Gk No 128448 Iebruary 1 2001

SCUSLS ALLIANDkC M|kASCL and LILIA L MIkASCL peLlLloners

vs
1nL CCUk1 CI ALALS nILIINL NA1ICNAL and nILIINL LkCnANGL CC INC respondenL
UISUM8ING
1hls ls a peLlLlon for revlew on cerLlorarl of Lhe declslon of Lhe CourL of Appeals daLed !uly 22 1996 ln
CAC8 C? no 38607 as well as of lLs resoluLlon of !anuary 23 1997 denylng peLlLloners moLlon for
reconslderaLlon 1he challenged declslon reversed Lhe [udgmenL of Lhe 8eglonal 1rlal CourL of 8acolod
ClLy 8ranch 42 ln Clvll Case no 14723
1he facLual background of Lhls case as gleaned from Lhe records ls as follows
1he Mlrasols are sugarland owners and planLers ln 19731974 Lhey produced 7030108 plculs
1
of sugar
2366236 of whlch were asslgned for exporL 1he followlng crop year Lhelr acreage planLed Lo Lhe same
crop was lower yleldlng 63100 plculs of sugar wlLh 2369640 plculs marked for exporL
rlvaLe respondenL hlllpplne naLlonal 8ank (n8) flnanced Lhe Mlrasols sugar producLlon venLure for
crop years 19731974 and 19741973 under a crop loan flnanclng scheme under sald scheme Lhe
Mlrasols slgned CredlL AgreemenLs a ChaLLel MorLgage on SLandlng Crops and a 8eal LsLaLe MorLgage ln
favor of n8 1he ChaLLel MorLgage empowered n8 as Lhe peLlLloners aLLorneylnfacL Lo negoLlaLe and
Lo sell Lhe laLLers sugar ln boLh domesLlc and exporL markeLs and Lo apply Lhe proceeds Lo Lhe paymenL
of Lhelr obllgaLlons Lo lL
Lxerclslng hls lawmaklng powers under MarLlal Law Lhen resldenL lerdlnand Marcos lssued
resldenLlal uecree (u) no 3792 ln november 1974 1he decree auLhorlzed prlvaLe respondenL
hlllpplne Lxchange Co lnc (PlLLx) Lo purchase sugar allocaLed for exporL Lo Lhe unlLed SLaLes and Lo
oLher forelgn markeLs 1he prlce and quanLlLy was deLermlned by Lhe Sugar CuoLa AdmlnlsLraLlon n8
Lhe ueparLmenL of 1rade and lndusLry and flnally by Lhe Cfflce of Lhe resldenL 1he decree furLher
auLhorlzed n8 Lo flnance PlLLxs purchases llnally Lhe decree dlrecLed LhaL whaLever proflL PlLLx
mlghL reallze from sales of sugar abroad was Lo be remlLLed Lo a speclal fund of Lhe naLlonal
governmenL afLer commlsslons overhead expenses and llablllLles had been deducLed 1he governmenL
offlces and enLlLles Lasked by exlsLlng laws and admlnlsLraLlve regulaLlons Lo oversee Lhe sugar exporL
pegged Lhe purchase prlce of exporL sugar ln crop years 19731974 and 19741973 aL 18000 per plcul
n8 conLlnued Lo flnance Lhe sugar producLlon of Lhe Mlrasols for crop years 19731976 and 19761977
1hese crop loans and slmllar obllgaLlons were secured by real esLaLe morLgages over several properLles
of Lhe Mlrasols and chaLLel morLgages over sLandlng crops 8ellevlng LhaL Lhe proceeds of Lhelr sugar
sales Lo n8 lf properly accounLed for were more Lhan enough Lo pay Lhelr obllgaLlons peLlLloners
asked n8 for an accounLlng of Lhe proceeds of Lhe sale of Lhelr exporL sugar n8 lgnored Lhe requesL
Meanwhlle peLlLloners conLlnued Lo avall of oLher loans from n8 and Lo make unfunded wlLhdrawals
from Lhelr currenL accounLs wlLh sald bank n8 Lhen asked peLlLloners Lo seLLle Lhelr due and
demandable accounLs As a resulL of Lhese demands for paymenL peLlLloners on AugusL 4 1977
conveyed Lo n8 real properLles valued aL 141046600 by way of Jocloo eo poqo leavlng an unpald
overdrawn accounL of 131334778
Cn AugusL 10 1982 Lhe balance of ouLsLandlng sugar crop and oLher loans owed by peLlLloners Lo n8
sLood aL 1396423293 uesplLe demands Lhe Mlrasols falled Lo seLLle sald due anLl demandable
accounLs n8 Lhen proceeded Lo exLra[udlclally for close Lhe morLgaged properLles AfLer applylng Lhe
proceeds of Lhe aucLlon sale of Lhe morLgaged realLles n8 sLlll had a deflclency clalm of
1233123293
eLlLloners conLlnued Lo ask n8 Lo accounL for Lhe proceeds of Lhe sale of Lhelr exporL sugar for crop
years 19731974 and 19741973 lnslsLlng LhaL sald proceeds lf properly llquldaLed could offseL Lhelr
ouLsLandlng obllgaLlons wlLh Lhe baLlk n8 remalned adamanL ln lLs sLance LhaL under u no 379
Lhere was noLhlng Lo accounL slnce under sald law all earnlngs from Lhe exporL sales of sugar perLalned
Lo Lhe naLlonal CovernmenL and were sub[ecL Lo Lhe dlsposlLlon of Lhe resldenL of Lhe hlllpplnes for
publlc purposes1wpbl1ot
Cn AugusL 9 1979 Lhe Mlrasols flled a sulL for accounLlng speclflc performance and damages agalnsL
n8 wlLh Lhe 8eglonal 1rlal CourL of 8acolod ClLy dockeLed as Clvll Case no 14723
Cn !une 16 1987 Lhe complalnL was amended Lo lmplead PlLLx as parLydefendanL
1he parLles agreed aL preLrlal Lo llmlL Lhe lssues Lo Lhe followlng
1 1he consLlLuLlonallLy and/or legallLy of resldenLlal uecrees numbered 338 379 and 1192
2 1he deLermlnaLlon of Lhe LoLal amounL allegedly due Lhe plalnLlffs from Lhe defendanLs
correspondlng Lo Lhe allege(d) unllquldaLed cosL prlce of exporL sugar durlng crop years 19731974 and
19741973
3

