Cases 50-57

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 81262 August 25, 1989
GLOBE MACKAY CABLE AND RADIO CORP., and HERBERT C. HENDRY, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and RESTITUTO M. TOBIAS, respondents.
Atencia & Arias Law Offices for petitioners.
Romulo C. Felizmena for private respondent.
CORTES, J.:
Private respondent Restituto M. Tobias was employed by petitioner Globe Mackay Cable and Radio Corporation (GLOBE
MACKAY) in a dual capacity as a purchasing agent and administrative assistant to the engineering operations manager. In 1972,
GLOBE MACKAY discovered fictitious purchases and other fraudulent transactions for which it lost several thousands of pesos.
According to private respondent it was he who actually discovered the anomalies and reported them on November 10, 1972 to his
immediate superior Eduardo T. Ferraren and to petitioner Herbert C. Hendry who was then the Executive Vice-President and
General Manager of GLOBE MACKAY.
On November 11, 1972, one day after private respondent Tobias made the report, petitioner Hendry confronted him by stating that
he was the number one suspect, and ordered him to take a one week forced leave, not to communicate with the office, to leave his
table drawers open, and to leave the office keys.
On November 20, 1972, when private respondent Tobias returned to work after the forced leave, petitioner Hendry went up to him
and called him a "crook" and a "swindler." Tobias was then ordered to take a lie detector test. He was also instructed to submit
specimen of his handwriting, signature, and initials for examination by the police investigators to determine his complicity in the
anomalies.
On December 6,1972, the Manila police investigators submitted a laboratory crime report (Exh. "A") clearing private respondent of
participation in the anomalies.
Not satisfied with the police report, petitioners hired a private investigator, retired Col. Jose G. Fernandez, who on December 10,
1972, submitted a report (Exh. "2") finding Tobias guilty. This report however expressly stated that further investigation was still to
be conducted.
Nevertheless, on December 12, 1972, petitioner Hendry issued a memorandum suspending Tobias from work preparatory to the
filing of criminal charges against him.
On December 19,1972, Lt. Dioscoro V. Tagle, Metro Manila Police Chief Document Examiner, after investigating other documents
pertaining to the alleged anomalous transactions, submitted a second laboratory crime report (Exh. "B") reiterating his previous
finding that the handwritings, signatures, and initials appearing in the checks and other documents involved in the fraudulent
transactions were not those of Tobias. The lie detector tests conducted on Tobias also yielded negative results.
Notwithstanding the two police reports exculpating Tobias from the anomalies and the fact that the report of the private investigator,
was, by its own terms, not yet complete, petitioners filed with the City Fiscal of Manila a complaint for estafa through falsification of
commercial documents, later amended to just estafa. Subsequently five other criminal complaints were filed against Tobias, four of
which were for estafa through Falsification of commercial document while the fifth was for of Article 290 of' the Revised Penal Code
(Discovering Secrets Through Seizure of Correspondence).lâwphî1.ñèt Two of these complaints were refiled with the Judge
Advocate General's Office, which however, remanded them to the fiscal's office. All of the six criminal complaints were dismissed
by the fiscal. Petitioners appealed four of the fiscal's resolutions dismissing the criminal complaints with the Secretary of Justice,
who, however, affirmed their dismissal.
In the meantime, on January 17, 1973, Tobias received a notice (Exh. "F") from petitioners that his employment has been
terminated effective December 13, 1972. Whereupon, Tobias filed a complaint for illegal dismissal. The labor arbiter dismissed the
complaint. On appeal, the National Labor Relations Commission (NLRC) reversed the labor arbiter's decision. However, the
Secretary of Labor, acting on petitioners' appeal from the NLRC ruling, reinstated the labor arbiter's decision. Tobias appealed the
Secretary of Labor's order with the Office of the President. During the pendency of the appeal with said office, petitioners and
private respondent Tobias entered into a compromise agreement regarding the latter's complaint for illegal dismissal.
Unemployed, Tobias sought employment with the Republic Telephone Company (RETELCO). However, petitioner Hendry, without
being asked by RETELCO, wrote a letter to the latter stating that Tobias was dismissed by GLOBE MACKAY due to dishonesty.
Private respondent Tobias filed a civil case for damages anchored on alleged unlawful, malicious, oppressive, and abusive acts of
petitioners. Petitioner Hendry, claiming illness, did not testify during the hearings. The Regional Trial Court (RTC) of Manila, Branch
IX, through Judge Manuel T. Reyes rendered judgment in favor of private respondent by ordering petitioners to pay him eighty
thousand pesos (P80,000.00) as actual damages, two hundred thousand pesos (P200,000.00) as moral damages, twenty
thousand pesos (P20,000.00) as exemplary damages, thirty thousand pesos (P30,000.00) as attorney's fees, and costs. Petitioners
appealed the RTC decision to the Court of Appeals. On the other hand, Tobias appealed as to the amount of damages. However,
the Court of Appeals, an a decision dated August 31, 1987 affirmed the RTC decision in toto. Petitioners' motion for reconsideration
having been denied, the instant petition for review on certiorari was filed.
The main issue in this case is whether or not petitioners are liable for damages to private respondent.
Petitioners contend that they could not be made liable for damages in the lawful exercise of their right to dismiss private
respondent.
On the other hand, private respondent contends that because of petitioners' abusive manner in dismissing him as well as for the
inhuman treatment he got from them, the Petitioners must indemnify him for the damage that he had suffered.
One of the more notable innovations of the New Civil Code is the codification of "some basic principles that are to be observed for
the rightful relationship between human beings and for the stability of the social order." [REPORT ON THE CODE COMMISSION
ON THE PROPOSED CIVIL CODE OF THE PHILIPPINES, p. 39]. The framers of the Code, seeking to remedy the defect of the
old Code which merely stated the effects of the law, but failed to draw out its spirit, incorporated certain fundamental precepts
which were "designed to indicate certain norms that spring from the fountain of good conscience" and which were also meant to
serve as "guides for human conduct [that] should run as golden threads through society, to the end that law may approach its
supreme ideal, which is the sway and dominance of justice" (Id.) Foremost among these principles is that pronounced in Article 19
which provides:
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.
This article, known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards which must be
observed not only in the exercise of one's rights but also in the performance of one's duties. These standards are the following: to
act with justice; to give everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a primordial
limitation on all rights; that in their exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by
itself legal because recognized or granted by law as such, may nevertheless become the source of some illegality. When a right is
exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal
wrong is thereby committed for which the wrongdoer must be held responsible. But while Article 19 lays down a rule of conduct for
the government of human relations and for the maintenance of social order, it does not provide a remedy for its violation. Generally,
an action for damages under either Article 20 or Article 21 would be proper.
Article 20, which pertains to damage arising from a violation of law, provides that:
Art. 20. Every person who contrary to law, wilfully or negligently causes damage to another, shall indemnify the
latter for the same.
However, in the case at bar, petitioners claim that they did not violate any provision of law since they were merely exercising their
legal right to dismiss private respondent. This does not, however, leave private respondent with no relief because Article 21 of the
Civil Code provides that:
Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.
This article, adopted to remedy the "countless gaps in the statutes, which leave so many victims of moral wrongs helpless, even
though they have actually suffered material and moral injury" [Id.] should "vouchsafe adequate legal remedy for that untold number
of moral wrongs which it is impossible for human foresight to provide for specifically in the statutes" [Id. it p. 40; See also PNB v.
CA, G.R. No. L-27155, May 18,1978, 83 SCRA 237, 247].
In determining whether or not the principle of abuse of rights may be invoked, there is no rigid test which can be applied. While the
Court has not hesitated to apply Article 19 whether the legal and factual circumstances called for its application [See for e.g.,
Velayo v. Shell Co. of the Phil., Ltd., 100 Phil. 186 (1956); PNB v. CA, supra; Grand Union Supermarket, Inc. v. Espino, Jr., G.R.
No. L-48250, December 28, 1979, 94 SCRA 953; PAL v. CA, G.R. No. L-46558, July 31,1981,106 SCRA 391; United General
Industries, Inc, v. Paler G.R. No. L-30205, March 15,1982,112 SCRA 404; Rubio v. CA, G.R. No. 50911, August 21, 1987, 153
SCRA 183] the question of whether or not the principle of abuse of rights has been violated resulting in damages under Article 20
or Article 21 or other applicable provision of law, depends on the circumstances of each case. And in the instant case, the Court,
after examining the record and considering certain significant circumstances, finds that all petitioners have indeed abused the right
that they invoke, causing damage to private respondent and for which the latter must now be indemnified.
The trial court made a finding that notwithstanding the fact that it was private respondent Tobias who reported the possible
existence of anomalous transactions, petitioner Hendry "showed belligerence and told plaintiff (private respondent herein) that he
was the number one suspect and to take a one week vacation leave, not to communicate with the office, to leave his table drawers
open, and to leave his keys to said defendant (petitioner Hendry)" [RTC Decision, p. 2; Rollo, p. 232]. This, petitioners do not
dispute. But regardless of whether or not it was private respondent Tobias who reported the anomalies to petitioners, the latter's
reaction towards the former upon uncovering the anomalies was less than civil. An employer who harbors suspicions that an
employee has committed dishonesty might be justified in taking the appropriate action such as ordering an investigation and
directing the employee to go on a leave. Firmness and the resolve to uncover the truth would also be expected from such
employer. But the high-handed treatment accorded Tobias by petitioners was certainly uncalled for. And this reprehensible attitude
of petitioners was to continue when private respondent returned to work on November 20, 1972 after his one week forced leave.
Upon reporting for work, Tobias was confronted by Hendry who said. "Tobby, you are the crook and swindler in this company."
Considering that the first report made by the police investigators was submitted only on December 10, 1972 [See Exh. A] the
statement made by petitioner Hendry was baseless. The imputation of guilt without basis and the pattern of harassment during the
investigations of Tobias transgress the standards of human conduct set forth in Article 19 of the Civil Code. The Court has already
ruled that the right of the employer to dismiss an employee should not be confused with the manner in which the right is exercised
and the effects flowing therefrom. If the dismissal is done abusively, then the employer is liable for damages to the employee
[Quisaba v. Sta. Ines-Melale Veneer and Plywood Inc., G.R. No. L-38088, August 30, 1974, 58 SCRA 771; See also Philippine
Refining Co., Inc. v. Garcia, G.R. No. L-21871, September 27,1966, 18 SCRA 107] Under the circumstances of the instant case,
the petitioners clearly failed to exercise in a legitimate manner their right to dismiss Tobias, giving the latter the right to recover
damages under Article 19 in relation to Article 21 of the Civil Code.
But petitioners were not content with just dismissing Tobias. Several other tortious acts were committed by petitioners against
Tobias after the latter's termination from work. Towards the latter part of January, 1973, after the filing of the first of six criminal
complaints against Tobias, the latter talked to Hendry to protest the actions taken against him. In response, Hendry cut short
Tobias' protestations by telling him to just confess or else the company would file a hundred more cases against him until he landed
in jail. Hendry added that, "You Filipinos cannot be trusted." The threat unmasked petitioner's bad faith in the various actions taken
against Tobias. On the other hand, the scornful remark about Filipinos as well as Hendry's earlier statements about Tobias being a
"crook" and "swindler" are clear violations of 'Tobias' personal dignity [See Article 26, Civil Code].
The next tortious act committed by petitioners was the writing of a letter to RETELCO sometime in October 1974, stating that
Tobias had been dismissed by GLOBE MACKAY due to dishonesty. Because of the letter, Tobias failed to gain employment with
RETELCO and as a result of which, Tobias remained unemployed for a longer period of time. For this further damage suffered by
Tobias, petitioners must likewise be held liable for damages consistent with Article 2176 of the Civil Code. Petitioners, however,
contend that they have a "moral, if not legal, duty to forewarn other employers of the kind of employee the plaintiff (private
respondent herein) was." [Petition, p. 14; Rollo, p. 15]. Petitioners further claim that "it is the accepted moral and societal obligation
of every man to advise or warn his fellowmen of any threat or danger to the latter's life, honor or property. And this includes warning
one's brethren of the possible dangers involved in dealing with, or accepting into confidence, a man whose honesty and integrity is
suspect" [Id.]. These arguments, rather than justify petitioners' act, reveal a seeming obsession to prevent Tobias from getting a
job, even after almost two years from the time Tobias was dismissed.
Finally, there is the matter of the filing by petitioners of six criminal complaints against Tobias. Petitioners contend that there is no
case against them for malicious prosecution and that they cannot be "penalized for exercising their right and prerogative of seeking
justice by filing criminal complaints against an employee who was their principal suspect in the commission of forgeries and in the
perpetration of anomalous transactions which defrauded them of substantial sums of money" [Petition, p. 10, Rollo, p. 11].
While sound principles of justice and public policy dictate that persons shall have free resort to the courts for redress of wrongs and
vindication of their rights [Buenaventura v. Sto. Domingo, 103 Phil. 239 (1958)], the right to institute criminal prosecutions can not
be exercised maliciously and in bad faith [Ventura v. Bernabe, G.R. No. L-26760, April 30, 1971, 38 SCRA 5871.] Hence, in Yutuk
V. Manila Electric Co., G.R. No. L-13016, May 31, 1961, 2 SCRA 337, the Court held that the right to file criminal complaints should
not be used as a weapon to force an alleged debtor to pay an indebtedness. To do so would be a clear perversion of the function of
the criminal processes and of the courts of justice. And in Hawpia CA, G.R. No. L-20047, June 30, 1967. 20 SCRA 536 the Court
upheld the judgment against the petitioner for actual and moral damages and attorney's fees after making a finding that petitioner,
with persistence, filed at least six criminal complaints against respondent, all of which were dismissed.
To constitute malicious prosecution, there must be proof that the prosecution was prompted by a design to vex and humiliate a
person and that it was initiated deliberately by the defendant knowing that the charges were false and groundless [Manila Gas
Corporation v. CA, G.R. No. L-44190, October 30,1980, 100 SCRA 602]. Concededly, the filing of a suit by itself, does not render a
person liable for malicious prosecution [Inhelder Corporation v. CA, G.R. No. 52358, May 301983122 SCRA 576]. The mere
dismissal by the fiscal of the criminal complaint is not a ground for an award of damages for malicious prosecution if there is no
competent evidence to show that the complainant had acted in bad faith [Sison v. David, G.R. No. L-11268, January 28,1961, 1
SCRA 60].
In the instant case, however, the trial court made a finding that petitioners acted in bad faith in filing the criminal complaints against
Tobias, observing that:
xxx
Defendants (petitioners herein) filed with the Fiscal's Office of Manila a total of six (6) criminal cases, five (5) of
which were for estafa thru falsification of commercial document and one for violation of Art. 290 of the Revised
Penal Code "discovering secrets thru seizure of correspondence," and all were dismissed for insufficiency or lack
of evidence." The dismissal of four (4) of the cases was appealed to the Ministry of Justice, but said Ministry
invariably sustained the dismissal of the cases. As above adverted to, two of these cases were refiled with the
Judge Advocate General's Office of the Armed Forces of the Philippines to railroad plaintiffs arrest and detention
in the military stockade, but this was frustrated by a presidential decree transferring criminal cases involving
civilians to the civil courts.
xxx
To be sure, when despite the two (2) police reports embodying the findings of Lt. Dioscoro Tagle, Chief
Document Examiner of the Manila Police Department, clearing plaintiff of participation or involvement in the
fraudulent transactions complained of, despite the negative results of the lie detector tests which defendants
compelled plaintiff to undergo, and although the police investigation was "still under follow-up and a
supplementary report will be submitted after all the evidence has been gathered," defendants hastily filed six (6)
criminal cases with the city Fiscal's Office of Manila, five (5) for estafa thru falsification of commercial document
and one (1) for violation of Art. 290 of the Revised Penal Code, so much so that as was to be expected, all six (6)
cases were dismissed, with one of the investigating fiscals, Asst. Fiscal de Guia, commenting in one case that,
"Indeed, the haphazard way this case was investigated is evident. Evident likewise is the flurry and haste in the
filing of this case against respondent Tobias," there can be no mistaking that defendants would not but be
motivated by malicious and unlawful intent to harass, oppress, and cause damage to plaintiff.
xxx
[RTC Decision, pp. 5-6; Rollo, pp. 235-236].
In addition to the observations made by the trial court, the Court finds it significant that the criminal complaints were filed during the
pendency of the illegal dismissal case filed by Tobias against petitioners. This explains the haste in which the complaints were filed,
which the trial court earlier noted. But petitioners, to prove their good faith, point to the fact that only six complaints were filed
against Tobias when they could have allegedly filed one hundred cases, considering the number of anomalous transactions
committed against GLOBE MACKAY. However, petitioners' good faith is belied by the threat made by Hendry after the filing of the
first complaint that one hundred more cases would be filed against Tobias. In effect, the possible filing of one hundred more cases
was made to hang like the sword of Damocles over the head of Tobias. In fine, considering the haste in which the criminal
complaints were filed, the fact that they were filed during the pendency of the illegal dismissal case against petitioners, the threat
made by Hendry, the fact that the cases were filed notwithstanding the two police reports exculpating Tobias from involvement in
the anomalies committed against GLOBE MACKAY, coupled by the eventual dismissal of all the cases, the Court is led into no
other conclusion than that petitioners were motivated by malicious intent in filing the six criminal complaints against Tobias.
Petitioners next contend that the award of damages was excessive. In the complaint filed against petitioners, Tobias prayed for the
following: one hundred thousand pesos (P100,000.00) as actual damages; fifty thousand pesos (P50,000.00) as exemplary
damages; eight hundred thousand pesos (P800,000.00) as moral damages; fifty thousand pesos (P50,000.00) as attorney's fees;
and costs. The trial court, after making a computation of the damages incurred by Tobias [See RTC Decision, pp. 7-8; Rollo, pp.
154-1551, awarded him the following: eighty thousand pesos (P80,000.00) as actual damages; two hundred thousand pesos
(P200,000.00) as moral damages; twenty thousand pesos (P20,000.00) as exemplary damages; thirty thousand pesos
(P30,000.00) as attorney's fees; and, costs. It must be underscored that petitioners have been guilty of committing several
actionable tortious acts, i.e., the abusive manner in which they dismissed Tobias from work including the baseless imputation of
guilt and the harassment during the investigations; the defamatory language heaped on Tobias as well as the scornful remark on
Filipinos; the poison letter sent to RETELCO which resulted in Tobias' loss of possible employment; and, the malicious filing of the
criminal complaints. Considering the extent of the damage wrought on Tobias, the Court finds that, contrary to petitioners'
contention, the amount of damages awarded to Tobias was reasonable under the circumstances.
Yet, petitioners still insist that the award of damages was improper, invoking the principle of damnum absque injuria. It is argued
that "[t]he only probable actual damage that plaintiff (private respondent herein) could have suffered was a direct result of his
having been dismissed from his employment, which was a valid and legal act of the defendants-appellants (petitioners
herein).lâwphî1.ñèt " [Petition, p. 17; Rollo, p. 18].
According to the principle of damnum absque injuria, damage or loss which does not constitute a violation of a legal right or amount
to a legal wrong is not actionable [Escano v. CA, G.R. No. L-47207, September 25, 1980, 100 SCRA 197; See also Gilchrist v.
Cuddy 29 Phil, 542 (1915); The Board of Liquidators v. Kalaw, G.R. No. L-18805, August 14, 1967, 20 SCRA 987]. This principle
finds no application in this case. It bears repeating that even granting that petitioners might have had the right to dismiss Tobias
from work, the abusive manner in which that right was exercised amounted to a legal wrong for which petitioners must now be held
liable. Moreover, the damage incurred by Tobias was not only in connection with the abusive manner in which he was dismissed
but was also the result of several other quasi-delictual acts committed by petitioners.
Petitioners next question the award of moral damages. However, the Court has already ruled in Wassmer v. Velez, G.R. No. L-
20089, December 26, 1964, 12 SCRA 648, 653, that [p]er express provision of Article 2219 (10) of the New Civil Code, moral
damages are recoverable in the cases mentioned in Article 21 of said Code." Hence, the Court of Appeals committed no error in
awarding moral damages to Tobias.
Lastly, the award of exemplary damages is impugned by petitioners. Although Article 2231 of the Civil Code provides that "[i]n
quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence," the Court, in Zulueta v. Pan
American World Airways, Inc., G.R. No. L- 28589, January 8, 1973, 49 SCRA 1, ruled that if gross negligence warrants the award
of exemplary damages, with more reason is its imposition justified when the act performed is deliberate, malicious and tainted with
bad faith. As in the Zulueta case, the nature of the wrongful acts shown to have been committed by petitioners against Tobias is
sufficient basis for the award of exemplary damages to the latter.
WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals in CA-G.R. CV No. 09055 is AFFIRMED.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr. and Bidin, JJ., concur.
Feliciano, J., took no part.

