5. Llorente vs.

Sandiganbayan, 202 SCRA 309

Facts: Petitioner David Llorente was charged with violation of Section 3(c) of the Anti Graft and Corrupt
Practices Act. Petitioner was then Deputy Administrator for the Philippine Coconut Authority (PCA), and
as such was empowered to approve clearances of employees. He accordingly took advantage of his
position, when refused to issue a certificate of clearance to Herminigildo Curio, an employee, who was
forced to resign as a result of the abolition of his item pursuant to the 1981 reorganization of the PCA,
resulting in his deprivation to receive his gratuity benefits amounting to P29,854.90, and to secure
employment with other offices to his damage and prejudice, and that of the public service.

However, petitioner was acquitted on the ground that he was not shown to have acted in bad faith.
Despite said acquittal, petitioner was held civilly liable and ordered to pay “compensatory damages’ in
the total sum of P90,000.00; and in support thereof the Sandiganbayan ruled that the petitioner was
nonetheless guilty of abuse of right (under Art. 19 of the Civil Code) and as a public officer he was liable
for damages suffered by the aggrieved party.

Issue: Whether it was proper for Sandiganbayan to hold the petitioner civilly liable and order the same to
pay for compensatory damages in the amount of P90.000.00 in violation of Art. 19 of the Civil Code

Ruling: Yes. It is the essence of Article 19 of the Civil Code, under which the petitioner was made to pay
damages, together with Article 27, that the performance of duty be done with justice and good faith.

The judgment found that petitioner in refusing to issue a certificate of clearance in favor of the private
offended party, Hermenegildo Curio, did not act with evidence of bad faith,”(sic) one of the elements of
Sec (e) of Republic Act No. 3019. The judgment is correct insofar as it found lack of evident bad faith by
the petitioner, basically because the petitioner was acting within the bounds of law in refusing to clear
Curio although the practice was that the clearance was nevertheless approved, and then the amount of the
unsettled obligation was deducted from the gratuity benefits of the employee.”

Although the petitioner did not act with evident bad faith, he acted with bad faith nevertheless, for which
he should respond for damages. The records show that the office practice indeed in the Phil. Coconut
Authority was to clear the employee (retiree) and deduct his accountabilities from his gratuity benefits.
There is no debate about the existence of this practice (the petitioner admitted it later on) and in fact he
cleared three employees on the condition that their obligations should be deducted from their benefits.

While the acts of the petitioner were legal (that is pursuant to procedures), as he insists in his petition, yet
it does not follow. For emphasis, he had no valid reason to “go legal” all of a sudden with respect to Mr.
Curio, since he had cleared three employee who, as the Sandiganbayan found, “were all similarly
circumstanced in that they all had pending obligations when their clearances were filed for consideration,
warranting similar official action.”

It is no defense that the petitioner was motivated by no ill-will (a grudge, according to the
Sandiganbayan), since the facts speak for themselves. It is no defense either that he was, after all,
complying merely with legal procedures since, as we indicated, he was not as strict with respect to the
three retiring other employees. There can be no other logical conclusion that he was acting unfairly, no
more, no less, to Mr. Curio.

In the case of Velayo vs. Shell Co. of the Philippines, we held the defendant liable under Article 19 for
disposing of its property—a perfectly legal act—in order to escape the reach of a creditor. In two fairly
more recent cases, Sevilla vs. Court of Appeals and Valenzuela vs. Court of Appeals, we held that a
principal is liable under Article 19 in terminating the agency—again, a legal act—when terminating the
agency would deprive the agent of his legitimate business.

6. Petrophil Corporation vs. CA

Facts: Petrophil Corporation, petitioner, entered into contract with private respondent Dr. Amanda
Ternida-Cruz, for hauling and transport any and all packages and/or bulk products of Petrophil. The
contract provided among others, that Petrophil could terminate the contract for breach, negligence,
discourtesy, improper and/or inadequate performance or abandonment. Par 11 of the contract stipulated
that the contract shall be for an indefinite period, provided that Petrophil may terminate at any time with
30 days prior written notice.

In a letter dated May 21, 1987, Petrophil, through its Operations Manager, advised Dr. Cruz that it was
terminating her hauling contract. Dr. Cruz appealed to Petrophil for reconsideration but said appeal was
denied on June 5, 1987-On June 23, 1987, Dr. Cruz filed with the RTC a complaint against Petrophil
seeking the nullity of the termination of the contract. Other private respondents herein, Jessie de Vera,
Marcial Mulig, Antonio and Rufino Cuenca, all tank truck drivers of Dr. Cruz, also filed a complaint for
damages against Petrophil Operations Manager Antonio Santos, Pandacan Terminal Manager Crispino A.
de Castro, and Pandacan Terminal Superintendent Jaime Tamayo.

