Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 72405 May 29, 1987
PACMAC, INC, petitioner, 
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT and VULCAN INDUSTRIAL & MINERAL EXPLORATION
CORPORATION, respondents.
 
GUTIERREZ, JR., J.:
This is a petition for review on certiorari of the decision of the then Intermediate Appellate Court, now the Court of Appeals,
which set aside the earlier decision in Civil Case No. Q-9386 of the then Court of First Instance of Rizal, 7th Judicial District
Branch V-Quezon City.
In Civil Case No. Q-9386, PACMAC Incorporated (hereinafter called PACMAC) alleged that by virtue of an existing contract
and arrangement with VULCAN Manufacturing Company Incorporated (hereinafter called VULCAN), the former since 1953
continuously up to August 3, 1965 has been the exclusive distributor of the latter's products and that in said arrangement
VULCAN was obliged to periodically deliver and sell, at its own dictated price any number or volume of its products exclusively
to PACMAC. PACMAC would. in turn, exclusively sell and distribute said products to the open market, whether in wholesale or
retail, at a price set and commanded by VULCAN, and that on August 3, 1965 VULCAN unilaterally terminated the contract of
exclusive distributorship causing damages to PACMAC.
In its answer, VULCAN denied the contract of exclusive distributorship with PACMAC. By way of counterclaim, VULCAN
alleged that PACMAC is indebted to it as of September 30, 1965 in the sum of P320,220.25 plus interest representing the
unpaid purchase price of VULCAN's products sold and delivered to PACMAC.
The facts of the case as found by the trial court are not disputed. The appellate court adopted these factual findings, to wit:
It appears from the evidence that plaintiff Pacmac, Inc., was organized in 1949 as a trading concern with
Russell T. Elliott as its president and general manager. Following researches and experimentation
conducted at Pacmac, Inc., Elliott subsequently organized the defendant corporation in 1953, as a
manufacturing concern, starting off with the production of rubber cement. Upon the organization of
defendant corporation, then known as the Vulcan Manufacturing Co., Inc., Elliott also became its president
and general manager, at the same time that he remained president and general manager of the Pacmac,
Inc. Both corporations had their offices in the same building inside the compound of Pacmac, Inc. from 1953
up to 1967. From the start, defendant sold its products to plaintiff on 60-day terms, and plaintiff in turn dealt
on said products in the open market. It was understood that plaintiff would not sell similar products from
other sources competitive with those of defendant.
In 1956, Patrocinio Bautista who had known Elliott since 1952, became vice president concurrently of both
corporations, while Elliott continued to be president and general manager also of both as from the start. At
the same time, many if not all of the members of the board of directors of plaintiff corporation were likewise
members of the board of directors of defendant corporation. The set-up remained as such until the early part
of 1960, when upon the suggestion of Elliott for the reason that the growth of both corporations had made it
difficult for him to manage both, Patrocinio Bautista was made president and general manager of Pacmac,
Inc. at the same time ceasing to be vice president of Vulcan Manufacturing Co., Inc., while Elliott stayed on
as president and general manager only of the latter company. The shift in management responsibilities over
the two corporations was eventually followed by a change in the stock-holdings of Elliott and Bautista, who
were substantial stockholders in both. Elliott gave up his shares in Pacmac, Inc. and acquired more shares
in the Vulcan Manufacturing Co., Inc. while Bautista gave up all his shares in the latter corporation and
acquired more shares in Pacmac, Inc. According to the evidence of plaintiff, this happened also in 1960, but
the evidence of defendant places this occurrence in 1962 after a power struggle over the control in the
management of Vulcan Manufacturing Co., Inc., between the group of Elliott on one hand, and that of
Bautista, on the other, which Bautista lost in the showdown at the annual stockholders' meeting in that year.
The drift of events appears to lend more probability to the claim of defendant in this respect. It appears that
on February 17, 1962, the majority of the members of the board of directors of defendant corporation
approved an amendment to its articles of incorporation thereby authorizing the said corporation to engage in
the merchandizing business as one of its secondary purposes and increasing the kind of products it could
manufacture. This amendment likewise was subsequently approved by the stockholders of the corporation
during the annual meeting held February 20, 1962. In the directors' certificate to this amendment, dated
March 20, 1962, Bautista still appears to have signed as director of defendant corporation (Exhs. "8" and "8-
A").
On December 6, 1962, both parties entered into a written contract (Exh. "6") of exclusive distributorship for
two years beginning November 16, 1962 over two products manufactured by defendant, the most pertinent
provision of which reads:
 1. That the PURCHASER shall have the exclusive right to distribute and resell the
MANUFACTURER'S SODIUM SILICATES and ADHESIVE products. However, in
consideration of this exclusive privilege, the PURCHASER agrees not to distribute or
resell adhesives and sodium silicates products of other manufacturers or brands; (This
agreement does not cover shoe cement products, moulds, dies, show ranks and other
products manufactured by Vulcan).
It appears that the two products subject of the written agreement of exclusive distributorship were new
products of defendant and the contract was prompted by an agitation in the board of directors of defendant
in view of a desire to go into the merchandizing business, as was suggested to plaintiff. Along with that,
defendant also claims that there was dissatisfaction with an alleged lag in plaintiff's payments of its accounts
with defendant.
While the agreement (Exh. "6") was not renewed at the end of its two-year term the purchase and sale by
plaintiff of the two products continued. ...
... on August 3, 1965, defendant, ... wrote plaintiff a letter (Exh. "7") advising the latter that as of that date
defendant would no longer deliver any of its products to plaintiff except those items for which orders had
already been booked, unless the same would be cancelled by plaintiff. Defendant justified its action on the
'knowledge that PACMAC is now distributing' Durabond' Sole Attaching Cement as manufactured by
Regional Enterprise.' In a letter of reply of the same date (Exh. "15"), plaintiff, ... denied and protested
against the accusation ... On the other hand, it was recalled that Elliott had previously admitted that
defendant had been distributing its own products' despite (its) existing relationship' with plaintiff. Plaintiff's
letter also advised that its orders previously booked still stood. It does not appear, however, that deliveries
on the pending orders were thereafter made, as it is admitted that defendant stopped deliveries as of August
3, 1965. The reason given by defendant for refusing to make further deliveries on the pending orders from
plaintiff was the latter's failure to pay a balance of P23,000.00 in accordance with an understanding between
them on August 10, 1965 (Exh. "17"). (Rollo, pp. 44-47).
The trial court found for the petitioner. Considering however, that PACMAC owed VULCAN the amount of P304,855.50
representing the unpaid purchase price of VULCAN's products sold and delivered to PACMAC and that the damages due
PACMAC was fixed in the amount of P189,908.76, the trial court ordered PACMAC to pay VULCAN the sum of P114,946.74
with interest therein at the legal rate from September 30, 1965 until the same is paid.
Both parties appealed the decision to the then Intermediate Appellate Court.
As stated earlier, the appellate court set aside the trial court's decision. The dispositive portion of the decision reads:
WHEREFORE, the decision appealed from is hereby set aside and judgment is rendered on the
counterclaim, ordering plaintiff PACMAC Incorporated to pay the defendant Vulcan Manufacturing and
Trading Corporation, the sum of P 304,855.50 with legal interest from September 30, 1965 until the same is
fully paid, with costs against plaintiff- appellant. This amount was mutually submitted and agreed between
the parties during the pre-trial proceedings as the balance due the defendant from the plaintiff on said date.
(Rollo, pp. 49-50).