Footnotes
** Penned by Justice Jorge R. Coquia and concurred in be Justice Josue N. Bellosillo and Justice Venancio D.
Aldecoa Jr.
FIRST DIVISION
G.R. No. 132344 February 17, 2000
UNIVERSITY OF THE EAST, petitioner,
vs.
ROMEO A. JADER, respondent.
YNARES-SANTIAGO, J.:
May an educational institution be held liable for damages for misleading a student into believing that the latter had satisfied all the
requirements for graduation when such is not the case? This is the issue in the instant petition for review premised on the following
undisputed facts as summarized by the trial court and adopted by the Court of Appeals (CA),1 to wit:
Plaintiff was enrolled in the defendants' College of Law from 1984 up to 1988. In the first semester of his last year (School
year 1987-1988), he failed to take the regular final examination in Practice Court I for which he was given an incomplete
grade (Exhibits "2", also Exhibit "H"). He enrolled for the second semester as fourth year law student (Exhibit "A") and on
February 1, 1988 he filed an application for the removal of the incomplete grade given him by Professor Carlos Ortega
(Exhibits "H-2", also Exhibit "2") which was approved by Dean Celedonio Tiongson after payment of the required fee. He
took the examination on March 28, 1988. On May 30, 1988, Professor Carlos Ortega submitted his grade. It was a grade
of five (5). (Exhibits "H-4", also Exhibits "2-L", "2-N").1âwphi1.nêt
In the meantime, the Dean and the Faculty Members of the College of Law met to deliberate on who among the fourth
year students should be allowed to graduate. The plaintiff's name appeared in the Tentative List of Candidates for
graduation for the Degree of Bachelor of Laws (LL.B) as of Second Semester (1987-1988) with the following annotation:
JADER ROMEO A.
Def. Conflict of Laws — x-1-87-88, Practice Court I Inc., 1-87-88 C-1 to submit transcript with S.O. (Exhibits "3", "3-C-1",
"3-C-2").
The 35th Investitures & Commencement Ceremonies for the candidates of Bachelor of Laws was scheduled on the 16th
of April 1988 at 3:00 o'clock in the afternoon, and in the invitation for that occasion the name of the plaintiff appeared as
one of the candidates. (Exhibits "B", "B-6", "B-6-A"). At the foot of the list of the names of the candidates there appeared
however the following annotation:
This is a tentative list Degrees will be conferred upon these candidates who satisfactorily complete requirements
as stated in the University Bulletin and as approved of the Department of Education, Culture and Sports (Exhibit
"B-7-A").
The plaintiff attended the investiture ceremonies at F. dela Cruz Quadrangle, U.E., Recto Campus, during the program of
which he went up the stage when his name was called, escorted by her (sic) mother and his eldest brother who assisted in
placing the Hood, and his Tassel was turned from left to right, and he was thereafter handed by Dean Celedonio a rolled
white sheet of paper symbolical of the Law Diploma. His relatives took pictures of the occasion (Exhibits "C" to "C-6", "D-
3" to "D-11").
He tendered a blow-out that evening which was attended by neighbors, friends and relatives who wished him good luck in
the forthcoming bar examination. There were pictures taken too during the blow-out (Exhibits "D" to "D-1").
He thereafter prepared himself for the bar examination. He took a leave of absence without pay from his job from April 20,
1988 to September 30, 1988 (Exhibit "G") and enrolled at the pre-bar review class in Far Eastern University. (Exhibits "F"
to "F-2"). Having learned of the deficiency he dropped his review class and was not able to take the bar examination.2
Consequently, respondent sued petitioner for damages alleging that he suffered moral shock, mental anguish, serious anxiety,
besmirched reputation, wounded feelings and sleepless nights when he was not able to take the 1988 bar examinations arising
from the latter's negligence. He prayed for an award of moral and exemplary damages, unrealized income, attorney's fees, and
costs of suit.
In its answer with counterclaim, petitioner denied liability arguing mainly that it never led respondent to believe that he completed
the requirements for a Bachelor of Laws degree when his name was included in the tentative list of graduating students. After trial,
the lower court rendered judgment as follows:
WHEREFORE, in view of the foregoing judgment is hereby rendered in favor of the plaintiff and against the defendant
ordering the latter to pay plaintiff the sum of THIRTY FIVE THOUSAND FOUR HUNDRED SEVENTY PESOS
(P35,470.00) with legal rate of interest from the filing of the complaint until fully paid, the amount of FIVE THOUSAND
PESOS (P5,000.00) as attorney's fees and the cost of suit.
Defendant's counterclaim is, for lack of merit, hereby dismissed.
SO ORDERED.3
which on appeal by both parties was affirmed by the Court of Appeals (CA) with modification. The dispositive portion of the CA
decision reads:
WHEREFORE, in the light of the foregoing, the lower Court's Decision is hereby AFFIRMED with the MODIFICATION that
defendant-appellee, in addition to the sum adjudged by the lower court in favor of plaintiff-appellant, is also ORDERED to
pay plaintiff-appellant the amount of FIFTY THOUSAND (P50,000.00) PESOS for moral damages. Costs against
defendant-appellee.
SO ORDERED.4
Upon the denial of its motion for reconsideration, petitioner UE elevated the case to this Court on a petition for review under Rule
45 of the Rules of Court, arguing that it has no liability to respondent Romeo A. Jader, considering that the proximate and
immediate cause of the alleged damages incurred by the latter arose out of his own negligence in not verifying from the professor
concerned the result of his removal exam.
The petition lacks merit.
When a student is enrolled in any educational or learning institution, a contract of education is entered into between said institution
and the student. The professors, teachers or instructors hired by the school are considered merely as agents and administrators
tasked to perform the school's commitment under the contract. Since the contracting parties are the school and the student, the
latter is not duty-bound to deal with the former's agents, such as the professors with respect to the status or result of his grades,
although nothing prevents either professors or students from sharing with each other such information. The Court takes judicial
notice of the traditional practice in educational institutions wherein the professor directly furnishes his/her students their grades. It is
the contractual obligation of the school to timely inform and furnish sufficient notice and information to each and every student as to
whether he or she had already complied with all the requirements for the conferment of a degree or whether they would be included
among those who will graduate. Although commencement exercises are but a formal ceremony, it nonetheless is not an ordinary
occasion, since such ceremony is the educational institution's way of announcing to the whole world that the students included in
the list of those who will be conferred a degree during the baccalaureate ceremony have satisfied all the requirements for such
degree. Prior or subsequent to the ceremony, the school has the obligation to promptly inform the student of any problem involving
the latter's grades and performance and also most importantly, of the procedures for remedying the same.
Petitioner, in belatedly informing respondent of the result of the removal examination, particularly at a time when he had already
commenced preparing for the bar exams, cannot be said to have acted in good faith. Absence of good faith must be sufficiently
established for a successful prosecution by the aggrieved party in a suit for abuse of right under Article 19 of the Civil Code. Good
faith connotes an honest intention to abstain from taking undue advantage of another, even though the forms and technicalities of
the law, together with the absence of all information or belief of facts, would render the transaction unconscientious.5 It is the school
that has access to those information and it is only the school that can compel its professors to act and comply with its rules,
regulations and policies with respect to the computation and the prompt submission of grades. Students do not exercise control,
much less influence, over the way an educational institution should run its affairs, particularly in disciplining its professors and
teachers and ensuring their compliance with the school's rules and orders. Being the party that hired them, it is the school that
exercises general supervision and exclusive control over the professors with respect to the submission of reports involving the
students' standing. Exclusive control means that no other person or entity had any control over the instrumentality which caused
the damage or injury.6
The college dean is the senior officer responsible for the operation of an academic program, enforcement of rules and regulations,
and the supervision of faculty and student services.7 He must see to it that his own professors and teachers, regardless of their
status or position outside of the university, must comply with the rules set by the latter. The negligent act of a professor who fails to
observe the rules of the school, for instance by not promptly submitting a student's grade, is not only imputable to the professor but
is an act of the school, being his employer.
Considering further, that the institution of learning involved herein is a university which is engaged in legal education, it should have
practiced what it inculcates in its students, more specifically the principle of good dealings enshrined in Articles 19 and 20 of the
Civil Code which states:
Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for
the same.
Art. 19 was intended to expand the concept of torts by granting adequate legal remedy for the untold number of moral wrongs
which is impossible for human foresight to provide specifically in statutory law.8 In civilized society, men must be able to assume
that others will do them no intended injury — that others will commit no internal aggressions upon them; that their fellowmen, when
they act affirmatively will do so with due care which the ordinary understanding and moral sense of the community exacts and that
those with whom they deal in the general course of society will act in good faith. The ultimate thing in the theory of liability is
justifiable reliance under conditions of civilized society.9 Schools and professors cannot just take students for granted and be
indifferent to them, for without the latter, the former are useless.
Educational institutions are duty-bound to inform the students of their academic status and not wait for the latter to inquire from the
former. The conscious indifference of a person to the rights or welfare of the person/persons who may be affected by his act or
omission can support a claim for damages.10 Want of care to the conscious disregard of civil obligations coupled with a conscious
knowledge of the cause naturally calculated to produce them would make the erring party liable.11 Petitioner ought to have known
that time was of the essence in the performance of its obligation to inform respondent of his grade. It cannot feign ignorance that
respondent will not prepare himself for the bar exams since that is precisely the immediate concern after graduation of an LL.B.
graduate. It failed to act seasonably. Petitioner cannot just give out its student's grades at any time because a student has to
comply with certain deadlines set by the Supreme Court on the submission of requirements for taking the bar. Petitioner's liability
arose from its failure to promptly inform respondent of the result of an examination and in misleading the latter into believing that he
had satisfied all requirements for the course. Worth quoting is the following disquisition of the respondent court:
It is apparent from the testimony of Dean Tiongson that defendant-appellee University had been informed during the
deliberation that the professor in Practice Court I gave plaintiff-appellant a failing grade. Yet, defendant-appellee still did
not inform plaintiff-appellant of his failure to complete the requirements for the degree nor did they remove his name from
the tentative list of candidates for graduation. Worse, defendant-appellee university, despite the knowledge that plaintiff-
appellant failed in Practice Court I, again included plaintiff-appellant's name in the "tentative list of candidates for
graduation which was prepared after the deliberation and which became the basis for the commencement rites program.
Dean Tiongson reasons out that plaintiff-appellant's name was allowed to remain in the tentative list of candidates for
graduation in the hope that the latter would still be able to remedy the situation in the remaining few days before
graduation day. Dean Tiongson, however, did not explain how plaintiff appellant Jader could have done something to
complete his deficiency if defendant-appellee university did not exert any effort to inform plaintiff-appellant of his failing
grade in Practice Court I.12
Petitioner cannot pass on its blame to the professors to justify its own negligence that led to the delayed relay of information to
respondent. When one of two innocent parties must suffer, he through whose agency the loss occurred must bear it.13 The modern
tendency is to grant indemnity for damages in cases where there is abuse of right, even when the act is not illicit.14 If mere fault or
negligence in one's acts can make him liable for damages for injury caused thereby, with more reason should abuse or bad faith
make him liable. A person should be protected only when he acts in the legitimate exercise of his right, that is, when he acts with
prudence and in good faith, but not when he acts with negligence or abuse.15
However, while petitioner was guilty of negligence and thus liable to respondent for the latter's actual damages, we hold that
respondent should not have been awarded moral damages. We do not agree with the Court of Appeals' findings that respondent
suffered shock, trauma and pain when he was informed that he could not graduate and will not be allowed to take the bar
examinations. At the very least, it behooved on respondent to verify for himself whether he has completed all necessary
requirements to be eligible for the bar examinations. As a senior law student, respondent should have been responsible enough to
ensure that all his affairs, specifically those pertaining to his academic achievement, are in order. Given these considerations, we
fail to see how respondent could have suffered untold embarrassment in attending the graduation rites, enrolling in the bar review
classes and not being able to take the bar exams. If respondent was indeed humiliated by his failure to take the bar, he brought this
upon himself by not verifying if he has satisfied all the requirements including his school records, before preparing himself for the
bar examination. Certainly, taking the bar examinations does not only entail a mental preparation on the subjects thereof; there are
also prerequisites of documentation and submission of requirements which the prospective examinee must meet.
WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner is ORDERED to PAY
respondent the sum of Thirty-five Thousand Four Hundred Seventy Pesos (P35,470.00), with legal interest of 6% per
annum computed from the date of filing of the complaint until fully paid; the amount of Five Thousand Pesos (P5,000.00) as
attorney's fees; and the costs of the suit. The award of moral damages is DELEIED.1âwphi1.nêt
SO ORDERED.
Davide, Jr., C.J., Kapunan and Pardo, JJ., concur.
Puno, J., took no part.
Footnotes
1
Court of Appeals (CA) Decision promulgated October 10, 1997 penned by Justice Barcelona, with Justices Mabutas, Jr.
and Aquino, concurring, pp. 5-6; Rollo, pp. 12-13.
2
A check with the Attorney's List in the Court shows that private respondent is not a member of the Philippine Bar.
(http.//www.supremecourt.gov.ph).
3
Decision of Regional Trial Court (RTC-Manila Branch IX) dated September 4, 1990 penned by Judge Edilberto
Sandoval, pp. 8-9; RTC Records, pp. 192-193; Rollo, pp. 8-9.
4
CA Decision, p. 24; Rollo, p. 31.
5
Tolentino, New Civil Code of the Philippines, Vol. I, (1960 ed.) citing Wood v. Conrad, 2, S.B. 83, 50 N.W. 95.
6
Mahowald v. Minnesota Gas Co. (Minn) 344 NW2d 856. See also Jackson v. H.H. Robertson Co., 118 Ariz 29, 574 P2d
82; Cummins v. West Linn, 21 Or. App 643, 536 P2d 455.
7
Hawes and Hawes, "The Concise Dictionary of Education," p. 62, 1982 ed. cited in Sarmiento, Manual, p. 164.
8
PNB v. CA, 83 SCRA 237 (1978) cited in Sea Commercial Company v. CA, G.R. No. 122823, November 25, 1999.
9
Dean Roscoe Pound, Introduction to the Philosophy of Law.
10
Texas Pacific & Oil Co. v. Robertson, 125 Tex 4, 79 SW2d 830, 98 ALR 262.
11
See Helms v. Universal Atlas Cement Co., (CA5 Tex) 202 F2d 421 cert de 346 US 858, 98 L ed 372, 74 S Ct 74; Otto
Kuehne Preserving Co. v. Allen (CA8 Mo) 148 F 166; See also Alabama G.S.R. Co. v. Hill, 93 Ala 514, 9 So 722;
Richmond & P.R. Co. v. Vance, 93 Ala 144, 9 So 574.
12
CA Decision, pp. 222-23; Rollo, pp. 29-30.
13
Ohio Farmers, Ins. Co. v. Norman, (App) 122 Ariz 330, 594 P2d 1026.
14
Sea Commercial Company v. CA, G.R. No. 122823, November 25, 1999.
15
Tolentino, Civil Code, 1990 ed., Vol, I, p. 61.
THIRD DIVISION
[G.R. No. 156841. June 30, 2005]
GF EQUITY, INC., petitioner, vs. ARTURO VALENZONA, respondent.
DECISION
CARPIO-MORALES, J.:
On challenge via Petition for Review on Certiorari is the Court of Appeals October 14, 2002 Decision[1] reversing that of the
Regional Trial Court (RTC) of Manila dated June 28, 1997 [2] which dismissed the complaint of herein respondent Arturo Valenzona
(Valenzona) for breach of contract with damages against herein petitioner GF Equity, Inc. (GF Equity).
The factual antecedents of the case are as follows:
GF Equity, represented by its Chief Financial Officer W. Steven Uytengsu (Uytengsu), hired Valenzona as Head Coach of the
Alaska basketball team in the Philippine Basketball Association (PBA) under a Contract of Employment.[3]
As head coach, the duties of Valenzona were described in the contract to include the following:
xxx
1. . . . coaching at all practices and games scheduled for the CORPORATIONs TEAM during the scheduled season of the
ASSOCIATION . . ., coaching all exhibition games scheduled by the corporation as approved by the PBA during and prior to the
scheduled season, coaching (if invited to participate) in the ASSOCIATIONs All Star Game and attending every event conducted in
association with the All Star Game, and coaching the play-off games subsequent to the scheduled season based on the athletic
program of the PBA.
xxx
3. The COACH agrees to observe and comply with all requirements of the CORPORATION respecting conduct of its TEAM and its
players, at all times whether on or off the playing floor. The CORPORATION may, from time to time during the continuance of this
contract, establish reasonable rules for the government of its players at home and on the road; and such rules shall be part of this
contract as fully is (sic) if herein written and shall be the responsibility of the COACH to implement; x x x
4. The COACH agrees (a) to report at the time and place fixed by the CORPORATION in good physical condition; (b) to keep
himself throughout the entire season in good physical condition; (c) to give his best services, as well as his loyalty to the
CORPORATION, and to serve as basketball coach for the CORPORATION and its assignees; (d) to be neatly and fully attired in
public and always to conduct himself on and off the court according to the highest standards of honesty, morality, fair play and
sportsmanship; (e) not to do anything which is detrimental to the best interests of the CORPORATION.
xxx
7. The COACH agrees that if so requested by the CORPORATION, he will endorse the CORPORATIONs products in commercial
advertising, promotions and the like. The COACH further agrees to allow the CORPORATION or the ASSOCIATION to take
pictures of the COACH alone or together with others, for still photographs, motion pictures or television, at such times as the
CORPORATION or the ASSOCIATION may designate, and no matter by whom taken may be used in any manner desired by
either of them for publicity or promotional purposes. (Underscoring supplied).
xxx
Even before the conclusion of the contract, Valenzona had already served GF Equity under a verbal contract by coaching its
team, Hills Brothers, in the 3rd PBA Conference of 1987 where the team was runner-up.
Under the contract, GF Equity would pay Valenzona the sum of Thirty Five Thousand Pesos (P35,000.00) monthly, net of
taxes, and provide him with a service vehicle and gasoline allowance.
While the employment period agreed upon was for two years commencing on January 1, 1988 and ending on December 31,
1989, the last sentence of paragraph 3 of the contract carried the following condition:
3. x x x If at any time during the contract, the COACH, in the sole opinion of the CORPORATION, fails to exhibit sufficient skill or
competitive ability to coach the team, the CORPORATION may terminate this contract. (Emphasis supplied)
Before affixing his signature on the contract, Valenzona consulted his lawyer who pointed out the one-sidedness of the above-
quoted last sentence of paragraph 3 thereof. The caveat notwithstanding, Valenzona still acceded to the terms of the contract
because he had trust and confidence in Uytengsu who had recommended him to the management of GF Equity.
During his stint as Alaskas head coach, the team placed third both in the Open and All-Filipino PBA Conferences in 1988.
Valenzona was later advised by the management of GF Equity by letter of September 26, 1988 of the termination of his
services in this wise:
We regret to inform you that under the contract of employment dated January 1, 1988 we are invoking our rights
specified in paragraph 3.
You will continue to be paid until your outstanding balance which, as of September 25, 1988, is P75,868.38 has been
fully paid.
Please return the service vehicle to my office no later than September 30, 1988.[4] (Emphasis supplied)
Close to six years after the termination of his services, Valenzonas counsel, by letter of July 30, 1994, [5] demanded from GF
Equity payment of compensation arising from the arbitrary and unilateral termination of his employment. GF Equity, however,
refused the claim.
Valenzona thus filed on September 26, 1994 before the Regional Trial Court of Manila a complaint [6] against GF Equity for
breach of contract with damages, ascribing bad faith, malice and disregard to fairness and to the rights of the plaintiff by unilaterally
and arbitrarily pre-terminating the contract without just cause and legal and factual basis. He prayed for the award of actual
damages in the amount of P560,000.00 representing his unpaid compensation from September 26, 1988 up to December 31,
1989, at the rate of P35,000.00 a month; moral damages in the amount of P100,000.00; exemplary damages in the amount
of P50,000.00; attorneys fees in the amount of P100,000.00; and costs of suit.
Before the trial court, Valenzona challenged the condition in paragraph 3 of the contract as lacking the element of mutuality of
contract, a clear transgression of Article 1308 of the New Civil Code, and reliance thereon, he contended, did not warrant his
unjustified and arbitrary dismissal.
GF Equity maintained, on the other hand, that it merely exercised its right under the contract to pre-terminate Valenzonas
employment due to incompetence. And it posited that he was guilty of laches and, in any event, his complaint should have been
instituted before a labor arbiter.
The trial court, upholding the validity of the assailed provision of the contract, dismissed, by decision of June 28, 1997, [7] the
complaint of Valenzona who, it held, was fully aware of entering into a bad bargain.
The Court of Appeals, before which Valenzona appealed, reversed the trial courts decision, by decision of October 14, 2002,
[8]
and accordingly ordered GF Equity to pay him damages.
In its decision, the appellate court held that the questioned provision in the contract merely confers upon GF Equity the right to
fire its coach upon a finding of inefficiency, a valid reason within the ambit of its management prerogatives, subject to limitations
imposed by law, although not expressly stated in the clause;
and the right granted in the contractcan neither be said to be immoral, unlawful, or contrary to public policy. It concluded, however,
that while the mutuality of the clause is evident, GF Equity abused its right by arbitrarily terminating . . . Valenzonas employment
and opened itself to a charge of bad faith. Hence, finding that Valenzonas claim for damages is obviously . . . based on Art. 19 of
the Civil Code which provides:
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith.,
the appellate court awarded Valenzona the following damages, furnishing the justification therefor:
. . . a) Compensatory damages representing his unearned income for 15 months. Actual and compensatory damages are those
recoverable because of a pecuniary loss in business, trade, property, profession, job or occupation. As testified, his employment
contract provided a monthly income of PhP35,000, which he lost from September 26, 1988 up to December 31, 1989 as a
consequence of his arbitrary dismissal; b) Moral damages of PhP20,000. The act caused wounded feelings on the part of the
plaintiff. Moral damages is recoverable under Article 2220 and the chapter on Human Relations of the Civil Code (Articles 1936)
when a contract is breached in bad faith; c) Exemplary damages of PhP20,000, by way of example or correction for the public
good; and d) When exemplary damages are awarded, attorneys fees can also be given. We deem it just to grant 10% of the actual
damages as attorneys fees. (Underscoring supplied)
Hence, this petition at bar, GF Equity faulting the appellate court in
. . . CONCLUD[ING] WRONGLY FROM ESTABLISHED FACTS IN A MANNER VIOLATIVE OF APPLICABLE LAWS AND
ESTABLISHED JURISPRUDENCE.[9]
GF Equity argues that the appellate court committed a non-sequitur when it agreed with the findings of fact of the lower court
but reached an opposite conclusion. It avers that the appellate court made itself a guardian of an otherwise intelligent individual
well-versed in tactical maneuvers; that the freedom to enter into contracts is protected by law, and the courts will not interfere
therewith unless the contract is contrary to law, morals, good customs, public policy or public order; that there was absolutely no
reason for the appellate court to have found bad faith on its part; and that, at all events, Valenzona is guilty of laches for his
unexplained inaction for six years.
Central to the resolution of the instant controversy is the determination of whether the questioned last sentence of paragraph
3 is violative of the principle of mutuality of contracts.
Mutuality is one of the characteristics of a contract, its validity or performance or compliance of which cannot be left to the will
of only one of the parties.[10] This is enshrined in Article 1308 of the New Civil Code, whose underlying principle is explained
in Garcia v. Rita Legarda, Inc.,[11] viz:
Article 1308 of the New Civil Code reads as follows:
The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.
The above legal provision is a virtual reproduction of Article 1256 of the old Civil Code but it was so phrased as to emphasize the
principle that the contract must bind both parties. This, of course is based firstly, on the principle that obligations arising from
contracts have the force of law between the contracting parties and secondly, that there must be mutuality between the parties
based on their essential equality to which is repugnant to have one party bound by the contract leaving the other free
therefrom (8 Manresa 556). Its ultimate purpose is to render void a contract containing a condition which makes its
fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties.
x x x (Emphasis, italics and underscoring supplied)
The ultimate purpose of the mutuality principle is thus to nullify a contract containing a condition which makes its fulfillment
or pre-termination dependent exclusively upon theuncontrolled will of one of the contracting parties.
Not all contracts though which vest to one party their determination of validity or compliance or the right to terminate the same
are void for being violative of the mutuality principle. Jurisprudence is replete with instances of cases [12] where this Court upheld the
legality of contracts which left their fulfillment or implementation to the will of either of the parties. In these cases, however, there
was a finding of the presence of essential equality of the parties to the contracts, thus preventing the perpetration of injustice on the
weaker party.
In the case at bar, the contract incorporates in paragraph 3 the right of GF Equity to pre-terminate the contract that if the
coach, in the sole opinion of the corporation, fails to exhibit sufficient skill or competitive ability to coach the team, the corporation
may terminate the contract. The assailed condition clearly transgresses the principle of mutuality of contracts. It leaves the
determination of whether Valenzona failed to exhibit sufficient skill or competitive ability to coach Alaska team solely to the
opinion of GF Equity. Whether Valenzona indeed failed to exhibit the required skill or competitive ability depended exclusively on
the judgment of GF Equity. In other words, GF Equity was given an unbridled prerogative to pre-terminate the contract irrespective
of the soundness, fairness or reasonableness, or even lack of basis of its opinion.
To sustain the validity of the assailed paragraph would open the gate for arbitrary and illegal dismissals, for void contractual
stipulations would be used as justification therefor.
The assailed stipulation being violative of the mutuality principle underlying Article 1308 of the Civil Code, it is null and void.
The nullity of the stipulation notwithstanding, GF Equity was not precluded from the right to pre-terminate the contract. The
pre-termination must have legal basis, however, if it is to be declared justified.
GF Equity failed, however, to advance any ground to justify the pre-termination. It simply invoked the assailed provision which
is null and void.
While GF Equitys act of pre-terminating Valenzonas services cannot be considered willful as it was based on a stipulation,
albeit declared void, it, in doing so, failed to consider the abuse of rights principle enshrined in Art. 19 of the Civil Code which
provides:
and observe honesty and good faith.
This provision of law sets standards which must be observed in the exercise of ones rights as well as in the performance of its
duties, to wit: to act with justice; give every one his due; and observe honesty and good faith.
Since the pre-termination of the contract was anchored on an illegal ground, hence, contrary to law, and GF Equity negligently
failed to provide legal basis for such pre-termination, e.g. that Valenzona breached the contract by failing to discharge his duties
thereunder, GF Equity failed to exercise in a legitimate manner its right to pre-terminate the contract, thereby abusing the right of
Valenzona to thus entitle him to damages under Art. 19 in relation to Article 20 of the Civil Code the latter of which provides:
Art. 20. Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same.
In De Guzman v. NLRC,[13] this Court quoted the following explanation of Tolentino why it is impermissible to abuse our rights
to prejudice others.
The exercise of a right ends when the right disappears, and it disappears when it is abused, especially to the prejudice of others.
The mask of a right without the spirit of justice which gives it life is repugnant to the modern concept of social law. It cannot be said
that a person exercises a right when he unnecessarily prejudices another or offends morals or good customs. Over and above the
specific precepts of positive law are the supreme norms of justice which the law develops and which are expressed in three
principles: honeste vivere,[14] alterum non laedere[15] and jus suum quique tribuere;[16] and he who violates them violates the law.
For this reason, it is not permissible to abuse our rights to prejudice others.
The disquisition in Globe Mackay Cable and Radio Corporation v. Court of Appeals [17] is just as relevant as it is illuminating on
the present case. In that case, this Court declared that even granting that the therein petitioners might have had the right to dismiss
the therein respondent from work, the abusive manner in which that right was exercised amounted to a legal wrong for which the
petitioners must be held liable.
supreme ideal, which is the sway and dominance of justice" (Id.) Foremost among these principles is that pronounced in Article 19
which provides:
and observe honesty and good faith.
observed not only in the exercise of one's rights but also in the performance of one's duties. These standards are the following: to
limitation on all rights; that in their exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though
by itself legal because recognized or granted by law as such, may nevertheless become the source of some
illegality. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and
results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. But
while Article 19 lays down a rule of conduct for the government of human relations and for the maintenance of social order, it does
not provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21 would be proper.
[18]
Emphasis and underscoring supplied).
As for GF Equitys defense of laches on account of Valenzonas invocation of his right under the contract only after the lapse of
six years, the same fails.
Laches has been defined as the failure or neglect for an unreasonable and unexplained length of time to do that which by
exercising due diligence, could or should have been done earlier, thus giving rise to a presumption that the party entitled to assert it
either has abandoned or declined to assert it. It is not concerned with mere lapse of time; the fact of delay, standing alone, is
insufficient to constitute laches.[19]
Laches applies in equity, whereas prescription applies at law. Our courts are basically courts of law, not courts of equity.
Laches cannot thus be invoked to evade the enforcement of an existing legal right. Equity, which has been aptly described as a
justice outside legality, is applied only in the absence of, and never against, statutory law. Aequetas nunquam contravenit
legis. Thus, where the claim was filed within the statutory period of prescription, recovery therefor cannot be barred by laches. The
doctrine of laches should never be applied earlier than the expiration of time limited for the commencement of actions at law,
[20]
unless, as a general rule, inexcusable delay in asserting a right and acquiescense in existing conditions are proven. [21] GF Equity
has not proven, nay alleged, these.
Under Article 1144[22] of the New Civil Code, an action upon a written contract must be brought within 10 years from the time
the right of action accrues. Since the action filed by Valenzona is an action for breach upon a written contract, his filing of the case
6 years from the date his cause of action arose was well within the prescriptive period, hence, the defense of laches would not,
under the circumstances, lie.
Consequently, Valenzona is entitled to recover actual damages his salary which he should have received from the time his
services were terminated up to the time the employment contract expired.[23]
As for moral damages which the appellate court awarded, Article 2220 of the New Civil Code allows such award to breaches
of contract where the defendant acted fraudulently or in bad faith. Malice or bad faith implies a conscious and intentional design to
do a wrongful act for a dishonest purpose or moral obliquity. It contemplates a state of mind affirmatively operating with furtive
design or ill-will.[24] Bad faith means a breach of a known duty through some motive of interest or ill will. It must, however, be
substantiated by evidence. Bad faith under the law cannot be presumed, it must be established by clear and convincing evidence.
As earlier stated, however, the pre-termination of the contract was not willful as GF Equity based it on a provision therein
which is void. Malice or bad faith cannot thus be ascribed to GF Equity.
The unbroken jurisprudence is that in breach of contract cases where a party is not shown to have acted fraudulently or in bad
faith, liability for damages is limited to the natural and probable consequences of the breach of the obligation which the parties had
foreseen or could reasonably have foreseen. The damages, however, do not include moral damages.[25]
The award by the appellate court of moral damages must thus be set aside. And so must the award of exemplary damages,
absent a showing that GF Equity acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.[26]
The award to Valenzona of attorneys fees must remain, however, GF Equity having refused to pay the balance of Valenzonas
salaries to which he was, under the facts and circumstances of the case, entitled under the contract, thus compelling him to litigate
to protect his interest.[27]
WHEREFORE, the decision of the Court of Appeals dated October 14, 2002 is hereby SET ASIDE and another rendered
declaring the assailed provision of the contract NULL AND VOID and ORDERING petitioner, GF Equity, to pay private respondent,
Arturo Valenzona, actual damages in the amount of P525,000.00 and attorneys fees in the amount of P60,000.00.
Costs against petitioner.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.
[1]
CA Rollo 84-92. unexpired portion of her contract. This is not a simple case of
[2]
Records at 211-213. illegal dismissal of an employee whose employment is without a
[3]
Id. at 7-10. definite period.
[4] [24]
Id. at 86. Far East Bank and Trust Company v. Court of Appeals, 241 SCRA 671,
[5]
Id. at 11-12. 675 (1995).
[6] [25]
Id. at 1-6. Philippine Air Lines v. Miano, 242 SCRA 235, 240 (1995) and Lufthansa
[7]
Vide note 2. German Airlines v. Court of Appeals, 243 SCRA 600, 614-615
[8]
Vide note 1. (1995). See also China Airlines, Ltd. v. Court of Appeals, 211
[9]
Rollo at 6. SCRA 897, 905-906 (1992); Saludo, Jr. v. Court of Appeals 207
[10]
TOLENTINO, CIVIL CODE OF THE PHILIPPINES, Vol. IV, 1990 ed., p. 410. SCRA 498, 535-536 (1992); China Airlines, Ltd. v. Intermediate
[11]
21 SCRA 555, 558-560 (1967). Appellate Court, G.R. No. 73835, January 17, 1989; and Philippine
[12]
E.g., Jespajo Realty v. Court of Appeals 390 SCRA 27, 39 (2002). This Airlines v. Court of Appeals, G.R. No. L-46558, July 31, 1981.
[26]
Court in this case enunciated the rule that the express provision in Article 2232 of the New Civil Code; Salvador v. Court of Appeals , G.R. No.
the lease agreement of the parties that violation of any of the terms 124899, March 30, 2004.
[27]
and conditions of the contract shall be sufficient ground for Article 2208 of the New Civil Code provides:
termination thereof by the lessor, removes the contract from the Art. 2208. In the absence of stipulation, attorneys fees
application of Article 1308. and expenses of litigation, other than judicial costs, cannot be
In Taylor v. Uy Tieng Piao, 43 Phil. 873 (1922), this Court ruled recovered, except:
that Article 1256 (now Art. 1308) creates no impediment to the (1) When exemplary damages are awarded:
insertion in a contract for personal service of a resolutory condition (2) When the defendants act or omission has compelled the
permitting the cancellation of the contract by one of the parties. plaintiff to litigate with third persons or to incur expenses to
Such a stipulation, as can be readily seen, does not make either protect his interest;
the validity of the fulfillment of the contract dependent upon the will (3) In criminal cases of malicious prosecution against the plaintiff;
of the party to whom is conceded the privilege of cancellation; for (4) In case of a clearly unfounded civil action or proceeding against
where the contracting parties have agreed that such option shall the plaintiff;
exist, the exercise of the option is as much in the fulfillment of the (5) Where the defendant acted in gross and evident bad faith in
contract as any other act which may have been the subject of refusing to satisfy the plaintiffs plainly valid, just and demandable
agreement. x x x. claim;
In Allied Banking Corporation v. Court of Appeals, 284 SCRA 357, (6) In actions for legal support;
363-365 (1998), this Court held: The fact that such option (7) In actions for the recovery of wages of household helpers,
is binding only on the lessor and can be exercised only by the laborers and skilled workers;
lessee does not render it void for lack of mutuality. After all, the (8) In actions for indemnity under workmens compensation and
lessor is free to give or not to give the option to the lessee. And employers liability laws;
while the lessee has a right to elect whether to continue with the (9) In a separate civil action to recover civil liability arising from a
lease or not, once he exercises his option to continue and the crime;
lessor accepts, both parties are thereafter bound by the new lease (10) When at least double judicial costs are awarded;
agreement. Their rights and obligations become mutually fixed, (11) In any other case where the court deems it just and equitable
and the lessee is entitled to retain possession of the property for that attorneys fees and expenses of litigation should be recovered.
the duration of the new lease, and the lessor may hold him liable In all cases, the attorneys fees and expenses of litigation must be
for the rent therefore. The lessee cannot thereafter escape liability reasonable. (Emphasis supplied)
even if he should subsequently decide to abandon the premises.
Mutuality obtains in such a contract and equality exists between
the lessor and the lessee since they remain with the same faculties
in respect to fulfillment. (Underscoring supplied)
[13]
211 SCRA 723, 730 (1992).
[14]
To live honorably, creditably, or virtuously.
[15]
Not to injure another.
[16]
To render to everyone his own.
[17]
176 SCRA 778, 790-791 (1989).
[18]
Id. at 783-784.
[19]
Chavez v. Bonto-Perez, 242 SCRA 73, 80 (1995).
[20]
Imperial Victory Shipping Agency v. NLRC 200 SCRA 178, 184 (1991).
[21]
Z. E. Lotho, Inc. v. Ice & Cold Storage Industries of the Phils., Inc. 3 SCRA
744, 750 (1961); Buenaventura v. David, 37 Phil. 435 (1918).
[22]
Art. 1144. The following actions must be brought within 10 years from the
time the right of action accrues.
(1) Upon a written contract;
(2) Upon an obligation created by law;
3) Upon a judgment.
[23]
In Teknika Skills and Trade Services, Inc. v. NLRC, 212 SCRA 132, 139-
140 (1992), this Court held:
The principal cause of action in private respondents
complaint is breach of contract of employment for a definite period.
Having established her case, which public respondents correctly
sustained, she is entitled to the salary corresponding to the
Supreme Court
Manila