AfLer Lrlal on Lhe merlLs Lhe Lrlal courL declded as follows
WPL8LlC8L Lhe foregolng premlses consldered [udgmenL ls hereby rendered ln favor of Lhe plalnLlffs
and agalnsL Lhe defendanLs hlllpplne naLlonal 8ank (n8) and hlllpplne Lxchange Co lnc (PlLLx)
(1) ueclarlng resldenLlal uecree 379 enacLed on november 12 1974 and all clrculars as well as pollcles
orders and oLher lssuances lssued ln furLherance Lhereof unconsLlLuLlonal and Lherefore nuLL and vClu
belng ln gross vlolaLlon of Lhe 8lll of 8lghLs
(2) Crderlng defendanLs n8 and PlLLx Lo pay [olnLly and severally plalnLlffs Lhe whole amounL
correspondlng Lo Lhe resldue of Lhe unllquldaLed acLual cosL prlce of 23662 plculs ln exporL sugar for
crop year 19731974 aL an average prlce of 30000 per plcul deducLlng Lherefrom however Lhe amounL
of 18000 already pald ln advance plus Lhe allowable deducLlons ln servlce fees and oLher charges
(3) And also for Lhe same defendanLs Lo pay [olnLly and severally same plalnLlffs Lhe whole amounL
correspondlng Lo Lhe unpald acLual prlce of 14396 plculs of exporL sugar for crop year 19741973 aL an
average raLe of 21414 per plcul mlnus however Lhe sum of 18000 per plcul already pald by Lhe
defendanLs ln advance and Lhe allowable deducLlng (slc) ln servlce fees and oLher charges
1he unllquldaLed amounL of money due Lhe plalnLlffs buL wlLhheld by Lhe defendanLs shall earn Lhe
legal raLe of lnLeresL aL 12 per annum compuLed from Lhe daLe Lhls acLlon was lnsLlLuLed unLll fully
pald and flnally
(4) ulrecLlng Lhe defendanLs n8 and PlLLx Lo pay [olnLly and severally plalnLlffs Lhe sum of
3000000 ln moral damages and Lhe amounL of 3000000 as aLLorneys fees plus Lhe cosLs of Lhls
llLlgaLlon
SC C8uL8Lu
4

