Case 4

Arco Pulp v. Dan T. Lim,

G.R. No. 206806,
June 25, 2014

Facts:

On January 11, 2013, the Court of Appeals rendered a decision reversing and setting aside the
judgment dated September 19, 2008 and ordering Arco Pulp and Paper pay (to jointly and severally Dan
T. Lim the amount of P7,220,968.31) with interest at 12% per annum from the time of demand;
P50,000.00 moral damages; P50,000.00 exemplary damages; and P50,000.00 attorney’s fees.

The appellate court ruled that Dan T. Lim was entitled to damages and attorney’s fees due to the
bad faith exhibited by Arco Pulp and Paper in not honoring its undertaking.

In its motion for reconsideration, petitioners argue that the Court of Appeals erred in awarding
moral and exemplary damages and attorney’s fees to respondent who did not show proof that he was
entitled to damages.

Respondent, on the other hand, argues, among others, that the Court of Appeals was correct in
ordering the payment of P7,220,968.31 with damages since the debt of petitioners remains unpaid.

Issue:
WoN the Court of Appeals erred in awarding damages to the respondent.

Ruling:

No. The Court of Appeals did not err in awarding damages to the respondent.

In the SC ruling, it generally held that demand for damages may be actionable if the acts of the
person, contrary to law, willfully or negligently cause damage to another (Art. 20), or that his acts
willfully cause loss or injury to another in a manner that is contrary to morals, good customs or public
(Art. 21). To be actionable, in other words, Article 20 requires that said acts are a violation of law while
Article 21 requires that said acts are contrary to morals, good customs, and public policy.

In this case, CA said that Petitioner Arco Pulp and Paper’s actions clearly show “a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty through some
motive or interest or ill will that partakes of the nature of fraud.” Said acts are not only contrary to laws
but are also contrary to morals, good customs, and public policy.

Thus, CA did not err in awarding damages to the respondent.