xxx xxx xxx

G.R. No. 124245 February 15, 2000

Q. One of the defendants in this case is a certain Avelino Profeta, have you
ANTONIO F. NAVARRETE, petitioner, met him before?

vs. A I never met this swindler before. I never seen him. Never heard of him.4

COURT OF APPEALS, and LEONILA E. GENEROSO, respondents. xxx xxx xxx

GONZAGA-REYES, J.: Q. Before this proceedings commence as it appears that it was so confirmed
thru a petition be defendant Frederick S. Pumaren on October 13, 1986, did you
Before us is a petition for review seeking the reversal of the Decision 1 of the receive from the Court or from the defendants that there was such proceedings?
respondent Court of Appeals dated March 14, 1996 in CA-G.R. CV No. 33838
insofar as it deleted the award of moral damages and attorney's fees granted to A. No, sir. I did not receive any notice from the court or from these stupid
him by the Regional Trial Court of Manila in its Decision 2 dated September 27, people.5
1990 in Civil Case No. 87-41856.
xxx xxx xxx
Petitioner is a lawyer and is one of the defendants in Civil Case No. 87-41856 for
annulment of "Deed of Sale with Right to Repurchase and Damages", filed with A. I do not know this document. I do not know about the selling. Those
the Regional Trial Court of Manila entitled "Leonila E. Generoso, et, al. vs. people are really swindlers.6
Frederick S. Pumaren, et. al.". Private respondent filed the civil case on September
2, 1987 originally against Mr. Frederick S. Pumaren, Mr. Avelino Profeta and the xxx xxx xxx
Register of Deeds of Metro Manila seeking to annul a deed of sale executed over
her property on the ground that her purported signature therein was forged. On A. I still could not understand how this certificate of title could be recopied.
December 21, 1987, the complaint was amended to include petitioner and Atty. There must be somebody who is responsible for it. How was it possible that this
Rafael C. Dinglasan. was copied by these swindlers.7

The Deed of Sale with Right of Repurchase involved in the civil case was prepared xxx xxx xxx
and notarized by petitioner. Petitioner claims that the statements made by private
respondent in her Amended Complaint and her testimonies in the course of the A. We came here precisely for this because I can not let these things go
trial falsely and maliciously slandered him. Hence, petitioner now assails the denial ahead. My property is being stolen behind my back. I have to come here 10,000
of his right to recover moral damages and attorney's fees from private respondent. miles away to defend my property so that justice may be given to punish those
plunderers.8
The alleged malicious and false statements made by private respondent against
petitioner were uttered on December 14 and 21, 1987. On these dates, the lower xxx xxx xxx
court conducted the hearings for the issuance of a writ of preliminary injunction in
Civil Case No. 87-41856. Petitioner claims that private respondent alluded to him DRA. GENEROSO: Before we have the break, can I make a statement to Atty.
when she said the words "stupid", "bastards", "swindlers", and "plunderers" while Villanueva? Are you defending Avelino Profeta, one of the swindlers in this case?
testifying on the Deed of Sale with Right of Repurchase. Quoted below are the How can you, after examining all those papers, protect and defend him after they
pertinent portions of private respondent's testimonies: plundered my property?9 (Emphasis supplied)

Q. Now, there are signatures here as witnesses appearing on page 2 of the Petitioner is also convinced that the following allegations of private respondent in
document, can you tell us, Ms. Witness, if you can recognize those signatures? her Amended Complaint are actionable:

A. I do not know any of those bastards, none of them.3 (a) Accused "private defendants" of "forging" Leonila Generoso's signature in the
Deed of Absolute Sale with Right of Repurchase" (par. 51);
(b) Claimed that "the same conspiring defendants falsified the signatures of
Leonila E. Generoso" (par. 61);
(c) Pointed to private defendants' wanton and malevolent acts to deceive and
defraud plaintiffs" (par. 91); and
(d) Charged the defendants of "blatant, malicious and fraudulent acts as
aforestated" (par. 10)10 (Emphasis supplied)
On September 27, 1990, the Regional Trial Court of Manila rendered its Decision
in Civil Case No. 87-41856, the dispositive portion of which reads:
WHEREFORE, and in view of the foregoing considerations, judgment is hereby
rendered:
(a) Declaring plaintiff Leonila E. Generoso as the absolute, exclusive and
paraphernal owner of the subject property covered by her already deemed
cancelled Transfer Certificate of Title No. 143351, now Transfer Certificate of Title
No. 154609, of the Register of Deeds of Manila;
(b) Declaring the Deed of Absolute Sale with Right of Repurchase, Exhibit A, and
Transfer Certificate of Title Nos. 143551 and 175354 issued to Frederick S.
Pumaren as null and void, concelled (sic) without force and effect;
(c) Declaring Transfer Certificate of Title No. 154609 issued to plaintiff Leonila E.
Generoso as the lawful and valid title to the land in question;
(d) Dismissing the complaint with respect to defendant Antonio Navarrete and, on
his counterclaim, ordering plaintiffs to pay him the amount of P100,000.00 as moral
damages and P 20,000.00 as attorney's fees.
No pronouncement as to costs.11
Both parties appealed, including petitioner who protested the minimal amount of
damages awarded to him.
On March 14, 1996, the Court of Appeals upheld the finding that the Deed of Sale
with Right of Repurchase and the Transfer of Certificate of Title issued to Pumaren
were null and void, but deleted the award of damages in favor of petitioner. It held:
IN THE LIGHT OF ALL THE FOREGOING, the assailed Decision is hereby
AFFIRMED with the modifications that: (a) the award of moral damages and
attorney's fees in favor of Navarrete are hereby deleted; (b) Appellant Pumaren
and Dinglasan are hereby ordered to pay to Appellant Generoso and Elshawi
jointly and severally, the amount of US $2,650.00 or its peso equivalent by way of
actual damages; to Appellant Generoso, the amount of P50,00.00 by way of
exemplary damages; and to Appellants Generoso and Elshawi, the amount of P
20,000.00 as attorney's fees; and the costs of suit.12
Petitioner believes that this Court should overturn the decision of the Court of
Appeals on the ground that:
IN HOLDING THAT A PARTY TO A CASE HAS THE ABSOLUTE PRIVILEGE OF
FALSELY AND MALICIOUSLY MALIGNING A LAWYER, EVEN WHILE THE
LATTER IS NOT YET A PARTY TO THAT CASE, THE RESPONDENT COURT
OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE, NOT
HERETOFORE DETERMINED BY THIS HONORABLE COURT, OR HAS
DECIDED IT IN A WAY CLEARLY NOT IN ACCORD WITH LAW, WITH THE
APPLICABLE DECISIONS OF THIS HONORABLE COURT OR, AT THE VERY
LEAST, WITH FAIRNESS AND EQUITY.13
In questioning the conclusion of the Court of Appeals that the statements made by
private respondent in the pleadings and in her testimony are considered absolutely
privileged, petitioner deplores the fact that only American cases were cited by the
Court to justify its conclusion. He insists that under Philippine law and
jurisprudence, the statements made by private respondent are not absolutely
privileged. The petition underscores the fact that petitioner is a lawyer whose
reputation has been allegedly besmirched by a "brown American". 14 Petitioner now
turns to this Court to vindicate his honor.
In her Answer, private respondent cited decisions 15 of the Supreme Court to the
effect that no action for libel or for damages may be founded on utterances made
in the course of judicial proceedings.16
This Court finds that the Court of Appeals did not commit any reversible error in
revoking the award of moral damages and attorney's fees to petitioner.
It is a settled principle in this jurisdiction that statements made in the course of
judicial proceedings are absolutely privileged. 17 This absolute privilege remains
regardless of the defamatory tenor and the presence of malice if the same are
relevant, pertinent or material to the cause in hand or subject of the inquiry. 18 Thus,
the person making these statements such as a judge, lawyer or witness does not
thereby incur the risk of being found liable thereon in a criminal prosecution or an
action for the recovery of damages.19
The doctrine that statements made during the course of judicial proceedings enjoy
the shield of absolute privilege was first categorically established 20 in the case of
Sison vs. David.21 In said case, the petition allegedly contained libelous
allegations, implying that the complainant was incompetent to manage the affairs
of a corporation and that he was converting his wife's paraphernal properties into
conjugal properties.22 This Court ruled in that case that the allegations in the
pleadings were absolutely privileged and went further by saying that:
Also, sarcastic, pungent and harsh allegations in a pleading although tending to
detract from the dignity that should characterize proceedings in courts of justice,
are absolutely privileged, if relevant to the issues. 23
We have adopted the same ruling in several cases 24 wherein statements made
during judicial proceedings were sued upon for libel or damages. The lone
requirement imposed to maintain the cloak of absolute privilege is the test of
relevancy.25
The doctrine of privileged communication has a practical purpose. As enunciated
in the case of Deles vs. Aragona, Jr.26:
The privilege is not intended so much for the protection of those engaged in the
public service and in the enactment and administration of law, as for the promotion
of public welfare, the purpose being that members of the legislature, judges of
courts, jurors, lawyers and witnesses may speak their minds freely and exercise
their respective functions without incurring the risk of a criminal prosecution or an
action for damages.27
In determining the issue of relevancy of statements made in judicial proceedings,
courts have adopted a liberal attitude by resolving all doubts in favor of relevancy. 28
In People vs. Aquino29, we emphasized that "it is the rule that what is relevant or
pertinent should be liberally considered to favor the writer, and the words are not
to be scrutinized with microscopic intensity".30
In this case, the allegations made by private respondent in her Amended
Complaint stand the test of relevancy. The words "forging", "malicious and
fraudulent" and "falsified" are clearly pertinent to the cause of action of private
respondent, which is to annul the Deed of Sale with Right of Repurchase wherein
private respondent's signature was forged by an impostor, and to recover damages
resulting from such forgery.
With respect to the words "swindlers", "plunderers" "stupid" and "bastards" uttered
by private respondent in the course of her testimony, we are inclined to agree that
such language is too ignominious and degrading and is out of place in a courtroom.
Understandably, private respondent has no love lost for the people she accused
of illegally depriving her of her property, but her indignation does not give her the
right to use contumacious language with impunity in a courtroom. The judge 31 and
commissioner32 then presiding at the time private respondent uttered the
contemptuous words should have restrained the latter because order and proper
decorum should always be maintained in the courtroom. 33 Without question, the
use of blatantly defamatory language like "stupid", "bastards", "swindlers", and
"plunderers" in describing the adverse parties detract from the honor and dignity
that befits a court proceeding and should have been stricken out of the records.
The foregoing notwithstanding, the Court finds that the terms used by the private
respondent in her pleading and in her testimony cannot be the basis for an award
of moral damages and attorney's fees in favor of petitioner. As stated earlier, the
words "forging", "falsified", "malicious" and "fraudulent" in the Amended Complaint
are unmistakably relevant to private respondent's cause of action which is to annul
the Deed of Sale where her signature was forged. The words "stupid", "bastards",
"swindlers", and "plunderers" uttered by private respondent did not specifically
pertain to petitioner to sufficiently identify him as the object of defamation, such
identifiability being an element of a libelous imputation. 34 We believe that neither
petitioner's good name and reputation nor his high standing in the profession have
been damaged by these utterances.
An examination of the transcript earlier quoted will show that private respondent
did not allude to petitioner in particular when she used the words "stupid" and
"bastards". The word "bastards" was in response to this question: "Now, there are
signatures here as witnesses appearing on page 2 of the document, can you tell
us, Ms. Witness, if you can recognize those signatures?" 35 Clearly, private
respondent was alluding to the witnesses to the deed in question, who are not
parties in the present action. Petitioner was not a witness to the deed, he prepared
and notarized it. Also, the word "swindler" was used with particular reference to
defendant Avelino Profeta who also is not a party to the instant case. Used in the
plural form in the other parts of her testimony, the words "those swindlers", "those
plunderers" and "those stupid people" referred to none of the defendants in
particular.
As regards the testimony of private respondent on December 14, 1987, the words
complained of were uttered before the complaint was amended to include
petitioner. It was on December 21, 1987 when private respondent amended her
complaint to include petitioner and Atty. Rafael Dinglasan as defendants. The
petitioner was well aware that the malicious imputations were made "while (he) is
not yet a party to the case" and could not have been the object thereof.1âwphi1.nêt
We accordingly affirm the ruling of the respondent court deleting the award of
attorney's fees in favor of petitioner.
WHEREFORE, this petition is hereby DENIED.
G.R. No. 125272 October 7, 1999

CANDIDO AMIL, petitioner,

vs.

COURT OF APPEALS, and SPOUSES ERNESTO GADOR and

NILA GADOR, respondents.

MENDOZA, J.:

1
This is a petition for review on certiorari of the decision of the Court
of Appeals, dated January 29, 1996, affirming the decision of the
Regional Trial Court, Branch 36, Dumaguete City, Negros Oriental,
dated October 26, 1993, which declared private respondents Ernesto
and Nila Gador the absolute owners of the parcel of land, covered by
Transfer Certificate of Title No. 14021, in Calindagan, Dumaguete City,
Negros Oriental.

The facts are as follows:

Petitioner Amil and private respondents Ernesto and Nila Gador

executed a document entitled "Deed of Pacto de Retro Sale," dated
November 14, 1987, involving the land in dispute. The parties
stipulated:
That Vendor A-Retro, Candido C. Amil, for and in consideration of the
sum of THIRTY THOUSAND (P30,000.00) PESOS, Philippine
Currency, in hand paid to him and receipt whereof is hereby
acknowledged to his entire satisfaction, do by these presents, SELL,
TRANSFER and CONVEY, under Pacto De Retro, unto the herein
Vendees A-Retro, the spouses Ernesto T. Gador and Nila A. Gador,
their heirs, successors and assigns, the above described parcel of land
together with all the improvements thereon, free from all liens and
encumbrances. 1âwphi1.nêt
That Vendor A-Retro, Candido C. Amil, reserve for himself the right to
redeem or repurchase the property herein sold, and the Vendees A-
Retro, in turn, obligate themselves to resell the parcel of land sold,
within a period of THREE (3) YEARS, from and after the due execution
of this instrument, for the same price of THIRTY THOUSAND
(P30,000.00) PESOS, Philippine Currency; PROVIDED, HOWEVER,
that if the Vendor A-Retro, Candido C. Amil, fails to exercise his right
to redeem or repurchase as herein granted within the period stipulated
upon, then this conveyance shall be deemed to be an absolute and
irrevocable sale, without the necessity of executing any further deed or
instituting judicial action to consolidate the ownership in the name of
2
the Vendees A-Retro.
The parties executed another document entitled "Addendum to Deed
of Pacto de Retro Sale," dated December 12, 1987 which provided:
That the Party of the First Part, the spouses Ernesto T. Gador and Nila
A. Gador, are the Mortgagees of that certain parcel of land situated at
Barrio Calindagan, Dumaguete City, under Transfer Certificate of Title
No. 14021 and the Party of the Second Part is the Mortgagor of said
parcel of land, for and in consideration of the sum of Thirty Thousand
(P30,000.00) Pesos, Philippine Currency, per Doc. No. 3; Book No. 1;
Page No. 1; Series of 1987 of Notary Public Jose G. Hernando, Jr.,
dated the 14th day of November, 1987, at Dumaguete City.
That considering that the Party of the First Part has to pay an additional
sum of One Thousand and Eight Hundred (P1,800.00) Pesos,
Philippine Currency, to cover costs or expenses for Capital Gains Tax
and Documentary Stamps, the Party of the Second Part hereby agrees
and covenants that his right to redeem or repurchase the parcel of land
subject matter of the Mortgage, within the period stipulated, shall cover
and include said amount of (P1,800.00) or the total sum of Thirty One
3
Thousand Eight Hundred (P31,800.00) Pesos, Philippine Currency.
After the redemption period had expired, private respondents filed a
petition for the consolidation of their ownership over the property in
question. Petitioner was declared in default as his counsel, Atty.
Reynaldo Piñero, failed to file an answer to the petition. Thereafter, the
case was heard and on October 26, 1993, judgment was rendered by
the court, the dispositive portion of which states:
WHEREFORE, in view of the foregoing and considering the fact that
respondent failed to file an answer to the petition or failed to appear
before this Court, in spite of the Court's efforts in exerting all possible
means to give the respondent his day in Court in order for him to be
duly heard before this Court in connection with this case, this Court
hereby renders Judgment declaring petitioners Ernesto T. Gador and
Nila A. Gador as the absolute owners of the Five Hundred (500) square
meters of Lot No. 782-D-4 of the Subdivision Plan, Psd-07-03-006671,
being a portion of Lot 782-D (LRC) Psd-120931, situated in the Barrio
of Calindagan, City of Dumaguete, the same being covered by
Transfer Certificate of Title No. 14021. The Register of Deeds of
Dumaguete City is hereby ordered to make the corresponding
annotation of the Consolidation of Ownership in the Vendees-A-Retro,
Ernesto T. Gador and Nila A. Gador on the Transfer Certificate of Title
No. 14021 upon payment of the prescribed fees thereof.
Petitioner, through a new counsel, then filed a motion for new trial,
which, however, was denied. He appealed to the Court of Appeals,
which, in its decision dated January 29, 1996, affirmed the decision of
the trial court. The Court of Appeals ruled:
We agree with the trial court's denial of respondent-appellant's motion
for new trial. Respondent had been given full opportunity to answer
and be heard. It is the duty of a party litigant to make inquiries to
counsel on matters concerning his case (Elino Ong Reyes vs. CA, 189
SCRA 46; Florendo vs. Florendo, 27 SCRA 432). In fact, respondent's
alleged counsel never even entered his appearance. Under these
circumstances, including those earlier adverted to, We rule that
respondent did not exercise the ordinary prudence required of him by
Rule 37, section 1(a) of the Rules of Court, and his negligence is not
excusable to justify a new trial.
We find likewise without merit defendant-appellant's contentions that
the Addendum dated December 12, 1987 clarifies or at least
engenders doubt as to the real intent of the parties and that the contract
is in reality a mortgage. The Addendum itself speaks of a capital gains
tax to be paid by the spouses Ernesto and Nila Gador. It also states
that Candido C. Amil "hereby agrees and covenants (that) his right to
redeem on repurchase the parcel of land . . . ". Such stipulations are
distinctive indicia of a sale, transfer or exchange of real property with
right to repurchase. The two documents, read together and taken
jointly, clearly evince a contract of sale with right to repurchase. It is
therefore of no moment that the words "mortgage" and "mortgagee"
were used in the Addendum. If words appear to be contrary to the
evident intention of the parties, the latter shall prevail over the former.
(Article 1370, New Civil Code; SY vs. Court of Appeals, 131 SCRA
116).
WHEREFORE, finding no error in the judgment appealed from, the
same is hereby AFFIRMED in toto. With costs against appellant.
Hence, this petition. It is contended that —
1. The lower Court gravely erred in denying appellant's motion for new
trial; and
2 The lower Court gravely erred in granting consolidation of ownership
in favor of petitioners-appellees considering that by their own evidence,
namely, the "Addendum to Deed of Pacto de Retro Sale" dated
December 12, 1987 (Exh. "B", Record), it is expressly stated that the
contract is merely MORTGAGE, NOT PACTO DE RETRO SALE.
We find the petition to be meritorious. Rule 37, §1 of the Revised Rules,
of Court of 1964 provides:
Within the period for perfecting appeal, the aggrieved party may move
the trial court to set aside the judgment and grant a new trial for one or
more of the following causes materially affecting the substantial rights
of said party:
(a) Fraud, accident, mistake or excusable negligence which ordinary
prudence could not have guarded against and by reason of which such
aggrieved party has probably been impaired in his rights;
(b) Newly discovered evidence, which he could not, with reasonable
diligence, have discovered, and produced at the trial, and which if
presented would probably alter the result;
(c) Award of excessive damages, or insufficiency of the evidence to
justify the decision, or that the decision is against the law.
As already noted, the Court of Appeals affirmed the denial of a new
trial on the ground that the failure of petitioner's original counsel to file
an answer within the reglementary period cannot be considered as
excusable negligence which ordinary prudence could not have
guarded against. According to the Court of Appeals, petitioner is bound
by the mistakes of his former counsel.
To be sure, as a rule, a party is bound by the mistakes of his counsel.
4
As we explained in Tesoro v. Court of Appeals:
It has been repeatedly enunciated that a client is bound by the action
of his counsel in the conduct of a case and cannot be heard to complain
that the result might have been different had he proceeded differently.
A client is bound by the mistakes of his lawyer. If such grounds were
to be admitted as reasons for reopening cases, there would never be
an end to a suit so long as new counsel could be employed who could
allege and show that prior counsel had not been sufficiently diligent or
experienced or learned.
Accordingly, this Court has affirmed the denial by trial courts of motions
for new trial on the ground that the failure of counsel to file an answer
within the reglementary period cannot be considered as excusable
5 would appear that the contract between petitioner and private
negligence.
In this case, however, there are factual considerations necessitating a
different outcome. First, an exception to the principle that a client is
bound by the mistakes of his counsel is one wherein the negligence of
the latter is so gross that the former was deprived of his day in court,
as a result of which he is deprived of property without due process of
6 inadequate;
law. Thus, in Legarda v. Court of Appeals, this Court ordered the
restoration to petitioner of her property sold at public auction in
satisfaction of a default judgment resulting from the failure of her
counsel to submit an answer and his lack of vigilance in protecting her
interests in subsequent proceedings before the trial court and the Court
of Appeals.
In the instant case, petitioner was likewise declared in default because
of the failure of his former counsel, Atty. Piñero, to file within the
reglementary period an answer to private respondents' petition for
consolidation of ownership. Atty. Piñero likewise failed to take any
action to protect the interests of petitioner in subsequent proceedings
before the trial court, such as by filing an opposition to the motion to
declare him in default or by moving to set aside the order of default. It
was Arty. Saleto J. Erasmes, the present counsel of petitioner, who
filed the motion for new trial after a judgment by default had been
rendered against him. As a consequence of his former counsel's gross
negligence, petitioner was deprived of his day in court.
Secondly, as we have emphasized, trial courts should be liberal in
setting aside orders of default and granting motions for new trial if the
7
defendant appears to have a meritorious defense. Parties must be
given every opportunity to present their sides. The issuance of orders
of default should be the exception rather than the rule, to be allowed
only in clear cases of obstinate refusal by the defendant to comply with
8 Amil, fails to exercise his right to redeem or repurchase as herein
the orders of the trial court.
Thirdly, petitioner appears to have a meritorious defense. Indeed, it
respondents is an equitable mortgage rather than a pacto de retro sale.
Arts. 1602 and 1603 of the Civil Code provide:
Art. 1602. The contract shall be presumed to be an equitable
mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period
is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall procure the payment
of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws.
Art. 1603. In case of doubt, a contract purporting to be a sale with right
to repurchase shall be construed as an equitable mortgage.
The price of P30,000.00 for the subject property appears to be
unusually inadequate. Furthermore, the words "mortgage,"
"mortgagor," and "mortgagees" appear in the "Addendum to Deed of
Pacto de Retro Sale." Finally, it should be noted that the "Deed of
Pacto de Retro Sale" provides that "if the Vendor A-Retro, Candido C.
granted within the period stipulated upon, then this conveyance shall
be deemed to be an absolute and irrevocable sale, without the
necessity of executing any further deed or instituting judicial action to
consolidate the ownership in the name of the Vendees A-Retro." This PACITA I. HABANA, ALICIA L. CINCO and JOVITA N. FERNANDO,
Petitioners, v. FELICIDAD C. ROBLES and GOODWILL TRADING CO.,
9
stipulation is void for being a pactum commissorium. Considering all INC., Respondents.