1he same was however modlfled by a 8esoluLlon of Lhe Lrlal courL daLed May 14 1992 whlch added
Lhe followlng paragraph
1hls however whaLever beneflLs LhaL may have accrued ln favor of Lhe plalnLlffs wlLh Lhe massage and
approval of 8epubllc AcL 7202 oLherwlse known as Lhe Sugar 8esLlLuLlon Law auLhorlzlng Lhe
resLlLuLlon of losses suffered by Lhe plalnLlffs from Crop year 19741973 Lo Crop year 19841983
occasloned by Lhe acLuaLlons of governmenLowned and conLrolled agencles (underscorlng ln Lhe
orlglnal)
SC C8uL8Lu
3

1he Mlrasols Lhen flled an appeal wlLh Lhe respondenL courL dockeLed as CAC8 C? no 38607 faulLlng
Lhe Lrlal courL for noL nulllfylng Lhe Jocloo eo poqo and Lhe morLgage conLracLs as well as Lhe
foreclosure of Lhelr morLgaged properLles Also faulLed was Lhe Lrlal courLs fallure Lo award Lhem Lhe full
money clalms and damages soughL from boLh n8 and PlLLx
Cn !uly 22 1996 Lhe CourL of Appeals reversed Lhe Lrlal courL as follows
WPL8LlC8L Lhls CourL renders [udgmenL 8LvL8SlnC Lhe appealed ueclslon and enLerlng Lhe followlng
verdlcL
1 ueclarlng Lhe Jocloo eo poqo and Lhe foreclosure of Lhe morLgaged properLles valld
2 Crderlng Lhe n8 Lo render an accounLlng of Lhe sugar accounL of Lhe Mlrasols speclflcally sLaLlng
Lhe lndebLedness of Lhe laLLer Lo Lhe former and Lhe proceeds of Mlrasols 19731974 and 19741973
sugar producLlon sold pursuanL Lo and ln accordance wlLh u 379 and Lhe lssuances Lherefrom
3 Crderlng Lhe n8 Lo recompuLe ln accordance wlLh 8A 7202 Mlrasols lndebLedness Lo lL credlLlng Lo
Lhe laLLer paymenLs already made as well as Lhe aucLlon prlce of Lhelr foreclosed real esLaLe and
sLlpulaLed value of Lhelr properLles ceded Lo n8 ln Lhe Jocoo (slc) eo poqo
4 WhaLever Lhe resulL of Lhe recompuLaLlon of Mlrasols accounL Lhe ouLsLandlng balance or Lhe
excess paymenL shall be governed by Lhe perLlnenL provlslons of 8A 7202
SC C8uL8Lu
6

Cn AugusL 28 1996 peLlLloners moved for reconslderaLlon whlch Lhe appellaLe courL denled on !anuary
23 1997
Pence Lhe lnsLanL peLlLlon wlLh peLlLloners submlLLlng Lhe followlng lssues for our resoluLlon
1 WheLher Lhe 1rlal CourL has [urlsdlcLlon Lo declare a sLaLuLe unconsLlLuLlonal wlLhouL noLlce Lo Lhe
SollclLor Ceneral where Lhe parLles have agreed Lo submlL such lssue for Lhe resoluLlon of Lhe 1rlal CourL
2 WheLher u 379 and subsequenL lssuances
7
Lhereof are unconsLlLuLlonal
3 WheLher Lhe Ponorable CourL of Appeals commlLLed manlfesL error ln noL applylng Lhe docLrlne of
plerclng Lhe corporaLe vell beLween respondenLs n8 and PlLLx
4 WheLher Lhe Ponorable CourL of Appeals commlLLed manlfesL error ln upholdlng Lhe valldlLy of Lhe
foreclosure on peLlLloners properLy and ln upholdlng Lhe valldlLy of Lhe Jocloo eo poqo ln Lhls case
3 WheLher Lhe Ponorable CourL of Appeals commlLLed manlfesL error ln noL awardlng damages Lo
peLlLloners grounds relled upon Lhe allowance of Lhe peLlLlon (underscored ln Lhe orlglnal)
8

