and effect
title transfer in the name of the BUYER, the amount of taxes, fees, and expenses covering
the same shall be paid by the BUYER to the SELLER within five (5) days from receipt of the
Notice of Completion and Delivery of the Unit issued by the SELLER. (Emphasis supplied)
The excuse given by RBDC deserves scant consideration. In order that the debtor may be
held to be in default, the following requisite conditions must be present: (1) the obligation
is demandable and already liquidated; (2) the debtor delays performance of the
obligation; and (3) the creditor requires the performance judicially or extrajudicially. 54
Nowhere in the records does this Court find a demand from RBDC for Universal to pay any
sum under the above provision. None of the letters of respondent to petitioner resembles
a notice requiring the latter to tender any payment for government charges and expenses
connected with the execution of the Deed of Absolute Sale or the transfer of titles.
Moreover, there is no liquidated demand to speak of, as there is no itemized final
computation.55 All in all, this Court does not consider Universal to have defaulted on the
payment of transfer charges.
Section 5(a) must be construed as a whole. Its first paragraph refers to the payment for
(1) government-imposed taxes, fees, and expenses related to the acquisition of the
property; and (2) expenses that may be incurred in connection with the execution of the
Deeds of Absolute Sale and the conveyance or transfer of titles to the buyer.
The second paragraph of Section 5 specifies that in the event the seller handles the
registration of the Deed of Absolute Sale and effects title transfer in the name of the
buyer, then that is the time that the buyer would have to give the seller the payment for
21 | P a g e
those transactions. Specifically, the buyer must tender payment within five days from
receipt of the seller's notice of completion and delivery of the unit.
We appreciate that the charges under Section 5(a) are sums to be expended for the titling
of the properties. However, the obligation to pay these charges specifically to the seller -
arises only "in the event" that the latter elects to handle the titling of the properties. In
this case, RBDC has not averred that it has undertaken that responsibility. Consequently,
Universal cannot be obliged to pay the transfer charges to respondent. RBDC cannot
demand performance by Universal without offering to comply with its own prestation. 56
RBDC is then left with no just reason not to perform its obligations to Universal. As early
as February 1999, respondent should have (1) executed deeds of absolute sale; and (2)
given the CCTs of the properties to petitioner. RBDC has not at all complied with its duties
despite the fact that Universal has already fully paid the purchase price of the properties.
Temperate Damages in lieu of Actual
Damages
As explained above, Universal failed to prove its claims for actual damages, both as
regards the liquidated damages under Section 6 of the Contracts to Sell and the alleged
losses amounting to P19,646,483.72.
Nonetheless, petitioner may still be awarded damages in the concept of temperate or
moderate damages. Temperate damages may be recovered when the court finds that
some pecuniary loss has been suffered but the amount cannot, from the nature of the
57
case, be proven with certainty. In this case, there is no doubt that Universal sustained
pecuniary loss, albeit difficult to quantify, arising from RBDC's failure to execute deeds of
absolute sale and to deliver the CCTs of the properties.
Had RBDC fulfilled these obligations, its transaction with Universal under the Contracts to
Sell would have been complete.58 After an absolute deed of sale has been signed by the
parties, notarized and hence, turned into a public instrument, then the delivery of the real
property is deemed made by the seller to the buyer.59 Consequently, the buyer would
have right away enjoyed the possession of the realties. Likewise, the titles thereto would
have permitted the use of the properties as collateral for further investments. Universal
lost all of these opportunities after RBDC failed to perform the latter's duties as a seller.
Hence, this Court is empowered to calculate moderate damages, rather than let the
60
aggrieved party suffer without redress from RBDC's wrongful act.
The calculation of temperate damages is usually left to the sound discretion of the
courts.61 We observe the limit that in giving recompense, the amount must be reasonable,
bearing in mind that the same should be more than nominal, but less than
compensatory.62 In jurisprudence, this Court has pegged temperate damages to an
amount equivalent to a certain percentage of the actual damages claimed by the injured
party.63
The plight of the petitioner in Pacific Basin Securities Co., Inc. v. Oriental Petroleum 64 is
parallel to that of Universal. In that case, the petitioner was also not given transfer
documents for the properties it had purchased, and the respondent unjustifiably refused
to record the transfer of the P17,727,000 worth of shares purchased by the former. As a
result, the petitioner therein was prevented from reselling the subject shares in the stock
market. For that dereliction, this Court awarded the petitioner therein P1 million for
temperate damages equivalent to 5% of the actual damages claimed.
Anent the failure to deliver the titles to a purchased property, Government Service
Insurance System v. Spouses Labung-Deang65 is instructive. Similar to petitioners herein,
Spouses Labung-Deang were deprived by the bank of copies of the title to the property
that they had purchased. Consequently, the spouses failed to mortgage it as security for a
P50,000 loan that they could have utilized to renovate their house. As recompense, this
Court awarded them P20,000 temperate damages equivalent to 40% of the amount of
their alleged injury.
Aside from those two analogous cases, this Court has reviewed other cases involving the
award of temperate damages for breaches of contract. We have considered the: (1)
investment to be lost by the injured party;66 (2) duration of suffering of the injured
party;67 and (3) urgent action undertaken by the party in breach to remedy the
situation.68 Thus, we take into account the following: (1) in 1999, Universal invested
P52,836,781.50 for 10 condominium units and 10 parking slots of Elizabeth Place in
Makati City; (2) Universal asked RBDC about the monthly rental rates of each of the
properties, which turned out be in the range of P20,000 to P48,000;69 (3) for six years,
petitioner had no titles to or possession of the properties; and (4) RBDC could have easily
executed deeds of absolute sale as the templates of these contracts had already been
attached to the Contracts to Sell.70
Having laid down all the circumstances obtaining in this case, this Court is of the view that
an award for temperate damages equivalent to 15% of the P52,836,781.50 purchase
value of the properties, or P7,925,517.23, is just and reasonable.
22 | P a g e
Exemplary Damages and Attorney's
Fees
Since petitioner is entitled to temperate damages, then the courts may also examine the
propriety of imposing exemplary damages on respondent.71 Exemplary damages are
corrective damages imposed by way of example or correction for the public good.72 The
grant thereof is intended to serve as a deterrent to or negative incentive for curbing
socially deleterious actions. 73 Relevant to this case, this Court highlights that the State
has an avowed policy to protect innocent buyers in real estate transactions.74
Article 2232 of the Civil Code of the Philippines provides that in contracts, the court may
award exemplary damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner. In this case, we find that respondent indeed acted in
that manner when, despite demand for and full payment of the properties,75 it refused to
execute deeds of absolute sale and release the CCTs to petitioner without any sound
basis.76 As already discussed, Universal's nonpayment of transfer charges does not even
serve as a potent excuse for RBDC's refusal to execute deeds of absolute sale and to
deliver the titles of the purchased properties.
Moreover, there was no impediment to RBDC's issuance of deeds of absolute sale. As the
owner, it could have still sold the properties even if it mortgaged them to China Bank. 77 As
for the CCTs, respondent need not cause their transfer to the name of petitioners. RBDC
could have simply turned them over to Universal in 1999, two years prior the foreclosure
of the securities by China Bank in 2001. To make matters worse, respondent did not
categorically deny that it had failed to disclose to petitioner that the lot of Elizabeth Place
had been mortgaged to China Bank prior the execution of the Contracts to Sell.78 This
Court holds that the totality of these circumstances justify the imposition of exemplary
damages on RBDC.
In Cantemprate v. CRS Realty Development Corporation,79 which is fairly akin to the case
at bar, the developer did not deliver the titles to the buyers of the fully paid properties.
For failing to comply with its unequivocal duty, this Court affirmed the HLURB's award of
P30,000 exemplary damages and P20,000 attorney's fees to each of the buyers.
Considering that ruling vis-a-vis the dereliction of RBDC in the present case, which also
involves the violation of a straightforward obligation to execute the deeds of absolute sale
and to deliver the CCTs for the 1 0 condominium units and 10 parking slots, an award of
P300,000 as exemplary damages is justified to set an example.
 2
Given the award of exemplary damages, this Court likewise finds it just and equitable Rollo (G.R. No. 182201), pp. 53-78. The CA Decision dated 25 June 2007 and Resolution
under the circumstances to award P200,000 as attorney's fees. 80 In addition, all damages dated 14 March 2008 in CA-G.R. SP No. 89578 were penned by Associate Justice Lucenito
awarded shall earn interest at the rate of 6% per annum from the date of finality of this N. Tagle, with Associate Justices Amelita G. Tolentino and Sixto Marella, Jr. concurring.
judgment until full payment.
3
Rollo (G.R. No. 18581), pp. 88-343.
WHEREFORE, premises considered, in G.R. No. 182201, the Court of Appeals Decision
dated 25 June 2007 and Resolution dated 14 March 2008 in CA-G.R. SP No. 89578 4
ld. at 344-358.
are AFFIRMED. In G.R. No. 185815, the Court of Appeals Decision dated 31 July 2007 and
Resolution dated 11 December 2008 in CA-G.R. SP No. 89468 are AFFIRMED with 5
Id. at 1033.
the MODIFICATION that P7,925,517.23 as temperate damages, P300,000 as exemplary
damages, and P200,000 as attorney's fees are awarded to petitioner Universal 6
Id. at 412; dated 1 August 2001.
International Investment (BVI) Limited. All damages awarded shall earn interest at the
rate of 6% per annum from the date of finality of this judgment until full payment. 7
Id. at 359-363.
SO ORDERED. 8
Id. at 364-379.
Leonardo-De Castro, Peralta,* and Reyes,*JJ., concur. 9
Id. at 382.
Caguioa,* J., on leave.
10
Id. at 1575; Memorandum of respondents, p. 14.
Endnotes:
11
Id. at 383-393; dated 21 May 2002.
*
Designated additional member in lieu of Associate Justice Lucas P. Bersamin per raffle 12
dated 28 September 2016, who concurred in the Court of Appeals Decision in CA-G.R. SP Id. at 394-395; issued by Jesse A. Obligacion, Regional Director of the ENCRFO.
No. 89468.
13
Id. at 396-411; Answer dated 25 June 2002.
**
Designated additional member in lieu of Associate Justice Estela M. Perlas-Bernabe per
14
raffle dated 28 September 2016, who concurred in the Court of Appeals Decision in CA- Id. at 67; CA Decision dated 31 July 2007, p. 4.
G.R. SP No. 89468.
15
Id. at 450-456; The Decision docketed as HLURB Case No. REM-052902-11917 was
***
On leave. penned by Housing and Land Use Arbiter Atty. Joselito F. Melchor.

1 16
Rollo (G.R. No. 185815), pp. 64-86. The CA Decision dated 31 July 2007 and Resolution Id. at 457-485; dated 12 May 2003.
dated 11 December 2008 in CA-G.R. SP No. 89468 were penned by Associate Justice
17
Portia Aliño-Hormachuelos, with Associate Justices Lucas P. Bersamin and Estela M. Id. at 209-212; dated 16 May 2003.
Perlas-Bernabe (both now members of this Court) concurring.
18
Id. at 486-504; Opposition to the Petition for Review dated 10 June 2003.

23 | P a g e
19
Id. at 506-508; the Order docketed as HLURB Case No. REM-A-030519-0118 was penned In addition, the appellant shall attach to the petition the following:
by the Second Division of the HLURB. xxxx
c. In case of an award of a money judgment in the complainant's favor, an appeal bond
20 satisfactory to the Board equivalent to the amount of the award excluding interests,
Id. at 509-522; Motion for Reconsideration dated 5 November 2003.
damages and attorney's fees.
21
Id. at 548-556; dated 19 November 2003.
33
Ruiz v. Court of Appeals, 164 Phil. 87 ( 1976).
22
Id. at 557-560; Resolution dated 29 June 2004.
34
Sps. Munsalud v. National Housing Authority, 595 Phil. 750 (2008).
23
Id. at 561-562; Notice of Appeal dated 15 July 2004.
35
Rollo (G.R. No. 182201), pp. 66-67.
24
Id. at 637-643.
36
CIVIL CODE OF THE PHILIPPINES, Article 1370.
25
Id. at 691-693; Order dated 7 April 2005.
37
CA rollo, pp. 1350-13 75; Valuation of CB Richard Ellis of Elizabeth Place Condominium
26
Rollo (GR. No. 182201). pp. 449-473; Petition for Certiorari dated 10 October 2005. dated 31 August 2006. Using the Market Value Approach, it opined that the market value
of the 10 residential condominium units and 10 parking slots amounted to P37,500.000 as
27 or 5 January 2005.
Rollo (GR. No. 185815), pp. 694-734; Petition for Review dated 10 May 2005.
38
28 490 Phil. 565, 577 (2005).
Id. at 1095-1101, 1120; Rejoinder with Manifestation re: Partial Satisfaction of
Judgment dated 20 December 2005: Universal's Counter-Manifestation and Opposition 39
dated 2 February 2006. Garrido v. Dela Paz, GR. No. 183967, 11 December 2013.

40
29
Id. at 1103; Manifestation of Lack of Cause of Action with Motion to Declare CIVIL CODE OF THE PHILIPPINES, Article 2199. "Except as provided by law or by
Respondent in Indirect Contempt dated 12 January 2006. stipulation, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation is referred to as actual or
30 compensatory damages."
Rollo (G.R. No. 182201), pp. 16-51; Petition for Review dated 8 May 2008. Rollo (G.R. No.
185815), pp. 9-62 and 1495-1546; Petition for Review dated 19 February 2009 and 41
Memorandum dated 29 June 2010. Uy v. Puzon, 169 Phil. 581 (1977).

42
31
Rollo (G.R. No. 182201), pp. 593-611; Comment dated 11 September 2008. Rollo(G.R. Integrated Packaging Corp. v. Court of Appeals, 388 Phil. 835 (2000).
No. 185815), pp. 1370-1401 and 1562-1600; Comment dated 24 June 2009 and
43
Memorandum dated 18 June 2010. 421 Phil. 532 (2001).

32 44
The provision reads: Coca Cola Bottlers, Phils.. Inc. v. Roque, 367 Phil. 493 ( 1999).

45
SECTION 3. Contents of the Petition for Review Go v. Pura V. Kalaw, Inc., 529 Phil. 150 (2006).
xxxx

24 | P a g e
46 61
449 Phil. 25, 45-46 (2003). Bacolod v. People, 714 Phil. 90 (2013).

47 62
See Bueno v. La Campania Minas de Carbon de Batan, 5 Phil. 210 (1905). International Container Terminal Services, Inc. v. Chua, 730 Phil. 475 (2014).