The main issue in the instant petition hinges on the actual business relationship between PACMAC and VULCAN on August 3,
1965 when the latter suddenly stopped deliveries of its products to the former.
The conclusions of the appellate court on factual matters differ from those of the trial court. Hence, a minute scrutiny by this
Court is in order and resort to duly proven evidence becomes necessary. (Serrano v. Court of Appeals, 139 SCRA 179;
Legaspi v. Court of Appeals, 69 SCRA 360; Tolentino v. De Jesus, 56 SCRA 167).
Although the appellate court found that there existed an implied contract of exclusive distributorship between the two parties
with PACMAC as distributor of VULCAN's products beginning in 1953, it ruled that this implied contract was terminated when
on December 6, 1962 both parties entered into a formal written contract (Exhibit '6') of exclusive distributorship for two years
beginning November 16, 1982 covering only two  products, namely sodium silicates and adhesive products manufactured by
VULCAN. Under this theory, the appellate court opined that the terms in the written contract superseded all previous contracts
between the two parties. Consequently, the appellate court concluded that since the contract provides for the expiration of the
exclusive distributorship after 2 years, specifically on November 16, 1964, there could have been no gross and evident bad
faith on the part of VULCAN when on August 3, 1965 it terminated the exclusive distributors agreement embodied in Exhibit
"6."
The appellate court came up with this conclusion applying the parol evidence rule which is Section 7, Rule 130 of the Revised
Rules of Court, to wit:
When the terms of an agreement have been reduced to writing, it is to be considered as containing all such
terms, and, therefore, there can be, between the parties and their successors in interest, no evidence of the
terms of the agreement other than the contents of the writing, ...
The petitioner now contends that the parol evidence rule was erroneously applied by the appellate court because there was
evidence of an oral agreement and acts implementing that agreement on the part of both parties subsequent to the execution
of the written contract which changed and added to the terms of the distributorship arrangement. Under these circumstances,
PACMAC argues that the written contract was an inadequate measure of the entire agreement between the parties thereto.
The stand of the petitioner is rightly premised on the principle that the parol evidence rule does not preclude the admission of
extrinsic evidence to prove subsequent agreements  between the parties to a written contract, to wit:
 The rule forbidding the admission of parol or extrinsic evidence to alter, vary, or contradict a written
instrument does not apply so as to prohibit the establishment by parol of an agreement between the parties
to a writing, entered into subsequent to the time when the written instrument was executed, notwithstanding
such agreement may have the effect of adding to, changing, modifying, or even altogether abrogating the
contract of the parties as evidenced by the writing; for the parol evidence does not in any way deny that the
original agreement of the parties was that which the writing purports to express, but merely goes to show
that the parties have exercised their right to change or abrogate the same, or to make a new and
independent contract. (32 C.J.S. 1008-1009 cited in Francisco, Evidence, Volume VII Part I 1973, p. 167.
See Canuto v. Mariano, 37 Phil, 840)
The appellate court, therefore, erred when it failed to consider the evidence proving that the exclusive contract of
distributorship between the parties went beyond the expiration of the two year written contract between the parties.
The petitioner presented evidence to show that after sensing VULCAN's desire to go into distribution of its own products,
Patrocinio Bautista, president and general manager of PACMAC secured verbal assurances from Russel Elliott VULCAN's
president and general manager, to give the former at least a year's notice in advance before cutting off the distributorship
arrangement between the two parties. This was given credence by the trial court over the denials of VULCAN.
Jose Basa, a witness for VULCAN testified that in a letter dated November 16, 1964 (Exh. "4," alleged true copy of letter)
VULCAN notified PACMAC of the expiry date of the 2-year distributorship agreement; that in reply to this letter, PACMAC
through P.E. Bautista, asked for at least 3-months notice before the business relationship could be effectively terminated by
either of the parties. This letter, marked as Exh. 5, was an alleged true copy of the letter written by P.E. Bautista. This was
denied by Bautista.
With two conflicting pieces of evidence before it, the trial court said:
... Of the two conflicting evidence on the point, the Court is more inclined to give credence to the testimony
of Bautista, than to Exh. 5 of defendant which was testified to by witness Jose Basa whose testimony has
heretofore been found to suffer from doubtful veracity. Moreover, considering the extent and volume of
business carried on between plaintiff and defendant under the distributorship arrangement, it is improbable
that plaintiff would have bargained for only a minimum of three months' notice within which to adjust its
business. One year's notice could not have been unreasonable it appearing that for the year ending
December 31, 1966, plaintiff managed to make a net income of only P68,404.57 (Exh. D-4) as compared to
its net income for the year 1964, when the distributorship arrangement was still intact, in the amount of
P218,313.33 (Exh. D-2). ... (Joint Record on Appeal, pp. 99-100)
We find no substantial reason from the records to deviate from, much less reverse, these factual findings of the trial court. The
trial court's conclusion that evidence on the one year notice to terminate the exclusive distributorship arrangement between
the two parties is more credible than the proof of a three-month notice alleged by VULCAN due to the volume of business
carried on by the two parties is bolstered by the unrebutted evidence of PACMAC that before the distributorship arrangement
was terminated, more than 60% of its gross sales consisted of VULCAN's products. VULCAN continued to supply the same
amounts and under the same terms to PACMAC of its entire range of products. After termination, gross sales of
P2,621,857.46 were reduced by P1,570,000.00 in one year's sales.
The records establish that after the termination of the two year written contract, the parties agreed on another term regarding
the duration of their distributorship arrangement. They also agreed that the distributorship arrangement would remain in full
force until one year from and after notice of its termination would have been given to PACMAC.
The inevitable conclusion, therefore, is that the parties' contract of exclusive distributorship arrangement was still in existence
on August 3, 1965 when VULCAN decided to stop deliveries of its products to PACMAC. VULCAN's unilateral act of
terminating the contract without legal justification makes it liable for damages suffered by PACMAC pursuant to Article 1170 of
the New Civil Code which provides:
Those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in
any manner contravene the tenor thereof, are liable for damages.
The petitioner argues on the basis of the evidence it presented before the trial court that it is entitled to actual and
compensatory damages of at least P360,000.00 plus interest, exemplary damages of at least P100,000.00, attorney's fees of
at least P50,000.00 and litigation expenses of at least P25,000,00.
The trial court reduced the claims for damages to more reasonable levels. We agree with its findings that:
Neither can the Court reasonably go along with plaintiff that the measure of damages due it should be based
on the average monthly profit of P 31,307.68 it was getting out of the sales of defendant's products during
the existence of the distributorship arrangement (Exh. D). Evidently and as can be gathered from the
testimony of plaintiff's witness Felicisimo S. de Ocampo, who prepared Exh. D, the average monthly profit
arrived at in the sum of P31,307.68 does not actually represent the average net monthly profit from the sale
of defendant's products, since the selling or administrative expenses have not been taken into account. As a
matter of fact, Ocampo could not state what part of plaintiff's selling expenses referred to defendant's
products. Moreover, it was incumbent upon plaintiff to minimize its damages by getting other suppliers and
selling other products when defendant altogether stopped selling to plaintiff. It is reasonable to assume that,
indeed, plaintiff did just this. The more equitable basis then would be the diminution in the net income of
plaintiff during the entire year following the termination of the distributorship arrangement, or the difference
between its net income of P218,313.33 in 1964, shown by its own evidence (Exh. D-2), as against
 P68,404.75 in 1966, also shown by its own evidence (Exh. D-4), which is P149,908.76. For having acted in
gross and evident bad faith, considering defendant's unjustified and sudden cutting off of its sales to plaintiff,
after having surreptitiously sold its products in the open market (see E xhs 9-A, 10-A, 11-A and 12-A), all in
a wilful breach of the distributorship arrangement with plaintiff and mindless of the prejudice to the latter's
business, defendant is also liable to plaintiff for exemplary damages in the amount of P30,000.00 and
attorney's fees in the amount of P10,000.00.
