G.R. No.

100152

March 31, 2000

ACEBEDO OPTICAL COMPANY, INC. vs. CA PURISIMA, J.: At bar is a petition for review under Rule 45 of the Rules of Court seeking to nullify the dismissal by the Court of Appeals of the original petition for certiorari, prohibition and mandamus filed by the herein petitioner against the City Mayor and City Legal Officer of Iligan and the Samahang Optometrist sa Pilipinas Iligan Chapter (SOPI, for brevity). The antecedent facts leading to the filing of the instant petition are as follows: Petitioner applied with the Office of the City Mayor of Iligan for a business permit. After consideration of petitioner's application and the opposition interposed thereto by local optometrists, respondent City Mayor issued Business Permit No. 5342 subject to the following conditions: 1. Since it is a corporation, Acebedo cannot put up an optical clinic but only a commercial store; 2. Acebedo cannot examine and/or prescribe reading and similar optical glasses for patients, because these are functions of optical clinics; 3. Acebedo cannot sell reading and similar eyeglasses without a prescription having first been made by an independent optometrist (not its employee) or independent optical clinic. Acebedo can only sell directly to the public, without need of a prescription, Ray-Ban and similar eyeglasses; 4. Acebedo cannot advertise optical lenses and eyeglasses, but can advertise Ray-Ban and similar glasses and frames; 5. Acebedo is allowed to grind lenses but only upon the prescription of an independent optometrist. 1 On December 5, 1988, private respondent Samahan ng Optometrist Sa Pilipinas (SOPI), Iligan Chapter, through its Acting President, Dr. Frances B. Apostol, lodged a complaint against the petitioner before the Office of the City Mayor, alleging that Acebedo had violated the conditions set forth in its business permit and requesting the cancellation and/or revocation of such permit. Acting on such complaint, then City Mayor Camilo P. Cabili designated City Legal Officer Leo T. Cahanap to conduct an investigation on the matter. On July 12, 1989, respondent City Legal Officer submitted a report to the City Mayor finding the herein petitioner guilty of violating all the conditions of its business permit and recommending the disqualification of petitioner from operating its business in Iligan City. The report further advised that no new permit shall be granted to petitioner for the year 1989 and should only be given time to wind up its affairs. On July 19, 1989, the City Mayor sent petitioner a Notice of Resolution and Cancellation of Business Permit effective as of said date and giving petitioner three (3) months to wind up its affairs. On October 17, 1989, petitioner brought a petition for certiorari, prohibition and mandamus with prayer for restraining order/preliminary injunction against the respondents, City Mayor, City Legal Officer and Samahan ng Optometrists sa Pilipinas-Iligan City Chapter (SOPI), docketed as Civil Case No. 1497 before the Regional Trial Court of Iligan City, Branch I. Petitioner alleged that (1) it was denied due process because it was not given an opportunity to present its evidence during the investigation conducted by the City Legal Officer; (2) it was denied equal protection of the laws as the limitations imposed on its business permit were not imposed on similar businesses in Iligan City; (3) the City Mayor had no authority to impose the special conditions on its business permit; and (4) the City Legal Officer had no authority to conduct the investigation as the matter falls within the exclusive jurisdiction of the Professional Regulation Commission and the Board of Optometry. Respondent SOPI interposed a Motion to Dismiss the Petition on the ground of non-exhaustion of administrative remedies but on November 24, 1989, Presiding Judge Mamindiara P. Mangotara deferred resolution of such Motion

to Dismiss until after trial of the case on the merits. However, the prayer for a writ of preliminary injunction was granted. Thereafter, respondent SOPI filed its answer.
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On May 30, 1990, the trial court dismissed the petition for failure to exhaust administrative remedies, and dissolved the writ of preliminary injunction it earlier issued. Petitioner's motion for reconsideration met the same fate. It was denied by an Order dated June 28, 1990. On October 3, 1990, instead of taking an appeal, petitioner filed a petition for certiorari, prohibition and mandamus with the Court of Appeals seeking to set aside the questioned Order of Dismissal, branding the same as tainted with grave abuse of discretion on the part of the trial court. On January 24, 1991, the Ninth Division 2 of the Court of Appeals dismissed the petition for lack of merit. Petitioner's motion reconsideration was also denied in the Resolution dated May 15, 1991. Undaunted, petitioner has come before this court via the present petition, theorizing that: A. THE RESPONDENT COURT, WHILE CORRECTLY HOLDING THAT THE RESPONDENT CITY MAYOR ACTED BEYOND HIS AUTHORITY IN IMPOSING THE SPECIAL CONDITIONS IN THE PERMIT AS THEY HAD NO BASIS IN ANY LAW OR ORDINANCE, ERRED IN HOLDING THAT THE SAID SPECIAL CONDITIONS NEVERTHELESS BECAME BINDING ON PETITIONER UPON ITS ACCEPTANCE THEREOF AS A PRIVATE AGREEMENT OR CONTRACT. B. THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE CONTRACT BETWEEN PETITIONER AND THE CITY OF ILIGAN WAS ENTERED INTO BY THE LATTER IN THE PERFORMANCE OF ITS PROPRIETARY FUNCTIONS. The petition is impressed with merit. Although petitioner agrees with the finding of the Court of Appeals that respondent City Mayor acted beyond the scope of his authority in imposing the assailed conditions in subject business permit, it has excepted to the ruling of the Court of Appeals that the said conditions nonetheless became binding on petitioner, once accepted, as a private agreement or contract. Petitioner maintains that the said special conditions are null and void for being ultra vires and cannot be given effect; and therefore, the principle of estoppel cannot apply against it. On the other hand, the public respondents, City Mayor and City Legal Officer, private respondent SOPI and the Office of the Solicitor General contend that as a valid exercise of police power, respondent City Mayor has the authority to impose, as he did, special conditions in the grant of business permits. Police power as an inherent attribute of sovereignty is the power to prescribe regulations to promote the health, morals, peace, education, good order or safety and general welfare of the people. 9 The State, through the legislature, has delegated the exercise of police power to local government units, as agencies of the State, in order to effectively accomplish and carry out the declared objects of their creation. 4 This delegation of police power is embodied in the general welfare clause of the Local Government Code which provides: Sec. 6. General Welfare. Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants.

The scope of police power has been held to be so comprehensive as to encompass almost all matters affecting the health, safety, peace, order, morals, comfort and convenience of the community. Police power is essentially regulatory in nature and the power to issue licenses or grant business permits, if exercised for a regulatory and not revenue-raising purpose, is within the ambit of this power. 5 The authority of city mayors to issue or grant licenses and business permits is beyond cavil. It is provided for by law. Section 171, paragraph 2 (n) of Batas Pambansa Bilang 337 otherwise known as the Local Government Code of 1983, reads: Sec. 171. The City Mayor shall: xxx xxx xxx n) Grant or refuse to grant, pursuant to law, city licenses or permits, and revoke the same for violation of law or ordinance or the conditions upon which they are granted. However, the power to grant or issue licenses or business permits must always be exercised in accordance with law, with utmost observance of the rights of all concerned to due process and equal protection of the law. Succinct and in point is the ruling of this Court, that: . . . While a business may be regulated, such regulation must, however, be within the bounds of reason, i.e., the regulatory ordinance must be reasonable, and its provision cannot be oppressive amounting to an arbitrary interference with the business or calling subject of regulation. A lawful business or calling may not, under the guise of regulation, be unreasonably interfered with even by the exercise of police power. . . . xxx xxx xxx . . . The exercise of police power by the local government is valid unless it contravenes the fundamental law of the land or an act of the legislature, or unless it is against public policy or is unreasonable, oppressive, partial, discriminating or in derogation of a common right. 6 In the case under consideration, the business permit granted by respondent City Mayor to petitioner was burdened with several conditions. Petitioner agrees with the holding by the Court of Appeals that respondent City Mayor acted beyond his authority in imposing such special conditions in its permit as the same have no basis in the law or ordinance. Public respondents and private respondent SOPI, on the other hand, are one in saying that the imposition of said special conditions on petitioner's business permit is well within the authority of the City Mayor as a valid exercise of police power. As aptly discussed by the Solicitor General in his Comment, the power to issue licenses and permits necessarily includes the corollary power to revoke, withdraw or cancel the same. And the power to revoke or cancel, likewise includes the power to restrict through the imposition of certain conditions. In the case of AustinHardware, Inc. vs.Court of Appeals, 7 it was held that the power to license carries with it the authority to provide reasonable terms and conditions under which the licensed business shall be conducted. As the Solicitor General puts it: If the City Mayor is empowered to grant or refuse to grant a license, which is a broader power, it stands to reason that he can also exercise a lesser power that is reasonably incidental to his express power, i.e. to restrict a license through the imposition of certain conditions, especially so that there is no positive prohibition to the exercise of such prerogative by the City Mayor, nor is there any particular official or body vested with such authority. 8 However, the present inquiry does not stop there, as the Solicitor General believes. The power or authority of the City Mayor to impose conditions or restrictions in the business permit is indisputable. What petitioner assails are the conditions imposed in its particular case which, it complains, amount to a confiscation of the business in which petitioner is engaged.

Distinction must be made between the grant of a license or permit to do business and the issuance of a license to engage in the practice of a particular profession. The first is usually granted by the local authorities and the second is issued by the Board or Commission tasked to regulate the particular profession. A business permit authorizes the person, natural or otherwise, to engage in business or some form of commercial activity. A professional license, on the other hand, is the grant of authority to a natural person to engage in the practice or exercise of his or her profession. In the case at bar, what is sought by petitioner from respondent City Mayor is a permit to engage in the business of running an optical shop. It does not purport to seek a license to engage in the practice of optometry as a corporate body or entity, although it does have in its employ, persons who are duly licensed to practice optometry by the Board of Examiners in Optometry. The case of Samahan ng Optometrists sa Pilipinas vs. Acebedo International Corporation, G.R. No. 117097, 9promulgated by this Court on March 21, 1997, is in point. The factual antecedents of that case are similar to those of the case under consideration and the issue ultimately resolved therein is exactly the same issue posed for resolution by this Court en banc. In the said case, the Acebedo International Corporation filed with the Office of the Municipal Mayor an application for a business permit for the operation of a branch of Acebedo Optical in Candon, Ilocos Sur. The application was opposed by the Samahan ng Optometrists sa Pilipinas-Ilocos Sur Chapter, theorizing that Acebedo is a juridical entity not qualified to practice optometry. A committee was created by the Office of the Mayor to study private respondent's application. Upon recommendation of the said committee, Acebedo's application for a business permit was denied. Acebedo filed a petition with the Regional Trial Court but the same was dismissed. On appeal, however, the Court of Appeals reversed the trial court's disposition, prompting the Samahan ng Optometrists to elevate the matter to this Court. The First Division of this Court, then composed of Honorable Justice Teodoro Padilla, Josue Bellosillo, Jose Vitug and Santiago Kapunan, with Honorable Justice Regino Hermosisima, Jr. as ponente, denied the petition and ruled in favor of respondent Acebedo International Corporation, holding that "the fact that private respondent hires optometrists who practice their profession in the course of their employment in private respondent's optical shops, does not translate into a practice of optometry by private respondent itself," 10 The Court further elucidated that in both the old and new Optometry Law, R.A. No. 1998, superseded by R.A. No. 8050, it is significant to note that there is no prohibition against the hiring by corporations of optometrists. The Court concluded thus: All told, there is no law that prohibits the hiring by corporations of optometrists or considers the hiring by corporations of optometrists as a practice by the corporation itself of the profession of optometry. In the present case, the objective of the imposition of subject conditions on petitioner's business permit could be attained by requiring the optometrists in petitioner's employ to produce a valid certificate of registration as optometrist, from the Board of Examiners in Optometry. A business permit is issued primarily to regulate the conduct of business and the City Mayor cannot, through the issuance of such permit, regulate the practice of a profession, like that of optometry. Such a function is within the exclusive domain of the administrative agency specifically empowered by law to supervise the profession, in this case the Professional Regulations Commission and the Board of Examiners in Optometry. It is significant to note that during the deliberations of the bicameral conference committee of the Senate and the House of Representatives on R.A. 8050 (Senate Bill No. 1998 and House Bill No. 14100), the committee failed to reach a consensus as to the prohibition on indirect practice of optometry by corporations. The proponent of the bill, former Senator Freddie Webb, admitted thus: Senator Webb: xxx xxx xxx The focus of contention remains to be the proposal of prohibiting the indirect practice of optometry by corporations. We took a second look and even a third look at the issue in the bicameral conference, but a compromise remained elusive. 11 Former Senator Leticia Ramos-Shahani likewise voted her reservation in casting her vote:

Senator Shahani: Mr. President. The optometry bills have evoked controversial views from the members of the panel. While we realize the need to uplift the standards of optometry as a profession, the consesnsus of both Houses was to avoid touching sensitive issues which properly belong to judicial determination. Thus, the bicameral conference committee decided to leave the issue of indirect practice of optometry and the use of trade names open to the wisdom of the Courts which are vested with the prerogative of interpreting the laws. 12 From the foregoing, it is thus evident that Congress has not adopted a unanimous position on the matter of prohibition of indirect practice of optometry by corporations, specifically on the hiring and employment of licensed optometrists by optical corporations. It is clear that Congress left the resolution of such issue for judicial determination, and it is therefore proper for this Court to resolve the issue. Even in the United States, jurisprudence varies and there is a conflict of opinions among the federal courts as to the right of a corporation or individual not himself licensed, to hire and employ licensed optometrists. 13 Courts have distinguished between optometry as a learned profession in the category of law and medicine, and optometry as a mechanical art. And, insofar as the courts regard optometry as merely a mechanical art, they have tended to find nothing objectionable in the making and selling of eyeglasses, spectacles and lenses by corporations so long as the patient is actually examined and prescribed for by a qualified practitioner. The primary purpose of the statute regulating the practice of optometry is to insure that optometrical services are to be rendered by competent and licensed persons in order to protect the health and physical welfare of the people from the dangers engendered by unlicensed practice. Such purpose may be fully accomplished although the person rendering the service is employed by a corporation. Furthermore, it was ruled that the employment of a qualified optometrist by a corporation is not against public policy. 16 Unless prohibited by statutes, a corporation has all the contractual rights that an individual has 17 and it does not become the practice of medicine or optometry because of the presence of a physician or optometrist. 18 The manufacturing, selling, trading and bartering of eyeglasses and spectacles as articles of merchandise do not constitute the practice of optometry. In the case of Dvorine vs. Castelberg Jewelry Corporation, 20 defendant corporation conducted as part of its business, a department for the sale of eyeglasses and the furnishing of optometrical services to its clients. It employed a registered optometrist who was compensated at a regular salary and commission and who was furnished instruments and appliances needed for the work, as well as an office. In holding that corporation was not engaged in the practice of optometry, the court ruled that there is no public policy forbidding the commercialization of optometry, as in law and medicine, and recognized the general practice of making it a commercial business by advertising and selling eyeglasses. To accomplish the objective of the regulation, a state may provide by statute that corporations cannot sell eyeglasses, spectacles, and lenses unless a duly licensed physician or a duly qualified optometrist is in charge of, and in personal attendance at the place where such articles are sold. 21 In such a case, the patient's primary and essential safeguard lies in the optometrist's control of the "treatment" by means of prescription and preliminary and final examination. 22 In analogy, it is noteworthy that private hospitals are maintained by corporations incorporated for the purpose of furnishing medical and surgical treatment. In the course of providing such treatments, these corporations employ physicians, surgeons and medical practitioners, in the same way that in the course of manufacturing and selling eyeglasses, eye frames and optical lenses, optical shops hire licensed optometrists to examine, prescribe and dispense ophthalmic lenses. No one has ever charged that these corporations are engaged in the practice of medicine. There is indeed no valid basis for treating corporations engaged in the business of running optical shops differently. It also bears stressing, as petitioner has pointed out, that the public and private respondents did not appeal from the ruling of the Court of Appeals. Consequently, the holding by the Court of Appeals that the act of respondent City Mayor in imposing the questioned special conditions on petitioner's business permit is ultra vires cannot be put into issue here by the respondents. It is well-settled that:

A party who has not appealed from the decision may not obtain any affirmative relief from the appellate court other than what he had obtain from the lower court, if any, whose decision is brought up on appeal. 23 . . . an appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he cannot seek modification or reversal of the judgment or affirmative relief unless he has also appealed. 24 Thus, respondents' submission that the imposition of subject special conditions on petitioner's business permit is not ultra vires cannot prevail over the finding and ruling by the Court of Appeals from which they (respondents) did not appeal. Anent the second assigned error, petitioner maintains that its business permit issued by the City Mayor is not a contract entered into by Iligan City in the exercise of its proprietary functions, such that although petitioner agreed to such conditions, it cannot be held in estoppel since ultra vires acts cannot be given effect. Respondents, on the other hand, agree with the ruling of the Court of Appeals that the business permit in question is in the nature of a contract between Iligan City and the herein petitioner, the terms and conditions of which are binding upon agreement, and that petitioner is estopped from questioning the same. Moreover, in the Resolution denying petitioner's motion for reconsideration, the Court of Appeals held that the contract between the petitioner and the City of Iligan was entered into by the latter in the performance of its proprietary functions. This Court holds otherwise. It had occasion to rule that a license or permit is not in the nature of a contract but a special privilege. . . . a license or a permit is not a contract between the sovereignty and the licensee or permitee, and is not a property in the constitutional sense, as to which the constitutional proscription against impairment of the obligation of contracts may extend. A license is rather in the nature of a special privilege, of a permission or authority to do what is within its terms. It is not in any way vested, permanent or absolute. 25 It is therefore decisively clear that estoppel cannot apply in this case. The fact that petitioner acquiesced in the special conditions imposed by the City Mayor in subject business permit does not preclude it from challenging the said imposition, which is ultra vires or beyond the ambit of authority of respondent City Mayor. Ultra vires acts or acts which are clearly beyond the scope of one's authority are null and void and cannot be given any effect. The doctrine of estoppel cannot operate to give effect to an act which is otherwise null and void or ultra vires. The Court of Appeals erred in adjudging subject business permit as having been issued by responded City Mayor in the performance of proprietary functions of Iligan City. As hereinabove elaborated upon, the issuance of business licenses and permits by a municipality or city is essentially regulatory in nature. The authority, which devolved upon local government units to issue or grant such licenses or permits, is essentially in the exercise of the police power of the State within the contemplation of the general welfare clause of the Local Government Code. WHEREFORE, the petition is GRANTED; the Decision of the Court of Appeals in CA-GR SP No. 22995 REVERSED: and the respondent City Mayor is hereby ordered to reissue petitioner's business permit in accordance with law and with this disposition. No pronouncement as to costs. SO ORDERED.

G.R. No. L-2832

November 24, 1906

REV. JORGE BARLIN vs. P. VICENTE RAMIREZ Manly & Gallup for appellants. Leoncio Imperial and Chicote, Miranda & Sierra for appellee.

WILLARD, J.: There had been priests of the Roman Catholic Church in the pueblo of Lagonoy, in the Province of Ambos Camarines, since 1839. On the 13th of January, 1869, the church and convent were burned. They were rebuilt between 1870 and 1873. There was evidence that this was done by the order of the provincial governor. The labor necessary for this reconstruction was performed by the people of the pueblo the direction of the cabeza debarangay. Under the law then in force, each man in the pueblo was required to work for the government, without compensation, for forty days every year. The time spent in the reconstruction of these buildings was counted as a part of the forty days. The material necessary was brought and paid for in part by the parish priest from the funds of the church and in part was donated by certain individuals of the pueblo. After the completion of the church it was always administered, until November 14, 1902, by a priest of a Roman Catholic Communion and all the people of the pueblo professed that faith and belonged to that church. The defendant, Ramirez, having been appointed by the plaintiff parish priest, took possession of the church on the 5th of July, 1901. he administered it as such under the orders of his superiors until the 14th day of November, 1902. His successor having been then appointed, the latter made a demand on this defendant for the delivery to him of the church, convent, and cemetery, and the sacred ornaments, books, jewels, money, and other property of the church. The defendant, by a written document of that date, refused to make such delivery. That document is as follows: At 7 o'clock last night I received through Father Agripino Pisino your respected order of the 12th instant, wherein I am advised of the appointment of Father Pisino as acting parish priest of this town, and directed to turn over to him this parish and to report to you at the vicarage. In reply thereto, I have the honor to inform you that the town of Lagonoy, in conjunction with the parish priest thereof, has seen fit to sever connection with the Pope at Rome and his representatives in these Islands, and join the Filipino Church, the head of which is at Manila. This resolution of the people was reduced to writing and triplicate copies made, of which I beg to inclose a copy herewith. For this reason I regret to inform you that I am unable to obey your said order by delivering to Father Agripino Pisino the parish property of Lagonoy which, as I understand, is now outside of the control of the Pope and his representatives in these Islands. May God guard you many years. Lagonoy, November 14, 1902. (Signed) VICENTE RAMIREZ. RT. REV. VICAR OF THIS DISTRICT. The document, a copy of which is referred to in this letter, is as follows: LAGONOY, November, 9, 1902. The municipality of this town and some of its most prominent citizens having learned through the papers from the capital of these Islands of the constitution of the Filipino National Church, separate from the control of the Pope at Rome by reason of the fact that the latter has refused to either recognize or grant the rights to the Filipino clergy which have many times been urged, and it appearing to us that the reasons advanced why such offices should be given to the Filipino clergy are evidently well-founded, we have deemed it advisable to consult with the parish priest of this town as to whether it would be advantageous to join the said Filipino Church and to separate from the control of the Pope as long as he continues to ignore the rights of the said Filipino clergy, under the conditions that there will be no change in the articles of faith, and that

the sacraments and other dogmas will be recognized and particularly that of the immaculate conception of the mother of our Lord. But the moment the Pope at Rome recognizes and grants the rights heretofore denied to the Filipino clergy we will return to his control. In view of this, and subject to this condition, the reverend parish priest, together with the people of the town, unanimously join in declaring that from this date they separate themselves from the obedience and control of the Pope and join the Filipino National Church. This assembly and the reverend parish priest have accordingly adopted this resolution written in triplicate, and resolved to send a copy thereof to the civil government of this province for its information, and do sign the same below. Vicente Ramirez, Francisco Israel, Ambrosio Bocon, Florentino Relloso, Macario P. Ledesma, Cecilio Obias, Balbino Imperial, Juan Preseada, Fernando Deudor, Mauricio Torres, Adriano Sabater. At the meeting at which the resolution spoken of in this document was adopted, there were present about 100 persons of the pueblo. There is testimony in the case that the population of the pueblo was at that time 9,000 and that all but 20 of the inhabitants were satisfied with the action there taken. Although it is of no importance in the case, we are inclined to think that the testimony to this effect merely means that about 100 of the principal men of the town were in favor of the resolution and about 20 of such principal men were opposed to it. After the 14th of November, the defendant, Ramirez, continued in the possession of the church and other property and administered the same under the directions of his superior, the Obispo Maximo of the Independent Filipino Church. The rites and ceremonies and the manner of worship were the same after the 14th day of November as they were before, but the relations between the Roman Catholic Church and the defendant had been entirely severed. In January, 1904, the plaintiff brought this action against the defendant, Ramirez, alleging in his amended complaint that the Roman Catholic Church was the owner of the church building, the convent, cemetery, the books, money, and other property belonging thereto, and asking that it be restored to the possession thereof and that the defendant render an account of the property which he had received and which was retained by him, and for other relief. The answer of the defendant, Ramirez, in addition to a general denial of the allegation of the complaint, admitted that he was in the possession and administration of the property described therein with the authority of the municipality of Lagonoy and of the inhabitants of the same, who were the lawful owners of the said property. After this answer had been presented, and on the 1st day of November, 1904, the municipality of Lagonoy filed a petition asking that it be allowed to intervene in the case and join with the defendant, Ramirez, as a defendant therein. This petition been granted, the municipality of the 1st day of December filed an answer in which it alleged that the defendant, Ramirez, was in possession of the property described in the complaint under the authority and with the consent of the municipality of Lagonoy and that such municipality was the owner thereof. Plaintiff answered this complaint, or answer in intervention, and the case was tried and final judgment in entered therein in favor of the plaintiff and against the defendants. The defendants then brought the case here by a bill of exceptions. That the person in the actual possession of the church and other property described in the complaint is the defendant, Ramirez, is plainly established by the evidence. It does not appear that the municipality, as a corporate body, ever took any action in reference to this matter until they presented their petition for intervention in this case. In fact, the witnesses for the defense, when they speak of the ownership of the buildings, say that they are owned by the people of the pueblo, and one witness, the president, said that the municipality as a corporation had nothing whatever to do with the matter. That the resolution adopted on the 14th of November, and which has been quoted above, was not the action of the municipality, as such, is apparent from an inspection thereof. The witnesses for the defenses speak of a delivery of the church by the people of the pueblo to the defendant, Ramirez, but there is no evidence in the case of any such delivery. Their testimony in regard to the delivery always refers to the action taken on the 14th of November, a record of which appears that in the document above quoted. It is apparent that the action taken consisted simply in separating themselves from the Roman Catholic Church, and nothing is said therein in reference to the material property then in possession of the defendant, Ramirez. There are several grounds upon which this judgment must be affirmed. (1) As to the defendant, Ramirez, it appears that he took possession of the property as the servant or agent of the plaintiff. The only right which he had to the possession at the time he took it, was the right which was given to him by the plaintiff, and he took possession under the agreement to return that possession whenever it should be

demanded of him. Under such circumstances he will not be allowed, when the return of such possession is demanded by him the plaintiff, to say that the plaintiff is not the owner of the property and is not entitled to have it delivered back to him. The principle of law that a tenant can not deny his landlord's title, which is found in section 333, paragraph 2, of the Code of Civil Procedure, and also in the Spanish law, is applicable to a case of this kind. An answer of the defendant, Ramirez, in which he alleged that he himself was the owner of the property at the time he received it from the plaintiff, or in which he alleged that the pueblo was the owner of the property at that time, would constitute no defense. There is no claim made by him that since the delivery of the possession of the property to him by the plaintiff he has acquired the title thereto by other means, nor does he is own behalf make any claim whatever either to the property or to the possession thereof. (2) The municipality of Lagonoy, in its answer, claims as such, to be the owner of the property. As we have said before, the evidence shows that it never was in the physical possession of the property. But waiving this point and assuming that the possession of Ramirez, which he alleges in his answer is the possession of the municipality, gives the municipality the rights of a possessor, the question still arises, Who has the better right to the present possession of the property? The plaintiff, in 1902, had been in the lawful possession thereof for more than thirty years and during all that time its possession had never been questioned or disturbed. That possession has been taken away from it and it has the right now to recover the possession from the persons who have so deprived it of such possession, unless the latter can show that they have a better right thereto. This was the preposition which was discussed and settled in the case of Bishop of Cebu vs. Mangaron, 1No. 1748, decided June 1, 1906. That decision holds that as against one who has been in possession for the length of the plaintiff has been in possession, and who had been deprived of his possession, and who can not produce any written evidence of title, the mere fact that the defendant is in possession does not entitle the defendant to retain that possession. In order that he may continue in possession, he must show a better right thereto. The evidence in this case does not show that the municipality has, as such, any right of whatever in the property in question. It has produced no evidence of ownership. Its claim of ownership is rested in its brief in this court upon the following propositions: That the property in question belonged prior to the treaty of Paris to the Spanish Government; that by the treaty of Paris the ownership thereof passed to the Government of the United States; that by section 12 of the act of Congress of July 1, 1902, such property was transferred to the Government of the Philippine Islands, and that by the circular of that Government, dated November 11, 1902, the ownership and the right to the possession of this property passed to the municipality of Lagonoy. If, for the purposes of the argument, we should admit that the other propositions are true, there is no evidence whatever to support the last proposition, namely that the Government of the Philippine Islands has transferred the ownership of this church to the municipality of Lagonoy. We have found no circular of the date above referred to. The one of February 10, 1903, which is probably the one intended, contains nothing that indicates any such transfer. As to the municipality of Lagonoy, therefore, it is very clear that it has neither title, ownership, nor right of possession. (3) We have said that it would have no such title or ownership ever admitting that the Spanish Government was the owner of the property and it has passed by the treaty of Paris to the American Government. But this assumption is not true. As a matter of law, the Spanish Government at the time the treaty of peace was signed, was not the owner of this property, nor of any other property like it, situated in the Philippine Islands. It does not admit of doubt that from the earliest times the parish churches in the Philippine Islands were built by the Spanish Government. Law 2, title 2, book 1, of the Compilation of the Laws of the Indies is, in part, as follows: Having erected all the churches, cathedrals, and parish houses of the Spaniards and natives of our Indian possessions from their discovery at the cost and expense of our royal treasury, and applied for their service and maintenance the part of the tithes belonging to us by apostolic concession according to the division we have made. Law 3 of the same title to the construction of parochial churches such as the one in question. That law is as follows: The parish churches which was erected in Spanish towns shall be of durable and decent construction. Their costs shall be divided and paid in three parts: One by our royal treasury, another by the residents and Indian encomenderos of the place where such churches are constructed, and the other part by the Indians who abide there; and if within the limits of a city, village, or place there should be any Indians incorporated to our royal crown, we command that for our part there be contributed the same amount as the residents and encomenderos, respectively, contribute; and the residents who have no Indians shall also contribute for

this purpose in accordance with their stations and wealth, and that which is so given shall be deducted from the share of the Indians should pay.
1w phil.net