these, the trial court should have granted petitioner a new trial to
DECISION
enable him to present evidence on the true nature of the contract in
question.
PARDO, J.:
WHEREFORE, the decision of the Court of Appeals dated January 29,
1996, is hereby REVERSED and the case is REMANDED to the
Regional Trial Court, Branch 36 Dumaguete City, Negros Oriental for The case before us is a petition for review on certiorari 1 to set aside the (a)
decision of the Court of Appeals 2 , and (b) the resolution denying
further proceedings in accordance with this decision.
petitioners’ motion for reconsideration, 3 in which the appellate court
1âwphi1.nêt

affirmed the trial court’s dismissal of the complaint for infringement and/or
unfair competition and damages but deleted the award for attorney’s fees.
: virtual law lib rary
chanroble s.com

The facts are as follows:chanrob 1es vi rtua l 1aw lib rary

Petitioners are authors and copyright owners of duly issued certificates of

copyright registration covering their published works, produced through
their combined resources and efforts, entitled COLLEGE ENGLISH FOR
TODAY (CET for brevity), Books 1 and 2, and WORKBOOK FOR COLLEGE
FRESHMAN ENGLISH, Series 1.

Respondent Felicidad Robles and Goodwill Trading Co., Inc. are the
author/publisher and distributor/seller of another published work entitled
"DEVELOPING ENGLISH PROFICIENCY" (DEP for brevity), Books 1 and 2
(1985 edition) which book was covered by copyrights issued to them.

In the course of revising their published works, petitioners scouted and

looked around various bookstores to check on other textbooks dealing with
the same subject matter. By chance they came upon the book of respondent
Robles and upon perusal of said book they were surprised to see that the
book was strikingly similar to the contents, scheme of presentation,
illustrations and illustrative examples in their own book, CET. chanrobles vi rtual lawlib rary

After an itemized examination and comparison of the two books (CET and
DEP), petitioners found that several pages of the respondent’s book are
similar, if not all together a copy of petitioners’ book, which is a case of
plagiarism and copyright infringement.

Petitioners then made demands for damages against respondents and also
demanded that they cease and desist from further selling and distributing to
the general public the infringed copies of respondent Robles’ works.
[G.R. No. 131522. July 19, 1999.]
However, respondents ignored the demands, hence, on July 7, 1988,
petitioners filed with the Regional Trial Court, Makati, a complaint for
"Infringement and/or unfair competition with damages" 4 against private
respondents. 5
In the complaint, petitioners alleged that in 1985, respondent Felicidad C.
Robles being substantially familiar with the contents of petitioners’ works,
and without securing their permission, lifted, copied, plagiarized and/or
transposed certain portions of their book CET. The textual contents and
illustrations of CET were literally reproduced in the book DEP. The
plagiarism, incorporation and reproduction of particular portions of the book
CET in the book DEP, without the authority or consent of petitioners, and
the misrepresentations of respondent Robles that the same was her original
work and concept adversely affected and substantially diminished the sale
of the petitioners’ book and caused them actual damages by way of
unrealized income. c hanroblesv irt uallawl ibra ry
Despite the demands of the petitioners for respondents to desist from
committing further acts of infringement and for respondent to recall DEP
from the market, respondents refused. Petitioners asked the court to order
the submission of all copies of the book DEP, together with the molds, plates
and films and other materials used in its printing destroyed, and for
respondents to render an accounting of the proceeds of all sales and profits
since the time of its publication and sale.
Respondent Robles was impleaded in the suit because she authored and
directly committed the acts of infringement complained of, while respondent
Goodwill Trading Co., Inc. was impleaded as the publisher and joint co-
owner of the copyright certificates of registration covering the two books
authored and caused to be published by respondent Robles with obvious
connivance with one another.
On July 27, 1988, respondent Robles filed a motion for a bill of particulars 6
which the trial court approved on August 17, 1988. Petitioners complied with
the desired particularization, and furnished respondent Robles the specific
portions, inclusive of pages and lines, of the published and copyrighted
books of the petitioners which were transposed, lifted, copied and
plagiarized and/or otherwise found their way into respondent’s book. chanrob les lawl ibra ry : red nad
On August 1, 1988, respondent Goodwill Trading Co., Inc. filed its answer
to the complaint 7 and alleged that petitioners had no cause of action against
Goodwill Trading Co., Inc. since it was not privy to the misrepresentation,
plagiarism, incorporation and reproduction of the portions of the book of
petitioners; that there was an agreement between Goodwill and the
respondent Robles that Robles guaranteed Goodwill that the materials
utilized in the manuscript were her own or that she had secured the
necessary permission from contributors and sources; that the author
assumed sole responsibility and held the publisher without any liability.
On November 28, 1988, respondent Robles filed her answer 8 , and denied
the allegations of plagiarism and copying that petitioners claimed.
Respondent stressed that (1) the book DEP is the product of her independent
researches, studies and experiences, and was not a copy of any existing
valid copyrighted book; (2) DEP followed the scope and sequence or syllabus
which are common to all English grammar writers as recommended by the
Association of Philippine Colleges of Arts and Sciences (APCAS), so any
similarity between the respondents book and that of the petitioners was due
to the orientation of the authors to both works and standards and syllabus;
and (3) the similarities may be due to the authors’ exercise of the "right to
fair use of copyrighted materials, as guides." cralaw virtua1aw li bra ry
Respondent interposed a counterclaim for damages on the ground that bad
faith and malice attended the filing of the complaint, because petitioner
Habana was professionally jealous and the book DEP replaced CET as the
official textbook of the graduate studies department of the Far Eastern
University. 9chan roble s law lib ra ry
During the pre-trial conference, the parties agreed to a stipulation of facts
10 and for the trial court to first resolve the issue of infringement before
disposing of the claim for damages.
After the trial on the merits, on April 23, 1993, the trial court rendered its
judgment finding thus: jgc:cha nrob les.co m.ph
"WHEREFORE, premises considered, the court hereby orders that the
complaint filed against defendants Felicidad Robles and Goodwill Trading
Co., Inc. shall be DISMISSED; that said plaintiffs solidarily reimburse
defendant Robles for P20,000.00 attorney’s fees and defendant Goodwill for
P5,000.00 attorney’s fees. Plaintiffs are liable for cost of suit.
IT IS SO ORDERED.
"Done in the City of Manila this 23rd day of April, 1993. chanro ble s.com:c ralaw:red
"(s/t) MARVIE R. ABRAHAM SINGSON
"Assisting Judge
"S.C. Adm. Order No. 124-92" 11
On May 14, 1993, petitioners filed their notice of appeal with the trial court
12, and on July 19, 1993, the court directed its branch clerk of court to
forward all the records of the case to the Court of Appeals. 13
In the appeal, petitioners argued that the trial court completely disregarded
their evidence and fully subscribed to the arguments of respondent Robles
that the books in issue were purely the product of her researches and studies
and that the copied portions were inspired by foreign authors and as such
not subject to copyright. Petitioners also assailed the findings of the trial
court that they were animated by bad faith in instituting the complaint. 14
On June 27, 1997, the Court of Appeals rendered judgment in favor of
respondents Robles and Goodwill Trading Co., Inc. The relevant portions of
the decision state: chan roble s law lib rary
"It must be noted, however, that similarity of the allegedly infringed work
to the author’s or proprietor’s copyrighted work does not of itself establish
copyright infringement, especially if the similarity results from the fact that
both works deal with the same subject or have the same common source,
as in this case.
Appellee Robles has fully explained that the portion or material of the book
claimed by appellants to have been copied or lifted from foreign books. She
has duly proven that most of the topics or materials contained in her book,
with particular reference to those matters claimed by appellants to have
been plagiarized were topics or matters appearing not only in appellants and
her books but also in earlier books on College English, including foreign
books, i.e. Edmund Burke’s "Speech on Conciliation", Boerigs’ "Competence
in English" and Broughton’s, "Edmund Burke’s Collection."
x x x other transformation of the work; chan roble svirtuall awlib rary:re d
"Appellant’s reliance on the last paragraph on Section 11 is misplaced. It
must be emphasized that they failed to prove that their books were made
sources by appellee." 15
The Court of Appeals was of the view that the award of attorneys’ fees was
not proper, since there was no bad faith on the part of petitioners Habana
Et. Al. in instituting the action against respondents.
On July 12, 1997, petitioners filed a motion for reconsideration, 16 however,
the Court of Appeals denied the same in a Resolution 17 dated November
25, 1997. chanrob lesvi rtua lawlib rary
Hence, this petition.
In this appeal, petitioners submit that the appellate court erred in affirming
the trial court’s decision.
Petitioners raised the following issues: (1) whether or not, despite the
apparent textual, thematic and sequential similarity between DEP and CET,
respondents committed no copyright infringement; (2) whether or not there
was animus furandi on the part of respondent when they refused to withdraw
the copies of CET from the market despite notice to withdraw the same; and
(3) whether or not respondent Robles abused a writer’s right to fair use, in
violation of Section 11 of Presidential Decree No. 49. 18
We find the petition impressed with merit. cha nrob les.co m : virt ual law li bra ry
The complaint for copyright infringement was filed at the time that
Presidential Decree No. 49 was in force. At present, all laws dealing with the
protection of intellectual property rights have been consolidated and as the
law now stands, the protection of copyrights is governed by Republic Act No.
8293. Notwithstanding the change in the law, the same principles are
reiterated in the new law under Section 177. It provides for the copy or
economic rights of an owner of a copyright as follows: jgc:chanro bles. com.ph
"SECTION 177. Copy or Economic rights. — Subject to the provisions of
chapter VIII, copyright or economic rights shall consist of the exclusive right
to carry out, authorize or prevent the following acts: chan rob1e s virtual 1aw l ibra ry
177.1 Reproduction of the work or substantial portion of the work;
chanrobles .com:c ralaw:red
177.2 Dramatization, translation, adaptation, abridgment, arrangement or
177.3 The first public distribution of the original and each copy of the work
by sale or other forms of transfer of ownership;
177.4 Rental of the original or a copy of an audiovisual or cinematographic
work, a work embodied in a sound recording, a computer program, a
compilation of data and other materials or a musical work in graphic form,
irrespective of the ownership of the original or the copy which is the subject
of the rental; (n)
177.5 Public display of the original or copy of the work;
177.6 Public performance of the work; and
177.7 Other communication to the public of the work" 19
The law also provided for the limitations on copyright, thus:
"SECTION 184.1 Limitations on copyright. — Notwithstanding the provisions
of Chapter V, the following acts shall not constitute infringement of
copyright: cha nrob 1es vi rtua l 1aw lib rary
(a) the recitation or performance of a work, once it has been lawfully made
accessible to the public, if done privately and free of charge or if made
strictly for a charitable or religious institution or society; [Sec. 10(1), P.D.
No. 49]
(b) The making of quotations from a published work if they are compatible
with fair use and only to the extent justified for the purpose, including
quotations from newspaper articles and periodicals in the form of press
summaries; Provided, that the source and the name of the author, if
appearing on the work are mentioned; (Sec. 11 third par. P.D. 49)
(e) The inclusion of a work in a publication, broadcast, or other
communication to the public, sound recording of film, if such inclusion is
made by way of illustration for teaching purposes and is compatible with fair
use: Provided, That the source and the name of the author, if appearing in
the work is mentioned; 20
In the above quoted provisions, "work" has reference to literary and artistic
creations and this includes books and other literary, scholarly and scientific
works. 21
A perusal of the records yields several pages of the book DEP that are similar
if not identical with the text of CET.
On page 404 of petitioners’ Book 1 of College English for Today, the authors
wrote:chan rob1e s virtual 1aw lib rary
Items in dates and addresses:
He died on Monday, April 15, 1975.
Miss Reyes lives in 214 Taft Avenue,
Manila 22
x x
chanroble s virtual lawlib rary
chan rob1es v irt ual 1aw li bra ry
On page 73 of respondents Book 1 Developing English Today, they wrote: chanro blesvi rt uallawli bra ry
chanrob lesvi rtua llawli bra ry
He died on Monday, April 25, 1975.
Miss Reyes address is 214 Taft Avenue Manila 23
On Page 250 of CET, there is this example on parallelism or repetition of
sentence structures, thus: jgc:chanroble s.com .ph
"The proposition is peace. Not peace through the medium of war; not peace
to be hunted through the labyrinth of intricate and endless negotiations; not
peace to arise out of universal discord, fomented from principle, in all parts
of the empire; not peace to depend on the juridical determination of
perplexing questions, or the precise marking of the boundary of a complex
government. It is simple peace; sought in its natural course, and in its
ordinary haunts. It is peace sought in the spirit of peace, and laid in
chanroble s.com.p h : virt ual law l ibra ry principles purely pacific.
x — Edmund Burke, "Speech on Criticism." 24
On page 100 of the book DEP 25 , also in the topic of parallel structure and
repetition, the same example is found in toto. The only difference is that
petitioners acknowledged the author Edmund Burke, and respondents did
not.
In several other pages 26 the treatment and manner of presentation of the
topics of DEP are similar if not a rehash of that contained in CET. cralawnad
We believe that respondent Robles’ act of lifting from the book of petitioners
substantial portions of discussions and examples, and her failure to
acknowledge the same in her book is an infringement of petitioners’
copyrights.
When is there a substantial reproduction of a book? It does not necessarily
require that the entire copyrighted work, or even a large portion of it, be
copied. If so much is taken that the value of the original work is substantially
diminished, there is an infringement of copyright and to an injurious extent,
the work is appropriated. 27
In determining the question of infringement, the amount of matter copied
from the copyrighted work is an important consideration. To constitute
infringement, it is not necessary that the whole or even a large portion of
the work shall have been copied. If so much is taken that the value of the
original is sensibly diminished, or the labors of the original author are
substantially and to an injurious extent appropriated by another, that is
sufficient in point of law to constitute piracy. 28
cralawnad
The essence of intellectual piracy should be essayed in conceptual terms in
order to underscore its gravity by an appropriate understanding thereof.
Infringement of a copyright is a trespass on a private domain owned and
occupied by the owner of the copyright, and, therefore, protected by law,
and infringement of copyright, or piracy, which is a synonymous term in this
connection, consists in the doing by any person, without the consent of the
owner of the copyright, of anything the sole right to do which is conferred
by statute on the owner of the copyright. 29
The respondents’ claim that the copied portions of the book CET are also
found in foreign books and other grammar books, and that the similarity
between her style and that of petitioners can not be avoided since they come
from the same background and orientation may be true. However, in this
jurisdiction under Sec 184 of Republic Act 8293 it is provided that:
Limitations on Copyright. Notwithstanding the provisions of Chapter V, the
following shall not constitute infringement of copyright: c han robles lawlibra ry : redna d
x x x
(c) The making of quotations from a published work if they are compatible
with fair use and only to the extent justified for the purpose, including
quotations from newspaper articles and periodicals in the form of press
summaries: Provided, That the source and the name of the author, if
appearing on the work, are mentioned.
A copy of a piracy is an infringement of the original, and it is no defense that
the pirate, in such cases, did not know whether or not he was infringing any
copyright; he at least knew that what he was copying was not his, and he
copied at his peril. 30
The next question to resolve is to what extent can copying be injurious to
the author of the book being copied. Is it enough that there are similarities
in some sections of the books or large segments of the books are the same?
virtua l lawlib ra ry
In the case at bar, there is no question that petitioners presented several
pages of the books CET and DEP that more or less had the same contents.
It may be correct that the books being grammar books may contain
materials similar as to some technical contents with other grammar books,
such as the segment about the "Author Card." However, the numerous
pages that the petitioners presented showing similarity in the style and the
manner the books were presented and the identical examples can not pass
as similarities merely because of technical consideration. chanrob les.co m.ph : vi rtual law lib rary
The respondents claim that their similarity in style can be attributed to the
fact that both of them were exposed to the APCAS syllabus and their
respective academic experience, teaching approach and methodology are
almost identical because they were of the same background.
However, we believe that even if petitioners and respondent Robles were of
the same background in terms of teaching experience and orientation, it is
not an excuse for them to be identical even in examples contained in their
books. The similarities in examples and material contents are so obviously
present in this case. How can similar/identical examples not be considered
as a mark of copying?
We consider as an indicia of guilt or wrongdoing the act of respondent Robles
chan rob1es v irt ual 1aw l ibra ry of pulling out from Goodwill bookstores the book DEP upon learning of
petitioners’ complaint while pharisaically denying petitioners’ demand. It
was further noted that when the book DEP was re-issued as a revised
version, all the pages cited by petitioners to contain portion of their book
College English for Today were eliminated.
In cases of infringement, copying alone is not what is prohibited. The copying
must produce an "injurious effect." Here, the injury consists in that
respondent Robles lifted from petitioners’ book materials that were the result
of the latter’s research work and compilation and misrepresented them as
her own. She circulated the book DEP for commercial use and did not
acknowledge petitioners as her source. chanrobles vi rt ual lawli bra ry
Hence, there is a clear case of appropriation of copyrighted work for her
benefit that respondent Robles committed. Petitioners’ work as authors is
the product of their long and assiduous research and for another to represent
it as her own is injury enough In copyrighting books the purpose is to give
protection to the intellectual product of an author. This is precisely what the
law on copyright protected, under Section 184.1 (b). Quotations from a
published work if they are compatible with fair use and only to the extent
justified by the purpose, including quotations from newspaper articles and
chanroble s periodicals in the form of press summaries are allowed provided that the
source and the name of the author, if appearing on the work, are mentioned.
In the case at bar, the least that respondent Robles could have done was to
acknowledge petitioners Habana Et. Al. as the source of the portions of DEP.
The final product of an author’s toil is her book. To allow another to copy the
book without appropriate acknowledgment is injury enough.
WHEREFORE, the petition is hereby GRANTED. The decision and resolution
of the Court of Appeals in CA-G.R. CV No. 44053 are SET ASIDE. The case
is ordered remanded to the trial court for further proceedings to receive
evidence of the parties to ascertain the damages caused and sustained by
petitioners and to render decision in accordance with the evidence submitted
to it.
chanro bles law l ib rary : red
SO ORDERED.
Kapunan and Ynares-Santiago, JJ., concur.
Melo, J., took no part; personal reasons.
Separate Opinions
DAVIDE, JR., C.J., dissenting: chan rob1e s virtual 1aw l ibra ry
I am unable to join the majority view.
From the following factual and procedural antecedents; I find no alternative
but to sustain both the trial court and the Court of Appeals. chanrob lesvi rtua l|awlib rary
On 12 July 1988, HABANA, Et. Al. filed with the trial court a complaint for
infringement and unfair competition, with damages against private
respondent Felicidad C. Robles (hereafter ROBLES) and her publisher and
distributor, Goodwill Trading Co., Inc. (hereafter GOODWILL). The case was
docketed as Civil Case No. 88-1317.
HABANA, Et. Al. averred in their complaint that they were the co-authors
and joint copyright owners of their published works College English for
Today, Books 1 and 2 (hereafter CET) and Workbook for College Freshmen
English, Series 1 1; they discovered that ROBLES’ own published works,
Developing English Proficiency, Books 1 and 2, (hereafter DEP), published
and distributed in 1985, exhibited an uncanny resemblance, if not outright
physical similarity, to CET as to content, scheme, sequence of topics and
ideas, manner of presentation and illustrative examples; the plagiarism,
incorporation and reproduction of particular portions of CET into DEP could
not be gainsaid since ROBLES was substantially familiar with CET and the
textual asportation was accomplished without their authority and/or
consent; ROBLES and GOODWILL Jointly misrepresented DEP (over which
they shared copyright ownership) "as the former’s original published works
and concept;" and "notwithstanding formal demands made . . . to cease and
desist from the sale and distribution of DEP, [ROBLES and GOODWILL]
persistently failed and refused to comply therewith." HABANA Et. Al. then
prayed for the court to: (1) order the submission and thereafter the
destruction of all copies of DEP, together with the molds, plates, films and
other materials used in the printing thereof; (2) require ROBLES and
GOODWILL to render an accounting of the sales of the "infringing works from
the time of its (sic) inceptive publication up to the time of judgment, as well
as the amount of sales and profits . . . derived;" and (3) to enjoin ROBLES
and GOODWILL to solidarily pay actual, moral and exemplary damages, as
well as attorney’s fees and expenses of litigation.c ralawnad
In its Answer, GOODWILL denied culpability since "it had no knowledge or
information sufficient to form a belief as to the allegations of plagiarism,
incorporation and reproduction" and hence "could not be privy to the same,
if (there were) any;" and that in an Agreement with co-defendant ROBLES,
the latter would be solely responsible for acts of plagiarism or violations of
copyright or any other law, to the extent of answering for any and all
damages GOODWILL may suffer. GOODWILL also interposed a compulsory
counterclaim against PACITA, Et. Al. and a crossclaim against its co-
defendant anchored on the aforementioned Agreement.
In her answer, ROBLES asserted that: (1) DEP was the exclusive product of
her independent research, studies and experience; (2) DEP, particularly the
segments where the alleged literal similitude appeared, were admittedly
influenced or inspired by earlier treatises, mostly by foreign authors; but
that "influences and/or inspirations from other writers" like the methodology
and techniques as to presentation, teaching concept and design, research
and orientation which she employed, fell within the ambit of general
information, ideas, principles of general or universal knowledge which were
commonly and customarily understood as incapable of private and exclusive
use, appropriation or copyright; and (3) her works were the result of the
legitimate and reasonable exercise of an author’s "right to fair use of even
copyrighted materials as [a] guide." She further claimed that her various
national and regional professional activities in general education, language
and literature, as well as her teaching experience in graduate and post
graduate education would obviate the remotest possibility of plagiarism. chanro bles vi rtua l lawlib ra ry
ROBLES likewise suggested that any similarity between DEP and CET as
regards scope and sequence could be attributed to "the orientation of the
authors to the scope and sequence or syllabus — which incorporates
standards known among English grammar book writers — of the subject-
matter for Basic Communication Arts recommended by the Association of
Philippine Colleges of Arts and Sciences (APCAS)." While the syllabus was
admittedly adopted in DEP, she claimed to have treated quite differently in
DEP the very ideas, techniques or principles expressed in CET such that
neither textbook could be considered a copy or plagiarism of the other.
At the pre-trial conference, the parties agreed to a stipulation of facts 2 and
for the court to first resolve the issue of infringement before disposing of the
claims for damages. After trial on the merits, the trial court rendered its
decision in favor of defendants, the dispositive portion of which reads:
WHEREFORE, premises considered, the Court hereby orders that the
complaint filed against defendants Felicidad Robles and Goodwill Trading Co.
Inc. shall be DISMISSED: that said plaintiffs solidarily reimburse defendant
Robles for P20,000.00 attorney’s fees and defendant Goodwill for P5,000.00
attorney’s fees. Plaintiffs are liable for costs of suit.
IT IS SO ORDERED. 3
Noting that the law applicable to the case was Presidential Decree No. 49, 4
the trial court found that HABANA, Et. Al. failed to discharge their onus of
proving that ROBLES and GOODWILL committed acts constituting copyright
infringement. Moreover, the trial court found that "the cause of action or
acts complained of [were] not covered by said decree" as Section 10 thereof
barred authors of works already lawfully made accessible to the public from
prohibiting the reproductions, translations, adaptations, recitation and
performance of the same, while Section 11 allowed the utilization of
reproductions, quotations and excerpts of such works. The trial court thus
agreed with ROBLES that "the complained acts [were] of general and
universal knowledge and use which plaintiffs cannot claim originality or seek
redress to the law for protection" and observed that DEP and CET had the
same sources, consisting chiefly of earlier works, mostly foreign books.
GOODWILL’s crossclaim against ROBLES, counterclaim against HABANA, Et.
Al. as well as ROBLES’ compulsory counterclaim against GOODWILL were all
dismissed for lack of factual and legal bases. chanrob lesvi rtual|awl ibra ry
HABANA, Et. Al. appealed to the Court of Appeals. The case was docketed
as CA-G.R. CV No. 44053. Before said court HABANA, Et Al., in the main,
argued that the trial court totally disregarded their evidence and merely
subscribed to ROBLES’ arguments. The Court of Appeals, however, likewise
disposed of the controversy in favor of ROBLES and GOODWILL. 5
However, the Court of Appeals modified the trial court’s decision by
reversing the award for attorney’s fees. It held that the good faith and
sincerity of HABANA, et al in commencing the action negated the basis
therefor. Their motion for reconsideration having been denied for want of
cogent reasons, HABANA, Et Al., instituted this petition. They claim that the
Court of Appeals committed reversible error in failing to appreciate: (1) the
insuperable evidence and facts admitted and proved demonstrating
plagiarism or piracy and instead afforded full weight and credit to ROBLES’
matrix of general, hypothetical and sweeping statements and/or defenses;
chanro bles vi rtua l lawli bra ry
(2) ROBLES’ and GOODWILL’s animo furandi or intent to appropriate or copy
CET with the non-removal of the damaging copies of DEP from the
bookstores despite notice to withdraw the same; and (3) the fact that
ROBLES abused a writer’s right to fair use, in violation of Section 11 of P.D.
No. 49. 6 They invoke Laktaw v. Paglinawan 7 which, they theorize is on all
fours with the case at bar. ROBLES contends that appeal by certiorari does
not lie in this case for the challenged decision and the trial court’s judgment
were amply supported by evidence, pertinent laws and jurisprudence.
Hence, her counterclaim for moral damages should, therefore, be granted
or for us to order the remand of the case to the trial court for reception of
evidence on damages. GOODWILL, on its part, stood pat on its disclaimer,
with the assertion that no proof was ever introduced that it co-authored DEP
or that it singly or in cabal with ROBLES committed any act constituting
copyright infringement. chanroblesv irt uallawl ibra ry
The core issue then is whether or not the Court of Appeals erred in affirming
the trial court’s judgment that despite the apparent textual, thematic and
sequential similarity between DEP and CET, no copyright was committed by
ROBLES and GOODWILL.
While the complaint, in Civil Case No. 88-1317 was filed during the effectivity
of P.D. No. 49, the provisions of the new intellectual property law, R.A. No.
8293, 8 nevertheless bears significance here. It took effect on 1 January
1998, but its Section 239.3 clearly states that its provisions shall apply to
works in which copyright protection obtained prior to the effectivity of the
Act subsists, provided, however, that the application of the Act shall not
result in the diminution of such protection. Also, the philosophy behind both
statutes as well as the essential principles of copyright protection and
copyright infringement have, to a certain extent, remained the same.
A copyright may be accurately defined as the right granted by statute to the
proprietor of an intellectual production to its exclusive use and enjoyment
to the extent specified in the statute. 9 Under Section 177 of R.A. No. 8293,
10 the copy or economic right (copyright and economic right are used
interchangeably in the statute) consists of the exclusive right to carry out,
authorize or prevent the following acts: chanrob les vi rtua lawlib rary c han robles. com:cha nrob les.co m.ph
177.1 Reproduction of the work or substantial portion of the work;
177.2 Dramatization, translation, adaptation, abridgment, arrangement or
other transformation of the work;
177.3 The first public distribution of the original and each copy of the work
by sale or other forms of transfer of ownership;
177.4 Rental of the original or a copy of an audiovisual or cinematographic
work, a work embodied in a sound recording, a computer program, a
compilation of data and other materials or a musical work in graphic form,
irrespective of the ownership of the original or the copy which is the subject
of the rental;
general as "piracy," is a trespass on a domain owned and occupied by a
copyright owner; it is violation of a private right protected by law. 14 With
the invasion of his property rights, a copyright owner is naturally entitled to
seek redress, enforce and hold accountable the defrauder or usurper of said
economic rights. chan roble svirtual lawlib rary