Cn Lhe fltst lssoe lL ls seLLled LhaL 8eglonal 1rlal CourLs have Lhe auLhorlLy and [urlsdlcLlon Lo conslder
Lhe consLlLuLlonallLy of a sLaLuLe presldenLlal decree or execuLlve order
9
1he ConsLlLuLlon vesLs Lhe
power of [udlclal revlew or Lhe power Lo declare a law LreaLy lnLernaLlonal or execuLlve agreemenL
presldenLlal decree order lnsLrucLlon ordlnance or regulaLlon noL only ln Lhls CourL buL ln all 8eglonal
1rlal CourLs
10
ln IM 1oosoo ooJ co v coott of Appeols 3 5ckA 696 (1961) we held
lalnly Lhe ConsLlLuLlon conLemplaLes LhaL Lhe lnferlor courLs should have [urlsdlcLlon ln cases lnvolvlng
consLlLuLlonallLy of any LreaLy or law for lL speaks of appellaLe revlew of flnal [udgmenLs of lnferlor
courLs ln cases where such consLlLuLlonallLy happens Lo be ln lssue
11

lurLhermore 8 8lg 129 granLs 8eglonal 1rlal CourLs Lhe auLhorlLy Lo rule on Lhe conformlLy of laws or
LreaLles wlLh Lhe ConsLlLuLlon Lhus
SLC1lCn 19 IotlsJlctloo lo clvll coses 8eglonal 1rlal CourLs shall exerclse excluslve orlglnal [urlsdlcLlon
(1) ln all clvll acLlons ln whlch Lhe sub[ecL of Lhe llLlgaLlons ls lncapable of pecunlary esLlmaLlon
1he plvoLal lssue whlch we musL address ls wheLher lL was proper for Lhe Lrlal courL Lo have exerclsed
[udlclal revlew
eLlLloners argue LhaL Lhe CourL of Appeals erred ln flndlng LhaL lL was lmproper for Lhe Lrlal courL Lo
have declared u no 37912 unconsLlLuLlonal slnce peLlLloners had noL complled wlLh 8ule 64 SecLlon
3 of Lhe 8ules of CourL eLlLloners conLend LhaL sald 8ule speclflcally refers only Lo acLlons for
declaraLory rellef and noL Lo an ordlnary acLlon for accounLlng speclflc performance and damages
eLlLloners conLenLlons are berefL of merlL 8ule 64 SecLlon 3 of Lhe 8ules of CourL provldes
SLC 3 Notlce to 5ollcltot Ceoetol ln any acLlon whlch lnvolves Lhe valldlLy of a sLaLuLe or execuLlve
order or regulaLlon Lhe SollclLor Ceneral shall be noLlfled by Lhe parLy aLLacklng Lhe sLaLuLe execuLlve
order or regulaLlon and shall be enLlLled Lo be heard upon such quesLlon
1hls should be read ln relaLlon Lo SecLlon 1 c of u no 478
13
whlch sLaLes ln parL
SLC1lCn 1 looctloos ooJ Otqoolzotloos (1) 1he Cfflce of Lhe SollclLor Ceneral shallhave Lhe
followlng speclflc powers and funcLlons
xxx
c Appear ln any courL ln any acLlon lnvolvlng Lhe valldlLy of any LreaLy law execuLlve order or
proclamaLlon rule or regulaLlon when ln hls [udgmenL hls lnLervenLlon ls necessary or when requesLed
by Lhe courL
lL ls baslc legal consLrucLlon LhaL where words of command such as shall musL or oughL are
employed Lhey are generally and ordlnarlly regarded as mandaLory
14
1hus where as ln 8ule 64 SecLlon
3 of Lhe 8ules of CourL Lhe word shall ls used a mandaLory duLy ls lmposed whlch Lhe courLs oughL Lo