Law 11 of the same title is as follows: We command that the part of the tithes which belongs to the fund for the erection of churches shall be given to their superintendents to be expended for those things necessary for these churches with the advice of the prelates and officials, and by their warrants, and not otherwise. And we request and charge the archbishops and bishops not to interfere in the collection and disbursement thereof, but to guard these structures. Law 4, title 3, book 6, is as follows: In all settlements, even though the Indians are few, there shall be erected a church where mass can be decently held, and it shall have a donor with a key, notwithstanding the fact that it be the subject to or separate from a parish. Not only were all the parish churches in the Philippines erected by the King and under his direction, but it was made unlawful to erect a church without the license of the King. This provision is contained in Law 2, title 6, book 1, which is as follows: Whereas it is our intention to erect, institute, found, and maintain all cathedrals, parish churches, monasteries, votive hospitals, churches, and religious and pious establishments where they are necessary for the teaching, propagation, and preaching of the doctrine of our sacred Roman Catholic faith, and to aid to this effect with out royal treasury whenever possible, and to receive information of such places where they should be founded and are necessary, and the ecclesiastical patronage of all our Indies belonging to us: We command that there shall not be erected, instituted, founded, or maintained any cathedral, parish church, monastery, hospital, or votive churches, or other pious or religious establishment without our express permission as is provided in Law 1, title 2, and Law 1, title 3, of this book, notwithstanding any permission heretofore given by our viceroy or other ministers, which in this respect we revoke and make null, void, and of no effect. By agreement at an early date between the Pope and the Crown of Spain, all tithes in the Indies were given by the former to the latter and the disposition made the King of the fund thus created is indicated by Law 1, title 16, book 1, which is as follows: Whereas the ecclesiastical tithes from the Indies belong to us by the apostolic concessions of the supreme pontiffs, we command the officials of our royal treasury of those provinces to collect and cause to be collected all tithes due and to become due from the crops and flocks of the residents in the manner in which it has been the custom to pay the same, and from these tithes the churches shall be provided with competent persons of good character to serve them and with all ornaments and things which may be necessary for divine worship, to the end that these churches may be well served and equipped, and we shall be informed of God, our Lord; this order shall be observed where the contrary has not already been directed by us in connection with the erection of churches. That the condition of things existing by virtue of the Laws of the Indies was continued to the present time is indicated by the royal order of the 31st of January, 1856, and by the royal order of the 13th of August, 1876, both relating to the construction and repair of churches, there being authority for saying that the latter order was in force in the Philippines. This church, and other churches similarly situated in the Philippines, having been erected by the Spanish Government, and under its direction, the next question to be considered is, To whom did these churches belong? Title 28 of the third partida is devoted to the ownership of things and, after discussing what can be called public property and what can be called private property, speaks, in Law 12, of those things which are sacred, religious, or holy. That law is as follows:

Law XII. HOW SACRED OR RELIGIOUS THINGS CAN NOT BE OWNED BY ANY PERSON. No sacred, religious, or holy thing, devoted to the service of God, can be the subject of ownership by any man, nor can it be considered as included in his property holdings. Although the priests may have such things in their possession, yet they are not the owners thereof. They, hold them thus as guardians or servants, or because they have the care of the same and serve God in or without them. Hence they were allowed to take from the revenues of the church and lands what was reasonably necessary for their support; the balance, belonging to God, was to be devoted to pious purposes, such as the feeding and clothing of the poor, the support of orphans, the marrying of poor virgins to prevent their becoming evil women because of their poverty, and for the redemption of captives and the repairing of the churches, and the buying of chalices, clothing, books, and others things which they might be in need of, and other similar charitable purposes. And then taking up for consideration the first of the classes in to which this law has divided these things, it defines in Law 13, title 28, third partida, consecrated things. That law is as follows: Sacred things, we say, are those which are consecrated by the bishops, such as churches, the altars therein, crosses, chalices, censers, vestments, books, and all other things which are in tended for the service of the church, and the title to these things can not be alienated except in certain specific cases as we have already shown in the first partida of this book by the laws dealing with this subject. We say further that even where a consecrated church is razed, the ground upon which it formerly stood shall always be consecrated ground. But if any consecrated church should fall into the hands of the enemies of our faith it shall there and then cease to be sacred as long as the enemy has it under control, although once recovered by the Christians, it will again become sacred, reverting to its condition before the enemy seized it and shall have all the right and privileges formerly belonging to it. That the principles of the partida in reference to churches still exist is indicated by Sanchez Roman, whose work on the Civil Law contains the following statement: First Group. Spiritual and corporeal or ecclesiastical. A. Spiritual. From early times distinction has been made by authors and by law between things governed by divine law, called divine, and those governed by human law, called human, and although the former can not be the subject of civil juridical relations, their nature and species should be ascertained either to identify them and exclude them from such relations or because they furnish a complete explanation of the foregoing tabulated statement, or finally because the laws of the partida deal with them. Divine things are those which are either directly or indirectly established by God for his service and sanctification of men and which are governed by divine or canonical laws. This makes it necessary to divide them into spiritual things, which are those which have a direct influence on the religious redemption of man such as the sacrament, prayers, fasts, indulgences, etc., and corporeal or ecclesiastical, which are those means more or less direct for the proper religious salvation of man. 7. First Group. Divine things. B. Corporeal or ecclesiastical things (sacred, religious, holy, and temporal belonging to the church). Corporeal or ecclesiastical things are so divided. (a) Sacred things are those devoted to God, religion, and worship in general, such as temples, altars, ornaments, etc. These things can not be alienated except for some pious purpose and in such cases as are provided for in the laws, according to which their control pertains to the ecclesiastical authorities, and in so far as their use is concerned, to the believers and the clergy. (2 Derecho Civil Espaol, Sanchez Roman, p. 480; 8 Manresa, Commentaries on the Spanish Civil Code, p. 636; 3 Alcubilla, Diccionario de la Administracion Espaola, p. 486.) The partidas defined minutely what things belonged to the public in general and what belonged to private persons. In the first group churches are not named. The present Civil Code declares in article 338 that property is of public or private ownership. Article 339, which defines public property, is as follows: Property of public ownership is

1. That destined to the public use, such as roads, canals, rivers, torrents, ports, and bridges constructed by the State, and banks, shores, roadsteads, and that of similar character. 2. That belonging exclusively to the state without being for public use and which is destined to some public service, or to the development of the national wealth, such as walls, fortresses, and other works for the defense of the territory, and mines, until their concession has been granted. The code also defines the property of provinces and of pueblos, and in defining what property is of public use, article 344 declares as follows: Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by the said towns or provinces. All other property possessed by either is patrimonial, and shall be governed by the provisions of this code, unless otherwise prescribe in special laws. It will be noticed that in either one of these articles is any mention made of churches. When the Civil Code undertook to define those things in a pueblo which were for the common use of the inhabitants of the pueblo, or which belonged to the State, while it mentioned a great many other things, it did not mention churches. It has been said that article 25 of the Regulations for the Execution of the Mortgage Law indicates that churches belong to the State and are public property. That article is as follows: There shall be excepted from the record required by article 2 of the law: First. Property which belongs exclusively to the eminent domain of the State, and which is for the use of all, such as the shores of the sea, islands, rivers and their borders, wagon roads, and the roads of all kinds, with the exception of railroads; streets, parks, public promenades, and commons of towns, provided they are not lands of common profit to the inhabitants; walls of cities and parks, ports, and roadsteads, and any other analogous property during the time they are in common and general use, always reserving the servitudes established by law on the shores of the sea and borders of navigable rivers. Second. Public temples dedicated to the Catholic faith. A reading of this article shows that far from proving that churches belong to the State and to the eminent domain thereof, it proves the contrary, for, if they had belonged to the State, they would have been included in the first paragraph instead of being placed in a paragraph by themselves. The truth is that, from the earliest times down to the cession of the Philippines to the United States, churches and other consecrated objects were considered outside of the commerce of man. They were not public property, nor could they be subjects of private property in the sense that any private person could the owner thereof. They constituted a kind of property distinctive characteristic of which was that it was devoted to the worship of God. But, being material things was necessary that some one should have the care and custody of them and the administration thereof, and the question occurs, To whom, under the Spanish law, was intrusted that possession and administration? For the purposes of the Spanish law there was only one religion. That was the religion professed by the Roman Catholic Church. It was for the purposes of that religion and for the observance of its rites that this church and all other churches in the Philippines were erected. The possession of the churches, their care and custody, and the maintenance of religious worship therein were necessarily, therefore, intrusted to that body. It was, by virtue of the laws of Spain, the only body which could under any circumstances have possession of, or any control over, any church dedicated to the worship of God. By virtue of those laws this possession and right of control were necessarily exclusive. It is not necessary or important to give any name to this right of possession and control exercised by the Roman Catholic Church in the church buildings of the Philippines prior to 1898. It is not necessary to show that the church as a juridical person was the owner of the buildings. It is sufficient to say that this right to the exclusive possession and control of the same, for the purposes of its creation, existed.

The right of patronage, existing in the King of Spain with reference to the churches in the Philippines, did not give him any right to interfere with the material possession of these buildings. Title 6 of book 1 of the Compilation of the laws of the Indies treats Del Patronazgo Real de las Indias. There is nothing in any one of the fifty-one laws which compose this title which in any way indicates that the King of Spain was the owner of the churches in the Indies because he had constructed them. These laws relate to the right of presentation to ecclesiastical charges and offices. For example, Law 49 of the title commences as follows: Because the patronage and right of presentation of all archbishops, bishops, dignitaries, prevents, curates, and doctrines and all other beneficiaries and ecclesiastical offices whatsoever belong to us, no other person can obtain or possess the same without our presentation as provided in Law 1 and other laws of this title. Title 15 of the first partida treats of the right of patronage vesting in private persons, but there is nothing in any one of its fifteen laws which in any way indicates that the private patron is the owner of the church. When it is said that this church never belonged to the Crown of Spain, it is not intended to say that the Government and had no power over it. It may be that by virtue of that power of eminent domain which is necessarily resides in every government, it might have appropriated this church and other churches, and private property of individuals. But nothing of this kind was ever attempted in the Philippines. It, therefore, follows that in 1898, and prior to the treaty of Paris, the Roman Catholic Church had by law the exclusive right to the possession of this church and it had the legal right to administer the same for the purposes for which the building was consecrated. It was then in the full and peaceful possession of the church with the rights aforesaid. That these rights were fully protected by the treaty of Paris is very clear. That treaty, in article 8, provides, among other things, as follows: And it is hereby declared that the relinquishment or cession, as the case may be, to which the preceding paragraph refers, can not in any respect impair the property or rights which by law belong to the peaceful possession of property of all kinds, or provinces, municipalities, public or private establishments, ecclesiastical or civic bodies, or any other associations having legal capacity to acquire and possess property in the aforesaid territories renounced or ceded, or of private individuals, or whatsoever nationality such individuals may be. It is not necessary, however, to invoke the provisions of that treaty. Neither the Government of the United States, nor the Government of these Islands, has ever attempted in any way to interfere with the rights which the Roman Catholic Church had in this building when Spanish sovereignty ceased in the Philippines. Any interference that has resulted has been caused by private individuals, acting without any authority from the Government. No point is made in the brief of the appellant that any distinction should be made between the church and the convent. The convent undoubtedly was annexed to the church and, as to it, the provisions of Law 19, title 2, book 1, of the Compilation of the Laws of the Indies would apply. That law is as follows: We command that the Indians of each town or barrio shall construct such houses as may be deemed sufficient in which the priests of such towns or barrios may live comfortably adjoining the parish church of the place where that may be built for the benefit of the priests in charge of such churches and engaged in the education and conversion of their Indian parishioners, and they shall not be alienated or devoted to any other purpose. The evidence in this case makes no showing in regard to the cemetery. It is always mentioned in connection with the church and convent and no point is made by the possession of the church and convent, he is not also entitled to recover possession of the cemetery. So, without discussing the question as to whether the rules applicable to churches are all respects applicable to cemeteries, we hold for the purpose of this case that the plaintiff has the same right to the cemetery that he has to the church. (4) It is suggested by the appellant that the Roman Catholic Church has no legal personality in the Philippine Islands. This suggestion, made with reference to an institution which antedates by almost a thousand years any other personality in Europe, and which existed "when Grecian eloquence still flourished in Antioch, and when idols

were still worshiped in the temple of Mecca," does not require serious consideration. In the preamble to the budget relating to ecclesiastical obligations, presented by Montero Rios to the Cortes on the 1st of October 1871, speaking of the Roman Catholic Church, he says: Persecuted as an unlawful association since the early days of its existence up to the time of Galieno, who was the first of the Roman emperors to admit it among the juridicial entities protected by the laws of the Empire, it existed until then by the mercy and will of the faithful and depended for such existence upon pious gifts and offerings. Since the latter half of the third century, and more particularly since the year 313, when Constantine, by the edict of Milan, inaugurated an era of protection for the church, the latter gradually entered upon the exercise of such rights as were required for the acquisition, preservation, and transmission of property the same as any other juridical entity under the laws of the Empire. (3 Dictionary of Spanish Administration, Alcubilla, p. 211. See also the royal order of the 4th of December, 1890, 3 Alcubilla, 189.) The judgment of the court below is affirmed, with the costs of this instance against the appellant. After the expiration of twenty days from the date hereof let judgment be entered in accordance herewith, and ten days thereafter the record be remanded to the court below for execution. So ordered.

