G.R. No. L-23145 November 29, 1968 of Court.
of Court. The domiciliary administrator did not comply with the order, and on
TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D.
TAYAG, ancillary administrator-appellee,
vs.
BENGUET CONSOLIDATED, INC., oppositor-appellant.
Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.
Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-appellant.
FERNANDO, J.:
Confronted by an obstinate and adamant refusal of the domiciliary
administrator, the County Trust Company of New York, United States of
America, of the estate of the deceased Idonah Slade Perkins, who died in New
York City on March 27, 1960, to surrender to the ancillary administrator in
the Philippines the stock certificates owned by her in a Philippine
corporation, Benguet Consolidated, Inc., to satisfy the legitimate claims of
local creditors, the lower court, then presided by the Honorable Arsenio
Santos, now retired, issued on May 18, 1964, an order of this tenor: "After
considering the motion of the ancillary administrator, dated February 11,
1964, as well as the opposition filed by the Benguet Consolidated, Inc., the
Court hereby (1) considers as lost for all purposes in connection with the
administration and liquidation of the Philippine estate of Idonah Slade
Perkins the stock certificates covering the 33,002 shares of stock standing in
her name in the books of the Benguet Consolidated, Inc., (2) orders said
certificates cancelled, and (3) directs said corporation to issue new
certificates in lieu thereof, the same to be delivered by said corporation to
either the incumbent ancillary administrator or to the Probate Division of this
Court."1
From such an order, an appeal was taken to this Court not by the domiciliary
administrator, the County Trust Company of New York, but by the Philippine
corporation, the Benguet Consolidated, Inc. The appeal cannot possibly
prosper. The challenged order represents a response and expresses a policy,
to paraphrase Frankfurter, arising out of a specific problem, addressed to the
attainment of specific ends by the use of specific remedies, with full and
ample support from legal doctrines of weight and significance.
The facts will explain why. As set forth in the brief of appellant Benguet
Consolidated, Inc., Idonah Slade Perkins, who died on March 27, 1960 in
New York City, left among others, two stock certificates covering 33,002
shares of appellant, the certificates being in the possession of the County
Trust Company of New York, which as noted, is the domiciliary administrator
of the estate of the deceased.2 Then came this portion of the appellant's brief:
"On August 12, 1960, Prospero Sanidad instituted ancillary administration
proceedings in the Court of First Instance of Manila; Lazaro A. Marquez was
appointed ancillary administrator, and on January 22, 1963, he was
substituted by the appellee Renato D. Tayag. A dispute arose between the
domiciary administrator in New York and the ancillary administrator in the
Philippines as to which of them was entitled to the possession of the stock
certificates in question. On January 27, 1964, the Court of First Instance of
Manila ordered the domiciliary administrator, County Trust Company, to
"produce and deposit" them with the ancillary administrator or with the Clerk
February 11, 1964, the ancillary administrator petitioned the court to "issue
an order declaring the certificate or certificates of stocks covering the 33,002
shares issued in the name of Idonah Slade Perkins by Benguet Consolidated,
Inc., be declared [or] considered as lost."3
It is to be noted further that appellant Benguet Consolidated, Inc. admits
that "it is immaterial" as far as it is concerned as to "who is entitled to the
possession of the stock certificates in question; appellant opposed the
petition of the ancillary administrator because the said stock certificates are
in existence, they are today in the possession of the domiciliary
administrator, the County Trust Company, in New York, U.S.A...."4
It is its view, therefore, that under the circumstances, the stock certificates
cannot be declared or considered as lost. Moreover, it would allege that there
was a failure to observe certain requirements of its by-laws before new stock
certificates could be issued. Hence, its appeal.
As was made clear at the outset of this opinion, the appeal lacks merit. The
challenged order constitutes an emphatic affirmation of judicial authority
sought to be emasculated by the wilful conduct of the domiciliary
administrator in refusing to accord obedience to a court decree. How, then,
can this order be stigmatized as illegal?
As is true of many problems confronting the judiciary, such a response was
called for by the realities of the situation. What cannot be ignored is that
conduct bordering on wilful defiance, if it had not actually reached it, cannot
without undue loss of judicial prestige, be condoned or tolerated. For the law
is not so lacking in flexibility and resourcefulness as to preclude such a
solution, the more so as deeper reflection would make clear its being
buttressed by indisputable principles and supported by the strongest policy
considerations.
It can truly be said then that the result arrived at upheld and vindicated the
honor of the judiciary no less than that of the country. Through this
challenged order, there is thus dispelled the atmosphere of contingent
frustration brought about by the persistence of the domiciliary administrator
to hold on to the stock certificates after it had, as admitted, voluntarily
submitted itself to the jurisdiction of the lower court by entering its
appearance through counsel on June 27, 1963, and filing a petition for relief
from a previous order of March 15, 1963.
Thus did the lower court, in the order now on appeal, impart vitality and
effectiveness to what was decreed. For without it, what it had been decided
would be set at naught and nullified. Unless such a blatant disregard by the
domiciliary administrator, with residence abroad, of what was previously
ordained by a court order could be thus remedied, it would have entailed,
insofar as this matter was concerned, not a partial but a well-nigh complete
paralysis of judicial authority.
1. Appellant Benguet Consolidated, Inc. did not dispute the power of the
appellee ancillary administrator to gain control and possession of all assets of
the decedent within the jurisdiction of the Philippines. Nor could it. Such a
power is inherent in his duty to settle her estate and satisfy the claims of
local creditors.5 As Justice Tuason speaking for this Court made clear, it is a the decedent to the ancillary administrator in the Philippines, there was
"general rule universally recognized" that administration, whether principal nothing unreasonable or arbitrary in considering them as lost and requiring
or ancillary, certainly "extends to the assets of a decedent found within the the appellant to issue new certificates in lieu thereof. Thereby, the task
state or country where it was granted," the corollary being "that an incumbent under the law on the ancillary administrator could be discharged
administrator appointed in one state or country has no power over property and his responsibility fulfilled.
in another state or country."6
Any other view would result in the compliance to a valid judicial order being
It is to be noted that the scope of the power of the ancillary administrator made to depend on the uncontrolled discretion of the party or entity, in this
was, in an earlier case, set forth by Justice Malcolm. Thus: "It is often case domiciled abroad, which thus far has shown the utmost persistence in
necessary to have more than one administration of an estate. When a person refusing to yield obedience. Certainly, appellant would not be heard to
dies intestate owning property in the country of his domicile as well as in a contend in all seriousness that a judicial decree could be treated as a mere
foreign country, administration is had in both countries. That which is scrap of paper, the court issuing it being powerless to remedy its flagrant
granted in the jurisdiction of decedent's last domicile is termed the principal disregard.
administration, while any other administration is termed the ancillary
It may be admitted of course that such alleged loss as found by the lower
administration. The reason for the latter is because a grant of administration
court did not correspond exactly with the facts. To be more blunt, the quality
does not ex proprio vigore have any effect beyond the limits of the country in
of truth may be lacking in such a conclusion arrived at. It is to be
which it is granted. Hence, an administrator appointed in a foreign state has
remembered however, again to borrow from Frankfurter, "that fictions which
no authority in the [Philippines]. The ancillary administration is proper,
the law may rely upon in the pursuit of legitimate ends have played an
whenever a person dies, leaving in a country other than that of his last
important part in its development."11
domicile, property to be administered in the nature of assets of the deceased
liable for his individual debts or to be distributed among his heirs."7 Speaking of the common law in its earlier period, Cardozo could state fictions
"were devices to advance the ends of justice, [even if] clumsy and at times
It would follow then that the authority of the probate court to require that
offensive."12 Some of them have persisted even to the present, that eminent
ancillary administrator's right to "the stock certificates covering the 33,002
jurist, noting "the quasi contract, the adopted child, the constructive trust,
shares ... standing in her name in the books of [appellant] Benguet
all of flourishing vitality, to attest the empire of "as if" today."13 He likewise
Consolidated, Inc...." be respected is equally beyond question. For appellant
noted "a class of fictions of another order, the fiction which is a working tool
is a Philippine corporation owing full allegiance and subject to the
of thought, but which at times hides itself from view till reflection and
unrestricted jurisdiction of local courts. Its shares of stock cannot therefore
analysis have brought it to the light."14
be considered in any wise as immune from lawful court orders.
What cannot be disputed, therefore, is the at times indispensable role that
Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue8
fictions as such played in the law. There should be then on the part of the
finds application. "In the instant case, the actual situs of the shares of stock
appellant a further refinement in the catholicity of its condemnation of such
is in the Philippines, the corporation being domiciled [here]." To the force of
judicial technique. If ever an occasion did call for the employment of a legal
the above undeniable proposition, not even appellant is insensible. It does
fiction to put an end to the anomalous situation of a valid judicial order being
not dispute it. Nor could it successfully do so even if it were so minded.
disregarded with apparent impunity, this is it. What is thus most obvious is
2. In the face of such incontrovertible doctrines that argue in a rather that this particular alleged error does not carry persuasion.
conclusive fashion for the legality of the challenged order, how does
3. Appellant Benguet Consolidated, Inc. would seek to bolster the above
appellant, Benguet Consolidated, Inc. propose to carry the extremely heavy
contention by its invoking one of the provisions of its by-laws which would
burden of persuasion of precisely demonstrating the contrary? It would
set forth the procedure to be followed in case of a lost, stolen or destroyed
assign as the basic error allegedly committed by the lower court its
stock certificate; it would stress that in the event of a contest or the
"considering as lost the stock certificates covering 33,002 shares of Benguet
pendency of an action regarding ownership of such certificate or certificates
belonging to the deceased Idonah Slade Perkins, ..."9 More specifically,
of stock allegedly lost, stolen or destroyed, the issuance of a new certificate or
appellant would stress that the "lower court could not "consider as lost" the
certificates would await the "final decision by [a] court regarding the
stock certificates in question when, as a matter of fact, his Honor the trial
ownership [thereof]."15
Judge knew, and does know, and it is admitted by the appellee, that the said
stock certificates are in existence and are today in the possession of the Such reliance is misplaced. In the first place, there is no such occasion to
domiciliary administrator in New York."10 apply such by-law. It is admitted that the foreign domiciliary administrator
did not appeal from the order now in question. Moreover, there is likewise the
There may be an element of fiction in the above view of the lower court. That
express admission of appellant that as far as it is concerned, "it is immaterial
certainly does not suffice to call for the reversal of the appealed order. Since
... who is entitled to the possession of the stock certificates ..." Even if such
there is a refusal, persistently adhered to by the domiciliary administrator in
were not the case, it would be a legal absurdity to impart to such a provision
New York, to deliver the shares of stocks of appellant corporation owned by
conclusiveness and finality. Assuming that a contrariety exists between the
above by-law and the command of a court decree, the latter is to be followed.
It is understandable, as Cardozo pointed out, that the Constitution overrides
a statute, to which, however, the judiciary must yield deference, when
appropriately invoked and deemed applicable. It would be most highly
unorthodox, however, if a corporate by-law would be accorded such a high
estate in the jural order that a court must not only take note of it but yield to
its alleged controlling force.
The fear of appellant of a contingent liability with which it could be saddled
unless the appealed order be set aside for its inconsistency with one of its by-
laws does not impress us. Its obedience to a lawful court order certainly
constitutes a valid defense, assuming that such apprehension of a possible
court action against it could possibly materialize. Thus far, nothing in the
circumstances as they have developed gives substance to such a fear.
Gossamer possibilities of a future prejudice to appellant do not suffice to
nullify the lawful exercise of judicial authority.
4. What is more the view adopted by appellant Benguet Consolidated, Inc. is
fraught with implications at war with the basic postulates of corporate
theory.
We start with the undeniable premise that, "a corporation is an artificial
being created by operation of law...."16 It owes its life to the state, its birth
being purely dependent on its will. As Berle so aptly stated: "Classically, a
corporation was conceived as an artificial person, owing its existence through
creation by a sovereign power."17 As a matter of fact, the statutory language
employed owes much to Chief Justice Marshall, who in the Dartmouth
College decision defined a corporation precisely as "an artificial being,
invisible, intangible, and existing only in contemplation of law."18
The well-known authority Fletcher could summarize the matter thus: "A
corporation is not in fact and in reality a person, but the law treats it as
though it were a person by process of fiction, or by regarding it as an
artificial person distinct and separate from its individual stockholders.... It
owes its existence to law. It is an artificial person created by law for certain
specific purposes, the extent of whose existence, powers and liberties is fixed
by its charter."19 Dean Pound's terse summary, a juristic person, resulting
from an association of human beings granted legal personality by the state,
puts the matter neatly.20
There is thus a rejection of Gierke's genossenchaft theory, the basic theme of
which to quote from Friedmann, "is the reality of the group as a social and
legal entity, independent of state recognition and concession."21 A corporation
as known to Philippine jurisprudence is a creature without any existence
until it has received the imprimatur of the state according to law. It is
logically inconceivable therefore that it will have rights and privileges of a
higher priority than that of its creator. More than that, it cannot legitimately
refuse to yield obedience to acts of its state organs, certainly not excluding
the judiciary, whenever called upon to do so.
As a matter of fact, a corporation once it comes into being, following
American law still of persuasive authority in our jurisdiction, comes more
often within the ken of the judiciary than the other two coordinate branches.
It institutes the appropriate court action to enforce its right. Correlatively, it
is not immune from judicial control in those instances, where a duty under
the law as ascertained in an appropriate legal proceeding is cast upon it.
To assert that it can choose which court order to follow and which to
disregard is to confer upon it not autonomy which may be conceded but
license which cannot be tolerated. It is to argue that it may, when so minded,
overrule the state, the source of its very existence; it is to contend that what
any of its governmental organs may lawfully require could be ignored at will.
So extravagant a claim cannot possibly merit approval.
5. One last point. In Viloria v. Administrator of Veterans Affairs,22 it was
shown that in a guardianship proceedings then pending in a lower court, the
United States Veterans Administration filed a motion for the refund of a
certain sum of money paid to the minor under guardianship, alleging that
the lower court had previously granted its petition to consider the deceased
father as not entitled to guerilla benefits according to a determination arrived
at by its main office in the United States. The motion was denied. In seeking
a reconsideration of such order, the Administrator relied on an American
federal statute making his decisions "final and conclusive on all questions of
law or fact" precluding any other American official to examine the matter
anew, "except a judge or judges of the United States court."23 Reconsideration
was denied, and the Administrator appealed.
In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus:
"We are of the opinion that the appeal should be rejected. The provisions of
the U.S. Code, invoked by the appellant, make the decisions of the U.S.
Veterans' Administrator final and conclusive when made on claims property
submitted to him for resolution; but they are not applicable to the present
case, where the Administrator is not acting as a judge but as a litigant. There
is a great difference between actions against the Administrator (which must
be filed strictly in accordance with the conditions that are imposed by the
Veterans' Act, including the exclusive review by United States courts), and
those actions where the Veterans' Administrator seeks a remedy from our
courts and submits to their jurisdiction by filing actions therein. Our
attention has not been called to any law or treaty that would make the
findings of the Veterans' Administrator, in actions where he is a party,
conclusive on our courts. That, in effect, would deprive our tribunals of
judicial discretion and render them mere subordinate instrumentalities of the
Veterans' Administrator."
It is bad enough as the Viloria decision made patent for our judiciary to
accept as final and conclusive, determinations made by foreign governmental
agencies. It is infinitely worse if through the absence of any coercive power by
our courts over juridical persons within our jurisdiction, the force and
effectivity of their orders could be made to depend on the whim or caprice of
alien entities. It is difficult to imagine of a situation more offensive to the
dignity of the bench or the honor of the country.
Yet that would be the effect, even if unintended, of the proposition to which
appellant Benguet Consolidated seems to be firmly committed as shown by
its failure to accept the validity of the order complained of; it seeks its
reversal. Certainly we must at all pains see to it that it does not succeed. The
deplorable consequences attendant on appellant prevailing attest to the
necessity of negative response from us. That is what appellant will get.
That is all then that this case presents. It is obvious why the appeal cannot
succeed. It is always easy to conjure extreme and even oppressive
possibilities. That is not decisive. It does not settle the issue. What carries
weight and conviction is the result arrived at, the just solution obtained,
grounded in the soundest of legal doctrines and distinguished by its
correspondence with what a sense of realism requires. For through the
appealed order, the imperative requirement of justice according to law is
satisfied and national dignity and honor maintained.
WHEREFORE, the appealed order of the Honorable Arsenio Santos, the
Judge of the Court of First Instance, dated May 18, 1964, is affirmed. With
costs against oppositor-appelant Benguet Consolidated, Inc.
Makalintal, Zaldivar and Capistrano, JJ., concur.
Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez and Castro, JJ., concur in the
result.
[G.R. Nos. 84132-33 : December 10, 1990.]
192 SCRA 257
NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX, INC.,
Petitioners, vs. PHILIPPINE VETERANS BANK, THE EX-OFFICIO
SHERIFF and GODOFREDO QUILING, in his capacity as Deputy Sheriff
of Calamba, Laguna, Respondents.