On the other hand, upon defendant's counterclaim, plaintiff is in turn liable for the payment of its admitted
account with defendant in the amount of P304,855.50 as of September 30, 1965 (Exh. C or 1).
Compensating the amounts due plaintiff under its complaint in the total sum of P189,908.76 against the
amount defendant under its counterclaim in the sum of P304,855.50, there still remains a net amount of
P114,946.74, exclusive of interest, due defendant from plaintiff. Defendant's claim for interest on plaintiff's
account at twelve (12%) percent per annum is not sufficiently supported by the evidence. Except for the
sodium silicates and adhesives subject of the written two-year agreement (Exh. 6), wherein it was stipulated
that nonpayment within sixty (60) days would make plaintiff liable to one (1%) percent interest charge per
month until the account is paid, there is nothing in the evidence to prove that the plaintiff's accounts as to the
other products were also subject to the same rate of penalty, or what part, if any, of plaintiff's accounts
pertained to unpaid purchases of sodium silicates and adhesives. However, defendant is entitled to interest
at the legal rate on the amount due it from plaintiff after compensating their respective claims. (Joint Record
on Appeal, pp. 100-103).
WHEREFORE, the instant petition is GRANTED. The questioned decision of the Intermediate Appellate Court is REVERSED
and SET ASIDE. The trial court's decision is REINSTATED.
SO ORDERED.
Fernan (Chairman), Paras, Bidin and Cortes, JJ., concur.
Padilla, J., took no part.
 FIRST DIVISION
[G.R. No. 122166. March 11, 1998]
CRESENTE Y. LLORENTE, JR., petitioner, vs. SANDIGANBAYAN and LETICIA G. FUERTES, respondents.
DECISION
PANGANIBAN, J.:
In a prosecution for violation of Section 3[e] of the Anti-Graft Law, that is, causing undue injury to any party, the
government prosecutors must prove actual injury to the offended party; speculative or incidental injury is not sufficient.
The Case

Before us is a petition for review of the Decision promulgated on June 23, 1995 and the Resolution promulgated on
October 12, 1995 of the Sandiganbayan in Criminal Case No. 18343, finding Cresente Y. Llorente, Jr. guilty as charged.
Llorente, then municipal mayor of Sindangan, Zamboanga del Norte, was charged with violation of Sec. 3[e] of Republic
Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, under an Information dated October 22, 1992,
textually reproduced as follows:[1]
That in or about and during the period of July, 1990 to October, 1991, or for sometime subsequent thereto, in the
Municipality of Sindangan, Province of Zamboanga del Norte, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused Cresente Y. Llorente, Jr., a public officer, being then the Mayor of
Sindangan, Zamboanga del Norte, in the exercise of his official and administrative functions, did then and there,
wilfully, unlawfully and criminally with evident bad faith refuse to sign and approve the payrolls and vouchers
representing the payments of the salaries and other emoluments of Leticia G. Fuertes, without just valid cause and
without due process of law, thereby causing undue injury to the said Leticia G. Fuertes.
CONTRARY TO LAW.
Duly arraigned on March 29, 1993, petitioner, with the assistance of counsel, entered a plea of NOT GUILTY. [2] After trial
in due course, the Sandiganbayan[3] rendered the assailed Decision, disposing as follows:[4]
WHEREFORE, judgment is hereby rendered finding accused Mayor Cresente Y. Llorente, Jr. GUILTY beyond
reasonable doubt as principal of the crime of Violation of Section 3(e) of Republic Act 3019, as amended, and he is
hereby sentenced to suffer imprisonment of SIX (6) YEARS and ONE (1) MONTH, as minimum to SEVEN (7)
YEARS, as maximum; to further suffer perpetual disqualification from public office; and to pay the costs.
Respondent Court denied the subsequent motion for reconsideration in the assailed Resolution, thus:[5]
WHEREFORE, accuseds Motion for Reconsideration and/or New Trial is hereby DENIED for lack of merit. His
Motion for Marking of Additional Exhibits Cum Offer of Documentary Exhibits in Support of Motion for
Reconsideration and/or New Trial is now rendered moot and academic.
Hence, this petition.[6]
The Facts
Version of the Prosecution

As found by Respondent Court, the prosecutions version of the facts of this case is as follows:[7]
After appreciating all the evidence on both sides, the following uncontroverted facts may be gleaned:
1. Accused Mayor Cresente Y. Llorente, Jr., at the time the alleged act was committed, was the Municipal Mayor of
Sindangan, Zamboanga del Norte.
2. Private [C]omplainant, Leticia C. Fuertes, is the duly appointed Assistant Municipal Treasurer in the same municipality since
October 18, 1985.
3. Starting 1986, private complainant was detailed to different offices, as follows:
(a) Municipality of Katipunan, Zamboanga del Norte from April, 1986 to August, 1987 as OIC Municipal Treasurer.
(b) Municipality of Roxas, Zamboanga del Norte from September, 1987 to March, 1988 as OIC Municipal Treasurer.
(c) Office of the Provincial Treasurer of Zamboanga del Norte from April, 1988 to May, 1988.
(d) Municipality of Pian, Zamboanga del Norte from June, 1988 to June, 1990 as OIC Municipal Treasurer.
4. In July, 1990, she was returned to her post as Assistant Municipal Treasurer in the town of Sindangan.
She was not provided with office table and chair nor given any assignment; neither her daily time record and
application for leave acted upon by the municipal treasurer per instruction of accused Mayor (Exh. G-2; G-3).
5. On July 23, 1990, the Sangguniang Bayan of Sindangan, Zamboanga del Norte, presided by accused Mayor,
passed Resolution No. SB 214 (Exh. 3), vehemently objecting to the assignment of complainant as Assistant
Municipal Treasurer of Sindangan.
6. On March 12, 1991, accused Municipal Mayor received a letter (SB Resolution No. 36) from the Sangguniang
Bayan of the Municipality of Pian, demanding from the private complainant return of the amount overpaid to her as
salaries (par. 9, p. 2 of Exh. 4 counter-affidavit of accused Mayor).
7. On May 22, 1991, private complainant filed a Petition for Mandamus with Damages (Exh. E) against the accused
Mayor and the Municipality of Sindangan before Branch II, Regional Trial Court of Sindangan, Zamboanga del Norte
docketed as Special Proceedings No. 45, for the alleged unjustified refusal of Mayor Llorente to sign and/or approve
her payrolls and/or vouchers representing her salaries and other emoluments as follows: (a) salary for the month of
June, 1990 in the amount of P5,452.00 under disbursement voucher dated September 5, 1990 (Exh. H). Although
complainant rendered services at the municipality of Pian during this period, she could not collect her salary there
considering that as of that month, Pian had already appointed an Assistant Municipal Treasurer. When she referred
the matter to the Provincial Auditor, she was advised to claim her salary for that month with her mother agency, the
 Municipality of Sindangan, [(]p. 12, TSN of August 9, 1994; 10th paragraph of complainants Supplemental Affidavit
marked Exh. G); (b) salary differential for the period from July 1, 1989 to April 30, 1990 in the total amount
of P19,480.00 under disbursement voucher dated August, 1990 (Exh. I); (c) 13th month pay, cash gift and clothing
allowance under Supplemental Budget No. 5, CY 1990 in the total amount of P7,275 per disbursement voucher
dated December 4, 1990 (Exh. J); (d) vacation leave commutation for the period from October to December 31,
1990 in the total amount of P16,356.00 per disbursement voucher dated December 3, 1990 (Exh. K); (e) RATA for
the months of July, August and September, 1990, January and February, 1991 in the total amount of P5,900.00 (par.