177.5 Public display of the original or a copy of the work;
177.6 Public performance of the work; and
177.7 Other communication to the public of the work.
Now, did ROBLES and GOODWILL infringe upon the copyright of HABANA Et.
Al. by publishing DEP; which the latter alleged to be a reproduction, or in
the least, a substantial reproduction of CET? Both the trial court and
respondent court found in the negative. I submit they were correct.
chanro blesvi rt uallawl ibra ry:red

To constitute infringement, the usurper must have copied or appropriated

"The work," as repeatedly mentioned, refers to the literary and artistic works
defined as original intellectual creations in the literary and artistic domain
protected from the moment of their creation and enumerated in Section
172.1, which includes books and other literary, scholarly, scientific and
artistic works. 11
Stripped in the meantime of its indisputable social and beneficial functions,
12 the use of intellectual property or creations should basically promote the
creator or author’s personal and economic gain. Hence, the copyright
protection extended to the creator should ensure his attainment of some
form of personal satisfaction and economic reward from the work he
produced. Without conceding the suitability of Laktaw as precedent, the
Court there quoted Manresa and explained: chan roble svirtual lawlib rary
the "original" work of an author or copyright proprietor; 15 absent copying,
there can be no infringement of copyright. 16 In turn, a work is deemed by
law an original if the author created it by his own skill, labor and judgment.
17 On its part, a copy is that which comes so near to the original so as to
give to every person seeing it the idea created by the original. It has been
held that the test of copyright infringement is whether an ordinary observer
comparing the works can readily see that one has been copied from the
other. 18 A visual comparison of the portions of CET 19 juxtaposed against
certain pages of DEP, 20 would inescapably lead to a conclusion that there
is a discernible similarity between the two; however, as correctly assessed
by respondent court and the lower court, no conclusion, can be drawn that
DEP, in legal contemplation, is a copy of CET.

Was DEP a substantial reproduction of CET? To constitute a substantial

He who writes a book, or carves a statue, or makes an invention, has the
absolute right to reproduce or sell it, just as the owner of the land has the
absolute right to sell it or its fruits. But while the owner of the land, by selling
it and its fruits, perhaps fully realizes all its economic value, by receiving its
benefits and utilities, which are represented for example, by the price, on
the other hand the author of a book, statue or invention does not reap all
the benefits and advantages of his own property by disposing of it, for the
most important form of realizing the economic advantages of a book, statue
or invention, consists in the right to reproduce it in similar or like copies,
everyone of which serves to give to the person reproducing them all the
reproduction, it is not necessary that the entire copyrighted work, or even a
large portion of it, be copied, if so much is taken that the value of the original
is substantially diminished, or if the labors of the original author are
substantially, and to an injurious extent, appropriated. 21 But the similarity
of the books here does not amount to an appropriation of a substantial
portion of CET. If the existence of substantial similarities does not of itself
establish infringement, 22 mere similarities (not substantial similarities) in
some sections of the books in question decisively militate against a claim for
infringement where the similarities had been convincingly established as
proceeding from a number of reasons and/or factors. cralawnad

conditions which the original requires in order to give the author the full
enjoyment thereof. If the author of a book, after its publication, cannot
prevent its reproduction by any person who may want to reproduce it, then
the property right granted him is reduced to a very insignificant thing and
the effort made in the production of the book is in no way rewarded. 13
The execution, therefore, of any one or more of the exclusive rights
conferred by law on a copyright owner, without his consent, constitutes
copyright infringement. In essence, copyright infringement, known in
1. As both books are grammar books, they inevitably deal with the same
subjects typically and ordinarily treated by writers of such genre, 23 e.g.,
system of book classification, the different kinds of card catalogs and their
entries, use of punctuation marks, paragraphs, the characteristics of an
effective paragraph, language structure, different parts of a book, etc. These
standard subjects fall within the domain of ideas, concepts, universal and
general knowledge that have, as admitted by the protagonists here, been in
existence for quite a long time. 24 As such, HABANA, Et. Al. cannot demand
monopoly, by way of example, in the use of the recognized library
classification systems (Dewey Decimal System and the Library of Congress
System), or how a book can be divided into parts (frontispiece, title page,
copyright page, preface, table of contents, etc.) or to the different headings
used in a card catalogue (title card, author card and subject card), since
these are of common or general knowledge. Even in this jurisdiction, no
protection can be extended to such an idea, procedure, system method or
operation, concept, principle, discovery or mere data, even if expressed,
explained, illustrated or embodied in a work.25 cra law:red
2. As found by respondent court, CET and DEP had common sources and
materials, 26 such that the particular portions claim to have been lifted and
literally reproduced also appeared in earlier works, mostly by foreign
authors. This is clear from the testimony of petitioner Dr. Pacita Habana:
virtua l law lib rary
chanrobles.c om :
Q Let’s clarify your position Dra. Habana. When defendants test (sic) showed
10 words similar to yours, you so concluded it was (sic) copied from yours
but when I pointed out to you same (sic) words contained in the earlier book
of Wills then you earlier in your test in your book (sic) you refused to admit
that it was copied from Wills.
A Yes, sir. We have never — all 35 words were copied from there.
Q But what I am asking how could you conclude that by just similarity of 10
words of defendants words that was copied from yours [sic] and when I
point out to you the similarity of that same words from the words earlier
than yours (sic) you refused to admit that you copied?
A I would like to change the final statement now that in the case of defendant
Robles you pointed out her source very clear. She copied it from that book
by Wills. c hanroblesv irt ual|awlib rary
Q So, she did not copy it from yours?
A Alright, maybe she did not copy it but definitely it is a pattern of plagerism
[sic]. 27
3. Similarity in orientation and style can likewise be attributed to the
exposure of the authors to the APCAS syllabus and their respective academic
experience, teaching approaches and methodology. It is not farfetched that
they could have even influenced each other as textbook writers. ROBLES
and Dr. Pacita Habana were faculty members of the Institute of English of
the Far Eastern University from 1964 to 1974. 28 Both were ardent students,
researchers, lecturers, textbook writers and teachers of English and
grammar. They even used to be on friendly terms with each other, to the
extent that Dr. Habana admitted that ROBLES assisted the former in the
preparation of her doctoral dissertation. Given their near-identical academic
and professional background, it is natural they would use many expressions
and definitions peculiar to teaching English grammar. It comes therefore
with no surprise that there are similarities in some parts of the rival books.
Indeed, it is difficult to conceive how writers on the same subject matter can
very well avoid resorting to common sources of information and materials
and employing similar expressions and terms peculiar to the subject they
are treating. 29 chanro bles law l ibra ry
To illustrate, an excerpt from page 21 of CET reads: chanrob 1es vi rtual 1aw lib rary
Author Card
The author card is the main entry card. It contains
1. the author’s complete name on the first line, surname first, which may be
followed by the date of his birth and death if he is no longer living;
2. the title of the book, and the subtitle, if there is one;
3. the edition, if it is not the first;
4. the translator or illustrator, if there is any;
5. the imprint which includes the publisher, the place and date of
publication; cha nrob les vi rtua lawlib rary chan robles .com:cha nro bles.c om.ph
6. the collation composed of the number of pages, volume, illustrations, and
the size of the book;
7. the subjects with which the book deals [sic];
8. the call number on the upper left-hand corner.
Names beginning with Mc, or M are filed in the card catalog as though spelled
out as MAC, for example Mc Graw-MacGraw. The same is true of St. and
Saint.
While a portion of DEP found on page 18 which discusses the author card
provides: c han rob1es v irt ual 1aw l ibra ry
The author card is the main entry card containing: chanrob 1es vi rtua l 1aw lib rary
1. the author’s complete name on the first line, surname first, which may be
followed by the date of his birth and death if he is no longer living;
2. the title of the book, and the subtitle if there is one;
3. the edition, if it is not the first;
4. the translator or illustrator, if any;
5. the imprint which includes the publisher, the place and date of publication;
6. the collation, composed of the number of pages, volume, illustrations,
and the size of the book;
7. the subject with which the book deals; and
8. the call number on the upper-left hand corner.
Names beginning with MC, or M are filed in the card catalog considered
spelled out as MAC, for example: Mcleod-Macleod. This is true also of St.
and Saint.
The entries found in an author card, having been developed over quite some
time, are expectedly uniform. Hence, HABANA Et. Al. and ROBLES would
have no choice but to articulate the terms particular to the entries in an
identical manner.
I thus find that the ruling of the respondent court is totally supported by the
evidence on record. Of doctrinal persuasion is the principle that factual
determinations of the Court of Appeals and the trial court are conclusive and
binding upon this Court, and the latter will not, as a rule, disturb these
findings unless compelling and cogent reasons necessitate a reexamination,
if not a reversal, of the same. 30 Tested against this jurisprudential canon,
to subject the challenged decision of the Court of Appeals to further scrutiny
would be superfluous, if not, improvident. cha nro bles vi rtua l lawlib ra ry
I am not persuaded by the claim of HABANA, Et. Al. that Laktaw is on all
fours with and hence applicable to the case at bar. There, this Court disposed
that defendant, without the consent of and causing irreparable damage to
Laktaw, reproduced the latter’s literary work Diccionario Hispano-Tagalog,
and improperly copied the greater part thereof in the work Diccionariong
Kastila-Tagalog published by defendant, in violation of Article 7 of the Law
of 10 January 1879 on Intellectual Property. This Court anchored its decision
on the following observations: chan roblesv irt uallawl ibra ry
(1) [O]f the 23,560 Spanish words in the defendant’s dictionary . . . only
cha nro bles. com:cra law:red 3,108 words are the defendant’s own, or, what is the same thing, the
defendant has added only this number of words to those that are in the
plaintiff’s dictionary, he having reproduced or copied the remaining 20,452
words;
(2) [T]he defendant also literally reproduced and copied for the Spanish
words in his dictionary, the equivalents, definitions and different meanings
in Tagalog, given in plaintiff’s dictionary, having reproduced, as to some
words, everything that appears in the plaintiff’s dictionary for similar Spanish
words, although as to some he made some additions of his own. Said copies
and reproductions are numerous . . .;
(3) [T]he printer’s errors in the plaintiffs dictionary as to the expression of
some words in Spanish as well as their equivalents in Tagalog are also
reproduced, a fact which shows that the defendant, in preparing his
chan roble s law li bra ry dictionary, literally copied those Spanish words and their meanings and
equivalents in Tagalog from the plaintiff’s dictionary. 31 chan roble s virt ual lawl ibra ry
Plainly, the rationale in Laktaw does not apply in this case. First, aside from
an isolated accounting of the number of words supposedly usurped in a
segment of DEP from CET, 32 the records do not disclose that all the words
allegedly copied were tallied and that the words thus tallied were numerous
enough to support a finding of copying. Second, as already conceded, while
there is an identity in the manner by which some of the ideas and concepts
were articulated, this prescinded from various factors already elucidated.
Besides, ROBLES’ testimony that she made an independent investigation or
research of the original works or authors she consulted was unrebutted; 33
for germane here is the question of whether the alleged infringer could have
obtained the same information by going to the same source by her own
independent research. 34 ROBLES convinced the trial court and the Court of
Appeals on this; thus, we are bound by this factual determination, as
likewise explained earlier. Third, reproduction of the printer’s errors or the
author’s blunders and inaccuracies in the infringing copy does not ipso facto
constitute copying or plagiarism or infringement, but it is conceded that they
are telltale signs that infringement might have been committed. 35
However, the records do not reveal this to be the case. Fourth, the law on
intellectual property violated in Laktaw was a world and time apart from R.A.
No. 8293 or even P.D. No. 49. Thus, under Article 7 of the Law of 10 January
1879, the Court ruled that nobody could reproduce another person’s work
without the owner’s consent, even merely to annotate or add anything to it,
or improve any edition thereof. The more recent laws on intellectual
property, however, recognize recent advancements in technology transfer
and information dissemination. They thus allow the use of copyrighted
materials if compatible with fair use and to the extent justified for the
purpose. In particular, the new laws sanction the fair use of copyrighted
work for criticism, comment, news reporting, teaching including multiple
copies for classroom use, scholarship, research and similar purposes. 36
Further, the limitations of the exclusive use of copyrighted materials under
Sections 10 and 11 of P.D. No. 49 in consonance with the principle of fair
use have been reproduced and incorporated in the new law. 37 All told,
Laktaw is inapplicable.
chan roble s law lib ra ry

Fair use has been defined as a privilege to use the copyrighted material in a
reasonable manner without the consent of the copyright owner or as copying
the theme or ideas rather than their expression. 38 No question of fair or
unfair use arises however, if no copying is proved to begin with. This is in
consonance with the principle that there can be no infringement if there was
no copying. 39 It is only where some form of copying has been shown that
it becomes necessary to determine whether it has been carried to an
"unfair," that is, illegal, extent. 40 Consequently, there is no reason to
address the issue of whether ROBLES abused a writer’s right to fair use with
the ascertainment that DEP was not a copy or a substantial copy of CET.