DECISION
CRUZ, J.:
This case involves the constitutionality of a presidential decree which, like all
other issuances of President Marcos during his regime, was at that time
regarded as sacrosanct. It is only now, in a freer atmosphere, that his acts
are being tested by the touchstone of the fundamental law that even then
was supposed to limit presidential action.: rd
The particular enactment in question is Pres. Decree No. 1717, which
ordered the rehabilitation of the Agrix Group of Companies to be
administered mainly by the National Development Company. The law
outlined the procedure for filing claims against the Agrix companies and
created a Claims Committee to process these claims. Especially relevant to
this case, and noted at the outset, is Sec. 4(1) thereof providing that "all
mortgages and other liens presently attaching to any of the assets of the
dissolved corporations are hereby extinguished."
Earlier, the Agrix Marketing, Inc. (AGRIX) had executed in favor of private
respondent Philippine Veterans Bank a real estate mortgage dated July 7,
1978, over three (3) parcels of land situated in Los Baños, Laguna. During
the existence of the mortgage, AGRIX went bankrupt. It was for the expressed
purpose of salvaging this and the other Agrix companies that the
aforementioned decree was issued by President Marcos.
Pursuant thereto, the private respondent filed a claim with the AGRIX Claims
Committee for the payment of its loan credit. In the meantime, the New Agrix,
Inc. and the National Development Company, petitioners herein, invoking
Sec. 4 (1) of the decree, filed a petition with the Regional Trial Court of
Calamba, Laguna, for the cancellation of the mortgage lien in favor of the
private respondent. For its part, the private respondent took steps to
extrajudicially foreclose the mortgage, prompting the petitioners to file a
second case with the same court to stop the foreclosure. The two cases were
consolidated.
After the submission by the parties of their respective pleadings, the trial
court rendered the impugned decision. Judge Francisco Ma. Guerrero
annulled not only the challenged provision, viz., Sec. 4 (1), but the entire
Pres. Decree No. 1717 on the grounds that: (1) the presidential exercise of
legislative power was a violation of the principle of separation of powers; (2)
the law impaired the obligation of contracts; and (3) the decree violated the
equal protection clause. The motion for reconsideration of this decision
having been denied, the present petition was filed.: rd
The petition was originally assigned to the Third Division of this Court but
because of the constitutional questions involved it was transferred to the
Court en banc. On August 30, 1988, the Court granted the petitioner's
prayer for a temporary restraining order and instructed the respondents to
cease and desist from conducting a public auction sale of the lands in
question. After the Solicitor General and the private respondent had filed
their comments and the petitioners their reply, the Court gave due course to
the petition and ordered the parties to file simultaneous memoranda. Upon
compliance by the parties, the case was deemed submitted.
The petitioners contend that the private respondent is now estopped from
contesting the validity of the decree. In support of this contention, it cites the
recent case of Mendoza v. Agrix Marketing, Inc., 1 where the constitutionality
of Pres. Decree No. 1717 was also raised but not resolved. The Court, after
noting that the petitioners had already filed their claims with the AGRIX
Claims Committee created by the decree, had simply dismissed the petition
on the ground of estoppel.
The petitioners stress that in the case at bar the private respondent also
invoked the provisions of Pres. Decree No. 1717 by filing a claim with the
AGRIX Claims Committee. Failing to get results, it sought to foreclose the
real estate mortgage executed by AGRIX in its favor, which had been
extinguished by the decree. It was only when the petitioners challenged the
foreclosure on the basis of Sec. 4 (1) of the decree, that the private
respondent attacked the validity of the provision. At that stage, however,
consistent with Mendoza, the private respondent was already estopped from
questioning the constitutionality of the decree.
The Court does not agree that the principle of estoppel is applicable.
It is not denied that the private respondent did file a claim with the AGRIX
Claims Committee pursuant to this decree. It must be noted, however, that
this was done in 1980, when President Marcos was the absolute ruler of this
country and his decrees were the absolute law. Any judicial challenge to
them would have been futile, not to say foolhardy. The private respondent, no
less than the rest of the nation, was aware of that reality and knew it had no
choice under the circumstances but to conform.: nad
It is true that there were a few venturesome souls who dared to question the
dictator's decisions before the courts of justice then. The record will show,
however, that not a single act or issuance of President Marcos was ever
declared unconstitutional, not even by the highest court, as long as he was in
power. To rule now that the private respondent is estopped for having abided
with the decree instead of boldly assailing it is to close our eyes to a cynical
fact of life during that repressive time.
This case must be distinguished from Mendoza, where the petitioners, after
filing their claims with the AGRIX Claims Committee, received in settlement
thereof shares of stock valued at P40,000.00 without protest or reservation.
The herein private respondent has not been paid a single centavo on its
claim, which was kept pending for more than seven years for alleged lack of
supporting papers. Significantly, the validity of that claim was not questioned
by the petitioner when it sought to restrain the extrajudicial foreclosure of
the mortgage by the private respondent. The petitioner limited itself to the
argument that the private respondent was estopped from questioning the
decree because of its earlier compliance with its provisions.
Independently of these observations, there is the consideration that an
affront to the Constitution cannot be allowed to continue existing simply
because of procedural inhibitions that exalt form over substance.
The Court is especially disturbed by Section 4(1) of the decree, quoted above,
extinguishing all mortgages and other liens attaching to the assets of AGRIX.
It also notes, with equal concern, the restriction in Subsection (ii) thereof that
all "unsecured obligations shall not bear interest" and in Subsection (iii) that
"all accrued interests, penalties or charges as of date hereof pertaining to the
obligations, whether secured or unsecured, shall not be recognized."
These provisions must be read with the Bill of Rights, where it is clearly
provided in Section 1 that "no person shall be deprived of life, liberty or
property without due course of law nor shall any person be denied the equal
protection of the law" and in Section 10 that "no law impairing the obligation
of contracts shall be passed."
In defending the decree, the petitioners argue that property rights, like all
rights, are subject to regulation under the police power for the promotion of
the common welfare. The contention is that this inherent power of the state
may be exercised at any time for this purpose so long as the taking of the
property right, even if based on contract, is done with due process of law.
This argument is an over-simplification of the problem before us. The police
power is not a panacea for all constitutional maladies. Neither does its mere
invocation conjure an instant and automatic justification for every act of the
government depriving a person of his life, liberty or property.
A legislative act based on the police power requires the concurrence of a
lawful subject and a lawful method. In more familiar words, a) the interests
of the public generally, as distinguished from those of a particular class,
should justify the interference of the state; and b) the means employed are
reasonably necessary for the accomplishment of the purpose and not unduly
oppressive upon individuals. 2
Applying these criteria to the case at bar, the Court finds first of all that the
interests of the public are not sufficiently involved to warrant the interference
of the government with the private contracts of AGRIX. The decree speaks
vaguely of the "public, particularly the small investors," who would be
prejudiced if the corporation were not to be assisted. However, the record
does not state how many there are of such investors, and who they are, and
why they are being preferred to the private respondent and other creditors of
AGRIX with vested property rights.:-cralaw
The public interest supposedly involved is not identified or explained. It has
not been shown that by the creation of the New Agrix, Inc. and the extinction
of the property rights of the creditors of AGRIX, the interests of the public as
a whole, as distinguished from those of a particular class, would be promoted
or protected. The indispensable link to the welfare of the greater number has
not been established. On the contrary, it would appear that the decree was
issued only to favor a special group of investors who, for reasons not given,
have been preferred to the legitimate creditors of AGRIX.
Assuming there is a valid public interest involved, the Court still finds that
the means employed to rehabilitate AGRIX fall far short of the requirement
that they shall not be unduly oppressive. The oppressiveness is patent on the
face of the decree. The right to property in all mortgages, liens, interests,
penalties and charges owing to the creditors of AGRIX is arbitrarily
destroyed. No consideration is paid for the extinction of the mortgage rights.
The accrued interests and other charges are simply rejected by the decree.
The right to property is dissolved by legislative fiat without regard to the
private interest violated and, worse, in favor of another private interest.
A mortgage lien is a property right derived from contract and so comes under
the protection of the Bill of Rights. So do interests on loans, as well as
penalties and charges, which are also vested rights once they accrue. Private
property cannot simply be taken by law from one person and given to
another without compensation and any known public purpose. This is plain
arbitrariness and is not permitted under the Constitution.
And not only is there arbitrary taking, there is discrimination as well. In
extinguishing the mortgage and other liens, the decree lumps the secured
creditors with the unsecured creditors and places them on the same level in
the prosecution of their respective claims. In this respect, all of them are
considered unsecured creditors. The only concession given to the secured
creditors is that their loans are allowed to earn interest from the date of the
decree, but that still does not justify the cancellation of the interests earned
before that date. Such interests, whether due to the secured or the
unsecured creditors, are all extinguished by the decree. Even assuming such
cancellation to be valid, we still cannot see why all kinds of creditors,
regardless of security, are treated alike.
Under the equal protection clause, all persons or things similarly situated
must be treated alike, both in the privileges conferred and the obligations
imposed. Conversely, all persons or things differently situated should be
treated differently. In the case at bar, persons differently situated are
similarly treated, in disregard of the principle that there should be equality
only among equals.- nad
One may also well wonder why AGRIX was singled out for government help,
among other corporations where the stockholders or investors were also
swindled. It is not clear why other companies entitled to similar concern were
not similarly treated. And surely, the stockholders of the private respondent,
whose mortgage lien had been cancelled and legitimate claims to accrued
interests rejected, were no less deserving of protection, which they did not
get. The decree operated, to use the words of a celebrated case, 3 "with an
evil eye and an uneven hand."
On top of all this, New Agrix, Inc. was created by special decree
notwithstanding the provision of Article XIV, Section 4 of the 1973
Constitution, then in force, that:
SEC. 4. The Batasang Pambansa shall not, except by general law, provide for
the formation, organization, or regulation of private corporations, unless
such corporations are owned or controlled by the Government or any
subdivision or instrumentality thereof. 4
The new corporation is neither owned nor controlled by the government. The
National Development Corporation was merely required to extend a loan of
not more than P10,000,000.00 to New Agrix, Inc. Pending payment thereof,
NDC would undertake the management of the corporation, but with the
obligation of making periodic reports to the Agrix board of directors. After
payment of the loan, the said board can then appoint its own management.
The stocks of the new corporation are to be issued to the old investors and
stockholders of AGRIX upon proof of their claims against the abolished
corporation. They shall then be the owners of the new corporation. New
Agrix, Inc. is entirely private and so should have been organized under the
Corporation Law in accordance with the above-cited constitutional provision.
The Court also feels that the decree impairs the obligation of the contract
between AGRIX and the private respondent without justification. While it is
true that the police power is superior to the impairment clause, the principle
will apply only where the contract is so related to the public welfare that it
will be considered congenitally susceptible to change by the legislature in the
interest of the greater number. 5 Most present-day contracts are of that
nature. But as already observed, the contracts of loan and mortgage executed
by AGRIX are purely private transactions and have not been shown to be
affected with public interest. There was therefore no warrant to amend their
provisions and deprive the private respondent of its vested property rights.
It is worth noting that only recently in the case of the Development Bank of
the Philippines v. NLRC, 6 we sustained the preference in payment of a
mortgage creditor as against the argument that the claims of laborers should
take precedence over all other claims, including those of the government. In
arriving at this ruling, the Court recognized the mortgage lien as a property
right protected by the due process and contract clauses notwithstanding the
argument that the amendment in Section 110 of the Labor Code was a
proper exercise of the police power.: nad
The Court reaffirms and applies that ruling in the case at bar.
Our finding, in sum, is that Pres. Decree No. 1717 is an invalid exercise of
the police power, not being in conformity with the traditional requirements of
a lawful subject and a lawful method. The extinction of the mortgage and
other liens and of the interest and other charges pertaining to the legitimate
creditors of AGRIX constitutes taking without due process of law, and this is
compounded by the reduction of the secured creditors to the category of
unsecured creditors in violation of the equal protection clause. Moreover, the
new corporation, being neither owned nor controlled by the Government,
should have been created only by general and not special law. And insofar as
the decree also interferes with purely private agreements without any
demonstrated connection with the public interest, there is likewise an
impairment of the obligation of the contract.
With the above pronouncements, we feel there is no more need to rule on the
authority of President Marcos to promulgate Pres. Decree No. 1717 under
Amendment No. 6 of the 1973 Constitution. Even if he had such authority,
the decree must fall just the same because of its violation of the Bill of
Rights.
WHEREFORE, the petition is DISMISSED. Pres. Decree No. 1717 is declared
UNCONSTITUTIONAL. The temporary restraining order dated August 30,
1988, is LIFTED. Costs against the petitioners.- nad
SO ORDERED.
Fernan (C.J.), Narvasa, Gutierrez, Jr., Paras, Gancayco Padilla, Bidin,
Sarmiento, Griño-Aquino, Medialdea and Regalado, JJ., concur.
Melencio-Herrera, J., In the result. In Dumlao v. COMELEC, 95 SCRA
392 (1980), a portion of the second paragraph of section 4 of Batas
Pambansa Blg. 52 was declared null and void for being
unconstitutional.
Feliciano, J., is on leave.
G.R. No. 120077 October 13, 2000
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J.
DIOSANA AND MARCELO G. SANTOS, respondents.
PARDO, J.:
The case before the Court is a petition for certiorari1 to annul the following
orders of the National Labor Relations Commission (hereinafter referred to as
"NLRC") for having been issued without or with excess jurisdiction and with
grave abuse of discretion:2
(1) Order of May 31, 1993.3 Reversing and setting aside its
earlier resolution of August 28, 1992.4 The questioned order
 declared that the NLRC, not the Philippine Overseas
Employment Administration (hereinafter referred to as
"POEA"), had jurisdiction over private respondent's
complaint;
(2) Decision of December 15, 1994.5 Directing petitioners to
jointly and severally pay private respondent twelve thousand
and six hundred dollars (US$ 12,600.00) representing
salaries for the unexpired portion of his contract; three
thousand six hundred dollars (US$3,600.00) as extra four
months salary for the two (2) year period of his contract,
three thousand six hundred dollars (US$3,600.00) as "14th
month pay" or a total of nineteen thousand and eight
hundred dollars (US$19,800.00) or its peso equivalent and
attorney's fees amounting to ten percent (10%) of the total
award; and
(3) Order of March 30, 1995.6 Denying the motion for
reconsideration of the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter referred to as
"Santos") was an overseas worker employed as a printer at the Mazoon
Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was
directly hired by the Palace Hotel, Beijing, People's Republic of China and
later terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to as
"MHC") and the Manila Hotel International Company, Limited (hereinafter
referred to as "MHICL").
When the case was filed in 1990, MHC was still a government-owned and
controlled corporation duly organized and existing under the laws of the
Philippines.
MHICL is a corporation duly organized and existing under the laws of Hong
Kong.7 MHC is an "incorporator" of MHICL, owning 50% of its capital stock.8
By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu
Company Limited), MHICL10 trained the personnel and staff of the Palace
Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the Sultanate of
Oman, respondent Santos received a letter dated May 2, 1988 from Mr.
Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr.
Schmidt informed respondent Santos that he was recommended by one
Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer, but with
a higher monthly salary and increased benefits. The position was slated to
open on October 1, 1988.11
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his
acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a
ready to sign employment contract to respondent Santos. Mr. Henk advised
respondent Santos that if the contract was acceptable, to return the same to
Mr. Henk in Manila, together with his passport and two additional pictures
for his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon Printing
Press, effective June 30, 1988, under the pretext that he was needed at home
to help with the family's piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and
acknowledged Mr. Henk's letter. Respondent Santos enclosed four (4) signed
copies of the employment contract (dated June 4, 1988) and notified them
that he was going to arrive in Manila during the first week of July 1988.
The employment contract of June 4, 1988 stated that his employment would
commence September 1, 1988 for a period of two years.12 It provided for a
monthly salary of nine hundred dollars (US$900.00) net of taxes, payable
fourteen (14) times a year.13
On June 30, 1988, respondent Santos was deemed resigned from the Mazoon
Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He started
to work at the Palace Hotel.14
Subsequently, respondent Santos signed an amended "employment
agreement" with the Palace Hotel, effective November 5, 1988. In the
contract, Mr. Shmidt represented the Palace Hotel. The Vice President
(Operations and Development) of petitioner MHICL Miguel D. Cergueda
signed the employment agreement under the word "noted".
From June 8 to 29, 1989, respondent Santos was in the Philippines on
vacation leave. He returned to China and reassumed his post on July 17,
1989.
On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna
suggested in a handwritten note that respondent Santos be given one (1)
month notice of his release from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by letter
signed by Mr. Shmidt that his employment at the Palace Hotel print shop
would be terminated due to business reverses brought about by the political
upheaval in China.15 We quote the letter:16
"After the unfortunate happenings in China and especially
Beijing (referring to Tiannamen Square incidents), our
business has been severely affected. To reduce expenses, we
will not open/operate printshop for the time being.
"We sincerely regret that a decision like this has to be made,
but rest assured this does in no way reflect your past
performance which we found up to our expectations."
 "Should a turnaround in the business happen, we will
contact you directly and give you priority on future
assignment."
On September 5, 1989, the Palace Hotel terminated the employment of
respondent Santos and paid all benefits due him, including his plane fare
back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the Philippines.
On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave
wrote Mr. Shmidt, demanding full compensation pursuant to the employment
agreement.
On November 11, 1989, Mr. Shmidt replied, to wit:17
His service with the Palace Hotel, Beijing was not abruptly
terminated but we followed the one-month notice clause and
Mr. Santos received all benefits due him.
"For your information the Print Shop at the Palace Hotel is
still not operational and with a low business outlook,
retrenchment in various departments of the hotel is going on
which is a normal management practice to control costs.