12 & 16 of Exh. E); and (f) salaries for January and February, 1991 in the total amount of P10,904.00 (par. 17 of
Exh. E).
8. Accused Mayor did not file an answer; instead, he negotiated for an amicable settlement of the case (p. 24, TSN
of August 10, 1994). Indeed, a Compromise Agreement (Exh. A) dated August 27, 1991, between the accused and
private complainant was submitted to and approved by the court, hereto quoted as follows:
COMPROMISE AGREEMENT
That the parties have agreed, as they hereby agree, to settle this case amicably on the basis of the following terms and
conditions, to wit:
(a) That the respondent Mayor Cresente Y. Llorente, Jr. binds himself to sign and/or approve all vouchers and/or payrolls for
unpaid salaries, RATA, Cash-gifts, 13th month pay, clothing allowance, salary differentials and other emoluments which the
petitioner is entitled is Assistant Municipal Treasurer of Sindangan, Zamboanga del Norte;
(b) That the parties herein hereby waive, renounce and relinquish their other claims and counter-claims against each other;
(c) That the respondent Mayor Cresente Y. Llorente Jr. binds himself to sign and/or approve all subsequent vouchers and
payrolls of the herein petitioner.
9. On August 27, 1991, a Decision (Exh. B) was rendered by Judge Wilfredo Ochotorena on the basis of the
aforesaid compromise agreement.
10. For his failure to comply with the terms of the compromise agreement, private complainant, thru counsel, filed a
Motion for Execution on September 12, 1991. A Writ of Execution (Exh. C) was issued by the Court on
September 17, 1991, and served [on] the accused on September 23, 1991.
11. As shown in the Sheriffs Return dated November 19, 1991 (Exh. D), private complainant was paid her salaries
for the period from January, 1991 to August, 1991, while the rest of her salaries including the RATA and other
emoluments were not paid considering the alleged need of a supplemental budget to be enacted by the
Sangguniang Bayan of Sindangan per verbal allegation of the municipal treasurer.
12. Complainant was not also paid her salaries from July to December 1990; September and October, 1991; RATA
for the period from July 1990 to June 1994 (admission of accused, pp. 8-9, TSN of June 27, 1994, a.m.; Exh. E; p.
17, TSN of June 27, 1994).
13. Sometime in 1993, accused municipal mayor received from the Municipality of Pian, Bill No. 93-08 (Exh. 1),
demanding from the Municipality of Sindangan settlement of overpayment to complainant Fuertes in the amount of
P50,643.93 per SB Resolution No. 6 sent on July 23, 1990. The bill was settled by the Municipality of Sindangan in
December, 1993 per Disbursement Voucher No. 101-9312487 dated December 2, 1993 (Exh. 2).
14. Private complainant was able to receive complete payment of her claims only on January 4, 1993 in the form of
checks all dated December 29, 1992 (as appearing on Exhs. H, I, J, K of the prosecution, Exhs. 6, 7, 8, of the
defense) except her RATA which was given to her only on July 25, 1994, covering the period from July 1990 to
December, 1993 amounting to P55,104.00, as evidenced by Disbursement Voucher dated July 25, 1994 (Exh. 5).
Version of the Defense

While admitting some delays in the payment of the complainants claims, petitioner sought to prove the defense of good
faith -- that the withholding of payment was due to her failure to submit the required money and property clearance, and to the
Sangguniang Bayans delayed enactment of a supplemental budget to cover the claims. He adds that such delays did not
result in undue injury to complainant. In his memorandum, petitioner restates the facts as follows:[8]
1. Complainant xxx was appointed assistant municipal treasurer of Sindangan, Zamboanga del Norte on October 18,
1985. However, starting 1986 until July 1990, or for a period of about four (4) and one half (1/2) years, she was
detailed in other municipalities and in the Office of the Provincial Treasurer of Zamboanga del Norte. She returned
as assistant treasurer of Sindangan in July 1990. (Decision, pp. 5-6).
2. As complainant had been working in municipallities and offices other than in Sindangan for more than four (4)
years, her name was removed from the regular payroll of Sindangan, and payment of past salaries and other
emoluments had to be done by vouchers. When complainant xxx presented her vouchers to petitioner, the latter
required her to submit clearances from the different offices to which she was detailed, as well as a certificate of last
payment as required by COA regulations (Tsn, p. 11, Aug. 10, 1994). Instead of submitting the required documents,
Mrs. Fuertes said that what I did, I endorsed my voucher to the mayor through the municipal treasurer (Tsn, p. 13,
June 27, 1994). The municipal treasurer could not, however, process the vouchers and certify as to the availability of
funds until after the Sangguniang Bayan had passed a supplemental budget for the purpose (Exhs. D and 6-c
Motion), which came only in December 1992.
3. Petitioner, in the meanwhile, received on March 12, 1991 SB Resolution No. 36 from the Municipality of Pinan,
demanding from Mrs. xxx Fuertes the reimbursement of P105,915.00, and because of this demand, he needed time
 to verify the matter before acting on Mrs. Fuertes claims (Exh. 4). Mrs. Fuertes admitted that she had at the time
problems of accountability with the Municipality of Pinan. She testified:
Q. Counsel now is asking you, when you went back to Sindangan there was [sic] still problems of the claims either against
you or against the Municipality of Sindangan by the municipalities had, [sic] in their minds, overpaid you?
A. Yes, your Honor, that was evidence[d] by the bill of the Municipality of Pinan to the Municipality of Sindangan. (Tsn, p.
18, Aug. 3, 194).
4. Petitioner also stated that he could not act on complainants claims because she had not submitted the required
money and property accountability clearance from Pinan (Tsn, 11, Aug. 10, 1994) and that at the time the
Sangguniang Bayan had not appropriated funds for the purpose. (Tsn, pp. 18, 30, 42-43, Aug. 10,
1994). Nonetheless, petitioner included Mrs. Fuertes name in the regular annual budget beginning 1991 (Exhs. 4-b,
4-d, 4-f), as a result of which she had been since then receiving her regular monthly salary.
5. On May 21, 1991, Mrs. Fuertes filed a complaint xxx. Petitioner filed his answer to the complaint, alleging as a
defense, that plaintiff did not exhaust administrative remedies. (Annex B, p. 3, Petition; Exh. 1-Motion). On August
27, 1991, the parties entered into a compromise agreement, which the trial court approved (Exh. B). x x x.
6. Upon motion of counsel for Mrs. Fuertes, the trial court issued a writ of execution of the compromise
judgment. However, the writ of execution was addressed only to petitioner; it was not served on the municipal
Sangguniang Bayan. x x x.
Thus, Mrs. Fuertes had been receiving her regular salary from January, 1991 because petitioner had included her
name in the regular budget beginning 1991, which fact complainant did not dispute. With respect to her other claims
for past services in other offices, Municipal Treasurer, Mrs. Narcisa Caber, informed that a supplemental budget for
such purpose to be passed by the Sangguniang Bayan was necessary before she could be paid thereof. Being the
municipal treasurer, Mrs. Caber knew that without such supplemental budget, payment of Mrs. Fuertes other claims
could not be made because the law requires that disbursements shall be made in accordance with the ordinance
authorizing the annual or supplemental appropriations (Sec. 346, RA 7160) and that no money shall be disbursed
unless xxx the local treasurer certifies to the availability of funds for the purpose. (Sec. 344, RA 7160).