WHEREFORE, I vote to DENY the petition and to AFFIRM the challenged

decision of 27 June 1997 of the Court of Appeals.

G.R. No. 141309 December 23, 2008
LIWAYWAY VINZONS-CHATO, petitioner,
vs.
FORTUNE TOBACCO CORPORATION, respondent.
RESOLUTION
NACHURA, J.:
It is a fundamental principle in the law of public officers that a duty
owing to the public in general cannot give rise to a liability in favor of
1
particular individuals. The failure to perform a public duty can
constitute an individual wrong only when a person can show that, in
the public duty, a duty to himself as an individual is also involved, and
that he has suffered a special and peculiar injury by reason of its
2 v. Court of Appeals. It was held, among others, that RMC 37-93, has
improper performance or non-performance.
3
By this token, the Court reconsiders its June 19, 2007 Decision in this
case.
As culled from the said decision, the facts, in brief, are as follows:
On June 10, 1993, the legislature enacted Republic Act No. 7654 (RA
7654), which took effect on July 3, 1993. Prior to its effectivity, cigarette
brands 'Champion," "Hope," and "More" were considered local brands
subjected to an ad valorem tax at the rate of 20-45%. However, on July
1, 1993, or two days before RA 7654 took effect, petitioner issued RMC
37-93 reclassifying "Champion," "Hope," and "More" as locally
manufactured cigarettes bearing a foreign brand subject to the 55% ad
valorem tax. RMC 37-93 in effect subjected "Hope," "More," and
"Champion" cigarettes to the provisions of RA 7654, specifically, to
Sec. 142, (c)(1) on locally manufactured cigarettes which are currently
classified and taxed at 55%, and which imposes an ad valorem tax of
"55% provided that the minimum tax shall not be less than Five Pesos
(P5.00) per pack."
On July 2, 1993, at about 5:50 p.m., BIR Deputy Commissioner Victor
A. Deoferio, Jr. sent via telefax a copy of RMC 37-93 to Fortune
Tobacco but it was addressed to no one in particular. On July 15, 1993,
Fortune Tobacco received, by ordinary mail, a certified xerox copy of
RMC 37-93. On July 20, 1993, respondent filed a motion for
reconsideration requesting the recall of RMC 37-93, but was denied in
a letter dated July 30, 1993. The same letter assessed respondent for
ad valorem tax deficiency amounting to P9,598,334.00 (computed on
the basis of RMC 37-93) and demanded payment within 10 days from
receipt thereof. On August 3, 1993, respondent filed a petition for
review with the Court of Tax Appeals (CTA), which on September 30,
1993, issued an injunction enjoining the implementation of RMC 37-
93. In its decision dated August 10, 1994, the CTA ruled that RMC 37-
93 is defective, invalid, and unenforceable and further enjoined
petitioner from collecting the deficiency tax assessment issued
pursuant to RMC No. 37-93. This ruling was affirmed by the Court of
Appeals, and finally by this Court in Commissioner of Internal Revenue
fallen short of the requirements for a valid administrative issuance.
On April 10, 1997, respondent filed before the RTC a complaint for
damages against petitioner in her private capacity. Respondent
contended that the latter should be held liable for damages under
Article 32 of the Civil Code considering that the issuance of RMC 37-
93 violated its constitutional right against deprivation of property
without due process of law and the right to equal protection of the laws.
Petitioner filed a motion to dismiss contending that: (1) respondent has
no cause of action against her because she issued RMC 37-93 in the
performance of her official function and within the scope of her
authority. She claimed that she acted merely as an agent of the
Republic and therefore the latter is the one responsible for her acts; (2)
the complaint states no cause of action for lack of allegation of malice
or bad faith; and (3) the certification against forum shopping was
signed by respondent's counsel in violation of the rule that it is the
plaintiff or the principal party who should sign the same.
On September 29, 1997, the RTC denied petitioner's motion to dismiss
holding that to rule on the allegations of petitioner would be to
prematurely decide the merits of the case without allowing the parties
to present evidence. It further held that the defect in the certification
against forum shopping was cured by respondent's submission of the
corporate secretary's certificate authorizing its counsel to execute the
certification against forum shopping. x x x x
xxxx
The case was elevated to the Court of Appeals via a petition for
certiorari under Rule 65. However, same was dismissed on the ground
that under Article 32 of the Civil Code, liability may arise even if the
defendant did not act with malice or bad faith. The appellate court
ratiocinated that Section 38, Book I of the Administrative Code is the
general law on the civil liability of public officers while Article 32 of the
Civil Code is the special law that governs the instant case.
Consequently, malice or bad faith need not be alleged in the complaint
for damages. It also sustained the ruling of the RTC that the defect of
the certification against forum shopping was cured by the submission
of the corporate secretary's certificate giving authority to its counsel to
4 at large, and who are ordinarily paid out of the public treasury.
execute the same. [Citations and underscoring omitted.]
In the aforesaid June 19, 2007 Decision, we affirmed the disposition of
the Court of Appeals (CA) and directed the trial court to continue with
5
the proceedings in Civil Case No. 97-341-MK.
Petitioner, on July 20, 2007, subsequently moved for the
6 he owes to the public at large and no one individual could single himself
reconsideration of the said decision. After respondent filed its
7 out and assert that they were duties owing to him alone. So, members
comment, the Court, in its April 14, 2008 Resolution, denied with
finality petitioner's motion for reconsideration.
Undaunted, petitioner filed, on April 29, 2008 her Motion to Refer [the
8
case] to the Honorable Court En Banc. She contends that the petition
raises a legal question that is novel and is of paramount importance.
The earlier decision rendered by the Court will send a chilling effect to
public officers, and will adversely affect the performance of duties of
superior public officers in departments or agencies with rule-making
and quasi-judicial powers. With the said decision, the Commissioner of
Internal Revenue will have reason to hesitate or refrain from
performing his/her official duties despite the due process safeguards
9
in Section 228 of the National Internal Revenue Code. Petitioner
10
hence moves for the reconsideration of the June 19, 2007 Decision.
11
In its June 25, 2008 Resolution, the Court referred the case to the
En Banc. Respondent consequently moved for the reconsideration of
this resolution.
We now resolve both motions.
There are two kinds of duties exercised by public officers: the "duty
owing to the public collectively" (the body politic), and the "duty owing
to particular individuals, thus:
1. Of Duties to the Public. - The first of these classes embraces those
officers whose duty is owing primarily to the public collectively --- to the
body politic --- and not to any particular individual; who act for the public
The officers whose duties fall wholly or partially within this class are
numerous and the distinction will be readily recognized. Thus, the
governor owes a duty to the public to see that the laws are properly
executed, that fit and competent officials are appointed by him, that
unworthy and ill-considered acts of the legislature do not receive his
approval, but these, and many others of a like nature, are duties which
of the legislature owe a duty to the public to pass only wise and proper
laws, but no one person could pretend that the duty was owing to
himself rather than to another. Highway commissioners owe a duty that
they will be governed only by considerations of the public good in
deciding upon the opening or closing of highways, but it is not a duty
to any particular individual of the community.
These illustrations might be greatly extended, but it is believed that
they are sufficient to define the general doctrine.
2. Of Duties to Individuals. - The second class above referred to
includes those who, while they owe to the public the general duty of a
proper administration of their respective offices, yet become, by reason
of their employment by a particular individual to do some act for him in
an official capacity, under a special and particular obligation to him as
an individual. They serve individuals chiefly and usually receive their
compensation from fees paid by each individual who employs them.
A sheriff or constable in serving civil process for a private suitor, a
recorder of deeds in recording the deed or mortgage of an individual,
a clerk of court in entering up a private judgment, a notary public in
protesting negotiable paper, an inspector of elections in passing upon
the qualifications of an elector, each owes a general duty of official
good conduct to the public, but he is also under a special duty to the
particular individual concerned which gives the latter a peculiar interest
12
in his due performance.
In determining whether a public officer is liable for an improper
performance or non-performance of a duty, it must first be determined
which of the two classes of duties is involved. For, indeed, as the
eminent Floyd R. Mechem instructs, "[t]he liability of a public officer to
an individual or the public is based upon and is co-extensive with his
duty to the individual or the public. If to the one or the other he owes
13
no duty, to that one he can incur no liability."
Stated differently, when what is involved is a "duty owing to the public
in general", an individual cannot have a cause of action for damages
against the public officer, even though he may have been injured by
the action or inaction of the officer. In such a case, there is damage to
the individual but no wrong to him. In performing or failing to perform a
public duty, the officer has touched his interest to his prejudice; but the
14
officer owes no duty to him as an individual. The remedy in this case
15
is not judicial but political.
The exception to this rule occurs when the complaining individual
suffers a particular or special injury on account of the public officer's
improper performance or non-performance of his public duty. An
individual can never be suffered to sue for an injury which, technically,
is one to the public only; he must show a wrong which he specially
16
suffers, and damage alone does not constitute a wrong. A contrary
precept (that an individual, in the absence of a special and peculiar
injury, can still institute an action against a public officer on account of
an improper performance or non-performance of a duty owing to the
public generally) will lead to a deluge of suits, for if one man might have
an action, all men might have the like-the complaining individual has
17
no better right than anybody else. If such were the case, no one will
serve a public office. Thus, the rule restated is that an individual cannot
have a particular action against a public officer without a particular
injury, or a particular right, which are the grounds upon which all
18
actions are founded.
19
Juxtaposed with Article 32 of the Civil Code, the principle may now
translate into the rule that an individual can hold a public officer
personally liable for damages on account of an act or omission that
violates a constitutional right only if it results in a particular wrong or
injury to the former. This is consistent with this Court's pronouncement
in its June 19, 2007 Decision (subject of petitioner's motion for
reconsideration) that Article 32, in fact, allows a damage suit for "tort
20
for impairment of rights and liberties."
It may be recalled that in tort law, for a plaintiff to maintain an action for
damages for the injuries of which he complains, he must establish that
such injuries resulted from a breach of duty which the defendant owed
the plaintiff, meaning a concurrence of injury to the plaintiff and legal
responsibility by the person causing it. Indeed, central to an award of
tort damages is the premise that an individual was injured in
21 22
contemplation of law. Thus, in Lim v. Ponce de Leon, we granted
the petitioner's claim for damages because he, in fact, suffered the loss
of his motor launch due to the illegal seizure thereof. In Cojuangco, Jr.
23
v. Court of Appeals, we upheld the right of petitioner to the recovery
of damages as there was an injury sustained by him on account of the
illegal withholding of his horserace prize winnings.
In the instant case, what is involved is a public officer's duty owing to
the public in general. The petitioner, as the then Commissioner of the
Bureau of Internal Revenue, is being taken to task for Revenue
Memorandum Circular (RMC) No. 37-93 which she issued without the
requisite notice, hearing and publication, and which, in Commissioner
24
of Internal Revenue v. Court of Appeals, we declared as having
25
"fallen short of a valid and effective administrative issuance." A
public officer, such as the petitioner, vested with quasi-legislative or
rule-making power, owes a duty to the public to promulgate rules which
are compliant with the requirements of valid administrative regulations.
But it is a duty owed not to the respondent alone, but to the entire body
politic who would be affected, directly or indirectly, by the
administrative rule.
Furthermore, as discussed above, to have a cause of action for
damages against the petitioner, respondent must allege that it suffered
a particular or special injury on account of the non-performance by
petitioner of the public duty. A careful reading of the complaint filed with
the trial court reveals that no particular injury is alleged to have been
sustained by the respondent. The phrase "financial and business
26
difficulties" mentioned in the complaint is a vague notion, ambiguous
in concept, and cannot translate into a "particular injury." In contrast,
the facts of the case eloquently demonstrate that the petitioner took
nothing from the respondent, as the latter did not pay a single centavo
on the tax assessment levied by the former by virtue of RMC 37-93.
With no "particular injury" alleged in the complaint, there is, therefore,
no delict or wrongful act or omission attributable to the petitioner that
would violate the primary rights of the respondent. Without such delict
or tortious act or omission, the complaint then fails to state a cause of
action, because a cause of action is the act or omission by which a
27
party violates a right of another.
A cause of action exists if the following elements are present: (1) a right
in favor of the plaintiff by whatever means and under whatever law it
arises or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and (3) an act or
omission on the part of such defendant violative of the right of the
plaintiff or constituting a breach of the obligation of defendant to plaintiff
28
for which the latter may maintain an action for recovery of damages.
The remedy of a party whenever the complaint does not allege a cause
of action is to set up this defense in a motion to dismiss, or in the
answer. A motion to dismiss based on the failure to state a cause of
action in the complaint hypothetically admits the truth of the facts
alleged therein. However, the hypothetical admission is limited to the
"relevant and material facts well-pleaded in the complaint and
inferences deducible therefrom. The admission does not extend to
conclusions or interpretations of law; nor does it cover allegations of
29
fact the falsity of which is subject to judicial notice."
The complaint may also be dismissed for lack of cause of action if it is
obvious from the complaint and its annexes that the plaintiff is not
30
entitled to any relief.
The June 19, 2007 Decision and the dissent herein reiterates that
under Article 32 of the Civil Code, the liability of the public officer may
accrue even if he/she acted in good faith, as long as there is a violation
31
of constitutional rights, citing Cojuangco, Jr. v. Court of Appeals,
where we said:
Under the aforecited article, it is not necessary that the public officer
acted with malice or bad faith. To be liable, it is enough that there was
a violation of the constitutional rights of petitioners, even on the pretext
32
of justifiable motives or good faith in the performance of duties.
The complaint in this case does not impute bad faith on the petitioner.
Without any allegation of bad faith, the cause of action in the
respondent's complaint (specifically, paragraph 2.02 thereof) for
damages under Article 32 of the Civil Code would be premised on the
findings of this Court in Commissioner of Internal Revenue v. Court of
33
Appeals (CIR v. CA), where we ruled that RMC No. 37-93, issued by
petitioner in her capacity as Commissioner of Internal Revenue, had
"fallen short of a valid and effective administrative issuance." This is a
logical inference. Without the decision in CIR v. CA, the bare
allegations in the complaint that respondent's rights to due process of
law and to equal protection of the laws were violated by the petitioner's
administrative issuance would be conclusions of law, hence not
hypothetically admitted by petitioner in her motion to dismiss.
But in CIR v. CA, this Court did not declare RMC 37-93
unconstitutional; certainly not from either the due process of law or
equal protection of the laws perspective. On due process, the majority,
after determining that RMC 37-93 was a legislative rule, cited an earlier
Revenue Memorandum Circular (RMC No. 10-86) requiring prior
notice before RMC's could become "operative." However, this Court
did not make an express finding of violation of the right to due process
of law. On the aspect of equal protection, CIR v. CA said: "Not
insignificantly, RMC 37-93 might have likewise infringed on uniformity
of taxation;" a statement that does not amount to a positive indictment
of petitioner for violation of respondent's constitutional right. Even if
one were to ascribe a constitutional infringement by RMC 37-93 on the
non-uniformity of tax provisions, the nature of the constitutional
transgression falls under Section 28, Article VI-not Section 1, Article
III-of the Constitution.
This Court's own summation in CIR v. CA: "All taken, the Court is
convinced that the hastily promulgated RMC 37-93 has fallen short of
a valid and effective administrative issuance," does not lend itself to an
interpretation that the RMC is unconstitutional. Thus, the complaint's
reliance on CIR v. CA-which is cited in, and a copy of which is annexed
to, the complaint-as suggestive of a violation of due process and equal
protection, must fail.
Accordingly, from the foregoing discussion, it is obvious that paragraph
2.02 of respondent's complaint loses the needed crutch to sustain a
valid cause of action against the petitioner, for what is left of the
paragraph is merely the allegation that only respondent's "Champion",
"Hope" and "More" cigarettes were reclassified.
If we divest the complaint of its reliance on CIR v. CA, what remains of
respondent's cause of action for violation of constitutional rights would
be paragraph 2.01, which reads:
2.01. On or about July 1, 1993, defendant issued Revenue
Memorandum Circular No. 37-93 (hereinafter referred to as RMC No.
37-93) reclassifying specifically "Champion", "Hope" and "More" as
locally manufactured cigarettes bearing a foreign brand. A copy of the
aforesaid circular is attached hereto and made an integral part hereof
as ANNEX "A". The issuance of a circular and its implementation
resulted in the "deprivation of property" of plaintiff. They were done
without due process of law and in violation of the right of plaintiff to the
equal protection of the laws. (Italics supplied.)
But, as intimated above, the bare allegations, "done without due
process of law" and "in violation of the right of plaintiff to the equal
protection of the laws" are conclusions of law. They are not
hypothetically admitted in petitioner's motion to dismiss and, for
purposes of the motion to dismiss, are not deemed as facts.
34
In Fluor Daniel, Inc. Philippines v. EB. Villarosa & Partners Co., Ltd.,
this Court declared that the test of sufficiency of facts alleged in the
complaint as constituting a cause of action is whether or not, admitting
the facts alleged, the court could render a valid verdict in accordance
with the prayer of the complaint. In the instant case, since what remains
of the complaint which is hypothetically admitted, is only the allegation
on the reclassification of respondent's cigarettes, there will not be
enough facts for the court to render a valid judgment according to the
prayer in the complaint.
Furthermore, in an action for damages under Article 32 of the Civil
Code premised on violation of due process, it may be necessary to
harmonize the Civil Code provision with subsequent legislative
enactments, particularly those related to taxation and tax collection.
Judicial notice may be taken of the provisions of the National Internal
Revenue Code, as amended, and of the law creating the Court of Tax
Appeals. Both statutes provide ample remedies to aggrieved
taxpayers; remedies which, in fact, were availed of by the respondent-
without even having to pay the assessment under protest-as recounted
by this Court in CIR v. CA, viz.:
In a letter, dated 19 July 1993, addressed to the appellate division of
the BIR, Fortune Tobacco requested for a review, reconsideration and
recall of RMC 37-93. The request was denied on 29 July 1993. The
following day, or on 30 July 1993, the CIR assessed Fortune Tobacco
for ad valorem tax deficiency amounting to P9,598,334.00.
On 03 August 1993, Fortune Tobacco filed a petition for review with
35
the CTA.
The availability of the remedies against the assailed administrative
action, the opportunity to avail of the same, and actual recourse to
these remedies, contradict the respondent's claim of due process
infringement.
At this point, a brief examination of relevant American jurisprudence
may be instructive.
42 U.S. Code 1983, a provision incorporated into the Civil Rights Act
of 1871, presents a parallel to our own Article 32 of the Civil Code, as
it states:
Every person who, under color of any statute, ordinance, regulation,
custom, usage, or any State or Territory, subjects, or causes to be
subjected, any citizen of the United States or other person within the
jurisdiction thereof to the deprivation of any rights, privileges or
immunities secured by the Constitution and laws, shall be liable to the
party injured in an action at law, suit in equity or other proper
proceeding for redress.
This provision has been employed as the basis of tort suits by many
petitioners intending to win liability cases against government officials
when they violate the constitutional rights of citizens.
Webster Bivens v. Six Unknown Named Agents of Federal Bureau of
36
Investigation, has emerged as the leading case on the victim's
entitlement to recover money damages for any injuries suffered as a
result of flagrant and unconstitutional abuses of administrative power.
In this case, federal narcotics officers broke into Bivens' home at 6:30
a.m. without a search warrant and in the absence of probable cause.
The agents handcuffed Bivens, searched his premises, employed
excessive force, threatened to arrest his family, subjected him to a
visual strip search in the federal court house, fingerprinted,
photographed, interrogated and booked him. When Bivens was
brought before a United States Commissioner, however, charges
against him were dismissed. On the issue of whether violation of the
Fourth Amendment "by a federal agent acting under color of authority
gives rise to a cause of action for damages consequent upon his
constitutional conduct," the U.S. Supreme Court held that Bivens is
entitled to recover damages for injuries he suffered as a result of the
agents' violation of the Fourth Amendment.
A number of subsequent decisions have upheld Bivens. For instance,
37
in Scheuer v. Rhodes, a liability suit for money damages was
allowed against Ohio Governor James Rhodes by petitioners who
represented three students who had been killed by Ohio National
Guard troops at Kent State University as they protested against U.S.
38
involvement in Vietnam. In Wood v. Strickland, local school board
members were sued by high school students who argued that they had
been deprived of constitutional due process rights when they were
expelled from school for having spiked a punch bowl at a school
39
function without the benefit of a full hearing. In Butz v. Economou,
Economou, whose registration privilege as a commodities futures
trader was suspended, without prior warning, by Secretary of
Agriculture Earl Butz, sued on a Bivens action, alleging that the
suspension was aimed at "chilling" his freedom of expression right
40
under the First Amendment. A number of other cases with virtually
the same conclusion followed.
However, it is extremely dubious whether a Bivens action against
government tax officials and employees may prosper, if we consider
the pronouncement of the U.S. Supreme Court in Schweiker v.
41
Chilicky, that a Bivens remedy will not be allowed when other
"meaningful safeguards or remedies for the rights of persons situated
as (is the plaintiff)" are available. It has also been held that a Bivens
42
action is not appropriate in the civil service system or in the military
43
justice system.
In Frank Vennes v. An Unknown Number of Unidentified Agents of the
44
United States of America, petitioner Vennes instituted a Bivens
action against agents of the Internal Revenue Service (IRS) who
alleged that he (Vennes) owed $250,000 in tax liability, instituted a
jeopardy assessment, confiscated Vennes' business, forced a total
asset sale, and put Vennes out of business, when in fact he owed not
a dime. The U.S. Court of Appeals, Eighth Circuit, ruled:
The district court dismissed these claims on the ground that a
taxpayer's remedies under the Internal Revenue Code preclude such
a Bivens action. Vennes cites to us no contrary authority, and we have
found none. Though the Supreme Court has not addressed this precise
question, it has strongly suggested that the district court correctly
applied Bivens:
When the design of a Government program suggests that Congress
has provided what it considers adequate remedial mechanisms for
constitutional violations that may occur in the course of its
administration, we have not created additional Bivens remedies.
xxxx
Congress has provided specific and meaningful remedies for
taxpayers who challenge overzealous tax assessment and collection
activities. A taxpayer may challenge a jeopardy assessment both
administratively and judicially, and may sue the government for a tax
refund, and have authorized taxpayer actions against the United States
to recover limited damages resulting from specific types of misconduct
by IRS employees. These carefully crafted legislative remedies confirm
that, in the politically sensitive realm of taxation, Congress's refusal to
permit unrestricted damage action by taxpayers has not been
inadvertent. Thus, the district court correctly dismissed Vennes's
Bivens claims against IRS agents for their tax assessment and
collection activities.
In still another Bivens action, instituted by a taxpayer against IRS
employees for alleged violation of due process rights concerning a tax
dispute, the U.S. District Court of Minnesota said:
In addition, the (Tax) Code provides taxpayers with remedies, judicial
and otherwise, for correcting and redressing wrongful acts taken by
IRS employees in connection with any collection activities. Although
these provisions do not provide taxpayers with an all-encompassing
remedy for wrongful acts of IRS personnel, the rights established under
the Code illustrate that it provides all sorts of rights against the
overzealous officialdom, including, most fundamentally, the right to sue
the government for a refund if forced to overpay taxes, and it would
make the collection of taxes chaotic if a taxpayer could bypass the
remedies provided by Congress simply by bringing a damage suit
45
against IRS employees.
American jurisprudence obviously validates the contention of the
petitioner.
Finally, we invite attention to Section 227, Republic Act No. 8424 (Tax
Reform Act of 1997), which provides:
Section 227. Satisfaction of Judgment Recovered Against any Internal
Revenue Officer. - When an action is brought against any Internal
Revenue officer to recover damages by reason of any act done in the
performance of official duty, and the Commissioner is notified of such
action in time to make defense against the same, through the Solicitor
General, any judgment, damages or costs recovered in such action
shall be satisfied by the Commissioner, upon approval of the Secretary
of Finance, or if the same be paid by the person sued shall be repaid
or reimbursed to him.
No such judgment, damages or costs shall be paid or reimbursed in
behalf of a person who has acted negligently or in bad faith, or with
willful oppression.
Because the respondent's complaint does not impute negligence or
bad faith to the petitioner, any money judgment by the trial court
against her will have to be assumed by the Republic of the Philippines.
46
As such, the complaint is in the nature of a suit against the State.