enforce
1he purpose of Lhe mandaLory noLlce ln 8ule 64 SecLlon 3 ls Lo enable Lhe SollclLor Ceneral Lo declde
wheLher or noL hls lnLervenLlon ln Lhe acLlon assalllng Lhe valldlLy of a law or LreaLy ls necessary 1o deny
Lhe SollclLor Ceneral such noLlce would be LanLamounL Lo deprlvlng hlm of hls day ln courL We musL
sLress LhaL conLrary Lo peLlLloners sLand Lhe mandaLory noLlce requlremenL ls noL llmlLed Lo acLlons
lnvolvlng declaraLory rellef and slmllar remedles 1he rule lLself provldes LhaL such noLlce ls requlred ln
any acLlon and noL [usL acLlons lnvolvlng declaraLory rellef Where Lhere ls no amblgulLy ln Lhe words
used ln Lhe Lrue Lhere ls no room for consLnlcLlon
13
ln all acLlons assalllng Lhe valldlLy of a sLaLuLe
LreaLy presldenLlal decree order or proclamaLlon noLlce Lo Lhe SollclLor Ceneral ls mandaLory
ln Lhls case Lhe SollclLor Ceneral was never noLlfled abouL Clvll Case no 14723 nor dld Lhe Lrlal courL
ever requlre hlm Lo appear ln person or by a represenLaLlve or Lo flle any pleadlng or memorandum on
Lhe consLlLuLlonallLy of Lhe assalled decree Pence Lhe CourL of Appeals dld noL err ln holdlng LhaL lack
of Lhe requlred noLlce made lL lmproper for Lhe Lrlal courL Lo pass upon Lhe consLlLuLlonal valldlLy of Lhe
quesLloned presldenLlal decrees
As regards Lhe secooJ lssoe peLlLloners conLend LhaL u no 379 and lLs lmplemenLlng lssuances are
vold for vlolaLlng Lhe due process clause and Lhe prohlblLlon agalnsL Lhe Laklng of prlvaLe properLy
wlLhouL [usL compensaLlon eLlLloners now ask Lhls CourL Lo exerclse lLs power of [udlclal revlew
!urlsprudence has lald down Lhe followlng requlslLes for Lhe exerclse of Lhls power llrsL Lhere musL be
before Lhe CourL an acLual case calllng for Lhe exerclse of [udlclal revlew Second Lhe quesLlon before
Lhe CourL musL be rlpe for ad[udlcaLlon 1hlrd Lhe person challenglng Lhe valldlLy of Lhe acL musL have
sLandlng Lo challenge lourLh Lhe quesLlon of consLlLuLlonallLy musL have been ralsed aL Lhe earllesL
opporLunlLy and lasLly Lhe lssue of consLlLuLlonallLy musL be Lhe very lls moto of Lhe case
16

As a rule Lhe courLs wlll noL resolve Lhe consLlLuLlonallLy of a law lf Lhe conLroversy can be seLLled on
oLher grounds
17
1he pollcy of Lhe courLs ls Lo avold rullng on consLlLuLlonal quesLlons and Lo presume
LhaL Lhe acLs of Lhe pollLlcal deparLmenLs are valld absenL a clear and unmlsLakable showlng Lo Lhe
conLrary 1o doubL ls Lo susLaln 1hls presumpLlon ls based on Lhe docLrlne of separaLlon of powers 1hls
means LhaL Lhe measure had flrsL been carefully sLudled by Lhe leglslaLlve and execuLlve deparLmenLs
and found Lo be ln accord wlLh Lhe ConsLlLuLlon before lL was flnally enacLed and approved
18