48 63
See Manila Electric Co. v. Remonquillo, 99 Phil. 117 ( 1956). In Dueñas v. Guce-Africa, 618 Phil. 10 (2009). this Court specifically calculated that the
temperate damages were equivalent to 20% of the original price of the subject of the
49 breached contract. In Iron Bulk Shipping Phil. Co. Ltd. v. Remington Industrial Sales Corp.,
Land Bank of the Philippines v. Kho, GR. Nos. 205839 & 205840, 7 July 2016.
462 Phil. 694 (2003), we specified that 30% of the alleged cost of actual damages was
50
Ramos v. C.O.L. Realty Corp., 614 Phil. 169 (2009). reasonable enough for temperate damages.

64
51
Rollo (G.R. No. 185815), pp. 441-442. 558 Phil. 425 (2007).

65
52
Id. at 91-92; Contract to Sell dated 18 October 1996. Sections 5 and 7, pp. 5-6. 417 Phil. 662 (2001).

53
Id. at 91; Contract to Sell dated 18 October 1996, p. 5.
54
Social Security System v. Moonwalk Development & Housing Corp., G.R. No. 73345, 7
April 1993, 221 SCRA 119.
55
Rollo (G.R. No. 185815), pp. 1089-1091; letter dated 21 August 2001. This
correspondence from Carol N. Co of RBDC to Mr. S.K. Tang of Universal stated the
estimate of expenses related to the transfer of title and other charges. Both items
contained the annotation "to be determined later."
56
ARTURO M. TOLENTINO, CIVIL CODE OF THE PHILIPPINES, Vol. IV, 109 (1991):
see Consolidated Industrial Gases, Inc. v. Alabang Medical Center, 721 Phil. 155 (2013).
57
Canada v. All Commodities Marketing Corp., 590 Phil. 342 (2008).
58
Chua v. Court of Appeals, 449 Phil. 25 (2003).
59
CIVIL CODE OF THE PHILIPPINES, Article 1498. "When the sale is made through a public
instrument, the execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear or cannot clearly
be inferred. x x x."
66
Adrian Wilson International Associates, Inc. v. TMX Philippines, Inc., 639 Phil. 335
(2010); Canada v. All Commodities Marketing Corp., 590 Phil. 342 (2008); College
Assurance Plan v. Belfranlt Development, Inc., 563 Phil. 355 (2007).
67
Caritas Health Shield, Inc. v. MRL Cybertech Corp., G.R. Nos. 221651 & 221691, 11 July
2016.
68
Araneta v. Bank of America, 148-B Phil. 124 (1971).
69
Rollo (G.R. No. 185815), p. 1091; table of rates given to Universal on 27 July 2000.
70
Id. at 95-97. The last sentence of Section 3 (a) of the Contracts to Sell reads: "A copy of
the Deed of Absolute Sale is attached as Annex A."
71
CIVIL CODE OF THE PHILIPPINES, Article 2229. ''Exemplary or corrective damages are
imposed, by way of example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages."
72
Zenith Insurance Corp. v. Court of Appeals, 263 Phil. 1120 (1990).
73
Del Rosario v. Court of Appeals, 334 Phil. 812 (1997).

60 74
Spouses Hernandez v. Spouses Dolor, 479 Phil. 593 (2004). SUBDIVISION AND CONDOMINIUM BUYER'S PROTECTIVE DECREE, Presidential Decree
No. 957 (1976); see United Overseas Bank of the Phils., Inc. v. Board of Commissioners-

25 | P a g e
HLURB, G.R. No. 182133, 23 June 2015; Casa Filipino Realty Corp. v. Office of the
President, 311 Phil. 170 ( 1995).

75
Republic Flour Mills Corp. v. Forbes Factors, Inc., 675 Phil. 599 (2011 ).

76
Metrobank v. Rosales, 724 Phil. 66 (2014).

77
Ranjo v. Salmon, 15 Phil. 436 (1910).

78
SUBDIVISION AND CONDOMINIUM BUYER'S PROTECTIVE DECREE. Presidential Decree
No. 957, Section 18 commands:

No mortgage on any unit or lot shall be made by the owner or developer without prior
written approval of the Authority. Such approval shall not be granted unless it is shown
that the proceeds of the mortgage loan shall be used for the development of the
condominium or subdivision project and effective measures have been provided to SECOND DIVISION
ensure such utilization. The loan value of each lot or unit covered by the mortgage shall
be determined and the buyer thereof, if any, shall be notified before the release of the
[G.R. NO. 161032, September 16, 2008]
loan. The buyer may, at his option, pay his installment for the lot or unit directly to the
mortgagee who shall apply the payments to the corresponding mortgage indebtedness
secured by the particular lot or unit being paid for, with a view to enabling said buyer to ERWIN TULFO, Petitioner, v. PEOPLE OF THE PHILIPPINES AND ATTY. CARLOS T.
obtain title over the lot or unit promptly alter full payment thereof. (Emphasis supplied) SO, Respondents.

79 [G.R. NO. 161176]

605 Phil. 574 (2009).

80 SUSAN CAMBRI, REY SALAO, JOCELYN BARLIZO, AND PHILIP

CIVIL CODE OF THE PHILIPPINES, Article 2208. "In the absence of stipulation, attorney's PICHAY, Petitioners, v. COURT OF APPEALS, PEOPLE OF THE PHILIPPINES, AND CARLOS
fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) SO,Respondents.
When exemplary damages are awarded: x x x x": see PhilTranco Service Enterprises, Inc.
Court of Appeals, 340 Phil. 98 ( 1997); Air France v. Carrascoso, 124 Phil. 722 (1966).
DECISION

VELASCO JR., J.:

The freedom of the press is one of the cherished hallmarks of our democracy; but even as
we strive to protect and respect the fourth estate, the freedom it enjoys must be
balanced with responsibility. There is a fine line between freedom of expression and libel,
and it falls on the courts to determine whether or not that line has been crossed.