"When going through the latest performance ratings, please
also be advised that his performance was below average and
a Chinese National who is doing his job now shows a better
approach.
"In closing, when Mr. Santos received the letter of notice, he
hardly showed up for work but still enjoyed free
accommodation/laundry/meals up to the day of his
departure."
On February 20, 1990, respondent Santos filed a complaint for illegal
dismissal with the Arbitration Branch, National Capital Region, National
Labor Relations Commission (NLRC). He prayed for an award of nineteen
thousand nine hundred and twenty three dollars (US$19,923.00) as actual
damages, forty thousand pesos (P40,000.00) as exemplary damages and
attorney's fees equivalent to 20% of the damages prayed for. The complaint
named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not served with summons and neither
participated in the proceedings before the Labor Arbiter.18
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case
against petitioners, thus:19
"WHEREFORE, judgment is hereby rendered:
"1. directing all the respondents to pay complainant jointly
and severally;
"a) $20,820 US dollars or its equivalent in Philippine
currency as unearned salaries;
"b) P50,000.00 as moral damages;
"c) P40,000.00 as exemplary damages; and
"d) Ten (10) percent of the total award as attorney's
fees.
"SO ORDERED."
On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA,
not the NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating:20
"WHEREFORE, let the appealed Decision be, as it is hereby,
declared null and void for want of jurisdiction. Complainant
is hereby enjoined to file his complaint with the POEA.
"SO ORDERED."
On September 18, 1992, respondent Santos moved for reconsideration of the
afore-quoted resolution. He argued that the case was not cognizable by the
POEA as he was not an "overseas contract worker."21
On May 31, 1993, the NLRC granted the motion and reversed itself. The
NLRC directed Labor Arbiter Emerson Tumanon to hear the case on the
question of whether private respondent was retrenched or dismissed.22
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings
based on the testimonial and documentary evidence presented to and heard
by him.23
Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the
National Capital Region, Arbitration Branch, and the case was transferred to
Labor Arbiter Jose G. de Vera.24
On November 25, 1994, Labor Arbiter de Vera submitted his report.25 He
found that respondent Santos was illegally dismissed from employment and
recommended that he be paid actual damages equivalent to his salaries for
the unexpired portion of his contract.26
On December 15, 1994, the NLRC ruled in favor of private respondent, to
wit:27
"WHEREFORE, finding that the report and recommendations
of Arbiter de Vera are supported by substantial evidence,
judgment is hereby rendered, directing the respondents to
jointly and severally pay complainant the following computed
contractual benefits: (1) US$12,600.00 as salaries for the
unexpired portion of the parties' contract; (2) US$3,600.00
as extra four (4) months salary for the two (2) years period
(sic) of the parties' contract; (3) US$3,600.00 as "14th month
pay" for the aforesaid two (2) years contract stipulated by the
parties or a total of US$19,800.00 or its peso equivalent,
plus (4) attorney's fees of 10% of complainant's total award.
"SO ORDERED."
On February 2, 1995, petitioners filed a motion for reconsideration arguing
that Labor Arbiter de Vera's recommendation had no basis in law and in
fact.28
On March 30, 1995, the NLRC denied the motion for reconsideration.29
Hence, this petition.30
On October 9, 1995, petitioners filed with this Court an urgent motion for the
issuance of a temporary restraining order and/or writ of preliminary
injunction and a motion for the annulment of the entry of judgment of the
NLRC dated July 31, 1995.31
On November 20, 1995, the Court denied petitioner's urgent motion. The
Court required respondents to file their respective comments, without giving
due course to the petition.32
On March 8, 1996, the Solicitor General filed a manifestation stating that
after going over the petition and its annexes, they can not defend and sustain
the position taken by the NLRC in its assailed decision and orders. The
Solicitor General prayed that he be excused from filing a comment on behalf
of the NLRC33
On April 30,1996, private respondent Santos filed his comment.34
On June 26, 1996, the Court granted the manifestation of the Solicitor
General and required the NLRC to file its own comment to the petition.35
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign
jurisdictions and the case involves purely foreign elements. The only link that
the Philippines has with the case is that respondent Santos is a Filipino
citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases
involving our citizens can be tried here.
The employment contract. — Respondent Santos was hired directly by the
Palace Hotel, a foreign employer, through correspondence sent to the
Sultanate of Oman, where respondent Santos was then employed. He was
hired without the intervention of the POEA or any authorized recruitment
agency of the government.36
Under the rule of forum non conveniens, a Philippine court or agency may
assume jurisdiction over the case if it chooses to do so provided: (1) that the
Philippine court is one to which the parties may conveniently resort to; (2)
that the Philippine court is in a position to make an intelligent decision as to
the law and the facts; and (3) that the Philippine court has or is likely to have
power to enforce its decision.37 The conditions are unavailing in the case at
bar.
Not Convenient. — We fail to see how the NLRC is a convenient forum given
that all the incidents of the case — from the time of recruitment, to
employment to dismissal occurred outside the Philippines. The inconvenience
is compounded by the fact that the proper defendants, the Palace Hotel and
MHICL are not nationals of the Philippines. Neither .are they "doing business
in the Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk
are non-residents of the Philippines.
No power to determine applicable law. — Neither can an intelligent decision
be made as to the law governing the employment contract as such was
perfected in foreign soil. This calls to fore the application of the principle of
lex loci contractus (the law of the place where the contract was made).38
The employment contract was not perfected in the Philippines. Respondent
Santos signified his acceptance by writing a letter while he was in the
Republic of Oman. This letter was sent to the Palace Hotel in the People's
Republic of China.
No power to determine the facts. — Neither can the NLRC determine the facts
surrounding the alleged illegal dismissal as all acts complained of took place
in Beijing, People's Republic of China. The NLRC was not in a position to
determine whether the Tiannamen Square incident truly adversely affected
operations of the Palace Hotel as to justify respondent Santos' retrenchment.
Principle of effectiveness, no power to execute decision. — Even assuming that
a proper decision could be reached by the NLRC, such would not have any
binding effect against the employer, the Palace Hotel. The Palace Hotel is a
corporation incorporated under the laws of China and was not even served
with summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power to solve
controversies involving foreign employers. Neither are we saying that we do
not have power over an employment contract executed in a foreign country. If
Santos were an "overseas contract worker", a Philippine forum, specifically the
POEA, not the NLRC, would protect him.39 He is not an "overseas contract
worker" a fact which he admits with conviction.40
Even assuming that the NLRC was the proper forum, even on the merits, the
NLRC's decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction over the
case, and (2) that MHICL was liable for Santos' retrenchment, still MHC, as a
separate and distinct juridical entity cannot be held liable.
True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its
capital stock. However, this is not enough to pierce the veil of corporate
fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to
when the corporate fiction is used to defeat public convenience, justify
wrong, protect fraud or defend a crime. 41 It is done only when a corporation
is a mere alter ego or business conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals,42 we held that "the mere
ownership by a single stockholder or by another corporation of all or nearly
all of the capital stock of a corporation is not of itself a sufficient reason for
disregarding the fiction of separate corporate personalities."
The tests in determining whether the corporate veil may be pierced are: First,
the defendant must have control or complete domination of the other
corporation's finances, policy and business practices with regard to the
transaction attacked. There must be proof that the other corporation had no
separate mind, will or existence with respect the act complained of. Second,
control must be used by the defendant to commit fraud or wrong. Third, the
aforesaid control or breach of duty must be the proximate cause of the injury
or loss complained of. The absence of any of the elements prevents the
piercing of the corporate veil.43
It is basic that a corporation has a personality separate and distinct from
those composing it as well as from that of any other legal entity to which it
may be related.44 Clear and convincing evidence is needed to pierce the veil of
corporate fiction.45 In this case, we find no evidence to show that MHICL and
MHC are one and the same entity.
III. MHICL not Liable
Respondent Santos predicates MHICL's liability on the fact that MHICL
"signed" his employment contract with the Palace Hotel. This fact fails to
persuade us.
First, we note that the Vice President (Operations and Development) of
MHICL, Miguel D. Cergueda signed the employment contract as a mere
witness. He merely signed under the word "noted".
When one "notes" a contract, one is not expressing his agreement or
approval, as a party would.46 In Sichangco v. Board of Commissioners of
Immigration,47 the Court recognized that the term "noted" means that the
person so noting has merely taken cognizance of the existence of an act or
declaration, without exercising a judicious deliberation or rendering a
decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the document. The
"witnessing part" of the document is that which, "in a deed or other formal
instrument is that part which comes after the recitals, or where there are no
recitals, after the parties (emphasis ours)."48 As opposed to a party to a
contract, a witness is simply one who, "being present, personally sees or
perceives a thing; a beholder, a spectator, or eyewitness."49 One who "notes"
something just makes a "brief written statement"50 a memorandum or
observation.
Second, and more importantly, there was no existing employer-employee
relationship between Santos and MHICL. In determining the existence of an
employer-employee relationship, the following elements are considered:51
"(1) the selection and engagement of the employee;
"(2) the payment of wages;
"(3) the power to dismiss; and
"(4) the power to control employee's conduct."
MHICL did not have and did not exercise any of the aforementioned powers.
It did not select respondent Santos as an employee for the Palace Hotel. He
was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not
engage respondent Santos to work. The terms of employment were negotiated
and finalized through correspondence between respondent Santos, Mr.
Schmidt and Mr. Henk, who were officers and representatives of the Palace
Hotel and not MHICL. Neither did respondent Santos adduce any proof that
MHICL had the power to control his conduct. Finally, it was the Palace Hotel,
through Mr. Schmidt and not MHICL that terminated respondent Santos'
services.
Neither is there evidence to suggest that MHICL was a "labor-only
contractor."52 There is no proof that MHICL "supplied" respondent Santos or
even referred him for employment to the Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel and MHICL are
one and the same entity. The fact that the Palace Hotel is a member of the
"Manila Hotel Group" is not enough to pierce the corporate veil between
MHICL and the Palace Hotel.
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and considering
further that no employer-employee relationship existed between MHICL, MHC
and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no
jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-90.
Labor Arbiters have exclusive and original jurisdiction only over the
following:53
"1. Unfair labor practice cases;
"2. Termination disputes;
"3. If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay,
hours of work and other terms and conditions of
employment;
"4. Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
"5. Cases arising from any violation of Article 264 of this
Code, including questions involving legality of strikes and
lockouts; and
"6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for
reinstatement."
In all these cases, an employer-employee relationship is an indispensable
jurisdictional requirement.
The jurisdiction of labor arbiters and the NLRC under Article 217 of the
Labor Code is limited to disputes arising from an employer-employee
relationship which can be resolved by reference to the Labor Code, or other
labor statutes, or their collective bargaining agreements.54
"To determine which body has jurisdiction over the present controversy, we
rely on the sound judicial principle that jurisdiction over the subject matter
is conferred by law and is determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the claims
asserted therein."55
The lack of jurisdiction of the Labor Arbiter was obvious from the allegations
of the complaint. His failure to dismiss the case amounts to grave abuse of
discretion.56
V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for certiorari and
ANNULS the orders and resolutions of the National Labor Relations
Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in
NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).
No costs.
SO ORDERED.
Davide, Jr., C .J ., Puno, Kapunan, Pardo and Ynares-Santiago, JJ ., concur.
[G.R. No. 128690. January 21, 1999]
ABS-CBN BROADCASTING CORPORATION, petitioners, vs. HONORABLE
COURT OF APPEALS, REPUBLIC BROADCASTING CORP., VIVA
PRODUCTIONS, INC., and VICENTE DEL ROSARIO, respondents.
DECISION
DAVIDE, JR., C.J.:
In this petition for review on certiorari, petitioners ABS-CBN
Broadcasting Corp. (hereinafter ABS-CBN) seeks to reverse and set aside the
decision of 31 October 1996 and the resolution of 10 March 1997 of the
Court of Appeals in CA-G.R. CV No. 44125. The former affirmed with
modification the decision of 28 April 1993 of the Regional Trial Court (RTC) of
Quezon City, Branch 80, in Civil Case No. Q-12309. The latter denied the
motion to reconsider the decision of 31 October 1996.
The antecedents, as found by the RTC and adopted by the Court of
Appeals, are as follows:
In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement
(Exh. A) whereby Viva gave ABS-CBN an exclusive right to exhibit some Viva
films. Sometime in December 1991, in accordance with paragraph 2.4 [sic] of
said agreement stating that-
1.4 ABS-CBN shall have the right of first refusal to the next twenty-
four (24) Viva films for TV telecast under such terms as may be agreed
upon by the parties hereto, provided, however, that such right shall be
exercised by ABS-CBN from the actual offer in writing.
Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-
president Charo Santos-Concio, a list of three (3) film packages (36 title) from
which ABS-CBN may exercise its right of first refusal under the afore-said
agreement (Exhs. 1 par. 2, 2, 2-A and 2-B Viva). ABS-CBN, however through
Mrs. Concio, can tick off only ten (10) titles (from the list) we can purchase
(Exh. 3 Viva) and therefore did not accept said list (TSN, June 8, 1992, pp. 9-
10). The titles ticked off by Mrs. Concio are not the subject of the case at bar
except the film Maging Sino Ka Man.
For further enlightenment, this rejection letter dated January 06, 1992
(Exh 3 Viva) is hereby quoted:
6 January 1992
Dear Vic,
This is not a very formal business letter I am writing to you as I
would like to express my difficulty in recommending the purchase of the
three film packages you are offering ABS-CBN.
From among the three packages I can only tick off 10 titles we can
purchase. Please see attached. I hope you will understand my position.
Most of the action pictures in the list do not have big action stars in the
cast. They are not for primetime. In line with this I wish to mention that
I have not scheduled for telecast several action pictures in our very first
contract because of the cheap production value of these movies as well
as the lack of big action stars. As a film producer, I am sure you
understand what I am trying to say as Viva produces only big action
pictures.
In fact, I would like to request two (2) additional runs for these
movies as I can only schedule them in out non-primetime slots. We have
to cover the amount that was paid for these movies because as you very
well know that non-primetime advertising rates are very low. These are
the unaired titles in the first contract.
1. Kontra Persa [sic]
2. Raider Platoon
3. Underground guerillas
4. Tiger Command
5. Boy de Sabog
6. lady Commando
7. Batang Matadero
8. Rebelyon
I hope you will consider this request of mine.
The other dramatic films have been offered to us before and have
been rejected because of the ruling of MTRCB to have them aired at 9:00
p.m. due to their very adult themes.
As for the 10 titles I have choosen [sic] from the 3 packages please
consider including all the other Viva movies produced last year, I have
quite an attractive offer to make.
Thanking you and with my warmest regards.
 (Signed)
Charo Santos-Concio
On February 27, 1992, defendant Del Rosario approached ABS-CBNs Ms.
Concio, with a list consisting of 52 original movie titles (i.e., not yet aired on
television) including the 14 titles subject of the present case, as well as 104
re-runs (previously aired on television) from which ABS-CBN may choose
another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN airing
rights over this package of 52 originals and 52 re-runs for P60,000,000.00 of
which P30,000,000.00 will be in cash and P30,000,000.00 worth of television
spots (Exh. 4 to 4-C Viva; 9 Viva).
On April 2, 1992, defendant Del Rosario and ABS-CBNs general
manager, Eugenio Lopez III, met at the Tamarind Grill Restaurant in Quezon
City to discuss the package proposal of VIVA. What transpired in that lunch
meeting is the subject of conflicting versions. Mr. Lopez testified that he and
Mr. Del Rosario allegedly agreed that ABS-CBN was granted exclusive film
rights to fourteen (14) films for a total consideration of P36 million; that he
allegedly put this agreement as to the price and number of films in a napkin
and signed it and gave it to Mr. Del Rosario (Exh. D; TSN, pp. 24-26, 77-78,
June 8, 1992). On the other hand. Del Rosario denied having made any
agreement with Lopez regarding the 14 Viva films; denied the existence of a
napkin in which Lopez wrote something; and insisted that what he and Lopez
discussed at the lunch meeting was Vivas film package offer of 104 films (52
originals and 52 re-runs) for a total price of P60 million. Mr. Lopez promising
[sic]to make a counter proposal which came in the form of a proposal
contract Annex C of the complaint (Exh. 1 Viva; Exh C ABS-CBN).
On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior
vice-president for Finance discussed the terms and conditions of Vivas offer
to sell the 104 films, after the rejection of the same package by ABS-CBN.
On April 07, 1992, defendant Del Rosario received through his secretary
, a handwritten note from Ms. Concio, (Exh. 5 Viva), which reads: Heres the
draft of the contract. I hope you find everything in order, to which was
attached a draft exhibition agreement (Exh. C ABS-CBN; Exh. 9 Viva p. 3) a
counter-proposal covering 53 films, 52 of which came from the list sent by
defendant Del Rosario and one film was added by Ms. Concio, for a
consideration of P35 million. Exhibit C provides that ABS-CBN is granted
film rights to 53 films and contains a right of first refusal to 1992 Viva Films.
The said counter proposal was however rejected by Vivas Board of Directors
[in the] evening of the same day, April 7, 1992, as Viva would not sell
anything less than the package of 104 films for P60 million pesos (Exh. 9
Viva), and such rejection was relayed to Ms. Concio.
On April 29, 1992, after the rejection of ABS-CBN and following several
negotiations and meetings defendant Del Rosario and Vivas President
Teresita Cruz, in consideration of P60 million, signed a letter of agreement
dated April 24, 1992, granting RBS the exclusive right to air 104 Viva-
produced and/or acquired films (Exh. 7-A - RBS; Exh. 4 RBS) including the
fourteen (14) films subject of the present case.