G.R. No. 108670 September 21, 1994 LBC EXPRESS, INC. vs. CA PUNO, J.: In this Petition for Review on Certiorari, petitioner LBC questions the decision 1 of respondent Court of Appeals affirming the judgment of the Regional Trial Court of Dipolog City, Branch 8, awarding moral and exemplary damages, reimbursement of P32,000.00, and costs of suit; but deleting the amount of attorney's fees. Private respondent Adolfo Carloto, incumbent President-Manager of private respondent Rural Bank of Labason, alleged that on November 12, 1984, he was in Cebu City transacting business with the Central Bank Regional Office. He was instructed to proceed to Manila on or before November 21, 1984 to follow-up the Rural Bank's plan of payment of rediscounting obligations with Central Bank's main office in Manila. 2 He then purchased a round trip plane ticket to Manila. He also phoned his sister Elsie Carloto-Concha to send him ONE THOUSAND PESOS (P1,000.00) for his pocket money in going to Manila and some rediscounting papers thru petitioner's LBC Office at Dipolog City. 3 On November 16, 1984, Mrs. Concha thru her clerk, Adelina Antigo consigned thru LBC Dipolog Branch the pertinent documents and the sum of ONE THOUSAND PESOS (P1,000.00) to respondent Carloto at No. 2 Greyhound Subdivision, Kinasangan, Pardo, Cebu City. This was evidenced by LBC Air Cargo, Inc., Cashpack Delivery Receipt No. 34805. On November 17, 1984, the documents arrived without the cashpack. Respondent Carloto made personal followups on that same day, and also on November 19 and 20, 1984 at LBC's office in Cebu but petitioner failed to deliver to him the cashpack. Consequently, respondent Carloto said he was compelled to go to Dipolog City on November 24, 1984 to claim the money at LBC's office. His effort was once more in vain. On November 27, 1984, he went back to Cebu City at LBC's office. He was, however, advised that the money has been returned to LBC's office in Dipolog City upon shipper's request. Again, he demanded for the ONE THOUSAND PESOS (P1,000.00) and refund of FORTY-NINE PESOS (P49.00) LBC revenue charges. He received the money only on December 15, 1984 less the revenue charges. Respondent Carloto claimed that because of the delay in the transmittal of the cashpack, he failed to submit the rediscounting documents to Central Bank on time. As a consequence, his rural bank was made to pay the Central Bank THIRTY-TWO THOUSAND PESOS (P32,000.00) as penalty interest. 4 He allegedly suffered embarrassment and humiliation. Petitioner LBC, on the other hand, alleged that the cashpack was forwarded via PAL to LBC Cebu City branch on November 22, 1984. 5 On the same day, it was delivered at respondent Carloto's residence at No. 2 Greyhound Subdivision, Kinasangan, Pardo, Cebu City. However, he was not around to receive it. The delivery man served instead a claim notice to insure he would personally receive the money. This was annotated on Cashpack Delivery Receipt No. 342805. Notwithstanding the said notice, respondent Carloto did not claim the cashpack at LBC Cebu. On November 23, 1984, it was returned to the shipper, Elsie Carloto-Concha at Dipolog City. Claiming that petitioner LBC wantonly and recklessly disregarded its obligation, respondent Carloto instituted an action for Damages Arising from Non-performance of Obligation docketed as Civil Case No. 3679 before the Regional Trial Court of Dipolog City on January 4, 1985. On June 25, 1988, an amended complaint was filed where respondent rural bank joined as one of the plaintiffs and prayed for the reimbursement of THIRTY-TWO THOUSAND PESOS (P32,000.00). After hearing, the trial court rendered its decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered:

1. Ordering the defendant LBC Air Cargo, Inc. to pay unto plaintiff Adolfo M. Carloto and Rural Bank of Labason, Inc., moral damages in the amount of P10,000.00; exemplary damages in the amount of P5,000.00; attorney's fees in the amount of P3,000.00 and litigation expenses of P1,000.00; 2. Sentencing defendant LBC Air Cargo, Inc., to reimburse plaintiff Rural Bank of Labason, Inc. the sum of P32,000.00 which the latter paid as penalty interest to the Central Bank of the Philippines as penalty interest for failure to rediscount its due bills on time arising from the defendant's failure to deliver the cashpack, with legal interest computed from the date of filing of this case; and 3. Ordering defendant to pay the costs of these proceedings.
SO ORDERED. 6

On appeal, respondent court modified the judgment by deleting the award of attorney's fees. Petitioner's Motion for Reconsideration was denied in a Resolution dated January 11, 1993. Hence, this petition raising the following questions, to wit: 1. Whether or not respondent Rural Bank of Labason Inc., being an artificial person should be awarded moral damages. 2. Whether or not the award of THIRTY-TWO THOUSAND PESOS (P32,000.00) was made with grave abuse of discretion. 3. Whether or not the respondent Court of Appeals gravely abused its discretion in affirming the trial court's decision ordering petitioner LBC to pay moral and exemplary damages despite performance of its obligation. We find merit in the petition. The respondent court erred in awarding moral damages to the Rural Bank of Labason, Inc., an artificial person. Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. 7 A corporation, being an artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental anguish. 8 Mental suffering can be experienced only by one having a nervous system and it flows from real ills, sorrows, and griefs of life 9 all of which cannot be suffered by respondent bank as an artificial person. We can neither sustain the award of moral damages in favor of the private respondents. The right to recover moral damages is based on equity. Moral damages are recoverable only if the case falls under Article 2219 of the Civil Code in relation to Article 21. 10 Part of conventional wisdom is that he who comes to court to demand equity, must come with clean hands. In the case at bench, respondent Carloto is not without fault. He was fully aware that his rural bank's obligation would mature on November 21, 1984 and his bank has set aside cash for these bills payable. 11 He was all set to go to Manila to settle this obligation. He has received the documents necessary for the approval of their rediscounting application with the Central Bank. He has also received the plane ticket to go to Manila. Nevertheless, he did not immediately proceed to Manila but instead tarried for days allegedly claiming his ONE THOUSAND PESOS (P1,000.00) pocket money. Due to his delayed trip, he failed to submit the rediscounting papers to the Central Bank on time and his bank was penalized THIRTY-TWO THOUSAND PESOS (P32,000.00) for failure to pay its obligation on its due date. The undue importance given by respondent Carloto to his ONE THOUSAND PESOS (P1,000.00) pocket money is inexplicable for it was not indispensable for him to follow up his bank's rediscounting application with Central Bank. According to said respondent, he needed the money to "invite people for a snack or dinner." 12 The attitude of said respondent speaks ill of his ways of business dealings and cannot be countenanced by this Court. Verily, it will be revolting to our sense of ethics to use it as basis for awarding damages in favor of private respondent Carloto and the Rural Bank of Labason, Inc.

We also hold that respondents failed to show that petitioner LBC's late delivery of the cashpack was motivated by personal malice or bad faith, whether intentional or thru gross negligence. In fact, it was proved during the trial that the cashpack was consigned on November 16, 1984, a Friday. It was sent to Cebu on November 19, 1984, the next business day. Considering this circumstance, petitioner cannot be charged with gross neglect of duty. Bad faith under the law can not be presumed; it must be established by clearer and convincing evidence. 13 Again, the unbroken jurisprudence is that in breach of contract cases where the defendant is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the branch of the obligation which the parties had foreseen or could reasonable have foreseen. The damages, however, will not include liability for moral damages. 14 Prescinding from these premises, the award of exemplary damages made by the respondent court would have no legal leg to support itself. Under Article 2232 of the Civil Code, in a contractual or quasi-contractual relationship, exemplary damages may be awarded only if the defendant had acted in "a wanton, fraudulent, reckless, oppressive, or malevolent manner." The established facts of not so warrant the characterization of the action of petitioner LBC. IN VIEW WHEREOF, the Decision of the respondent court dated September 30, 1992 is REVERSED and SET ASIDE; and the Complaint in Civil Case No. 3679 is ordered DISMISSED. No costs. SO ORDERED.

G.R. No. 103576 August 22, 1996 ACME SHOE vs. CA VITUG, J.:p Would it be valid and effective to have a clause in a chattel mortgage that purports to likewise extend its coverage to obligations yet to be contracted or incurred? This question is the core issue in the instant petition for review oncertiorari. Petitioner Chua Pac, the president and general manager of co-petitioner "Acme Shoe, Rubber & Plastic Corporation," executed on 27 June 1978, for and in behalf of the company, a chattel mortgage in favor of private respondent Producers Bank of the Philippines. The mortgage stood by way of security for petitioner's corporate loan of three million pesos (P3,000,000.00). A provision in the chattel mortgage agreement was to this effect (c) If the MORTGAGOR, his heirs, executors or administrators shall well and truly perform the full obligation or obligations above-stated according to the terms thereof, then this mortgage shall be null and void. . . .
In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations such as overdrafts, letters of credit, acceptances and bills of exchange, releases of import shipments on Trust Receipts, etc., this mortgage shall also stand as security for the payment of the said promissory note or notes and/or accommodations without the necessity of executing a new contract and this mortgage shall have the same force and effect as if the said promissory note or notes and/or accommodations were existing on the date thereof. This mortgage shall also stand as security for said obligations and any and all other obligations of the MORTGAGOR to the MORTGAGEE of whatever kind and nature, whether such obligations have been contracted before, during or after the constitution of this mortgage. 1

In due time, the loan of P3,000,000.00 was paid by petitioner corporation. Subsequently, in 1981, it obtained from respondent bank additional financial accommodations totalling P2,700,000.00. 2 These borrowings were on due date also fully paid. On 10 and 11 January 1984, the bank yet again extended to petitioner corporation a loan of one million pesos (P1,000,000.00) covered by four promissory notes for P250,000.00 each. Due to financial constraints, the loan was not settled at maturity. 3 Respondent bank thereupon applied for an extra judicial foreclosure of the chattel mortgage, herein before cited, with the Sheriff of Caloocan City, prompting petitioner corporation to forthwith file an action for injunction, with damages and a prayer for a writ of preliminary injunction, before the Regional Trial Court of Caloocan City (Civil Case No. C-12081). Ultimately, the court dismissed the complaint and ordered the foreclosure of the chattel mortgage. It held petitioner corporation bound by the stipulations, aforequoted, of the chattel mortgage. Petitioner corporation appealed to the Court of Appeals 4 which, on 14 August 1991, affirmed, "in all respects," the decision of the court a quo. The motion for reconsideration was denied on 24 January 1992. The instant petition interposed by petitioner corporation was initially dinied on 04 March 1992 by this Court for having been insufficient in form and substance. Private respondent filed a motion to dismiss the petition while petitioner corporation filed a compliance and an opposition to private respondent's motion to dismiss. The Court denied petitioner's first motion for reconsideration but granted a second motion for reconsideration, thereby reinstating the petition and requiring private respondent to comment thereon. 5 Except in criminal cases where the penalty of reclusion perpetua or death is imposed 6 which the Court so reviews as a matter of course, an appeal from judgments of lower courts is not a matter of right but of sound judicial discretion. The circulars of the Court prescribing technical and other procedural requirements are meant to weed out unmeritorious petitions that can unnecessarily clog the docket and needlessly consume the time of the Court. These technical and procedural rules, however, are intended to help secure, not suppress, substantial justice. A deviation from the rigid enforcement of the rules may thus be allowed to attain the prime objective for, after all, the