The Facts

26 | P a g e
On the complaint of Atty. Carlos "Ding" So of the Bureau of Customs, four (4) separate
informations were filed on September 8, 1999 with the Regional Trial Court in (RTC) Pasay
City. These were assigned to Branch 112 and docketed as Criminal Case Nos. 99-1597 to
99-1600, and charged petitioners Erwin Tulfo, as author/writer, Susan Cambri, as
managing editor, Rey Salao, as national editor, Jocelyn Barlizo, as city editor, and Philip
Pichay, as president of the Carlo Publishing House, Inc., of the daily tabloid Remate, with
the crime of libel in connection with the publication of the articles in the column "Direct
Hit" in the issues of May 11, 1999; May 12, 1999; May 19, 1999; and June 25, 1999. 1 The
four informations read as follows:
Criminal Case No. 99-1598
That on or about the 11th day of May, 1999 in Pasay City, Metro Manila, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused, conspiring and
confederating together and mutually helping one another, being then the columnist,
publisher and managing editor, respectively of "REMATE", a tabloid published daily and of
general circulation in the Philippines, did then and there willfully, unlawfully and
feloniously and with malicious intent to discredit or dishonor complainant, ATTY. CARLOS
"DING" SO, and with the malicious intent of injuring and exposing said complainant to
public hatred, contempt and ridicule, write and publish in the regular issue of said
publication on May 11, 1999, its daily column "DIRECT HIT", quoted hereunder, to wit:
PINAKAMAYAMAN SA CUSTOMS
Ito palang si Atty. Ding So ng Intelligence Division ng Bureau of Customs and [sic]
pinakamayaman na yata na government official sa buong bansa sa pangungurakot lamang
diyan sa South Harbor.
Hindi matibag ang gagong attorney dahil malakas daw ito sa Iglesia ni Kristo.
Hoy, So! . . nakakahiya ka sa mga INC, ikaw na yata ang pinakagago at magnanakaw na
miyembro nito.
Balita ko, malapit ka nang itiwalag ng nasabing simbahan dahil sa mga kalokohan mo.
Abangan bukas ang mga raket ni So sa BOC.
WHEREIN said complainant was indicated as an extortionist, a corrupt public official,
smuggler and having illegally acquired wealth, all as already stated, with the object of
destroying his reputation, discrediting and ridiculing him before the bar of public opinion.2
Criminal Case No. 99-1599
27 | P a g e
That on or about the 12th day of May, 1999 in Pasay City, Metro Manila, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused, conspiring and
confederating together and mutually helping one another, being then the columnist,
publisher and managing editor, respectively of "REMATE", a tabloid published daily and of
general circulation in the Philippines, did then and there willfully, unlawfully and
feloniously and with malicious intent to discredit or dishonor complainant, ATTY. CARLOS
"DING" SO, and with the malicious intent of injuring and exposing said complainant to
public hatred, contempt and ridicule, write and publish in the regular issue of said
publication on May 12, 1999, in daily column "DIRECT HIT", quoted hereunder, to wit:
SI ATTY. SO NG BOC
"LINTEK" din sa pangungurakot itong Ding So ng Bureau of Customs Intelligence Unit sa
South Harbor.
Daan-daang libong piso ang kinikita ng masiba at matakaw na si So sa mga importer na
ayaw ideklara ang totoong laman ng mga container para makaiwas sa pagbayad ng
malaking customs duties at taxes.
Si So ang nagpapadrino sa mga pag-inspection ng mga container na ito. Siyempre-
binibigyan din niya ng salapi yung ibang mga ahensiya para pumikit na lang at itikom ang
kanilang nga [sic] bibig diyan sa mga buwayang taga BOC.
Awang-awa ako sa ating gobyerno. Bankrupt na nga, ninanakawan pa ng mga kawatan
tulad ni So.
Ewan ko ba rito kay Atty. So, bakit hindi na lang tumayo ng sarili niyang robbery-hold-up
gang para kumita ng mas mabilis.
Hoy So.. hindi bagay sa iyo ang pagiging attorney . . . Mas bagay sa iyo ang pagiging
buwayang naka korbata at holdaper. Magnanakaw ka So!!"
WHEREIN said complainant was indicated as an extortionist, a corrupt public official,
smuggler and having illegally acquired wealth, all as already stated, with the object of
destroying his reputation, discrediting and ridiculing him before the bar of public opinion. 3
Criminal Case No. 99-1600
That on or about 19th day of May, 1999 in Pasay City, Metro Manila, Philippines and within
the jurisdiction of this Honorable Court, the above-named accused, conspiring and
confederating together and mutually helping one another, being then the columnist,
publisher and managing editor, respectively of "REMATE", a tabloid published daily and of
general circulation in the Philippines, did then and there willfully, unlawfully and
feloniously and with malicious intent to discredit or dishonor complainant, ATTY. CARLOS
"DING" SO, and with the malicious intent of injuring and exposing said complainant to
public hatred, contempt and ridicule, write and publish in the regular issue of said
publication on May 19, 1999, in daily column "DIRECT HIT", quoted hereunder, to wit:
xxxx
"Tulad ni Atty. Ding So ng Bureau of Customs Intelligence Division, saksakan din ng lakas
itong si Daniel Aquino ng Presidential Anti-Smuggling Unit na nakatalaga sa South Harbor.
Tulad ni So, magnanakaw na tunay itong si Aquino.
Panghihingi ng pera sa mga brokers, ang lakad nito.
Pag hindi nagbigay ng pera ang mga brokers, maiipit ang pagre-release ng kanilang
kargamento."
WHEREIN said complainant was indicated as an extortionist, a corrupt public official,
smuggler and having illegally acquired wealth, all as already stated, with the object of
destroying his reputation, discrediting and ridiculing him before the bar of public opinion. 4
Criminal Case No. 99-1597
That on or about 25th day of June, 1999 in Pasay City, Metro Manila, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused, conspiring and
confederating together and mutually helping one another, being then the columnist,
publisher and managing editor, respectively of "REMATE", a tabloid published daily and of
general circulation in the Philippines, did then and there willfully, unlawfully and
feloniously and with malicious intent to discredit or dishonor complainant, ATTY. CARLOS
"DING" T. SO, and with the malicious intent of injuring and exposing said complainant to
public hatred, contempt and ridicule, write and publish in the regular issue of said
publication on June 25, 1999, its daily column "DIRECT HIT", quoted hereunder, to wit:
xxxx
Nagfile ng P10 M na libel suit itong si Atty. Carlos So ng Bureau of Customs laban sa
inyong lingkod at ilang opisyales ng Remate sa Pasay City Court. Nagalit itong tarantadong
si Atty. So dahil binanatan ko siya at inexpose ang kagaguhan niya sa BOC.
28 | P a g e
Hoy, So . . . dagdagan mo pa ang pagnanakaw mo dahil hindi kita tatantanan. Buhay ka pa
sinusunog na ang iyong kaluluwa sa impyerno.
WHEREIN said complainant was indicated as an extortionist, a corrupt public official,
smuggler and having illegally acquired wealth, all as already stated, with the object of
destroying his reputation, discrediting and ridiculing him before the bar of public opinion. 5
On November 3, 1999, Tulfo, Salao, and Cambri were arraigned, while Barlizo and Pichay
were arraigned on December 15, 1999. They all pleaded not guilty to the offenses
charged.
At pre-trial, the following were admitted by petitioners: (1) that during the four dates of
the publication of the questioned articles, the complaining witness was not assigned at
South Harbor; (2) that the accused and complaining witness did not know each other
during all the time material to the four dates of publication; (3) that Remate is a
newspaper/tabloid of general circulation in the Philippines; (4) the existence and
genuineness of the Remate newspaper; (5) the column therein and its authorship and the
alleged libelous statement as well as the editorial post containing the designated
positions of the other accused; and (6) the prosecution's qualified admission that it is the
duty of media persons to expose corruption.6
The prosecution presented four witnesses, namely: Oscar M. Ablan, Atty. James Fortes,
Jr., Gladys Fontanilla, and complainant Atty. So. The prosecution presented documentary
evidence as well.
Ablan testified that he had read the four columns written by Tulfo, and that the articles
were untrue because he had known Atty. So since 1992 and had worked with him in the
Customs Intelligence and Investigation Service Division of the Bureau of Customs. He
further testified that upon reading the articles written by Tulfo, he concluded that they
referred to Atty. So because the subject articles identified "Atty. Carlos" as "Atty. `Ding'
So" of the Customs Intelligence and Investigation Service Division, Bureau of Customs and
there was only one Atty. Carlos "Ding" So of the Bureau of Customs.7
Fontanilla, Records Officer I of the Bureau of Customs, testified that she issued a
certification in connection with these cases upon the request of Atty. So. 8 This
certification stated that as per records available in her office, there was only one
employee by the name of "Atty. Carlos T. So" who was also known as "Atty. Ding So" in
the Intelligence Division of the Customs Intelligence and Investigation Service or in the
entire Bureau of Customs.9
Atty. Fortes testified that he knew Atty. So as a fellow member of the Iglesia Ni Kristo and
as a lawyer, and that having read the articles of Tulfo, he believed that these were untrue,
as he knew Atty. Carlos "Ding" So.10
Atty. So testified that he was the private complainant in these consolidated cases. He
further testified that he is also known as Atty. "Ding" So, that he had been connected with
the Bureau of Customs since October 1981, and that he was assigned as Officer-in-Charge
(OIC) of the Customs Intelligence and Investigation Service Division at the Manila
International Container Port since December 27, 1999. He executed two complaint-
affidavits, one dated June 4, 1999 and the other dated July 5, 1999, for Criminal Case Nos.
99-1598 to 99-1600. Prior to this, he also filed 14 cases of libel against Raffy Tulfo, brother
of petitioner Erwin Tulfo. He testified that petitioner Tulfo's act of imputing upon him
criminality, assailing his honesty and integrity, caused him dishonor, discredit, and
contempt among his co-members in the legal profession, co-officers of the Armed Forces
of the Philippines, co-members and peers in the Iglesia ni Kristo, his co-officers and
employees and superior officers in the Bureau of Customs, and among ordinary persons
who had read said articles. He said it also caused him and his family sleepless nights,
mental anguish, wounded feelings, intrigues, and embarrassment. He further testified
that he included in his complaint for libel the officers of Remate such as the publisher,
managing editor, city editor, and national editor because under Article 360 of the Revised
Penal Code (RPC), they are equally responsible and liable to the same extent as if they
were the author of the articles. He also testified that "Ding" is his nickname and that he is
the only person in the entire Bureau of Customs who goes by the name of Atty. Carlos T.
So or Atty. Carlos "Ding" So.11
In his defense, petitioner Tulfo testified that he did not write the subject articles with
malice, that he neither knew Atty. So nor met him before the publication of the articles.
He testified that his criticism of a certain Atty. So of the South Harbor was not directed
against the complainant, but against a person by the name of Atty. "Ding" So at the South
Harbor. Tulfo claimed that it was the practice of certain people to use other people's
names to advance their corrupt practices. He also claimed that his articles had neither
discredited nor dishonored the complainant because as per his source in the Bureau of
Customs, Atty. So had been promoted. He further testified that he did not do any
research on Atty. So before the subject articles, because as a columnist, he had to rely on
his source, and that he had several sources in the Bureau of Customs, particularly in the
South Harbor.12
Petitioner Salao testified that he came to know Atty. Carlos "Ding" So when the latter filed
a case against them. He testified that he is an employee of Carlo Publishing House, Inc.;
that he was designated as the national editor of the newspaper Remate since December
1999; that the duties of the position are to edit, evaluate, encode, and supervise layout of
the news from the provinces; and that Tulfo was under the supervision of Rey Briones,
29 | P a g e
Vice President for Editorial and Head of the Editorial Division. Salao further testified that
he had no participation in the subject articles of Tulfo, nor had he anything to do with the
latter's column.13
Petitioner Cambri, managing editor of Remate, testified that she classifies the news
articles written by the reporters, and that in the Editorial Division, the officers are herself;
Briones, her supervisor; Lydia Bueno, as news and city editor; and Salao as national editor.
She testified that petitioner Barlizo is her subordinate, whose duties and responsibilities
are the typesetting, editing, and layout of the page assigned to her, the Metro page. She
further testified that she had no participation in the writing, editing, or publication of the
column of Tulfo because the column was not edited. She claimed that none among her
co-accused from the Remate newspaper edited the columns of Tulfo, that the publication
and editing of the subject articles were the responsibility of Tulfo, and that he was given
blanket authority to write what he wanted to write. She also testified that the page
wherein Tulfo's column appeared was supervised by Bueno as news editor. 14
Petitioner Pichay testified that he had been the president of Carlo Publishing House, Inc.
since December 1998. He testified that the company practice was to have the columnists
report directly to the vice-president of editorials, that the columnists were given
autonomy on their columns, and that the vice-president for editorials is the one who
would decide what articles are to be published and what are not. He further testified that
Tulfo was already a regular contributor.15
The Ruling of the RTC
In a Decision dated November 17, 2000, the RTC found petitioners guilty of the crime of
Libel. The dispositive portion reads as follows:
WHEREFORE, the Court finds the accused ERWIN TULFO, SUSAN CAMBRI, REY SALAO,
JOCELYN BARLIZO and PHILIP PICHAY guilty beyond reasonable doubt of four (4) counts of
the crime of LIBEL, as defined in Article 353 of the Revised Penal Code, and penalized by
prision correccional in its minimum and medium periods, or a fine ranging from P200.00
Pesos to P6,000.00 Pesos or both, under Article 355 of the same Code.
Applying the Indeterminate Sentence Law, the Court hereby sentences EACH of the
accused to suffer imprisonment of SIX (6) MONTHS of arresto mayor, as minimum, to
FOUR (4) YEARS and TWO (2) MONTHS of prision correccional, as maximum, for EACH
count with accessory penalties provided by law.
Considering that the accused Erwin Tulfo, Susan Cambri, Rey Salao, Jocelyn Barlizo and
Philip Pichay wrote and published the four (4) defamatory articles with reckless disregard,
being, in the mind of the Court, of whether it was false or not, the said articles libelous
per se, they are hereby ordered to pay, jointly and severally, the sum of EIGHT HUNDRED
THOUSAND (P800,000.00) PESOS, as actual damages, the sum of ONE MILLION PESOS
(P1,000,000.00), as moral damages, and an additional amount of FIVE HUNDRED
THOUSAND PESOS (P500,000.00), by way of exemplary damages, all with subsidiary
imprisonment, in case of insolvency, and to pay the costs.
SO ORDERED.16
The Ruling of the Court of Appeals
Before the Court of Appeals (CA), Tulfo assigned the following errors:
1. THE LOWER COURT ERRED IN IGNORING THE UNREBUTTED TESTIMONY OF THE
APPELLANT THAT HE DID NOT CRITICIZE THE PRIVATE COMPLAINANT WORKING
AT THE NAIA. HE CRITICIZED ANOTHER PERSON WORKING AT THE SOUTH
HARBOR. HENCE, THE ELEMENT OF IDENTITY IS LACKING.
2. THE LOWER COURT ERRED IN IGNORING THE LACK OF THE ESSENTIAL ELEMENT
OF DISCREDIT OR DISHONOR, AS DEFINED BY JURISPRUDENCE.
3. THERE WAS NO MALICE AGAINST THE PRIVATE COMPLAINANT ATTY. CARLOS
"DING" SO.17
His co-accused assigned the following errors:
A
The trial court seriously erred in holding accused Susan Cambri, Rey Salao, Jocelyn Barlizo
and Philip Pichay liable for the defamations contained in the questioned articles despite
the fact that the trial court did not have any finding as to their participation in the writing,
editing and/or publication of the questioned articles.
B
The trial court seriously erred in concluding that libel was committed by all of the accused
on the basis of its finding that the elements of libel have been satisfactorily established by
evidence on record.
C as follows:
30 | P a g e
The trial court seriously erred in considering complainant to be the one referred to by
Erwin Tulfo in his articles in question.18
In a Decision19 dated June 17, 2003, the Eighth Division of the CA dismissed the appeal
and affirmed the judgment of the trial court. A motion for reconsideration dated June 30,
2003 was filed by Tulfo, while the rest of his co-accused filed a motion for reconsideration
dated July 2, 2003. In a Resolution dated December 11, 2003, both motions were denied
for lack of merit.20
Petitions for Review on Certiorari under Rule 45
Tulfo brought this petition docketed as G.R. No. 161032, seeking to reverse the Decision
of the CA in CA-G.R. CR No. 25318 which affirmed the decision of the RTC. Petitioners
Cambri, Salao, Barlizo, and Pichay brought a similar petition docketed as G.R. No. 161176,
seeking the nullification of the same CA decision.
In a Resolution dated March 15, 2004, the two cases were consolidated since both cases
arise from the same set of facts, involve the same parties, assail the same decision of the
CA, and seek identical reliefs.21
Assignment of Errors
Petitioner Tulfo submitted the following assignment of errors:
I
Assuming that the Prosecution presented credible and relevant evidence, the Honorable
CA erred in not declaring the assailed articles as privileged; the CA erred in concluding
that malice in law exists by the court's having incorrectly reasoned out that malice was
presumed in the instant case.
II
Even assuming arguendo that the articles complained of are not privileged, the lower
court, nonetheless, committed gross error as defined by the provisions of Section 6 of
Rule 45 by its misappreciation of the evidence presented on matters substantial and
material to the guilt or innocence of the petitioner.22
Petitioners Cambri, Salao, Barlizo, and Pichay submitted their own assignment of errors,
A - The Court of Appeals Seriously Erred In Its Application of Article 360 Of The Revised
Penal Code By Holding Cambri, Salao And Barlizo Liable For The Defamatory Articles In
The May 11, 12, 19 And June 25, 1999 Issues Of Remate Simply Because They Were
Managing Editor, National Editor And City Editor Respectively Of Remate And By Holding
Pichay Also Liable For Libel Merely Because He Was The President Of Carlo Publishing
House, Inc. Without Taking Into Account The Unrebutted Evidence That Petitioners Had
No Participation In The Editing Or Publication Of The Defamatory Articles In Question.
B - The Court Of Appeals Committed Grave Abuse Of Discretion In Manifestly Disregarding
The Unrebutted Evidence That Petitioners Had No Participation In The Editing Or
Publication Of The Defamatory Articles In Question.
C - The Court Of Appeals Seriously Misappreciated The Evidence In Holding That The
Person Referred To In The Published Articles Was Private Complainant Atty. Carlos So. 23
Our Ruling
The petitions must be dismissed.
The assignment of errors of petitioner Tulfo shall be discussed first.
In his appeal, Tulfo claims that the CA erred in not applying the ruling in Borjal v. Court of
Appeals.24 In essence, he argues that the subject articles fall under "qualifiedly privileged
communication" under Borjal and that the presumption of malice in Art. 354 of the RPC
does not apply. He argues that it is the burden of the prosecution to prove malice in fact.
This case must be distinguished from Borjal on several points, the first being
that Borjal stemmed from a civil action for damages based on libel, and was not a criminal
case. Second, the ruling in Borjal/i> was that there was no sufficient identification of the
complainant, which shall be differentiated from the present case in discussing the second
assignment of error of Tulfo. Third, the subject in Borjal was a private citizen, whereas in