On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific
performance with a prayer for a writ of preliminary injunction and/or
temporary restraining order against private respondents Republic
Broadcasting Corporation (hereafter RBS), Viva Production (hereafter VIVA),
and Vicente del Rosario. The complaint was docketed as Civil Case No. Q-92-
12309.
On 28 May 1992, the RTC issued a temporary restraining order
enjoining private respondents from proceeding with the airing, broadcasting,
and televising of the fourteen VIVA films subject of the controversy, starting
with the film Maging Sino Ka Man, which was scheduled to be shown on
private respondent RBS channel 7 at seven oclock in the evening of said date.
On 17 June 1992, after appropriate proceedings, the RTC issued an
order directing the issuance of a writ of preliminary injunction upon ABS-
CBNs posting of a P35 million bond. ABS-CBN moved for the reduction of the
bond, while private respondents moved for reconsideration of the order and
offered to put up a counterbond.
In the meantime, private respondents filed separate answer with
counterclaim. RBS also set up a cross-claim against VIVA.
On 3 August 1992, the RTC issued an order dissolving the writ of
preliminary injunction upon the posting by RBS of a P30 million counterbond
to answer for whatever damages ABS-CBN might suffer by virtue of such
dissolution. However, it reduced petitioners injunction bond to P15 million as
a condition precedent for the reinstatement of the writ of preliminary
injunction should private respondents be unable to post a counterbond.
At the pre-trial on 6 August 1992, the parties upon suggestion of the
court, agreed to explore the possibility of an amicable settlement. In the
meantime, RBS prayed for and was granted reasonable time within which to
put up a P30 million counterbond in the event that no settlement would be
reached.
As the parties failed to enter into an amicable settlement, RBS posted on
1 October 1992 a counterbond, which the RTC approved in its Order of 15
October 1992.
On 19 October 1992, ABS-CBN filed a motion for reconsideration of the
3 August and 15 October 1992 Orders, which RBS opposed.
On 29 October, the RTC conducted a pre-trial.
Pending resolution of its motion for reconsideration, ABS-CBN filed with
the Court of Appeals a petition challenging the RTCs Order of 3 August and
15 October 1992 and praying for the issuance of a writ of preliminary
injunction to enjoin the RTC from enforcing said orders. The case was
docketed as CA-G.R. SP No. 29300.
On 3 November 1992, the Court of Appeals issued a temporary
restraining order to enjoin the airing, broadcasting, and televising of any or
all of the films involved in the controversy.
On 18 December 1992, the Court of Appeals promulgated a decision
dismissing the petition in CA-G.R. SP No. 29300 for being premature. ABS-
CBN challenged the dismissal in a petition for review filed with this Court on
19 January 1993, which was docketed s G.R. No. 108363.
 In the meantime the RTC received the evidence for the parties in Civil
Case No. Q-92-12309. Thereafter, on 28 April 1993, it rendered a decision in
favor of RBS and VIVA and against ABS-CBN disposing as follows:
WHEREFORE, under cool reflection and prescinding from the foregoing,
judgment is rendered in favor of defendants and against the plaintiff.
(1) The complaint is hereby dismissed;
(2) Plaintiff ABS-CBN is ordered to pay defendant RBS the following:
a) P107,727.00 the amount of premium paid by RBS to the
surety which issued defendants RBSs bond to lift the
injunction;
b) P191,843.00 for the amount of print advertisement for
Maging Sino Ka Man in various newspapers;
c) Attorneys fees in the amount of P1 million;
d) P5 million as and by way of moral damages;
e) P5 million as and by way of exemplary damages;
(3) For the defendant VIVA, plaintiff ABS-CBN is ordered to pay
P212,000.00 by way of reasonable attorneys fees.
(4) The cross-claim of defendant RBS against defendant VIVA is
dismissed.
(5) Plaintiff to pay the costs.
According to the RTC, there was no meeting of minds on the price and
terms of the offer. The alleged agreement between Lopez III and Del Rosario
was subject to the approval of the VIVA Board of Directors, and said
agreement was disapproved during the meeting of the Board on 7 April 1992.
Hence, there was no basis for ABS-CBNs demand that VIVA signed the 1992
Film Exhibition Agreement. Furthermore, the right of first refusal under the
1990 Film Exhibition Agreement had previously been exercised per Ms.
Concios letter to Del Rosario ticking off ten titles acceptable to them, which
would have made the 1992 agreement an entirely new contract.
On 21 June 1993, this Court denied ABS-CBNs petition for review in
G.R. No. 108363, as no reversible error was committed by the Court of
Appeals in its challenged decision and the case had become moot and
academic in view of the dismissal of the main action by the court a quo in its
decision of 28 April 1993.
Aggrieved by the RTCs decision, ABS-CBN appealed to the Court of
Appeals claiming that there was a perfected contract between ABS-CBN and
VIVA granting ABS-CBN the exclusive right to exhibit the subject films.
Private respondents VIVA and Del Rosario also appealed seeking moral and
exemplary damages and additional attorneys fees.
In its decision of 31 October 1996, the Court of Appeals agreed with the
RTC that the contract between ABS-CBN and VIVA had not been perfected,
absent the approval by the VIVA Board of Directors of whatever Del Rosario,
its agent, might have agreed with Lopez III. The appellate court did not even
believe ABS-CBNs evidence that Lopez III actually wrote down such an
agreement on a napkin, as the same was never produced in court. It likewise
rejected ABS-CBNs insistence on its right of first refusal and ratiocinated as
follows:
As regards the matter of right of first refusal, it may be true that a Film
Exhibition Agreement was entered into between Appellant ABS-CBN and
appellant VIVA under Exhibit A in 1990 and that parag. 1.4 thereof provides:
1.4 ABS-CBN shall have the right of first refusal to the next twenty-
four (24) VIVA films for TV telecast under such terms as may be agreed
upon by the parties hereto, provided, however, that such right shall be
exercised by ABS-CBN within a period of fifteen (15) days from the
actual offer in writing (Records, p. 14).
[H]owever, it is very clear that said right of first refusal in favor of ABS-CBN
shall still be subjected to such terms as may be agreed upon by the parties
thereto, and that the said right shall be exercised by ABS-CBN within fifteen
(15) days from the actual offer in writing.
Said parag. 1.4 of the agreement Exhibit A on the right of first refusal
did not fix the price of the film right to the twenty-four (24) films, nor did it
specify the terms thereof. The same are still left to be agreed upon by the
parties.
In the instant case, ABS-CBNs letter of rejection Exhibit 3 (Records, p.
89) stated that it can only tick off ten (10) films, and the draft contract
Exhibit C accepted only fourteen (14) films, while parag. 1.4 of Exhibit A
speaks of the next twenty-four (24) films.
The offer of VIVA was sometime in December 1991, (Exhibits 2, 2-A, 2-
B; Records, pp. 86-88; Decision, p. 11, Records, p. 1150), when the first list
of VIVA films was sent by Mr. Del Rosario to ABS-CBN. The Vice President of
ABS-CBN, Mrs. Charo Santos-Concio, sent a letter dated January 6, 1992
(Exhibit 3, Records, p. 89) where ABS-CBN exercised its right of refusal by
rejecting the offer of VIVA. As aptly observed by the trial court, with the said
letter of Mrs. Concio of January 6, 1992, ABS-CBN had lost its right of first
refusal. And even if We reckon the fifteen (15) day period from February 27,
1992 (Exhibit 4 to 4-C) when another list was sent to ABS-CBN after the
letter of Mrs. Concio, still the fifteen (15) day period within which ABS-CBN
shall exercise its right of first refusal has already expired.
Accordingly, respondent court sustained the award factual damages
consisting in the cost of print advertisements and the premium payments for
the counterbond, there being adequate proof of the pecuniary loss which RBS
has suffered as a result of the filing of the complaint by ABS-CBN. As to the
award of moral damages, the Court of Appeals found reasonable basis
therefor, holding that RBSs reputation was debased by the filing of the
complaint in Civil Case No. Q-92-12309 and by the non-showing of the film
Maging Sino Ka Man. Respondent court also held that exemplary damages
were correctly imposed by way of example or correction for the public good in
view of the filing of the complaint despite petitioners knowledge that the
contract with VIVA had not been perfected. It also upheld the award of
attorneys fees, reasoning that with ABS-CBNs act of instituting Civil Case No.
Q-92-12309, RBS was unnecessarily forced to litigate. The appellate court,
however, reduced the awards of moral damages to P 2 million, exemplary
damages to P2 million, and attorneys fees to P500,000.00.
On the other hand, respondent Court of Appeals denied VIVA and Del
Rosarios appeal because it was RBS and not VIVA which was actually
prejudiced when the complaint was filed by ABS-CBN.
Its motion for reconsideration having been denied, ABS-CBN filed the
petition in this case, contending that the Court of Appeals gravely erred in
I contractual dealings or from specific acts committed by ABS-CBN against
RULING THAT THERE WAS NO PERFECTED CONTRACT BETWEEN
PETITIONER AND PRIVATE RESPONDENT VIVA
NOTWITHSTANDING PREPONFERANCE OF EVIDENCE ADDUCED
BY PETITIONER TO THE CONTRARY.
II
IN AWARDING ACTUAL AND COMPENSATORY DAMAGES IN FAVOR
OF PRIVATE RESPONDENT RBS.
III
IN AWARDING MORAL AND EXEMPLARY DAMAGES IN FAVOR OF
PRIVATE RESPONDENT RBS.
IV
IN AWARDING ATORNEYS FEES OF RBS.
ABS-CBN claims that it had yet to fully exercise its right of first refusal
over twenty-four titles under the 1990 Film Exhibition Agreement, as it had
chosen only ten titles from the first list. It insists that we give credence to
Lopezs testimony that he and Del Rosario met at the Tamarind Grill
Restaurant, discussed the terms and conditions of the second list (the 1992
Film Exhibition Agreement) and upon agreement thereon, wrote the same on
a paper napkin. It also asserts that the contract has already been effective,
as the elements thereof, namely, consent, object, and consideration were
established. It then concludes that the Court of Appeals pronouncements
were not supported by law and jurisprudence, as per our decision of 1
December 1995 in Limketkai Sons Milling, Inc. v. Court of Appeals, which
cited Toyota Shaw, Inc. v. Court of Appeals; Ang Yu Asuncion v. Court of
Appeals, and Villonco Realty Company v. Bormaheco, Inc.
Anent the actual damages awarded to RBS, ABS-CBN disavows liability
therefor. RBS spent for the premium on the counterbond of its own volition
in order to negate the injunction issued by the trial court after the parties
had ventilated their respective positions during the hearings for the purpose.
The filing of the counterbond was an option available to RBS, but it can
hardly be argued that ABS-CBN compelled RBS to incur such expense.
Besides, RBS had another available option, i.e., move for the dissolution of
the injunction; or if it was determined to put up a counterbond, it could have
presented a cash bond. Furthermore under Article 2203 of the Civil Code, the
party suffering loss injury is also required to exercise the diligence of a good
father of a family to minimize the damages resulting from the act or
omission. As regards the cost of print advertisements, RBS had not
convincingly established that this was a loss attributable to the non-showing
of Maging Sino Ka Man; on the contrary, it was brought out during trial that
with or without the case or injunction, RBS would have spent such an
amount to generate interest in the film.
ABS-CBN further contends that there was no other clear basis for the
awards of moral and exemplary damages. The controversy involving ABS-
CBN and RBS did not in any way originate from business transaction
between them. The claims for such damages did not arise from any
RBS that may be characterized as wanton, fraudulent, or reckless; they arose
by virtue only of the filing of the complaint. An award of moral and exemplary
damages is not warranted where the record is bereft of any proof that a party
acted maliciously or in bad faith in filing an action. In any case, free resort to
courts for redress of wrongs is a matter of public policy. The law recognizes
the right of every one to sue for that which he honestly believes to be his
right without fear of standing trial for damages where by lack of sufficient
evidence, legal technicalities, or a different interpretation of the laws on the
matter, the case would lose ground. One who, makes use of his own legal
right does no injury. If damage results from filing of the complaint, it is
damnum absque injuria. Besides, moral damages are generally not awarded
in favor of a juridical person, unless it enjoys a good reputation that was
debased by the offending party resulting in social humiliation.
As regards the award of attorneys fees, ABS-CBN maintains that the
same had no factual, legal, or equitable justification. In sustaining the trial
courts award, the Court of Appeals acted in clear disregard of the doctrine
laid down in Buan v. Camaganacan that the text of the decision should state
the reason why attorneys fees are being awarded; otherwise, the award
should be disallowed. Besides, no bad faith has been imputed on, much less
proved as having been committed by, ABS-CBN. It has been held that where
no sufficient showing of bad faith would be reflected in a partys persistence
in a case other than an erroneous conviction of the righteousness of his
cause, attorneys fees shall not be recovered as cost.
On the other hand, RBS asserts that there was no perfected contract
between ABS-CBN and VIVA absent meeting of minds between them
regarding the object and consideration of the alleged contract. It affirms that
ABS-CBNs claim of a right of first refusal was correctly rejected by the trial
court. RBS insists the premium it had paid for the counterbond constituted a
pecuniary loss upon which it may recover. It was obliged to put up the
counterbond due to the injunction procured by ABS-CBN. Since the trial
court found that ABS-CBN had no cause of action or valid claim against RBS
and, therefore not entitled to the writ of injunction, RBS could recover from
ABS-CBN the premium paid on the counterbond. Contrary to the claim of
ABS-CBN, the cash bond would prove to be more expensive, as the loss
would be equivalent to the cost of money RBS would forego in case the P30
million came from its funds or was borrowed from banks.
RBS likewise asserts that it was entitled to the cost of advertisements
for the cancelled showing of the film Maging Sino Ka Man because the print
advertisements were out to announce the showing on a particular day and
hour on Channel 7, i.e., in its entirety at one time, not as series to be shown
on a periodic basis. Hence, the print advertisements were good and relevant
for the particular date of showing, and since the film could not be shown on
that particular date and hour because of the injunction, the expenses for the
advertisements had gone to waste.
As regards moral and exemplary damages, RBS asserts that ABS-CBN
filed the case and secured injunctions purely for the purpose of harassing
and prejudicing RBS. Pursuant then to Articles 19 and 21 of the Civil Code,
ABS-CBN must be held liable for such damages. Citing Tolentino, damages
may be awarded in cases of abuse of rights even if the done is not illicit, and
there is abuse of rights where a plaintiff institutes an action purely for the
purpose of harassing or prejudicing the defendant.
In support of its stand that a juridical entity can recover moral and
exemplary damages, private respondent RBS cited People v. Manero, where it
was stated that such entity may recover moral and exemplary damages if it
has a good reputation that is debased resulting in social humiliation. It then
ratiocinates; thus:
There can be no doubt that RBS reputation has been debased by ABS-
CBNs acts in this case. When RBS was not able to fulfill its commitment to
the viewing public to show the film Maging Sino Ka Man on the scheduled
dates and times (and on two occasions that RBS advertised), it suffered
serious embarrassment and social humiliation. When the showing was
cancelled, irate viewers called up RBS offices and subjected RBS to verbal
abuse (Announce kayo ng announce, hindi ninyo naman ilalabas, nanloloko
yata kayo) (Exh. 3-RBS, par.3). This alone was not something RBS brought
upon itself. It was exactly what ABS-CBN had planted to happen.
The amount of moral and exemplary damages cannot be said to be
excessive. Two reasons justify the amount of the award.
The first is that the humiliation suffered by RBS, is national in extent.
RBS operations as a broadcasting company is [sic] nationwide. Its clientele,
like that of ABS-CBN, consists of those who own and watch television. It is
not an exaggeration to state, and it is a matter of judicial notice that almost
every other person in the country watches television. The humiliation
suffered by RBS is multiplied by the number of televiewers who had
anticipated the showing of the film, Maging Sino Ka Man on May 28 and
November 3, 1992 but did not see it owing to the cancellation. Added to this
are the advertisers who had placed commercial spots for the telecast and to
whom RBS had a commitment in consideration of the placement to show the
film in the dates and times specified.
The second is that it is a competitor that caused RBS suffer the
humiliation. The humiliation and injury are far greater in degree when
caused by an entity whose ultimate business objective is to lure customers
(viewers in this case) away from the competition.
For their part, VIVA and Vicente del Rosario contend that the findings of
fact of the trial court and the Court of Appeals do not support ABS-CBNs
claim that there was a perfected contract. Such factual findings can no
longer be disturbed in this petition for review under Rule 45, as only
questions of law can be raised, not questions of fact. On the issue of damages
and attorneys fees, they adopted the arguments of RBS.
The key issues for our consideration are (1) whether there was a
perfected contract between VIVA and ABS-CBN, and (2) whether RBS is
entitled to damages and attorneys fees. It may be noted that that award of
attorneys fees of P212,000 in favor of VIVA is not assigned as another error.
I
The first issue should be resolved against ABS-CBN. A contract is a
meeting of minds between two persons whereby one binds himself to give
something or render some service to another for a consideration. There is no
contract unless the following requisites concur: (1) consent of the contracting
parties; (2) object certain which is the subject of the contract; and (3) cause
of the obligation, which is established. A contract undergoes three stages:
(a) preparation, conception, or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of
the parties;
(b) perfection or birth of the contract, which is the moment when the
parties come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of
the terms agreed upon in the contract.