WHEREFORE, premises considered, we GRANT petitioner's motion

for reconsideration of the June 19, 2007 Decision and DENY
respondent's motion for reconsideration of the June 25, 2008
Resolution. Civil Case No. CV-97-341-MK, pending with the Regional
Trial Court of Marikina City, is DISMISSED

G.R. No. L-9356 February 18, 1915

C. S. GILCHRIST, plaintiff-appellee,

vs.

E. A. CUDDY, ET AL., defendants.

JOSE FERNANDEZ ESPEJO and MARIANO ZALDARRIAGA, appellants.

C. Lozano for appellants.

Bruce, Lawrence, Ross and Block for appellee.

TRENT, J.:

An appeal by the defendants, Jose Fernandez Espejo and Mariano Zaldarriaga,

from a judgment of the Court of First Instance of Iloilo, dismissing their cross-
complaint upon the merits for damages against the plaintiff for the alleged wrongful
issuance of a mandatory and a preliminary injunction.

Upon the application of the appellee an ex parte mandatory injunction was issued
on the 22d of May, 1913, directing the defendant, E. A. Cuddy, to send to the
appellee a certain cinematograph film called "Zigomar" in compliance with an
alleged contract which had been entered into between these two parties, and at
the time an ex parte preliminary injunction was issued restraining the appellants
from receiving and exhibiting in their theater the Zigomar until further orders of the
court. On the 26th of that month the appellants appeared and moved the court to
dissolve the preliminary injunction. When the case was called for trial on August 6,
the appellee moved for the dismissal of the complaint "for the reason that there is
no further necessity for the maintenance of the injunction." The motion was granted
without objection as to Cuddy and denied as to the appellants in order to give them
an opportunity to prove that the injunction were wrongfully issued and the amount
of damages suffered by reason thereof.
The pertinent part of the trial court's findings of fact in this case is as follows:
It appears in this case that Cuddy was the owner of the film Zigomar and that on
the 24th of April he rented it to C. S. Gilchrist for a week for P125, and it was to be
delivered on the 26th of May, the week beginning that day. A few days prior to this
Cuddy sent the money back to Gilchrist, which he had forwarded to him in Manila,
saying that he had made other arrangements with his film. The other arrangements
was the rental to these defendants Espejo and his partner for P350 for the week
and the injunction was asked by Gilchrist against these parties from showing it for
the week beginning the 26th of May.
It appears from the testimony in this case, conclusively, that Cuddy willfully violated
his contract, he being the owner of the picture, with Gilchrist because the
defendants had offered him more for the same period. Mr. Espejo at the trial on
the permanent injunction on the 26th of May admitted that he knew that Cuddy
was the owner of the film. He was trying to get it through his agents Pathe Brothers
in Manila. He is the agent of the same concern in Iloilo. There is in evidence in this
case on the trial today as well as on the 26th of May, letters showing that the Pathe
Brothers in Manila advised this man on two different occasions not to contend for
this film Zigomar because the rental price was prohibitive and assured him also
that he could not get the film for about six weeks. The last of these letters was
written on the 26th of April, which showed conclusively that he knew they had to
get this film from Cuddy and from this letter that the agent in Manila could not get
it, but he made Cuddy an offer himself and Cuddy accepted it because he was
paying about three times as much as he had contracted with Gilchrist for.
Therefore, in the opinion of this court, the defendants failed signally to show the
injunction against the defendant was wrongfully procured.
The appellants duly excepted to the order of the court denying their motion for new
trial on the ground that the evidence was insufficient to justify the decision
rendered. There is lacking from the record before us the deposition of the
defendant Cuddy, which apparently throws light upon a contract entered into
between him and the plaintiff Gilchrist. The contents of this deposition are
discussed at length in the brief of the appellants and an endeavor is made to show
that no such contract was entered into. The trial court, which had this deposition
before it, found that there was a contract between Cuddy and Gilchrist. Not having
the deposition in question before us, it is impossible to say how strongly it militates
against this findings of fact. By a series of decisions we have construed section
143 and 497 (2) of the Code of Civil Procedure to require the production of all the
evidence in this court. This is the duty of the appellant and, upon his failure to
perform it, we decline to proceed with a review of the evidence. In such cases we
rely entirely upon the pleadings and the findings of fact of the trial court and
examine only such assigned errors as raise questions of law. (Ferrer vs. Neri
Abejuela, 9 Phil. Rep., 324; Valle vs. Galera, 10 Phil. Rep., 619; Salvacion vs.
Salvacion, 13 Phil. Rep., 366; Breta vs. Smith, Bell & Co., 15 Phil. Rep., 446;
Arroyo vs. Yulo, 18 Phil. Rep., 236; Olsen & Co. vs. Matson, Lord & Belser Co., 19
Phil. Rep., 102; Blum vs. Barretto, 19 Phil. Rep., 161; Cuyugan vs. Aguas, 19 Phil.
Rep., 379; Mapa vs. Chaves, 20 Phil. Rep., 147; Mans vs. Garry, 20 Phil. Rep.,
134.) It is true that some of the more recent of these cases make exceptions to the
general rule. Thus, in Olsen & Co. vs. Matson, Lord & Belser Co., (19 Phil. Rep.,
102), that portion of the evidence before us tended to show that grave injustice
might result from a strict reliance upon the findings of fact contained in the
judgment appealed from. We, therefore, gave the appellant an opportunity to
explain the omission. But we required that such explanation must show a
satisfactory reason for the omission, and that the missing portion of the evidence
must be submitted within sixty days or cause shown for failing to do so. The other
cases making exceptions to the rule are based upon peculiar circumstances which
will seldom arise in practice and need not here be set forth, for the reason that they
are wholly inapplicable to the present case. The appellants would be entitled to
indulgence only under the doctrine of the Olsen case. But from that portion of the
record before us, we are not inclined to believe that the missing deposition would
be sufficient to justify us in reversing the findings of fact of the trial court that the
contract in question had been made. There is in the record not only the positive
and detailed testimony of Gilchrist to this effect, but there is also a letter of apology
from Cuddy to Gilchrist in which the former enters into a lengthy explanation of his
reasons for leasing the film to another party. The latter could only have been called
forth by a broken contract with Gilchrist to lease the film to him. We, therefore, fail
to find any reason for overlooking the omission of the defendants to bring up the
missing portion of the evidence and, adhering to the general rule above referred
to, proceed to examine the questions of law raised by the appellants.
From the above-quoted findings of fact it is clear that Cuddy, a resident of Manila,
was the owner of the "Zigomar;" that Gilchrist was the owner of a cinematograph
theater in Iloilo; that in accordance with the terms of the contract entered into
between Cuddy and Gilchrist the former leased to the latter the "Zigomar" for
exhibition in his (Gilchrist's) theater for the week beginning May 26, 1913; and that
Cuddy willfully violate his contract in order that he might accept the appellant's
offer of P350 for the film for the same period. Did the appellants know that they
were inducing Cuddy to violate his contract with a third party when they induced
him to accept the P350? Espejo admitted that he knew that Cuddy was the owner
of the film. He received a letter from his agents in Manila dated April 26, assuring
him that he could not get the film for about six weeks. The arrangement between
Cuddy and the appellants for the exhibition of the film by the latter on the 26th of
May were perfected after April 26, so that the six weeks would include and extend
beyond May 26. The appellants must necessarily have known at the time they
made their offer to Cuddy that the latter had booked or contracted the film for six
weeks from April 26. Therefore, the inevitable conclusion is that the appellants
knowingly induced Cuddy to violate his contract with another person. But there is
no specific finding that the appellants knew the identity of the other party. So we
must assume that they did not know that Gilchrist was the person who had
contracted for the film.
The appellants take the position that if the preliminary injunction had not been
issued against them they could have exhibited the film in their theater for a number
of days beginning May 26, and could have also subleased it to other theater
owners in the nearby towns and, by so doing, could have cleared, during the life
of their contract with Cuddy, the amount claimed as damages. Taking this view of
the case, it will be unnecessary for us to inquire whether the mandatory injunction
against Cuddy was properly issued or not. No question is raised with reference to
the issuance of that injunction.
The right on the part of Gilchrist to enter into a contract with Cuddy for the lease of
the film must be fully recognized and admitted by all. That Cuddy was liable in an
action for damages for the breach of that contract, there can be no doubt. Were
the appellants likewise liable for interfering with the contract between Gilchrist and
Cuddy, they not knowing at the time the identity of one of the contracting parties?
The appellants claim that they had a right to do what they did. The ground upon
which the appellants base this contention is, that there was no valid and binding
contract between Cuddy and Gilchrist and that, therefore, they had a right to
compete with Gilchrist for the lease of the film, the right to compete being a
justification for their acts. If there had been no contract between Cuddy and
Gilchrist this defense would be tenable, but the mere right to compete could not
justify the appellants in intentionally inducing Cuddy to take away the appellee's
contractual rights.
Chief Justice Wells in Walker vs. Cronin (107 Mass., 555), said: "Everyone has a
right to enjoy the fruits and advantages of his own enterprise, industry, skill and
credit. He has no right to be free from malicious and wanton interference,
disturbance or annoyance. If disturbance or loss come as a result of competition,
or the exercise of like rights by others, it is damnum absque injuria, unless some
superior right by contract or otherwise is interfered with."
In Read vs. Friendly Society of Operative Stonemasons ([1902] 2 K. B., 88),
Darling, J., said: "I think the plaintiff has a cause of action against the defendants,
unless the court is satisfied that, when they interfered with the contractual rights of
plaintiff, the defendants had a sufficient justification for their interference; . . . for it
is not a justification that `they acted bona fide in the best interests of the society of
masons,' i. e., in their own interests. Nor is it enough that `they were not actuated
by improper motives.' I think their sufficient justification for interference with
plaintiff's right must be an equal or superior right in themselves, and that no one
can legally excuse himself to a man, of whose contract he has procured the breach,
on the ground that he acted on a wrong understanding of his own rights, or without
malice, or bona fide, or in the best interests of himself, or even that he acted as an
altruist, seeking only good of another and careless of his own advantage." (Quoted
with approval in Beekman vs. Marsters, 195 Mass., 205.)
It is said that the ground on which the liability of a third party for interfering with a
contract between others rests, is that the interference was malicious. The contrary
view, however, is taken by the Supreme Court of the United States in the case of
Angle vs. Railway Co. (151 U. S., 1). The only motive for interference by the third
party in that case was the desire to make a profit to the injury of one of the parties
of the contract. There was no malice in the case beyond the desire to make an
unlawful gain to the detriment of one of the contracting parties.
In the case at bar the only motive for the interference with the Gilchrist — Cuddy
contract on the part of the appellants was a desire to make a profit by exhibiting
the film in their theater. There was no malice beyond this desire; but this fact does
not relieve them of the legal liability for interfering with that contract and causing
its breach. It is, therefore, clear, under the above authorities, that they were liable
to Gilchrist for the damages caused by their acts, unless they are relieved from
such liability by reason of the fact that they did not know at the time the identity of
the original lessee (Gilchrist) of the film.
The liability of the appellants arises from unlawful acts and not from contractual
obligations, as they were under no such obligations to induce Cuddy to violate his
contract with Gilchrist. So that if the action of Gilchrist had been one for damages,
it would be governed by chapter 2, title 16, book 4 of the Civil Code. Article 1902
of that code provides that a person who, by act or omission, causes damages to
another when there is fault or negligence, shall be obliged to repair the damage do
done. There is nothing in this article which requires as a condition precedent to the
liability of a tort-feasor that he must know the identity of a person to whom he
causes damages. In fact, the chapter wherein this article is found clearly shows
that no such knowledge is required in order that the injured party may recover for
the damage suffered.
But the fact that the appellants' interference with the Gilchrist contract was
actionable did not of itself entitle Gilchrist to sue out an injunction against them.
The allowance of this remedy must be justified under section 164 of the Code of
Civil Procedure, which specifies the circumstance under which an injunction may
issue. Upon the general doctrine of injunction we said in Devesa vs. Arbes (13
Phil. Rep., 273):
An injunction is a "special remedy" adopted in that code (Act No. 190) from
American practice, and originally borrowed from English legal procedure, which
was there issued by the authority and under the seal of a court of equity, and
limited, as in order cases where equitable relief is sought, to cases where there is
no "plain, adequate, and complete remedy at law," which "will not be granted while
the rights between the parties are undetermined, except in extraordinary cases
where material and irreparable injury will be done," which cannot be compensated
in damages, and where there will be no adequate remedy, and which will not, as
a rule, be granted, to take property out of the possession of one party and put it
into that of another whose title has not been established by law.
We subsequently affirmed the doctrine of the Devesa case in Palafox vs.
Madamba (19 Phil., Rep., 444), and we take this occasion of again affirming it,
believing, as we do, that the indiscriminate use of injunctions should be
discouraged.
Does the fact that the appellants did not know at the time the identity of the original
lessee of the film militate against Gilchrist's right to a preliminary injunction,
although the appellant's incurred civil liability for damages for such interference?
In the examination of the adjudicated cases, where in injunctions have been issued
to restrain wrongful interference with contracts by strangers to such contracts, we
have been unable to find any case where this precise question was involved, as in
all of those cases which we have examined, the identity of both of the contracting
parties was known to the tort-feasors. We might say, however, that this fact does
not seem to have a controlling feature in those cases. There is nothing in section
164 of the Code of Civil Procedure which indicates, even remotely, that before an
injunction may issue restraining the wrongful interference with contrast by
strangers, the strangers must know the identity of both parties. It would seem that
this is not essential, as injunctions frequently issue against municipal corporations,
public service corporations, public officers, and others to restrain the commission
of acts which would tend to injuriously affect the rights of person whose identity the
respondents could not possibly have known beforehand. This court has held that
in a proper case injunction will issue at the instance of a private citizen to restrain
ultra vires acts of public officials. (Severino vs. Governor-General, 16 Phil. Rep.,
366.) So we proceed to the determination of the main question of whether or not
the preliminary injunction ought to have been issued in this case.
As a rule, injunctions are denied to those who have an adequate remedy at law.
Where the choice is between the ordinary and the extraordinary processes of law,
and the former are sufficient, the rule will not permit the use of the latter. (In re
Debs, 158 U. S., 564.) If the injury is irreparable, the ordinary process is
inadequate. In Wahle vs. Reinbach (76 Ill., 322), the supreme court of Illinois
approved a definition of the term "irreparable injury" in the following language: "By
`irreparable injury' is not meant such injury as is beyond the possibility of repair, or
beyond possible compensation in damages, nor necessarily great injury or great
damage, but that species of injury, whether great or small, that ought not to be
submitted to on the one hand or inflicted on the other; and, because it is so large
on the one hand, or so small on the other, is of such constant and frequent
recurrence that no fair or reasonable redress can be had therefor in a court of law."
(Quoted with approval in Nashville R. R. Co. vs. McConnell, 82 Fed., 65.)
The case at bar is somewhat novel, as the only contract which was broken was
that between Cuddy and Gilchrist, and the profits of the appellee depended upon
the patronage of the public, for which it is conceded the appellants were at liberty
to complete by all fair does not deter the application of remarked in the case of the
"ticket scalpers" (82 Fed., 65), the novelty of the facts does not deter the
application of equitable principles. This court takes judicial notice of the general
character of a cinematograph or motion-picture theater. It is a quite modern form
of the play house, wherein, by means of an apparatus known as a cinematograph
or cinematograph, a series of views representing closely successive phases of a
moving object, are exhibited in rapid sequence, giving a picture which, owing to
the persistence of vision, appears to the observer to be in continuous motion. (The
Encyclopedia Britanica, vol. 6, p. 374.) The subjects which have lent themselves
to the art of the photographer in this manner have increased enormously in recent
years, as well as have the places where such exhibition are given. The attendance,
and, consequently, the receipts, at one of these cinematograph or motion-picture
theaters depends in no small degree upon the excellence of the photographs, and
it is quite common for the proprietor of the theater to secure an especially attractive
exhibit as his "feature film" and advertise it as such in order to attract the public.
This feature film is depended upon to secure a larger attendance that if its place
on the program were filled by other films of mediocre quality. It is evident that the
failure to exhibit the feature film will reduce the receipts of the theater.
Hence, Gilchrist was facing the immediate prospect of diminished profits by reason
of the fact that the appellants had induced Cuddy to rent to them the film Gilchrist
had counted upon as his feature film. It is quite apparent that to estimate with any
decree of accuracy the damages which Gilchrist would likely suffer from such an
event would be quite difficult if not impossible. If he allowed the appellants to exhibit
the film in Iloilo, it would be useless for him to exhibit it again, as the desire of the
public to witness the production would have been already satisfied. In this
extremity, the appellee applied for and was granted, as we have indicated, a
mandatory injunction against Cuddy requiring him to deliver the Zigomar to
Gilchrist, and a preliminary injunction against the appellants restraining them from
exhibiting that film in their theater during the weeks he (Gilchrist) had a right to
exhibit it. These injunction saved the plaintiff harmless from damages due to the
unwarranted interference of the defendants, as well as the difficult task which
would have been set for the court of estimating them in case the appellants had
been allowed to carry out their illegal plans. As to whether or not the mandatory
injunction should have been issued, we are not, as we have said, called upon to
determine. So far as the preliminary injunction issued against the appellants is
concerned, which prohibited them from exhibiting the Zigomar during the week
which Gilchrist desired to exhibit it, we are of the opinion that the circumstances
justified the issuance of that injunction in the discretion of the court.
We are not lacking in authority to support our conclusion that the court was justified
in issuing the preliminary injunction against the appellants. Upon the precise
question as to whether injunction will issue to restrain wrongful interference with
contracts by strangers to such contracts, it may be said that courts in the United
States have usually granted such relief where the profits of the injured person are
derived from his contractual relations with a large and indefinite number of
individuals, thus reducing him to the necessity of proving in an action against the
tort-feasor that the latter was responsible in each case for the broken contract, or
else obliging him to institute individual suits against each contracting party and so
exposing him to a multiplicity of suits. Sperry & Hutchinson Co. vs. Mechanics'
Clothing Co. (128 Fed., 800); Sperry & Hutchinson Co. vs. Louis Weber & Co. (161
Fed., 219); Sperry & Hutchinson Co. vs. Pommer (199 Fed., 309); were all cases
wherein the respondents were inducing retail merchants to break their contracts
with the company for the sale of the latters' trading stamps. Injunction issued in
each case restraining the respondents from interfering with such contracts.
In the case of the Nashville R. R. Co. vs. McConnell (82 Fed., 65), the court, among
other things, said: "One who wrongfully interferes in a contract between others,
and, for the purpose of gain to himself induces one of the parties to break it, is
liable to the party injured thereby; and his continued interference may be ground
for an injunction where the injuries resulting will be irreparable."
In Hamby & Toomer vs. Georgia Iron & Coal Co. (127 Ga., 792), it appears that
the respondents were interfering in a contract for prison labor, and the result would
be, if they were successful, the shutting down of the petitioner's plant for an
indefinite time. The court held that although there was no contention that the
respondents were insolvent, the trial court did not abuse its discretion in granting
a preliminary injunction against the respondents.
In Beekman vs. Marsters (195 Mass., 205), the plaintiff had obtained from the
Jamestown Hotel Corporation, conducting a hotel within the grounds of the
Jamestown Exposition, a contract whereby he was made their exclusive agent for
the New England States to solicit patronage for the hotel. The defendant induced
the hotel corporation to break their contract with the plaintiff in order to allow him
to act also as their agent in the New England States. The court held that an action
for damages would not have afforded the plaintiff adequate relief, and that an
injunction was proper compelling the defendant to desist from further interference
with the plaintiff's exclusive contract with the hotel company.
In Citizens' Light, Heat & Power Co. vs. Montgomery Light & Water Power Co. For the foregoing reasons the judgment is affirmed, with costs, against the
(171 Fed., 553), the court, while admitting that there are some authorities to the appellants.
contrary, held that the current authority in the United States and England is that:

Arellano, C.J., Torres, Carson and Araullo, JJ., concur.

The violation of a legal right committed knowingly is a cause of action, and that it
is a violation of a legal right to interfere with contractual relations recognized by
law, if there be no sufficient justification for the interference. (Quinn vs. Leatham,
supra, 510; Angle vs. Chicago, etc., Ry. Co., 151 U. S., 1; 14 Sup. Ct., 240; 38 L.
Ed., 55; Martens vs. Reilly, 109 Wis., 464, 84 N. W., 840; Rice vs. Manley, 66 N.
Y., 82; 23 Am. Rep., 30; Bitterman vs. L. & N. R. R. Co., 207 U. S., 205; 28 Sup. Separate Opinions
Ct., 91; 52 L. Ed., 171; Beekman vs. Marsters, 195 Mass., 205; 80 N. E., 817; 11
L. R. A. [N. S.] 201; 122 Am. St. Rep., 232; South Wales Miners' Fed. vs.
Glamorgan Coal Co., Appeal Cases, 1905, p. 239.)
MORELAND, J., concurring:

See also Nims on Unfair Business Competition, pp. 351- 371.

In 3 Elliot on Contracts, section 2511, it is said: "Injunction is the proper remedy to
prevent a wrongful interference with contract by strangers to such contracts where
the legal remedy is insufficient and the resulting injury is irreparable. And where
there is a malicious interference with lawful and valid contracts a permanent
injunction will ordinarily issue without proof of express malice. So, an injunction
may be issued where the complainant to break their contracts with him by agreeing
to indemnify who breaks his contracts of employment may be adjoined from
including other employees to break their contracts and enter into new contracts
with a new employer of the servant who first broke his contract. But the remedy by
injunction cannot be used to restrain a legitimate competition, though such
competition would involve the violation of a contract. Nor will equity ordinarily
enjoin employees who have quit the service of their employer from attempting by
proper argument to persuade others from taking their places so long as they do
not resort to force or intimidations on obstruct the public thoroughfares."
Beekman vs. Marster, supra, is practically on all fours with the case at bar in that
there was only one contract in question and the profits of the injured person
depended upon the patronage of the public. Hamby & Toomer vs. Georgia Iron &
Coal Co., supra, is also similar to the case at bar in that there was only one
contract, the interference of which was stopped by injunction.
The court seems to be of the opinion that the action is one for a permanent
injunction; whereas, under my view of the case, it is one for specific performance.
The facts are simple. C. S. Gilchrist, the plaintiff, proprietor of the Eagle Theater of
Iloilo, contracted with E. A. Cuddy, one of the defendants, of Manila, for a film
entitled "Zigomar or Eelskin, 3d series," to be exhibited in his theater in Iloilo during
the week beginning May 26, 1913. Later, the defendants Espejo and Zaldarriaga,
who were also operating a theater in Iloilo, representing Pathe Freres, also
obtained from Cuddy a contract for the exhibition of the film aforesaid in their
theater in Iloilo during the same week.
The plaintiff commenced this action against Cuddy and the defendants Espejo and
Zaldarriaga for the specific performance of the contract with Cuddy. The complaint
prays "that the court, by a mandatory injunction, order Cuddy to deliver, on the
24th of May, 1913, in accordance with the aforesaid contract, the said film
'Zigomar, 3d series, or Eelskin,' to the plaintiff Gilchrist, in accordance with the
terms of the agreement, so that plaintiff can exhibit the same during the last week
beginning May 26, 1913, in the Eagle Theater, in Iloilo; that the court issue a
preliminary injunction against the defendants Espejo and Zaldarriaga prohibiting
them from receiving, exhibiting, or using said film in Iloilo during the last week of
May, 1913, or at any other time prior to the delivery to the plaintiff ; that, on the
trial, said injunction be made perpetual and that Cuddy be ordered and
commanded to specifically perform his contract with the plaintiff ."
On the filing of the complaint the plaintiff made an application for a mandatory
injunction compelling the defendant Cuddy to deliver to plaintiff the film in question
by mailing it to him from Manila on the 24th of May so that it would reach Iloilo for
exhibition on the 26th; and for a preliminary restraining order against the order two
defendants prohibiting them from receiving or exhibiting the said film prior to its
exhibition by plaintiff.
The court, on this application, entered an order which provided that Cuddy should
"not send said film 'Zigomar, 3d series, or Eelskin,' to the defendants Espejo and
Zaldarriaga and that he should send it to the plaintiff, Gilchrist, on the 24th day of
May, 1913, in the mail for Iloilo," This order was duly served on the defendants,
including Cuddy, in whose possession the film still was, and, in compliance
therewith Cuddy mailed the film to the plaintiff at Iloilo on the 24th of May. The
latter duly received it and exhibited it without molestation during the week
beginning the 26th of May in accordance with the contract which he claimed to
have made with Cuddy.
The defendants Espejo and Zaldarriaga having received due notice of the issuance
of the mandatory injunction and restraining order of the 22d of May, appeared
before the court on the 26th of May and moved that the court vacate so much of
the order as prohibited them from receiving and exhibiting the film. In other words,
while the order of the 22d of May was composed of two parts, one a mandatory
order for immediate specific performance of the plaintiff's contract with the
defendant Cuddy, and the other a preliminary restraining order directed to Espejo
and Zaldarriaga prohibiting them from receiving and exhibiting the film during the
week beginning the 26th of May, their motion of the 26th of May referred
exclusively to the injunction against them and touched in no way that portion of the
order which required the immediate performance by Cuddy of his contract with
Gilchrist. Indeed, the defendants Espejo and Zaldarriaga did not even except to
the order requiring Cuddy to specifically perform his agreement with the plaintiff
nor did they in any way make an objection to or show their disapproval of it. It was
not excepted to or appealed from and is not before this court for review.
The motion of Espejo and Zaldarriaga to vacate the injunction restraining them
from receiving the film was denied on the 26th of May. After the termination of the
week beginning May 26th, and after the exhibition of the film by the plaintiff in
accordance with the alleged contract with Cuddy, the plaintiff came into court and
moved that, in view of the fact that he had already obtained all that he desired to
obtain or could obtain by his action, namely, the exhibition of the film in question
during the week beginning May 26th, there was no reason for continuing it and
moved for its dismissal. To this motion Cuddy consented and the action was
dismissed as to him. But the other defendants objected to the dismissal of the
action on the ground that they desired to present to the court evidence showing
the damages which they had suffered by reason of the issuance of the preliminary
injunction prohibiting them from receiving and exhibiting the film in question during
the week beginning May 26. The court sustained their objection and declined to
dismiss the action as to them, and, on the 8th of August, heard the evidence as to
damages. He denied defendants the relief asked for and dismissed their claim for
damages. They thereupon took an appeal from that order, and that is the appeal
which we have now before us and which is the subject of the opinion of the court
with which I am concurring.
We thus have this strange condition:
An action for specific performance of a contract to deliver a film for exhibition during
a given time. A preliminary mandatory injunction ordering the delivery of the film in
accordance with the contract. The delivery of the film in accordance with the
preliminary mandatory injunction. The actual exhibition of the film during the time
specified in the contract. No objection to the issuance of the mandatory injunction,
to the delivery of the film, or to the ground that the plaintiff had obtained full relief
by means of the so-called preliminary remedy by virtue of which the contract was
actually specifically performed before the action was tried. No objection or
exception to the order requiring the specific performance of the contract.
Under such conditions it is possible for the defendant Espejo and Zaldarriaga to
secure damages for the wrongful issuance of the preliminary injunction directed
against them even though it be admitted that it was erroneously issued and that
there was no ground therefor whatever? It seems to me that it is not. At the time
this action was begun the film, as we have seen, was in the possession of Cuddy
and, while in his possession, he complied with a command of the court to deliver
it to plaintiff. In pursuance of that command he delivered it to plaintiff, who used it
during the time specified in his contract with Cuddy; or, in other words, he made
such use of it as he desired and then returned it to Cuddy. This order and the
delivery of the film under it were made in an action in which the defendants Espejo
and Zaldarriaga were parties, without objection on their part and without objection
or exception to the order. The film having been delivered to defendants' competitor,
the plaintiff, under a decree of the court to which they made no objection and took
no exception and from which they have not appealed, what injury can they show
by reason of the injunction restraining them from making use of the film? If they
themselves, by their conduct, permitted the plaintiff to make it impossible for them
to gain possession of the film and to use it, then the preliminary injunction produced
no injury for the reason that no harm can result from restraining a party from doing
a thing which, without such restraint, it would be impossible for him to do.
Moreover, the order for the delivery of the film to plaintiff was a complete
determination of the rights of the parties to the film which, while the court had no
right to make, nevertheless, was valid and binding on all the parties, none of them
objecting or taking exception thereto. Being a complete determination of the rights
of the parties to the action, it should have been the first point attacked by the
defendants, as it foreclosed them completely and, if left in force, eliminating every
defense. This order was made on May 22d and was not excepted to or appealed
from. On the 8th of August following the defendants appealed from the order
dismissing their claim to damages but the order for the delivery of the film to plaintiff
was final at that time and is now conclusive on this court.
Section 143 of the Code of Civil Procedure, providing for appeals by bill of
exceptions, provides that "upon the rendition of final judgment disposing of the
action, either party shall have the right to perfect a bill of exceptions for a review
by the Supreme Court of all rulings, orders, and judgment made in the action, to
which the party has duly excepted at the time of making such ruling, order, or
judgment." While the order for the delivery of the film to plaintiff was in one sense
a preliminary order, it was in reality a final determination of the rights of the parties
to the film, as it ordered the delivery thereof to plaintiff for his use. If it had been
duly excepted to, its validity could have been attacked in an appeal from the final
judgment thereafter entered in the action. Not having been excepted to as required
by the section just referred to, it became final and conclusive on all the parties to
the action, and when, on the 8th day of August following, the defendants presented
their claim for damages based on the alleged wrongful issuance of a temporary
restraining order, the whole foundation of their claim had disappeared by virtue of
the fact that the execution of the order of the 22d of May had left nothing for them
to litigate. The trial court, on the 8th of August, would have been fully justified in
refusing to hear the defendants on their claim for damages. Their right thereto had
been adjudicated on the 22d of May and that adjudication had been duly put into
execution without protest, objection or exception, and was, therefore, final and
conclusive on them on the 8th of August.
I have presented this concurring opinion in an attempt to prevent confusion, if any,
which might arise from the theory on which the court decides this case. It seems
to me impossible that the action can be one for a permanent injunction. The very
nature of the case demonstrates that a permanent injunction is out of the question.
The only thing that plaintiff desired was to be permitted to use the film for the week
beginning the 26th of May. With the termination of that week his rights expired.
After that time Cuddy was perfectly free to turn the film over to the defendants
Espejo and Zaldarriaga for exhibition at any time. An injunction permanently
prohibiting the defendants from exhibiting the film in Iloilo would have been
unjustifiable, as it was something that plaintiff did not ask and did not want; and
would have been an invasion of the rights of Cuddy as, after the termination of the
week beginning May 26, he was at liberty, under his contract with plaintiff, to rent
the film to the defendants Espejo and Zaldarriaga and permit its exhibition in Iloilo
at any time. The plaintiff never asked to have defendants permanently enjoined
from exhibiting the film in Iloilo and no party to the action has suggested such thing.
The action is one for specific performance purely; and while the court granted
plaintiff rights which should have been granted only after a trial of the action,
nevertheless, such right having been granted before trial and none of the
defendants having made objection or taken exception thereto, and the order
granting them having become final, such order became a final determination of the
action, by reason of the nature of the action itself, the rights of the parties became
thereby finally determined and the defendants Espejo and Zaldarriaga, being
parties to the action, were precluded from further litigation relative to the subject
matter of the controversy.
No damages are claimed by reason of the issuance of the mandatory injunction
under which the film was delivered to plaintiff and used by him during the week
beginning the 26th of May. While the opinion says in the first paragraph that the
action is "for damages against the plaintiff for the alleged wrongful issuance of a
mandatory and preliminary injunction," the opinion also says in a latter portion that
"It will be unnecessary for us to inquire whether the mandatory injunction against
Cuddy was properly issued or not. No question is raised with reference to the
issuance of that injunction;" and still later it is also stated that "as to whether or not
the mandatory injunction should have been issued, we are not, as we have said,
called upon to determine." I repeat that no objection was made by the defendants
to the issuance of the mandatory injunction, no exception was taken to the order
on which it was issued and no appeal has been taken therefrom. That order is now
final and conclusive and was at the time this appeal was taken. That being so, the
rights of the defendants were foreclosed thereby. The defendants Espejo and
Zaldarriaga cannot now be heard to say that they were damaged by the issuance
of the preliminary restraining injunction issued on the same day as the mandatory
injunction.
From what has been said it is clear, it seems to me, that the question of a breach
of contract by inducement, which is substantially the only question discussed and
decided, is not in the case in reality and, in my judgment, should not be touched
upon. Courts will not proceed with a litigation and discuss and decided question
which might possibly be involved in the case when it clearly appears that there
remains nothing about which to litigate, the whole subject matter of the original
action having been settled and the parties having no real controversy to present.
At the time the defendants Espejo and Zaldarriaga offered their claim for damages
arising out of the wrongful issuance of the restraining order, there was nothing
between them and the plaintiff to litigate, the rightfulness of plaintiff's demand
having already been finally adjudicated and determined in the same action.
G.R. No. L-13505 February 4, 1919
GEO. W. DAYWALT, plaintiff-appellant,
vs.
LA CORPORACION DE LOS PADRES AGUSTINOS RECOLETOS,
ET AL., defendants-appellees.
C. C. Cohn and Thos. D. Aitken for appellant.
Crossfield & O'Brien for appellee.
STREET, J.:
In the year 1902, Teodorica Endencia, an unmarried woman, resident
in the Province of Mindoro, executed a contract whereby she obligated
herself to convey to Geo. W. Daywalt, a tract of land situated in the
barrio of Mangarin, municipality of Bulalacao, now San Jose, in said
province. It was agreed that a deed should be executed as soon as the
title to the land should be perfected by proceedings in the Court of Land
Registration and a Torrens certificate should be produced therefore in
the name of Teodorica Endencia. A decree recognizing the right of
Teodorica as owner was entered in said court in August 1906, but the
Torrens certificate was not issued until later. The parties, however, met
immediately upon the entering of this decree and made a new contract
with a view to carrying their original agreement into effect. This new
contract was executed in the form of a deed of conveyance and bears
date of August 16, 1906. The stipulated price was fixed at P4,000, and
the area of the land enclosed in the boundaries defined in the contract
was stated to be 452 hectares and a fraction.
The second contract was not immediately carried into effect for the
reason that the Torrens certificate was not yet obtainable and in fact
said certificate was not issued until the period of performance
contemplated in the contract had expired. Accordingly, upon October
3, 1908, the parties entered into still another agreement, superseding
the old, by which Teodorica Endencia agreed upon receiving the
Torrens title to the land in question, to deliver the same to the
Hongkong and Shanghai Bank in Manila, to be forwarded to the
Crocker National Bank in San Francisco, where it was to be delivered
to the plaintiff upon payment of a balance of P3,100.
The Torrens certificate was in time issued to Teodorica Endencia, but
in the course of the proceedings relative to the registration of the land,
it was found by official survey that the area of the tract inclosed in the
boundaries stated in the contract was about 1.248 hectares of 452
hectares as stated in the contract. In view of this development
Teodorica Endencia became reluctant to transfer the whole tract to the
purchaser, asserting that she never intended to sell so large an amount
of land and that she had been misinformed as to its area.
This attitude of hers led to litigation in which Daywalt finally succeeded,
upon appeal to the Supreme Court, in obtaining a decree for specific
performance; and Teodorica Endencia was ordered to convey the
entire tract of land to Daywalt pursuant to the contract of October 3,
1908, which contract was declared to be in full force and effect. This
decree appears to have become finally effective in the early part of the
year 1914.
1
The defendant, La Corporacion de los Padres Recoletos, is a religious
corporation, with its domicile in the city of Manila. Said corporation was
formerly the owner of a large tract of land, known as the San Jose
Estate, on the island of Mindoro, which was sold to the Government of
the Philippine Islands in the year 1909. The same corporation was at
this time also the owner of another estate on the same island
immediately adjacent to the land which Teodorica Endencia had sold
to Geo. W. Daywalt; and for many years the Recoletos Fathers had
maintained large herds of cattle on the farms referred to. Their
representative, charged with management of these farms, was father
Isidoro Sanz, himself a members of the order. Father Sanz had long
been well acquainted with Teodorica Endencia and exerted over her
an influence and ascendency due to his religious character as well as
to the personal friendship which existed between them. Teodorica
appears to be a woman of little personal force, easily subject to
influence, and upon all the important matters of business was
accustomed to seek, and was given, the advice of father Sanz and
other members of his order with whom she came in contact.
Father Sanz was fully aware of the existence of the contract of 1902
by which Teodorica Endencia agreed to sell her land to the plaintiff as
well as of the later important developments connected with the history
of that contract and the contract substituted successively for it; and in
particular Father Sanz, as well as other members of the defendant
corporation, knew of the existence of the contract of October 3, 1908,
which, as we have already seen finally fixed the rights of the parties to
the property in question. When the Torrens certificate was finally
issued in 1909 in favor of Teodorica Endencia, she delivered it for
safekeeping to the defendant corporation, and it was then taken to
Manila where it remained in the custody and under the control of P.
Juan Labarga the procurador and chief official of the defendant
corporation, until the deliver thereof to the plaintiff was made
compulsory by reason of the decree of the Supreme Court in 1914.
When the defendant corporation sold the San Jose Estate, it was
necessary to bring the cattle off of that property; and, in the first half of
1909, some 2,368 head were removed to the estate of the corporation
immediately adjacent to the property which the plaintiff had purchased
from Teodorica Endencia. As Teodorica still retained possession of
said property Father Sanz entered into an arrangement with her
whereby large numbers of cattle belonging to the defendant
corporation were pastured upon said land during a period extending
from June 1, 1909, to May 1, 1914.
Under the first cause stated in the complaint in the present action the
plaintiff seeks to recover from the defendant corporation the sum of
P24,000, as damages for the use and occupation of the land in
question by reason of the pasturing of cattle thereon during the period
stated. The trial court came to the conclusion that the defendant
corporation was liable for damages by reason of the use and
occupation of the premises in the manner stated; and fixed the amount
to be recovered at P2,497. The plaintiff appealed and has assigned
error to this part of the judgment of the court below, insisting that
damages should have been awarded in a much larger sum and at least
to the full extent of P24,000, the amount claimed in the complaint.
As the defendant did not appeal, the property of allowing damages for
the use and occupation of the land to the extent o P2,497, the amount
awarded, is not now in question an the only thing here to be
considered, in connection with this branch of the case, is whether the
damages allowed under this head should be increased. The trial court
rightly ignored the fact that the defendant corporation had paid
Teodorica Endencia of ruse and occupation of the same land during
the period in question at the rate of P425 per annum, inasmuch as the
final decree of this court in the action for specific performance is
conclusive against her right, and as the defendant corporation had
notice of the rights of the plaintiff under this contract of purchase, it can
not be permitted that the corporation should escape liability in this
action by proving payment of rent to a person other than the true
owner.
With reference to the rate of which compensation should be estimated
the trial court came to the following conclusion:
As to the rate of the compensation, the plaintiff contends that the
defendant corporation maintained at leas one thousand head of cattle
on the land and that the pasturage was of the value of forty centavos
per head monthly, or P4,800 annually, for the whole tract. The court
can not accept this view. It is rather improbable that 1,248 hectares of
wild Mindoro land would furnish sufficient pasturage for one thousand
head of cattle during the entire year, and, considering the locality, the
rate of forty centavos per head monthly seems too high. The evidence
shows that after having recovered possession of the land the plaintiff
rented it to the defendant corporation for fifty centavos per hectares
annually, the tenant to pay the taxes on the land, and this appears to
be a reasonable rent. There is no reason to suppose that the land was
worth more for grazing purposes during the period from 1909 to 1913,
than it was at the later period. Upon this basis the plaintiff is entitled to
damages in the sum of p2,497, and is under no obligation to reimburse
the defendants for the land taxes paid by either of them during the
period the land was occupied by the defendant corporation. It may be
mentioned in this connection that the Lontok tract adjoining the land in
question and containing over three thousand hectares appears to have
been leased for only P1,000 a year, plus the taxes.
From this it will be seen that the trial court estimated the rental value
of the land for grazing purposes at 50 centavos per hectare per annum,
and roughly adopted the period of four years as the time for which
compensation at that rate should be made. As the court had already
found that the defendant was liable for these damages from June, 1,
1909, to May 1, 1914, or a period of four years and eleven months,
there seems some ground for the contention made in the appellant's
first assignment of error that the court's computation was erroneous,
even accepting the rule upon which the damages were assessed, as it
is manifest that at the rate of 50 centavos per hectare per annum, the
damages for four years and eleven months would be P3,090.
Notwithstanding this circumstance, we are of the opinion that the
damages assessed are sufficient to compensate the plaintiff for the use
and occupation of the land during the whole time it was used. There is
evidence in the record strongly tending to show that the wrongful use
of the land by the defendant was not continuous throughout the year
but was confined mostly to the reason when the forage obtainable on
the land of the defendant corporation was not sufficient to maintain its
cattle, for which reason it became necessary to allow them to go over
to pasture on the land in question; and it is not clear that the whole of
the land was used for pasturage at any time. Considerations of this
character probably led the trial court to adopt four years as roughly
being the period during which compensation should be allowed. But
whether this was advertently done or not, we see no sufficient reason,
in the uncertainty of the record with reference to the number of the
cattle grazed and the period when the land was used, for substituting
our guess for the estimate made by the trial court.
In the second cause of action stated in the complaint the plaintiff seeks
to recover from the defendant corporation the sum of P500,000, as
damages, on the ground that said corporation, for its own selfish
purposes, unlawfully induced Teodorica Endencia to refrain from the
performance of her contract for the sale of the land in question and to
withhold delivery to the plaintiff of the Torrens title, and further,
maliciously and without reasonable cause, maintained her in her
defense to the action of specific performance which was finally decided