7. Petitioner had instructed the municipal budget officer to prepare the supplemental budget for payment of
complainants unpaid claims for submission to the Sangguniang [Bayan] for enactment. (Tsn, pp. 32-33, Aug. 10,
1994). The budget officer, Mr. Narciso Siasico stated as follows:
1. I am the budget officer for the Municipality of Sindangan, Zamboanga del Norte, a position I have held
since 1981.
xxx xxx xxx
3. Immediately after said mandamus case was settled through a compromise agreement, Mayor Llorente
instructed me to prepare the necessary budget proposals for the deliberation and approval of the
Sangguniang Bayan;
xxx xxx xxx.
8. Instead of waiting for the Sangguniang Bayan to enact the budget or of securing an alias writ of execution to
compel the Sangguniang Bayan to pass the same, Mrs. Fuertes filed a criminal complaint with the Office of the
Ombudsman under date of October 28, 1991, admitting receipt of her salaries from January 1991 and saying she
had not been paid her other claims in violation of the compromise judgment. (Exh. F). She had thus made the Office
of the Ombudsman a collecting agency to compel payment of the judgment obligation.
9. While the budget proposal had been prepared and submitted to the Sangguniang Bayan for action, it took time for
the Sangguniang Bayan to pass the supplemental budget and for the Provincial Board to approve the same. It was
only on December 27, 1992 that the municipal treasurer and the municipal accountant issued a certification of
availability of funds for the purpose. Petitioner approved the vouchers immediately, and in a period of one week,
Mrs. Fuertes was paid all claims, as evidenced by the prosecutions Exhs. H, I, J and K, which were the four
vouchers of Mrs. Fuertes, xxxx.
xxx xxx xxx
11. Petitioner testified that he could not immediately sign or approve the vouchers of Mrs. Fuertes for the following
reasons:
a) The Sangguniang Bayan had not appropriated the amounts to pay Mrs. Fuertes. (Tsn, pp. 18, 30, 42-
43, Aug. 10, 1994).
b) Municipal Treasurer Caber, to whom Mrs. Fuertes endorsed her vouchers for processing, and the
Municipal Accountant issued the certificate of availability of funds only on December 27, 1992 (Tsn, p. 42,
Aug. 10, 1994; Exhs. H, I, J and K); and the delay in the issuance of the certificate of availability of funds
was due to the delay by the Provincial Board to approve the supplemental budget. (Tsn, p. 43, Aug. 10,
1994).
[c]) He received on March 12, 1991 a demand from the Municipality of Pinan, Zamboanga del Norte,
where Mrs. Fuertes last worked, for the reimbursement of P105,915.00, and the matter had to be clarified
first. (Exh. 4). Mrs. Fuertes admitted that she had some problem of accountability with the Municipality of
Pinan. (Tsn, p. 18, 1994). It took time before this matter could be clarified by the Municipality of Pinan
reducing its claim to P50,647.093 and the Municipality of Sindangan paying said claim. (Exh. 2; Decision,
p. 9).
 [d]) Mrs. Fuertes had not submitted the required clearance from the Municipality of Pinan. (Tsn, p. 11,
Aug. 10, 1994). He did not insist on this requirement after the trial court issued the writ of execution to
implement the compromise judgment. (Tsn, p. 23, Aug. 10, 1994). Nonetheless, in the post audit of Mrs.
Fuertes accountability, the Commission on Audit issued a notice of suspension of the amount of
P5,452.00 from Mrs. Fuertes for her failure to submit: 1. Clearance for money & property accountability
from former office. 2. Certification as [sic] last day of service in former office. 3. Certification of last salary
received & issued by the disbursing officer in former office, certified by chief accountant and verified by
resident auditor. (Exh. 2-Motion).
12. The Information dated October 12, 1992 filed against petitioner alleged that petitioner as mayor did not sign and
approve the vouchers of Mrs. Fuertes for payment of her salaries and other emoluments from July 1, 1990 to
October 1991, which caused her undue injury. However, the prosecutions Exh. D, the sheriffs return dated
November 19, 1991, stated that Mrs. Fuertes had received her salary from January 1, 1991 up to the present, which
meant that even before the information was filed, she had been paid her regular salaries from January 1, 1991 to
October 1991. The supplemental budget to cover payment of her other claims for past services was passed only in
December 1992 and the municipal treasurer and accountant issued the certificate of availability of funds only on
December 27, 1992, and Mrs. Fuertes got paid of [sic] all her other claims, including those not claimed in the
Information, within one week therefrom. (Exhs. H, I, J, and K).
xxx xxx xxx.
Ruling of the Sandiganbayan

Respondent Court held that the delay or withholding of complainants salaries and emoluments was unreasonable and
caused complainant undue injury. Being then the sole breadwinner in their family, the withholding of her salaries caused her
difficulties in meeting her familys financial obligations like paying for the tuition fees of her four children.Petitioners defense
that complainant failed to attach the required money and property clearance to her vouchers was held to be an afterthought
that was brought about, in the first place, by his own failure to issue any memorandum requiring its submission. That the
voucher form listed the clearance as one of the requirements for its approval had neither been brought to complainants
attention, nor raised by petitioner as defense in his answer. In any event, the payment of complainants salary from January to
November 1991, confirmed by the sheriffs return, showed that the clearance was not an indispensable requirement, because
petitioner could have acted upon or approved the disbursement even without it. The alleged lack of a supplemental budget
was also rejected, because it was petitioners duty as municipal mayor to prepare and submit the executive and supplemental
budgets under Sections 318, 320, and 444 (3)(ii) of the Local Government Code, [9] and the complainants claims as assistant
municipal treasurer, a permanent position included in the plantilla for calendar year 1990 and 1991, were classified as current
operating expenditures for the same calendar years, which were chargeable against the general funds of the town of
Sindangan. Except for the representation and transportation allowance, Fuertes claims for thirteenth month pay, cash gift and
clothing allowance were already covered by Supplemental Budget No. 5 for calendar year 1990. Petitioners contention that
funds covering complainants claims were made available only in December 1992 was unbelievable, considering that an
ordinance enacting a supplemental budget takes effect upon its approval or on the date fixed therein under Sec. 320 of the
Local Government Code.
The Sandiganbayan also ruled that the petitioners evident bad faith was the direct and proximate cause of Fuertes undue
injury. Complainants salaries and allowances were withheld for no valid or justifiable reasons. Such delay was intended to
harass complainant, because petitioner wanted to replace her with his political protege whom he eventually designated as
municipal treasurer, bypassing Fuertes who was next in seniority. Bad faith was further evidenced by petitioners instructions to
the outgoing municipal treasurer not to give the complaining witness any work assignment, not to provide her with office table
and chair, not to act on her daily time record and application for leave of absence, instructions which were confirmed in the
municipal treasurers certification. (Exh. G-2).
The Issues

In his memorandum, petitioner submits the following issues:[10]

1. Could accused be held liable under Sec. 3(e) of R.A. 3019 in the discharge of his official administrative duties, a
positive act, when what was imputed to him was failing and refusing to sign and/or approve the vouchers of Mr[s].
Fuertes on time or by inaction on his obligation under the compromise agreement (ibid., p. 19), a passive act?Did
not the act come under Sec. 3(f) of R.A. 3019, of [sic] which accused was not charged with?