Contracts that are consensual in nature are perfected upon mere
meeting of the minds. Once there is concurrence between the offer and the
acceptance upon the subject matter, consideration, and terms of payment a
contract is produced. The offer must be certain. To convert the offer into a
contract, the acceptance must be absolute and must not qualify the terms of
the offer; it must be plain, unequivocal, unconditional, and without variance
of any sort from the proposal. A qualified acceptance, or one that involves a
new proposal, constitutes a counter-offer and is a rejection of the original
offer. Consequently, when something is desired which is not exactly what is
proposed in the offer, such acceptance is not sufficient to generate consent
because any modification or variation from the terms of the offer annuls the
offer.
When Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN at the
Tamarind Grill on 2 April 1992 to discuss the package of films, said package
of 104 VIVA films was VIVAs offer to ABS-CBN to enter into a new Film
Exhibition Agreement. But ABS-CBN, sent through Ms. Concio, counter-
proposal in the form a draft contract proposing exhibition of 53 films for a
consideration of P35 million. This counter-proposal could be nothing less
than the counter-offer of Mr. Lopez during his conference with Del Rosario at
Tamarind Grill Restaurant. Clearly, there was no acceptance of VIVAs offer,
for it was met by a counter-offer which substantially varied the terms of the
offer.
ABS-CBNs reliance in Limketkai Sons Milling, Inc. v. Court of Appeals
and Villonco Realty Company v. Bormaheco, Inc., is misplaced. In these cases,
it was held that an acceptance may contain a request for certain changes in
the terms of the offer and yet be a binding acceptance as long as it is clear
that the meaning of the acceptance is positively and unequivocally to accept
the offer, whether such request is granted or not. This ruling was, however,
reversed in the resolution of 29 March 1996, which ruled that the acceptance
of an offer must be unqualified and absolute, i.e., it must be identical in all
respects with that of the offer so as to produce consent or meetings of the
minds.
On the other hand, in Villonco, cited in Limketkai, the alleged changes in
the revised counter-offer were not material but merely clarificatory of what
had previously been agreed upon. It cited the statement in Stuart v. Franklin
Life Insurance Co. that a vendors change in a phrase of the offer to purchase,
which change does not essentially change the terms of the offer, does not
amount to a rejection of the offer and the tender of a counter-offer. However,
when any of the elements of the contract is modified upon acceptance, such
alteration amounts to a counter-offer.
In the case at bar, ABS-CBN made no unqualified acceptance of VIVAs
offer hence, they underwent period of bargaining. ABS-CBN then formalized
its counter-proposals or counter-offer in a draft contract. VIVA through its
Board of Directors, rejected such counter-offer. Even if it be conceded
arguendo that Del Rosario had accepted the counter-offer, the acceptance did
not bind VIVA, as there was no proof whatsoever that Del Rosario had the
specific authority to do so.
Under the Corporation Code, unless otherwise provided by said Code,
corporate powers, such as the power to enter into contracts, are exercised by
the Board of Directors. However, the Board may delegate such powers to
either an executive committee or officials or contracted managers. The
delegation, except for the executive committee, must be for specific purposes.
Delegation to officers makes the latter agents of the corporation; accordingly,
the general rules of agency as to the binding effects of their acts would apply.
For such officers to be deemed fully clothed by the corporation to exercise a
power of the Board, the latter must specially authorize them to do so. that
Del Rosario did not have the authority to accept ABS-CBNs counter-offer was
best evidenced by his submission of the draft contract to VIVAs Board of
Directors for the latters approval. In any event, there was between Del
Rosario and Lopez III no meeting of minds. The following findings of the trial
court are instructive:
A number of considerations militate against ABS-CBNs claim that a
contract was perfected at that lunch meeting on April 02, 1992 at the
Tamarind Grill.
FIRST, Mr. Lopez claimed that what was agreed upon at the Tamarind
Grill referred to the price and the number of films, which he wrote on a
napkin. However, Exhibit C contains numerous provisions which were not
discussed at the Tamarind Grill, if Lopez testimony was to be believed nor
could they have been physically written on a napkin. There was even doubt
as to whether it was a paper napkin or cloth napkin. In short what were
written in Exhibit C were not discussed, and therefore could not have been
agreed upon, by the parties. How then could this court compel the parties to
sign Exhibit C when the provisions thereof were not previously agreed upon?
SECOND, Mr. Lopez claimed that what was agreed upon as the subject
matter of the contract was 14 films. The complaint in fact prays for delivery
of 14 films. But Exhibit C mentions 53 films as its subject matter. Which is
which? If Exhibit C reflected the true intent of the parties, then ABS-CBNs
claim for 14 films in its complaint is false or if what it alleged in the
complaint is true, then Exhibit C did not reflect what was agreed upon by the
parties. This underscores the fact that there was no meeting of the minds as
to the subject matter of the contract, so as to preclude perfection thereof. For
settled is the rule that there can be no contract where there is no object
certain which is its subject matter (Art. 1318, NCC).
THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit testimony
(Exh. D) States:
We were able to reach an agreement. VIVA gave us the exclusive
license to show these fourteen (14) films, and we agreed to pay Viva the
amount of P16,050,000.00 as well as grant Viva commercial slots worth
P19,950,000.00. We had already earmarked this P16,050,000.00.
which gives a total consideration of P36 million (P19,951,000.00 plus
P16,050,000.00 equals P36,000,000.00).
On cross-examination Mr. Lopez testified:
Q What was written in this napkin?
A The total price, the breakdown the known Viva movies, the 7
blockbuster movies and the other 7 Viva movies because the price
was broken down accordingly. The none [sic] Viva and the seven
other Viva movies and the sharing between the cash portion and the
concerned spot portion in the total amount of P35 million pesos.
Now, which is which? P36 million or P35 million? This weakens ABS-CBNs
claim.
FOURTH. Mrs. Concio, testifying for ABS-CBN stated that she
transmitted Exhibit C to Mr. Del Rosario with a handwritten note, describing
said Exhibit C as a draft. (Exh. 5 Viva; tsn pp. 23-24, June 08, 1992). The
said draft has a well defined meaning.
Since Exhibit C is only a draft, or a tentative, provisional or preparatory
writing prepared for discussion, the terms and conditions thereof could not
have been previously agreed upon by ABS-CBN and Viva. Exhibit C could not
therefore legally bind Viva, not having agreed thereto. In fact, Ms. Concio
admitted that the terms and conditions embodied in Exhibit C were prepared
by ABS-CBNs lawyers and there was no discussion on said terms and
conditions.
As the parties had not yet discussed the proposed terms and conditions
in Exhibit C, and there was no evidence whatsoever that Viva agreed to the
terms and conditions thereof, said document cannot be a binding contract.
The fact that Viva refused to sign Exhibit C reveals only two [sic] well that it
did not agree on its terms and conditions, and this court has no authority to
compel Viva to agree thereto.
FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del Rosario
agreed upon at the Tamarind Grill was only provisional, in the sense that it
was subject to approval by the Board of Directors of Viva. He testified:
Q Now, Mr. Witness, and after that Tamarinf meeting the second
 meeting wherein you claimed that you have the meeting of the minds
between you and Mr. Vic del Rosario, what happened?
A Vic Del Rosario was supposed to call us up and tell us specifically
the result of the discussion with the Board of Directors.
Q And you are referring to the so-called agreement which you wrote in
[sic] a piece of paper?
A Yes, sir.
Q So, he was going to forward that to the board of Directors for
approval?
A Yes, sir (Tsn, pp. 42-43, June 8, 1992)
Q Did Mr. Del Rosario tell you that he will submit it to his Board for
approval?
A Yes, sir. (Tsn, p. 69, June 8, 1992).
The above testimony of Mr. Lopez shows beyond doubt that he knew Mr.
Del Rosario had no authority to bind Viva to a contract with ABS-CBN until
and unless its Board of Directors approved it. The complaint, in fact, alleges
that Mr. Del Rosario is the Executive Producer of defendant Viva which is a
corporation. (par. 2, complaint). As a mere agent of Viva, Del Rosario could
not bind Viva unless what he did is ratified by its Directors. (Vicente
vs.Geraldez, 52 SCRA 210; Arnold vs. Willets and Paterson, 44 Phil. 634). As
a mere agent, recognized as such by plaintiff, Del Rosario could not be held
liable jointly and severally with Viva and his inclusion as party defendant has
no legal basis. (Salonga vs. Warner Barnes [sic],COLTA, 88 Phil. 125; Salmon
vs. Tan, 36 Phil. 556).
The testimony of Mr. Lopez and the allegations in the complaint are
clear admissions that what was supposed to have been agreed upon at the
Tamarind Grill between Mr. Lopez and Del Rosario was not a binding
agreement. It is as it should be because corporate power to enter into a
contract is lodged in the Board of Directors. (Sec. 23, Corporation Code).
Without such board approval by the Viva board, whatever agreement Lopez
and Del Rosario arrived at could not ripen into a valid binding upon Viva
(Yao Ka Sin Trading vs. Court of Appeals, 209 SCRA 763). The evidence
adduced shows that the Board of Directors of Viva rejected Exhibit C and
insisted that the film package for 104 films be maintained (Exh. 7-1 Cica).
The contention that ABS-CBN had yet to fully exercise its right of first
refusal over twenty-four films under the 1990 Film Exhibition Agreement and
that the meeting between Lopez and Del Rosario was a continuation of said
previous contract is untenable. As observed by the trial court, ABS-CBNs
right of first refusal had already been exercised when Ms. Concio wrote to
Viva ticking off ten films. Thus:
[T]he subsequent negotiation with ABS-CBN two (2) months after this
letter was sent, was for an entirely different package. Ms. Concio herself
admitted on cross-examination to having used or exercised the right of
first refusal. She stated that the list was not acceptable and was indeed
not accepted by ABS-CBN, (Tsn, June 8, 1992, pp. 8-10). Even Mr.
Lopez himself admitted that the right of first refusal may have been
already exercised by Ms. Concio (as she had). (TSN, June 8, 1992, pp.
71-75). Del Rosario himself knew and understand [sic] that ABS-CBN
has lost its right of first refusal when his list of 36 titles were rejected
(Tsn, June 9, 1992, pp. 10-11).
II
However, we find for ABS-CBN on the issue of damages. We shall first
take up actual damages. Chapter 2, Title XVIII, Book IV of the Civil Code is
the specific law on actual or compensatory damages. Except as provided by
law or by stipulation, one is entitled to compensation for actual damages only
for such pecuniary loss suffered by him as he has duly proved. The
indemnification shall comprehend not only the value of the loss suffered, but
also that of the profits that the obligee failed to obtain. In contracts and
quasi-contracts the damages which may be awarded are dependent on
whether the obligor acted with good faith or otherwise. In case of good faith,
the damages recoverable are those which are the natural and probable
consequences of the breach of the obligation and which the parties have
foreseen or could have reasonably foreseen at the time of the constitution of
the obligation. If the obligor acted with fraud, bad faith, malice, or wanton
attitude, he shall be responsible for all damages which may be reasonably
attributed to the non-performance of the obligation. In crimes and quasi-
delicts, the defendants shall be liable for all damages which are the natural
and probable consequences of the act or omission complained of, whether or
not such damages have been foreseen or could have reasonably been
foreseen by the defendant.
Actual damages may likewise be recovered for loss or impairment of
earning capacity in cases of temporary or permanent personal injury, or for
injury to the plaintiffs business standing or commercial credit.
The claim of RBS for actual damages did not arise from contract, quasi-
contract, delict, or quasi-delict. It arose from the fact of filing of the
complaint despite ABS-CBNs alleged knowledge of lack of cause of action.
Thus paragraph 12 of RBSs Answer with Counterclaim and Cross-claim
under the heading COUNTERCLAIM specifically alleges:
12. ABS-CBN filed the complaint knowing fully well that it has no cause
of action against RBS. As a result thereof, RBS suffered actual
damages in the amount of P6,621,195.32.
Needless to state the award of actual damages cannot be comprehended
under the above law on actual damages. RBS could only probably take refuge
under Articles 19, 20, and 21 of the Civil Code, which read as follows:
ART. 19. Every person must, in the exercise of hid rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
ART. 20. Every person who, contrary to law, wilfully or negligently
causes damage to another shall indemnify the latter for the same.
ART. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
 It may further be observed that in cases where a writ of preliminary
injunction is issued, the damages which the defendant may suffer by reason
of the writ are recoverable from the injunctive bond. In this case, ABS-CBN
had not yet filed the required bond; as a matter of fact, it asked for reduction
of the bond and even went to the Court of Appeals to challenge the order on
the matter. Clearly then, it was not necessary for RBS to file a counterbond.
Hence, ABS-CBN cannot be held responsible for the premium RBS paid for
the counterbond.
Neither could ABS-CBN be liable for the print advertisements for Maging
Sino Ka Man for lack of sufficient legal basis. The RTC issued a temporary
restraining order and later, a writ of preliminary injunction on the basis of its
determination that there existed sufficient ground for the issuance thereof.
Notably, the RTC did not dissolve the injunction on the ground of lack of
legal and factual basis, but because of the plea of RBS that it be allowed to
put up a counterbond.
As regards attorneys fees, the law is clear that in the absence of
stipulation, attorneys fees may be recovered as actual or compensatory
damages under any of the circumstances provided for in Article 2208 of the
Civil Code.
The general rule is that attorneys fees cannot be recovered as part of
damages because of the policy that no premium should be placed on the
right to litigate. They are not to be awarded every time a party wins a suit.
The power of the court t award attorneys fees under Article 2208 demands
factual, legal, and equitable justification. Even when a claimant is compelled
to litigate with third persons or to incur expenses to protect his rights, still
attorneys fees may not be awarded where no sufficient showing of bad faith
could be reflected in a partys persistence in a case other than an erroneous
conviction of the righteousness of his cause.
As to moral damages the law is Section 1, Chapter 3, Title XVIII, Book IV
of the Civil Code. Article 2217 thereof defines what are included in moral
damages, while Article 2219 enumerates the cases where they may be
recovered. Article 2220 provides that moral damages may be recovered in
breaches of contract where the defendant acted fraudulently or in bad faith.
RBSs claim for moral damages could possibly fall only under item (10) of
Article 2219, thereof which reads:
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32,
34 and 35.
Moral damages are in the category of an award designed to compensate
the claimant for actual injury suffered and not to impose a penalty on the
wrongdoer. The award is not meant to enrich the complainant at the expense
of the defendant, but to enable the injured party to obtain means, diversion,
or amusements that will serve to obviate the moral suffering he has
undergone. It is aimed at the restoration, within the limits of the possible, of
the spiritual status quo ante, and should be proportionate to the suffering
inflicted. Trial courts must then guard against the award of exorbitant
damages; they should exercise balanced restrained and measured objectivity
to avoid suspicion that it was due to passion, prejudice, or corruption or the
part of the trial court.
The award of moral damages cannot be granted in favor of a corporation
because, being an artificial person and having existence only in legal
contemplation, it has no feelings, no emotions, no senses. It cannot,
therefore, experience physical suffering and mental anguish, which can be
experienced only by one having a nervous system. The statement in People v.
Manero and Mambulao Lumber Co. v. PNB that a corporation may recover
moral damages if it has a good reputation that is debased, resulting in social
humiliation is an obiter dictum. On this score alone the award for damages
must be set aside, since RBS is a corporation.
The basic law on exemplary damages is Section 5 Chapter 3, Title XVIII,
Book IV of the Civil Code. These are imposed by way of example or correction
for the public good, in addition to moral, temperate, liquidated, or
compensatory damages. They are recoverable in criminal cases as part of the
civil liability when the crime was committed with one or more aggravating
circumstances; in quasi-delicts, if the defendant acted with gross negligence;
and in contracts and quasi-contracts, if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
It may be reiterated that the claim of RBS against ABS-CBN is not based
on contract, quasi-contract, delict, or quasi-delict. Hence, the claims for
moral and exemplary damages can only be based on Articles 19, 20, and 21
of the Civil Code.
The elements of abuse of right under Article 19 are the following: (1) the
existence of a legal right or duty, (2) which is exercised in bad faith, and (3)
for the sole intent of prejudicing or injuring another. Article 20 speaks of the
general sanction for all provisions of law which do not especially provide for
their own sanction; while Article 21 deals with acts contra bonus mores, and
has the following elements: (1) there is an act which is legal, (2) but which is
contrary to morals, good custom, public order, or public policy, and (3) and it
is done with intent to injure.
Verily then, malice or bad faith is at the core of Articles 19, 20, and 21.
Malice or bad faith implies a conscious and intentional design to do a
wrongful act for a dishonest purpose or moral obliquity. Such must be
substantiated by evidence.
There is no adequate proof that ABS-CBN was inspired by malice or bad
faith. It was honestly convinced of the merits of its cause after it had
undergone serious negotiations culminating in its formal submission of a
draft contract. Settled is the rule that the adverse result of an action does not
per se make the action wrongful and subject the actor to damages, for the
law could not have meant impose a penalty on the right to litigate. If
damages result from a persons exercise of a right, it is damnum absque
injuria.
WHEREFORE, the instant petition is GRANTED. The challenged
decision of the Court of Appeals in CA-G.R. CV No. 44125 is hereby
REVERSED except as to unappealed award of attorneys fees in favor of VIVA
Productions, Inc.