dispensation of justice is the core reason for the existence of courts. In this instance, once again, the Court is constrained to relax the rules in order to give way to and uphold the paramount and overriding interest of justice. Contracts of security are either personal or real. In contracts of personal security, such as a guaranty or a suretyship, the faithful performance of the obligation by the principal debt or is secured by the personalcommitment of another (the guarantor or surety). In contracts of real security, such as a pledge, a mortgage or an antichresis, that fulfillment is secured by an encumbrance of property in pledge, the placing of movable property in the possession of the creditor; in chattel mortgage, by the execution of the corresponding deed substantially in the form prescribed by law; in real estate mortgage, by the execution of a public instrument encumbering the real property covered thereby; and in antichresis, by a written instrument granting to the creditor the right to receive the fruits of an immovable property with the obligation to apply such fruits to the payment of interest, if owing, and thereafter to the principal of his credit upon the essential condition that if the obligation becomes due and the debtor defaults, then the property encumbered can be alienated for the payment of the obligation, 7 but that should the obligation be duly paid, then the contract is automatically extinguished proceeding from the accessory character 8 of the agreement. As the law so puts it, once the obligation is complied with, then the contract of security becomes, ipso facto, null and void. 9 While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred obligations so long as these future debts are accurately described, 10 a chattel mortgage, however, can only cover obligations existing at the time the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that can be compelled upon, the security itself, however, does not come into existence or arise until after a chattel mortgage agreement covering the newly contracted debt is executed either by concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the Chattel Mortgage Law. 11 Refusal on the part of the borrower to execute the agreement so as to cover the after-incurred obligation can constitute an act of default on the part of the borrower of the financing agreement whereon the promise is written but, of course, the remedy of foreclosure can only cover the debts extant at the time of constitution and during the life of the chattel mortgage sought to be foreclosed. A chattel mortgage, as hereinbefore so intimated, must comply substantially with the form prescribed by the Chattel Mortgage Law itself. One of the requisites, under Section 5 thereof, is an affidavit of good faith. While it is not doubted that if such an affidavit is not appended to the agreement, the chattel mortgage would still be valid between the parties (not against third persons acting in good faith 12), the fact, however, that the statute has provided that the parties to the contract must execute an oath that
. . . (the) mortgage is made for the purpose of securing the obligation specified in the conditions thereof, and for no other purpose, and that the same is a just and valid obligation, and one not entered into for the purpose of fraud. 13

makes it obvious that the debt referred to in the law is a current, not an obligation that is yet merely contemplated. In the chattel mortgage here involved, the only obligation specified in the chattel mortgage contract was the P3,000,000.00 loan which petitioner corporation later fully paid. By virtue of Section 3 of the Chattel Mortgage Law, the payment of the obligation automatically rendered the chattel mortgage void or terminated. In Belgian Catholic Missionaries, Inc., vs. Magallanes Press, Inc., et al., 14 the Court said
. . . A mortgage that contains a stipulation in regard to future advances in the credit will take effect only from the date the same are made and not from the date of the mortgage. 15

The significance of the ruling to the instant problem would be that since the 1978 chattel mortgage had ceased to exist coincidentally with the full payment of the P3,000,000.00 loan, 16 there no longer was any chattel mortgage that could cover the new loans that were concluded thereafter. We find no merit in petitioner corporation's other prayer that the case should be remanded to the trial court for a specific finding on the amount of damages it has sustained "as a result of the unlawful action taken by respondent bank against it." 17 This prayer is not reflected in its complaint which has merely asked for the amount of P3,000,000.00 by way of moral damages. 18 In LBC Express, Inc. vs. Court of Appeals, 19 we have said:

Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. A corporation, being an artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental anguish. Mental suffering can be experienced only by one having a nervous system and it flows from real ills, sorrows, and griefs of life all of which cannot be suffered by respondent bank as an artificial person. 20

While Chua Pac is included in the case, the complaint, however, clearly states that he has merely been so named as a party in representation of petitioner corporation. Petitioner corporation's counsel could be commended for his zeal in pursuing his client's cause. It instead turned out to be, however, a source of disappointment for this Court to read in petitioner's reply to private respondent's comment on the petition his so-called "One Final Word;" viz:
In simply quoting in toto the patently erroneous decision of the trial court, respondent Court of Appeals should be required to justify its decision which completely disregarded the basic laws on obligations and contracts, as well as the clear provisions of the Chattel Mortgage Law and well-settled jurisprudence of this Honorable Court; that in the event that its explanation is wholly unacceptable, this Honorable Court should impose appropriate sanctions on the erring justices. This is one positive step in ridding our courts of law of incompetent and dishonest magistrates especially members of a superior court of appellate jurisdiction. 21 (Emphasis supplied.)

The statement is not called for. The Court invites counsel's attention to the admonition in Guerrero vs.Villamor; 22 thus:
(L)awyers . . . should bear in mind their basic duty "to observe and maintain the respect due to the courts of justice and judicial officers and . . . (to) insist on similar conduct by others." This respectful attitude towards the court is to be observed, "not for the sake of the temporary incumbent of the judicial office, but for the maintenance of its supreme importance." And it is through a scrupulous preference for respectful language that a lawyer best demonstrates his observance of the respect due to the courts and judicial officers . . . 23

The virtues of humility and of respect and concern for others must still live on even in an age of materialism. WHEREFORE, the questioned decisions of the appellate court and the lower court are set aside without prejudice to the appropriate legal recourse by private respondent as may still be warranted as an unsecured creditor. No costs. Atty. Francisco R. Sotto, counsel for petitioners, is admonished to be circumspect in dealing with the courts. SO ORDERED.

G.R. No. L-27268

January 29, 1968

MARCELO vs. GO KIM PAH ZALDIVAR, J.: This case is before this Court on appeal by the defendants who are at the same time third-party plaintiffs, from the decision of the Court of First Instance of Manila, in its Civil Case No. 54871, dated August 8, 1966, the dispositive portion of which reads as follows: WHEREFORE, the Court hereby renders judgment annulling the Deed of Sale (Exhibits B & 65) and ordering the cancellation of the Transfer Certificate of Title No. 46415 issued in the name of defendant Equitable Development Company and another one issued in the name of the plaintiffs, and ordering the defendants to pay the plaintiffs, jointly and severally: (a) the sum of P49,000.00 representing one-half of the fair market value of the improvement which was demolished by the defendants in 1950; (b) the sum of P15,810.00 annually representing one-half () of the fair annual rent value of the property from October 23, 1946, the date of the order denying the petition for registration of the property in the name of defendant Go Kim Pah and on which date also the obligation of the latter to return the property in accordance with the agreement, until August 31, 1963, the date when the present action was filed, or a total sum of P265,573.91 with interest at the rate of six per cent (6%) per annum from the filing of the complaint; (c) the sum of P31,620.00 as the fair rental value of the improvement from September 1, 1963 up to the time the possession of the property shall have been completely restored to the plaintiffs; (d) the sum of P10,000.00 as attorney's fees of counsel for the plaintiffs, which is the same amount claim by defendants; and (e) ordering the plaintiffs to pay the defendants the sum of P42,000.00 representing the redemption price of the one-half () of the property litigated sold by the third-party-defendant to defendant Go Kim Pah which may be set-off or deducted from the sums due the plaintiffs. The third-party complaint filed by the defendants third-party plaintiffs against the third-party defendant Juan P. Juan, Sr., is hereby dismissed with costs against the defendants. A compromise agreement, dated December 29, 1967, signed by all the parties and their respective counsel, was submitted to this Court, as follows: COMPROMISE AGREEMENT COME NOW the parties assisted by their respective undersigned counsel and to this Honorable Supreme Court respectfully submits the following compromise agreement: 1. That the plaintiffs-appellees had filed a complaint and an amended complaint against the defendants-appellants docketed as Civil Case No. 54871 of the Court of First Instance of Manila praying for the annulment of sale, cancellation of transfer certificate of title, partition, legal redemption by plaintiffsappellees of one-half () of the property, and recovery of damages, back rentals, attorney's fees and possession of that certain parcel of land described as follows: (TCT No. 46415, Register of Deeds of Manila) A PARCEL OF LAND (Lot No, 39 of Block No. 2012 of the Cadastral Survey of the City of Manila), with the buildings and improvements thereon, except those herein expressly noted as belonging to other persons, situated on the SE. line of Calle Hormiga District of Binondo. Bounded on the NE. by Calle Hormiga and Lot No. 40 of Block No. 2012; on the SE. by Lot No. 37 of Block

No. 2012; on the SW. by Lot No. 38 of Block No. 2012; and on the NW. by Calle Hormiga. Beginning at a point marked 1 on plan, having N. 78 deg. 05'W., 127.86 m. from B.L.L.M. No. 29 and N. 27 deg. 59'W., 51.11 m. from Fire Hydrant No. 331; thence N. 29 deg. 39'W. 14.46 m. to point 2; thence N. 69 deg. 58'E., 8.92 m. to point 3; thence S. 69 deg. 06'E., 8.55 m. to point 4; thence S. 45 deg. 00'E 0.14 m. to point 5; thence S. 23 deg. 02'E., 12.83 m. to point 6; thence S. 64 deg. 47'W., 15.85 m. to the point of beginning; containing an area of TWO HUNDRED TWENTY SEVEN SQUARE METERS and TEN SQUARE DECIMETERS (227.10), more or less. All points referred to are indicated on the plan and on the ground point 2 is marked by a spike in corner of wall; point 3 to 5 by new galvanized iron spikes; point 6 by a tack on top of wall; bearings true; date of survey, May 23, 1916 October 6, 1917. . . . 2. That the defendants-appellants had filed their answer to the complaint and amended complaint interposing several defenses and also a third-party complaint against Juan P. Juan, Sr. and third-party defendant-appellee, Juan P. Juan, Sr., had filed his Answer thereto with a counterclaim praying for the annulment of sale also prayed for by plaintiffs-appellees and for attorney's fees. 3. That the Court of First Instance of Manila rendered a decision dated August 8, 1966, and the defendantsappellants not being satisfied with the same have already perfected their appeal, submitted their printed Record on Appeal and are as a matter of fact in the process of preparing their Brief to be filed with this Honorable Court. Considering that it will take a long time for said appeal to be decided the parties hereto have agreed to compromise and amicably settle this case. 4. That for and in consideration of the foregoing premises and of the sum of FORTY TWO THOUSAND PESOS ONLY (P42,000.00), Philippine Currency, which amount the defendants-appellants agree to pay to the plaintiffs-appellees and third-party-defendant-appellee in cash immediately upon the rendition of the Decision or order of the Court approving this Compromise Agreement, the parties hereto hereby settle this case amicably and agree as follows: a. The parties hereto agree that the decision of the Court of First Instance of Manila in said Civil Case No. 54871 dated August 8, 1966 shall be deemed vacated and set aside and without force and effect and in lieu thereof another decision be rendered by this Honorable Court, embodying this Compromise Agreement, and declaring the defendant-appellant Equitable Development Company as the true and absolute owner of the property described in paragraph 1 hereof and the cancellation of the Notice of lis pendens annotated as Entry No. 3120/2417 under the date of September 2, 1963 on the original of Transfer Certificate of Title No. 46415, T-507 of the Register of Deeds of Manila at the instance of plaintiffs-appellees; b. The plaintiffs-appellees and third-party defendant-appellee hereby waive absolutely and forever any and all claims that they have against defendants-appellants and Charles Go, who is also one of the children of defendant-appellant Go Kim Pah and one of the partners in defendant-appellant Equitable Development Company, and over the property described in paragraph 1 hereof as well as on any improvement which stood, stands or which may be constructed thereon; c. The parties abandon and relinquish absolutely and finally any and all claims, demands and counterclaims in the complaint, amended complaint, answer, third-party complaint, and answer to third-party complaint and in all such other pleadings in this case; d. Plaintiffs-appellees and third-party-defendant-appellee hereby recognize the present ownership of defendant-appellant Equitable Development Company of the property described in paragraph 1 hereof and of the validity of its title thereto as evidenced by T.C.T. No. 46415 of the Register of Deeds of Manila, as well as the previous acquisition by and ownership of the other defendantsappellants and CHARLES GO of said property; and e. Plaintiffs-appellees and third-party-defendant-appellee hereby represent and warrant that they are the only heirs of the deceased Lucia T. Santos and theretofore the only parties who could have any claim or right to the property described in paragraph 1 hereof.

WHEREFORE, it is respectfully prayed that this compromise agreement be approved and that the decision of the Court of First Instance of Manila in Civil Case No. 54871 dated August 8, 1966, be set aside and in lieu thereof judgment be rendered by this Honorable Supreme Court embodying this agreement. Manila, Philippines, December 29, 1967. Finding the foregoing compromise agreement not contrary to law, public order, public policy, morals or good custom, the same is approved. The decision of the lower court of August 8, 1966 is set aside, and in lieu thereof judgment is hereby rendered in conformity with, and embodying the terms and conditions mentioned in, the abovequoted Compromise Agreement. No costs. It is so ordered.