During the hearing;

 Dr. Cruz claimed that the termination of her hauling contract was a retaliation against her for
allegedly sympathizing with the then striking Petrophil employees and for informing the PNOC
president of anomalies perpetrated bys ome of its officers and employees.
 Driver Jessie de Vera corroborated these allegations and said that thetermination of Dr. Cruz's
contract was intended to silence her. Further, hetestified that before the termination of the
contract, Petrophil officials reduced their hauling trips to make life harder for them so that they
would resign from Dr: Cruz's employ, which in turn would result in the closure of her business.
 Petitioner denied that Petrophil officials were out to starve Dr. Cruz's drivers for their support of
her. Additionally, witnesses for Petrophil testified that on April25, 1987, there was a strike at the
Pandacan terminal and Dr. Cruz and herhusband were at the picket line. They refused to load
petroleum products,resulting in the disruption of delivery to service stations in Metro Manila and
inthe provinces, which in turn resulted in loss of sales and revenues. Because of Dr. Cruz's refusal
to load, the management terminated the hauling contract.

Issue: Whether petitioner was guilty of arbitrary termination of the contract which would entitle Dr. Cruz
to damages

Ruling: Yes. When petitioner terminated the contract “without cause”, it was required only to give Dr.
Cruz a 30-day prior written notice, which it did in this case. However, before Petrophil terminated the
contract on May 25, 1987, there was a strike of its employees at the Pandacan terminal. Dr. Cruz and her
husband were seen at the picket line and were reported to have instructed their truck drivers not to load
petroleum products. At the resumption of the operation in Pandacan terminal, Dr. Cruz’s contract was
suspended for one week and eventually terminated

Nowhere in the record do we find that petitioner asked her to explain her actions. Petrophil simply
terminated her contract. In terminating the hauling contract of Dr. Cruz without hearing her side on the
factual context above described, petitioner opened itself to a charge of bad faith. While Petrophil had the
right to terminate the contract, petitioner could not act purposely to injure private respondents. There is an
abuse of right under Article 19 if the following elements are present:
 1) There is a legal right or duty
2) It is exercised in bad faith
3) For the sole purpose of prejudicing or injuring another

All these 3 elements are present in the case at bar.

Petitioner contends that the CA erred when it imposed a tortious liability where the requisites there for
were not established by the evidence, that there is no other evidence that the termination of the contract
was done with deliberate intent to harm or for the sole purpose of prejudicing the respondent-drivers-

Article 20 of the Civil Code provides that every person who, contrary to law, willfully or negligently
causes damage to another, shall indemnify the latter for the damage done. Petitioner might not have
deliberately intended to injure the respondent-drivers. But as a consequence of its willful act directed
against Dr. Cruz, respondent-drivers lost their jobs and consequently suffered loss of income.

Note that under Article 20, there is no requirement that the act must be directed at a specific person, but it
suffices that a person suffers damage as a consequence of a wrongful act of another in order that
indemnity could be demanded from the wrongdoer. The appellate court did not err, given the
circumstances of this case, in awarding damages to respondent-drivers.

No abuse of right

7. Dart Philippines, Inc. vs. Sps. Calogcog

Facts: Dart PH entered into a distributorship agreement with the respondent spouses for the direct selling
distribution of Tupperware product. After the expiration on Mar. 31, 1987, Dart PH informed the
respondent spouses that they’re not willing to renew anymore because the spouses violated the terms and
agreement of the contract. The respondent spouses made a handwritten promise to comply with the terms
of the contract. Dart PH was convinced to enter again to renew.

Dart PH now subject the respondent spouses’ books for audit. The 2nd audit was made and now the
respondent spouses refused to have their books audited. Spouses Calogcog disallowed the auditing firm
from inspecting their books and records. As a result, Dart only accepted the spouses’ purchase order on a
prepaid basis. Respondent spouses filed before the RTC a case for damages plus injunction against Dart
PH on the ground that Dart abused its right when they subjected the respondents to audit and when they
only accepted order on a “prepaid basis” and that damages were allegedly 1.3m.

RTC granted the writ of PI and ordered Dart PH to comply with terms of contract. Thereafter, Dart PH
filed for certiorari with CA.

Issue: Whether Dart PH abused its right when it conducted a 2nd audit, changed the terms to a pre-paid
basis, and ultimately when it denied to renew their agreement

Ruling: No. there were violations already pointed out in their very first agreement which caused the
respondents to give a hand written promise. The correspondence prompted respondents to make a
handwritten promise that they would observe and comply with the terms and conditions of the
distributorship agreement. This promise notwithstanding, Dart PH was not barred from exercising its right
in the agreement to conduct an audit review of respondents’ account. Thus, an audit was made.
Petitioner informed respondents that it was causing the conduct of a second audit review. The second
audit was intended to cover the period not subject of the initial audit. Because respondents objected to the
second audit, petitioner exercised its option under the agreement to vary the manner in which orders are
processed—this time, instead of the usual credit arrangement, petitioner only admitted respondents’
purchase orders on pre-paid basis.

From these facts, we find that bad faith cannot be attributed to the acts of petitioner. Petitioner’s exercise
of its rights under the agreement to conduct an audit, to vary the manner of processing purchase orders,
and to refuse the renewal of the agreement was supported by legitimate reasons, principally, to protect its
own business. The exercise of its rights was not impelled by any evil motive designed, whimsically and
capriciously, to injure or prejudice respondents. The rights exercised were all in accord with the terms and
conditions of the distributorship agreement, which has the force of law between them.

Petitioner could not be said to have committed an abuse of its rights. It may not be amiss to state at this
juncture that a complaint based on Article 19 of the Civil Code must necessarily fail if it has nothing to
support it but innuendos and conjectures.