1he presenL case was lnsLlLuLed prlmarlly for accounLlng and speclflc performance 1he CourL of Appeals
correcLly ruled LhaL n8s obllgaLlon Lo render an accounLlng ls an lssue whlch can be deLermlned
wlLhouL havlng Lo rule on Lhe consLlLuLlonallLy of u no 379 ln facL Lhere ls noLhlng ln u no 379
whlch ls appllcable Lo n8s lnLranslgence ln refuslng Lo glve an accounLlng 1he governlng law should be
Lhe law on agency lL belng undlspuLed LhaL n8 acLed as peLlLloners agenL ln oLher words Lhe requlslLe
LhaL Lhe consLlLuLlonallLy of Lhe law ln quesLlon be Lhe very lls moto of Lhe case ls absenL 1hus we
cannoL rule on Lhe consLlLuLlonallLy of u no 379
eLlLloners furLher conLend LhaL Lhe passage of 8A no 720219 rendered u no 379 unconsLlLuLlonal
slnce 8A no 7202 afflrms LhaL under u 379 Lhe due process clause of Lhe ConsLlLuLlon and Lhe rlghL
of Lhe sugar planLers noL Lo be deprlved of Lhelr properLy wlLhouL [usL compensaLlon were vlolaLed
A perusal of Lhe LexL of 8A no 7202 shows LhaL Lhe repeallng clause of sald law merely reads
SLC 10 All laws acLs execuLlve orders and clrculars ln confllcL herewlLh are hereby repealed or
modlfled accordlngly
1he seLLled rule of sLaLuLory consLrucLlon ls LhaL repeals by lmpllcaLlon are noL favored
20
8A no 7202
cannoL be deemed Lo have repealed u no 379 ln addlLlon Lhe power Lo declare a law
unconsLlLuLlonal does noL lle wlLh Lhe leglslaLure buL wlLh Lhe courLs
21
Assumlng otqoeoJo LhaL 8A no
7202 dld lndeed repeal u no 379 sald repeal ls noL a leglslaLlve declaraLlon flndlng Lhe earller law
unconsLlLuLlonal
1o resolve Lhe tbltJ lssoe peLlLloners ask us Lo apply Lhe docLrlne of plerclng Lhe vell of corporaLe flcLlon
wlLh respecL Lo n8 and PlLLx eLlLloners submlL LhaL PlLLx was a whollyowned subsldlary of n8
prlor Lo Lhe laLLers prlvaLlzaLlon
We noLe however LhaL Lhe appellaLe courL made Lhe followlng flndlng of facL
1 n8 and PlLLx are separaLe [urldlcal persons and Lhere ls no reason Lo plerce Lhe vell of corporaLe
personallLy 8oLh exlsLed by vlrLue of separaLe organlc acLs 1hey had separaLe operaLlons and dlfferenL
purposes and powers
22

llndlngs of facL by Lhe CourL of Appeals are concluslve and blndlng upon Lhls CourL unless sald flndlngs
are noL supporLed by Lhe evldence
23
Cur [urlsdlcLlon ln a peLlLlon for revlew under 8ule 43 of Lhe 8ules
of CourL ls llmlLed only Lo revlewlng quesLlons of law and facLual lssues are noL wlLhln lLs provlnce
24
ln
vlew of Lhe aforequoLed flndlng of facL no manlfesL error ls chargeable Lo Lhe respondenL courL for
refuslng Lo plerce Lhe vell of corporaLe flcLlon
Cn Lhe foottb lssoe Lhe appellaLe courL found LhaL Lhere were Lwo seLs of accounLs beLween peLlLloners
and n8 namely
1 1he accounLs relaLlve Lo Lhe loan flnanclng scheme enLered lnLo by Lhe Mlrasols wlLh n8 (n8s
8rlef p 16) Cn Lhe quesLlon of haw much Lhe n8 lenL Lhe Mlrasols for crop years 19731974 and 1974
1973 Lhe evldence reclLed by Lhe lower courL ln lLs declslon was deflclenL We are offered (slc) n8 Lhe
amounL of lll1LLn MlLLlCn nlnL Punu8Lu Slx1? lCu8 1PCuSAnu 1WC Punu8Lu lll1? 1WC LSCS
and nlnL1? 1P8LL CenLavos (s1396423293) buL Lhls ls Lhe alleged balance Lhe Mlrasols owe n8
coverlng Lhe years 1973 Lo 1982
2 1he accounL relaLlve Lo Lhe Mlrasols currenL accounL numbers 3186 and 3177 lnvolvlng Lhe amounL
of 1P8LL MlLLlCn lCu8 Punu8Lu 1PCuSAnu esos (340000000) n8 clalms agalnsL Lhe Mlrasols
(n8s 8rlef p 17)
ln regard Lo Lhe flrsL seL of accounLs besldes Lhe proceeds from n8s sale of sugar (lnvolvlng Lhe
defendanL PlLLx ln relaLlon Lo Lhe exporL porLlon of Llle sLock) Lhe n8 foreclosed Lhe Mlrasols
morLgaged properLles reallzlng Lherefrom ln 1981 1P8LL MlLLlCn lCu8 Punu8Lu 1Pl81LLn
1PCuSAnu pesos (341300000) Lhe n8 lLself havlng acqulred Lhe properLles as Lhe hlghesL bldder
As Lo Lhe second seL of accounLs n8 proposed and Lhe Mlrasols accepLed a Jocloo eo poqo scheme
by whlch Lhe Mlrasols conveyed Lo n8 pleces of properLy valued aL CnL MlLLlCn lCu8 Punu8Lu 1Ln
1PCuSAnu lCu8 Punu8Lu Slx1?Slx esos (s141046600) (n8s 8rlef pp 1617)
23