2. Assuming, arguendo,  that his failure and refusal to immediately sign and approve the vouchers of Mrs. Fuertes
comes [sic] under Sec. 3(e), the questions are:
(a) Did not the duty to sign and approve the same arise only after the Sangguniang Bayan had passed an appropriations
ordinance, and not before? In other words, was the non-passage of the appropriation ordinance a justifiable reason for not
signing the vouchers?
(b) Did Mrs. Fuertes suffer undue injury, as the term is understood in Sec. 3(e), she having been paid all her claims?
(c) Did petitioner not act in good faith in refusing to immediately sign the vouchers and implement the compromise agreement
until the Sangguniang Bayan had enacted the appropriation ordinance and until Mrs. Fuertes submitted the clearance from the
Municipality of Pinan, Zamboanga del Norte?
Restated, petitioner claims that the prosecution failed to establish the elements of undue injury and bad
faith. Additionally, petitioner submits that a violation of Section 3[e] of RA 3019 cannot be committed through nonfeasance.
The Courts Ruling
 The petition is meritorious. After careful review of the evidence on record and thorough deliberation on the applicable
provision of the Anti-Graft Law, the Court agrees with the solicitor generals assessment that the prosecution failed to establish
the elements of the crime charged.
First Issue: Undue Injury

Petitioner was charged with violation of Section 3[e] of R.A. 3019, which states:
SEC. 3. Corrupt practices of public officers.In addition to acts or omissions of public officers already penalized by
existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be
unlawful:
xxx xxx xxx
(e) Causing any undue injury to any party, including the Government, or giving any private party any unwarranted
benefits, advantage or preference in the discharge of his official, administrative or judicial functions through manifest
partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers and employees of
offices or government corporations charged with the grant of licenses or permits or other concessions.
To hold a person liable under this section, the concurrence of the following elements must be established beyond reasonable
doubt by the prosecution:
(1) that the accused is a public officer or a private person charged in conspiracy with the former;
(2) that said public officer commits the prohibited acts during the performance of his or her official duties or in
relation to his or her public positions;
(3) that he or she causes undue injury to any party, whether the government or a private party; and 
(4) that the public officer has acted with manifest partiality, evident bad faith or gross inexcusable negligence.[11]
The solicitor general, in his manifestation, [12] points out that undue injury requires proof of actual injury or damage, citing
our ruling in Alejandro vs. People[13]  and Jacinto vs. Sandiganbayan.[14] Inasmuch as complainant was actually paid all her
claims, there was thus no undue injury established.
This point is well-taken. Unlike in actions for torts, undue injury in Sec. 3[e] cannot be presumed even after a wrong or a
violation of a right has been established. Its existence must be proven as one of the elements of the crime. In fact, the causing
of undue injury, or the giving of any unwarranted benefits, advantage or preference through manifest partiality, evident bad
faith or gross inexcusable negligence constitutes the very act punished under this section. Thus, it is required that the undue
injury be specified, quantified and proven to the point of moral certainty.
In jurisprudence, undue injury is consistently interpreted as actual damage. Undue has been defined as more than
necessary, not proper, [or] illegal; and injury  as any wrong or damage done to another, either in his person, rights, reputation
or property[;] [that is, the] invasion of any legally protected interest of another. Actual damage, in the context of these
definitions, is akin to that in civil law.[15]
In turn, actual or compensatory damages is defined by Article 2199 of the Civil Code as follows:
Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved.Such compensation is referred to as actual or compensatory
damages.
Fundamental in the law on damages is that one injured by a breach of a contract, or by a wrongful or negligent act or
omission shall have a fair and just compensation commensurate to the loss sustained as a consequence of the defendants
act. Actual pecuniary compensation is awarded as a general rule, except where the circumstances warrant the allowance of
other kinds of damages.[16] Actual damages are primarily intended to simply make good or replace the loss caused by the
wrong.[17]
Furthermore, damages must not only be capable of proof, but must be actually proven with a reasonable degree of
certainty. They cannot be based on flimsy and non-substantial evidence or upon speculation, conjecture or guesswork. [18] They
cannot include speculative damages which are too remote to be included in an accurate estimate of the loss or injury.
In this case, the complainant testified that her salary and allowance for the period beginning July 1990 were withheld,
and that her family underwent financial difficulty which resulted from the delay in the satisfaction of her claims. [19] As regards
her money claim, payment of her salaries from January 1991 until November 19, 1991 was evidenced by the Sheriffs Return
dated November 19, 1991 (Exh. D). She also admitted having been issued a check on January 4, 1994 to cover her salary
from June 1 to June 30, 1990; her salary differential from July 1, 1989 to April 30, 1990; her thirteenth-month pay; her cash
gift; and her clothing allowances. Respondent Court found that all her monetary claims were satisfied. After she fully received
her monetary claims, there is no longer any basis for compensatory damages or undue injury, there being nothing more to
compensate.
Complainants testimony regarding her familys financial stress was inadequate and largely speculative. Without giving
specific details, she made only vague references to the fact that her four children were all going to school and that she was the
breadwinner in the family. She, however, did not say that she was unable to pay their tuition fees and the specific damage
brought by such nonpayment. The fact that the injury to her family was unspecified or unquantified does not satisfy the
element of undue injury, as akin to actual damages. As in civil cases, actual damages, if not supported by evidence on record,
cannot be considered.[20]
Other than the amount of the withheld salaries and allowances which were eventually received, the prosecution failed to
specify and to prove any other loss or damage sustained by the complainant. Respondent Court insists that complainant
suffered by reason of the long period of time that her emoluments were withheld.
 This inconvenience, however, is not constitutive of undue injury. In Jacinto,  this Court held that the injury suffered by the
complaining witness, whose salary was eventually released and whose position was restored in the plantilla, was negligible;
undue injury entails damages that are more than necessary or are excessive, improper or illegal. [21] In Alejandro, the Court
held that the hospital employees were not caused undue injury, as they were in fact paid their salaries.[22]
Second Issue: No Evident Bad Faith

In the challenged Decision, Respondent Court found evident bad faith on the part of the petitioner, holding that, without
any valid or justifiable reason, accused withheld the payment of complainants salaries and other benefits for almost two (2)
years, demonstrating a clear manifestation of bad faith. [23] It then brushed aside the petitioners defenses that complainant
failed to submit money and property clearances for her vouchers, and that an appropriation by the Sangguniang Bayan was
required before complainants vouchers could be approved. It said:[24]
Secondly, his reliance on the failure of complainant to submit the clearances which were allegedly necessary for the
approval of vouchers is futile in the light of the foregoing circumstances:
xxx xxx xxx
b. The evidence on record shows that complainants salaries for the period from January to November 1991 (included as
subject matter in the mandamus case) were duly paid, as confirmed in the Sheriffs Return dated November 19, 1991 (Exh.
D). This means that accused, even without the necessary clearance, could have acted upon or approved complainants
disbursement vouchers if he wanted to.
c. It may be true that a clearance is an indispensable requirement before complainant will be paid of her claims, but accused
could not just hide behind the cloak of the clearance requirement in order to exculpate himself from liability. As the approving
officer, it was his duty to direct complainant to submit the same. Moreover, accused could not just set aside the obligation he
voluntarily imposed upon himself when he entered into a compromise agreement binding himself to sign complainants
vouchers without any qualification as to the clearance requirement. Perforce, he could have seen to it that complainant
secured the same in order that he could comply with the said obligation.
xxx xxx xxx
Fourthly, accuseds contention that the delay in the release of complainants claim could not be attributed to him because the
vouchers were only submitted to him for his signature on December 24-27, 1992; that the approval of the budget
appropriations/resolutions depends on the Sangguniang Bayan, Budget Officer and the Sangguniang Panlalawigan, is
unavailing.