THIRD DIVISION

Heirs of PURISIMA NALA, represented by their G.R. No. 161188
attorney-in-fact EFEGENIA DIGNA DUYAN,
Petitioners, Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
-versus- CHICO-NAZARIO,
REYES, and
BRION,* JJ.

ARTEMIO CABANSAG, Promulgated:
Respondent.
June 13, 2008
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
AUSTRIA-MARTINEZ, J.:

This is a petition for review under Rule 45 of the Rules of Court assailing the Court of Appeals (CA) Decision [1] dated December 19,
2002 and Resolution[2] dated October 28, 2003, dismissing petitioners' appeal and affirming with modification the Regional Trial
Court (RTC) Decision dated August 10, 1994 rendered in Civil Case No. Q-91-10541.

The facts of the case are as follows:
Artemio Cabansag (respondent) filed Civil Case No. Q-91-10541 for damages in October 1991. According to respondent, he
bought a 50-square meter property from spouses Eugenio Gomez, Jr. and Felisa Duyan Gomez on July 23, 1990. Said property is
part of a 400-square meter lot registered in the name of the Gomez spouses. In October 1991, he received a demand letter from
Atty. Alexander del Prado (Atty. Del Prado), in behalf of Purisima Nala (Nala), asking for the payment of rentals from 1987 to 1991
until he leaves the premises, as said property is owned by Nala, failing which criminal and civil actions will be filed against him.
Another demand letter was sent on May 14, 1991. Because of such demands, respondent suffered damages and was constrained
to file the case against Nala and Atty. Del Prado.[3]

Atty. Del Prado claimed that he sent the demand letters in good faith and that he was merely acting in behalf of his client, Nala,
who disputed respondent's claim of ownership. Nala alleged that said property is part of an 800-square meter property owned by
her late husband, Eulogio Duyan, which was subsequently divided into two parts. The 400-square meter property was conveyed to
spouses Gomez in a fictitious deed of sale, with the agreement that it will be merely held by them in trust for
the Duyan's children. Said property is covered by Transfer Certificate of Title (TCT) No. 281115 in the name of spouses
Gomez. Nala also claimed that respondent is only renting the property which he occupies.[4]
After trial, the RTC of Quezon City, Branch 93, rendered its Decision on August 10, 1994, in favor of
respondent. The dispositive portion of the Decision provides:

WHEREFORE, premises considered, by preponderance of evidence, the Court finds in favor of the plaintiff and
hereby orders the defendants, jointly and severally, to pay plaintiff the following:
1. P150,000.00 by way of moral damages;
2. P30,000.00 by way of exemplary damages;
3. P20,000.00 as and for reasonable attorney's fees and other litigation expenses; and
4. to pay the costs.
SO ORDERED.[5]
Nala and Atty. Del Prado appealed to the CA. The herein assailed CA Decision dated December 19, 2002 affirmed the RTC
Decision with modification, thus:
WHEREFORE, premises considered, the instant appeal is hereby DISMISSED. The assailed decision of
the Regional Trial Court, Branch 93, Quezon City, in Civil Case No. Q-91-10541 is heretofore AFFIRMED with
MODIFICATION. Defendants-appellants are ordered to pay, jointly and severally, plaintiff-appellee the amount
of P30,000.00 by way of moral damages. It is further ordered to pay him exemplary damages in the amount
of P10,000.00 and P10,000.00, attorney's fees.
SO ORDERED.[6]

In affirming the RTC Decision, the CA took note of the Decision dated September 5, 1994 rendered by the RTC
of Quezon City, Branch 80, dismissing Civil Case No. 91-8821, an action for reconveyance of real property and cancellation of TCT
No. 281115 with damages, filed by Nala against spouses Gomez.[7]

Hence, herein petition by the heirs of Nala (petitioners)[8] with the following assignment of errors:
a) Respondent Court of Appeals erred in not considering the right of Purisima Nala to assert her rights and interest over the
property.
b) Respondent Court of Appeals erred in not considering the Decision rendered by the Court of Appeals in the case
for reconveyance which upheld the rights and interest of PurisimaNala and her children over a certain parcel of land, a
portion of which is subject of the present case.
c) Respondent Court of Appeals erred in awarding damages and attorney's fees without any basis.[9]

Atty. Del Prado filed a motion for extension of time to file his separate petition but it was denied by the Court per its Resolution
dated January 19, 2004 issued in G.R. No. 160829.