No pronouncement as to costs.
SO ORDERED.
 Melo, Kapunan, Martinez, and Pardo, JJ., concur.
G.R. Nos. 86883-85 January 29, 1993
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
NORBERTO MANERO, JR., EDILBERTO MANERO, ELPIDIO MANERO,
SEVERINO LINES, RUDY LINES, EFREN PLEÑAGO, ROGER BEDAÑO,
RODRIGO ESPIA, ARSENIO VILLAMOR, JR., JOHN DOE and PETER DOE,
accused.
SEVERINO LINES, RUDY LINES, EFREN PLEÑAGO and ROGER
BENDAÑO, accused-appellants.
The Solicitor General for plaintiff-appellee.
Romeo P. Jorge for accused-appellants.
BELLOSILLO, J.:
This was gruesome murder in a main thoroughfare an hour before sundown.
A hapless foreign religious minister was riddled with bullets, his head
shattered into bits and pieces amidst the revelling of his executioners as they
danced and laughed around their quarry, chanting the tune "Mutya Ka
Baleleng", a popular regional folk song, kicking and scoffing at his prostrate,
miserable, spiritless figure that was gasping its last. Seemingly unsatiated
with the ignominy of their manslaughter, their leader picked up pieces of the
splattered brain and mockingly displayed them before horrified spectators.
Some accounts swear that acts of cannibalism ensued, although they were
not sufficiently demonstrated. However, for their outrageous feat, the
gangleader already earned the monicker "cannibal priest-killer" But, what is
indubitable is that Fr. Tulio Favali1 was senselessly killed for no apparent
reason than that he was one of the Italian Catholic missionaries laboring in
heir vineyard in the hinterlands of Mindanao.2
In the aftermath of the murder, police authorities launched a massive
manhunt which resulted in the capture of the perpetrators except Arsenio
Villamor, Jr., and two unidentified persons who eluded arrest and still
remain at large.
Informations for Murder,3 Attempted Murder4 andArson5 were accordingly
filed against those responsible for the frenzied orgy of violence that fateful
day of 11 April 1985. As these cases arose from the same occasion, they were
all consolidated in Branch 17 of the Regional Trial Court of Kidapawan,
Cotabato.6
After trial, the court a quo held —
WHEREFORE . . . the Court finds the accused Norberto
Manero, Jr. alias Commander Bucay, Edilberto Manero alias
Edil, Elpidio Manero, Severino Lines, Rudy Lines, Rodrigo
Espia alias Rudy, Efren Pleñago and Roger Bedaño GUILTY
beyond reasonable doubt of the offense of Murder, and with
the aggravating circumstances of superior strength and
treachery, hereby sentences each of them to a penalty of
imprisonment of reclusion perpetua; to pay the Pontifical
Institute of Foreign Mission (PIME) Brothers, the
congregation to which Father Tulio Favali belonged, a civil
indemnity of P12,000.00; attorney's fees in the sum of
P50,000.00 for each of the eight (8) accused or a total sum of
P400,000.00; court appearance fee of P10,000.00 for every
day the case was set for trial; moral damages in the sum of
P100,000.00; and to pay proportionately the costs.
Further, the Court finds the accused Norberto Manero, Jr.
alias Commander Bucay GUILTY beyond reasonable doubt of
the offense of Arson and with the application of the
Indeterminate Sentence Law, hereby sentences him to an
indeterminate penalty of imprisonment of not less than four
(4) years, nine (9) months, one (1) day of prision correccional,
as minimum, to six (6) years of prision correccional, as
maximum, and to indemnify the Pontifical Institute of
Foreign Mission (PIME) Brothers, the congregation to which
Father Tulio Favali belonged, the sum of P19,000.00
representing the value of the motorcycle and to pay the
costs.
Finally, the Court finds the accused Norberto Manero, Jr.,
alias Commander Bucay, Edilberto Manero alias Edil, Elpidio
Manero, Severino Lines, Rudy Lines, Rodrigo Espia alias
Rudy, Efren Pleñago and Roger Bedaño GUILTY beyond
reasonable doubt of the offense of Attempted Murder and
with the application of the Indeterminate Sentence Law,
hereby sentences each of them to an indeterminate penalty
of imprisonment of not less than two (2) years, four (4)
months and one (1) day of prision correccional, and
minimum, to eight (8) years and twenty (20) days of prision
mayor, as maximum, and to pay the complainant Rufino
Robles the sum of P20,000.00 as attorney's fees and
P2,000.00 as court appearance fee for every day of trial and
to pay proportionately the costs.
The foregoing penalties shall be served by the said accused
successively in the order of their respective severity in
accordance with the provisions of Article 70 of the Revised
Penal Code, as amended.7
From this judgment of conviction only accused Severino Lines, Rudy Lines,
Efren Pleñago and Roger Bedaño appealed with respect to the cases for
Murder and Attempted Murder. The Manero brothers as well as Rodrigo
Espia did not appeal; neither did Norberto Manero, Jr., in the Arson case.
Consequently, the decision as against them already became final.
Culled from the records, the facts are: On 11 April 1985, around 10:00
o'clock in the morning, the Manero brothers Norberto Jr., Edilberto and
Elpidio, along with Rodrigo Espia, Severino Lines, Rudy Lines, Efren Pleñago
and Roger Bedaño, were inside the eatery of one Reynaldo Diocades at Km.
125, La Esperanza, Tulunan, Cotabato. They were conferring with Arsenio
Villamor, Jr., private secretary to the Municipal Mayor of Tulunan, Cotabato,
and his two (2) unidentified bodyguards. Plans to liquidate a number of
suspected communist sympathizers were discussed. Arsenio Villamor, Jr.
scribbled on a cigarette wrapper the following "NPA v. NPA, starring Fr. Peter,
Domingo Gomez, Bantil, Fred Gapate, Rene alias Tabagac and Villaning." "Fr.
Peter" is Fr. Peter Geremias, an Italian priest suspected of having links with
the communist movement; "Bantil" is Rufino Robles, a Catholic lay leader
who is the complaining witness in the Attempted Murder; Domingo Gomez is
another lay leader, while the others are simply "messengers". On the same
occasion, the conspirators agreed to Edilberto Manero's proposal that should
they fail to kill Fr. Peter Geremias, another Italian priest would be killed in
his stead.8
At about 1:00 o'clock that afternoon, Elpidio Manero with two (2) unidentified
companions nailed a placard on a street-post beside the eatery of Deocades.
The placard bore the same inscriptions as those found on the cigarette
wrapper except for the additional phrase "versus Bucay, Edil and Palo." Some
two (2) hours later, Elpidio also posted a wooden placard bearing the same
message on a street cross-sign close to the eatery.9
Later, at 4:00 o'clock, the Manero brothers, together with Espia and the four
(4) appellants, all with assorted firearms, proceeded to the house of "Bantil",
their first intended victim, which was also in the vicinity of Deocades'
carinderia. They were met by "Bantil" who confronted them why his name
was included in the placards. Edilberto brushed aside the query; instead, he
asked "Bantil" if he had any qualms about it, and without any provocation,
Edilberto drew his revolver and fired at the forehead of "Bantil". "Bantil" was
able to parry the gun, albeit his right finger and the lower portion of his right
ear were hit. Then they grappled for its possession until "Bantil" was
extricated by his wife from the fray. But, as he was running away, he was
again fired upon by Edilberto. Only his trousers were hit. "Bantil" however
managed to seek refuge in the house of a certain Domingo Gomez. 10
Norberto, Jr., ordered his men to surround the house and not to allow any
one to get out so that "Bantil" would die of hemorrhage. Then Edilberto went
back to the restaurant of Deocades and pistol-whipped him on the face and
accused him of being a communist coddler, while appellants and their
cohorts relished the unfolding drama. 11
Moments later, while Deocades was feeding his swine, Edilberto strewed him
with a burst of gunfire from his M-14 Armalite. Deocades cowered in fear as
he knelt with both hands clenched at the back of his head. This again drew
boisterous laughter and ridicule from the dreaded desperados.
At 5:00 o'clock, Fr. Tulio Favali arrived at Km. 125 on board his motorcycle.
He entered the house of Gomez. While inside, Norberto, Jr., and his co-
accused Pleñago towed the motorcycle outside to the center of the highway.
Norberto, Jr., opened the gasoline tank, spilled some fuel, lit a fire and
burned the motorcycle. As the vehicle was ablaze, the felons raved and
rejoiced. 12
Upon seeing his motorcycle on fire, Fr. Favali accosted Norberto, Jr. But the
latter simply stepped backwards and executed a thumbs-down signal. At this
point, Edilberto asked the priest: "Ano ang gusto mo, padre (What is it you
want, Father)? Gusto mo, Father, bukon ko ang ulo mo (Do you want me,
Father, to break your head)?" Thereafter, in a flash, Edilberto fired at the
head of the priest. As Fr. Favali dropped to the ground, his hands clasped
against his chest, Norberto, Jr., taunted Edilberto if that was the only way he
knew to kill a priest. Slighted over the remark, Edilberto jumped over the
prostrate body three (3) times, kicked it twice, and fired anew. The burst of
gunfire virtually shattered the head of Fr. Favali, causing his brain to scatter
on the road. As Norberto, Jr., flaunted the brain to the terrified onlookers, his
brothers danced and sang "Mutya Ka Baleleng" to the delight of their
comrades-in-arms who now took guarded positions to isolate the victim from
possible assistance. 13
In seeking exculpation from criminal liability, appellants Severino Lines,
Rudy Lines, Efren Pleñago and Roger Bedaño contend that the trial court
erred in disregarding their respective defenses of alibi which, if properly
appreciated, would tend to establish that there was no prior agreement to
kill; that the intended victim was Fr. Peter Geremias, not Fr. Tulio Favali;
that there was only one (1) gunman, Edilberto; and, that there was absolutely
no showing that appellants cooperated in the shooting of the victim despite
their proximity at the time to Edilberto.
But the evidence on record does not agree with the arguments of accused-
appellants.
On their defense of alibi, accused brothers Severino and Rudy Lines claim
that they were harvesting palay the whole day of 11 April 1985 some one
kilometer away from the crime scene. Accused Roger Bedaño alleges that he
was on an errand for the church to buy lumber and nipa in M'lang, Cotabato,
that morning of 11 April 1985, taking along his wife and sick child for
medical treatment and arrived in La Esperanza, Tulunan, past noontime.
Interestingly, all appellants similarly contend that it was only after they
heard gunshots that they rushed to the house of Norberto Manero, Sr.,
Barangay Captain of La Esperanza, where they were joined by their fellow
CHDF members and co-accused, and that it was only then that they
proceeded together to where the crime took place at Km. 125.
It is axiomatic that the accused interposing the defense of alibi must not only
be at some other place but that it must also be physically impossible for him
to be at the scene of the crime at the time of its commission. 14
Considering the failure of appellants to prove the required physical
impossibility of being present at the crime scene, as can be readily deduced
from the proximity between the places where accused-appellants were
allegedly situated at the time of the commission of the offenses and the locus
criminis, 15 the defense of alibi is definitely feeble. 16 After all, it has been the
consistent ruling of this Court that no physical impossibility exists in
instances where it would take the accused only fifteen to twenty minutes by
jeep or tricycle, or some one-and-a-half hours by foot, to traverse the
distance between the place where he allegedly was at the time of commission
of the offense and the scene of the crime. 17 Recently, we ruled that there can
be no physical impossibility even if the distance between two places is merely
two (2) hours by bus. 18 More important, it is well-settled that the defense of
alibi cannot prevail over
the positive identification of the authors of the crime by the prosecution
witnesses. 19
In the case before Us, two (2) eyewitnesses, Reynaldo Deocades and Manuel
Bantolo, testified that they were both inside the eatery at about 10:00 o'clock
in the morning of 11 April 1985 when the Manero brothers, together with
appellants, first discussed their plan to kill some communist sympathizers.
The witnesses also testified that they still saw the appellants in the company
of the Manero brothers at 4:00 o'clock in the afternoon when Rufino Robles
was shot. Further, at 5:00 o'clock that same afternoon, appellants were very
much at the scene of the crime, along with the Manero brothers, when Fr.
Favali was brutally murdered. 20 Indeed, in the face of such positive
declarations that appellants were at the locus criminis from 10:00 o'clock in
the morning up to about 5:00 o'clock in the afternoon, the alibi of appellants
that they were somewhere else, which is negative in nature, cannot prevail. 21
The presence of appellants in the eatery at Km. 125 having been positively
established, all doubts that they were not privy to the plot to liquidate alleged
communist sympathizers are therefore removed. There was direct proof to
link them to the conspiracy.
There is conspiracy when two or more persons come to an agreement to
commit a crime and decide to commit it. 22 It is not essential that all the
accused commit together each and every act constitutive of the offense. 23 It
is enough that an accused participates in an act or deed where there is
singularity of purpose, and unity in its execution is present. 24
The findings of the court a quo unmistakably show that there was indeed a
community of design as evidenced by the concerted acts of all the accused.
Thus —
The other six accused, 25 all armed with high powered
firearms, were positively identified with Norberto Manero, Jr.
and Edilberto Manero in the carinderia of Reynaldo
Deocades in La Esperanza, Tulunan, Cotabato at 10:00
o'clock in the morning of 11 April 1985 morning . . . they
were outside of the carinderia by the window near the table
where Edilberto Manero, Norberto Manero, Jr., Jun Villamor,
Elpidio Manero and unidentified members of the airborne
from Cotabato were grouped together. Later that morning,
they all went to the cockhouse nearby to finish their plan
and drink tuba. They were seen again with Edilberto Manero
and Norberto Manero, Jr., at 4:00 o'clock in the afternoon of
that day near the house of Rufino Robles (Bantil) when
Edilberto Manero shot Robles. They surrounded the house of
Domingo Gomez where Robles fled and hid, but later left
when Edilberto Manero told them to leave as Robles would
die of hemorrhage. They followed Fr. Favali to Domingo
Gomez' house, witnessed and enjoyed the burning of the
motorcycle of Fr. Favali and later stood guard with their
firearms ready on the road when Edilberto Manero shot to
death Fr. Favali. Finally, they joined Norberto Manero, Jr.
and Edilberto Manero in their enjoyment and merriment on
the death of the priest. 26
From the foregoing narration of the trial court, it is clear that appellants were
not merely innocent bystanders but were in fact vital cogs in perpetrating the
savage murder of Fr. Favali and the attempted murder of Rufino Robles by
the Manero brothers and their militiamen. For sure, appellants all assumed a
fighting stance to discourage if not prevent any attempt to provide assistance
to the fallen priest. They surrounded the house of Domingo Gomez to stop
Robles and the other occupants from leaving so that the wounded Robles
may die of hemorrhage. 27 Undoubtedly, these were overt acts to ensure
success of the commission of the crimes and in furtherance of the aims of the
conspiracy. The appellants acted in concert in the murder of Fr. Favali and in
the attempted murder of Rufino Robles. While accused-appellants may not
have delivered the fatal shots themselves, their collective action showed a
common intent to commit the criminal acts.
While it may be true that Fr. Favali was not originally the intended victim, as
it was Fr. Peter Geremias whom the group targetted for the kill, nevertheless,
Fr. Favali was deemed a good substitute in the murder as he was an Italian
priest. On this, the conspirators expressly agreed. As witness Manuel Bantolo
explained 28 —
Q Aside from those persons listed in that
paper to be killed, were there other persons
who were to be liquidated?
A There were some others.
Q Who were they?
A They said that if they could not kill those
persons listed in that paper then they will
(sic) kill anyone so long as he is (sic) an
Italian and if they could not kill the persons
they like to kill they will (sic) make Reynaldo
Deocades as their sample.
That appellants and their co-accused reached a common understanding to
kill another Italian priest in the event that Fr. Peter Geremias could not be
spotted was elucidated by Bantolo thus 29 —
Q Who suggested that Fr. Peter be the first
to be killed?
A All of them in the group.
Q What was the reaction of Norberto Manero
with respect to the plan to kill Fr. Peter?
A He laughed and even said, "amo ina"
meaning "yes, we will kill him ahead."
xxx xxx xxx
Q What about Severino Lines? What was his
reaction?
 A He also laughed and so conformed and
agreed to it.
Q Rudy Lines.
A He also said "yes".
Q What do you mean "yes"?
A He also agreed and he was happy and said
"yes" we will kill him.
xxx xxx xxx
Q What about Efren Pleñago?
A He also agreed and even commented
laughing "go ahead".
Q Roger Bedaño, what was his reaction to
that suggestion that should they fail to kill
Fr. Peter, they will (sic) kill anybody provided
he is an Italian and if not, they will (sic)
make Reynaldo Deocades an example?
A He also agreed laughing.
Conspiracy or action in concert to achieve a criminal design being sufficiently
shown, the act of one is the act of all the other conspirators, and
the precise extent or modality of participation of each of them becomes
secondary. 30
The award of moral damages in the amount of P100,000.00 to the
congregation, the Pontifical Institute of Foreign Mission (PIME) Brothers, is
not proper. There is nothing on record which indicates that the deceased
effectively severed his civil relations with his family, or that he disinherited
any member thereof, when he joined his religious congregation. As a matter
of fact, Fr. Peter Geremias of the same congregation, who was then a parish
priest of Kidapawan, testified that "the religious family belongs to the natural
family of origin." 31 Besides, as We already held, 32 a juridical person is not
entitled to moral damages because, not being a natural person, it cannot
experience physical suffering or such sentiments as wounded feelings,
serious anxiety, mental anguish or moral shock. It is only when a juridical
person has a good reputation that is debased, resulting in social humiliation,
that moral damages may be awarded.