the present case, the subject is a public official. Finally, it was held in Borjal that the
articles written by Art Borjal were "fair commentaries on matters of public interest" 25 It
shall be discussed and has yet to be determined whether or not the articles fall under the
category of "fair commentaries."
In passing, it must be noted that the defense of Tulfo's articles being qualifiedly privileged
communication is raised for the first time in the present petition, and this particular issue
was never brought before either the RTC or the CA. Thus, neither the RTC nor the CA had a
chance to properly consider and evaluate this defense. Tulfo now draws parallels between
his case and that of Art Borjal, and argues that the prosecution should have proved malice
in fact, and it was error on the part of the trial and appellate courts to use the
presumption of malice in law in Art. 354 of the RPC. This lays an unusual burden on the
31 | P a g e
part of the prosecution, the RTC, and the CA to refute a defense that Tulfo had never
raised before them. Whether or not the subject articles are privileged communications
must first be established by the defense, which it failed to do at the level of the RTC and
the CA. Even so, it shall be dealt with now, considering that an appeal in a criminal
proceeding throws the whole case open for review.
There is no question of the status of Atty. So as a public official, who served as the OIC of
the Bureau of Customs Intelligence and Investigation Service at the Ninoy Aquino
International Airport (NAIA) at the time of the printing of the allegedly libelous articles.
Likewise, it cannot be refuted that the goings-on at the Bureau of Customs, a government
agency, are matters of public interest. It is now a matter of establishing whether the
articles of Tulfo are protected as qualified privileged communication or are defamatory
and written with malice, for which he would be liable.
Freedom of the Press v. Responsibility of the Press
The Court has long respected the freedom of the press, and upheld the same when it came
to commentaries made on public figures and matters of public interest. Even in cases
wherein the freedom of the press was given greater weight over the rights of individuals,
the Court, however, has stressed that such freedom is not absolute and unbounded. The
exercise of this right or any right enshrined in the Bill of Rights, indeed, comes with an
equal burden of responsible exercise of that right. The recognition of a right is not free
license for the one claiming it to run roughshod over the rights of others.
The Journalist's Code of Ethics adopted by the National Union of Journalists of the
Philippines shows that the press recognizes that it has standards to follow in the exercise
of press freedom; that this freedom carries duties and responsibilities. Art. I of said code
states that journalists "recognize the duty to air the other side and the duty to correct
substantive errors promptly." Art. VIII states that journalists "shall presume persons
accused of crime of being innocent until proven otherwise."
In the present case, it cannot be said that Tulfo followed the Journalist's Code of Ethics and
exercised his journalistic freedom responsibly.
In his series of articles, he targeted one Atty. "Ding" So of the Bureau of Customs as being
involved in criminal activities, and was using his public position for personal gain. He went
even further than that, and called Atty. So an embarrassment to his religion, saying "ikaw
na yata ang pinakagago at magnanakaw sa miyembro nito.">26 He accused Atty. So of
stealing from the government with his alleged corrupt activities. 27 And when Atty. So filed
a libel suit against him, Tulfo wrote another article, challenging Atty. So, saying, "Nagalit
itong tarantadong si Atty. So dahil binabantayan ko siya at in-expose ang kagaguhan niya
sa [Bureau of Customs]"28
In his testimony, Tulfo admitted that he did not personally know Atty. So, and had neither
met nor known him prior to the publication of the subject articles. He also admitted that
he did not conduct a more in-depth research of his allegations before he published them,
and relied only on his source at the Bureau of Customs.
In his defense before the trial court, Tulfo claimed knowledge of people using the names of
others for personal gain, and even stated that he had been the victim of such a practice.
He argued then that it may have been someone else using the name of Atty. So for corrupt
practices at the South Harbor, and this person was the target of his articles. This argument
weakens his case further, for even with the knowledge that he may be in error, even
knowing of the possibility that someone else may have used Atty. So's name, as Tulfo
surmised, he made no effort to verify the information given by his source or even to
ascertain the identity of the person he was accusing.
The trial court found Tulfo's accusations against Atty. So to be false, but Tulfo argues that
the falsity of contents of articles does not affect their privileged character. It may be that
the falsity of the articles does not prove malice. Neither did Borjal give journalists carte
blanche with regard to their publications. It cannot be said that a false article accusing a
public figure would always be covered by the mantle of qualified privileged
communication. The portion of Borjalcited by Tulfo must be scrutinized further:
Even assuming that the contents of the articles are false, mere error, inaccuracy or even
falsity alone does not prove actual malice. Errors or misstatements are inevitable in any
scheme of truly free expression and debate. Consistent with good faith and reasonable
care, the press should not be held to account, to a point of suppression, for honest
mistakes or imperfections in the choice of language. There must be some room for
misstatement of fact as well as for misjudgment. Only by giving them much leeway and
tolerance can they courageously and effectively function as critical agencies in our
democracy. In Bulletin Publishing Corp. v. Noel we held -
A newspaper especially one national in reach and coverage, should be free to report on
events and developments in which the public has a legitimate interest with minimum fear
of being hauled to court by one group or another on criminal or civil charges for libel, so
long as the newspaper respects and keeps within the standards of morality and civility
prevailing within the general community.
To avoid the self-censorship that would necessarily accompany strict liability for erroneous
statements, rules governing liability for injury to reputation are required to allow an
adequate margin of error by protecting some inaccuracies. It is for the same reason that
the New York Times doctrinerequires that liability for defamation of a public official or
32 | P a g e
public figure may not be imposed in the absence of proof of "actual malice" on the part of
the person making the libelous statement.29 (Emphasis supplied.)
Reading more deeply into the case, the exercise of press freedom must be done
"consistent with good faith and reasonable care." This was clearly abandoned by Tulfo
when he wrote the subject articles. This is no case of mere error or honest mistake, but a
case of a journalist abdicating his responsibility to verify his story and instead
misinforming the public. Journalists may be allowed an adequate margin of error in the
exercise of their profession, but this margin does not expand to cover every defamatory or
injurious statement they may make in the furtherance of their profession, nor does this
margin cover total abandonment of responsibility.
Borjal may have expanded the protection of qualified privileged communication beyond
the instances given in Art. 354 of the RPC, but this expansion does not cover Tulfo. The
addition to the instances of qualified privileged communications is reproduced as follows:
To reiterate, fair commentaries on matters of public interest are privileged and constitute
a valid defense in an action for libel or slander. The doctrine of fair comment means that
while in general every discreditable imputation publicly made is deemed false, because
every man is presumed innocent until his guilt is judicially proved, and every false
imputation is deemed malicious, nevertheless, when the discreditable imputation is
directed against a public person in his public capacity, it is not necessarily actionable.In
order that such discreditable imputation to a public official may be actionable, it must
either be a false allegation of fact or a comment based on a false supposition. If the
comment is an expression of opinion, based on established facts, then it is immaterial that
the opinion happens to be mistaken, as long as it might reasonably be inferred from the
facts.30(Emphasis supplied.)
The expansion speaks of "fair commentaries on matters of public interest."
While Borjal places fair commentaries within the scope of qualified privileged
communication, the mere fact that the subject of the article is a public figure or a matter
of public interest does not automatically exclude the author from liability. Borjal allows
that for a discreditable imputation to a public official to be actionable, it must be a false
allegation of fact or a comment based on a false supposition. As previously mentioned, the
trial court found that the allegations against Atty. So were false and that Tulfo did not
exert effort to verify the information before publishing his articles.
Tulfo offered no proof for his accusations. He claimed to have a source in the Bureau of
Customs and relied only on this source for his columns, but did no further research on his
story. The records of the case are bereft of any showing that Atty. So was indeed the villain
Tulfo pictured him to be. Tulfo's articles related no specific details or acts committed to
prove Atty. So was indeed a corrupt public official. These columns were unsubstantiated
attacks on Atty. So, and cannot be countenanced as being privileged simply because the
target was a public official. Although wider latitude is given to defamatory utterances
against public officials in connection with or relevant to their performance of official
duties, or against public officials in relation to matters of public interest involving them,
such defamatory utterances do not automatically fall within the ambit of constitutionally
protected speech.31 Journalists still bear the burden of writing responsibly when practicing
their profession, even when writing about public figures or matters of public interest. As
held in In Re: Emil P. Jurado:
Surely it cannot be postulated that the law protects a journalist who deliberately prints lies
or distorts the truth; or that a newsman may ecape liability who publishes derogatory or
defamatory allegations against a person or entity, but recognizes no obligation bona
fide to establish beforehand the factual basis of such imputations and refuses to submit
proof thereof when challenged to do so. It outrages all notions of fair play and due
process, and reduces to uselessness all the injunctions of the Journalists' Code of Ethics to
allow a newsman, with all the potential of his profession to influence popular belief and
shape public opinion, to make shameful and offensive charges destructive of personal or
institutional honor and repute, and when called upon to justify the same, cavalierly beg off
by claiming that to do so would compromise his sources and demanding acceptance of his
word for the reliability of those sources. 32
The prosecution showed that Tulfo could present no proof of his allegations against Atty.
So, only citing his one unnamed source. It is not demanded of him that he name his source.
The confidentiality of sources and their importance to journalists are accepted and
respected. What cannot be accepted are journalists making no efforts to verify the
information given by a source, and using that unverified information to throw wild
accusations and besmirch the name of possibly an innocent person. Journalists have a
responsibility to report the truth, and in doing so must at least investigate their stories
before publication, and be able to back up their stories with proof. The rumors and gossips
spread by unnamed sources are not truth. Journalists are not storytellers or novelists who
may just spin tales out of fevered imaginings, and pass them off as reality. There must be
some foundation to their reports; these reports must be warranted by facts.
Jurado also established that the journalist should exercise some degree of care even when
writing about public officials. The case stated:
Clearly, the public interest involved in freedom of speech and the individual interest of
judges (and for that matter, all other public officials) in the maintenance of private honor
and reputation need to be accommodated one to the other. And the point of adjustment
or accommodation between these two legitimate interests is precisely found in the norm
which requires those who, invoking freedom of speech, publish statements which are
clearly defamatory to identifiable judges or other public officials to exercise bona fide care
in ascertaining the truth of the statements they publish. The norm does not require that a
journalist guarantee the truth of what he says or publishes. But the norm does prohibit
33 | P a g e
the recklessdisregard of private reputation by publishing or
circulating defamatory statements without any bona fide effort to ascertain the truth
thereof. That this norm represents the generally accepted point of balance or adjustment
between the two interests involved is clear from a consideration of both the pertinent civil
law norms and the Code of Ethics adopted by the journalism profession in the
Philippines.33
Tulfo has clearly failed in this regard. His articles cannot even be considered as qualified
privileged communication under the second paragraph of Art. 354 of the RPC which
exempts from the presumption of malice "a fair and true report, made in good faith,
without any comments or remarks, of any judicial, legislative, or other official proceedings
which are not of confidential nature, or any statement, report, or speech delivered in said
proceedings, or of any other act performed by public officers in the exercise of their
functions." This particular provision has several elements which must be present in order
for the report to be exempt from the presumption of malice. The provision can be
dissected as follows:
In order that the publication of a report of an official proceeding may be considered
privileged, the following conditions must exist:
(a) That it is a fair and true report of a judicial, legislative, or other
official proceedings which are not of confidential nature, or of a statement,
report or speech delivered in said proceedings, or of any other act performed by a
public officer in the exercise of his functions;
(b) That it is made in good faith; and
(c) That it is without any comments or remarks.34
The articles clearly are not the fair and true reports contemplated by the provision. They
provide no details of the acts committed by the subject, Atty. So. They are plain and simple
baseless accusations, backed up by the word of one unnamed source. Good faith is
lacking, as Tulfo failed to substantiate or even attempt to verify his story before
publication. Tulfo goes even further to attack the character of the subject, Atty. So, even
calling him a disgrace to his religion and the legal profession. As none of the elements of
the second paragraph of Art. 354 of the RPC is present in Tulfo's articles, it cannot thus be
argued that they are qualified privileged communications under the RPC.
Breaking down the provision further, looking at the terms "fair" and "true," Tulfo's articles
do not meet the standard. "Fair" is defined as "having the qualities of impartiality and
honesty"35 "True" is defined as "conformable to fact; correct; exact; actual; genuine;
honest"36 Tulfo failed to satisfy these requirements, as he did not do research before
making his allegations, and it has been shown that these allegations were baseless. The
articles are not "fair and true reports," but merely wild accusations.
Even assuming arguendo that the subject articles are covered by the shield of qualified
privileged communication, this would still not protect Tulfo.
In claiming that his articles were covered by qualified privileged communication, Tulfo
argues that the presumption of malice in law under Art. 354 of the RPC is no longer
present, placing upon the prosecution the burden of proving malice in fact. He then argues
that for him to be liable, there should have been evidence that he was motivated by ill will
or spite in writing the subject articles.
The test to be followed is that laid down in New York Times Co. v. Sullivan,37 and reiterated
in Flor v. People, which should be to determine whether the defamatory statement was
made with actual malice, that is, with knowledge that it was false or with reckless
disregard of whether it was false or not.38
The trial court found that Tulfo had in fact written and published the subject articles with
reckless disregard of whether the same were false or not, as proven by the prosecution.
There was the finding that Tulfo failed to verify the information on which he based his
writings, and that the defense presented no evidence to show that the accusations against
Atty. So were true. Tulfo cannot argue that because he did not know the subject, Atty. So,
personally, there was no malice attendant in his articles. The test laid down is the "reckless
disregard" test, and Tulfo has failed to meet that test.
The fact that Tulfo published another article lambasting respondent Atty. So can be
considered as further evidence of malice, as held in U.S. vs. Montalvo,39 wherein
publication after the commencement of an action was taken as further evidence of a
malicious design to injure the victim. Tulfo did not relent nor did he pause to consider his
actions, but went on to continue defaming respondent Atty. So. This is a clear indication of
his intent to malign Atty. So, no matter the cost, and is proof of malice.
Leaving the discussion of qualified privileged communication, Tulfo also argues that the
lower court misappreciated the evidence presented as to the identity of the complainant:
that Tulfo wrote about Atty. "Ding" So, an official of the Bureau of Customs who worked at
the South Harbor, whereas the complainant was Atty. Carlos So who worked at the NAIA.
He claims that there has arisen a cloud of doubt as to the identity of the real party referred
to in the articles.
This argument is patently without merit.
The prosecution was able to present the testimonies of two other witnesses who identified
Atty. So from Tulfo's articles. There is the certification that there is only one Atty. So in the
34 | P a g e
Bureau of Customs. And most damning to Tulfo's case is the last column he wrote on the
matter, referring to the libel suit against him by Atty. So of the Bureau of Customs. In this
article, Tulfo launched further attacks against Atty. So, stating that the libel case was due
to the exposés Tulfo had written on the corrupt acts committed by Atty. So in the Bureau
of Customs. This last article is an admission on the part of Tulfo that Atty. So was in fact
the target of his attacks. He cannot now point to a putative "Atty. Ding So" at South
Harbor, or someone else using the name of Atty. So as the real subject of his attacks, when
he did not investigate the existence or non-existence of an Atty. So at South Harbor, nor
investigate the alleged corrupt acts of Atty. So of the Bureau of Customs. Tulfo cannot say
that there is doubt as to the identity of the Atty. So referred to in his articles, when all the
evidence points to one Atty. So, the complainant in the present case.
Having discussed the issue of qualified privileged communication and the matter of the
identity of the person referred to in the subject articles, there remains the petition of the
editors and president of Remate, the paper on which the subject articles appeared.
In sum, petitioners Cambri, Salao, Barlizo, and Pichay all claim that they had no
participation in the editing or writing of the subject articles, and are thus not liable.
The argument must fail.
The language of Art. 360 of the RPC is plain. It lists the persons responsible for libel:
Art. 360. Persons responsible.--Any person who shall publish, exhibit, or cause the
publication or exhibition of any defamation in writing or by similar means, shall be
responsible for the same.