in favor of the plaintiff in this court. The cause of action here stated is
based on liability derived from the wrongful interference of the
defendant in the performance of the contract between the plaintiff and
Teodorica Endencia; and the large damages laid in the complaint were,
according to the proof submitted by the plaintiff, incurred as a result of
a combination of circumstances of the following nature: In 1911, it
appears, the plaintiff, as the owner of the land which he had bought
from Teodorica Endencia entered into a contract (Exhibit C) with S. B.
Wakefield, of San Francisco, for the sale and disposal of said lands to
a sugar growing and milling enterprise, the successful launching of
which depended on the ability of Daywalt to get possession of the land
and the Torrens certificate of title. In order to accomplish this end, the
plaintiff returned to the Philippine Islands, communicated his
arrangement to the defendant,, and made repeated efforts to secure
the registered title for delivery in compliance with said agreement with
Wakefield. Teodorica Endencia seems to have yielded her consent to
the consummation of her contract, but the Torrens title was then in the
possession of Padre Juan Labarga in Manila, who refused to deliver
the document. Teodorica also was in the end contract with the plaintiff,
with the result that the plaintiff was kept out of possession until the
Wakefield project for the establishment of a large sugar growing and
milling enterprise fell through. In the light of what has happened in
recent years in the sugar industry, we feel justified in saying that the
project above referred to, if carried into effect, must inevitably have
proved a great success.
The determination of the issue presented in this second cause of action
requires a consideration of two points. The first is whether a person
who is not a party to a contract for the sale of land makes himself liable
for damages to the vendee, beyond the value of the use and
occupation, by colluding with the vendor and maintaining him in the
effort to resist an action for specific performance. The second is
whether the damages which the plaintiff seeks to recover under this
head are too remote and speculative to be the subject of recovery.
As preliminary to a consideration of the first of these questions, we
deem it well it dispose of the contention that the members of the
defendants corporation, in advising and prompting Teodorica
Endencia not to comply with the contract of sale, were actuated by
improper and malicious motives. The trial court found that this
contention was not sustained, observing that while it was true that the
circumstances pointed to an entire sympathy on the part of the
defendant corporation with the efforts of Teodorica Endencia to defeat
the plaintiff's claim to the land, the fact that its officials may have
advised her not to carry the contract into effect would not constitute
actionable interference with such contract. It may be added that when
one considers the hardship that the ultimate performance of that
contract entailed on the vendor, and the doubt in which the issue was
involved — to the extent that the decision of the Court of the First
Instance was unfavorable to the plaintiff and the Supreme Court itself
was divided — the attitude of the defendant corporation, as exhibited
in the conduct of its procurador, Juan Labarga, and other members of
the order of the Recollect Fathers, is not difficult to understand. To our
mind a fair conclusion on this feature of the case is that father Juan
Labarga and his associates believed in good faith that the contract cold
not be enforced and that Teodorica would be wronged if it should be
carried into effect. Any advice or assistance which they may have given
was, therefore, prompted by no mean or improper motive. It is not, in
our opinion, to be denied that Teodorica would have surrendered the
documents of title and given possession of the land but for the
influence and promptings of members of the defendants corporation.
But we do not credit the idea that they were in any degree influenced
to the giving of such advice by the desire to secure to themselves the
paltry privilege of grazing their cattle upon the land in question to the
prejudice of the just rights of the plaintiff.
The attorney for the plaintiff maintains that, by interfering in the
performance of the contract in question and obstructing the plaintiff in
his efforts to secure the certificate of tittle to the land, the defendant
corporation made itself a co-participant with Teodorica Endencia in the
breach of said contract; and inasmuch as father Juan Labarga, at the
time of said unlawful intervention between the contracting parties, was
fully aware of the existence of the contract (Exhibit C) which the plaintiff
had made with S. B. Wakefield, of San Francisco, it is insisted that the
defendant corporation is liable for the loss consequent upon the failure
of the project outlined in said contract.
In this connection reliance is placed by the plaintiff upon certain
American and English decisions in which it is held that a person who
is a stranger to contract may, by an unjustifiable interference in the
performance thereof, render himself liable for the damages
consequent upon non-performance. It is said that the doctrine of these
cases was recognized by this court in Gilchrist vs. Cuddy (29 Phil.
Rep., 542); and we have been earnestly pressed to extend the rule
there enunciated to the situation here presente.
Somewhat more than half a century ago the English Court of the
Queen's Bench saw its way clear to permit an action for damages to
be maintained against a stranger to a contract wrongfully interfering in
its performance. The leading case on this subject is Lumley vs. Gye
([1853], 2 El. & Bl., 216). It there appeared that the plaintiff, as manager
of a theatre, had entered into a contract with Miss Johanna Wagner,
an opera singer,, whereby she bound herself for a period to sing in the
plaintiff's theatre and nowhere else. The defendant, knowing of the
existence of this contract, and, as the declaration alleged, "maliciously
intending to injure the plaintiff," enticed and produced Miss Wagner to
leave the plaintiff's employment. It was held that the plaintiff was
entitled to recover damages. The right which was here recognized had
its origin in a rule, long familiar to the courts of the common law, to the
effect that any person who entices a servant from his employment is
liable in damages to the master. The master's interest in the service
rendered by his employee is here considered as a distinct subject of
juridical right. It being thus accepted that it is a legal wrong to break up
a relation of personal service, the question now arose whether it is
illegal for one person to interfere with any contract relation subsisting
between others. Prior to the decision of Lumley vs. Gye [supra] it had
been supposed that the liability here under consideration was limited
to the cases of the enticement of menial servants, apprentices, and
others to whom the English Statutes of Laborers were applicable. But
in the case cited the majority of the judges concurred in the opinion
that the principle extended to all cases of hiring. This doctrine was
followed by the Court of Appeal in Bowen vs. Hall ([1881], 6 Q. B., Div.,
333); and in Temperton vs. Russell ([1893], Q. B., 715), it was held that
the right of action for maliciously procuring a breach of contract is not
confined to contracts for personal services, but extends to contracts in
general. In that case the contract which the defendant had procured to
be breached was a contract for the supply of building material.
Malice in some form is generally supposed to be an essential
ingredient in cases of interference with contract relations. But upon the
authorities it is enough if the wrong-doer, having knowledge of the
existence of the contract relations, in bad faith sets about to break it
up. Whether his motive is to benefit himself or gratify his spite by
working mischief to the employer is immaterial. Malice in the sense of
ill-will or spite is not essential.
Upon the question as to what constitutes legal justification, a good
illustration was put in the leading case. If a party enters into contract to
go for another upon a journey to a remote and unhealthful climate, and
a third person, with a bona fide purpose of benefiting the one who is
under contract to go, dissuades him from the step, no action will lie.
But if the advice is not disinterested and the persuasion is used for "the
indirect purpose of benefiting the defendant at the expense of the
plaintiff," the intermedler is liable if his advice is taken and the contract
broken.
The doctrine embodied in the cases just cited has sometimes been
found useful, in the complicated relations of modern industry, as a
means of restraining the activities of labor unions and industrial
societies when improperly engaged in the promotion of strikes. An
illustration of the application of the doctrine in question in a case of this
kind is found in South Wales Miners Federation vs. Glamorgan Coal
Co. ([1905]), A. C., 239). It there appeared that certain miners
employed in the plaintiff's collieries, acting under the order of the
executive council of the defendant federation, violated their contract
with the plaintiff by abstaining from work on certain days. The
federation and council acted without any actual malice or ill-will
towards the plaintiff, and the only object of the order in question was
that the price of coal might thereby be kept up, a factor which affected
the miner's wage scale. It was held that no sufficient justification was
shown and that the federation was liable.
In the United States, the rule established in England by Lumley vs. Gye
[supra] and subsequent cases is commonly accepted, though in a few
of the States the broad idea that a stranger to a contract can be held
liable upon its is rejected, and in these jurisdictions the doctrine, if
accepted at all, is limited to the situation where the contract is strictly
for personal service. (Boyson vs. Thorn, 98 Cal., 578; Chambers &
Marshall vs. Baldwin 91 Ky., 121; Bourlier vs. Macauley, 91 Ky., 135;
Glencoe Land & Gravel Co. vs. Hudson Bros. Com. Co., 138 Mo., 439.)
It should be observed in this connection that, according to the English
and American authorities, no question can be made as to the liability
to one who interferes with a contract existing between others by means
which, under known legal cannons, can be denominated an unlawful
means. Thus, if performance is prevented by force, intimidation,
coercion, or threats, or by false or defamatory statements, or by
nuisance or riot, the person using such unlawful means is, under all
the authorities, liable for the damage which ensues. And in jurisdictions
where the doctrine of Lumley vs. Gye [supra] is rejected, no liability can
arise from a meddlesome and malicious interference with a contract
relation unless some such unlawful means as those just indicated are
used. (See cases last above cited.)
This brings us to the decision made by this court in Gilchrist vs. Cuddy
(29 Phil. Rep., 542). It there appeared that one Cuddy, the owner of a
cinematographic film, let it under a rental contract to the plaintiff
Gilchrist for a specified period of time. In violation of the terms of this
agreement, Cuddy proceeded to turn over the film also under a rental
contract, to the defendants Espejo and Zaldarriaga. Gilchrist thereupon
restored to the Court of First Instance and produced an injunction
restraining the defendants from exhibiting the film in question in their
theater during the period specified in the contract of Cuddy with
Gilchrist. Upon appeal to this court it was in effect held that the
injunction was not improperly granted, although the defendants did not,
at the time their contract was made, know the identity of the plaintiff as
the person holding the prior contract but did know of the existence of a
contract in favor of someone. It was also said arguendo, that the
defendants would have been liable in damages under article 1902 of
the Civil Code, if the action had been brought by the plaintiff to recover
damages. The force of the opinion is, we think, somewhat weakened
by the criticism contain in the concurring opinion, where it is said that
the question of breach of contract by inducement was not really
involved in the case. Taking the decision upon the point which was rally
decided, it is authority for the proposition that one who buys something
which he knows has been sold to some other person can be restrained
from using that thing to the prejudice of the person having the prior and
better right.
Translated into terms applicable to the case at bar, the decision in
Gilchrist vs. Cuddy (29 Phil. Rep., 542), indicates that the defendant
corporation, having notice of the sale of the land in question to Daywalt,
might have been enjoined by the latter from using the property for
grazing its cattle thereon. That the defendant corporation is also liable
in this action for the damage resulting to the plaintiff from the wrongful
use and occupation of the property has also been already determined.
But it will be observed that in order to sustain this liability it is not
necessary to resort to any subtle exegesis relative to the liability of a
stranger to a contract for unlawful interference in the performance
thereof. It is enough that defendant use the property with notice that
the plaintiff had a prior and better right.
Article 1902 of the Civil Code declares that any person who by an act
or omission, characterized by fault or negligence, causes damage to
another shall be liable for the damage so done. Ignoring so much of
this article as relates to liability for negligence, we take the rule to be
that a person is liable for damage done to another by any culpable act;
and by "culpable act" we mean any act which is blameworthy when
judged by accepted legal standards. The idea thus expressed is
undoubtedly broad enough to include any rational conception of liability
for the tortious acts likely to be developed in any society. Thus
considered, it cannot be said that the doctrine of Lumley vs. Gye
[supra] and related cases is repugnant to the principles of the civil law.
Nevertheless, it must be admitted that the codes and jurisprudence of
the civil law furnish a somewhat uncongenial field in which to
propagate the idea that a stranger to a contract may sued for the
breach thereof. Article 1257 of the Civil Code declares that contracts
are binding only between the parties and their privies. In conformity
with this it has been held that a stranger to a contract has no right of
action for the nonfulfillment of the contract except in the case especially
contemplated in the second paragraph of the same article. (Uy Tam
and Uy Yet vs. Leonard, 30 Phil. Rep., 471.) As observed by this court
in Manila Railroad Co. vs. Compañia Transatlantica, R. G. No. 11318
(38 Phil. Rep., 875), a contract, when effectually entered into between
certain parties, determines not only the character and extent of the
liability of the contracting parties but also the person or entity by whom
the obligation is exigible. The same idea should apparently be
applicable with respect to the person against whom the obligation of
the contract may be enforced; for it is evident that there must be a
certain mutuality in the obligation, and if the stranger to a contract is
not permitted to sue to enforce it, he cannot consistently be held liable
upon it.
If the two antagonistic ideas which we have just brought into
juxtaposition are capable of reconciliation, the process must be
accomplished by distinguishing clearly between the right of action
arising from the improper interference with the contract by a stranger
thereto, considered as an independent act generate of civil liability, and
the right of action ex contractu against a party to the contract resulting
from the breach thereof. However, we do not propose here to pursue
the matter further, inasmuch as, for reasons presently to be stated, we
are of the opinion that neither the doctrine of Lumley vs. Gye [supra]
nor the application made of it by this court in Gilchrist vs. Cuddy (29
Phil. Rep., 542), affords any basis for the recovery of the damages
which the plaintiff is supposed to have suffered by reason of his inability
to comply with the terms of the Wakefield contract.
Whatever may be the character of the liability which a stranger to a
contract may incur by advising or assisting one of the parties to evade
performance, there is one proposition upon which all must agree. This
is, that the stranger cannot become more extensively liable in damages
for the nonperformance of the contract than the party in whose behalf
he intermeddles. To hold the stranger liable for damages in excess of
those that could be recovered against the immediate party to the
contract would lead to results at once grotesque and unjust. In the case
at bar, as Teodorica Endencia was the party directly bound by the
contract, it is obvious that the liability of the defendant corporation,
even admitting that it has made itself coparticipant in the breach of the
contract, can in no even exceed hers. This leads us to consider at this
point the extent of the liability of Teodorica Endencia to the plaintiff by
reason of her failure to surrender the certificate of title and to place the
plaintiff in possession.
It should in the first place be noted that the liability of Teodorica
Endencia for damages resulting from the breach of her contract with
Daywalt was a proper subject for adjudication in the action for specific
performance which Daywalt instituted against her in 1909 and which
was litigated by him to a successful conclusion in this court, but without
obtaining any special adjudication with reference to damages.
Indemnification for damages resulting from the breach of a contract is
a right inseparably annexed to every action for the fulfillment of the
obligation (art. 1124, Civil Code); and its is clear that if damages are
not sought or recovered in the action to enforce performance they
cannot be recovered in an independent action. As to Teodorica
Endencia, therefore, it should be considered that the right of action to
recover damages for the breach of the contract in question was
exhausted in the prior suit. However, her attorneys have not seen fit to
interpose the defense of res judicata in her behalf; and as the
defendant corporation was not a party to that action, and such defense
could not in any event be of any avail to it, we proceed to consider the
question of the liability of Teodorica Endencia for damages without
refernce to this point.
The most that can be said with refernce to the conduct of Teodorica
Endencia is that she refused to carry out a contract for the sale of
certain land and resisted to the last an action for specific performance
in court. The result was that the plaintiff was prevented during a period
of several years from exerting that control over the property which he
was entitled to exert and was meanwhile unable to dispose of the
property advantageously. Now, what is the measure of damages for
the wrongful detention of real property by the vender after the time has
come for him to place the purchaser in possession?
The damages ordinarily and normally recoverable against a vendor for
failure to deliver land which he has contracted to deliver is the value of
the use and occupation of the land for the time during which it is
wrongfully withheld. And of course where the purchaser has not paid
the purchaser money, a deduction may be made in respect to the
interest on the money which constitutes the purchase price.
Substantially the same rule holds with respect to the liability of a
landlord who fails to put his tenant in possession pursuant to contract
of lease. The measure of damages is the value of the leasehold
interest, or use and occupation, less the stipulated rent, where this has
not been paid. The rule that the measure of damages for the wrongful
detention of land is normally to be found in the value of use and
occupation is, we believe, one of the things that may be considered
certain in the law (39 cyc., 1630; 24 Cyc., 1052 Sedgewick on
Damages, Ninth ed., sec. 185.) — almost as wellsettled, indeed, as the
rule that the measure of damages for the wrongful detention of money
is to be found in the interest.
We recognize the possibility that more extensive damages may be
recovered where, at the time of the creation of the contractual
obligation, the vendor, or lessor, is aware of the use to which the
purchaser or lessee desires to put the property which is the subject of
the contract, and the contract is made with the eyes of the vendor or
lessor open to the possibility of the damage which may result to the
other party from his own failure to give possession. The case before
us is not this character, inasmuch as at the time when the rights of the
parties under the contract were determined, nothing was known to any
to them about the San Francisco capitalist who would be willing to back
the project portrayed in Exhibit C.
The extent of the liability for the breach of a contract must be
determined in the light of the situation in existence at the time the
contract is made; and the damages ordinarily recoverable are in all
events limited to such as might be reasonable are in all events limited
to such as might be reasonably foreseen in the light of the facts then
known to the contracting parties. Where the purchaser desires to
protect himself, in the contingency of the failure of the vendor promptly
to give possession, from the possibility of incurring other damages than
such as the incident to the normal value of the use and occupation, he
should cause to be inserted in the contract a clause providing for
stipulated amount to the paid upon failure of the vendor to give
possession; and not case has been called to our attention where, in
the absence of such a stipulation, damages have been held to be
recoverable by the purchaser in excess of the normal value of use and
occupation. On the contrary, the most fundamental conceptions of the
law relative to the assessment of damages are inconsistent with such
idea.
The principles governing this branch of the law were profoundly
considered in the case Hadley vs. Baxendale (9 Exch., 341), decided
in the English Court of Exchequer in 1854; and a few words relative to
the principles governing will here be found instructive. The decision in
that case is considered a leading authority in the jurisprudence of the
common law. The plaintiffs in that case were proprietors of a mill in
Gloucester, which was propelled by steam, and which was engaged in
grinding and supplying meal and flour to customers. The shaft of the
engine got broken, and it became necessarily that the broken shaft be
sent to an engineer or foundry man at Greenwich, to serve as a model
for casting or manufacturing another that would fit into the machinery.
The broken shaft could be delivered at Greenwich on the second day
after its receipts by the carrier it. It was delivered to the defendants,
who were common carriers engaged in that business between these
points, and who had told plaintiffs it would be delivered at Greenwich
on the second day after its delivery to them, if delivered at a given hour.
The carriers were informed that the mill was stopped, but were not
informed of the special purpose for which the broken shaft was desired
to forwarded, They were not told the mill would remain idle until the
new shaft would be returned, or that the new shaft could not be
manufactured at Greenwich until the broken one arrived to serve as a
model. There was delay beyond the two days in delivering the broken
shaft at Greenwich, and a corresponding delay in starting the mill. No
explanation of the delay was offered by the carriers. The suit was
brought to recover damages for the lost profits of the mill, cause by the
delay in delivering the broken shaft. It was held that the plaintiff could
not recover.
The discussion contained in the opinion of the court in that case leads
to the conclusion that the damages recoverable in case of the breach
of a contract are two sorts, namely, (1) the ordinary, natural, and in a
sense necessary damage; and (2) special damages.
Ordinary damages is found in all breaches of contract where the are
no special circumstances to distinguish the case specially from other
contracts. The consideration paid for an unperformed promise is an
instance of this sort of damage. In all such cases the damages
recoverable are such as naturally and generally would result from such
a breach, "according to the usual course of things." In case involving
only ordinary damage no discussion is ever indulged as to whether that
damage was contemplated or not. This is conclusively presumed from
the immediateness and inevitableness of the damage, and the
recovery of such damage follows as a necessary legal consequence
of the breach. Ordinary damage is assumed as a matter of law to be
within the contemplation of the parties.
Special damage, on the other hand, is such as follows less directly
from the breach than ordinary damage. It is only found in case where
some external condition, apart from the actual terms to the contract
exists or intervenes, as it were, to give a turn to affairs and to increase
damage in a way that the promisor, without actual notice of that
external condition, could not reasonably be expected to foresee.
Concerning this sort of damage, Hadley vs. Baxendale (1854) [supra]
lays down the definite and just rule that before such damage can be
recovered the plaintiff must show that the particular condition which
made the damage a possible and likely consequence of the breach
was known to the defendant at the time the contract was made.
The statement that special damages may be recovered where the
likelihood of such damages flowing from the breach of the contract is
contemplated and foreseen by the parties needs to be supplemented
by a proposition which, though not enunciated in Hadley vs.
Baxendale, is yet clearly to be drawn from subsequent cases. This is
that where the damage which a plaintiff seeks to recover as special
damage is so far speculative as to be in contemplation of law remote,
notification of the special conditions which make that damage possible
cannot render the defendant liable therefor. To bring damages which
would ordinarily be treated as remote within the category of
recoverable special damages, it is necessary that the condition should
be made the subject of contract in such sense as to become an
express or implied term of the engagement. Horne vs. Midland R. Co.
(L. R., 8 C. P., 131) is a case where the damage which was sought to
be recovered as special damage was really remote, and some of the
judges rightly places the disallowance of the damage on the ground
that to make such damage recoverable, it must so far have been within
the contemplation of the parties as to form at least an implied term of
the contract. But others proceeded on the idea that the notice given to
the defendant was not sufficiently full and definite. The result was the
same in either view. The facts in that case were as follows: The
plaintiffs, shoe manufacturers at K, were under contract to supply by a
certain day shoes to a firm in London for the French government. They
delivered the shoes to a carrier in sufficient time for the goods to reach
London at the time stipulated in the contract and informed the railroad
agent that the shoes would be thrown back upon their hands if they did
not reach the destination in time. The defendants negligently failed to
forward the good in due season. The sale was therefore lost, and the
market having fallen, the plaintiffs had to sell at a loss.