Petitioners argue that their predecessor-in-interest had every right to protect and assert her interests over the property. Nala had no
knowledge that the property was sold by spouses Gomez to respondent when the demand letters were sent. What she was aware
of was the fact that spouses Gomez were managing the rentals on the property by virtue of the implied trust created between them
and Eulogio Duyan. When spouses Gomez failed to remit the rentals and claimed ownership of the property, it was then
that Nala decided to procure the services of legal counsel to protect their rights over the property.

Petitioners also contend that it was error for the CA to take note of the RTC Decision in Civil Case No. 91-8821 without further
noting that the CA had already reversed and set aside said RTC Decision and ordered reconveyance of the property to Nala and
her children in a Decision dated March 8, 2000 rendered in CA-G.R. CV No. 49163. Petitioners also argue that respondent did not
substantiate his claim for damages.

Preliminarily, the Court notes that both the RTC and the CA failed to indicate the particular provision of law under which it held
petitioners liable for damages.Nevertheless, based on the allegations in respondent's complaint, it may be gathered that the basis
for his claim for damages is Article 19 of the Civil Code, which provides:


The foregoing provision sets the standards which may be observed not only in the exercise of ones rights but also in the
performance of ones duties. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19
and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. But a
right, though by itself legal because recognized or granted by law as such, may nevertheless become the source of some illegality.
A person should be protected only when he acts in the legitimate exercise of his right; that is, when he acts with prudence and in
good faith, but not when he acts with negligence or abuse. There is an abuse of right when it is exercised only for the purpose of
prejudicing or injuring another. The exercise of a right must be in accordance with the purpose for which it was established, and
must not be excessive or unduly harsh; there must be no intention to injure another.[10]

In order to be liable for damages under the abuse of rights principle, the following requisites must concur: (a) the existence of a
legal right or duty; (b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another.[11]

It should be stressed that malice or bad faith is at the core of Article 19 of the Civil Code. Good faith is presumed, and he who
alleges bad faith has the duty to prove the same. [12] Bad faith, on the other hand, does not simply connote bad judgment to simple
negligence, dishonest purpose or some moral obloquy and conscious doing of a wrong, or a breach of known duty due to some
motives or interest or ill will that partakes of the nature of fraud. Malice connotes ill will or spite and speaks not in response to duty.
It implies an intention to do ulterior and unjustifiable harm.[13]

In the present case, there is nothing on record which will prove that Nala and her counsel, Atty. Del Prado, acted in bad faith or
malice in sending the demand letters to respondent. In the first place, there was ground for Nala's actions since she believed that
the property was owned by her husband Eulogio Duyan and that respondent was illegally occupying the same. She had no
knowledge that spouses Gomez violated the trust imposed on them by Eulogio and surreptitiously sold a portion of the property to
respondent. It was only after respondent filed the case for damages against Nala that she learned of such sale. The bare
fact that respondent claims ownership over the property does not give rise to the conclusion that the sending of the demand letters
by Nala was done in bad faith. Absent any evidence presented by respondent, bad faith or malice could not be attributed to
petitioner since Nala was only trying to protect their interests over the property.

Moreover, respondent failed to show that Nala and Atty. Del Prado's acts were done with the sole intention of prejudicing and
injuring him. It may be true that respondent suffered mental anguish, serious anxiety and sleepless nights when he received the
demand letters; however, there is a material distinction between damages and injury.Injury is the legal invasion of a legal right while
damage is the hurt, loss or harm which results from the injury. [14] Thus, there can be damage without injury in those instances in
which the loss or harm was not the result of a violation of a legal duty. In such cases, the consequences must be borne by the
injured person alone; the law affords no remedy for damages resulting from an act which does not amount to a legal injury or
wrong. These situations are often called damnum absque injuria.[15]

Nala was acting well within her rights when she instructed Atty. Del Prado to send the demand letters. She had to take all the
necessary legal steps to enforce her legal/equitable rights over the property occupied by respondent. One who makes use of his
own legal right does no injury.[16] Thus, whatever damages are suffered by respondent should be borne solely by him.

Nala's acts in protecting her rights over the property find further solid ground in the fact that the property has already been
ordered reconveyed to her and her heirs. In itsDecision dated March 8, 2000 in CA-G.R. CV No. 49163, the CA reversed and set
aside the RTC's Decision and ordered the reconveyance of the property to petitioners, and TCT No. 281115 was declared
canceled. Said CA Decision was affirmed by this Court in its Decision dated March 18, 2005 in G.R. No. 144148, which became
final and executory on July 27, 2005.

WHEREFORE, the petition is GRANTED. The Decision dated December 19, 2002 and Resolution dated October 28,
2003 rendered by the Court of Appeals in CA-G.R. CV No. 48580 are NULLIFIED. Civil Case No. Q-91-10541 is DISMISSED for
lack of merit.

Costs against respondent.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MINITA V. CHICO-NAZARIO RUBEN T. REYES
Associate Justice Associate Justice

ARTURO D. BRION
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that
the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.

REYNATO S. PUNO
Chief Justice
* In Lieu of Justice Antonio Eduardo B. Nachura, per Special Order No. 507 dated May 28, 2008.
[1]
Penned by Associate Justice Rodrigo V. Cosico, with Associate Justices Rebecca de Guia-Salvador
and Regalado E. Maambong, concurring; rollo, pp. 23-30.
[2]
Id. at 32-33.
[3]
Rollo, pp. 35-37.
[4]
Id. at 41-47.
[5]
CA rollo, p. 55.
[6]
Id. at 146-147.
[7]
Id. at 144-145.
[8]
Nala was substituted by petitioners after her death on January 28, 2002.
[9]
Rollo, p. 10.
[10]
Hongkong and Shanghai Banking Corporation Limited v. Catalan, G.R. No. 159590, October 18, 2004, 440 SCRA 498, 511.
[11]
Far East Bank and Trust Company v. Pacilan, Jr., G.R. No. 157314, July 29, 2005, 465 SCRA 372, 382.
[12]
Saber v. Court of Appeals, G.R. No. 132981, August 31, 2004, 437 SCRA 259, 278.
[13]
Id. at 278-279.
[14]
Lagon v. Court of Appeals, G.R. No. 119107, March 18, 2005, 453 SCRA 616, 627-628.
[15]
Diaz v. Davao Light and Power Co., Inc., G.R. No. 160959, April 4, 2007, 520 SCRA 481, 509-510.
[16]
Pro Line Sports Center, Inc. v. Court of Appeals, 346 Phil. 143, 154 (1997).
FIRST DIVISION

ALLAN C. GO, doing business under the name G.R. No. 164703
and style ACG Express Liner,
Petitioner,
- versus -

MORTIMER F. CORDERO,
Respondent.
x-----------------------------------------x

MORTIMER F. CORDERO, G.R. No. 164747
Petitioner,
Present:

- versus - PUNO, C.J., Chairperson,
CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
ALLAN C. GO, doing business VILLARAMA, JR., JJ.
underthe name and style ACG Express Liner, FELIPE
M. LANDICHO and VINCENT D. TECSON, Promulgated:
Respondents.
May 4, 2010
x-----------------------------------------------------------------------------------------x

DECISION
VILLARAMA, JR., J.:
For review is the Decision[1] dated March 16, 2004 as modified by the Resolution[2] dated July 22, 2004 of the Court of Appeals (CA)
in CA-G.R. CV No. 69113, which affirmed with modifications the Decision [3] dated May 31, 2000 of the Regional Trial Court (RTC)
of Quezon City, Branch 85 in Civil Case No. 98-35332.
The factual antecedents:
Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation (Pamana), ventured into the business of
marketing inter-island passenger vessels. After contacting various overseas fast ferry manufacturers from all over the world, he
came to meet Tony Robinson, an Australian national based in Brisbane,Australia, who is the Managing Director of Aluminium Fast
Ferries Australia (AFFA).
Between June and August 1997, Robinson signed documents appointing Cordero as the exclusive distributor of AFFA catamaran
and other fast ferry vessels in the Philippines. As such exclusive distributor, Cordero offered for sale to prospective buyers the 25-
meter Aluminium Passenger catamaran known as the SEACAT 25.[4]
After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go who is the owner/operator of ACG Express
Liner of Cebu City, a single proprietorship, Cordero was able to close a deal for the purchase of two (2) SEACAT 25 as evidenced
by the Memorandum of Agreement dated August 7, 1997.[5]Accordingly, the parties executed Shipbuilding Contract No. 7825 for
one (1) high-speed catamaran (SEACAT 25) for the price of US$1,465,512.00. [6] Per agreement between Robinson and Cordero,
the latter shall receive commissions totalling US$328,742.00, or 22.43% of the purchase price, from the sale of each vessel.[7]
Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and on one (1) occasion even accompanied Go and his
family and Landicho, to monitor the progress of the building of the vessel. He shouldered all the expenses for airfare, food, hotel
accommodations, transportation and entertainment during these trips. He also spent for long distance telephone calls to
communicate regularly with Robinson, Go, Tecson and Landicho.
However, Cordero later discovered that Go was dealing directly with Robinson when he was informed by Dennis Padua of Wartsila
Philippines that Go was canvassing for a second catamaran engine from their company which provided the ship engine for the first
SEACAT 25. Padua told Cordero that Go instructed him to fax the requested quotation of the second engine to the Park Royal
Hotel in Brisbane where Go was then staying. Cordero tried to contact Go and Landicho to confirm the matter but they were
nowhere to be found, while Robinson refused to answer his calls. Cordero immediately flew to Brisbane to clarify matters with
Robinson, only to find out that Go and Landicho were already there in Brisbane negotiating for the sale of the second SEACAT
25. Despite repeated follow-up calls, no explanation was given by Robinson, Go, Landicho and Tecson who even made Cordero
believe there would be no further sale between AFFA and ACG Express Liner.
In a handwritten letter dated June 24, 1998, Cordero informed Go that such act of dealing directly with Robinson violated his
exclusive distributorship and demanded that they respect the same, without prejudice to legal action against him and Robinson
should they fail to heed the same. [8] Corderos lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm, also wrote ACG Express
Liner assailing the fraudulent actuations and misrepresentations committed by Go in connivance with his lawyers (Landicho and
Tecson) in breach of Corderos exclusive distributorship appointment.[9]
Having been apprised of Corderos demand letter, Thyne & Macartney, the lawyer of AFFA and Robinson, faxed a letter
to ACCRA law firm asserting that the appointment of Cordero as AFFAs distributor was for the purpose of one (1) transaction only,
that is, the purchase of a high-speed catamaran vessel by ACG Express Liner in August 1997. The letter further stated that
Cordero was offered the exclusive distributorship, the terms of which were contained in a draft agreement which Cordero allegedly
failed to return to AFFA within a reasonable time, and which offer is already being revoked by AFFA.[10]
As to the response of Go, Landicho and Tecson to his demand letter, Cordero testified before the trial court that on the same day,
Landicho, acting on behalf of Go, talked to him over the telephone and offered to amicably settle their dispute. Tecson and
Landicho offered to convince Go to honor his exclusive distributorship with AFFA and to purchase all vessels for ACG Express
Liner through him for the next three (3) years. In an effort to amicably settle the matter, Landicho, acting in behalf of Go, set up a
meeting with Cordero on June 29, 1998 between 9:30 p.m. to 10:30 p.m. at the Mactan Island Resort Hotel lobby. On said date,
however, only Landicho and Tecson came and no reason was given for Gos absence. Tecson and Landicho proposed that they will
convince Go to pay him US$1,500,000.00 on the condition that they will get a cut of 20%. And so it was agreed between him,
Landicho and Tecson that the latter would give him a weekly status report and that the matter will be settled in three (3) to four (4)
weeks and neither party will file an action against each other until a final report on the proposed settlement. No such report was
made by either Tecson or Landicho who, it turned out, had no intention to do so and were just buying time as the catamaran vessel
was due to arrive from Australia. Cordero then filed a complaint with the Bureau of Customs (BOC) to prohibit the entry of SEACAT
25 from Australia based on misdeclaration and undervaluation. Consequently, an Alert Order was issued by Acting BOC
Commissioner Nelson Tan for the vessel which in fact arrived on July 17, 1998. Cordero claimed that Go and Robinson had
conspired to undervalue the vessel by around US$500,000.00.[11]
On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to hold Robinson, Go, Tecson and Landicho liable jointly
and solidarily for conniving and conspiring together in violating his exclusive distributorship in bad faith and wanton disregard of his
rights, thus depriving him of his due commissions (balance of unpaid commission from the sale of the first vessel in the amount of
US$31,522.01 and unpaid commission for the sale of the second vessel in the amount of US$328,742.00) and causing him actual,
moral and exemplary damages, including P800,000.00 representing expenses for airplane travel to Australia, telecommunications
bills and entertainment, on account of AFFAs untimely cancellation of the exclusive distributorship agreement. Cordero also prayed
for the award of moral and exemplary damages, as well as attorneys fees and litigation expenses.[12]
Robinson filed a motion to dismiss grounded on lack of jurisdiction over his person and failure to state a cause of action, asserting
that there was no act committed in violation of the distributorship agreement. Said motion was denied by the trial court
on December 20, 1999. Robinson was likewise declared in default for failure to file his answer within the period granted by the trial
court.[13] As for Go and Tecson, their motion to dismiss based on failure to state a cause of action was likewise denied by the trial
court on February 26, 1999.[14] Subsequently, they filed their Answer denying that they have anything to do with the termination by
AFFA of Corderos authority as exclusive distributor in the Philippines. On the contrary, they averred it was Cordero who stopped
communicating with Go in connection with the purchase of the first vessel from AFFA and was not doing his part in making
progress status reports and airing the clients grievances to his principal, AFFA, such that Go engaged the services of Landicho to
fly to Australia and attend to the documents needed for shipment of the vessel to the Philippines. As to the inquiry for the Philippine
price for a Wartsila ship engine for AFFAs other on-going vessel construction, this was merely requested by Robinson but which
Cordero misinterpreted as indication that Go was buying a second vessel. Moreover, Landicho and Tecson had no transaction
whatsoever with Cordero who had no document to show any such shipbuilding contract. As to the supposed meeting to settle their
dispute, this was due to the malicious demand of Cordero to be given US$3,000,000 as otherwise he will expose in the media the
alleged undervaluation of the vessel with the BOC. In any case, Cordero no longer had cause of action for his commission for the
sale of the second vessel under the memorandum of agreement dated August 7, 1997 considering the termination of his authority
by AFFAs lawyers on June 26, 1998.[15]
Pre-trial was reset twice to afford the parties opportunity to reach a settlement. However, on motion filed by Cordero through
counsel, the trial court reconsidered the resetting of the pre-trial to another date for the third time as requested by Go, Tecson and
Landicho, in view of the latters failure to appear at the pre-trial conference on January 7, 2000 despite due notice. The trial court
further confirmed that said defendants misled the trial court in moving for continuance during the pre-trial conference held
on December 10, 1999, purportedly to go abroad for the holiday season when in truth a Hold-Departure Order had been issued
against them.[16] Accordingly, plaintiff Cordero was allowed to present his evidence ex parte.
Corderos testimony regarding his transaction with defendants Go, Landicho and Tecson, and the latters offer of settlement, was
corroborated by his counsel who also took the witness stand. Further, documentary evidence including photographs taken of the
June 29, 1998 meeting with Landicho, Tecson and Atty. Tabujara at Shangri-las Mactan Island Resort, photographs taken in
Brisbane showing Cordero, Go with his family, Robinson and Landicho, and also various documents, communications, vouchers
and bank transmittals were presented to prove that: (1) Cordero was properly authorized and actually transacted in behalf of AFFA
as exclusive distributor in the Philippines; (2) Cordero spent considerable sums of money in pursuance of the contract with Go and
ACG Express Liner; and (3) AFFA through Robinson paid Cordero his commissions from each scheduled payment made by Go for
the first SEACAT 25 purchased from AFFA pursuant to Shipbuilding Contract No. 7825.[17]
On May 31, 2000, the trial court rendered its decision, the dispositive portion of which reads as follows:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of Plaintiff and against defendants
Allan C. Go, Tony Robinson, Felipe Landicho, and Vincent Tecson. As prayed for, defendants are hereby ordered to
pay Plaintiff jointly and solidarily, the following:
1. On the First Cause of Action, the sum total of SIXTEEN MILLION TWO HUNDRED NINETY ONE THOUSAND
THREE HUNDRED FIFTY TWO AND FORTY THREE CENTAVOS (P16,291,352.43) as actual damages with legal
interest from 25 June 1998 until fully paid;
2. On the Second Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as moral damages;
3. On the Third Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as exemplary damages; and
4. On the Fourth Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as attorneys fees;
Costs against the defendants.
SO ORDERED.[18]
Go, Robinson, Landicho and Tecson filed a motion for new trial, claiming that they have been unduly prejudiced by the negligence
of their counsel who was allegedly unaware that the pre-trial conference on January 28, 2000 did not push through for the reason
that Cordero was then allowed to present his evidence ex-parte, as he had assumed that the said ex-parte hearing was being
conducted only against Robinson who was earlier declared in default.[19] In its Order dated July 28, 2000, the trial court denied the
motion for new trial.[20] In the same order, Corderos motion for execution pending appeal was granted. Defendants moved to
reconsider the said order insofar as it granted the motion for execution pending appeal. [21] On August 8, 2000, they filed a notice of
appeal.[22]
On August 18, 2000, the trial court denied the motion for reconsideration and on August 21, 2000, the writ of execution pending
appeal was issued.[23] Meanwhile, the notice of appeal was denied for failure to pay the appellate court docket fee within the
prescribed period.[24] Defendants filed a motion for reconsideration and to transmit the case records to the CA.[25]
On September 29, 2000, the CA issued a temporary restraining order at the instance of defendants in the certiorari case they filed
with said court docketed as CA-G.R. SP No. 60354 questioning the execution orders issued by the trial court. Consequently, as
requested by the defendants, the trial court recalled and set aside its November 6, 2000 Order granting the ex-parte motion for
release of garnished funds, cancelled the scheduled public auction sale of levied real properties, and denied the ex-parte Motion
for Break-Open Order and Ex-Parte Motion for Encashment of Check filed by Cordero. [26] On November 29, 2000, the trial court
reconsidered its Order dated August 21, 2000 denying due course to the notice of appeal and forthwith directed the transmittal of
the records to the CA.[27]
On January 29, 2001, the CA rendered judgment granting the petition for certiorari in CA-G.R. SP No. 60354 and setting aside the
trial courts orders of execution pending appeal. Cordero appealed the said judgment in a petition for review filed with this Court
which was eventually denied under our Decision dated September 17, 2002.[28]
On March 16, 2004, the CA in CA-G.R. CV No. 69113 affirmed the trial court (1) in allowing Cordero to present his
evidence ex-parte after the unjustified failure of appellants (Go, Tecson and Landicho) to appear at the pre-trial conference despite
due notice; (2) in finding that it was Cordero and not Pamana who was appointed by AFFA as the exclusive distributor in the
Philippines of its SEACAT 25 and other fast ferry vessels, which is not limited to the sale of one (1) such catamaran to Go on
August 7, 1997; and (3) in finding that Cordero is entitled to a commission per vessel sold for AFFA through his efforts in the
amount equivalent to 22.43% of the price of each vessel or US$328,742.00, and with payments of US$297,219.91 having been
made to Cordero, there remained a balance of US$31,522.09 still due to him. The CA sustained the trial court in ruling that Cordero
is entitled to damages for the breach of his exclusive distributorship agreement with AFFA. However, it held that Cordero is entitled
only to commission for the sale of the first catamaran obtained through his efforts with the remaining unpaid sum of US$31,522.09
or P1,355,449.90 (on the basis of US$1.00=P43.00 rate) with interest at 6% per annum from the time of the filing of the complaint
until the same is fully paid. As to the P800,000.00 representing expenses incurred by Cordero for transportation, phone bills,
entertainment, food and lodging, the CA declared there was no basis for such award, the same being the logical and necessary
consequences of the exclusive distributorship agreement which are normal in the field of sales and distribution, and the
expenditures having redounded to the benefit of the distributor (Cordero).
On the amounts awarded by the trial court as moral and exemplary damages, as well as attorneys fees, the CA reduced
the same to P500,000.00, P300,000.00 and P50,000.00, respectively. Appellants were held solidarily liable pursuant to the
provisions of Article 1207 in relation to Articles 19, 20, 21 and 22 of the New Civil Code.The CA further ruled that no error was
committed by the trial court in denying their motion for new trial, which said court found to be pro forma and did not raise any
substantial matter as to warrant the conduct of another trial.
By Resolution dated July 22, 2004, the CA denied the motions for reconsideration respectively filed by the appellants and
appellee, and affirmed the Decision dated March 16, 2004 with the sole modification that the legal interest of 6% per annum shall
start to run from June 24, 1998 until the finality of the decision, and the rate of 12% interest per annum shall apply once the
decision becomes final and executory until the judgment has been satisfied.
The case before us is a consolidation of the petitions for review under Rule 45 separately filed by Go (G.R. No. 164703)
and Cordero (G.R. No. 164747) in which petitioners raised the following arguments:
G.R. No. 164703
(Petitioner Go)
I. THE HONORABLE COURT OF APPEALS DISREGARDED THE RULES OF COURT AND PERTINENT JURISPRUDENCE
AND ACTED WITH GRAVE ABUSE OF DISCRETION IN NOT RULING THAT THE RESPONDENT IS NOT THE REAL PARTY-
IN-INTEREST AND IN NOT DISMISSING THE INSTANT CASE ON THE GROUND OF LACK OF CAUSE OF ACTION;
II. THE HONORABLE COURT OF APPEALS IGNORED THE LAW AND JURISPRUDENCE AND ACTED WITH GRAVE
ABUSE OF DISCRETION IN HOLDING HEREIN PETITIONER RESPONSIBLE FOR THE BREACH IN THE ALLEGED
EXCLUSIVE DISTRIBUTORSHIP AGREEMENT WITH ALUMINIUM FAST FERRIES AUSTRALIA;
III. THE HONORABLE APPELLATE COURT MISAPPLIED THE LAW AND ACTED WITH GRAVE ABUSE OF
DISCRETION IN FINDING PETITIONER LIABLE IN SOLIDUM WITH THE CO-DEFENDANTS WITH RESPECT TO THE
CLAIMS OF RESPONDENT;
IV. THE HONORABLE COURT OF APPEALS MISAPPLIED LAW AND JURISPRUDENCE AND GRAVELY ABUSED ITS
DISCRETION WHEN IT FOUND PETITIONER LIABLE FOR UNPAID COMMISSIONS, DAMAGES, ATTORNEYS FEES,
AND LITIGATION EXPENSES; and
V. THE HONORABLE APPELLATE COURT ACTED CONTRARY TO LAW AND JURISPRUDENCE AND GRAVELY
ABUSED ITS DISCRETION WHEN IT EFFECTIVELY DEPRIVED HEREIN PETITIONER OF HIS RIGHT TO DUE
PROCESS BY AFFIRMING THE LOWER COURTS DENIAL OF PETITIONERS MOTION FOR NEW TRIAL. [29]