eLlLloners now clalm LhaL Lhe Jocloo eo poqo and Lhe foreclosure of Lhelr morLgaged properLles were
vold for wanL of conslderaLlon eLlLloners lnslsL LhaL Lhe loans granLed Lhem by n8 from 1973 Lo 1982
had been fully pald by vlrLue of legal compensaLlon Pence Lhe foreclosure was lnvalld and of no effecL
slnce Lhe morLgages were already fully dlscharged lL ls also averred LhaL Lhey agreed Lo Lhe Jocloo only
by vlrLue of a marLlal law ArresL Search and Selzure Crder (ASSC)
We flnd peLlLloners argumenLs unpersuaslve 8oLh Lhe lower courL and Lhe appellaLe courL found LhaL
Lhe Mlrasols admlLLed LhaL Lhey were lndebLed Lo n8 ln Lhe sum sLaLed ln Lhe laLLers
counLerclalm
26
eLlLloners noneLheless lnslsL LhaL Lhe same can be offseL by Lhe unllquldaLed amounLs
owed Lhem by n8 for crop years 197374 and 197473 eLlLloners argumenL has no basls ln law lor
legal compensaLlon Lo Lake place Lhe requlremenLs seL forLh ln ArLlcles 1278 and 1279 of Lhe Clvll Code
musL be presenL Sald arLlcles read as follows
ArL 1278 CompensaLlon shall Lake place when Lwo persons ln Lhelr own rlghL are credlLors and
debLors of each oLher
ArL 1279 ln order LhaL compensaLlon may be proper lL ls necessary
(1) 1haL each one of Lhe obllgors be bound prlnclpally and LhaL he be aL Lhe same Llme a prlnclpal
credlLor of Lhe oLher
(2) 1haL boLh debLs conslsL ln a sum of money or lf Lhe Lhlngs due are consumable Lhey be of Lhe same
klnd and also of Lhe same quallLy lf Lhe laLLer has been sLaLed
(3) 1haL Lhe Lwo debLs are due
(4) 1haL Lhey be llquldaLed and demandable
(3) 1haL over nelLher of Lhem Lhere be any reLenLlon or conLroversy commenced by Lhlrd persons and
communlcaLed ln due Llme Lo Lhe debLor
ln Lhe presenL case seLoff or compensaLlon cannoL Lake place beLween Lhe parLles because llrsL
nelLher of Lhe parLles are muLually credlLors and debLors of each oLher under u no 379 nelLher n8
nor PlLLx could reLaln any dlfference clalmed by Lhe Mlrasols ln Lhe prlce of sugar sold by Lhe Lwo
flrms u no 379 prescrlbed where Lhe proflLs from Lhe sales are Lo be pald Lo wlL
SLC1lCn 7 x x x AfLer deducLlng lLs commlsslon of Lwo and onehalf (21/2) percenL of gross sales Lhe
balance of Lhe proceeds of sugar Lradlng operaLlons for every crop year shall be seL aslde by Lhe
hlllpplne Lxchange Company lnc as proflLs whlch shall be pald Lo a speclal fund of Lhe naLlonal
CovernmenL sub[ecL Lo Lhe dlsposlLlon of Lhe resldenL for publlc purposes
1hus as correcLly found by Lhe CourL of Appeals Lhere was noLhlng wlLh whlch n8 was supposed Lo
have offseL Mlrasols admlLLed lndebLedness
27