The author or editor of a book or pamphlet, or the editor or business manager of a daily
newspaper, magazine or serial publication, shall be responsible for the defamations
contained therein to the same extent as if he were the author thereof.
The claim that they had no participation does not shield them from liability. The provision
in the RPC does not provide absence of participation as a defense, but rather plainly and
specifically states the responsibility of those involved in publishing newspapers and other
periodicals. It is not a matter of whether or not they conspired in preparing and publishing
the subject articles, because the law simply so states that they are liable as they were the
author.
Neither the publisher nor the editors can disclaim liability for libelous articles that appear
on their paper by simply saying they had no participation in the preparation of the same.
They cannot say that Tulfo was all alone in the publication of Remate, on which the
subject articles appeared, when they themselves clearly hold positions of authority in the
newspaper, or in the case of Pichay, as the president in the publishing company.
As Tulfo cannot simply say that he is not liable because he did not fulfill his responsibility
as a journalist, the other petitioners cannot simply say that they are not liable because
they did not fulfill their responsibilities as editors and publishers. An editor or manager of
a newspaper, who has active charge and control of its management, conduct, and policy,
generally is held to be equally liable with the owner for the publication therein of a libelous
article.40 On the theory that it is the duty of the editor or manager to know and control the
contents of the paper,41 it is held that said person cannot evade responsibility by
abandoning the duties to employees,42 so that it is immaterial whether or not the editor or
manager knew the contents of the publication. 43 In Fermin v. People of the
Philippines,44 the Court held that the publisher could not escape liability by claiming lack of
participation in the preparation and publication of a libelous article. The Court cited U.S. v.
Ocampo, stating the rationale for holding the persons enumerated in Art. 360 of the RPC
criminally liable, and it is worth reiterating:
According to the legal doctrines and jurisprudence of the United States, the printer of a
publication containing libelous matter is liable for the same by reason of his direct
connection therewith and his cognizance of the contents thereof. With regard to a
publication in which a libel is printed, not only is the publisher but also all other persons
who in any way participate in or have any connection with its publication are liable as
publishers.
xxxx
In the case of State vs. Mason (26 L.R.A., 779; 26 Oreg., 273, 46 Am. St. Rep., 629), the
question of the responsibility of the manager or proprietor of a newspaper was discussed.
The court said, among other things (pp. 782, 783):
"The question then recurs as to whether the manager or proprietor of a newspaper can
escape criminal responsibility solely on the ground that the libelous article was published
without his knowledge or consent. When a libel is published in a newspaper, such fact
alone is sufficient evidence prima facie to charge the manager or proprietor with the guilt
of its publication.
"The manager and proprietor of a newspaper, we think ought to be held prima facie
criminally for whatever appears in his paper; and it should be no defense that the
publication was made without his knowledge or consent, x x x.
"One who furnishes the means for carrying on the publication of a newspaper and entrusts
its management to servants or employees whom he selects and controls may be said to
35 | P a g e
cause to be published what actually appears, and should be held responsible therefore,
whether he was individually concerned in the publication or not, x x x. Criminal
responsibility for the acts of an agent or servant in the course of his employment
necessarily implies some degree of guilt or delinquency on the part of the publisher; x x x.
"We think, therefore, the mere fact that the libelous article was published in the
newspaper without the knowledge or consent of its proprietor or manager is no defense to
a criminal prosecution against such proprietor or manager."
In the case of Commonwealth vs. Morgan (107 Mass., 197), this same question was
considered and the court held that in the criminal prosecution of a publisher of a
newspaper in which a libel appears, he is prima facie presumed to have published the libel,
and that the exclusion of an offer by the defendant to prove that he never saw the libel
and was not aware of its publication until it was pointed out to him and that an apology
and retraction were afterwards published in the same paper, gave him no ground for
exception. In this same case, Mr. Justice Colt, speaking for the court, said:
"It is the duty of the proprietor of a public paper, which may be used for the publication of
improper communications, to use reasonable caution in the conduct of his business that
no libels be published." (Wharton's Criminal Law, secs. 1627, 1649; 1 Bishop's Criminal
Law, secs. 219, 221; People vs. Wilson, 64 Ill., 195; Commonwealth vs. Damon, 136 Mass.,
441.)
The above doctrine is also the doctrine established by the English courts. In the case of Rex
vs. Walter (3 Esp., 21) Lord Kenyon said that he was "clearly of the opinion that the
proprietor of a newspaper was answerable criminally as well as civilly for the acts of his
servants or agents for misconduct in the management of the paper."
This was also the opinion of Lord Hale, Mr. Justice Powell, and Mr. Justice Foster.
Lofft, an English author, in his work on Libel and Slander, said:
"An information for libel will lie against the publisher of a papers, although he did not
know of its being put into the paper and stopped the sale as soon as he discovered it."
In the case of People vs. Clay (86 Ill., 147) the court held that -
"A person who makes a defamatory statement to the agent of a newspaper for
publication, is liable both civilly and criminally, and his liability is shared by the agent and
45
all others who aid in publishing it"
Under Art. 360 of the RPC, as Tulfo, the author of the subject articles, has been found
guilty of libel, so too must Cambri, Salao, Barlizo, and Pichay.
Though we find petitioners guilty of the crime charged, the punishment must still be
tempered with justice. Petitioners are to be punished for libel for the first time. They did
not apply for probation to avoid service of sentence possibly in the belief that they have
not committed any crime. In Buatis, Jr. v. People,46 the Court, in a criminal case for libel,
removed the penalty of imprisonment and instead imposed a fine as penalty. In Sazon v.
Court of Appeals,47 the accused was merely fined in lieu of the original penalty of
imprisonment and fine. Freedom of expression as well as freedom of the press may not be
unrestrained, but neither must it be reined in too harshly. In light of this, considering the
necessity of a free press balanced with the necessity of a responsible press, the penalty of
a fine of PhP 6,000 for each count of libel, with subsidiary imprisonment in case of
insolvency, should suffice.48 Lastly, the responsibilities of the members of the press
notwithstanding, the difficulties and hazards they encounter in their line of work must also
be taken into consideration.
The award of damages by the lower court must be modified. Art. 2199 of the Civil Code
provides, "Except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages." There was no showing
of any pecuniary loss suffered by the complainant Atty. So. Without proof of actual loss
that can be measured, the award of actual damages cannot stand.
In Del Mundo v. Court of Appeals, it was held, as regards actual and moral damages:
A party is entitled to an adequate compensation for such pecuniary loss actually suffered
by him as he has duly proved. Such damages, to be recoverable, must not only be capable
of proof, but must actually be proved with a reasonable degree of certainty. We have
emphasized that these damages cannot be presumed, and courts, in making an award
must point out specific facts which could afford a basis for measuring whatever
compensatory or actual damages are borne.
Moral damages, upon the other hand, may be awarded to compensate one for manifold
injuries such as physical suffering, mental anguish, serious anxiety, besmirched reputation,
wounded feelings and social humiliation. These damages must be understood to be in the
concept of grants, not punitive or corrective in nature, calculated to compensate the
claimant for the injury suffered. Although incapable of exactness and no proof of
pecuniary loss is necessary in order that moral damages may be awarded, the amount of
indemnity being left to the sound discretion of the court, it is imperative, nevertheless,
that (1) injury must have been suffered by the claimant, and (2) such injury must have
36 | P a g e
sprung from any of the cases expressed in Article 2219 and Article 2220 of the Civil Code. A
causal relation, in fine, must exist between the act or omission referred to in the Code
which underlies, or gives rise to, the case or proceeding on the one hand, and the resulting
injury, on the other hand; i.e. the first must be the proximate cause and the latter the
direct consequence thereof.49
It was the articles of Tulfo that caused injury to Atty. So, and for that Atty. So deserves the
award of moral damages. Justification for the award of moral damages is found in Art.
2219(7) of the Civil Code, which states that moral damages may be recovered in cases of
libel, slander, or any other form of defamation. As the cases involved are criminal cases of
libel, they fall squarely within the ambit of Art. 2219(7).
Moral damages can be awarded even in the absence of actual or compensatory damages.
The fact that no actual or compensatory damage was proven before the trial court does
not adversely affect the offended party's right to recover moral damages. 50
And while on the subject of moral damages, it may not be amiss to state at this juncture
that Tulfo's libelous articles are abhorrent not only because of its vilifying and demeaning
effect on Atty. So himself, but also because of their impact on members of his family,
especially on the children and possibly even the children's children.
The Court can perhaps take judicial notice that the sense of kinship runs deeply in a typical
Filipino family, such that the whole family usually suffers or rejoices at the misfortune or
good fortune, as the case may be, of any of its member. Accordingly, any attempt to
dishonor or besmirch the name and reputation of the head of the family, as here,
invariably puts the other members in a state of disrepute, distress, or anxiety. This reality
adds an imperative dimension to the award of moral damages to the defamed party.
The award of exemplary damages, however, cannot be justified. Under Art. 2230 of the
Civil Code, "In criminal offenses, exemplary damages as a part of the civil liability may be
imposed when the crime was committed with one or more aggravating circumstances.
Such damages are separate and distinct from fines and shall be paid to the offended
party." No aggravating circumstances accompanied the commission of the libelous acts;
thus, no exemplary damages can be awarded.
Conclusion
The press wields enormous power. Through its widespread reach and the information it
imparts, it can mold and shape thoughts and opinions of the people. It can turn the tide of
public opinion for or against someone, it can build up heroes or create villains.
It is in the interest of society to have a free press, to have liberal discussion and
dissemination of ideas, and to encourage people to engage in healthy debate. It is through
this that society can progress and develop.
Those who would publish under the aegis of freedom of the press must also acknowledge
the corollary duty to publish responsibly. To show that they have exercised their freedom
responsibly, they must go beyond merely relying on unfounded rumors or shadowy
anonymous sources. There must be further investigation conducted, some shred of proof
found to support allegations of misconduct or even criminal activity. It is in fact too easy
for journalists to destroy the reputation and honor of public officials, if they are not
required to make the slightest effort to verify their accusations. Journalists are supposed
to be reporters of facts, not fiction, and must be able to back up their stories with solid
research. The power of the press and the corresponding duty to exercise that power
judiciously cannot be understated.
But even with the need for a free press, the necessity that it be free does not mean that it
be totally unfettered. It is still acknowledged that the freedom can be abused, and for the
abuse of the freedom, there must be a corresponding sanction. It falls on the press to
wield such enormous power responsibly. It may be a cliché that the pen is mightier than
the sword, but in this particular case, the lesson to be learned is that such a mighty
weapon should not be wielded recklessly or thoughtlessly, but always guided by
conscience and careful thought.
A robust and independently free press is doubtless one of the most effective checks on
government power and abuses. Hence, it behooves government functionaries to respect
the value of openness and refrain from concealing from media corruption and other
anomalous practices occurring within their backyard. On the other hand, public officials
also deserve respect and protection against false innuendoes and unfounded accusation of
official wrongdoing from an abusive press. As it were, the law and jurisprudence on libel
heavily tilt in favor of press freedom. The common but most unkind perception is that
government institutions and their officers and employees are fair game to official and
personal attacks and even ridicule. And the practice on the ground is just as disconcerting.
Reports and accusation of official misconduct often times merit front page or primetime
treatment, while defenses set up, retraction issued, or acquittal rendered get no more, if
ever, perfunctory coverage. The unfairness needs no belaboring. The balm of clear
conscience is sometimes not enough.
Perhaps lost in the traditional press freedom versus government impasse is the fact that a
maliciously false imputation of corruption and dishonesty against a public official, as here,
leaves a stigmatizing mark not only on the person but also the office to which he belongs.
37 | P a g e
In the ultimate analysis, public service also unduly suffers.
WHEREFORE, in view of the foregoing, the petitions in G.R. NOS. 161032 and 161176
are DISMISSED. The CA Decision dated June 17, 2003 in CA-G.R. CR No. 25318 is
hereby AFFIRMED with the MODIFICATIONS that in lieu of imprisonment, the penalty to
be imposed upon petitioners shall be a fine of six thousand pesos (PhP 6,000) for each
count of libel, with subsidiary imprisonment in case of insolvency, while the award of
actual damages and exemplary damages is DELETED. The Decision dated November 17,
2000 of the RTC, Branch 112 in Pasay City in Criminal Case Nos. 99-1597 to 99-1600 is
modified to read as follows:
WHEREFORE, the Court finds the accused ERWIN TULFO, SUSAN CAMBRI, REY SALAO,
JOCELYN BARLIZO, and PHILIP PICHAY guilty beyond reasonable doubt of four (4) counts of
the crime of LIBEL, as defined in Article 353 of the Revised Penal Code, and sentences
EACH of the accused to pay a fine of SIX THOUSAND PESOS (PhP 6,000) per count of libel
with subsidiary imprisonment, in case of insolvency.
Considering that the accused Erwin Tulfo, Susan Cambri, Rey Salao, Jocelyn Barlizo, and
Philip Pichay wrote and published the four (4) defamatory articles with reckless disregard
whether it was false or not, the said articles being libelous per se, they are hereby ordered
to pay complainant Atty. Carlos T. So, jointly and severally, the sum of ONE MILLION
PESOS (PhP 1,000,000) as moral damages. The claim of actual and exemplary damages
is denied for lack of merit.
Costs against petitioners.
SO ORDERED.
Carpio Morales, Nachura, and Brion, JJ., concur.
Quisumbing, (Chairperson), dissent, on the ground of sufficient proof lacking for "actual
malice" required in libel case prosecution.
G.R. No. 128690 January 21, 1999
ABS-CBN BROADCASTING CORPORATION, petitioner,
vs.
HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP, VIVA PRODUCTION,
INC., and VICENTE DEL ROSARIO, respondents.
DAVIDE, JR., CJ.:
In this petition for review on certiorari, petitioner ABS-CBN Broadcasting Corp. (hereafter
ABS-CBN) seeks to reverse and set aside the decision 1 of 31 October 1996 and the
resolution 2 of 10 March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The
former affirmed with modification the decision 3 of 28 April 1993 of the Regional Trial
Court (RTC) of Quezon City, Branch 80, in Civil Case No. Q-92-12309. The latter denied the
motion to reconsider the decision of 31 October 1996.
The antecedents, as found by the RTC and adopted by the Court of Appeals, are as
follows:
In 1990, ABS-CBN and Viva executed a Film Exhibition Agreement (Exh.
"A") whereby Viva gave ABS-CBN an exclusive right to exhibit some Viva
films. Sometime in December 1991, in accordance with paragraph 2.4
[sic] of said agreement stating that —.
1.4 ABS-CBN shall have the right of first refusal to the next twenty-four
(24) Viva films for TV telecast under such terms as may be agreed upon
by the parties hereto, provided, however, that such right shall be
exercised by ABS-CBN from the actual offer in writing.
Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-
president Charo Santos-Concio, a list of three(3) film packages (36 title)
from which ABS-CBN may exercise its right of first refusal under the
afore-said agreement (Exhs. "1" par, 2, "2," "2-A'' and "2-B"-Viva). ABS-
CBN, however through Mrs. Concio, "can tick off only ten (10) titles"
(from the list) "we can purchase" (Exh. "3" - Viva) and therefore did not
accept said list (TSN, June 8, 1992, pp. 9-10). The titles ticked off by Mrs.
Concio are not the subject of the case at bar except the film ''Maging
Sino Ka Man."
For further enlightenment, this rejection letter dated January 06, 1992
(Exh "3" - Viva) is hereby quoted:
6 January 1992
Dear Vic,
38 | P a g e
This is not a very formal business letter I am writing to you as I would
like to express my difficulty in recommending the purchase of the three
film packages you are offering ABS-CBN.
From among the three packages I can only tick off 10 titles we can
purchase. Please see attached. I hope you will understand my position.
Most of the action pictures in the list do not have big action stars in the
cast. They are not for primetime. In line with this I wish to mention that
I have not scheduled for telecast several action pictures in out very first
contract because of the cheap production value of these movies as well
as the lack of big action stars. As a film producer, I am sure you
understand what I am trying to say as Viva produces only big action
pictures.
In fact, I would like to request two (2) additional runs for these movies
as I can only schedule them in our non-primetime slots. We have to
cover the amount that was paid for these movies because as you very
well know that non-primetime advertising rates are very low. These are
the unaired titles in the first contract.
1. Kontra Persa [sic].
2. Raider Platoon.
3. Underground guerillas
4. Tiger Command
5. Boy de Sabog
6. Lady Commando
7. Batang Matadero
8. Rebelyon
I hope you will consider this request of mine.
 The other dramatic films have been offered to us before and have been
rejected because of the ruling of MTRCB to have them aired at 9:00 p.m.
due to their very adult themes.
As for the 10 titles I have choosen [sic] from the 3 packages please
consider including all the other Viva movies produced last year. I have
quite an attractive offer to make.
Thanking you and with my warmest regards.
On February 27, 1992, defendant Del Rosario approached ABS-CBN's
Ms. Concio, with a list consisting of 52 original movie titles (i.e. not yet
aired on television) including the 14 titles subject of the present case, as
well as 104 re-runs (previously aired on television) from which ABS-CBN
may choose another 52 titles, as a total of 156 titles, proposing to sell to
ABS-CBN airing rights over this package of 52 originals and 52 re-runs for
P60,000,000.00 of which P30,000,000.00 will be in cash and
P30,000,000.00 worth of television spots (Exh. "4" to "4-C" Viva; "9" -
Viva).