G.R. No. 164747
(Petitioner Cordero)
I.
THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE JUDGMENT OF THE TRIAL COURT
AWARDING PETITIONER ACTUAL DAMAGES FOR HIS COMMISSION FOR THE SALE OF THE SECOND
VESSEL, SINCE THERE IS SUFFICIENT EVIDENCE ON RECORD WHICH PROVES THAT THERE WAS A
SECOND SALE OF A VESSEL.
A. THE MEMORANDUM OF AGREEMENT DATED 7 AUGUST 1997 PROVIDES THAT
RESPONDENT GO WAS CONTRACTUALLY BOUND TO BUY TWO (2) VESSELS FROM AFFA.
B. RESPONDENT GOS POSITION PAPER AND COUNTER-AFFIDAVIT/POSITION PAPER THAT
WERE FILED BEFORE THE BUREAU OF CUSTOMS, ADMITS UNDER OATH THAT HE HAD
INDEED PURCHASED A SECOND VESSEL FROM AFFA.
C. RESPONDENTS ADMITTED IN THEIR PRE-TRIAL BRIEF THAT THEY HAD PURCHASED A
SECOND VESSEL.
II.
THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER IS NOT ENTITLED TO HIS
COMMISSIONS FOR THE PURCHASE OF A SECOND VESSEL, SINCE IT WAS PETITIONERS EFFORTS
WHICH ACTUALLY FACILITATED AND SET-UP THE TRANSACTION FOR RESPONDENTS.

III.
THE COURT OF APPEALS ERRED IN NOT IMPOSING THE PROPER LEGAL INTEREST RATE ON
RESPONDENTS UNPAID OBLIGATION WHICH SHOULD BE TWELVE PERCENT (12%) FROM THE TIME OF
THE BREACH OF THE OBLIGATION.
IV.
THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE ORIGINAL AMOUNT OF CONSEQUENTIAL
DAMAGES AWARDED TO PETITIONER BY THE TRIAL COURT CONSIDERING THE BAD FAITH AND
FRAUDULENT CONDUCT OF RESPONDENTS IN MISAPPROPRIATING THE MONEY OF PETITIONER. [30]
The controversy boils down to two (2) main issues: (1) whether petitioner Cordero has the legal personality to sue the respondents
for breach of contract; and (2) whether the respondents may be held liable for damages to Cordero for his unpaid commissions and
termination of his exclusive distributorship appointment by the principal, AFFA.

I. Real Party-in-Interest
First, on the issue of whether the case had been filed by the real party-in-interest as required by Section 2, Rule 3 of the Rules of
Court, which defines such party as the one (1) to be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit. The purposes of this provision are: 1) to prevent the prosecution of actions by persons without any right, title or
interest in the case; 2) to require that the actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a
multiplicity of suits; and 4) to discourage litigation and keep it within certain bounds, pursuant to sound public policy. [31] A case is
dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-interest, hence grounded on failure to
state a cause of action.[32]
On this issue, we agree with the CA in ruling that it was Cordero and not Pamana who is the exclusive distributor of AFFA in
the Philippines as shown by the Certification dated June 1, 1997 issued by Tony Robinson.[33] Petitioner Go mentions the following
documents also signed by respondent Robinson which state that Pamana Marketing Corporation represented by Mr. Mortimer F.
Cordero was actually the exclusive distributor: (1) letter dated 1 June 1997[34]; (2) certification dated 5 August 1997[35]; and (3) letter
dated 5 August 1997 addressed to petitioner Cordero concerning commissions to be paid to Pamana Marketing Corporation.
[36]
Such apparent inconsistency in naming AFFAs exclusive distributor in the Philippines is of no moment. For all intents and
purposes, Robinson and AFFA dealt only with Cordero who alone made decisions in the performance of the exclusive
distributorship, as with other clients to whom he had similarly offered AFFAs fast ferry vessels.Moreover, the stipulated
commissions from each progress payments made by Go were directly paid by Robinson to Cordero. [37] Respondents Landicho and
Tecson were only too aware of Corderos authority as the person who was appointed and acted as exclusive distributor of AFFA,
which can be gleaned from their act of immediately furnishing him with copies of bank transmittals everytime Go remits payment to
Robinson, who in turn transfers a portion of funds received to the bank account of Cordero in the Philippines as his commission.
Out of these partial payments of his commission, Cordero would still give Landicho and Tecson their respective commission, or
cuts from his own commission. Respondents Landicho and Tecson failed to refute the evidence submitted by Cordero consisting of
receipts signed by them. Said amounts were apart from the earlier expenses shouldered by Cordero for Landichos airline tickets,
transportation, food and hotel accommodations for the trip to Australia.[38]
Moreover, petitioner Go, Landicho and Tecson never raised petitioner Corderos lack of personality to sue on behalf of Pamana,
[39]
and did so only before the CA when they contended that it is Pamana and not Cordero, who was appointed and acted as
exclusive distributor for AFFA.[40] It was Robinson who argued in support of his motion to dismiss that as far as said defendant is
concerned, the real party plaintiff appears to be Pamana, against the real party defendant which is AFFA. [41] As already mentioned,
the trial court denied the motion to dismiss filed by Robinson.
We find no error committed by the trial court in overruling Robinsons objection over the improper resort to summons by
publication upon a foreign national like him and in an action in personam, notwithstanding that he raised it in a special appearance
specifically raising the issue of lack of jurisdiction over his person. Courts acquire jurisdiction over the plaintiffs upon the filing of the
complaint, while jurisdiction over the defendants in a civil case is acquired either through the service of summons upon them in the
manner required by law or through their voluntary appearance in court and their submission to its authority.[42] A party who makes a
special appearance in court challenging the jurisdiction of said court based on the ground of invalid service of summons is not
deemed to have submitted himself to the jurisdiction of the court.[43]
In this case, however, although the Motion to Dismiss filed by Robinson specifically stated as one (1) of the grounds the
lack of personal jurisdiction, it must be noted that he had earlier filed a Motion for Time to file an appropriate responsive pleading
even beyond the time provided in the summons by publication.[44] Such motion did not state that it was a conditional appearance
entered to question the regularity of the service of summons, but an appearance submitting to the jurisdiction of the court by
acknowledging the summons by publication issued by the court and praying for additional time to file a responsive
pleading. Consequently, Robinson having acknowledged the summons by publication and also having invoked the jurisdiction of
the trial court to secure affirmative relief in his motion for additional time, he effectively submitted voluntarily to the trial courts
jurisdiction. He is now estopped from asserting otherwise, even before this Court.[45]

II. Breach of Exclusive Distributorship,
Contractual Interference and
Respondents Liability for Damages

In Yu v. Court of Appeals,[46] this Court ruled that the right to perform an exclusive distributorship agreement and to reap
the profits resulting from such performance are proprietary rights which a party may protect. Thus, injunction is the appropriate
remedy to prevent a wrongful interference with contracts by strangers to such contracts where the legal remedy is insufficient and
the resulting injury is irreparable. In that case, the former dealer of the same goods purchased the merchandise from the
manufacturer in England through a trading firm in West Germany and sold these in the Philippines. We held that the rights granted
to the petitioner under the exclusive distributorship agreement may not be diminished nor rendered illusory by the expedient act of
utilizing or interposing a person or firm to obtain goods for which the exclusive distributorship was conceptualized, at the expense
of the sole authorized distributor.[47]
In the case at bar, it was established that petitioner Cordero was not paid the balance of his commission by respondent
Robinson. From the time petitioner Go and respondent Landicho directly dealt with respondent Robinson in Brisbane, and ceased
communicating through petitioner Cordero as the exclusive distributor of AFFA in the Philippines, Cordero was no longer informed
of payments remitted to AFFA in Brisbane. In other words, Cordero had clearly been cut off from the transaction until the arrival of
the first SEACAT 25 which was sold through his efforts. When Cordero complained to Go, Robinson, Landicho and Tecson about
their acts prejudicial to his rights and demanded that they respect his exclusive distributorship, Go simply let his lawyers led by
Landicho and Tecson handle the matter and tried to settle it by promising to pay a certain amount and to purchase high-speed
catamarans through Cordero. However, Cordero was not paid anything and worse, AFFA through its lawyer in Australia even
terminated his exclusive dealership insisting that his services were engaged for only one (1) transaction, that is, the purchase of the
first SEACAT 25 in August 1997.
Petitioner Go argues that unlike in Yu v. Court of Appeals[48] there is no conclusive proof adduced by petitioner Cordero
that they actually purchased a second SEACAT 25 directly from AFFA and hence there was no violation of the exclusive
distributorship agreement. Further, he contends that the CA gravely abused its discretion in holding them solidarily liable to
Cordero, relying on Articles 1207, 19 and 21 of the Civil Code despite absence of evidence, documentary or testimonial, showing
that they conspired to defeat the very purpose of the exclusive distributorship agreement.[49]
We find that contrary to the claims of petitioner Cordero, there was indeed no sufficient evidence that respondents actually
purchased a second SEACAT 25 directly from AFFA. But this circumstance will not absolve respondents from liability for invading
Corderos rights under the exclusive distributorship. Respondents clearly acted in bad faith in bypassing Cordero as they completed
the remaining payments to AFFA without advising him and furnishing him with copies of the bank transmittals as they previously
did, and directly dealt with AFFA through Robinson regarding arrangements for the arrival of the first SEACAT 25 in Manila and
negotiations for the purchase of the second vessel pursuant to the Memorandum of Agreement which Cordero signed in behalf of
AFFA. As a result of respondents actuations, Cordero incurred losses as he was not paid the balance of his commission from the
sale of the first vessel and his exclusive distributorship revoked by AFFA.
Petitioner Go contends that the trial and appellate courts erred in holding them solidarily liable for Corderos unpaid
commission, which is the sole obligation of the principal AFFA. It was Robinson on behalf of AFFA who, in the letter dated August
5, 1997 addressed to Cordero, undertook to pay commission payments to Pamana on a staggered progress payment plan in the
form of percentage of the commission per payment. AFFA explicitly committed that it will, upon receipt of progress payments, pay
to Pamana their full commission by telegraphic transfer to an account nominated by Pamana within one to two days of [AFFA]
receiving such payments.[50]Petitioner Go further maintains that he had not in any way violated or caused the termination of the
exclusive distributorship agreement between Cordero and AFFA; he had also paid in full the first and only vessel he purchased
from AFFA.[51]
While it is true that a third person cannot possibly be sued for breach of contract because only parties can breach
contractual provisions, a contracting party may sue a third person not for breach but for inducing another to commit such breach.
Article 1314 of the Civil Code provides:
Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the
other contracting party.

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 a contract; and (3) interference of the third person is without legal justification.[52]
The presence of the first and second elements is not disputed. Through the letters issued by Robinson attesting that Cordero is the
exclusive distributor of AFFA in the Philippines, respondents were clearly aware of the contract between Cordero and AFFA
represented by Robinson. In fact, evidence on record showed that respondents initially dealt with and recognized Cordero as such
exclusive dealer of AFFA high-speed catamaran vessels in the Philippines. In that capacity as exclusive distributor, petitioner Go
entered into the Memorandum of Agreement and Shipbuilding Contract No. 7825 with Cordero in behalf of AFFA.
As to the third element, our ruling in the case of So Ping Bun v. Court of Appeals[53] is instructive, to wit:
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 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, petitioners Trendsetter Marketing asked DCCSI to
execute lease contracts in its favor, and as a result petitioner deprived respondent corporation of the latters
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.

Authorities debate on whether interference may be justified where the defendant acts for the sole purpose
of furthering his own financial or economic interest. One view is that, as a general rule, justification for interfering
with the business relations of another exists where the actors 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 interferers 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-protection.Moreover, justification for protecting ones financial position
should not be made to depend on a comparison of his economic interest 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
motives.

As early as Gilchrist vs. Cuddy, we held that where there was no malice in the interference of a
contract, and the impulse behind ones 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 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 in him.

x x x

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 petitioners interference.[54] [EMPHASIS SUPPLIED.]

Malice connotes ill will or spite, and speaks not in response to duty. It implies an intention to do ulterior and unjustifiable
harm. Malice is bad faith or bad motive.[55] In the case of Lagon v. Court of Appeals,[56] we held that to sustain a case for tortuous
interference, the defendant must have acted with malice or must have been driven by purely impure reasons to injure the plaintiff;
in other words, his act of interference cannot be justified. We further explained that the word induce refers to situations where a
person causes another to choose one course of conduct by persuasion or intimidation. As to the allegation of private respondent in
said case that petitioner induced the heirs of the late Bai Tonina Sepi to sell the property to petitioner despite an alleged renewal of
the original lease contract with the deceased landowner, we ruled as follows:
Assuming ex gratia argumenti that petitioner knew of the contract, such knowledge alone was not
sufficient to make him liable for tortuous interference. x x x

Furthermore, the records do not support the allegation of private respondent that petitioner induced the
heirs of Bai Tonina Sepi to sell the property to him. The word induce refers to situations where a person causes
another to choose one course of conduct by persuasion or intimidation. The records show that the decision of the
heirs of the late Bai Tonina Sepi to sell the property was completely of their own volition and that petitioner did
absolutely nothing to influence their judgment. Private respondent himself did not proffer any evidence to support
his claim. In short, even assuming that private respondent was able to prove the renewal of his lease contract
with Bai Tonina Sepi, the fact was that he was unable to prove malice or bad faith on the part of petitioner in
purchasing the property. Therefore, the claim of tortuous interference was never established.[57]
In their Answer, respondents denied having anything to do with the unpaid balance of the commission due to Cordero and the
eventual termination of his exclusive distributorship by AFFA. They gave a different version of the events that transpired following
the signing of Shipbuilding Contract No. 7825. According to them, several builder-competitors still entered the picture after the said
contract for the purchase of one (1) SEACAT 25 was sent to Brisbane in July 1997 for authentication, adding that the contract was to
be effective on August 7, 1997, the time when their funds was to become available. Go admitted he called the attention of AFFA if it
can compete with the prices of other builders, and upon mutual agreement, AFFA agreed to give them a discounted price under the
following terms and conditions: (1) that the contract price be lowered; (2) that Go will obtain another vessel; (3) that to secure
compliance of such conditions, Go must make an advance payment for the building of the second vessel; and (4) that the payment
scheme formerly agreed upon as stipulated in the first contract shall still be the basis and used as the guiding factor in remitting
money for the building of the first vessel. This led to the signing of another contract superseding the first one (1), still to be
dated 07 August 1997. Attached to the answer were photocopies of the second contract stating a lower purchase price
(US$1,150,000.00) and facsimile transmission of AFFA to Go confirming the transaction.[58]
As to the cessation of communication with Cordero, Go averred it was Cordero who was nowhere to be contacted at the time the
shipbuilding progress did not turn good as promised, and it was always Landicho and Tecson who, after several attempts, were
able to locate him only to obtain unsatisfactory reports such that it was Go who would still call up Robinson regarding any progress
status report, lacking documents for MARINA, etc., and go to Australia for ocular inspection. Hence, in May 1998 on the scheduled
launching of the ship in Australia, Go engaged the services of Landicho who went to Australia to see to it that all documents
needed for the shipment of the vessel to the Philippines would be in order. It was also during this time that Robinsons request for
inquiry on the Philippine price of a Wartsila engine for AFFAs then on-going vessel construction, was misinterpreted by Cordero as
indicating that Go was buying a second vessel.[59]
We find these allegations unconvincing and a mere afterthought as these were the very same averments contained in the Position
Paper for the Importer dated October 9, 1998, which was submitted by Go on behalf of ACG Express Liner in connection with the
complaint-affidavit filed by Cordero before the BOC-SGS Appeals Committee relative to the shipment valuation of the first
SEACAT 25 purchased from AFFA.[60] It appears that the purported second contract superseding the original Shipbuilding Contract
No. 7825 and stating a lower price of US$1,150,000.00 (not US$1,465,512.00) was only presented before the BOC to show that
the vessel imported into the Philippines was not undervalued by almost US$500,000.00. Cordero vehemently denied there was
such modification of the contract and accused respondents of resorting to falsified documents, including the facsimile transmission
of AFFA supposedly confirming the said sale for only US$1,150,000.00.Incidentally, another document filed in said BOC case, the
Counter-Affidavit/Position Paper for the Importer dated November 16, 1998, [61] states in paragraph 8 under the Antecedent facts
thereof, that --
8. As elsewhere stated, the total remittances made by herein Importer to AFFA does not alone
represent the purchase price for Seacat 25. It includes advance payment for the
acquisition of another vessel as part of the deal due to the discounted price. [62]
which even gives credence to the claim of Cordero that respondents negotiated for the sale of the second vessel and that the
nonpayment of the remaining two (2) instalments of his commission for the sale of the first SEACAT 25 was a result of Go and
Landichos directly dealing with Robinson, obviously to obtain a lower price for the second vessel at the expense of Cordero.
The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter into another contract directly with ACG
Express Liner to obtain a lower price for the second vessel resulted in AFFAs breach of its contractual obligation to pay in full the
commission due to Cordero and unceremonious termination of Corderos appointment as exclusive distributor. Following our
pronouncement in Gilchrist v. Cuddy (supra), such act may not be deemed malicious if impelled by a proper business interest
rather than in wrongful motives. The attendant circumstances, however, demonstrated that respondents transgressed the bounds
of permissible financial interest to benefit themselves at the expense of Cordero. Respondents furtively went directly to
Robinson after Cordero had worked hard to close the deal for them to purchase from AFFA two (2) SEACAT 25, closely monitored
the progress of building the first vessel sold, attended to their concerns and spent no measly sum for the trip to Australia with Go,
Landicho and Gos family members. But what is appalling is the fact that even as Go, Landicho and Tecson secretly negotiated
with Robinson for the purchase of a second vessel, Landicho and Tecson continued to demand and receive from Cordero their
commission or cut from Corderos earned commissionfrom the sale of the first SEACAT 25.
Cordero was practically excluded from the transaction when Go, Robinson, Tecson and Landicho suddenly ceased
communicating with him, without giving him any explanation. While there was nothing objectionable in negotiating for a lower price
in the second purchase of SEACAT 25, which is not prohibited by the Memorandum of Agreement, Go, Robinson, Tecson and
Landicho clearly connived not only in ensuring that Cordero would have no participation in the contract for sale of the second
SEACAT 25, but also that Cordero would not be paid the balance of his commission from the sale of the first SEACAT 25. This,
despite their knowledge that it was commission already earned by and due to Cordero. Thus, the trial and appellate courts
correctly ruled that the actuations of Go, Robinson, Tecson and Landicho were without legal justification and intended solely to
prejudice Cordero.
The existence of malice, ill will or bad faith is a factual matter. As a rule, findings of fact of the trial court, when affirmed
by the appellate court, are conclusive on this Court.[63] We see no compelling reason to reverse the findings of the RTC and the
CA that respondents acted in bad faith and in utter disregard of the rights of Cordero under the exclusive distributorship
agreement.
The failure of Robinson, Go, Tecson and Landico to act with fairness, honesty and good faith in securing better terms for
the purchase of high-speed catamarans from AFFA, to the prejudice of Cordero as the duly appointed exclusive distributor, is
further proscribed by Article 19 of the Civil Code:
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith.