G.R. Nos. 86883-85 January 29, 1993 PEOPLE OF THE PHILIPPINES vs. MANERO, JR BELLOSILLO, J.: This was gruesome murder in a main thoroughfare an hour before sundown. A hapless foreign religious minister was riddled with bullets, his head shattered into bits and pieces amidst the revelling of his executioners as they danced and laughed around their quarry, chanting the tune "Mutya Ka Baleleng", a popular regional folk song, kicking and scoffing at his prostrate, miserable, spiritless figure that was gasping its last. Seemingly unsatiated with the ignominy of their manslaughter, their leader picked up pieces of the splattered brain and mockingly displayed them before horrified spectators. Some accounts swear that acts of cannibalism ensued, although they were not sufficiently demonstrated. However, for their outrageous feat, the gangleader already earned the monicker "cannibal priest-killer" But, what is indubitable is that Fr. Tulio Favali 1 was senselessly killed for no apparent reason than that he was one of the Italian Catholic missionaries laboring in heir vineyard in the hinterlands of Mindanao. 2 In the aftermath of the murder, police authorities launched a massive manhunt which resulted in the capture of the perpetrators except Arsenio Villamor, Jr., and two unidentified persons who eluded arrest and still remain at large. Informations for Murder, 3 Attempted Murder 4 and Arson 5 were accordingly filed against those responsible for the frenzied orgy of violence that fateful day of 11 April 1985. As these cases arose from the same occasion, they were all consolidated in Branch 17 of the Regional Trial Court of Kidapawan, Cotabato. 6 After trial, the court a quo held WHEREFORE . . . the Court finds the accused Norberto Manero, Jr. alias Commander Bucay, Edilberto Manero alias Edil, Elpidio Manero, Severino Lines, Rudy Lines, Rodrigo Espia alias Rudy, Efren Pleago and Roger Bedao GUILTY beyond reasonable doubt of the offense of Murder, and with the aggravating circumstances of superior strength and treachery, hereby sentences each of them to a penalty of imprisonment of reclusion perpetua; to pay the Pontifical Institute of Foreign Mission (PIME) Brothers, the congregation to which Father Tulio Favali belonged, a civil indemnity of P12,000.00; attorney's fees in the sum of P50,000.00 for each of the eight (8) accused or a total sum of P400,000.00; court appearance fee of P10,000.00 for every day the case was set for trial; moral damages in the sum of P100,000.00; and to pay proportionately the costs. Further, the Court finds the accused Norberto Manero, Jr. alias Commander Bucay GUILTY beyond reasonable doubt of the offense of Arson and with the application of the Indeterminate Sentence Law, hereby sentences him to an indeterminate penalty of imprisonment of not less than four (4) years, nine (9) months, one (1) day of prision correccional, as minimum, to six (6) years of prision correccional, as maximum, and to indemnify the Pontifical Institute of Foreign Mission (PIME) Brothers, the congregation to which Father Tulio Favali belonged, the sum of P19,000.00 representing the value of the motorcycle and to pay the costs. Finally, the Court finds the accused Norberto Manero, Jr., alias Commander Bucay, Edilberto Manero alias Edil, Elpidio Manero, Severino Lines, Rudy Lines, Rodrigo Espia alias Rudy, Efren Pleago and Roger Bedao GUILTY beyond reasonable doubt of the offense of Attempted Murder and with the application of the Indeterminate Sentence Law, hereby sentences each of them to an indeterminate penalty of imprisonment of not less than two (2) years, four (4) months and one (1) day of prision correccional, and minimum, to eight (8) years and twenty (20) days of prision mayor, as maximum, and to pay the complainant Rufino Robles the sum of P20,000.00 as attorney's fees and P2,000.00 as court appearance fee for every day of trial and to pay proportionately the costs.
The foregoing penalties shall be served by the said accused successively in the order of their respective severity in accordance with the provisions of Article 70 of the Revised Penal Code, as amended. 7

From this judgment of conviction only accused Severino Lines, Rudy Lines, Efren Pleago and Roger Bedao appealed with respect to the cases for Murder and Attempted Murder. The Manero brothers as well as Rodrigo

Espia did not appeal; neither did Norberto Manero, Jr., in the Arson case. Consequently, the decision as against them already became final. Culled from the records, the facts are: On 11 April 1985, around 10:00 o'clock in the morning, the Manero brothers Norberto Jr., Edilberto and Elpidio, along with Rodrigo Espia, Severino Lines, Rudy Lines, Efren Pleago and Roger Bedao, were inside the eatery of one Reynaldo Diocades at Km. 125, La Esperanza, Tulunan, Cotabato. They were conferring with Arsenio Villamor, Jr., private secretary to the Municipal Mayor of Tulunan, Cotabato, and his two (2) unidentified bodyguards. Plans to liquidate a number of suspected communist sympathizers were discussed. Arsenio Villamor, Jr. scribbled on a cigarette wrapper the following "NPA v. NPA, starring Fr. Peter, Domingo Gomez, Bantil, Fred Gapate, Rene alias Tabagac and Villaning." "Fr. Peter" is Fr. Peter Geremias, an Italian priest suspected of having links with the communist movement; "Bantil" is Rufino Robles, a Catholic lay leader who is the complaining witness in the Attempted Murder; Domingo Gomez is another lay leader, while the others are simply "messengers". On the same occasion, the conspirators agreed to Edilberto Manero's proposal that should they fail to kill Fr. Peter Geremias, another Italian priest would be killed in his stead.8 At about 1:00 o'clock that afternoon, Elpidio Manero with two (2) unidentified companions nailed a placard on a street-post beside the eatery of Deocades. The placard bore the same inscriptions as those found on the cigarette wrapper except for the additional phrase "versus Bucay, Edil and Palo." Some two (2) hours later, Elpidio also posted a wooden placard bearing the same message on a street cross-sign close to the eatery. 9 Later, at 4:00 o'clock, the Manero brothers, together with Espia and the four (4) appellants, all with assorted firearms, proceeded to the house of "Bantil", their first intended victim, which was also in the vicinity of Deocades'carinderia. They were met by "Bantil" who confronted them why his name was included in the placards. Edilberto brushed aside the query; instead, he asked "Bantil" if he had any qualms about it, and without any provocation, Edilberto drew his revolver and fired at the forehead of "Bantil". "Bantil" was able to parry the gun, albeit his right finger and the lower portion of his right ear were hit. Then they grappled for its possession until "Bantil" was extricated by his wife from the fray. But, as he was running away, he was again fired upon by Edilberto. Only his trousers were hit. "Bantil" however managed to seek refuge in the house of a certain Domingo Gomez. 10Norberto, Jr., ordered his men to surround the house and not to allow any one to get out so that "Bantil" would die of hemorrhage. Then Edilberto went back to the restaurant of Deocades and pistol-whipped him on the face and accused him of being a communist coddler, while appellants and their cohorts relished the unfolding drama. 11 Moments later, while Deocades was feeding his swine, Edilberto strewed him with a burst of gunfire from his M-14 Armalite. Deocades cowered in fear as he knelt with both hands clenched at the back of his head. This again drew boisterous laughter and ridicule from the dreaded desperados. At 5:00 o'clock, Fr. Tulio Favali arrived at Km. 125 on board his motorcycle. He entered the house of Gomez. While inside, Norberto, Jr., and his co-accused Pleago towed the motorcycle outside to the center of the highway. Norberto, Jr., opened the gasoline tank, spilled some fuel, lit a fire and burned the motorcycle. As the vehicle was ablaze, the felons raved and rejoiced. 12 Upon seeing his motorcycle on fire, Fr. Favali accosted Norberto, Jr. But the latter simply stepped backwards and executed a thumbs-down signal. At this point, Edilberto asked the priest: "Ano ang gusto mo, padre (What is it you want, Father)? Gusto mo, Father, bukon ko ang ulo mo (Do you want me, Father, to break your head)?" Thereafter, in a flash, Edilberto fired at the head of the priest. As Fr. Favali dropped to the ground, his hands clasped against his chest, Norberto, Jr., taunted Edilberto if that was the only way he knew to kill a priest. Slighted over the remark, Edilberto jumped over the prostrate body three (3) times, kicked it twice, and fired anew. The burst of gunfire virtually shattered the head of Fr. Favali, causing his brain to scatter on the road. As Norberto, Jr., flaunted the brain to the terrified onlookers, his brothers danced and sang "Mutya Ka Baleleng" to the delight of their comrades-inarms who now took guarded positions to isolate the victim from possible assistance. 13 In seeking exculpation from criminal liability, appellants Severino Lines, Rudy Lines, Efren Pleago and Roger Bedao contend that the trial court erred in disregarding their respective defenses of alibi which, if properly appreciated, would tend to establish that there was no prior agreement to kill; that the intended victim was Fr. Peter Geremias, not Fr. Tulio Favali; that there was only one (1) gunman, Edilberto; and, that there was absolutely no showing that appellants cooperated in the shooting of the victim despite their proximity at the time to Edilberto.

But the evidence on record does not agree with the arguments of accused-appellants. On their defense of alibi, accused brothers Severino and Rudy Lines claim that they were harvesting palay the whole day of 11 April 1985 some one kilometer away from the crime scene. Accused Roger Bedao alleges that he was on an errand for the church to buy lumber and nipa in M'lang, Cotabato, that morning of 11 April 1985, taking along his wife and sick child for medical treatment and arrived in La Esperanza, Tulunan, past noontime. Interestingly, all appellants similarly contend that it was only after they heard gunshots that they rushed to the house of Norberto Manero, Sr., Barangay Captain of La Esperanza, where they were joined by their fellow CHDF members and co-accused, and that it was only then that they proceeded together to where the crime took place at Km. 125. It is axiomatic that the accused interposing the defense of alibi must not only be at some other place but that it must also be physically impossible for him to be at the scene of the crime at the time of its commission. 14 Considering the failure of appellants to prove the required physical impossibility of being present at the crime scene, as can be readily deduced from the proximity between the places where accused-appellants were allegedly situated at the time of the commission of the offenses and the locus criminis, 15 the defense of alibi is definitely feeble. 16 After all, it has been the consistent ruling of this Court that no physical impossibility exists in instances where it would take the accused only fifteen to twenty minutes by jeep or tricycle, or some one-and-a-half hours by foot, to traverse the distance between the place where he allegedly was at the time of commission of the offense and the scene of the crime. 17 Recently, we ruled that there can be no physical impossibility even if the distance between two places is merely two (2) hours by bus. 18 More important, it is well-settled that the defense of alibi cannot prevail over the positive identification of the authors of the crime by the prosecution witnesses. 19 In the case before Us, two (2) eyewitnesses, Reynaldo Deocades and Manuel Bantolo, testified that they were both inside the eatery at about 10:00 o'clock in the morning of 11 April 1985 when the Manero brothers, together with appellants, first discussed their plan to kill some communist sympathizers. The witnesses also testified that they still saw the appellants in the company of the Manero brothers at 4:00 o'clock in the afternoon when Rufino Robles was shot. Further, at 5:00 o'clock that same afternoon, appellants were very much at the scene of the crime, along with the Manero brothers, when Fr. Favali was brutally murdered. 20 Indeed, in the face of such positive declarations that appellants were at the locus criminis from 10:00 o'clock in the morning up to about 5:00 o'clock in the afternoon, the alibi of appellants that they were somewhere else, which is negative in nature, cannot prevail. 21 The presence of appellants in the eatery at Km. 125 having been positively established, all doubts that they were not privy to the plot to liquidate alleged communist sympathizers are therefore removed. There was direct proof to link them to the conspiracy. There is conspiracy when two or more persons come to an agreement to commit a crime and decide to commit it.22 It is not essential that all the accused commit together each and every act constitutive of the offense. 23 It is enough that an accused participates in an act or deed where there is singularity of purpose, and unity in its execution is present. 24 The findings of the court a quo unmistakably show that there was indeed a community of design as evidenced by the concerted acts of all the accused. Thus
The other six accused, 25 all armed with high powered firearms, were positively identified with Norberto Manero, Jr. and Edilberto Manero in the carinderia of Reynaldo Deocades in La Esperanza, Tulunan, Cotabato at 10:00 o'clock in the morning of 11 April 1985 morning . . . they were outside of the carinderia by the window near the table where Edilberto Manero, Norberto Manero, Jr., Jun Villamor, Elpidio Manero and unidentified members of the airborne from Cotabato were grouped together. Later that morning, they all went to the cockhouse nearby to finish their plan and drink tuba. They were seen again with Edilberto Manero and Norberto Manero, Jr., at 4:00 o'clock in the afternoon of that day near the house of Rufino Robles (Bantil) when Edilberto Manero shot Robles. They surrounded the house of Domingo Gomez where Robles fled and hid, but later left when Edilberto Manero told them to leave as Robles would die of hemorrhage. They followed Fr. Favali to Domingo Gomez' house, witnessed and enjoyed the burning of the motorcycle of Fr. Favali and later stood guard with their firearms ready on the road when Edilberto Manero shot to death Fr. Favali. Finally, they joined Norberto Manero, Jr. and Edilberto Manero in their enjoyment and merriment on the death of the priest. 26

From the foregoing narration of the trial court, it is clear that appellants were not merely innocent bystanders but were in fact vital cogs in perpetrating the savage murder of Fr. Favali and the attempted murder of Rufino Robles by the Manero brothers and their militiamen. For sure, appellants all assumed a fighting stance to discourage if not prevent any attempt to provide assistance to the fallen priest. They surrounded the house of Domingo Gomez to stop Robles and the other occupants from leaving so that the wounded Robles may die of hemorrhage. 27Undoubtedly, these were overt acts to ensure success of the commission of the crimes and in furtherance of the aims of the conspiracy. The appellants acted in concert in the murder of Fr. Favali and in the attempted murder of Rufino Robles. While accused-appellants may not have delivered the fatal shots themselves, their collective action showed a common intent to commit the criminal acts. While it may be true that Fr. Favali was not originally the intended victim, as it was Fr. Peter Geremias whom the group targetted for the kill, nevertheless, Fr. Favali was deemed a good substitute in the murder as he was an Italian priest. On this, the conspirators expressly agreed. As witness Manuel Bantolo explained 28 Q Aside from those persons listed in that paper to be killed, were there other persons who were to be liquidated? A There were some others. Q Who were they? A They said that if they could not kill those persons listed in that paper then they will (sic) kill anyone so long as he is (sic) an Italian and if they could not kill the persons they like to kill they will (sic) make Reynaldo Deocades as their sample. That appellants and their co-accused reached a common understanding to kill another Italian priest in the event that Fr. Peter Geremias could not be spotted was elucidated by Bantolo thus 29 Q Who suggested that Fr. Peter be the first to be killed? A All of them in the group. Q What was the reaction of Norberto Manero with respect to the plan to kill Fr. Peter? A He laughed and even said, "amo ina" meaning "yes, we will kill him ahead." xxx xxx xxx Q What about Severino Lines? What was his reaction? A He also laughed and so conformed and agreed to it. Q Rudy Lines. A He also said "yes". Q What do you mean "yes"? A He also agreed and he was happy and said "yes" we will kill him. xxx xxx xxx Q What about Efren Pleago? A He also agreed and even commented laughing "go ahead".