( On April 2, 1992, defendant Del Rosario and ABS-CBN general manager,

S Eugenio Lopez III, met at the Tamarind Grill Restaurant in Quezon City to
i discuss the package proposal of Viva. What transpired in that lunch
g meeting is the subject of conflicting versions. Mr. Lopez testified that he
n and Mr. Del Rosario allegedly agreed that ABS-CRN was granted
e exclusive film rights to fourteen (14) films for a total consideration of
d P36 million; that he allegedly put this agreement as to the price and
) number of films in a "napkin'' and signed it and gave it to Mr. Del
Rosario (Exh. D; TSN, pp. 24-26, 77-78, June 8, 1992). On the other hand,
Del Rosario denied having made any agreement with Lopez regarding
C
the 14 Viva films; denied the existence of a napkin in which Lopez wrote
h
something; and insisted that what he and Lopez discussed at the lunch
a
meeting was Viva's film package offer of 104 films (52 originals and 52
r
re-runs) for a total price of P60 million. Mr. Lopez promising [sic]to
o
make a counter proposal which came in the form of a proposal contract
Annex "C" of the complaint (Exh. "1"·- Viva; Exh. "C" - ABS-CBN).
S
a
n On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior
t vice-president for Finance discussed the terms and conditions of Viva's
o offer to sell the 104 films, after the rejection of the same package by
s ABS-CBN.
-
C On April 07, 1992, defendant Del Rosario received through his secretary,
o a handwritten note from Ms. Concio, (Exh. "5" - Viva), which reads:
n "Here's the draft of the contract. I hope you find everything in order," to
c which was attached a draft exhibition agreement (Exh. "C''- ABS-CBN;
i Exh. "9" - Viva, p. 3) a counter-proposal covering 53 films, 52 of which
o came from the list sent by defendant Del Rosario and one film was
added by Ms. Concio, for a consideration of P35 million. Exhibit "C"
provides that ABS-CBN is granted films right to 53 films and contains a
39 | P a g e
 right of first refusal to "1992 Viva Films." The said counter proposal was
however rejected by Viva's Board of Directors [in the] evening of the
same day, April 7, 1992, as Viva would not sell anything less than the
package of 104 films for P60 million pesos (Exh. "9" - Viva), and such
rejection was relayed to Ms. Concio.
On April 29, 1992, after the rejection of ABS-CBN and following several
negotiations and meetings defendant Del Rosario and Viva's President
Teresita Cruz, in consideration of P60 million, signed a letter of
agreement dated April 24, 1992. granting RBS the exclusive right to air
104 Viva-produced and/or acquired films (Exh. "7-A" - RBS; Exh. "4" -
RBS) including the fourteen (14) films subject of the present case. 4
At the pre-trial 12 on 6 August 1992, the parties, upon suggestion of the court, agreed to
explore the possibility of an amicable settlement. In the meantime, RBS prayed for and
was granted reasonable time within which to put up a P30 million counterbond in the
event that no settlement would be reached.
As the parties failed to enter into an amicable settlement RBS posted on 1 October 1992 a
13
counterbond, which the RTC approved in its Order of 15 October 1992.
On 19 October 1992, ABS-CBN filed a motion for reconsideration 14 of the 3 August and 15
October 1992 Orders, which RBS opposed. 15
On 29 October 1992, the RTC conducted a pre-trial. 16

On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance with
a prayer for a writ of preliminary injunction and/or temporary restraining order against
private respondents Republic Broadcasting Corporation 5 (hereafter RBS ), Viva Production
(hereafter VIVA), and Vicente Del Rosario. The complaint was docketed as Civil Case No.
Q-92-12309.
Pending resolution of its motion for reconsideration, ABS-CBN filed with the Court of
Appeals a petition17challenging the RTC's Orders of 3 August and 15 October 1992 and
praying for the issuance of a writ of preliminary injunction to enjoin the RTC from
enforcing said orders. The case was docketed as CA-G.R. SP No. 29300.

6
On 3 November 1992, the Court of Appeals issued a temporary restraining order18 to
On 27 May 1992, RTC issued a temporary restraining order enjoining private enjoin the airing, broadcasting, and televising of any or all of the films involved in the
respondents from proceeding with the airing, broadcasting, and televising of the fourteen controversy.
VIVA films subject of the controversy, starting with the film Maging Sino Ka Man, which
was scheduled to be shown on private respondents RBS' channel 7 at seven o'clock in the
On 18 December 1992, the Court of Appeals promulgated a decision 19 dismissing the
evening of said date.
petition in CA -G.R. No. 29300 for being premature. ABS-CBN challenged the dismissal in a
petition for review filed with this Court on 19 January 1993, which was docketed as G.R.
On 17 June 1992, after appropriate proceedings, the RTC issued an No. 108363.
order 7 directing the issuance of a writ of preliminary injunction upon ABS-CBN's posting
of P35 million bond. ABS-CBN moved for the reduction of the bond, 8 while private
In the meantime the RTC received the evidence for the parties in Civil Case No. Q-192-
respondents moved for reconsideration of the order and offered to put up a
1209. Thereafter, on 28 April 1993, it rendered a decision 20 in favor of RBS and VIVA and
counterbound. 9
against ABS-CBN disposing as follows:

In the meantime, private respondents filed separate answers with counterclaim. 10 RBS
WHEREFORE, under cool reflection and prescinding from the foregoing,
also set up a cross-claim against VIVA..
judgments is rendered in favor of defendants and against the plaintiff.

On 3 August 1992, the RTC issued an order 11 dissolving the writ of preliminary injunction
(1) The complaint is hereby dismissed;
upon the posting by RBS of a P30 million counterbond to answer for whatever damages
ABS-CBN might suffer by virtue of such dissolution. However, it reduced petitioner's
(2) Plaintiff ABS-CBN is ordered to pay defendant RBS
injunction bond to P15 million as a condition precedent for the reinstatement of the writ
the following:
of preliminary injunction should private respondents be unable to post a counterbond.