In the preceding discussion we have considered the plaintiff's right

chiefly against Teodorica Endencia; and what has been said suffices
G.R. No. 120554 September 21, 1999
in our opinion to demonstrate that the damages laid under the second
cause of action in the complaint could not be recovered from her, first, SO PING BUN, petitioner,
because the damages laid under the second cause of action in the
complaint could not be recovered from her, first, because the damages vs.
in question are special damages which were not within contemplation
of the parties when the contract was made, and secondly, because COURT OF APPEALS, TEK HUA ENTERPRISES CORP. and
said damages are too remote to be the subject of recovery. This MANUEL C. TIONG, respondents.
conclusion is also necessarily fatal to the right of the plaintiff to recover
such damages from the defendant corporation, for, as already
suggested, by advising Teodorica not to perform the contract, said
QUISUMBING, J.:
corporation could in no event render itself more extensively liable than
the principle in the contract. 1
This petition for certiorari challenges the Decision of the Court of
Our conclusion is that the judgment of the trial court should be affirmed, 2
Appeals dated October 10, 1994, and the Resolution dated June 5, 1995,
and it is so ordered, with costs against the appellant. in CA-G.R. CV No. 38784. The appellate court affirmed the decision of the
Regional Trial Court of Manila, Branch 35, except for the award of
attorney's fees, as follows:

WHEREFORE, foregoing considered, the appeal of respondent-

appellant So Ping Bun for lack of merit is DISMISSED. The appealed
decision dated April 20, 1992 of the court a quo is modified by reducing
the attorney's fees awarded to plaintiff Tek Hua Enterprising
3
Corporation from P500,000.00 to P200,000.00.

The facts are as follows:

In 1963, Tek Hua Trading Co, through its managing partner, So Pek
Giok, entered into lease agreements with lessor Dee C. Chuan & Sons
Inc. (DCCSI). Subjects of four (4) lease contracts were premises
located at Nos. 930, 930-Int., 924-B and 924-C, Soler Street, Binondo,
Manila. Tek Hua used the areas to store its textiles. The contracts each
had a one-year term. They provided that should the lessee continue to
occupy the premises after the term, the lease shall be on a month-to-
month basis.
When the contracts expired, the parties did not renew the contracts,
but Tek Hua continued to occupy the premises. In 1976, Tek Hua
Trading Co. was dissolved. Later, the original members of Tek Hua
Trading Co. including Manuel C. Tiong, formed Tek Hua Enterprising
Corp., herein respondent corporation.
So Pek Giok, managing partner of Tek Hua Trading, died in 1986. So
Pek Giok's grandson, petitioner So Ping Bun, occupied the warehouse
for his own textile business, Trendsetter Marketing.
On August 1, 1989, lessor DCCSI sent letters addressed to Tek Hua
Enterprises, informing the latter of the 25% increase in rent effective
September 1, 1989. The rent increase was later on reduced to 20%
effective January 1, 1990, upon other lessees' demand. Again on
December 1, 1990, the lessor implemented a 30% rent increase.
Enclosed in these letters were new lease contracts for signing. DCCSI
warned that failure of the lessee to accomplish the contracts shall be
deemed as lack of interest on the lessee's part, and agreement to the
termination of the lease. Private respondents did not answer any of
these letters. Still, the lease contracts were not rescinded.
On March 1, 1991, private respondent Tiong sent a letter to petitioner
which reads as follows:
March 1, 1991
Mr. So Ping Bun
930 Soler Street
Binondo, Manila
Dear Mr. So,
Due to my closed (sic) business associate (sic) for three decades with
your late grandfather Mr. So Pek Giok and late father, Mr. So Chong
Bon, I allowed you temporarily to use the warehouse of Tek Hua
Enterprising Corp. for several years to generate your personal
business.
Since I decided to go back into textile business, I need a warehouse
immediately for my stocks. Therefore, please be advised to vacate all
your stocks in Tek Hua Enterprising Corp. Warehouse. You are hereby
given 14 days to vacate the premises unless you have good reasons
that you have the right to stay. Otherwise, I will be constrained to take
measure to protect my interest.
Please give this urgent matter your preferential attention to avoid
inconvenience on your part.
Very truly yours,
(Sgd) Manuel C. Tiong
MANUEL C. TIONG
4
President
Petitioner refused to vacate. On March 4, 1992, petitioner requested
formal contracts of lease with DCCSI in favor Trendsetter Marketing. So
Ping Bun claimed that after the death of his grandfather, So Pek Giok, he
had been occupying the premises for his textile business and religiously
paid rent. DCCSI acceded to petitioner's request. The lease contracts in
favor of Trendsetter were executed.
In the suit for injunction, private respondents pressed for the
nullification of the lease contracts between DCCSI and petitioner. They
also claimed damages.
After trial, the trial court ruled:
WHEREFORE, judgment is rendered:
1. Annulling the four Contracts of Lease (Exhibits A, A-1 to A-3,
inclusive) all dated March 11, 1991, between defendant So Ping Bun,
doing business under the name and style of "Trendsetter Marketing",
and defendant Dee C. Chuan & Sons, Inc. over the premises located
at Nos. 924-B, 924-C, 930 and 930, Int., respectively, Soler Street,
Binondo Manila;
2. Making permanent the writ of preliminary injunction issued by this
Court on June 21, 1991;
3. Ordering defendant So Ping Bun to pay the aggrieved party, plaintiff
Tek Hua Enterprising Corporation, the sum of P500,000.00, for
attorney's fees;
4. Dismissing the complaint, insofar as plaintiff Manuel C. Tiong is
concerned, and the respective counterclaims of the defendant;
5. Ordering defendant So Ping Bun to pay the costs of this lawsuit;
This judgment is without prejudice to the rights of plaintiff Tek Hua
Enterprising Corporation and defendant Dee C. Chuan & Sons, Inc. to
negotiate for the renewal of their lease contracts over the premises
located at Nos. 930, 930-Int., 924-B and 924-C Soler Street, Binondo,
Manila, under such terms and conditions as they agree upon, provided
they are not contrary to law, public policy, public order, and morals.
5 (3) interference of the third person is without legal justification or excuse.
SO ORDERED.
Petitioner's motion for reconsideration of the above decision was denied.
On appeal by So Ping Bun, the Court of Appeals upheld the trial court.
On motion for reconsideration, the appellate court modified the
decision by reducing the award of attorney's fees from five hundred
thousand (P500,000.00) pesos to two hundred thousand
(P200,000.00) pesos.
Petitioner is now before the Court raising the following issues:
I. WHETHER THE APPELLATE COURT ERRED IN AFFIRMING THE
TRIAL COURT'S DECISION FINDING SO PING BUN GUILTY OF
TORTUOUS INTERFERENCE OF CONTRACT?
II. WHETHER THE APPELLATE COURT ERRED IN AWARDING
ATTORNEY'S FEES OF P200,000.00 IN FAVOR OF PRIVATE
RESPONDENTS.
The foregoing issues involve, essentially, the correct interpretation of
the applicable law on tortuous conduct, particularly unlawful
interference with contract. We have to begin, obviously, with certain
fundamental principles on torts and damages.
Damage is the loss, hurt, or harm which results from injury, and
damages are the recompense or compensation awarded for the
6
damage suffered. One becomes liable in an action for damages for a
nontrespassory invasion of another's interest in the private use and
enjoyment of asset if (a) the other has property rights and privileges with
respect to the use or enjoyment interfered with, (b) the invasion is
substantial, (c) the defendant's conduct is a legal cause of the invasion,
and (d) the invasion is either intentional and unreasonable or unintentional
7
and actionable under general negligence rules.
The elements of tort interference are: (1) existence of a valid contract; (2)
knowledge on the part of the third person of the existence of contract; and
8
A duty which the law of torts is concerned with is respect for the property
of others, and a cause of action ex delicto may be predicated upon an
unlawful interference by one person of the enjoyment by the other of his
private
9
property. This may pertain to a situation where a third person induces a
party to renege on or violate his undertaking under a contract. In the case
before us, petitioner's Trendsetter Marketing asked DCCSI to execute
lease contracts in its favor, and as a result petitioner deprived respondent
corporation of the latter's property right. Clearly, and as correctly viewed
by the appellate court, the three elements of tort interference above-
mentioned are present in the instant case.
 14
As early as Gilchrist vs. Cuddy, we held that where there was no malice
in the interference of a contract, and the impulse behind one's conduct lies
in a proper business interest rather than in wrongful motives, a party
cannot be a malicious interferer. Where the alleged interferer is financially
interested, and such interest motivates his conduct, it cannot be said that
15
he is an officious or malicious intermeddler.
In the instant case, it is clear that petitioner So Ping Bun prevailed upon
DCCSI to lease the warehouse to his enterprise at the expense of
respondent corporation. Though petitioner took interest in the property of
respondent corporation and benefited from it, nothing on record imputes
deliberate wrongful motives or malice on him.
Sec. 1314 of the Civil Code categorically provides also that, "Any third
person who induces another to violate his contract shall be liable for
damages to the other contracting party." Petitioner argues that damage
is an essential element of tort interference, and since the trial court and
the appellate court ruled that private respondents were not entitled to
actual, moral or exemplary damages, it follows that he ought to be
absolved of any liability, including attorney's fees.
It is true that the lower courts did not award damages, but this was only
because the extent of damages was not quantifiable. We had a similar
situation in Gilchrist, where it was difficult or impossible to determine
the extent of damage and there was nothing on record to serve as
basis thereof. In that case we refrained from awarding damages. We
believe the same conclusion applies in this case.
While we do not encourage tort interferers seeking their economic
interest to intrude into existing contracts at the expense of others,
however, we find that the conduct herein complained of did not
transcend the limits forbidding an obligatory award for damages in the
absence of any malice. The business desire is there to make some
gain to the detriment of the contracting parties. Lack of malice,
however, precludes damages. But it does not relieve petitioner of the
legal liability for entering into contracts and causing breach of existing
ones. The respondent appellate court correctly confirmed the
permanent injunction and nullification of the lease contracts between
DCCSI and Trendsetter Marketing, without awarding damages. The
injunction saved the respondents from further damage or injury caused
by petitioner's interference.
Considering that the respondent corporation's lease contract, at the
time when the cause of action accrued, ran only on a month-to-month
basis whence before it was on a yearly basis, we find even the reduced
amount of attorney's fees ordered by the Court of Appeals still
21
exorbitant in the light of prevailing jurisprudence. Consequently, the
amount of two hundred thousand (P200,000.00) awarded by respondent
appellate court should be reduced to one hundred thousand
(P100,000.00) pesos as the reasonable award or attorney's fees in favor
of private respondent corporation.
WHEREFORE, the petition is hereby DENIED. The assailed Decision
and Resolution of the Court of Appeals in CA-G.R. CV No. 38784 are
hereby AFFIRMED, with MODIFICATION that the award of attorney's
fees is reduced from two hundred thousand (P200,000.00) to one
hundred thousand (P100,000.00) pesos. No pronouncement as to
costs.1âwphi 1.nêt
SO ORDERED.
Lastly, the recovery of attorney's fees in the concept of actual or
compensatory damages, is allowed under the circumstances provided for
16
in Article 2208 of the Civil Code. One such occasion is when the
defendant's act or omission has compelled the plaintiff to litigate with third
17
persons or to incur expenses to protect his interest. But we have
consistently held that the award of considerable damages should have
18
clear factual and legal bases. In connection with attorney's fees, the
award should be commensurate to the benefits that would have been
derived from a favorable judgment. Settled is the rule that fairness of the
award of damages by the trial court calls for appellate review such that the
19
award if far too excessive can be reduced. This ruling applies with equal
force on the award of attorney's fees. In a long line of cases we said, "It is
not sound policy to place in penalty on the right to litigate. To compel the
defeated party to pay the fees of counsel for his successful opponent
would throw wide open the door of temptation to the opposing party and
20
his counsel to swell the fees to undue proportions."

Authorities debate on whether interference may be justified where the

defendant acts for the sole purpose of furthering his own financial or
10
economic interest. One view is that, as a general rule, justification for
interfering with the business relations of another exists where the actor's
motive is to benefit himself. Such justification does not exist where his sole
motive is to cause harm to the other. Added to this, some authorities
believe that it is not necessary that the interferer's interest outweigh that
of the party whose rights are invaded, and that an individual acts under an
economic interest that is substantial, not merely de minimis, such that
wrongful and malicious motives are negatived, for he acts in self-
11
protection. Moreover justification for protecting one's financial position
should not be made to depend on a comparison of his economic interest
12
in the subject matter with that of others. It is sufficient if the impetus of
his conduct lies in a proper business interest rather than in wrongful
13
motives.