As we have expounded in another case:
Elsewhere, we explained that when a right is exercised in a manner which does not conform with the norms
enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the
wrongdoer must be responsible. The object of this article, therefore, is to set certain standards which must be
observed not only in the exercise of ones rights but also in the performance of ones duties. These standards are
the following: act with justice, give everyone his due and observe honesty and good faith. Its antithesis,
necessarily, is any act evincing bad faith or intent to injure. Its elements are the following: (1) There is a legal
right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. When
Article 19 is violated, an action for damages is proper under Articles 20 or 21 of the Civil Code. Article 20
pertains to damages arising from a violation of law x x x. Article 21, on the other hand, states:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the latter for the damage.
Article 21 refers to acts contra bonus mores and has the following elements: (1) There is an act which is legal; (2)
but which is contrary to morals, good custom, public order, or public policy; and (3) it is done with intent to injure.
A common theme runs through Articles 19 and 21, and that is, the act complained of must be intentional.
[64]

Petitioner Gos argument that he, Landicho and Tecson cannot be held liable solidarily with Robinson for actual, moral and
exemplary damages, as well as attorneys fees awarded to Cordero since no law or contract provided for solidary obligation in these
cases, is equally bereft of merit. Conformably with Article 2194 of the Civil Code, the responsibility of two or more persons who are
liable for the quasi-delict is solidary.[65] In Lafarge Cement Philippines, Inc. v. Continental Cement Corporation,[66] we held:
[O]bligations arising from tort are, by their nature, always solidary. We have assiduously
maintained this legal principle as early as 1912 in Worcester v. Ocampo, in which we held:

x x x The difficulty in the contention of the appellants is that they fail to recognize that the
basis of the present action is tort. They fail to recognize the universal doctrine that each joint tort
feasor is not only individually liable for the tort in which he participates, but is also jointly liable
with his tort feasors. x x x

It may be stated as a general rule that joint tort feasors are all the persons who
command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if done for their benefit. They are each
liable as principals, to the same extent and in the same manner as if they had performed
the wrongful act themselves. x x x

Joint tort feasors are jointly and severally liable for the tort which they commit. The
persons injured may sue all of them or any number less than all. Each is liable for the whole
damages caused by all, and all together are jointly liable for the whole damage. It is no defense
for one sued alone, that the others who participated in the wrongful act are not joined with him as
defendants; nor is it any excuse for him that his participation in the tort was insignificant as
compared to that of the others. x x x

Joint tort feasors are not liable pro rata. The damages can not be apportioned among
them, except among themselves. They cannot insist upon an apportionment, for the purpose of
each paying an aliquot part. They are jointly and severally liable for the whole amount. x x x

A payment in full for the damage done, by one of the joint tort feasors, of course satisfies
any claim which might exist against the others. There can be but satisfaction. The release of one
of the joint tort feasors by agreement generally operates to discharge all. x x x

Of course, the court during trial may find that some of the alleged tort feasors are liable
and that others are not liable. The courts may release some for lack of evidence while
condemning others of the alleged tort feasors. And this is true even though they are charged
jointly and severally.[67] [EMPHASIS SUPPLIED.]

The rule is that the defendant found guilty of interference with contractual relations cannot be held liable for more than
the amount for which the party who was inducted to break the contract can be held liable. [68] Respondents Go, Landicho and
Tecson were therefore correctly held liable for the balance of petitioner Corderos commission from the sale of the first SEACAT
25, in the amount of US$31,522.09 or its peso equivalent, which AFFA/Robinson did not pay in violation of the exclusive
distributorship agreement, with interest at the rate of 6% per annum from June 24, 1998 until the same is fully paid.
Respondents having acted in bad faith, moral damages may be recovered under Article 2219 of the Civil Code.[69] On the
other hand, the requirements of an award of exemplary damages are: (1) they may be imposed by way of example in addition to
compensatory damages, and only after the claimants right to them has been established; (2) that they cannot be recovered as a
matter of right, their determination depending upon the amount of compensatory damages that may be awarded to the claimant;
and (3) the act must be accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent manner. [70] The award
of exemplary damages is thus in order. However, we find the sums awarded by the trial court as moral and exemplary damages
as reduced by the CA, still excessive under the circumstances.
Moral damages are meant to compensate and alleviate the physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injuries unjustly caused. Although incapable
of pecuniary estimation, the amount must somehow be proportional to and in approximation of the suffering inflicted. Moral
damages are not punitive in nature and were never intended to enrich the claimant at the expense of the defendant. There is no
hard-and-fast rule in determining what would be a fair and reasonable amount of moral damages, since each case must be
governed by its own peculiar facts. Trial courts are given discretion in determining the amount, with the limitation that it should not
be palpably and scandalously excessive. Indeed, it must be commensurate to the loss or injury suffered.[71]
We believe that the amounts of P300,000.00 and P200,000.00 as moral and exemplary damages, respectively, would be
sufficient and reasonable. Because exemplary damages are awarded, attorneys fees may also be awarded in consonance with
Article 2208 (1).[72] We affirm the appellate courts award of attorneys fees in the amount of P50,000.00.
WHEREFORE, the petitions are DENIED. The Decision dated March 16, 2004 as modified by the Resolution dated July
22, 2004 of the Court of Appeals in CA-G.R. CV No. 69113 are hereby AFFIRMED with MODIFICATION in that the awards of
moral and exemplary damages are hereby reduced to P300,000.00 and P200,000.00, respectively.
With costs against the petitioner in G.R. No. 164703.
SO ORDERED.
MARTIN S. VILLARAMA, JR.
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
CONCHITA CARPIO MORALES TERESITA J. LEONARDO-DE CASTRO
Associate Justice Associate Justice
LUCAS P. BERSAMIN
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the conclusions in the above Decision had been reached
in consultation before the case was assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice
[1] [45]
Penned by Associate Justice Jose Catral Mendoza (now a Member of this See Dole Philippines, Inc.(Tropifresh Division) v. Quilala, G.R. No.
Court) and concurred in by Associate Justices B.A. Adefuin-Dela Cruz 168723, July 9, 2008, 557 SCRA 433, 437-438.
[46]
and Eliezer R. Delos Santos. G.R. No. 86683, January 21, 1993, 217 SCRA 328.
[2] [47]
Penned by Associate Justice Jose Catral Mendoza (now a Member of this Id., pp. 331, 332.
[48]
Court) and concurred in by Associate Justices Delilah Vidallon-Magtolis Supra.
[49]
and Eliezer R. Delos Santos. Rollo (G.R. No. 164703), pp. 33-34.
[3] [50]
Penned by Judge Pedro M. Areola. Id., pp 36-37; Exhibit A-3, folder of exhibits, p. 4.
[4] [51]
Folder of plaintiffs exhibits, pp. 1-34. Rollo (G.R. No. 164703), p. 39.
[5] [52]
Id., pp. 35-39. So Ping Bun v. Court of Appeals, G.R. No. 120554, September 21, 1999,
[6]
Id., pp. 43-51. 314 SCRA 751, 758, citing 30 Am Jur, Section 19, pp. 71-72
[7]
Id., pp. 40-42. and Sampaguita Pictures, Inc. v. Vasquez, et al. (Court of Appeals, 68
[8]
Id., pp. 52-53. O.G. 7666).
[9] [53]
Id., pp. 54-56. Supra.
[10] [54]
Id., pp. 56-57. Id., pp. 758-760.
[11] [55]
TSN, April 5, 2000, pp. 27-35; folder of plaintiffs exhibits, p. 58. Borjal v. Court of Appeals, G.R. No. 126466, January 14, 1999, 301 SCRA
[12]
Records, Vol. I, pp. 1-16. 1, 28.
[13] [56]
Id., pp. 155-157, 167-171, 186-189, 249-251. G.R. No. 119107, March 18, 2005, 453 SCRA 616, 626.
[14] [57]
Id., pp. 70-77, 178. Id., p. 626.
[15] [58]
Id., pp. 213-214. Records, Vol. I, pp. 204-206.
[16] [59]
Id., pp. 298-299. Id., pp. 206-207.
[17] [60]
TSN, April 14, 2000, pp. 2-44. Folder of exhibits, Exhibit BB, pp. 324-342.
[18] [61]
Records, Vol. I, pp. 445-446. Id., Exhibit CC, pp. 343-361.
[19] [62]
Id., pp. 460-465. Id., p. 345.
[20] [63]
Id., pp. 477-480. Ramas v. Quiamco, G.R. No. 146322, December 6, 2006, 510 SCRA 172,
[21]
Id., pp. 481-485. 178.
[22] [64]
Id., p. 486. Nikko Hotel Manila Garden v. Reyes, G.R. No. 154259, February 28, 2005,
[23]
Id., pp. 500-502. 452 SCRA 532, 546-547, citing Albenson Enterprises Corp. v. Court of
[24]
Id., p. 503. Appeals, G.R. No. 88694, January 11, 1993, 217 SCRA 16, 25.
[25] [65]
Id., pp. 512-514. Ngo Sin Sing v. Li Seng Giap & Sons, Inc., G.R. No. 170596, November 28,
[26]
Records, Vol. II, pp. 550-620. 2008, 572 SCRA 625, 638, citing Chan, Jr. v. Iglesia ni Cristo, Inc., G.R.
[27]
Id., pp. 621-622. No. 160283, October 14, 2005, 473 SCRA 177, 186.
[28] [66]
Cordero v. Go, G.R. No. 149754, 389 SCRA 288. G.R. No. 155173, November 23, 2004, 443 SCRA 522.
[29] [67]
Rollo (G.R. No. 164703), pp. 23-24. As cited in Ngo Sin Sing v. Li Seng Giap & Sons, Inc., supra.
[30] [68]
Rollo (G.R. No. 164747), pp. 21-22. Daywalt v. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587 (1919).
[31] [69]
Oco v. Limbaring, G.R. No. 161298, January 31, 2006, 481 SCRA 348, Magat v. Court of Appeals, G.R. No. 124221, August 4, 2000, 337 SCRA
358. 298; Far East Bank & Trust Company v. Court of Appeals, 311 Phil. 783
[32]
Tamondong v. Court of Appeals, G.R. No. 158397, November 26, 2004, (1995); and Expertravel & Tours, Inc. v. Court of Appeals, G.R. No.
444 SCRA 509. 130030, June 25, 1999, 309 SCRA 141, 145-146.
[33] [70]
Folder of exhibits, Exhibit A-6, p. 7. National Steel Corporation v. Regional Trial Court of Lanao del Norte, Br. 2,
[34]
Id., Exhibit A-9, p. 10 Iligan City, G.R. No. 127004, March 11, 1999 304 SCRA 609.
[35] [71]
Id., Exhibit A, p. 1. Samson, Jr. v. Bank of the Philippine Islands, G.R. No. 150487, July 10,
[36]
Id., Exhibit A-3, p. 4. 2003, 405 SCRA 607, 611-612, citing Expertravel & Tours, Inc. v. Court
[37]
Id., Exhibits J to J-2, K to K-4, M, Y to Y-4, pp. 59-66, 69-71, 314-318. of Appeals, 368 Phil. 444 (1999); De la Serna v. Court of Appeals, G.R.
[38]
Id., Exhibits R-6, P, R-7, V, W , X to X-7, Y to Y-4 and Z to Z-2, pp. 232, No. 109161, June 21, 1994, 233 SCRA 325; Visayan Sawmill Company,
236-238, 239, 301-321. Inc. v. Court of Appeals, G.R. No. 83851, March 3, 1993, 219 SCRA
[39]
Records, Vol. I, pp. 70-73, 203-213, 265-267, 460-464. 378; Flores v. Uy, G.R. Nos. 121492 & 124325, October 26, 2001, 368
[40]
CA rollo, pp. 78-84. SCRA 347; Pagsuyuin v. Intermediate Appellate Court, G.R. No. 72121,
[41]
Records, Vol. I, pp. 241-242. February 6, 1991, 193 SCRA 547; Northwest Airlines v. Laya, G.R. No.
[42]
Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporation, G.R. No. 145956, May 29, 2002, 382 SCRA 730; Cavite Development Bank v.
172242, August 14, 2007, 530 SCRA 170, 186. Sps. Lim, 381 Phil. 355 (2000); Coca-Cola Bottlers, Phils., Inc. v.
[43]
United Coconut Planters Bank v. Ongpin, G.R. No. 146593, October 26, Roque, 367 Phil. 493 (1999); Morales v. Court of Appeals, G.R. No.
2001, 368 SCRA 464, 470. 117228, June 19, 1997, 274 SCRA 282; Prudential Bank v. Court of
[44]
Records, Vol. I, pp. 168-170. Appeals, 384 Phil. 942 (1999); Singson v. Court of Appeals, 346 Phil.
831 (1997); Del Rosario v. Court of Appeals, 334 Phil. 812
(1997); Philippine National Bank v. Court of Appeals, 326 Phil. 326
(1996); Mayo v. People, G.R. No. 91201, December 5, 1991, 204 SCRA
642; Policarpio v. Court of Appeals, G.R. No. 94563, March 5, 1991, 194
SCRA 729; Radio Communications of the Phils., Inc. v. Rodriguez, G.R.
No. 83768, February 28, 1990, 182 SCRA 899; and Prudenciado v.
Alliance Transport System, Inc., No. L-33836, March 16, 1987, 148
SCRA 440.
[72]
B.F. Metal (Corporation) v. Lomotan, G.R. No. 170813, April 16, 2008, 551
SCRA 618.
SECOND DIVISION

TITUS B. VILLANUEVA, G.R. No. 180764
Petitioner,
Present:
Carpio, J., Chairperson,
- versus - Brion,
Del Castillo,
Abad, and
Perez, JJ.
EMMA M. ROSQUETA,
Respondent. Promulgated:

January 19, 2010
x --------------------------------------------------------------------------------------- x

DECISION

ABAD, J.:

This case is about the right to recover damages for alleged abuse of right committed by a superior public officer in preventing a
subordinate from doing her assigned task and being officially recognized for it.

The Facts and the Case

Respondent Emma M. Rosqueta (Rosqueta), formerly Deputy Commissioner of the Revenue Collection and Monitoring
Group of the Bureau of Customs (the Bureau), tendered her courtesy resignation from that post on January 23, 2001, shortly after
President Gloria Macapagal-Arroyo assumed office. But five months later on June 5, 2001, she withdrew her resignation, claiming
that she enjoyed security of tenure and that she had resigned against her will on orders of her superior.[1]
Meantime, on July 13, 2001 President Arroyo appointed Gil Valera (Valera) to respondent Rosquetas
position. Challenging such appointment, Rosqueta filed a petition for prohibition, quo warranto, and injunction against petitioner
Titus B. Villanueva (Villanueva), then Commissioner of Customs, the Secretary of Finance, and Valera with the Regional Trial
Court[2] (RTC) of Manila in Civil Case 01-101539. On August 27, 2001 the RTC issued a temporary restraining order (TRO),
enjoining Villanueva and the Finance Secretary[3] from implementing Valeras appointment. On August 28, 2001 the trial court
superseded the TRO with a writ of preliminary injunction.[4]

Petitioner Villanueva, Valera, and the Secretary of Finance challenged the injunction order before the Court of Appeals
(CA) in CA-G.R. SP 66070. On September 14, 2001 the CA issued its own TRO, enjoining the implementation of the RTCs
injunction order. But the TRO lapsed after 60 days and the CA eventually dismissed the petition before it.

On November 22, 2001 while the preliminary injunction in the quo warranto case was again in force, petitioner Villanueva
issued Customs Memorandum Order 40-2001, authorizing Valera to exercise the powers and functions of the Deputy
Commissioner.

During the Bureaus celebration of its centennial anniversary in February 2002, its special Panorama magazine edition
featured all the customs deputy commissioners, except respondent Rosqueta. The souvenir program, authorized by the Bureaus
Steering Committee headed by petitioner Villanueva to be issued on the occasion, had a space where Rosquetas picture was
supposed to be but it instead stated that her position was under litigation. Meanwhile, the commemorative billboard displayed at the
Bureaus main gate included Valeras picture but not Rosquetas.

On February 28, 2002 respondent Rosqueta filed a complaint [5] for damages before the RTC of Quezon City against
petitioner Villanueva in Civil Case Q-02-46256, alleging that the latter maliciously excluded her from the centennial anniversary
memorabilia. Further, she claimed that he prevented her from performing her duties as Deputy Commissioner, withheld her
salaries, and refused to act on her leave applications. Thus, she asked the RTC to award her P1,000,000.00 in moral
damages, P500,000.00 in exemplary damages, and P300,000.00 in attorneys fees and costs of suit.

But the RTC dismissed[6] respondent Rosquetas complaint, stating that petitioner Villanueva committed no wrong and
incurred no omission that entitled her to damages. The RTC found that Villanueva had validly and legally replaced her as Deputy
Commissioner seven months before the Bureaus centennial anniversary.