Q Roger Bedao, what was his reaction to that suggestion that should they fail to kill Fr. Peter, they will (sic) kill anybody provided he is an Italian and if not, they will (sic) make Reynaldo Deocades an example? A He also agreed laughing. Conspiracy or action in concert to achieve a criminal design being sufficiently shown, the act of one is the act of all the other conspirators, and the precise extent or modality of participation of each of them becomes secondary. 30 The award of moral damages in the amount of P100,000.00 to the congregation, the Pontifical Institute of Foreign Mission (PIME) Brothers, is not proper. There is nothing on record which indicates that the deceased effectively severed his civil relations with his family, or that he disinherited any member thereof, when he joined his religious congregation. As a matter of fact, Fr. Peter Geremias of the same congregation, who was then a parish priest of Kidapawan, testified that "the religious family belongs to the natural family of origin." 31 Besides, as We already held, 32 a juridical person is not entitled to moral damages because, not being a natural person, it cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. It is only when a juridical person has a good reputation that is debased, resulting in social humiliation, that moral damages may be awarded. Neither can We award moral damages to the heirs of the deceased who may otherwise be lawfully entitled thereto pursuant to par. (3), Art. 2206, of the Civil Code, 33 for the reason that the heirs never presented any evidence showing that they suffered mental anguish; much less did they take the witness stand. It has been held 34 that moral damages and their causal relation to the defendant's acts should be satisfactorily proved by the claimant. It is elementary that in order that moral damages may be awarded there must be proof of moral suffering. 35However, considering that the brutal slaying of Fr. Tulio Favali was attended with abuse of superior strength, cruelty and ignominy by deliberately and inhumanly augmenting the pain and anguish of the victim, outraging or scoffing at his person or corpse, exemplary damages may be awarded to the lawful heirs, 36 even though not proved nor expressly pleaded in the complaint, 37 and the amount of P100,000.00 is considered reasonable. With respect to the civil indemnity of P12,000.00 for the death of Fr. Tulio Favali, the amount is increased to P50,000.00 in accordance with existing jurisprudence, which should be paid to the lawful heirs, not the PIME as the trial court ruled. WHEREFORE, the judgment appealed from being in accord with law and the evidence is AFFIRMED with the modification that the civil indemnity which is increased from P12,000.00 to P50,000.00 is awarded to the lawful heirs of the deceased plus exemplary damages of P100,000.00; however, the award of moral damages is deleted. Costs against accused-appellants.

G.R. No. 117501 July 8, 1997 SOLID HOMES, INC. vs.CA PANGANIBAN, J.: Is the failure to annotate the vendor a retro's right of repurchase in the certificates of title of the real estate properties subject of dacion en pago conclusive evidence of the vendee a retro's malice and bad faith, entitling the former to damages? In a sale with pacto de retro, is the repurchase price limited by Article 1616 of the Civil Code? These are the basic questions raised in this petition for review on certiorari under Rule 45 of the Rules of Court assailing the Court of Appeals 1 Decision 2 promulgated on April 25, 1994 and Resolution 3 of September 26, 1994 in CA-G.R. CV No. 39154, affirming the decision 4 of the Regional Trial Court of Pasig, Branch 157 in Civil Case No. 51214. The said RTC decision sustained the validity of the subject dacion en pago agreement and declared the same as "a true sale with right of repurchase." The Facts The facts of the case as narrated by the trial court and reproduced in the assailed Decision of the Court of Appeals are undisputed by the parties. These are the relevant portions: It appears that on June 4, 1979, Solid Homes executed in favor of State Financing (Center, Inc.) a Real Estate Mortgage (Exhibit "3") on its properties embraced in Transfer Certificate of Title No. 9633 (Exhibit "9") and Transfer Certificate of Title No. (492194) 11938 (Exhibit "8") of the Registry of Deeds in Pasig, Metro Manila, in order to secure the payment of a loan of P10,000,000.00 which the former obtained from the latter. A year after, Solid Homes applied for and was granted an additional loan of P1,511,270.03 by State Financing, and to secure its payment, Solid Homes executed the Amendment to Real Estate Mortgage dated June 4, 1980 (Exhibit "4") whereby the credits secured by the first mortgage on the abovementioned properties were increased from P10,000,000.00 to P11,511,270.03. Sometime thereafter, Solid Homes obtained additional credits and financing facilities from State Financing in the sum of P1,499,811,97, and to secure its payment, Solid Homes executed in favor of State Financing the Amendment to Real Estate Mortgage dated March 5, 1982 (Exhibit "5") whereby the mortgage executed on its properties on June 4, 1979 was again amended so that the loans or credits secured thereby were further increased from P11,511,270.03 to P13,011,082.00. When the loan obligations abovementioned became due and payable, State Financing made repeated demands upon Solid Homes for the payment thereof, but the latter failed to do so. So, on December 16, 1982, State Financing filed a petition for extrajudicial foreclosure of the mortgages abovementioned with the Provincial Sheriff of Rizal, who, in pursuance of the petition, issued a Notice of Sheriff's Sale dated February 4, 1983 (Exhibit "6"), whereby the mortgaged properties of Solid Homes and the improvements existing thereon, including the V.V. Soliven Towers II Building, were set for public auction sale on March 7, 1983 in order to satisfy the full amount of Solid Homes' mortgage indebtedness, the interest thereon, and the fees and expenses incidental to the foreclosure proceedings. Before the scheduled public auction sale . . . , the mortgagor Solid Homes made representations and induced State Financing to forego with the foreclosure of the real estate mortgages referred to above. By reason thereof, State Financing agreed to suspend the foreclosure of the mortgaged properties, subject to the terms and conditions they agreed upon, and in pursuance of their said agreement, they executed a document entitled MEMORANDUM OF AGREEMENT/DACION EN PAGO ("Memorandum") dated February 28, 1983 (Exhibits "C" and "7") . . . . Among the terms and conditions that said parties agreed upon were . . . : 1. (Solid Homes) acknowledges that it has an outstanding obligation due and payable to (State Financing) and binds and obligates to pay (State Financing) the totality of its outstanding obligation in the amount of P14,225,178.40, within one hundred eighty (180) days from date of signing of this instrument. However, it is

understood and agreed that the principal obligation of P14,225,178.40 shall earn interest at the rate of 14% per annum and penalty of 16% per annum counted from March 01, 1983 until fully paid. 2. The parties agree that should (Solid Homes) be able to pay (State Financing) an amount equivalent to sixty per centum (60%) of the principal obligation, or the amount of P8,535,107.04, within the first one hundred eighty (180) days, (State Financing) shall allow the remaining obligation of (Solid Homes) to be restructured at a rate of interest to be mutually agreed between the parties. 3. It is hereby understood and agreed that in the event (Solid Homes) fails to comply with the provisions of the preceding paragraphs, within the said period of one hundred eighty (180) days, this document shall automatically operate to be an instrument of dacion en pago without the need of executing any document to such an effect and (Solid Homes) hereby obligates and binds itself to transfer, convey and assign to (State Financing), by way of dacion en pago, its heirs, successors and assigns, and (State Financing) does hereby accept the conveyance and transfer of the above-described real properties, including all the improvements thereon, free from all liens and encumbrances, in full payment of the outstanding indebtedness of (Solid Homes) to (State Financing) . . . . xxx xxx xxx 6. (State Financing) hereby grants (Solid Homes) the right to repurchase the aforesaid real properties, including the condominium units and other improvements thereon, within ten (10) months counted from and after the one hundred eighty (180) days from date of signing hereof at an agreed price of P14,225,178.40, or as reduced pursuant to par. 5 (d), plus all cost of money equivalent to 30% per annum, registration fees, real estate and documentary stamp taxes and other incidental expenses incurred by (State Financing) in the transfer and registration of its ownership via dacion en pago . . . . xxx xxx xxx Subsequently, Solid Homes failed to pay State Financing an amount equivalent to 60% (or P8,535,107.04) of the principal obligation of P14,225,178.40 within 180 days from the signing of the (Memorandum) on February 28, 1983, as provided under paragraph 2 of the said document. Hence, and in pursuance of paragraph 3 thereof which provided that "this document shall automatically operate to be an instrument of dacion en pago without the need of executing any document to such an effect . . . (,)" State Financing registered the said (Memorandum) with the Register of Deeds in Pasig, Metro Manila on September 15, 1983. Consequently, the said Register of Deeds cancelled TCT No. 9633 and TCT No. (492194) 11938 in the name of Solid Homes which were the subject matter of the (Memorandum) abovementioned, and in lieu thereof, the said office issued Transfer Certificate of Title No. 40534 (Exhibits "J" and "11") and Transfer Certificate of Title No. 40534 (Exhibits "K" and "12") in the name of State Financing . . . . In a letter dated October 11, 1983 (Exhibit "16"), State Financing informed Solid Homes of the transfer in its name of the titles to all the properties subject matter of the (Memorandum) and demanded among other things, the Solid Homes turn over to State Financing the possession of the V.V. Soliven Towers II Building erected on two of the said properties. Solid Homes replied with a letter dated October 14, 1983, (Exhibit "20") asking for a period of ten (10) days within which to categorize its position on the matter; and in a subsequent letter dated October 24, 1983, Solid Homes made known to State Financing its position that the (Memorandum) is null and void because the essence thereof is that State Financing, as mortgagee creditor, would be able to appropriate unto itself the properties mortgaged by Solid Homes which is in contravention of Article 2088 of the Civil Code. State Financing then sent to Solid Homes another letter dated November 3, 1983 (Exhibit "17"), whereby it pointed out that Art. 2088 of the Civil Code is not applicable to the (Memorandum) they have executed, and also reiterated its previous demand that Solid Homes turn

over to it the possession of the V.V. Soliven Towers II Building within five (5) days, but Solid Homes did not comply with the said demand. . . . and within that period of repurchase, Solid Homes wrote to State Financing a letter dated April 30, 1984 containing its proposal for repayment schemes under terms and conditions indicated therein for the repurchase of the properties referred to. In reply to said letter, State Financing sent a letter dated May 17, 1984 (Exhibit "18") advising Solid Homes that State Financing's management was not amenable to its proposal, and that by way of granting it some concessions, said management made a counter-proposal requiring Solid Homes to make an initial payment of P10 million until 22 May 1984 and the balance payable within the remaining period to repurchase the properties as provided for under the (Memorandum) . . . . Thereafter, a number of conferences were held among the corporate officers of both companies wherein they discussed the payment arrangement of Solid Home's outstanding obligation, . . . . In a letter dated June 7, 1984 (Exhibit "19"), State Financing reiterated the counter-proposal in its previous letter dated May 17, 1984 to Solid Homes as a way of making good its account, and at the same time reminded Solid Homes that it has until 27 June 1984 to exercise its right to repurchase the properties pursuant to the terms and conditions of the (Memorandum), otherwise, it will have to vacate and turn over the possession of said properties to State Financing. In return, Solid Homes sent to State Financing a letter dated June 18, 1984 (Exhibits "N" and "22") containing a copy of the written offer made by C.L. Alma Jose & Sons, Inc. (Exhibits "M" and "22-A") to avail of Solid Homes' right to repurchase the V.V. Soliven Towers II pursuant to the terms of the Dacion En Pago. The letter also contained a request that the repurchase period under said Dacion En Pago which will expire on June 27, 1984 be extended by sixty (60) days to enable Solid Homes to comply with the conditions in the offer of Alma Jose & Sons, Inc. referred to, and thereafter, to avail of the one year period to pay the balance based on the verbal commitment of State Financing's President . . . .
However, on June 26, 1984, a day before the expiry date of its right to repurchase the properties involved in the (Memorandum) on June 27, 1984, Solid Homes filed the present action against defendants State Financing and the Register of Deeds for Metro Manila District II (Pasig), seeking the annulment of said (Memorandum) and the consequent reinstatement of the mortgages over the same properties; . . . 5

As earlier stated, the trial court held that the Memorandum of Agreement/Dacion En Pago executed by the parties was valid and binding, and that the registration of said instrument in the Register of Deeds was in accordance with law and the agreement of the parties. It disposed of the case thus: WHEREFORE, this Court hereby renders judgment, as follows: 1. Declaring that the Memorandum of Agreement/Dacion En Pago entered into by and between plaintiff Solid Homes and defendant State Financing on February 28, 1983 is a valid and binding document which does not violate the prohibition against pactum commisorium under Art. 2088 of the Civil Code; 2. Declaring that the said Memorandum of Agreement/Dacion En Pago is a true sale with right of repurchase, and not an equitable mortgage; 3. Declaring that the registration of the said Memorandum of Agreement/Dacion En Pago with the defendant Register of Deeds in Pasig, Metro Manila by defendant State Financing on September 15, 1983 is in accordance with law and the agreement of the parties in the said document; but the annotation of the said document by the said Register of Deeds on the certificates of title over the properties subject of the Memorandum of Agreement/Dacion En Pago without any mention of the right of repurchase and the period thereof, is improper, and said Register of Deeds' cancellation of the certificates of title in the name of Solid Homes over the properties referred to and issuance of new titles in lieu thereof in the name of State Financing during the period of repurchase and without any judicial order is in violation of Art. 1607 of the Civil Code, which renders said titles null and void; 4. Ordering the defendant State Financing to surrender to the defendant Register of Deeds in Pasig, Metro Manila for the cancellation thereof, all the certificates of title issued in its name over the

properties subject of the Memorandum of Agreement/Dacion En Pago, including those titles covering the fully paid condominium units and the substitute collateral submitted in exchange for said condominium units; 5. Ordering the said defendant Register of Deeds to cancel all the titles in the name of State Financing referred to and to reinstate the former titles over the same properties in the name of Solid Homes, with the proper annotation thereon of the Memorandum of Agreement/Dacion En Pago together with the right of repurchase and the period thereof as provided in said document and to return the said reinstated former titles (owner's copies) in the name of Solid Homes to State Financing; 6. Ordering the defendant State Financing to release to plaintiff Solid Homes all the certificates of title over the fully paid condominium units in the name of Solid Homes, free from all liens and encumbrances by releasing the mortgage thereon; 7. Granting the plaintiff Solid Homes the opportunity to exercise its right to repurchase the properties subject of the Memorandum of Agreement/Dacion En Pago within thirty (30) days from the finality of this Decision, by paying to defendant State Financing the agreed price of P14,225,178.40 plus all cost of money equivalent to 30% (interest of 14% and penalty of 16% from March 1, 1983) per annum, registration fees, real estate and documentary stamp taxes and other incidental expenses incurred by State Financing in the transfer and registration of its ownership via the Dacion En Pago, as provided in the said document and in pursuance of Articles 1606 and 1616 of the Civil Code; and 8. Ordering the defendant Register of Deeds in Pasig, Metro Manila should plaintiff Solid Homes fail to exercise the abovementioned right to repurchase within 30 days from the finality of this judgment to record the consolidation of ownership in State Financing over the properties subject of the Memorandum of Agreement/Dacion En Pago in the Registry of Property, in pursuance of this Order, but excluding therefrom the fully paid condominium units and their corresponding titles to be released by State Financing.
For lack of merit, the respective claims of both parties for damages, attorney's fees, expenses of litigation and costs of suit are hereby denied. 6