As revealed in the alleged newly discovered evidence themselves, particularly x x x SB Res. No. 202 and Appropriation
Ordinance No. 035, both dated May 21, 1990 (Exh. 5-a- Motion), the Sangguniang Bayan appropriated a budget of P5M in the
General Fund for calendar year 1991 [the Budget Officer does not approve the budget but assists the Municipal Mayor and the
Sangguniang Bayan in the preparation of the budget (Sec. 475, Local Government Code of 1991)]. Complainants claims
consisted of her salaries and other benefits for 1990 and 1991 which were classified as Current Operating Expenditures
chargeable against the General Fund. It is undisputed that she was holding her position as Assistant Municipal Treasurer in a
permanent capacity (her position was also designated Assistant Department Head), which was included in the plantilla for
calender years 1990 and 1991 (Exhs. 4-a & '4-b', Motion). In Program Appropriation and Obligation by Object (Exhs. 4-c & 4-c,
Motion), appropriations were made for current operating expenditures to which complainants claims properly
appertained. xxx. Verily, complainants claims were covered by appropriations duly approved by the officials concerned,
signifying that adequate funds were available for the purpose. In fact, even complainants claims for her 13th month pay, cash
gift and clothing allowance, subject matter of Disbursement Voucher marked Exhibit J which would need a supplemental
budget was covered by Supplemental Budget No. 5 for CY 1990 duly approved by the authorities concerned as shown in the
voucher itself. This means that the said claim was already obligated (funds were already reserved for it) as of calendar year
1990. xxxx. It is clear, then, that as regards availability of funds, there was no obstacle for the release of all the complainants
claims.
The Court disagrees. Respondent Court cannot shift the blame on the petitioner, when it was the complainant who failed
to submit the required clearance. This requirement, which the complainant disregarded, was even printed at the back of the
very vouchers sought to be approved. As assistant municipal treasurer, she ought to know that this is a condition for the
payment of her claims. This clearance is required by Article 443 of the Implementing Rules and Regulations of the Local
Government Code of 1991:
Art. 443. Property Clearances When an employee transfers to another government office, retires, resigns, is
dismissed, or is separated from the service, he shall be required to secure supplies or property clearance from the
supply officer concerned, the provincial or city general services officer concerned, the municipal mayor and the
municipal treasurer, or the punong barangay and the barangay treasurer, as the case may be. The local chief
executive shall prescribe the property clearance form for this purpose.
For her own failure to submit the required clearance, complainant is not entirely blameless for the delay in the approval of
her claims.
Also, given the lack of corresponding appropriation ordinance and certification of availability of funds for such purpose,
petitioner had the duty not to sign the vouchers. As chief executive of the municipality Llorente could not have approved the
voucher for the payment of complainants salaries under Sec. 344, Local Government Code of 1991.[25] Also, Appropriation
Ordinance No. 020[26] adding a supplemental budget for calendar year 1990 was approved on April 10, 1989, or almost a year
before complainant was transferred back to Sindangan. Hence, she could not have been included therein. SB Resolution No.
202 and Appropriation Ordinance No. 035,[27] which fixed the municipal budget for calendar year 1991, was passed only on
May 21, 1990, or almost another year after the transfer took effect. The petitioners failure to approve the complainants
vouchers was therefore due to some legal obstacles, [28] and not entirely without reason. Thus, evident bad faith cannot be
completely imputed to him.
Bad faith does not simply connote bad judgment or negligence; it imputes a dishonest purpose or some moral obliquity and
conscious doing of a wrong; a breach of sworn duty through some motive or intent or ill will; it partakes of the nature of fraud.
(Spiegel v. Beacon Participations, 8 NE 2nd Series, 895, 1007). It contemplates a state of mind affirmatively operating with
furtive design or some motive of self interest or ill will for ulterior purposes (Air France v. Carrascoso, 18 SCRA 155, 166-
167). Evident bad faith connotes a manifest deliberate intent on the part of the accused to do wrong or cause damage. [29]
In Jacinto, evident bad faith was not appreciated because the actions taken by the accused were not entirely without
rhyme or reason; he refused to release the complainants salary because the latter failed to submit her daily time record; he
refused to approve her sick-leave application because he found out that she did not suffer any illness; and he removed her
name from the plantilla because she was moonlighting during office hours. Such actions were measures taken by a superior
against an erring employee who studiously ignored, if not defied, his authority.[30]
In Alejandro, evident bad faith was ruled out, because the accused gave his approval to the questioned disbursement
after relying on the certification of the bookkeeper on the availability of funds for such disbursement.[31]
Third Issue: Interpretation of  Causing

The Court does not completely agree with petitioners assertion that the imputed act does not fall under Sec. 3[e] which,
according to him, requires a positive act -- a malfeasance or misfeasance. Causing means to be the cause or occasion of, to
effect as an agent, to bring into existence, to make or to induce, to compel. [32] Causing is, therefore, not limited to positive acts
only. Even passive acts or inaction may cause undue injury. What is essential is that undue injury, which is quantifiable and
demonstrable, results from the questioned official act or inaction.
In this case, the prosecution accused petitioner of failing or refusing to pay complainants salaries on time, while
Respondent Court convicted him of unduly delaying the payment of complainants claims. As already explained, both acts did
not, however, legally result in undue injury or in giving any unwarranted benefits, advantage or preference in the discharge of
his official, [or] administrative x x x functions. Thus, these acts are not punishable under Sec. 3[e].
It would appear that petitioners failure or refusal to act on the complainants vouchers, or the delay in his acting on them
more properly falls under Sec. 3[f]:
(f) Neglecting or refusing, after due demand or request, without sufficient justification, to act within a reasonable time
on any matter pending before him for the purpose of obtaining, directly or indirectly, from any person interested in
the matter some pecuniary or material benefit or advantage, or for purpose of favoring his own interest or giving
undue advantage in favor of or discriminating against any other interested party.
Here, the neglect or refusal to act within a reasonable time is the criminal act, not the causing of undue injury. Thus, its
elements are:
1) The offender is a public officer;
2) Said officer has neglected or has refused to act without sufficient justification after due demand or request has
been made on him;
3) Reasonable time has elapsed from such demand or request without the public officer having acted on the matter
pending before him; and
4) Such failure to so act is for the purpose of obtaining, directly or indirectly, from any person interested in the matter
some pecuniary or material benefit or advantage in favor of an interested party, or discriminating against another.[33]
However, petitioner is not charged with a violation of Sec. 3[f]. Hence, further disquisition is not proper. Neither may this Court
convict petitioner under Sec. 3[f] without violating his constitutional right to due process.
WHEREFORE, the petition is hereby GRANTED. Petitioner is ACQUITTED of violating Section 3[e] of R.A. 3019, as
amended. No costs.
SO ORDERED.
Davide, Jr. (Chairman), Bellosillo, Vitug  and  Quisumbing, JJ.,  concur.
 FIRST DIVISION
[G.R. No. 141910. August 6, 2002]
FGU INSURANCE CORPORATION, petitioner, vs.  G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M.
EROLES, respondents.
DECISION
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. white
refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc., along
South Superhighway in Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was
traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an
unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the
covered cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights and interests of Concepcion
Industries, Inc., sought reimbursement of the amount it had paid to the latter from GPS. Since the trucking company failed to
heed the claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver Lambert
Eroles with the Regional Trial Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS was the
exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a common
carrier. Respondents further claimed that the cause of damage was purely accidental.