Neither can We award moral damages to the heirs of the deceased who may
otherwise be lawfully entitled thereto pursuant to par. (3), Art. 2206, of the
Civil Code, 33 for the reason that the heirs never presented any evidence
showing that they suffered mental anguish; much less did they take the
witness stand. It has been held 34 that moral damages and their causal
relation to the defendant's acts should be satisfactorily proved by the
claimant. It is elementary that in order that moral damages may be awarded
there must be proof of moral suffering. 35 However, considering that the
brutal slaying of Fr. Tulio Favali was attended with abuse of superior
strength, cruelty and ignominy by deliberately and inhumanly augmenting
the pain and anguish of the victim, outraging or scoffing at his person or
corpse, exemplary damages may be awarded to the lawful heirs, 36 even
though not proved nor expressly pleaded in the complaint, 37 and the amount
of P100,000.00 is considered reasonable.
With respect to the civil indemnity of P12,000.00 for the death of Fr. Tulio
Favali, the amount is increased to P50,000.00 in accordance with existing
jurisprudence, which should be paid to the lawful heirs, not the PIME as the
trial court ruled.
WHEREFORE, the judgment appealed from being in accord with law and the
evidence is AFFIRMED with the modification that the civil indemnity which is
increased from P12,000.00 to P50,000.00 is awarded to the lawful heirs of
the deceased plus exemplary damages of P100,000.00; however, the award of
moral damages is deleted.
Costs against accused-appellants.
SO ORDERED.
Cruz, Padilla and Griño-Aquino, JJ., concur
G.R. No. L-22973 January 30, 1968
MAMBULAO LUMBER COMPANY, plaintiff-appellant,
vs.
PHILIPPINE NATIONAL BANK and ANACLETO HERALDO Deputy
Provincial Sheriff of Camarines Norte, defendants-appellees.
Ernesto P. Vilar and Arthur Tordesillas for plaintiff-appellant.
Tomas Besa and Jose B. Galang for defendants-appellees.
ANGELES, J.:
An appeal from a decision, dated April 2, 1964, of the Court of First Instance
of Manila in Civil Case No. 52089, entitled "Mambulao Lumber Company,
plaintiff, versus Philippine National Bank and Anacleto Heraldo, defendants",
dismissing the complaint against both defendants and sentencing the
plaintiff to pay to defendant Philippine National Bank (PNB for short) the sum
of P3,582.52 with interest thereon at the rate of 6% per annum from
December 22, 1961 until fully paid, and the costs of suit.
In seeking the reversal of the decision, the plaintiff advances several
propositions in its brief which may be restated as follows:
1. That its total indebtedness to the PNB as of November 21, 1961,
was only P56,485.87 and not P58,213.51 as concluded by the court
a quo; hence, the proceeds of the foreclosure sale of its real property
alone in the amount of P56,908.00 on that date, added to the sum of
P738.59 it remitted to the PNB thereafter was more than sufficient to
liquidate its obligation, thereby rendering the subsequent foreclosure
sale of its chattels unlawful;
2. That it is not liable to pay PNB the amount of P5,821.35 for
attorney's fees and the additional sum of P298.54 as expenses of the
foreclosure sale;
 3. That the subsequent foreclosure sale of its chattels is null and
void, not only because it had already settled its indebtedness to the
PNB at the time the sale was effected, but also for the reason that the
said sale was not conducted in accordance with the provisions of the
Chattel Mortgage Law and the venue agreed upon by the parties in
the mortgage contract;
4. That the PNB, having illegally sold the chattels, is liable to the
plaintiff for its value; and
5. That for the acts of the PNB in proceeding with the sale of the
chattels, in utter disregard of plaintiff's vigorous opposition thereto,
and in taking possession thereof after the sale thru force,
intimidation, coercion, and by detaining its "man-in-charge" of said
properties, the PNB is liable to plaintiff for damages and attorney's
fees.
The antecedent facts of the case, as found by the trial court, are as follows:
On May 5, 1956 the plaintiff applied for an industrial loan of
P155,000 with the Naga Branch of defendant PNB and the former
offered real estate, machinery, logging and transportation
equipments as collaterals. The application, however, was approved
for a loan of P100,000 only. To secure the payment of the loan, the
plaintiff mortgaged to defendant PNB a parcel of land, together with
the buildings and improvements existing thereon, situated in the
poblacion of Jose Panganiban (formerly Mambulao), province of
Camarines Norte, and covered by Transfer Certificate of Title No. 381
of the land records of said province, as well as various sawmill
equipment, rolling unit and other fixed assets of the plaintiff, all
situated in its compound in the aforementioned municipality.
On August 2, 1956, the PNB released from the approved loan the
sum of P27,500, for which the plaintiff signed a promissory note
wherein it promised to pay to the PNB the said sum in five equal
yearly installments at the rate of P6,528.40 beginning July 31, 1957,
and every year thereafter, the last of which would be on July 31,
1961.
On October 19, 1956, the PNB made another release of P15,500 as
part of the approved loan granted to the plaintiff and so on the said
date, the latter executed another promissory note wherein it agreed
to pay to the former the said sum in five equal yearly installments at
the rate of P3,679.64 beginning July 31, 1957, and ending on July
31, 1961.
The plaintiff failed to pay the amortization on the amounts released
to and received by it. Repeated demands were made upon the
plaintiff to pay its obligation but it failed or otherwise refused to do
so. Upon inspection and verification made by employees of the PNB,
it was found that the plaintiff had already stopped operation about
the end of 1957 or early part of 1958.
On September 27, 1961, the PNB sent a letter to the Provincial
Sheriff of Camarines Norte requesting him to take possession of the
parcel of land, together with the improvements existing thereon,
covered by Transfer Certificate of Title No. 381 of the land records of
Camarines Norte, and to sell it at public auction in accordance with
the provisions of Act No. 3135, as amended, for the satisfaction of
the unpaid obligation of the plaintiff, which as of September 22,
1961, amounted to P57,646.59, excluding attorney's fees. In
compliance with the request, on October 16, 1961, the Provincial
Sheriff of Camarines Norte issued the corresponding notice of extra-
judicial sale and sent a copy thereof to the plaintiff. According to the
notice, the mortgaged property would be sold at public auction at
10:00 a.m. on November 21, 1961, at the ground floor of the Court
House in Daet, Camarines Norte.
On November 6, 1961, the PNB sent a letter to the Provincial Sheriff
of Camarines Norte requesting him to take possession of the chattels
mortgaged to it by the plaintiff and sell them at public auction also
on November 21, 1961, for the satisfaction of the sum of P57,646.59,
plus 6% annual interest therefore from September 23, 1961,
attorney's fees equivalent to 10% of the amount due and the costs
and expenses of the sale. On the same day, the PNB sent notice to
the plaintiff that the former was foreclosing extrajudicially the
chattels mortgaged by the latter and that the auction sale thereof
would be held on November 21, 1961, between 9:00 and 12:00 a.m.,
in Mambulao, Camarines Norte, where the mortgaged chattels were
situated.
On November 8, 1961, Deputy Provincial Sheriff Anacleto Heraldo
took possession of the chattels mortgaged by the plaintiff and made
an inventory thereof in the presence of a PC Sergeant and a
policeman of the municipality of Jose Panganiban. On November 9,
1961, the said Deputy Sheriff issued the corresponding notice of
public auction sale of the mortgaged chattels to be held on November
21, 1961, at 10:00 a.m., at the plaintiff's compound situated in the
municipality of Jose Panganiban, Province of Camarines Norte.
On November 19, 1961, the plaintiff sent separate letters, posted as
registered air mail matter, one to the Naga Branch of the PNB and
another to the Provincial Sheriff of Camarines Norte, protesting
against the foreclosure of the real estate and chattel mortgages on
the grounds that they could not be effected unless a Court's order
was issued against it (plaintiff) for said purpose and that the
foreclosure proceedings, according to the terms of the mortgage
contracts, should be made in Manila. In said letter to the Naga
Branch of the PNB, it was intimated that if the public auction sale
would be suspended and the plaintiff would be given an extension of
ninety (90) days, its obligation would be settled satisfactorily because
an important negotiation was then going on for the sale of its "whole
interest" for an amount more than sufficient to liquidate said
obligation.
The letter of the plaintiff to the Naga Branch of the PNB was
construed by the latter as a request for extension of the foreclosure
sale of the mortgaged chattels and so it advised the Sheriff of
Camarines Norte to defer it to December 21, 1961, at the same time
and place. A copy of said advice was sent to the plaintiff for its
information and guidance.
The foreclosure sale of the parcel of land, together with the buildings
and improvements thereon, covered by Transfer Certificate of Title
No. 381, was, however, held on November 21, 1961, and the said
property was sold to the PNB for the sum of P56,908.00, subject to
the right of the plaintiff to redeem the same within a period of one
year. On the same date, Deputy Provincial Sheriff Heraldo executed a
certificate of sale in favor of the PNB and a copy thereof was sent to
the plaintiff.
In a letter dated December 14, 1961 (but apparently posted several
days later), the plaintiff sent a bank draft for P738.59 to the Naga
Branch of the PNB, allegedly in full settlement of the balance of the
obligation of the plaintiff after the application thereto of the sum of
P56,908.00 representing the proceeds of the foreclosure sale of
parcel of land described in Transfer Certificate of Title No. 381. In the
said letter, the plaintiff reiterated its request that the foreclosure sale
of the mortgaged chattels be discontinued on the grounds that the
mortgaged indebtedness had been fully paid and that it could not be
legally effected at a place other than the City of Manila.
In a letter dated December 16, 1961, the plaintiff advised the
Provincial Sheriff of Camarines Norte that it had fully paid its
obligation to the PNB, and enclosed therewith a copy of its letter to
the latter dated December 14, 1961.
On December 18, 1961, the Attorney of the Naga Branch of the PNB,
wrote to the plaintiff acknowledging the remittance of P738.59 with
the advice, however, that as of that date the balance of the account
of the plaintiff was P9,161.76, to which should be added the
expenses of guarding the mortgaged chattels at the rate of P4.00 a
day beginning December 19, 1961. It was further explained in said
letter that the sum of P57,646.59, which was stated in the request
for the foreclosure of the real estate mortgage, did not include the
10% attorney's fees and expenses of the sale. Accordingly, the
plaintiff was advised that the foreclosure sale scheduled on the 21st
of said month would be stopped if a remittance of P9,161.76, plus
interest thereon and guarding fees, would be made.
On December 21, 1961, the foreclosure sale of the mortgaged
chattels was held at 10:00 a.m. and they were awarded to the PNB
for the sum of P4,200 and the corresponding bill of sale was issued
in its favor by Deputy Provincial Sheriff Heraldo.
In a letter dated December 26, 1961, the Manager of the Naga
Branch of the PNB advised the plaintiff giving it priority to
repurchase the chattels acquired by the former at public auction.
This offer was reiterated in a letter dated January 3, 1962, of the
Attorney of the Naga Branch of the PNB to the plaintiff, with the
suggestion that it exercise its right of redemption and that it apply
for the condonation of the attorney's fees. The plaintiff did not follow
the advice but on the contrary it made known of its intention to file
appropriate action or actions for the protection of its interests.
On May 24, 1962, several employees of the PNB arrived in the
compound of the plaintiff in Jose Panganiban, Camarines Norte, and
they informed Luis Salgado, Chief Security Guard of the premises,
that the properties therein had been auctioned and bought by the
PNB, which in turn sold them to Mariano Bundok. Upon being
advised that the purchaser would take delivery of the things he
bought, Salgado was at first reluctant to allow any piece of property
to be taken out of the compound of the plaintiff. The employees of
the PNB explained that should Salgado refuse, he would be exposing
himself to a litigation wherein he could be held liable to pay big sum
of money by way of damages. Apprehensive of the risk that he would
take, Salgado immediately sent a wire to the President of the plaintiff
in Manila, asking advice as to what he should do. In the meantime,
Mariano Bundok was able to take out from the plaintiff's compound
two truckloads of equipment.
In the afternoon of the same day, Salgado received a telegram from
plaintiff's President directing him not to deliver the "chattels" without
court order, with the information that the company was then filing
an action for damages against the PNB. On the following day, May
25, 1962, two trucks and men of Mariano Bundok arrived but
Salgado did not permit them to take out any equipment from inside
the compound of the plaintiff. Thru the intervention, however, of the
local police and PC soldiers, the trucks of Mariano Bundok were able
finally to haul the properties originally mortgaged by the plaintiff to
the PNB, which were bought by it at the foreclosure sale and
subsequently sold to Mariano Bundok.
Upon the foregoing facts, the trial court rendered the decision appealed from
which, as stated in the first paragraph of this opinion, sentenced the
Mambulao Lumber Company to pay to the defendant PNB the sum of
P3,582.52 with interest thereon at the rate of 6% per annum from December
22, 1961 (day following the date of the questioned foreclosure of plaintiff's
chattels) until fully paid, and the costs. Mambulao Lumber Company
interposed the instant appeal.
We shall discuss the various points raised in appellant's brief in seriatim.
The first question Mambulao Lumber Company poses is that which relates to
the amount of its indebtedness to the PNB arising out of the principal loans
and the accrued interest thereon. It is contended that its obligation under the
terms of the two promissory notes it had executed in favor of the PNB
amounts only to P56,485.87 as of November 21, 1961, when the sale of real
property was effected, and not P58,213.51 as found by the trial court.
There is merit to this claim. Examining the terms of the promissory note
executed by the appellant in favor of the PNB, we find that the agreed interest
on the loan of P43,000.00 — P27,500.00 released on August 2, 1956 as per
promissory note of even date (Exhibit C-3), and P15,500.00 released on
October 19, 1956, as per promissory note of the same date (Exhibit C-4) —
was six per cent (6%) per annum from the respective date of said notes "until
paid". In the statement of account of the appellant as of September 22, 1961,
submitted by the PNB, it appears that in arriving at the total indebtedness of
P57,646.59 as of that date, the PNB had compounded the principal of the
loan and the accrued 6% interest thereon each time the yearly amortizations
became due, and on the basis of these compounded amounts charged
additional delinquency interest on them up to September 22, 1961; and to
this erroneously computed total of P57,646.59, the trial court added 6%
interest per annum from September 23, 1961 to November 21 of the same
year. In effect, the PNB has claimed, and the trial court has adjudicated to it,
interest on accrued interests from the time the various amortizations of the
loan became due until the real estate mortgage executed to secure the loan
was extra-judicially foreclosed on November 21, 1961. This is an error.
Section 5 of Act No. 2655 expressly provides that in computing the interest
on any obligation, promissory note or other instrument or contract,
compound interest shall not be reckoned, except by agreement, or in default
thereof, whenever the debt is judicially claimed. This is also the clear
mandate of Article 2212 of the new Civil Code which provides that interest
due shall earn legal interest only from the time it is judicially demanded, and
of Article 1959 of the same code which ordains that interest due and unpaid
shall not earn interest. Of course, the parties may, by stipulation, capitalize
the interest due and unpaid, which as added principal shall earn new
interest; but such stipulation is nowhere to be found in the terms of the
promissory notes involved in this case. Clearly therefore, the trial court fell
into error when it awarded interest on accrued interests, without any
agreement to that effect and before they had been judicially demanded.
Appellant next assails the award of attorney's fees and the expenses of the
foreclosure sale in favor of the PNB. With respect to the amount of P298.54
allowed as expenses of the extra-judicial sale of the real property, appellant
maintains that the same has no basis, factual or legal, and should not have
been awarded. It likewise decries the award of attorney's fees which,
according to the appellant, should not be deducted from the proceeds of the
sale of the real property, not only because there is no express agreement in
the real estate mortgage contract to pay attorney's fees in case the same is
extra-judicially foreclosed, but also for the reason that the PNB neither spent
nor incurred any obligation to pay attorney's fees in connection with the said
extra-judicial foreclosure under consideration.
There is reason for the appellant to assail the award of P298.54 as expenses
of the sale. In this respect, the trial court said:
The parcel of land, together with the buildings and improvements
existing thereon covered by Transfer Certificate of Title No. 381, was
sold for P56,908. There was, however, no evidence how much was
the expenses of the foreclosure sale although from the pertinent
provisions of the Rules of Court, the Sheriff's fees would be P1 for
advertising the sale (par. k, Sec. 7, Rule 130 of the Old Rules) and
P297.54 as his commission for the sale (par. n, Sec. 7, Rule 130 of
the Old Rules) or a total of P298.54.
There is really no evidence of record to support the conclusion that the PNB
is entitled to the amount awarded as expenses of the extra-judicial
foreclosure sale. The court below committed error in applying the provisions
of the Rules of Court for purposes of arriving at the amount awarded. It is to
be borne in mind that the fees enumerated under paragraphs k and n,
Section 7, of Rule 130 (now Rule 141) are demandable, only by a sheriff
serving processes of the court in connection with judicial foreclosure of
mortgages under Rule 68 of the new Rules, and not in cases of extra-judicial
foreclosure of mortgages under Act 3135. The law applicable is Section 4 of
Act 3135 which provides that the officer conducting the sale is entitled to
collect a fee of P5.00 for each day of actual work performed in addition to his
expenses in connection with the foreclosure sale. Admittedly, the PNB failed
to prove during the trial of the case, that it actually spent any amount in
connection with the said foreclosure sale. Neither may expenses for
publication of the notice be legally allowed in the absence of evidence on
record to support it. 1 It is true, as pointed out by the appellee bank, that
courts should take judicial notice of the fees provided for by law which need
not be proved; but in the absence of evidence to show at least the number of
working days the sheriff concerned actually spent in connection with the
extra-judicial foreclosure sale, the most that he may be entitled to, would be
the amount of P10.00 as a reasonable allowance for two day's work — one for
the preparation of the necessary notices of sale, and the other for conducting
the auction sale and issuance of the corresponding certificate of sale in favor
of the buyer. Obviously, therefore, the award of P298.54 as expenses of the
sale should be set aside.