40 | P a g e
 a) P107,727.00, the amount of
premium paid by RBS to the surety
which issued defendant RBS's bond
to lift the injunction;
b) P191,843.00 for the amount of
print advertisement for "Maging
Sino Ka Man" in various newspapers;
c) Attorney's fees in the amount of
P1 million;
d) P5 million as and by way of moral
damages;
e) P5 million as and by way of
exemplary damages;
(3) For defendant VIVA, plaintiff ABS-CBN is ordered to
pay P212,000.00 by way of reasonable attorney's fees.
(4) The cross-claim of defendant RBS against
defendant VIVA is dismissed.
(5) Plaintiff to pay the costs.
According to the RTC, there was no meeting of minds on the price and terms of the offer.
The alleged agreement between Lopez III and Del Rosario was subject to the approval of
the VIVA Board of Directors, and said agreement was disapproved during the meeting of
the Board on 7 April 1992. Hence, there was no basis for ABS-CBN's demand that VIVA
signed the 1992 Film Exhibition Agreement. Furthermore, the right of first refusal under
the 1990 Film Exhibition Agreement had previously been exercised per Ms. Concio's letter
to Del Rosario ticking off ten titles acceptable to them, which would have made the 1992
agreement an entirely new contract.
On 21 June 1993, this Court denied21 ABS-CBN's petition for review in G.R. No. 108363, as
no reversible error was committed by the Court of Appeals in its challenged decision and
the case had "become moot and academic in view of the dismissal of the main action by
the court a quo in its decision" of 28 April 1993.
41 | P a g e
Aggrieved by the RTC's decision, ABS-CBN appealed to the Court of Appeals claiming that
there was a perfected contract between ABS-CBN and VIVA granting ABS-CBN the
exclusive right to exhibit the subject films. Private respondents VIVA and Del Rosario also
appealed seeking moral and exemplary damages and additional attorney's fees.
In its decision of 31 October 1996, the Court of Appeals agreed with the RTC that the
contract between ABS-CBN and VIVA had not been perfected, absent the approval by the
VIVA Board of Directors of whatever Del Rosario, it's agent, might have agreed with Lopez
III. The appellate court did not even believe ABS-CBN's evidence that Lopez III actually
wrote down such an agreement on a "napkin," as the same was never produced in court.
It likewise rejected ABS-CBN's insistence on its right of first refusal and ratiocinated as
follows:
As regards the matter of right of first refusal, it may be true that a Film
Exhibition Agreement was entered into between Appellant ABS-CBN
and appellant VIVA under Exhibit "A" in 1990, and that parag. 1.4
thereof provides:
1.4 ABS-CBN shall have the right of first refusal to the
next twenty-four (24) VIVA films for TV telecast under
such terms as may be agreed upon by the parties
hereto, provided, however, that such right shall be
exercised by ABS-CBN within a period of fifteen (15)
days from the actual offer in writing (Records, p. 14).
[H]owever, it is very clear that said right of first refusal in favor of ABS-
CBN shall still be subject to such terms as may be agreed upon by the
parties thereto, and that the said right shall be exercised by ABS-CBN
within fifteen (15) days from the actual offer in writing.
Said parag. 1.4 of the agreement Exhibit "A" on the right of first refusal
did not fix the price of the film right to the twenty-four (24) films, nor
did it specify the terms thereof. The same are still left to be agreed upon
by the parties.
In the instant case, ABS-CBN's letter of rejection Exhibit 3 (Records, p.
89) stated that it can only tick off ten (10) films, and the draft contract
Exhibit "C" accepted only fourteen (14) films, while parag. 1.4 of Exhibit
"A'' speaks of the next twenty-four (24) films.
 The offer of V1VA was sometime in December 1991 (Exhibits 2, 2-A. 2-B;
Records, pp. 86-88; Decision, p. 11, Records, p. 1150), when the first list
of VIVA films was sent by Mr. Del Rosario to ABS-CBN. The Vice
President of ABS-CBN, Ms. Charo Santos-Concio, sent a letter dated
January 6, 1992 (Exhibit 3, Records, p. 89) where ABS-CBN exercised its
right of refusal by rejecting the offer of VIVA.. As aptly observed by the
trial court, with the said letter of Mrs. Concio of January 6, 1992, ABS-
CBN had lost its right of first refusal. And even if We reckon the fifteen
(15) day period from February 27, 1992 (Exhibit 4 to 4-C) when another
list was sent to ABS-CBN after the letter of Mrs. Concio, still the fifteen
(15) day period within which ABS-CBN shall exercise its right of first
refusal has already expired.22
Accordingly, respondent court sustained the award of actual damages consisting in the
cost of print advertisements and the premium payments for the counterbond, there being
adequate proof of the pecuniary loss which RBS had suffered as a result of the filing of the
complaint by ABS-CBN. As to the award of moral damages, the Court of Appeals found
reasonable basis therefor, holding that RBS's reputation was debased by the filing of the
complaint in Civil Case No. Q-92-12309 and by the non-showing of the film "Maging Sino
Ka Man." Respondent court also held that exemplary damages were correctly imposed by
way of example or correction for the public good in view of the filing of the complaint
despite petitioner's knowledge that the contract with VIVA had not been perfected, It also
upheld the award of attorney's fees, reasoning that with ABS-CBN's act of instituting Civil
Case No, Q-92-1209, RBS was "unnecessarily forced to litigate." The appellate court,
however, reduced the awards of moral damages to P2 million, exemplary damages to P2
million, and attorney's fees to P500, 000.00.
On the other hand, respondent Court of Appeals denied VIVA and Del Rosario's appeal
because it was "RBS and not VIVA which was actually prejudiced when the complaint was
filed by ABS-CBN."
Its motion for reconsideration having been denied, ABS-CBN filed the petition in this case,
contending that the Court of Appeals gravely erred in
I
. . . RULING THAT THERE WAS NO PERFECTED CONTRACT BETWEEN
PETITIONER AND PRIVATE RESPONDENT VIVA NOTWITHSTANDING
42 | P a g e
PREPONDERANCE OF EVIDENCE ADDUCED BY PETITIONER TO THE
CONTRARY.
II
. . . IN AWARDING ACTUAL AND COMPENSATORY DAMAGES IN FAVOR
OF PRIVATE RESPONDENT RBS.
III
. . . IN AWARDING MORAL AND EXEMPLARY DAMAGES IN FAVOR OF
PRIVATE RESPONDENT RBS.
IV
. . . IN AWARDING ATTORNEY'S FEES IN FAVOR OF RBS.
ABS-CBN claims that it had yet to fully exercise its right of first refusal over twenty-four
titles under the 1990 Film Exhibition Agreement, as it had chosen only ten titles from the
first list. It insists that we give credence to Lopez's testimony that he and Del Rosario met
at the Tamarind Grill Restaurant, discussed the terms and conditions of the second list
(the 1992 Film Exhibition Agreement) and upon agreement thereon, wrote the same on a
paper napkin. It also asserts that the contract has already been effective, as the elements
thereof, namely, consent, object, and consideration were established. It then concludes
that the Court of Appeals' pronouncements were not supported by law and
jurisprudence, as per our decision of 1 December 1995 in Limketkai Sons Milling, Inc. v.
Court of Appeals, 23 which cited Toyota Shaw, Inc. v. Court of Appeals, 24 Ang Yu Asuncion
v. Court of Appeals, 25 and Villonco Realty Company v. Bormaheco. Inc.26
Anent the actual damages awarded to RBS, ABS-CBN disavows liability therefor. RBS spent
for the premium on the counterbond of its own volition in order to negate the injunction
issued by the trial court after the parties had ventilated their respective positions during
the hearings for the purpose. The filing of the counterbond was an option available to
RBS, but it can hardly be argued that ABS-CBN compelled RBS to incur such expense.
Besides, RBS had another available option, i.e., move for the dissolution or the injunction;
or if it was determined to put up a counterbond, it could have presented a cash bond.
Furthermore under Article 2203 of the Civil Code, the party suffering loss or injury is also
required to exercise the diligence of a good father of a family to minimize the damages
resulting from the act or omission. As regards the cost of print advertisements, RBS had
not convincingly established that this was a loss attributable to the non showing "Maging
Sino Ka Man"; on the contrary, it was brought out during trial that with or without the
case or the injunction, RBS would have spent such an amount to generate interest in the
film.
ABS-CBN further contends that there was no clear basis for the awards of moral and
exemplary damages. The controversy involving ABS-CBN and RBS did not in any way
originate from business transaction between them. The claims for such damages did not
arise from any contractual dealings or from specific acts committed by ABS-CBN against
RBS that may be characterized as wanton, fraudulent, or reckless; they arose by virtue
only of the filing of the complaint, An award of moral and exemplary damages is not
warranted where the record is bereft of any proof that a party acted maliciously or in bad
faith in filing an action. 27 In any case, free resort to courts for redress of wrongs is a
matter of public policy. The law recognizes the right of every one to sue for that which he
honestly believes to be his right without fear of standing trial for damages where by lack
of sufficient evidence, legal technicalities, or a different interpretation of the laws on the
matter, the case would lose ground. 28 One who makes use of his own legal right does no
injury. 29 If damage results front the filing of the complaint, it is damnum absque
injuria. 30 Besides, moral damages are generally not awarded in favor of a juridical person,
unless it enjoys a good reputation that was debased by the offending party resulting in
social humiliation.31
As regards the award of attorney's fees, ABS-CBN maintains that the same had no factual,
legal, or equitable justification. In sustaining the trial court's award, the Court of Appeals
acted in clear disregard of the doctrines laid down in Buan v. Camaganacan 32 that the
text of the decision should state the reason why attorney's fees are being awarded;
otherwise, the award should be disallowed. Besides, no bad faith has been imputed on,
much less proved as having been committed by, ABS-CBN. It has been held that "where
no sufficient showing of bad faith would be reflected in a party' s persistence in a case
other than an erroneous conviction of the righteousness of his cause, attorney's fees shall
not be recovered as cost." 33
On the other hand, RBS asserts that there was no perfected contract between ABS-CBN
and VIVA absent any meeting of minds between them regarding the object and
consideration of the alleged contract. It affirms that the ABS-CBN's claim of a right of first
refusal was correctly rejected by the trial court. RBS insist the premium it had paid for the
counterbond constituted a pecuniary loss upon which it may recover. It was obliged to
put up the counterbound due to the injunction procured by ABS-CBN. Since the trial court
found that ABS-CBN had no cause of action or valid claim against RBS and, therefore not
entitled to the writ of injunction, RBS could recover from ABS-CBN the premium paid on
43 | P a g e
the counterbond. Contrary to the claim of ABS-CBN, the cash bond would prove to be
more expensive, as the loss would be equivalent to the cost of money RBS would forego
in case the P30 million came from its funds or was borrowed from banks.
RBS likewise asserts that it was entitled to the cost of advertisements for the cancelled
showing of the film "Maging Sino Ka Man" because the print advertisements were put out
to announce the showing on a particular day and hour on Channel 7, i.e., in its entirety at
one time, not a series to be shown on a periodic basis. Hence, the print advertisement
were good and relevant for the particular date showing, and since the film could not be
shown on that particular date and hour because of the injunction, the expenses for the
advertisements had gone to waste.
As regards moral and exemplary damages, RBS asserts that ABS-CBN filed the case and
secured injunctions purely for the purpose of harassing and prejudicing RBS. Pursuant
then to Article 19 and 21 of the Civil Code, ABS-CBN must be held liable for such
damages. Citing Tolentino,34 damages may be awarded in cases of abuse of rights even if
the act done is not illicit and there is abuse of rights were plaintiff institutes and action
purely for the purpose of harassing or prejudicing the defendant.
In support of its stand that a juridical entity can recover moral and exemplary damages,
private respondents RBS cited People v. Manero,35 where it was stated that such entity
may recover moral and exemplary damages if it has a good reputation that is debased
resulting in social humiliation. it then ratiocinates; thus:
There can be no doubt that RBS' reputation has been debased by ABS-
CBN's acts in this case. When RBS was not able to fulfill its commitment
to the viewing public to show the film "Maging Sino Ka Man" on the
scheduled dates and times (and on two occasions that RBS advertised),
it suffered serious embarrassment and social humiliation. When the
showing was canceled, late viewers called up RBS' offices and subjected
RBS to verbal abuse ("Announce kayo nang announce, hindi ninyo
naman ilalabas," "nanloloko yata kayo") (Exh. 3-RBS, par. 3). This alone
was not something RBS brought upon itself. it was exactly what ABS-
CBN had planned to happen.
The amount of moral and exemplary damages cannot be said to be
excessive. Two reasons justify the amount of the award.
 The first is that the humiliation suffered by RBS is national extent. RBS
operations as a broadcasting company is [sic] nationwide. Its clientele,
like that of ABS-CBN, consists of those who own and watch television. It
is not an exaggeration to state, and it is a matter of judicial notice that
almost every other person in the country watches television. The
humiliation suffered by RBS is multiplied by the number of televiewers
who had anticipated the showing of the film "Maging Sino Ka Man" on
May 28 and November 3, 1992 but did not see it owing to the
cancellation. Added to this are the advertisers who had placed
commercial spots for the telecast and to whom RBS had a commitment
in consideration of the placement to show the film in the dates and
times specified.
The second is that it is a competitor that caused RBS to suffer the
humiliation. The humiliation and injury are far greater in degree when
caused by an entity whose ultimate business objective is to lure
customers (viewers in this case) away from the competition. 36
For their part, VIVA and Vicente del Rosario contend that the findings of fact of the trial
court and the Court of Appeals do not support ABS-CBN's claim that there was a perfected
contract. Such factual findings can no longer be disturbed in this petition for review under
Rule 45, as only questions of law can be raised, not questions of fact. On the issue of
damages and attorneys fees, they adopted the arguments of RBS.
The key issues for our consideration are (1) whether there was a perfected contract
between VIVA and ABS-CBN, and (2) whether RBS is entitled to damages and attorney's
fees. It may be noted that the award of attorney's fees of P212,000 in favor of VIVA is not
assigned as another error.
I.
The first issue should be resolved against ABS-CBN. A contract is a meeting of minds
between two persons whereby one binds himself to give something or to render some
service to another 37 for a consideration. there is no contract unless the following
requisites concur: (1) consent of the contracting parties; (2) object certain which is the
subject of the contract; and (3) cause of the obligation, which is established. 38 A contract
undergoes three stages:
44 | P a g e
(a) preparation, conception, or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of the
parties;
(b) perfection or birth of the contract, which is the moment when the
parties come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of
the terms agreed upon in the contract. 39
Contracts that are consensual in nature are perfected upon mere meeting of the minds,
Once there is concurrence between the offer and the acceptance upon the subject
matter, consideration, and terms of payment a contract is produced. The offer must be
certain. To convert the offer into a contract, the acceptance must be absolute and must
not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and
without variance of any sort from the proposal. A qualified acceptance, or one that
involves a new proposal, constitutes a counter-offer and is a rejection of the original offer.
Consequently, when something is desired which is not exactly what is proposed in the
offer, such acceptance is not sufficient to generate consent because any modification or
40
variation from the terms of the offer annuls the offer.
When Mr. Del Rosario of VIVA met with Mr. Lopez of ABS-CBN at the Tamarind Grill on 2
April 1992 to discuss the package of films, said package of 104 VIVA films was VIVA's offer
to ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent, through
Ms. Concio, a counter-proposal in the form of a draft contract proposing exhibition of 53
films for a consideration of P35 million. This counter-proposal could be nothing less than
the counter-offer of Mr. Lopez during his conference with Del Rosario at Tamarind Grill
Restaurant. Clearly, there was no acceptance of VIVA's offer, for it was met by a counter-
offer which substantially varied the terms of the offer.
ABS-CBN's reliance in Limketkai Sons Milling, Inc. v. Court of
Appeals 41 and Villonco Realty Company v. Bormaheco, Inc., 42 is misplaced. In these cases,
it was held that an acceptance may contain a request for certain changes in the terms of
the offer and yet be a binding acceptance as long as "it is clear that the meaning of the
acceptance is positively and unequivocally to accept the offer, whether such request is
granted or not." This ruling was, however, reversed in the resolution of 29 March
1996, 43which ruled that the acceptance of all offer must be unqualified and absolute, i.e.,
it "must be identical in all respects with that of the offer so as to produce consent or
meeting of the minds."
On the other hand, in Villonco, cited in Limketkai, the alleged changes in the revised
counter-offer were not material but merely clarificatory of what had previously been
agreed upon. It cited the statement in Stuart v.Franklin Life Insurance Co.44 that "a
vendor's change in a phrase of the offer to purchase, which change does not essentially
change the terms of the offer, does not amount to a rejection of the offer and the tender
of a counter-offer." 45 However, when any of the elements of the contract is modified
upon acceptance, such alteration amounts to a counter-offer.
In the case at bar, ABS-CBN made no unqualified acceptance of VIVA's offer. Hence, they
underwent a period of bargaining. ABS-CBN then formalized its counter-proposals or
counter-offer in a draft contract, VIVA through its Board of Directors, rejected such
counter-offer, Even if it be conceded arguendo that Del Rosario had accepted the
counter-offer, the acceptance did not bind VIVA, as there was no proof whatsoever that
Del Rosario had the specific authority to do so.
Under Corporation Code,46 unless otherwise provided by said Code, corporate powers,
such as the power; to enter into contracts; are exercised by the Board of Directors.
However, the Board may delegate such powers to either an executive committee or
officials or contracted managers. The delegation, except for the executive committee,
47
must be for specific purposes, Delegation to officers makes the latter agents of the
corporation; accordingly, the general rules of agency as to the bindings effects of their
acts would
apply. 48 For such officers to be deemed fully clothed by the corporation to exercise a
power of the Board, the latter must specially authorize them to do so. That Del Rosario
did not have the authority to accept ABS-CBN's counter-offer was best evidenced by his
submission of the draft contract to VIVA's Board of Directors for the latter's approval. In
any event, there was between Del Rosario and Lopez III no meeting of minds. The
following findings of the trial court are instructive:
A number of considerations militate against ABS-CBN's claim that a
contract was perfected at that lunch meeting on April 02, 1992 at the
Tamarind Grill.
FIRST, Mr. Lopez claimed that what was agreed upon at the Tamarind
Grill referred to the price and the number of films, which he wrote on a
napkin. However, Exhibit "C" contains numerous provisions which, were
not discussed at the Tamarind Grill, if Lopez testimony was to be
believed nor could they have been physically written on a napkin. There
was even doubt as to whether it was a paper napkin or a cloth napkin. In
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short what were written in Exhibit "C'' were not discussed, and
therefore could not have been agreed upon, by the parties. How then
could this court compel the parties to sign Exhibit "C" when the
provisions thereof were not previously agreed upon?
SECOND, Mr. Lopez claimed that what was agreed upon as the subject
matter of the contract was 14 films. The complaint in fact prays for
delivery of 14 films. But Exhibit "C" mentions 53 films as its subject
matter. Which is which If Exhibits "C" reflected the true intent of the
parties, then ABS-CBN's claim for 14 films in its complaint is false or if
what it alleged in the complaint is true, then Exhibit "C" did not reflect
what was agreed upon by the parties. This underscores the fact that
there was no meeting of the minds as to the subject matter of the
contracts, so as to preclude perfection thereof. For settled is the rule
that there can be no contract where there is no object which is its
subject matter (Art. 1318, NCC).
THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit testimony
(Exh. "D") states:
We were able to reach an agreement. VIVA gave us
the exclusive license to show these fourteen (14) films,
and we agreed to pay Viva the amount of
P16,050,000.00 as well as grant Viva commercial slots
worth P19,950,000.00. We had already earmarked this
P16, 050,000.00.
which gives a total consideration of P36 million (P19,950,000.00 plus
P16,050,000.00. equals P36,000,000.00).
On cross-examination Mr. Lopez testified:
Q. What was written in this napkin?
A. The total price, the breakdown the known Viva
movies, the 7 blockbuster movies and the other 7 Viva
movies because the price was broken down
accordingly. The none [sic] Viva and the seven other
Viva movies and the sharing between the cash portion
 and the concerned spot portion in the total amount of
P35 million pesos.
Now, which is which? P36 million or P35 million? This weakens ABS-
CBN's claim.
FOURTH. Mrs. Concio, testifying for ABS-CBN stated that she
transmitted Exhibit "C" to Mr. Del Rosario with a handwritten note,
describing said Exhibit "C" as a "draft." (Exh. "5" - Viva; tsn pp. 23-24
June 08, 1992). The said draft has a well defined meaning.
Since Exhibit "C" is only a draft, or a tentative, provisional or
preparatory writing prepared for discussion, the terms and conditions
thereof could not have been previously agreed upon by ABS-CBN and
Viva Exhibit "C'' could not therefore legally bind Viva, not having agreed
thereto. In fact, Ms. Concio admitted that the terms and conditions
embodied in Exhibit "C" were prepared by ABS-CBN's lawyers and there
was no discussion on said terms and conditions. . . .
As the parties had not yet discussed the proposed terms and conditions
in Exhibit "C," and there was no evidence whatsoever that Viva agreed
to the terms and conditions thereof, said document cannot be a binding
contract. The fact that Viva refused to sign Exhibit "C" reveals only two
[sic] well that it did not agree on its terms and conditions, and this court
has no authority to compel Viva to agree thereto.
FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del Rosario
agreed upon at the Tamarind Grill was only provisional, in the sense that
it was subject to approval by the Board of Directors of Viva. He testified:
Q. Now, Mr. Witness, and after that Tamarind meeting
... the second meeting wherein you claimed that you
have the meeting of the minds between you and Mr.
Vic del Rosario, what happened?
A. Vic Del Rosario was supposed to call us up and tell
us specifically the result of the discussion with the
Board of Directors.
46 | P a g e
Q. And you are referring to the so-called agreement
which you wrote in [sic] a piece of paper?
A. Yes, sir.
Q. So, he was going to forward that to the board of
Directors for approval?
A. Yes, sir. (Tsn, pp. 42-43, June 8, 1992)
Q. Did Mr. Del Rosario tell you that he will submit it to
his Board for approval?
A. Yes, sir. (Tsn, p. 69, June 8, 1992).
The above testimony of Mr. Lopez shows beyond doubt that he knew
Mr. Del Rosario had no authority to bind Viva to a contract with ABS-
CBN until and unless its Board of Directors approved it. The complaint,
in fact, alleges that Mr. Del Rosario "is the Executive Producer of
defendant Viva" which "is a corporation." (par. 2, complaint). As a mere
agent of Viva, Del Rosario could not bind Viva unless what he did is
ratified by its Board of Directors. (Vicente vs. Geraldez, 52 SCRA
210; Arnold vs.Willets and Paterson, 44 Phil. 634). As a mere agent,
recognized as such by plaintiff, Del Rosario could not be held liable
jointly and severally with Viva and his inclusion as party defendant has
no legal basis. (Salonga vs. Warner Barner [sic] , COLTA , 88 Phil. 125;
Salmon vs. Tan, 36 Phil. 556).
The testimony of Mr. Lopez and the allegations in the complaint are
clear admissions that what was supposed to have been agreed upon at
the Tamarind Grill between Mr. Lopez and Del Rosario was not a binding
agreement. It is as it should be because corporate power to enter into a
contract is lodged in the Board of Directors. (Sec. 23, Corporation Code).
Without such board approval by the Viva board, whatever agreement
Lopez and Del Rosario arrived at could not ripen into a valid contract
binding upon Viva (Yao Ka Sin Trading vs. Court of Appeals, 209 SCRA
763). The evidence adduced shows that the Board of Directors of Viva
rejected Exhibit "C" and insisted that the film package for 140 films be
49
maintained (Exh. "7-1" - Viva ).
The contention that ABS-CBN had yet to fully exercise its right of first refusal over twenty-
four films under the 1990 Film Exhibition Agreement and that the meeting between Lopez
and Del Rosario was a continuation of said previous contract is untenable. As observed by
the trial court, ABS-CBN right of first refusal had already been exercised when Ms. Concio
wrote to VIVA ticking off ten films, Thus:
[T]he subsequent negotiation with ABS-CBN two (2) months after this
letter was sent, was for an entirely different package. Ms. Concio herself
admitted on cross-examination to having used or exercised the right of
first refusal. She stated that the list was not acceptable and was indeed
not accepted by ABS-CBN, (TSN, June 8, 1992, pp. 8-10). Even Mr. Lopez
himself admitted that the right of the first refusal may have been
already exercised by Ms. Concio (as she had). (TSN, June 8, 1992, pp. 71-
75). Del Rosario himself knew and understand [sic] that ABS-CBN has
lost its rights of the first refusal when his list of 36 titles were rejected
(Tsn, June 9, 1992, pp. 10-11) 50
II
However, we find for ABS-CBN on the issue of damages. We shall first take up actual
damages. Chapter 2, Title XVIII, Book IV of the Civil Code is the specific law on actual or
compensatory damages. Except as provided by law or by stipulation, one is entitled to
compensation for actual damages only for such pecuniary loss suffered by him as he has
duly proved. 51 The indemnification shall comprehend not only the value of the loss
suffered, but also that of the profits that the obligee failed to obtain. 52 In contracts and
quasi-contracts the damages which may be awarded are dependent on whether the
obligor acted with good faith or otherwise, It case of good faith, the damages recoverable
are those which are the natural and probable consequences of the breach of the
obligation and which the parties have foreseen or could have reasonably foreseen at the
time of the constitution of the obligation. If the obligor acted with fraud, bad faith,
malice, or wanton attitude, he shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation. 53 In crimes and quasi-
delicts, the defendant shall be liable for all damages which are the natural and probable
consequences of the act or omission complained of, whether or not such damages has
been foreseen or could have reasonably been foreseen by the defendant. 54
Actual damages may likewise be recovered for loss or impairment of earning capacity in
cases of temporary or permanent personal injury, or for injury to the plaintiff's business
standing or commercial credit.55
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The claim of RBS for actual damages did not arise from contract, quasi-contract, delict, or
quasi-delict. It arose from the fact of filing of the complaint despite ABS-CBN's alleged
knowledge of lack of cause of action. Thus paragraph 12 of RBS's Answer with
Counterclaim and Cross-claim under the heading COUNTERCLAIM specifically alleges:
12. ABS-CBN filed the complaint knowing fully well that it has no cause
of action RBS. As a result thereof, RBS suffered actual damages in the
amount of P6,621,195.32. 56
Needless to state the award of actual damages cannot be comprehended under the above
law on actual damages. RBS could only probably take refuge under Articles 19, 20, and 21
of the Civil Code, which read as follows:
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
Art. 20. Every person who, contrary to law, wilfully or negligently causes
damage to another, shall indemnify the latter for tile same.
Art. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
It may further be observed that in cases where a writ of preliminary injunction is issued,
the damages which the defendant may suffer by reason of the writ are recoverable from
the injunctive bond. 57 In this case, ABS-CBN had not yet filed the required bond; as a
matter of fact, it asked for reduction of the bond and even went to the Court of Appeals
to challenge the order on the matter, Clearly then, it was not necessary for RBS to file a
counterbond. Hence, ABS-CBN cannot be held responsible for the premium RBS paid for
the counterbond.
Neither could ABS-CBN be liable for the print advertisements for "Maging Sino Ka Man"
for lack of sufficient legal basis. The RTC issued a temporary restraining order and later, a
writ of preliminary injunction on the basis of its determination that there existed
sufficient ground for the issuance thereof. Notably, the RTC did not dissolve the injunction
on the ground of lack of legal and factual basis, but because of the plea of RBS that it be
allowed to put up a counterbond.
As regards attorney's fees, the law is clear that in the absence of stipulation, attorney's
fees may be recovered as actual or compensatory damages under any of the
circumstances provided for in Article 2208 of the Civil Code. 58
The general rule is that attorney's fees cannot be recovered as part of damages because
of the policy that no premium should be placed on the right to litigate. 59 They are not to
be awarded every time a party wins a suit. The power of the court to award attorney's
fees under Article 2208 demands factual, legal, and equitable justification. 60Even when
claimant is compelled to litigate with third persons or to incur expenses to protect his
rights, still attorney's fees may not be awarded where no sufficient showing of bad faith
could be reflected in a party's persistence in a case other than erroneous conviction of the
righteousness of his cause. 61
As to moral damages the law is Section 1, Chapter 3, Title XVIII, Book IV of the Civil Code.
Article 2217 thereof defines what are included in moral damages, while Article 2219
enumerates the cases where they may be recovered, Article 2220 provides that moral
damages may be recovered in breaches of contract where the defendant acted
fraudulently or in bad faith. RBS's claim for moral damages could possibly fall only under
item (10) of Article 2219, thereof which reads:
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34,
and 35.
Moral damages are in the category of an award designed to compensate the claimant for
actual injury suffered. and not to impose a penalty on the wrongdoer. 62 The award is not
meant to enrich the complainant at the expense of the defendant, but to enable the
injured party to obtain means, diversion, or amusements that will serve to obviate then
moral suffering he has undergone. It is aimed at the restoration, within the limits of the
possible, of the spiritual status quo ante, and should be proportionate to the suffering
inflicted.63 Trial courts must then guard against the award of exorbitant damages; they
should exercise balanced restrained and measured objectivity to avoid suspicion that it
was due to passion, prejudice, or corruption on the part of the trial court. 64
The award of moral damages cannot be granted in favor of a corporation because, being
an artificial person and having existence only in legal contemplation, it has no feelings, no
emotions, no senses, It cannot, therefore, experience physical suffering and mental
anguish, which call be experienced only by one having a nervous system. 65 The statement
in People v. Manero 66 and Mambulao Lumber Co. v. PNB 67 that a corporation may
recover moral damages if it "has a good reputation that is debased, resulting in social
48 | P a g e
humiliation" is an obiter dictum. On this score alone the award for damages must be set
aside, since RBS is a corporation.
The basic law on exemplary damages is Section 5, Chapter 3, Title XVIII, Book IV of the
Civil Code. These are imposed by way of example or correction for the public good, in
addition to moral, temperate, liquidated or compensatory damages. 68 They are
recoverable in criminal cases as part of the civil liability when the crime was committed
with one or more aggravating circumstances; 69 in quasi-contracts, if the defendant acted
with gross negligence; 70 and in contracts and quasi-contracts, if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner. 71
It may be reiterated that the claim of RBS against ABS-CBN is not based on contract,
quasi-contract, delict, or quasi-delict, Hence, the claims for moral and exemplary damages
can only be based on Articles 19, 20, and 21 of the Civil Code.
The elements of abuse of right under Article 19 are the following: (1) the existence of a
legal right or duty, (2) which is exercised in bad faith, and (3) for the sole intent of
prejudicing or injuring another. Article 20 speaks of the general sanction for all other
provisions of law which do not especially provide for their own sanction; while Article 21
deals with acts contra bonus mores, and has the following elements; (1) there is an act
which is legal, (2) but which is contrary to morals, good custom, public order, or public
policy, and (3) and it is done with intent to injure. 72
Verily then, malice or bad faith is at the core of Articles 19, 20, and 21. Malice or bad faith
implies a conscious and intentional design to do a wrongful act for a dishonest purpose or
moral obliquity. 73 Such must be substantiated by evidence. 74
There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It was
honestly convinced of the merits of its cause after it had undergone serious negotiations
culminating in its formal submission of a draft contract. Settled is the rule that the
adverse result of an action does not per se make the action wrongful and subject the
actor to damages, for the law could not have meant to impose a penalty on the right to
litigate. If damages result from a person's exercise of a right, it is damnum absque
injuria.75
WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of
Appeals in CA-G.R. CV No, 44125 is hereby REVERSED except as to unappealed award of
attorney's fees in favor of VIVA Productions, Inc.1âwphi1.nêt
No pronouncement as to costs. 14 Id., 398-402, 403-404.