The issues having thus been joined, FGU presented its evidence, establishing the extent of damage to the cargoes and
the amount it had paid to the assured. GPS, instead of submitting its evidence, filed with leave of court a motion to dismiss the
complaint by way of demurrer to evidence on the ground that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,[1] granted the motion to dismiss, explaining thusly:
Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must prove his own affirmative allegation, xxx.
In the instant case, plaintiff did not present any single evidence that would prove that defendant is a common carrier.
x x x x x x x x x
Accordingly, the application of the law on common carriers is not warranted and the presumption of fault or negligence on the
part of a common carrier in case of loss, damage or deterioration of goods during transport under 1735 of the Civil Code is not
availing.
Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was subrogated and the owner of
the vehicle which transports the cargo are the laws on obligation and contract of the Civil Code as well as the law on quasi
delicts.
Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi delict provides for some
presumption of negligence but only upon the attendance of some circumstances. Thus, Article 2185 provides:
Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the
time of the mishap, he was violating any traffic regulation.
Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation. Hence, the presumption of
negligence is not obtaining.
Considering that plaintiff failed to adduce evidence that defendant is a common carrier and defendants driver was the one
negligent, defendant cannot be made liable for the damages of the subject cargoes.[2]
The subsequent motion for reconsideration having been denied,[3] plaintiff interposed an appeal to the Court of Appeals,
contending that the trial court had erred (a) in holding that the appellee corporation was not a common carrier defined under
the law and existing jurisprudence; and (b) in dismissing the complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate court, in its decision of 10
June 1999, [4] discoursed, among other things, that -
"x x x in order for the presumption of negligence provided for under the law governing common carrier (Article 1735, Civil
Code) to arise, the appellant must first prove that the appellee is a common carrier. Should the appellant fail to prove that the
appellee is a common carrier, the presumption would not arise; consequently, the appellant would have to prove that the
carrier was negligent.
"x x x x x x x x x
"Because it is the appellant who insists that the appellees can still be considered as a common carrier, despite its `limited
clientele, (assuming it was really a common carrier), it follows that it (appellant) has the burden of proving the same. It
(plaintiff-appellant) `must establish his case by a preponderance of evidence, which means that the evidence as a whole
adduced by one side is superior to that of the other. (Summa Insurance Corporation vs. Court of Appeals, 243 SCRA
175). This, unfortunately, the appellant failed to do -- hence, the dismissal of the plaintiffs complaint by the trial court is
justified.
"x x x x x x x x x
"Based on the foregoing disquisitions and considering the circumstances that the appellee trucking corporation has been `its
exclusive contractor, hauler since 1970, defendant has no choice but to comply with the directive of its principal, the inevitable
conclusion is that the appellee is a private carrier.
"x x x x x x x x x
"x x x the lower court correctly ruled that 'the application of the law on common carriers is not warranted and the presumption
of fault or negligence on the part of a common carrier in case of loss, damage or deterioration of good[s] during transport
under [article] 1735 of the Civil Code is not availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a trial court are entitled to great weight
on appeal and should not be disturbed unless for strong and valid reasons."[5]
Petitioner's motion for reconsideration was likewise denied;[6] hence, the instant petition,[7] raising the following issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED UNDER THE LAW AND
EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED TO
HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY
DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be amply justified. GPS,
being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services to no other individual
or entity, cannot be considered a common carrier. Common carriers are persons, corporations, firms or associations engaged
in the business of carrying or transporting passengers or goods or both, by land, water, or air, for hire or compensation,
offering their services to the public,[8]whether to the public in general or to a limited clientele in particular, but never on an
exclusive basis.[9] The true test of a common carrier is the carriage of passengers or goods, providing space for those who opt
to avail themselves of its transportation service for a fee. [10] Given accepted standards, GPS scarcely falls within the term
common carrier.
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the
mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief.
[11]
 The law, recognizing the obligatory force of contracts, [12] will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof. [13] A breach upon the contract confers
upon the injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve
the interests of the promisee that may include his expectation interest, which is his interest in having the benefit of his bargain
by being put in as good a position as he would have been in had the contract been performed, or his reliance interest, which is
his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would
have been in had the contract not been made; or his restitution interest, which is his interest in having restored to him any
benefit that he has conferred on the other party.[14] Indeed, agreements can accomplish little, either for their makers or for
society, unless they are made the basis for action.[15] The effect of every infraction is to create a new duty, that is, to make
recompense to the one who has been injured by the failure of another to observe his contractual obligation [16] unless he can
show extenuating circumstances, like proof of his exercise of due diligence (normally that of the diligence of a good father of a
family or, exceptionally by stipulation or by law such as in the case of common carriers, that of extraordinary diligence) or of
the attendance of fortuitous event, to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioners assured,
and admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody.  In such a situation, a
default on, or failure of compliance with, the obligation in this case, the delivery of the goods in its custody to the place of
destination - gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor the
burden being on him to establish otherwise.GPS has failed to do so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be ordered to
pay petitioner. The driver, not being a party to the contract of carriage between petitioners principal and defendant, may not be
held liable under the agreement. A contract can only bind the parties who have entered into it or their successors who have
assumed their personality or their juridical position.[17] Consonantly with the axiom res inter alios acta aliis neque nocet
prodest, such contract can neither favor nor prejudice a third person. Petitioners civil action against the driver can only be
based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for damages to prove negligence or fault
on the part of the defendant.[18]
A word in passing. Res ipsa loquitur,  a doctrine being invoked by petitioner, holds a defendant liable where the thing
which caused the injury complained of is shown to be under the latters management and the accident is such that, in the
ordinary course of things, cannot be expected to happen if those who have its management or control use proper care.  It
affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from want of care. [19] It is
not a rule of substantive law and, as such, it does not create an independent ground of liability. Instead, it is regarded as a
mode of proof, or a mere procedural convenience since it furnishes a substitute for, and relieves the plaintiff of, the burden of
producing specific proof of negligence. The maxim simply places on the defendant the burden of going forward with the proof.
[20]
 Resort to the doctrine, however, may be allowed only when (a) the event is of a kind which does not ordinarily occur in the
absence of negligence; (b) other responsible causes, including the conduct of the plaintiff and third persons, are sufficiently
eliminated by the evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the plaintiff. [21]Thus,
it is not applicable when an unexplained accident may be attributable to one of several causes, for some of which the
defendant could not be responsible.[22]
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the
defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and not from the nature
of the relation of the parties. [23] Nevertheless, the requirement that responsible causes other than those due to defendants
conduct must first be eliminated, for the doctrine to apply, should be understood as being confined only to cases of pure (non-
contractual) tort since obviously the presumption of negligence in culpa contractual, as previously so pointed out, immediately
attaches by a failure of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is predicated
on culpa acquiliana, while he admittedly can be said to have been in control and management of the vehicle which figured in
the accident, it is not equally shown, however, that the accident could have been exclusively due to his negligence, a matter
that can allow, forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to
have waived the right to present evidence.[24] Thus, respondent corporation may no longer offer proof to establish that it has
exercised due care in transporting the cargoes of the assured so as to still warrant a remand of the case to the trial court.
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City, and the decision,
dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles is concerned, but
said assailed order of the trial court and decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking
Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation the value of the damaged and lost cargoes in
the amount of P204,450.00. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago,  and  Austria-Martinez, JJ.,  concur.