Keyword/s: Corporation not entitled to moral damages

SOLID HOMES INC, petitioner vs HON. COURT OF APPEALS, STATE FINANCING CENTER, INC and
REGISTER OF DEEDS FOR RIZAL
GR No. 117501, July 8, 1997

This is a petition for review on certiorari under Rule 45 of the ROC assailing the decision of the Court of Appeals in
affirming the decision of the RTC of Pasig who decided the validity of the subject dacion en pago agreement and
declared the same as a “true sale with right of repurchase”.

FACTS:

On June 4, 1979, petitioner Solid Homes executed in favor of State Financing Center Inc a REAL ESTATE
MORTGAGE on two properties covered by separated TCT to secure the payment of loan of P10,000,000.00. A year
after, petitioner was granted additional loan of P1,511,270.03 and an Amendment to Real Estate Mortgage was executed
to increase the secured credits from P10M to P11,511,270.03. Sometime thereafter, petitioner obtained additional credits
amounting to P1,499,811.97 and to secure its payment an Amendment to Real Estate Mortgage was executed to increase
the secured credits from P11,511,270.03 to P13,011,082.00.
When the loan became due, State Financing made repeated demands upon Solid Homes but the latter failed to do so.
State Financing then filed a petition for extrajudicial foreclosure of the mortgages. A Notice of Sheriff’s Sale was issued
by the Sheriff of Rizal to cover the mortgage property including the VV. Soliven Towers II Building (erected on two of
the said properties) for an auction sale.
Before the auction sale, petitioner made representations and induce private respondent to forego with the foreclosure of
the real estate mortgage. Private respondent agreed to suspend the foreclosure subject to the terms and conditions they
agreed upon in a MEMORANDUM OF AGREEMENT/DACION EN PAGO dated February 28, 1983.
The two parties agreed that petitioner has an outstanding obligation with the private respondent amounting to
P14,225,178.40 which must be paid within 180 days from the signing of the agreement and it shall earn an interest of
14% and 16% penalty per annum.
They also agreed that should petitioner be able to pay an amount equivalent to 60% of the principal obligation within
180 days, private respondent shall allow the restructuring of the remaining balance. They also agreed that if petition
fails to comply with the provisions of payment, the MOA/DACION EN PAGO shall automatically operate to be an
instrument of dacion en pago without the need of executing any document to such effect and that petitioner binds itself
to transfer, convey and assign the real properties to private respondent.
Subsequently, petitioner failed to pay private respondent and pursuant to their agreement, private respondent registered
the MOA/DACION EN PAGO with the RD of Pasig. Consequently, the RD cancelled the two TCT’s and issued new
ones in the name of State Financing.
In a letter, private respondent informed the petitioner of the transfer in its name of the two titles of the properties subject
of mortgage and demanded the turn over of possession of the VV. Soliven Towers II Building. In a reply letter,
petitioner ask for a period of 10 days within which to categorize their position on the matter and in a subsequent letter,
petitioner claimed that the MOA/DACION EN PAGO is null and void in violation of Article 2088 (pactum
commissorium or automatic appropriation). In a letter, private respondent said that Article 2088 does not apply and
reiterated their previous demand for the turn over of possession over the building.
Within the period of redemption, petitioner wrote private respondent containing a proposal for repayment scheme which
was denied by the latter. A number of conferences were made to discuss possible payment arrangement but to no avail.
On June 18, 1984, petitioner send private respondent a letter containing a copay of written offer made by CL Alma Jose
& Sons Inc to avail of the right to repurchase the building (VV. SOLIVEN) and a request for a 60-day extension within
which to comply with the conditions.
However, on June 26, 1984, a day before the expiry of the right to repurchase, petitioner filed an action against private
respondent and RD of Metro Manila II seeking the annulment of the MOA/DACION EN PAGO and the consequent
reinstatement of the mortgages over the properties involved.
TRIAL COURT. The trial court ruled that:
a. The MOA/DACION EN PAGO is a valid and binding document and is not violative of Article 2088.
b. The such agreement is a true sale with right of repurchase and not an equitable mortgage.
c. That the registration of the agreement is in accordance with the law.
d. That the failure to annotate the right to repurchase is improper and the issuance of the title during the repurchase
period is in violation of Article 1607 of NCC, rendering the said titles null and void.
e. Order the return by private respondent of the titles issued in their name to the RD for cancellation and
reinstatement of the former title in favor of petitioner.
 f. Granting the petitioner a period of 60-day within which to exercise the right to repurchase
g. And, ordering the RD of Pasig to consolidate the titles in favor of State Financing should Solid Homes failed to
repurchase the properties within 30 days.

On appeal with the appellate court, petitioner contest the denial of its claim for damages which resulted from the bad
faith and malice of State Financing in deliberately failing to annotate the right to repurchase.

Private respondent, on its appeal to the appellate court, questioned the (1) granting of 30-day redemption period (2)
ordering petitioner to pay only 30% instead of the reasonable rental value from the time possession of properties was
illegally withheld from State Financing, and (3) failing to order the immediate turnover of the possession of the
properties to State Financing.

COURT OF APPEALS.
As to the lone issue of the petitioner, the CA agreed with the lower court that the failure to annotate the right to
repurchase is not by itself an indication of bad faith or malice. Petitioner should have taken steps to protect its own
interest. The subsequent negotiations between the two parties negates the idea of bad faith.

As to the issues raised by private respondent, the CA ruled that petitioner has a right to file the action and affirmed the
imposition of the 30% interest. However, if ruled favorably to private respondent when it ordered petitioner to deliver to
private respondent the possession of the building.

Both parties filed a motion for reconsideration but was denied by the appellate court for lack of merit.

Before the Supreme Court, the two parties filed petitions. The SC denied private respondent’s petition for their failure to
show any reversible error.

ISSUE: Whether or not Solid Homes is entitled to recover damages.

HELD:
No, the petitioner has not shown nor bothered to support with evidence their claim for actual, moral, and
punitive/nominal damages, as well as exemplary damages and attorney’s fees. It is bases that the claim for these
damages must each be independently identified and justified; such claims cannot be dealt with in the aggregate, since
they are neither kindred or analogous terms nor governed by a coincident set of rules.
Petitioner was not prejudiced by the non-annotation of the right to repurchase. Bad faith and malice were negated by the
subsequent talks held between two parties to come up with an agreeable payment scheme.
The SC also said that it is equally the responsibility of petitioner to protect its own rights by making sure that its right of
repurchase was indeed annotated in the consolidated titles of private respondent.

The only transgression of State Financing is its failure to observe the proper procedure in effecting the consolidation.
However, this does not automatically entitle the petitioner to damages absent convincing proof of malice and bad faith.
The evidence offered by petitioner consist of mere conjectures and speculations.

Neither can moral damages be awarded to petitioner. Time and again, we have held that a corporation being an artificial
person which has no feelings, emotions or senses, and which cannot experience physical suffering or mental anguish—
is not entitled to moral damages.

Award of Attorney’s fees is likewise not warranted when moral and exemplary damages are eliminated and entitlement
thereto is not demonstrated by the claimant.

Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized and not for the purpose of indemnifying the plaintiff for nay loss suffered
by him. In this case, no right of petitioner was violated or invaded by respondent corporation.

The decision of the appellate court was affirmed with modification. The Redemption price shall not include the
registration and other expenses incurred by State Financing Center because the issuance of the new title is null and void.