Both parties appealed from the trial court's decision. Solid Homes raised a lone question contesting the denial of its claim for damages. Such damages allegedly resulted from the bad faith and malice of State Financing in deliberately failing to annotate Solid Homes' right to repurchase the subject properties in the former's consolidated titles thereto. As a result of the non-annotation, Solid Homes claimed to have been prevented from generating funds from prospective buyers to enable it to comply with the Agreement and to redeem the subject properties. State Financing, on the other hand, assigned three errors against the RTC decision: (1) granting Solid Homes a period of thirty (30) days from finality of the judgment within which to exercise its right of repurchase; (2) ordering Solid Homes to pay only 30% per annum as interest and penalty on the principal obligation, rather than reasonable rental value from the time possession of the properties was illegally withheld from State Financing; and (3) failing to order the immediate turnover of the possession of the properties to State Financing as the purchasera retro from whom no repurchase has been made. As to the lone issue raised by Solid Homes, the Court of Appeals agreed with the trial court that the failure to annotate the right of repurchase of the vendor a retro is not by itself an indication of bad faith or malice. State Financing was not legally bound to cause its annotation, and Solid Homes could have taken steps to protect its own interests. The evidence shows that after such registration and transfer of titles, State Financing willingly negotiated with Solid Homes to enable the latter to exercise its right to repurchase the subject properties, 7 an act that negates bad faith. Anent the first error assigned by State Financing, Respondent Court likewise upheld the trial court in applying Article 1606, paragraph 3 8 of the Civil Code. Solid Homes was not in bad faith in filing the complaint for the declaration of nullity of the Memorandum of Agreement/Dacion En Pago. There is statutory basis for petitioner's claim that an equitable mortgage existed since it believed that (1) the price of P14 million was grossly inadequate, considering that the building alone was allegedly built at a cost of P60 million in 1979 and the lot was valued at P5,000.00 per

square meter and (2) it remained in possession of the subject properties. 9 Furthermore, Article 1607 10 of the Civil Code abolished automatic consolidation of ownership in the vendee a retro upon expiration of the redemption period by requiring the vendee to institute an action for consolidation where the vendor a retromay be duly heard. If the vendee succeeds in proving that the transaction was indeed a pacto de retro, the vendor is still given a period of thirty days from the finality of the judgment within which to repurchase the property. 11 Respondent Court also affirmed the trial court's imposition of the 30% interest per annum on top of the redemption price in accordance with paragraph 6 of the parties' Memorandum of Agreement. 12 However, Respondent Court of Appeals rules favorably on State Financing's last assigned error by ordering Solid Homes to deliver possession of the subject properties to the private respondent, citing jurisprudence that in a sale with pacto de retro, the vendee shall immediately acquire title over and possession of the real property sold, subject only to the vendor's right of redemption. 13 The full text of the dispositive portion of the assailed Decision is as follows:
WHEREFORE, the judgment appealed from is affirmed with the modification that plaintiff Solid Homes is further ordered to deliver the possession of the subject property to State Financing. 14

The two opposing parties filed their respective motions for reconsideration of the assailed Decision. Both were denied by said Court for lack of merit. Both parties thereafter filed separate petitions for review before this Court. In a minute Resolution 15 dated December 5, 1994, this Court (Third Division) denied State Financing Center's petition because of its failure to show that a reversible error was committed by the appellate court. Its motion for reconsideration of said resolution was likewise denied for lack of merit. This case disposes only of the petition filed by Solid Homes, Inc. Issues In its petition, Solid Homes repeats its arguments before the Court of Appeals. It claims damages allegedly arising from the non-annotation of its right of repurchase in the consolidated titles issued to private respondent. Petitioner reiterates its attack against the inclusion of 30% interest per annum as part of the redemption price. It asserts that Article 1616 of the Civil Code authorizes only the return of the (1) price of the sale, (2) expenses of the contract and any other legitimate payments by reason of the sale and (3) necessary and useful expenses made on the thing sold. Considering that the transfer of titles was null and void, it was thus erroneous to charge petitioner the registration fees, documentary stamp taxes and other incidental expenses incurred by State Financing in the transfer and registration of the subject properties via the dacion en pago. Lastly, petitioner argues that there is no need for the immediate turnover of the properties to State Financing since the same was not stipulated under their Agreement, and the latter's rights were amply protected by the issuance of new certificates of title in its name. The Court's Ruling First Issue: Damages To resolve the issue of damages, an examination of factual circumstances would be necessary, a task that is clearly beyond this Court's dominion. It is elementary that in petitions for review on certiorari, only questions of law may be brought by the parties and passed upon by this Court. Findings of fact of lower courts are deemed conclusive and binding upon the Supreme Court except when the findings are grounded on speculation, surmises or conjectures; when the inference made is manifestly mistaken, absurd or impossible; when there is grave abuse of discretion in the appreciation of facts; when the factual findings of the trial and appellate courts are conflicting; when the Court of Appeals, in making its findings, has gone beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; 16 when the judgment of the appellate court is premised on a misapprehension of facts or when it has failed to notice certain relevant facts which, if properly considered, will justify a different conclusion; when the findings of fact are conclusions without citation of specific evidence upon which they are based; and when findings of fact of the Court of Appeals are premised on the absence of evidence but are contradicted by the evidence on record. 17 The petitioner has not shown any and indeed the Court finds none of the above-mentioned exceptions to warrant a departure from the general rule.

In fact, petitioner has not even bothered to support with evidence as claim for "actual, moral and punitive/nominal damages" as well as "exemplary damages and attorney's fees." It is basic that the claim for these damages must each be independently identified and justified; such claims cannot be dealt with in the aggregate, since they are neither kindred or analogous terms nor governed by a coincident set of rules. 18 The trial court found, and the Court of Appeals affirmed, that petitioner's claim for actual damages was baseless. Solid Homes utterly failed to prove that respondent corporation had maliciously and in bad faith caused the nonannotation of petitioner's right of repurchase so as to prevent the latter from exercising such right. On the contrary, it is admitted by both parties that State Financing informed petitioner of the registration with the Register of Deeds of Pasig of their Memorandum of Agreement/Dacion en Pago and the issuance of new certificates of title in the name of the respondent corporation. Petitioner exchanged communications and held conferences with private respondent in order to draw a mutually acceptable payment arrangement for the former's repurchase of the subject properties. A written offer from another corporation alleging willingness to avail itself of petitioner's right of repurchase was even attached to one of these communications. Clearly, petitioner was not prejudiced by the non-annotation of such right in the certificates of titles issued in the name of State Financing. Besides, as the Court of Appeals noted, it was not the function of respondent corporation for cause said annotation. It was equally the responsibility of petitioner to protect its own rights by making sure that its right of repurchase was indeed annotated in the consolidated titles of private respondent. The only legal transgression of State Financing was its failure to observe the proper procedure in effecting the consolidation of the titles in its name. But this does not automatically entitle the petitioner to damages absent convincing proof of malice and bad faith 19 on the part of private respondent and actual damages suffered by petitioner as a direct and probable consequence thereof. In fact, the evidence proffered by petitioner consist of mere conjectures and speculations with no factual moorings. Furthermore, such transgression was addressed by the lower courts when they nullified the consolidated of ownership over the subject properties in the name of respondent corporation, because it had been effected in contravention of the provisions of Article 1607 20 of the Civil Code. Such rulings are consistent with law and jurisprudence. Neither can moral damages be awarded to petitioner. Time and again, we have held that a corporation being an artificial person which has no feelings, emotions or senses, and which cannot experience physical suffering or mental anguish is not entitled to moral damages. 21 While the amount of exemplary damages need not be proved, petitioner must show that he is entitled to moral or actual damages; 22 but the converse obtains in the instant case. Award of attorney's fees is likewise not warranted when moral and exemplary damages are eliminated and entitlement thereto is not demonstrated by the claimant.23 Lastly, "(n)ominal damages are adjudicated in order that a right of the plaintiff, 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 by him." 24 As elaborated above and in the decisions of the two lower courts, no right of petitioner was violated or invaded by respondent corporation. Second Issue: Redemption Price Another fundamental principle of procedural law precludes higher courts from entertaining matters neither alleged in the pleadings nor raised during the proceedings below, but ventilated for the first time only in a motion for reconsideration or on appeal. 25 On appeal, only errors specifically assigned and properly argued in the brief will be considered, with the exception of those affecting jurisdiction over the subject matter as well as plain and clerical errors. 26 As stated earlier, the single issue raised by petitioner in its appeal of the RTC decision to the Court of Appeals concerned only the denial of its claim for damages. Petitioner succinctly stated such issue in its brief as follows: I. LONE ASSIGNMENT OF ERROR The trial court erred in that after having found that the registration of the Memorandum of Agreement/Dacion en Pago on September 15, 1983 [and the consequent cancellation of the titles of plaintiff-appellant Solid Homes, Inc. and issuance in lieu thereof of titles to defendant-appellant State Financing Center, Inc. (SFCI)] was null and void because of failure to duly annotate the right to

repurchase granted to plaintiff-appellant Solid Homes, Inc. under par. 6 thereof still then subsisting up to June 28, 1984 and the failure to comply with the provisions of Art. 1607, Civil Code . . .
I[t] nonetheless did not rule that such irregular registration unduly deprived plaintiff-appellant Solid Homes, Inc. of its right of repurchase and that it further erred in not having declared that defendantappellant SFCI liable in favor of said plaintiff-appellant for damages. 27

Petitioner is thus barred from raising a new issue in its appeal before this Court. Nevertheless, in the interest of substantial justice, we now resolve the additional question posed with respect to the composition of the redemption price prescribed by the trial court and affirmed by the Court of Appeals, as follows:
7. Granting the plaintiff Solid Homes the opportunity to exercise its right to repurchase the properties . . . by paying to defendant State Financing the agreed price of P14,225,178.40 plus all cost of money equivalent to 30% (interest of 14% and penalty of 16% from March 1, 1983) per annum, registration fees, real estate and documentary stamp taxes and other incidental expenses incurred by State Financing in the transfer and registration of its ownership via the Dacion En Pago, as provided in the said document and in pursuance of Articles 1606 and 1616 of the Civil Code; 28

Petitioner argues that such total redemption price is in contravention of Art. 1616 of the Civil Code. We do not, however, find said legal provision to be restrictive or exclusive, barring additional amounts that the parties may agree upon. Said provision should be construed together with Art. 1601 of the same Code which provides as follows: Art. 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulations which may have been agreed upon. (emphasis supplied) It is clear, therefore, that the provisions of Art. 1601 require petitioner to "comply with . . . the other stipulations" of the Memorandum of Agreement/Dacion en Pago it freely entered into with private respondent. The said Memorandum's provision on redemption states:
6. The FIRST PARTY (State Financing) hereby grants the SECOND PARTY (Solid Homes) the right to repurchase the aforesaid real properties, including the condominium units and other improvements thereon, within ten (10) months counted from and after the one hundred eighty (180) days from date of signing hereof at an agreed price of P14,225,178.40, or as reduced pursuant to par. 5 (d), plus all cost of money equivalent to 30% per annum, registration fees, real estate and documentary stamp taxes and the other incidental expensesincurred by the FIRST PARTY (State Financing) in the transfer and registration of its ownership via dacion en pago . . . 29 (emphasis supplied)

Contracts have the force of law between the contracting parties who may establish such stipulations, clauses, terms and conditions as they may want subject only to the limitation that their agreements are not contrary to law, morals, customs, public policy or public order 30 and the above-quoted provision of the Memorandum does not appear to be so. Petitioner, however, is right in its observation that the Court of Appeal's inclusion of "registration fees, real estate and documentary stamp taxes and other incidental expenses incurred by State Financing in the transfer and registration of its ownership (of the subject properties) via dacion en pago" was vague, if not erroneous, considering that such transfer and issuance of the new titles were null and void. Thus, the redemption price shall include only those expenses relating to the registration of the dacion en pago, but not the registration and other expenses incurred in the issuance of new certificates of title in the name of State Financing. Possession of the Subject Properties During the Redemption Period The Court of Appeals Decision modified that of the trial court only insofar as it ordered petitioner to deliver possession of the subject properties to State Financing, the vendee a retro. We find no legal error in this holding. In a contract of sale with pacto de retro, the vendee has a right to the immediate possession of the property sold, unless otherwise agreed upon. It is basic that in a pacto de retro sale, the title and ownership of the property sold

are immediately vested in the vendee a retro, subject only to the resolutory condition of repurchase by the vendora retro within the stipulated period. 31 WHEREFORE, the assailed Decision of the Court of Appeals is hereby AFFIRMED with the MODIFICATION that the redemption price shall not include the registration and other expenses incurred by State Financing Center, Inc. in the issuance of new certificates of title in its name, as this was done without the proper judicial order required under Article 1607 of the Civil Code.