But the CA reversed the RTCs decision,[7] holding instead that petitioner Villanuevas refusal to comply with the preliminary
injunction order issued in the quo warranto case earned for Rosqueta the right to recover moral damages from him. [8] Citing the
abuse of right principle, the RTC said that Villanueva acted maliciously when he prevented Rosqueta from performing her duties,
deprived her of salaries and leaves, and denied her official recognition as Deputy Commissioner by excluding her from the
centennial anniversary memorabilia. Thus, the appellate court ordered Villanueva to pay P500,000.00 in moral
damages, P200,000.00 in exemplary damages and P100,000.00 in attorneys fees and litigation expenses. With the denial of his
motion for reconsideration, Villanueva filed this petition for review on certiorari under Rule 45.

The Issue Presented

The key issue presented in this case is whether or not the CA erred in holding petitioner Villanueva liable in damages to
respondent Rosqueta for ignoring the preliminary injunction order that the RTC issued in the quo warranto case (Civil Case 01-
101539), thus denying her of the right to do her job as Deputy Commissioner of the Bureau and to be officially recognized as such
public officer.

The Courts Ruling

Under the abuse of right principle found in Article 19 of the Civil Code,[9] a person must, in the exercise of his legal right or
duty, act in good faith. He would be liable if he instead acts in bad faith, with intent to prejudice another. Complementing this
principle are Articles 20[10] and 21[11] of the Civil Code which grant the latter indemnity for the injury he suffers because of such
abuse of right or duty.[12]

Petitioner Villanueva claims that he merely acted on advice of the Office of the Solicitor General (OSG) when he
allowed Valera to assume the office as Deputy Commissioner since respondent Rosqueta held the position merely in a temporary
capacity and since she lacked the Career Executive Service eligibility required for the job.

But petitioner Villanueva cannot seek shelter in the alleged advice that the OSG gave him. Surely, a government official of
his rank must know that a preliminary injunction order issued by a court of law had to be obeyed, especially since the question
of Valeras right to replace respondent Rosqueta had not yet been properly resolved.

That petitioner Villanueva ignored the injunction shows bad faith and intent to spite Rosqueta who remained in the eyes of
the law the Deputy Commissioner. His exclusion of her from the centennial anniversary memorabilia was not an honest mistake by
any reckoning. Indeed, he withheld her salary and prevented her from assuming the duties of the position. As the Court said
in Amonoy v. Spouses Gutierrez,[13] a partys refusal to abide by a court order enjoining him from doing an act, otherwise lawful,
constitutes an abuse and an unlawful exercise of right.

That respondent Rosqueta was later appointed Deputy Commissioner for another division of the Bureau is
immaterial. While such appointment, when accepted, rendered the quo warranto case moot and academic, it did not have the effect
of wiping out the injuries she suffered on account of petitioner Villanuevas treatment of her.The damage suit is an independent
action.

The CA correctly awarded moral damages to respondent Rosqueta. Such damages may be awarded when the
defendants transgression is the immediate cause of the plaintiffs anguish[14] in the cases specified in Article 2219[15] of the Civil
Code.[16]

Here, respondent Rosquetas colleagues and friends testified that she suffered severe anxiety on account of the
speculation over her employment status.[17] She had to endure being referred to as a squatter in her workplace. She had to face
inquiries from family and friends about her exclusion from the Bureaus centennial anniversary memorabilia. She did not have to
endure all these affronts and the angst and depression they produced had Villanueva abided in good faith by the courts order in her
favor. Clearly, she is entitled to moral damages.

The Court, however, finds the award of P500,000.00 excessive. As it held in Philippine Commercial International Bank v.
Alejandro,[18] moral damages are not a bonanza. They are given to ease the defendants grief and suffering. Moral damages should
reasonably approximate the extent of hurt caused and the gravity of the wrong done. Here, that would be P200,000.00.

The Court affirms the grant of exemplary damages by way of example or correction for the public good but, in line with the
same reasoning, reduces it to P50,000.00. Finally, the Court affirms the award of attorneys fees and litigation expenses but
reduces it to P50,000.00.

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals dated April 30, 2007 in
CA-G.R. CV 85931 with MODIFICATION in that petitioner Titus B. Villanueva is ORDERED to pay respondent Emma M. Rosqueta
the sum of P200,000.00 in moral damages, P50,000.00 in exemplary damages, and P50,000.00 in attorneys fees and litigation
expenses.
SO ORDERED.
ROBERT agents and any other persons assisting are hereby enjoined from implementing or enforcing
O A. ABAD the appointment of respondent GIL A. VALERA to the position of Customs Deputy
Associate Justice Commissioner for Revenue Collection and Monitoring and respondent Valera from
WE CONCUR: assuming the said office or exercising its functions until further orders from this Court.
[5]
ANTONIO T. CARPIO Id. at 1-8.
[6]
Associate Justice Rollo, pp. 80-109. Penned by Judge Thelma A. Ponferrada.
[7]
ARTURO D. BRION MARIANO C. DEL CASTILLO Id. at 48-65. Penned by Associate Justice Enrico A. Lanzanas and concurred in by
Associate Justice Associate Justice Associate Justices Remedios Salazar-Fernando and Rosalinda Asuncion-Vicente.
[8]
JOSE P. PEREZ Id. at 63.
[9]
Associate Justice Art. 19. Every person must, in the exercise of his rights and in the performance of his
ATTESTATION duties, act with justice, give everyone his due, and observe honesty and good faith.
[10]
I attest that the conclusions in the above Decision had been reached in consultation before Art. 20. Every person who, contrary to law, willfully or negligently causes damage to
the case was assigned to the writer of the opinion of the Courts Division. another, shall indemnify the latter for the same.
[11]
ANTONIO T. CARPIO Art. 21. Any person who willfully causes loss or injury to another in a manner that is
Associate Justice contrary to morals or good customs or public policy shall compensate the latter for the
Chairperson, Second Division damage.
[12]
CERTIFICATION Carpio v. Valmonte, 481 Phil. 352, 362 (2004).
[13]
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons 404 Phil. 586, 594 (2001).
[14]
Attestation, I certify that the conclusions in the above Decision had been reached in Art. 2217, Civil Code. Moral damages include physical suffering, mental anguish, fright,
consultation before the case was assigned to the writer of the opinion of the Courts serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,
Division. and similar injury. Though incapable of pecuniary computation, moral damages may be
REYNATO S. PUNO recovered if they are the proximate result of the defendants wrongful act for omission.
[15]
Chief Justice Art. 2219. Moral damages may be recovered in the following and analogous cases:
1) A criminal offense resulting in physical injuries;
2) Quasi-delicts causing physical injuries;
[1]
Former Commissioner of Customs, Renato A. Ampil. 3) Seduction, abduction, rape, or other lascivious acts;
[2]
Branch 51. 4) Adultery or concubinage;
[3]
Hon. Jose Isidro Camacho. 5) Illegal or arbitrary detention or arrest;
[4]
Records, p. 12. It is hereby ordered by the undersigned Judge of the Regional Trial Court 6) Illegal search;
that until further orders, you, the said respondents and all your attorneys, representatives, 7) Libel, slander or any other form of defamation;
8) Malicious prosecution; The spouse, descendants, ascendants, and brothers and sisters may bring the action
9) Acts mentioned in Article 309; mentioned in No. 9 of this Article, in the order named.
[16]
10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and Carpio v. Valmonte, supra note 12, at 364.
[17]
35. Testimony of Wilnora Cawile, TSN, March 5, 2003, pp. 16-18; testimony of Wilhelmina
The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this Faustino, TSN, May 15, 2003, pp. 10-13, 19-25; testimony of John Aclaro, June 6, 2003,
Article, may also recover moral damages. pp. 20-26.
[18]
G.R. No. 175587, September 21, 2007, 533 SCRA 738, 757-758.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 161921 July 17, 2013
JOYCE V. ARDIENTE, PETITIONER,
vs.
SPOUSES JAVIER AND MA. THERESA PASTORFIDE, CAGAYAN DE ORO WATER DISTRICT AND GASPAR
GONZALEZ,* JR., RESPONDENTS.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the
Decision1 and Resolution2 of the Court of Appeals (CA), dated August 28, 2003 and December 17, 2003, respectively, in CA-G.R.
CV No. 73000. The CA Decision affirmed with modification the August 15, 2001 Decision3of the Regional Trial Court (RTC) of
Cagayan de Oro City, Branch 24, while the CA Resolution denied petitioner's Motion for Reconsideration.
The facts, as summarized by the CA, are as follows:
[Herein petitioner] Joyce V. Ardiente and her husband Dr. Roberto S. Ardiente are owners of a housing unit at Emily Homes,
Balulang, Cagayan de Oro City with a lot area of one hundred fifty-three (153) square meters and covered by Transfer Certificate of
Title No. 69905.
On June 2, 1994, Joyce Ardiente entered into a Memorandum of Agreement (Exh. "B", pp. 470-473, Records) selling, transferring
and conveying in favor of [respondent] Ma. Theresa Pastorfide all their rights and interests in the housing unit at Emily Homes in
consideration of ₱70,000.00. The Memorandum of Agreement carries a stipulation:
"4. That the water and power bill of the subject property shall be for the account of the Second Party (Ma. Theresa Pastorfide)
effective June 1, 1994." (Records, p. 47)
vis-a-vis Ma. Theresa Pastorfide's assumption of the payment of the mortgage loan secured by Joyce Ardiente from the National
Home Mortgage (Records, Exh. "A", pp. 468-469)
For four (4) years, Ma. Theresa's use of the water connection in the name of Joyce Ardiente was never questioned nor perturbed
(T.S.N., October 31, 2000, pp. 7-8) until on March 12, 1999, without notice, the water connection of Ma. Theresa was cut off.
Proceeding to the office of the Cagayan de Oro Water District (COWD) to complain, a certain Mrs. Madjos told Ma. Theresa that
she was delinquent for three (3) months corresponding to the months of December 1998, January 1999, and February 1999. Ma.
Theresa argued that the due date of her payment was March 18, 1999 yet (T.S.N., October 31, 2000, pp. 11-12). Mrs. Madjos later
told her that it was at the instance of Joyce Ardiente that the water line was cut off (T.S.N., February 5, 2001, p. 31).
On March 15, 1999, Ma. Theresa paid the delinquent bills (T.S.N., October 31, 2000, p. 12). On the same date, through her lawyer,
Ma. Theresa wrote a letter to the COWD to explain who authorized the cutting of the water line (Records, p. 160).
On March 18, 1999, COWD, through the general manager, [respondent] Gaspar Gonzalez, Jr., answered the letter dated March
15, 1999 and reiterated that it was at the instance of Joyce Ardiente that the water line was cut off (Records, p. 161).
Aggrieved, on April 14, 1999, Ma. Theresa Pastorfide [and her husband] filed [a] complaint for damages [against petitioner, COWD
and its manager Gaspar Gonzalez] (Records, pp. 2-6).
In the meantime, Ma. Theresa Pastorfide's water line was only restored and reconnected when the [trial] court issued a writ of
preliminary mandatory injunction on December 14, 1999 (Records, p. 237).4
After trial, the RTC rendered judgment holding as follows:
xxxx
In the exercise of their rights and performance of their duties, defendants did not act with justice, gave plaintiffs their due and
observe honesty and good faith. Before disconnecting the water supply, defendants COWD and Engr. Gaspar Gonzales did not
even send a disconnection notice to plaintiffs as testified to by Engr. Bienvenido Batar, in-charge of the Commercial Department of
defendant COWD. There was one though, but only three (3) days after the actual disconnection on March 12, 1999. The due date
for payment was yet on March 15. Clearly, they did not act with justice. Neither did they observe honesty.
They should not have been swayed by the prodding of Joyce V. Ardiente. They should have investigated first as to the present
ownership of the house. For doing the act because Ardiente told them, they were negligent. Defendant Joyce Ardiente should have
requested before the cutting off of the water supply, plaintiffs to pay. While she attempted to tell plaintiffs but she did not have the
patience of seeing them. She knew that it was plaintiffs who had been using the water four (4) years ago and not hers. She should
have been very careful. x x x5
The dispositive portion of the trial court's Decision reads, thus:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendants [Ardiente, COWD and Gonzalez] to pay
jointly and severally plaintiffs, the following sums:
(a) ₱200,000.00 for moral damages;
(b) 200,000.00 for exemplary damages; and
(c) 50,000.00 for attorney's fee.
The cross-claim of Cagayan de Oro Water District and Engr. Gaspar Gonzales is hereby dismissed. The Court is not swayed that
the cutting off of the water supply of plaintiffs was because they were influenced by defendant Joyce Ardiente. They were negligent
too for which they should be liable.
SO ORDERED.6
Petitioner, COWD and Gonzalez filed an appeal with the CA.
On August 28, 2003, the CA promulgated its assailed Decision disposing as follows:
IN VIEW OF ALL THE FOREGOING, the appealed decision is AFFIRMED, with the modification that the awarded damages is
reduced to ₱100,000.00 each for moral and exemplary damages, while attorney's fees is lowered to ₱25,000.00. Costs against
appellants.
SO ORDERED.7
The CA ruled, with respect to petitioner, that she has a "legal duty to honor the possession and use of water line by Ma. Theresa
Pastorfide pursuant to their Memorandum of Agreement" and "that when [petitioner] applied for its disconnection, she acted in bad
faith causing prejudice and [injury to] Ma. Theresa Pastorfide."8
As to COWD and Gonzalez, the CA held that they "failed to give a notice of disconnection and derelicted in reconnecting the water
line despite payment of the unpaid bills by the [respondent spouses Pastorfide]."9
Petitioner, COWD and Gonzalez filed their respective Motions for Reconsideration, but these were denied by the CA in its
Resolution dated December 17, 2003.
COWD and Gonzalez filed a petition for review on certiorari with this Court, which was docketed as G.R. No. 161802. However,
based on technical grounds and on the finding that the CA did not commit any reversible error in its assailed Decision, the petition
was denied via a Resolution10 issued by this Court on March 24, 2004. COWD and Gonzalez filed a motion for reconsideration, but
the same was denied with finality through this Court's Resolution11 dated June 28, 2004.
Petitioner, on the other hand, timely filed the instant petition with the following Assignment of Errors:
7.1 HONORABLE COURT OF APPEALS (ALTHOUGH IT HAS REDUCED THE LIABILITY INTO HALF) HAS STILL
COMMITTED GRAVE AND SERIOUS ERROR WHEN IT UPHELD THE JOINT AND SOLIDARY LIABILITY OF
PETITIONER JOYCE V. ARDIENTE WITH CAGAYAN DE ORO WATER DISTRICT (COWD) AND ENGR. GASPAR D.
GONZALES FOR THE LATTER'S FAILURE TO SERVE NOTICE UPON RESPONDENTS SPOUSES PASTORFIDE
PRIOR TO THE ACTUAL DISCONNECTION DESPITE EVIDENCE ADDUCED DURING TRIAL THAT EVEN WITHOUT
PETITIONER'S REQUEST, COWD WAS ALREADY SET TO EFFECT DISCONNECTION OF RESPONDENTS' WATER
SUPPLY DUE TO NON-PAYMENT OF ACCOUNT FOR THREE (3) MONTHS.
7.2 THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR WHEN IT RULED
TOTALLY AGAINST PETITIONER AND FAILED TO FIND THAT RESPONDENTS ARE GUILTY OF CONTRIBUTORY
NEGLIGENCE WHEN THEY FAILED TO PAY THEIR WATER BILLS FOR THREE MONTHS AND TO MOVE FOR THE
TRANSFER OF THE COWD ACCOUNT IN THEIR NAME, WHICH WAS A VIOLATION OF THEIR MEMORANDUM OF
AGREEMENT WITH PETITIONER JOYCE V. ARDIENTE. RESPONDENTS LIKEWISE DELIBERATELY FAILED TO
EXERCISE DILIGENCE OF A GOOD FATHER OF THE FAMILY TO MINIMIZE THE DAMAGE UNDER ART. 2203 OF
THE NEW CIVIL CODE.
7.3 THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT DISREGARDED THE FACT THAT
RESPONDENT SPOUSES PASTORFIDE ARE LIKEWISE BOUND TO OBSERVE ARTICLE 19 OF THE NEW CIVIL
CODE, i.e., IN THE EXERCISE OF THEIR RIGHTS AND IN THE PERFORMANCE OF THEIR DUTIES TO ACT WITH
JUSTICE, GIVE EVERYONE HIS DUE AND OBSERVE HONESTY AND GOOD FAITH.
7.4 THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT GRANTED AN AWARD OF MORAL AND
EXEMPLARY DAMAGES AND ATTORNEY'S FEES AS AGAINST PETITIONER ARDIENTE. 12
At the outset, the Court noticed that COWD and Gonzalez, who were petitioner's co-defendants before the RTC and her co-
appellants in the CA, were impleaded as respondents in the instant petition. This cannot be done. Being her co-parties before the
RTC and the CA, petitioner cannot, in the instant petition for review on certiorari, make COWD and Gonzalez, adversary parties. It
is a grave mistake on the part of petitioner's counsel to treat COWD and Gonzalez as respondents. There is no basis to do so,
considering that, in the first place, there is no showing that petitioner filed a cross-claim against COWD and Gonzalez. Under
Section 2, Rule 9 of the Rules of Court, a cross-claim which is not set up shall be barred. Thus, for failing to set up a cross-claim
against COWD and Gonzalez before the RTC, petitioner is already barred from doing so in the present petition.
More importantly, as shown above, COWD and Gonzalez's petition for review on certiorari filed with this Court was already denied
with finality on June 28, 2004, making the presently assailed CA Decision final and executory insofar as COWD and Gonzalez are
concerned. Thus, COWD and Gonzalez are already precluded from participating in the present petition. They cannot resurrect their
lost cause by filing pleadings this time as respondents but, nonetheless, reiterating the same prayer in their previous pleadings filed
with the RTC and the CA.
As to the merits of the instant petition, the Court likewise noticed that the main issues raised by petitioner are factual and it is
settled that the resolution of factual issues is the function of lower courts, whose findings on these matters are received with
respect and considered binding by the Supreme Court subject only to certain exceptions, none of which is present in this instant
petition.13 This is especially true when the findings of the RTC have been affirmed by the CA as in this case.14
In any case, a perusal of the records at hand would readily show that the instant petition lacks merit.
Petitioner insists that she should not be held liable for the disconnection of respondent spouses' water supply, because she had no
participation in the actual disconnection. However, she admitted in the present petition that it was she who requested COWD to
disconnect the Spouses Pastorfide's water supply. This was confirmed by COWD and Gonzalez in their cross-claim against
petitioner. While it was COWD which actually discontinued respondent spouses' water supply, it cannot be denied that it was
through the instance of petitioner that the Spouses Pastorfide's water supply was disconnected in the first place.
It is true that it is within petitioner's right to ask and even require the Spouses Pastorfide to cause the transfer of the former's
account with COWD to the latter's name pursuant to their Memorandum of Agreement. However, the remedy to enforce such right
is not to cause the disconnection of the respondent spouses' water supply. The exercise of a right must be in accordance with the
purpose for which it was established and must not be excessive or unduly harsh; there must be no intention to harm
another.15 Otherwise, liability for damages to the injured party will attach.16 In the present case, intention to harm was evident on the
part of petitioner when she requested for the disconnection of respondent spouses’ water supply without warning or informing the
latter of such request. Petitioner claims that her request for disconnection was based on the advise of COWD personnel and that
her intention was just to compel the Spouses Pastorfide to comply with their agreement that petitioner's account with COWD be
transferred in respondent spouses' name. If such was petitioner's only intention, then she should have advised respondent spouses
before or immediately after submitting her request for disconnection, telling them that her request was simply to force them to
comply with their obligation under their Memorandum of Agreement. But she did not. What made matters worse is the fact that
COWD undertook the disconnection also without prior notice and even failed to reconnect the Spouses Pastorfide’s water supply
despite payment of their arrears. There was clearly an abuse of right on the part of petitioner, COWD and Gonzalez. They are guilty
of bad faith.
The principle of abuse of rights as enshrined in Article 19 of the Civil Code provides that every person must, in the exercise of his
rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.
In this regard, the Court's ruling in Yuchengco v. The Manila Chronicle Publishing Corporation17 is instructive, to wit:
xxxx
This provision of law sets standards which must be observed in the exercise of one’s rights as well as in the performance of its
duties, to wit: to act with justice; give everyone his due; and observe honesty and good faith.
In Globe Mackay Cable and Radio Corporation v. Court of Appeals, it was elucidated that while Article 19 "lays down a rule of
conduct for the government of human relations and for the maintenance of social order, it does not provide a remedy for its
violation. Generally, an action for damages under either Article 20 or Article 21 would be proper." The Court said:
supreme ideal, which is the sway and dominance of justice." (Id.) Foremost among these principles is that pronounced in Article 19
x x x.
xxxx
observed not only in the exercise of one's rights, but also in the performance of one's duties. These standards are the following: to
limitation on all rights; that in their exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by
itself legal because recognized or granted by law as such, may nevertheless become the source of some illegality. When a right is
exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal
wrong is thereby committed for which the wrongdoer must be held responsible. But while Article 19 lays down a rule of conduct for
the government of human relations and for the maintenance of social order, it does not provide a remedy for its violation. Generally,
an action for damages under either Article 20 or Article 21 would be proper.
Corollarilly, Article 20 provides that "every person who, contrary to law, willfully or negligently causes damage to another shall
indemnify the latter for the same." It speaks of the general sanctions of all other provisions of law which do not especially provide
for its own sanction. When a right is exercised in a manner which does not conform to the standards set forth in the said provision
and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be responsible. Thus, if the
provision does not provide a remedy for its violation, an action for damages under either Article 20 or Article 21 of the Civil Code
would be proper.
The question of whether or not the principle of abuse of rights has been violated resulting in damages under Article 20 or other
applicable provision of law, depends on the circumstances of each case. x x x18
To recapitulate, petitioner's acts which violated the abovementioned provisions of law is her unjustifiable act of having the
respondent spouses' water supply disconnected, coupled with her failure to warn or at least notify respondent spouses of such
intention. On the part of COWD and Gonzalez, it is their failure to give prior notice of the impending disconnection and their
subsequent neglect to reconnect respondent spouses' water supply despite the latter's settlement of their delinquent account.
On the basis of the foregoing, the Court finds no cogent reason to depart from the ruling of both the RTC and the CA that petitioner,
COWD and Gonzalez are solidarily liable.
The Spouses Pastorfide are entitled to moral damages based on the provisions of Article 2219,19 in connection with Articles
2020 and 2121 of the Civil Code.
As for exemplary damages, Article 2229 provides that exemplary damages may be imposed by way of example or correction for
the public good. Nonetheless, exemplary damages are imposed not to enrich one party or impoverish another, but to serve as a
deterrent against or as a negative incentive to curb socially deleterious actions.22 In the instant case, the Court agrees with the CA
in sustaining the award of exemplary damages, although it reduced the amount granted, considering that respondent spouses were
deprived of their water supply for more than nine (9) months, and such deprivation would have continued were it not for the relief
granted by the RTC.
With respect to the award of attorney's fees, Article 2208 of the Civil Code provides, among others, that such fees may be
recovered when exemplary damages are awarded, when the defendant's act or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest, and where the defendant acted in gross and evident bad faith in refusing
to satisfy the plaintiffs’ plainly valid, just and demandable claim.
WHEREFORE, instant petition for review on certiorari is DENIED. The Decision and Resolution of the Court of Appeals, dated
August 28, 2003 and December 17, 2003, respectively, in CA-G.R. CV No. 73000 are AFFIRMED.
SO ORDERED.
Velasco, Jr., (Chairperson), Abad, Mendoza, and Leonen, JJ., concur.
July 24, 2013
N O T I C E OF J U D G M E N T
Sirs/Mesdames:
Please take notice that on ___July 17, 2013___ a Decision, copy attached herewith, was rendered by the Supreme Court in the
above-entitled case, the original of which was received by this Office on July 19, 2013 at 2:25 p.m.
Very truly yours,
(SGD)
LUCITA ABJELINA SORIANO
Division Clerk of Court
Footnotes
* Spelled as Gonzales in other parts of the rollo and records.
1
Penned by Associate Justice Conrado M. Vasquez, Jr., with Associate Justices Edgardo P. Cruz and Noel G. Tijam,
concurring; rollo, pp. 60-67.
2
Id. at 68.
3
Penned by Judge Leonardo N. Demecillo, id. at 27-37.
4
Rollo, pp. 60-62.
5
Id. at 35-36.
6
Id. at 37.
7
Id. at 67. (Emphasis in the original)
8
Id. at 65.
9
Id. at 64.
10
Id. at 219.
11
Id. at 220.
12
Id. at 14.
13
Philippine National Bank v. DKS International, Inc., G.R. No. 179161, January 22, 2010, 610 SCRA 603, 621.
14
Id.
15
Uypitching v. Quiamco, G.R. No. 146322, December 6, 2006, 510 SCRA 172, 179.
16
Id.
17
G.R. No. 184315, November 28, 2011, 661 SCRA 392.
18
Id. at 402-404. (Emphasis supplied)
19
Art. 2219. Moral damages may be recovered in the following and analogous cases:
xxxx
(10) Acts and actions referred to in Articles 21, 26, 27, 28. 29, 30, 32, 34 and 35.
xxxx
20
Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the
same.
21
Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public
policy shall compensate the latter for the damage.
22
Yuchengco v. The Manila Chronicle Publishing Corporation, supra note 17, at 405.
SECOND DIVISION
G.R. No. 199601, November 23, 2015
PHILIPPINE COMMERCIAL INTERNATIONAL BANK (NOW BDO UNIBANK, INC., Petitioner, v.JOSEPHINE D. GOMEZ, Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari under Rule 45 of the Rules of Court 1 filed by Philippine Commercial International Bank (PCIB)
assailing the May 23, 2011 decision2 and the December 7, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 68288. The CA
affirmed the May 25, 1999 decision of the Regional Trial Court of Makati City, Branch 145 (RTC) in toto.
FACTUAL ANTECEDENTS
Josephine D. Gomez (Josephine) was a teller at the Domestic Airport Branch of the PCIB when a certain Colin R. Harrington opened Savings
Account No. 373-28010-6 with said branch in January 1985.
The following day, Harrington presented two (2) genuine bank drafts dated January 3, 1985, issued by the Bank of New Zealand. The first draft was
in the sum of US$724.57 payable to "C.R. Harrington," while the second draft was in the sum of US$2,004.76 payable to "Servants C/C.R.
Harrington."
The PCIB, on the other hand, alleged that it was a certain Sophia La'O, as a representative of Harrington, who presented the bank drafts for
deposit.
Upon receipt of the bank drafts, Josephine asked her immediate supervisor, Eleanor Flores, whether the drafts payable to "Servants C/C.R.
Harrington" were acceptable for deposit to the savings account of Harrington. When Flores answered in the affirmative, and after receiving from the
bank's foreign exchange supervision a Philippine Currency conversion of the amounts reflected in the drafts, Josephine received the deposit slip.
Thereafter, the deposits were duly entered in Harrington's savings account.
On two (2) separate dates, a certain individual representing himself as Harrington withdrew the sums of P45,000.00 and P5,600.00. Subsequently,
the bank discovered that the person who made the withdrawals was an impostor. Thus, the bank had to pay Harrington P50,600.00 representing
the amounts of the bank drafts in his name.
The PCIB issued a memorandum asking Josephine to explain why no disciplinary action should be taken against her for having accepted the bank
drafts for deposits. Josephine reasoned that being a new teller she was not yet fully oriented with the various aspects of the job. She further alleged
that she had asked the approval of her immediate supervisor prior to receiving the deposits.
On November 14, 1985, the PCIB deducted the amount of P-423.38 from Josephine's salary. Josephine wrote the PCIB to ask why the deduction
was made.
After due investigation on the matter, the PCIB issued another memorandum finding Josephine grossly negligent and liable for performing acts in
violation of established operating procedures. The memorandum required Josephine to pay the amount of P-50,600.00 through deductions in her
salary, allowance, bonuses, and profit sharing until the amount is fully paid.
Josephine wrote the PCIB to ask for the basis of its findings that she was grossly negligent and liable to pay the amount of P50,600.00. During trial,
the RTC found that the PCIB did not even respond to this letter. PCIB, however, alleged that it had replied to Josephine's letter, and explained that
she was afforded due process and the deductions made prior to January 15, 1986, were merely a withholding pending the investigation.
The PCIB also admitted that as early as January 15, 1986, it had started to deduct the amount of P 200.00 from Josephine's salary as well as 50%
of her bonuses and profit sharing.
On February 10, 1986, Josephine filed a complaint for damages with prayer for preliminary injunction before the RTC of Makati City. She claimed
that the PCIB had abused its right by gradually deducting from her salary the amount the bank had to pay Harrington.
The PCIB filed its answer with counterclaims and a separate complaint with the RTC of Makati City, which was raffled to Branch 149.
In its May 25, 1999 decision, the RTC rendered judgment in favor of Josephine and ordered the PCIB to pay her actual damages in the amount of
P5,006.00 plus 12% interest from filing of the complaint; moral damages in the amount of PI 50,000.00; and attorney's fees in the amount of P-
50,000.00.
The RTC considered the PCIB's manner of deducting from the salary and allowance of Josephine as having been rendered in bad faith and
contrary to morals, good custom, and public policy. This was borne out by the fact that the PCIB had already deducted from her salary before
Josephine received the memorandum finding her liable for the P50,600.00. In addition, while there were other individuals involved in this incident, it
appeared that it was only Josephine who was made solely responsible.
On appeal, the PCIB argued that the RTC had no jurisdiction over the case because it was a labor dispute, which the labor tribunals are more
competent to resolve. It also maintained that there was no factual or legal basis for the RTC to make it liable for damages and to pay Josephine.
In its May 23, 2011 decision, the CA affirmed the May 25, 1999 RTC decision. It held that the PCIB was estopped from questioning the jurisdiction
of the RTC because it had filed an answer with counterclaims and even initiated a separate case before a different branch of the RTC. It upheld the
RTC's findings and conclusion in awarding damages and attorney's fees to Josephine because there was no reason to disturb them.
The CA, subsequently, denied the PCIB's motion for reconsideration on December 7, 2011; hence, the PCIB filed the present petition.
First, the PCIB contends that the CA gravely erred in ruling that its actions were in total and wanton disregard of Articles 19 and 21 of the Civil Code
because the courts a quo summarily imputed bad faith on how it had treated Josephine.
Second, the PCIB maintains that the CA gravely erred in awarding moral damages and attorney's fees to Josephine absent any basis for it while
averring that bad faith cannot be presumed and that Josephine had failed to prove it with clear and convincing evidence.
OUR RULING
We DENY the present petition for lack of merit.
The civil courts have jurisdiction