Second compensaLlon cannoL Lake place where one clalm as ln Lhe lnsLanL case ls sLlll Lhe sub[ecL of
llLlgaLlon as Lhe same cannoL be deemed llquldaLed
28

WlLh respecL Lo Lhe duress allegedly employed by n8 whlch lmpugned peLlLloners consenL Lo
Lhe Jocloo eo poqo boLh Lhe Lrlal courL and Lhe CourL of Appeals found LhaL Lhere was no evldence Lo
supporL sald clalm lacLual flndlngs of Lhe Lrlal courL afflrmed by Lhe appellaLe courL are concluslve
upon Lhls CourL
29

Cn Lhe flftb lssoe Lhe Lrlal courL awarded peLlLloners 3000000 ln moral damages and 3000000 ln
aLLorneys fees eLlLloners now Lheorlze LhaL lL was error for Lhe CourL of Appeals Lo have deleLed Lhese
awards conslderlng LhaL Lhe appellaLe courL found n8 breached lLs duLy as an agenL Lo render an
accounLlng Lo peLlLloners
An agenLs fallure Lo render an accounLlng Lo hls prlnclpal ls conLrary Lo ArLlcle 1891 of Lhe Clvll
Code
30
1he errlng agenL ls llable for damages under ArLlcle 1170 of Lhe Clvll Code whlch sLaLes
1hose who ln Lhe performance of Lhelr obllgaLlons are gullLy of fraud negllgence or delay and Lhose
who ln any manner conLravene Lhe Lenor Lhereof are llable for damages
ArLlcle 1170 of Lhe Clvll Code however musL be consLrued ln relaLlon Lo ArLlcle 2217 of sald Code whlch
reads
Moral damages lnclude physlcal sufferlng menLal angulsh frlghL serlous anxleLy besmlrched
repuLaLlon wounded feellngs moral shock soclal humlllaLlon and slmllar ln[ury 1hough lncapable of
pecunlary compuLaLlon moral damages may be recovered lf Lhey are Lhe proxlmaLe resulL of Lhe
defendanLs wrongful acL or omlsslon
Moral damages are expllclLly auLhorlzed ln breaches of conLracL where Lhe defendanL acLed fraudulenLly
or ln bad falLh
31
Cood falLh however ls always presumed and any person who seeks Lo be awarded
damages due Lo Lhe acLs of anoLher has Lhe burden of provlng LhaL Lhe laLLer acLed ln bad falLh wlLh
mallce or wlLh lll moLlve ln Lhe lnsLanL case peLlLloners have falled Lo show mallce or bad falLh
32
on Lhe
parL of n8 ln falllng Lo render an accounLlng AbsenL such showlng moral damages cannoL be awarded
nor can we resLore Lhe award of aLLorneys fees and cosLs of sulL ln favor of peLlLloners under ArLlcle
2208 (3) of Lhe Clvll Code aLLorneys fees are allowed ln Lhe absence of sLlpulaLlon only lf Lhe defendanL
acLed ln gross and evldenL bad falLh ln refuslng Lo saLlsfy Lhe plalnLlff s plalnly valld [usL and
demandable clalm As earller sLaLed peLlLloners have noL proven bad falLh on Lhe parL of n8 and
PlLLx 1wpbl1ot
JnLkLICkL Lhe lnsLanL peLlLlon ls DLNILD and Lhe assalled declslon of Lhe respondenL courL ln CAC8
C? 38607 AIIIkMLD CosLs agalnsL peLlLloners
SC CkDLkLD
elloslllo MeoJozo oeoo ue leoo It II concur