SO ORDERED. 15 Id., 406-409.

Melo, Kapunan, Martinez and Pardo JJ., concur. 16 Id., 453-454.

Footnotes 17 Vol. 2, OR, 465-484.

1 Per Adefuin-Dela Cruz, J., with Lantin and Tayao-Jaguros, JJ., 18 Id., 464.
concurring; Rollo, 49-60.
19 Id., 913-928.
2 Rollo, 62.
20 Id., 1140-1166; Rollo, 134-161.
3 Per Judge Efren N. Ambrosio; Rollo, 134-161.
21 Vol. 2, OR, 2030-2035.
4 RTC Decision, Rollo, 146-149.
22 Rollo, 55.
5. This should be Republic Broadcasting System, now GMA Network Inc.,
upon approval by the Securities and Exchange Commission of the 23 290 SCRA 523 [1995].
change in corporate name on 20 February 1996.
24 244 SCRA 320 [1995].
6 Vol. 1, Original Record (OR), Civil Case No. Q-92-12309, 27-28,
Hereafter, OR shall refer to the record of this case. 25 238 SCRA [1994].

7 Vol, 1 OR, 170-173. 26 65 SCRA 352 [1975].

8 Vol. 1, OR, 217-220. 27 Citing Francel Realty Corp. v. Court of Appeals, 252 SCRA 127, 134
[1996].
9 Id., 184-216.
28 Citing Tan v. Court of Appeals, 131 SCRA 397, 404 [1984].
10 Id., 177-183 (VIVA and Del Rosario); 222-228 (RBS).
29 Citing Auyong Hian v. Court of Tax Appeals, 59 SCRA 110, 134 [1974].
11 Id., 331-332.
30 Citing Ilocos Norte Electric Company v. Court of Appeals, 179 SCRA 5
12 Id., 369. [1989].

13 Id., 397. 31 Citing People v. Manero, 218 SCRA 85,96-97 [1993]; citing Simex
International Manila) Inc. v. Court of Appeals, 183 SCRA 360 [1990].
49 | P a g e
 32 16 SCRA 321 [1966]. 48 I JOSE C. CAMPOS, JR., and MARIA CLARA LOPEZ-CAMPOS, THE
CORPORATION CODE, 348-385 (1990 ed.)
33 See Gonzales v. National Housing Corp., 94 SCRA 786 [1979];
Servicewide Specialist, Inc. v. Court of Appeals, 256 SCRA 649 [1996]. 49 RTC Decision, Rollo, 153-156.

34 I ARTUTRO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE 50 Id., 158.

ON THE CIVIL CODE OF THE PHILIPPINES 63-66 [1983 Ed).
51 Art. 2199, Civil Code.
35 Supra note 31.
52 Art. 2200, Id.
36 Rollo, 191.
53 Art. 2201, id.
37 Art. 1305, Civil Code.
54 Art. 2202, id.
38 Art. 1318, Civil Code.
55 Art. 2205, id.
39 Toyota Shaw, Inc. v. Court of Appeals, Supra note 24, at 329.
56 Vol. 1, OR, 225.
40 See IV ARTURO M. TOLENTINO, COMMENTARIES AND
JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 450 (6th ed., 57 Sec. 4 in relation to Section 8, Rule 58 1997 Rules of Civil Procedure.
1996).
58 It reads as follows:
41 Supra note 23.
Art. 2208. In the absence of stipulation, attorney's fees and expenses of
42 Supra note 26. litigation, other than judicial costs, cannot be recovered, except:

43 255 SCRA 626, 639 [1996]. (1) When exemplary damages are awarded;

44 165 Fed. 2nd 965, Citing Sec. 79 Williston on Contracts. (2) When the defendant's act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest;
45 Villonco Realty Company v. Bormaheco, Inc. Supra note 25, at 365-
366. (3) In criminal cases of malicious prosecution against the plaintiff;

46 B.P. Blg. 68, Sec. 23. (4) In case of a clearly unfounded civil action or proceeding against the
plaintiff;
47 Jose C. VITUG, PANDECT OF COMMERCIAL LWA AND
JURISPRUDENCE 356 (Reviced ed; 1990). (5) Where the defendant acted in gross and evident bad faith in refusing
to satisfy the plaintiffs plainly valid, just and demandable claim;
50 | P a g e
 (6) In actions for legal support; 65 Prime White Cement Corp. v. Intermediate Appellate Court, 220
SCRA 103, 113-114 [1993] LBC Express Inc. v. Court of Appeals, 236
(7) In actions for the recovery of wages of household helpers, laborers SCRA 602, 607 [1994]; Acme Shoe, Rubber and Plastic Corp. v. Court of
and skilled workers; Appeals, 260 SCRA 714, 722 [1996].

(8) In actions for indemnity under workmen's compensation and 66 Supra note 31.
employer's liability laws;
67 130 Phil. 366 [1968].
(9) In a separate civil action to recover civil liability arising from a crime;
68 Art. 2229, Civil Code.
(10) When at least double judicial costs are awarded;
69 Art. 2230, id.
(11) In any other case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be recovered. 70 Art. 2231, id.

In all cases, the attorney's fees and expenses of litigation must be 71 Art. 2232, id.
reasonable.
72 Albenson Enterprises Corp. v. Court of Appeals, 217 SCRA I 16, 25
59 Firestone Tire & Rubber Company of the Philippines v. Ines Chaves & [1993].
Co. Ltd., 18 SCRA 356,358 [1966]; Philippine Air Lines v. Miano, 242
SCRA 235, 240 [1995]. 73 Far East Bank and Trust Company v. Court of Appeals, 241 SCRA 671,
675 [1995].
60 Scott Consultants & Resource Development Corporation, Inc. v. Court
of Appeals, 242 SCRA 393 . 406 [1995]. 74 Philippine Air Lines v. Miano, supra note 59.

61 Gonzales v. National Housing Corp., 94 SCRA 786, 792 [1979]; 75 Tiera International Construction Corp. v. NLRC, 211 SCRA 73, 81
Servicewide Specialists, Inc. v. Court of Appeals, supra note ,73, at 655. [1992] citing Saba v. Court of Appeals, 189 SCRA 50, 55 [1990].

62 Pagsuyuin v. Intermediate Appellate Court, 193 SCRA 547, 555

[1991].

63 Visayan Sawmill Company v. Court of Appeals, 219 SCRA 378, 392

[1993], citing R&B Security Insurance Co., Inc. v. Intermediate appellate
Court 129 SCRA 736 [1984]; De la Serna v. Court of Appeals, 233 SCRA
325, 329-330 [1994].

64 People v. Wenceslao, 212 SCRA 560, 569 [1992], citing Filinvest

Credit Corp. v. Intermediate Appellate Court, 166 SCRA 155[1998].

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