over a case when the cause of action
does not have a reasonable causal
connection from the employer-employee
relationship.
Although the PCIB opted not to raise the issue before this Court, we find it prudent and imperative to justify why the RTC had jurisdiction to take
cognizance of Josephine's complaint despite the fact that her cause of action arose because her employer arbitrarily deducted from her salary - an
act expressly prohibited by our labor laws.4
Article 224 [217] of the Labor Code provides that the Labor Arbiters have original and exclusive jurisdiction to hear and decide claims for actual,
moral, exemplary, and other forms of damages arising from employer-employee relations. The legislative intent appears clear to allow Labor
Arbiters to award to an employee not only the reliefs provided by our labor laws, but also moral and other forms of damages governed by the Civil
Code. Specifically, we have mentioned, in fact, that a complaint for damages under Articles 19, 20, and 21 of the Civil Code would not suffice to
keep the case without the jurisdictional boundaries of our labor courts -especially when the claim for damages is interwoven with a labor dispute. 5
Nevertheless, when the cause of action has no reasonable connection with any of the claims provided for in Article 224 of the Labor Code,
jurisdiction over the action is with the regular courts. 6 Here, since Josephine's cause of action is based on a quasi-delict or tort under Article 19 in
relation to Article 21 of the Civil Code, the civil courts (not the labor tribunals) have jurisdiction over the subject matter of this case.
To be sure, the case of Singapore Airlines Ltd. v. Ernani Cruz Paño is enlightening:chanRoblesvirtualLawlibrary
Upon the facts and issues involved, jurisdiction over the present controversy must be held to belong to the civil courts. While seemingly petitioner's
claim for damages arises from employer-employee relations, and the latest amendment to Article 217 of the Labor Code under PD No. 1691 and
BP Big. 130 provides that all other claims arising from employer-employee relationship are cognizable by Labor Arbiters, in essence, petitioner's
claim for damages is grounded on the "wanton failure and refusal" without just cause of private respondent Cruz to report for duty despite repeated
notices served upon him of the disapproval of his application for leave of absence without pay. This, coupled with the further averment that Cruz
"maliciously and with bad faith" violated the terms and conditions of the conversion training course agreement to the damage of petitioner removes
the present controversy from the coverage of the Labor Code and brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per se by private respondent Cruz of his job as the latter was not required in the
Complaint to report back to work but on the manner and consequent effects of such abandonment of work translated in terms of the
damages which petitioner had to suffer.7 [emphasis and underscoring supplied]cralawlawlibrary
In the present case, Josephine filed a civil complaint for damages against the PCIB based on how her employer quickly concluded that she was
negligent and hence arbitrarily started to deduct from her salary. Clearly, without having to dwell on the merits of the case, Josephine opted to
invoke the jurisdiction of our civil courts because her right to fair treatment was violated.
The discussion in Quisaba v. Sta. Ines-Melale Veneer & Plywood, Inc. is just as relevant as it is illuminating on the present case, to
wit:chanRoblesvirtualLawlibrary
Although the acts complained of seemingly appear to constitute "matters involving employee-employer relations" as Quisaba's dismissal was the
severance of a preexisting employee-employer relation, his complaint is grounded not on his dismissal per se as in fact he does not ask for
reinstatement or backwages, but on the manner of his dismissal and the consequent effects of such dismissal.
xxx
The "right" of the respondents to dismiss Quisaba should not be confused with the manner in which the right was exercised and the effects flowing
therefrom. If the dismissal was done anti-socially or oppressively, as the complaint alleges, then the respondents violated article 1701 of the Civil
Code which prohibits acts of oppression by either capital or labor against the other, and article 21, which makes a person liable for damages if he
willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy, the sanction for which, by way of
moral damages, is provided in article 2219, no. 10. (Cf. Phil. Refining Co. v. Garcia, L-21962, Sept. 27, 1966, 18 SCRA 107).8cralawlawlibrary
From the foregoing, the case at bar is intrinsically concerned with a civil dispute because it has something to do with Josephine's right under Article
19 of the Civil Code, and does not involve an existing employer-employee relation within the meaning of Article 224 of the Labor Code. Josephine's
complaint was, therefore, properly filed with and exclusively cognizable by the RTC.
Questions on whether there was a

preponderance of evidence to justify the
award of damages or whether there was
a causal connection between the given
set of facts and the damage suffered by
the private complainant are questions of fact.
The Court's jurisdiction under a Rule 45 review is limited to reviewing perceived errors of law, which the lower courts may have committed. The
resolution of factual issues is the function of the lower courts whose findings, when aptly supported by evidence, bind this Court. This is especially
true when the CA affirms the RTC's findings. While this Court, under established exceptional circumstances, had deviated from the above rule, we
do not find this case to be under any of the exceptions.
Essentially, what the PCIB seeks is a relief from the Court on the issue of the propriety of the award of damages. On this point alone, the petition
must fail, as a Rule 45 petition bars us from the consideration of factual issues, especially when both the RTC and the CA were consistent with their
rulings.
Nevertheless, we still affirm the assailed CA rulings even if we were to disregard these established doctrinal rules.
Article 19 of the Civil Code provides that every person in the exercise of his rights and in the performance of his duties must act with justice, give
everyone his due, and observe honesty and good faith. The principle embodied in this provision is more commonly known as the "abuse of right
principle." The legal sanctions for violations of this fundamental principle are found in Articles 20 9 and 2110 of the Civil Code. We explained how
these two provisions correlate with each other in GF Equity, Inc. v. Valenzona:chanRoblesvirtualLawlibrary
[Article 19], known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards which must be observed not
only in the exercise of one's rights but also in the performance of one's duties. These standards are the following: to act with justice; to give
everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a primordial limitation on all rights; that in their exercise,
the norms of human conduct set forth in Article 19 must be observed. A right, though by itself legal because recognized or granted by law as
such, may nevertheless become the source of some illegality. When a right is exercised in a manner which does not conform with the
norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be
held responsible. But while Article 19 lays down a rule of conduct for the government of human' relations and for the maintenance of social order,
it does not provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21 would be proper. 11 [Emphasis
supplied]cralawlawlibrary
Both the RTC and the CA found the acts of the PCIB were in clear violation of Article 19 of the Civil Code and held the PCIB liable for damages.
While the PCIB has a right to penalize employees for acts of negligence, the right must not be exercised unjustly and illegally. In the instant case,
the PCIB made deductions on Josephine's salary even if the investigation was still pending. Belatedly, the PCIB issued a memorandum finding
Josephine grossly negligent and requiring her to pay the amount which the bank erroneously paid to Harrington's impostor. When Josephine asked
for legal and factual basis for the finding of negligence, the PCIB refused to give any. Moreover, the PCIB continued to make deductions on
Josephine's salary, allowances, and bonuses.
The trial court and the CA also noted that while Josephine was penalized, other employees of the bank involved in the subject transactions were
not. It was Josephine who was made solely responsible for the loss without giving any basis therefor. It was emphasized that the subject deposit
could not have been received by the bank and entered in Harrington's savings account without the participation of the other bank employees. The
PCIB could have exercised prudence before taking oppressive actions against Josephine.
All told, we find nothing in the record which would warrant the reversal of the position held by the RTC and the CA. Based on the above discussion,
we find the award of moral damages and attorney's fees in Josephine's favor proper.
WHEREFORE, the petition for review on certiorari is DENIED and consequently, the May 23, 2011 decision and the December 7, 2011 resolution of
the Court of Appeals in CA-G.R. CV No. 68288 are AFFIRMED in toto.
SO ORDERED.chanroblesvirtuallawlibrary
Velasco,* Villarama, Jr.,** Mendoza, and Leonen, JJ., concur.

Brion,** (Acting Chairperson)
Endnotes:
*
Designated as Acting Member in lieu of Associate Justice Antonio T. Carpio, per Special Order No. 2282 dated November 13, 2015.
**
Designated as Acting Chairperson in lieu of Associate Justice Antonio T. Carpio, per Special Order No. 2281 dated November 13, 2015.
**
Designated as Additional Member per Raffle dated September 5, 2012.
1
Rollo, pp. 8-25.
2
Id. at 27-38; penned by Associate Justice Danton Q. Bueser, and concurred in by Associate Justice Hakim S. Abdulwahid and Associate Justice
Ricardo R. Rosario.
3
Id. at 40-41.
4
See Article 113 of the Labor Code.
5
San Miguel Corp. Employees Union-PTGWO v. Judge Bersamira, G.R. No. 87700, June 13, 1990, 264 Phil. 875, 884, to wit:
"The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil Code would not suffice to keep the case within
the jurisdictional boundaries of regular Courts. That claim for damages is interwoven with a labor dispute existing between the parties and would
have to be ventilated before the administrative machinery established for the expeditious settlement of those disputes. To allow the action filed
below to prosper would bring about "split jurisdiction" which is obnoxious to the orderly administration of justice (Philippine Communications,
Electronics and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968, 24 SCRA 321)."
6
Yusen Air and Sea Service Phils, v. Villamor, G.R, No. 154060, August 16, 2005, 504 Phil. 437, 446-447, citing Ocheda v. Court of Appeals, G.R.
No. 85517, October 16, 1992, 214 SCRA 629.
7
G.R. No. L-47739, June 22, 1983,122 SCRA 671, 676.
8
G.R. No. L-38088, August 30, 1974, 58 SCRA 771, 774.
9
Article 20. Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same.
10
Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs, or public policy shall
compensate the latter for damages.
11
G.R. No. 156841, June 30, 2005, 462 SCRA 466, 479-480, citing Globe Mackay Cable and Radio Corporation v. Court of Appeals, G.R. No.
81262, August 25, 1989, 176 SCRA 778, 783-784.

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We DENY the present petition for lack of merit.

The civil courts have jurisdiction

Questions on whether there was a

Velasco,* Villarama, Jr.,** Mendoza, and Leonen, JJ., concur.

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