But the claim of the appellant that the real estate mortgage does not provide
for attorney's fees in case the same is extra-judicially foreclosed, cannot be
favorably considered, as would readily be revealed by an examination of the
pertinent provision of the mortgage contract. The parties to the mortgage
appear to have stipulated under paragraph (c) thereof, inter alia:
. . . For the purpose of extra-judicial foreclosure, the Mortgagor
hereby appoints the Mortgagee his attorney-in-fact to sell the
property mortgaged under Act 3135, as amended, to sign all
documents and to perform all acts requisite and necessary to
accomplish said purpose and to appoint its substitute as such
attorney-in-fact with the same powers as above specified. In case of
judicial foreclosure, the Mortgagor hereby consents to the
appointment of the Mortgagee or any of its employees as receiver,
without any bond, to take charge of the mortgaged property at once,
and to hold possession of the same and the rents, benefits and
profits derived from the mortgaged property before the sale, less the
costs and expenses of the receivership; the Mortgagor hereby agrees
further that in all cases, attorney's fees hereby fixed at Ten Per cent
(10%) of the total indebtedness then unpaid which in no case shall
be less than P100.00 exclusive of all fees allowed by law, and the
expenses of collection shall be the obligation of the Mortgagor and
shall with priority, be paid to the Mortgagee out of any sums realized
as rents and profits derived from the mortgaged property or from the
proceeds realized from the sale of the said property and this
mortgage shall likewise stand as security therefor. . . .
We find the above stipulation to pay attorney's fees clear enough to cover
both cases of foreclosure sale mentioned thereunder, i.e., judicially or extra-
judicially. While the phrase "in all cases" appears to be part of the second
sentence, a reading of the whole context of the stipulation would readily show
that it logically refers to extra-judicial foreclosure found in the first sentence
and to judicial foreclosure mentioned in the next sentence. And the
ambiguity in the stipulation suggested and pointed out by the appellant by
reason of the faulty sentence construction should not be made to defeat the
otherwise clear intention of the parties in the agreement.
It is suggested by the appellant, however, that even if the above stipulation to
pay attorney's fees were applicable to the extra-judicial foreclosure sale of its
real properties, still, the award of P5,821.35 for attorney's fees has no legal
justification, considering the circumstance that the PNB did not actually
spend anything by way of attorney's fees in connection with the sale. In
support of this proposition, appellant cites authorities to the effect: (1) that
when the mortgagee has neither paid nor incurred any obligation to pay an
attorney in connection with the foreclosure sale, the claim for such fees
should be denied; 2 and (2) that attorney's fees will not be allowed when the
attorney conducting the foreclosure proceedings is an officer of the
corporation (mortgagee) who receives a salary for all the legal services
performed by him for the corporation. 3 These authorities are indeed
enlightening; but they should not be applied in this case. The very same
authority first cited suggests that said principle is not absolute, for there is
authority to the contrary. As to the fact that the foreclosure proceeding's
were handled by an attorney of the legal staff of the PNB, we are reluctant to
exonerate herein appellant from the payment of the stipulated attorney's fees
on this ground alone, considering the express agreement between the parties
in the mortgage contract under which appellant became liable to pay the
same. At any rate, we find merit in the contention of the appellant that the
award of P5,821.35 in favor of the PNB as attorney's fees is unconscionable
and unreasonable, considering that all that the branch attorney of the said
bank did in connection with the foreclosure sale of the real property was to
file a petition with the provincial sheriff of Camarines Norte requesting the
latter to sell the same in accordance with the provisions of Act 3135.
The principle that courts should reduce stipulated attorney's fees whenever it
is found under the circumstances of the case that the same is unreasonable,
is now deeply rooted in this jurisdiction to entertain any serious objection to
it. Thus, this Court has explained:
But the principle that it may be lawfully stipulated that the legal
expenses involved in the collection of a debt shall be defrayed by the
debtor does not imply that such stipulations must be enforced in
accordance with the terms, no matter how injurious or oppressive
they may be. The lawful purpose to be accomplished by such a
stipulation is to permit the creditor to receive the amount due him
under his contract without a deduction of the expenses caused by
the delinquency of the debtor. It should not be permitted for him to
convert such a stipulation into a source of speculative profit at the
expense of the debtor.
Contracts for attorney's services in this jurisdiction stands upon an
entirely different footing from contracts for the payment of
compensation for any other services. By express provision of section
29 of the Code of Civil Procedure, an attorney is not entitled in the
absence of express contract to recover more than a reasonable
compensation for his services; and even when an express contract is
made the court can ignore it and limit the recovery to reasonable
compensation if the amount of the stipulated fee is found by the
court to be unreasonable. This is a very different rule from that
announced in section 1091 of the Civil Code with reference to the
obligation of contracts in general, where it is said that such
obligation has the force of law between the contracting parties. Had
the plaintiff herein made an express contract to pay his attorney an
uncontingent fee of P2,115.25 for the services to be rendered in
reducing the note here in suit to judgment, it would not have been
enforced against him had he seen fit to oppose it, as such a fee is
obviously far greater than is necessary to remunerate the attorney
for the work involved and is therefore unreasonable. In order to
enable the court to ignore an express contract for an attorney's fees,
it is not necessary to show, as in other contracts, that it is contrary
to morality or public policy (Art. 1255, Civil Code). It is enough that it
is unreasonable or unconscionable. 4
Since then this Court has invariably fixed counsel fees on a quantum meruit
basis whenever the fees stipulated appear excessive, unconscionable, or
unreasonable, because a lawyer is primarily a court officer charged with the
duty of assisting the court in administering impartial justice between the
parties, and hence, the fees should be subject to judicial control. Nor should
it be ignored that sound public policy demands that courts disregard
stipulations for counsel fees, whenever they appear to be a source of
speculative profit at the expense of the debtor or mortgagor. 5 And it is not
material that the present action is between the debtor and the creditor, and
not between attorney and client. As court have power to fix the fee as
between attorney and client, it must necessarily have the right to say
whether a stipulation like this, inserted in a mortgage contract, is valid. 6
In determining the compensation of an attorney, the following circumstances
should be considered: the amount and character of the services rendered; the
responsibility imposed; the amount of money or the value of the property
affected by the controversy, or involved in the employment; the skill and
experience called for in the performance of the service; the professional
standing of the attorney; the results secured; and whether or not the fee is
contingent or absolute, it being a recognized rule that an attorney may
properly charge a much larger fee when it is to be contingent than when it is
not. 7 From the stipulation in the mortgage contract earlier quoted, it appears
that the agreed fee is 10% of the total indebtedness, irrespective of the
manner the foreclosure of the mortgage is to be effected. The agreement is
perhaps fair enough in case the foreclosure proceedings is prosecuted
judicially but, surely, it is unreasonable when, as in this case, the mortgage
was foreclosed extra-judicially, and all that the attorney did was to file a
petition for foreclosure with the sheriff concerned. It is to be assumed
though, that the said branch attorney of the PNB made a study of the case
before deciding to file the petition for foreclosure; but even with this in mind,
we believe the amount of P5,821.35 is far too excessive a fee for such
services. Considering the above circumstances mentioned, it is our
considered opinion that the amount of P1,000.00 would be more than
sufficient to compensate the work aforementioned.
Deduct: Total obligation to the PNB P57,495.86
The next issue raised deals with the claim that the proceeds of the sale of the
real properties alone together with the amount it remitted to the PNB later
was more than sufficient to liquidate its total obligation to herein appellee
bank. Again, we find merit in this claim. From the foregoing discussion of the Excess Payment to the PNB P 150.73
first two errors assigned, and for purposes of determining the total obligation
========
of herein appellant to the PNB as of November 21, 1961 when the real estate
mortgage was foreclosed, we have the following illustration in support of this
conclusion:1äwphï1.ñët From the foregoing illustration or computation, it is clear that there was no
further necessity to foreclose the mortgage of herein appellant's chattels on
A. - December 21, 1961; and on this ground alone, we may declare the sale of
appellant's chattels on the said date, illegal and void. But we take into
consideration the fact that the PNB must have been led to believe that the
I. Principal Loan stipulated 10% of the unpaid loan for attorney's fees in the real estate
mortgage was legally maintainable, and in accordance with such belief,
(a) Promissory note dated August 2, 1956 P27,500.00 herein appellee bank insisted that the proceeds of the sale of appellant's real
property was deficient to liquidate the latter's total indebtedness. Be that as
it may, however, we still find the subsequent sale of herein appellant's
(1) Interest at 6% per annum from Aug. 2, 1956 to Nov. chattels illegal and objectionable on other grounds.
8,751.78
21, 1961
That appellant vigorously objected to the foreclosure of its chattel mortgage
after the foreclosure of its real estate mortgage on November 21, 1961, can
(b) Promissory note dated October 19, 1956 P15,500.00 not be doubted, as shown not only by its letter to the PNB on November 19,
1961, but also in its letter to the provincial sheriff of Camarines Norte on the
same date. These letters were followed by another letter to the appellee bank
(1) Interest at 6% per annum from Oct.19, 1956 to Nov.
4,734.08 on December 14, 1961, wherein herein appellant, in no uncertain terms,
21, 1961
reiterated its objection to the scheduled sale of its chattels on December 21,
1961 at Jose Panganiban, Camarines Norte for the reasons therein stated
II. Sheriff's fees [for two (2) day's work] 10.00 that: (1) it had settled in full its total obligation to the PNB by the sale of the
real estate and its subsequent remittance of the amount of P738.59; and (2)
that the contemplated sale at Jose Panganiban would violate their agreement
III. Attorney's fee 1,000.00
embodied under paragraph (i) in the Chattel Mortgage which provides as
follows:
(i) In case of both judicial and extra-judicial foreclosure under Act
Total obligation as of Nov. 21, 1961 P57,495.86 1508, as amended, the parties hereto agree that the corresponding
complaint for foreclosure or the petition for sale should be filed with
the courts or the sheriff of the City of Manila, as the case may be; and
B. -
that the Mortgagor shall pay attorney's fees hereby fixed at ten per
cent (10%) of the total indebtedness then unpaid but in no case shall
Proceeds of the foreclosure sale of the real estate it be less than P100.00, exclusive of all costs and fees allowed by law
I. P56,908.00
mortgage on Nov. 21, 1961 and of other expenses incurred in connection with the said
foreclosure. [Emphasis supplied]
II. Additional amount remitted to the PNB on Dec. 18, 1961 738.59 Notwithstanding the abovequoted agreement in the chattel mortgage
contract, and in utter disregard of the objection of herein appellant to the
sale of its chattels at Jose Panganiban, Camarines Norte and not in the City
of Manila as agreed upon, the PNB proceeded with the foreclosure sale of said
Total amount of Payment made to PNB as of Dec. 18,
P57,646.59 chattels. The trial court, however, justified said action of the PNB in the
1961
decision appealed from in the following rationale:
 While it is true that it was stipulated in the chattel mortgage contract to the contrary, a sale conducted at a place other than that
that a petition for the extra-judicial foreclosure thereof should be stipulated for in the mortgage is invalid, unless the mortgagor
filed with the Sheriff of the City of Manila, nevertheless, the effect consents to such sale. 12
thereof was merely to provide another place where the mortgage
Moreover, Section 14 of Act 1508, as amended, provides that the officer
chattel could be sold in addition to those specified in the Chattel
making the sale should make a return of his doings which shall particularly
Mortgage Law. Indeed, a stipulation in a contract cannot abrogate
describe the articles sold and the amount received from each article. From
much less impliedly repeal a specific provision of the statute.
this, it is clear that the law requires that sale be made article by article,
Considering that Section 14 of Act No. 1508 vests in the mortgagee
otherwise, it would be impossible for him to state the amount received for
the choice where the foreclosure sale should be held, hence, in the
each item. This requirement was totally disregarded by the Deputy Sheriff of
case under consideration, the PNB had three places from which to
Camarines Norte when he sold the chattels in question in bulk,
select, namely: (1) the place of residence of the mortgagor; (2) the
notwithstanding the fact that the said chattels consisted of no less than
place of the mortgaged chattels were situated; and (3) the place
twenty different items as shown in the bill of sale. 13 This makes the sale of
stipulated in the contract. The PNB selected the second and,
the chattels manifestly objectionable. And in the absence of any evidence to
accordingly, the foreclosure sale held in Jose Panganiban, Camarines
show that the mortgagor had agreed or consented to such sale in gross, the
Norte, was legal and valid.
same should be set aside.
To the foregoing conclusion, We disagree. While the law grants power and
It is said that the mortgagee is guilty of conversion when he sells under the
authority to the mortgagee to sell the mortgaged property at a public place in
mortgage but not in accordance with its terms, or where the proceedings as
the municipality where the mortgagor resides or where the property is
to the sale of foreclosure do not comply with the statute. 14 This rule applies
situated, 8 this Court has held that the sale of a mortgaged chattel may be
squarely to the facts of this case where, as earlier shown, herein appellee
made in a place other than that where it is found, provided that the owner
bank insisted, and the appellee deputy sheriff of Camarines Norte proceeded
thereof consents thereto; or that there is an agreement to this effect between
with the sale of the mortgaged chattels at Jose Panganiban, Camarines
the mortgagor and the mortgagee. 9 But when, as in this case, the parties
Norte, in utter disregard of the valid objection of the mortgagor thereto for the
agreed to have the sale of the mortgaged chattels in the City of Manila,
reason that it is not the place of sale agreed upon in the mortgage contract;
which, any way, is the residence of the mortgagor, it cannot be rightly said
and the said deputy sheriff sold all the chattels (among which were a skagit
that mortgagee still retained the power and authority to select from among
with caterpillar engine, three GMC 6 x 6 trucks, a Herring Hall Safe, and
the places provided for in the law and the place designated in their
Sawmill equipment consisting of a 150 HP Murphy Engine, plainer, large
agreement over the objection of the mortgagor. In providing that the
circular saws etc.) as a single lot in violation of the requirement of the law to
mortgaged chattel may be sold at the place of residence of the mortgagor or
sell the same article by article. The PNB has resold the chattels to another
the place where it is situated, at the option of the mortgagee, the law clearly
buyer with whom it appears to have actively cooperated in subsequently
contemplated benefits not only to the mortgagor but to the mortgagee as well.
taking possession of and removing the chattels from appellant compound by
Their right arising thereunder, however, are personal to them; they do not
force, as shown by the circumstance that they had to take along PC soldiers
affect either public policy or the rights of third persons. They may validly be
and municipal policemen of Jose Panganiban who placed the chief security
waived. So, when herein mortgagor and mortgagee agreed in the mortgage
officer of the premises in jail to deprive herein appellant of its possession
contract that in cases of both judicial and extra-judicial foreclosure under Act
thereof. To exonerate itself of any liability for the breach of peace thus
1508, as amended, the corresponding complaint for foreclosure or the petition
committed, the PNB would want us to believe that it was the subsequent
for sale should be filed with the courts or the Sheriff of Manila, as the case
buyer alone, who is not a party to this case, that was responsible for the
may be, they waived their corresponding rights under the law. The correlative
forcible taking of the property; but assuming this to be so, still the PNB
obligation arising from that agreement have the force of law between them
cannot escape liability for the conversion of the mortgaged chattels by parting
and should be complied with in good faith. 10
with its interest in the property. Neither would its claim that it afterwards
By said agreement the parties waived the legal venue, and such gave a chance to herein appellant to repurchase or redeem the chattels,
waiver is valid and legally effective, because it, was merely a personal improve its position, for the mortgagor is not under obligation to take
privilege they waived, which is not contrary, to public policy or to the affirmative steps to repossess the chattels that were converted by the
prejudice of third persons. It is a general principle that a person may mortgagee. 15 As a consequence of the said wrongful acts of the PNB and the
renounce any right which the law gives unless such renunciation is Deputy Sheriff of Camarines Norte, therefore, We have to declare that herein
expressly prohibited or the right conferred is of such nature that its appellant is entitled to collect from them, jointly and severally, the full value
renunciation would be against public policy. 11 of the chattels in question at the time they were illegally sold by them. To this
effect was the holding of this Court in a similar situation. 16
On the other hand, if a place of sale is specified in the mortgage and
statutory requirements in regard thereto are complied with, a sale is The effect of this irregularity was, in our opinion to make the plaintiff
properly conducted in that place. Indeed, in the absence of a statute liable to the defendant for the full value of the truck at the time the
 plaintiff thus carried it off to be sold; and of course, the burden is on
the defendant to prove the damage to which he was thus subjected. .
..
This brings us to the problem of determining the value of the mortgaged
chattels at the time of their sale in 1961. The trial court did not make any
finding on the value of the chattels in the decision appealed from and denied
altogether the right of the appellant to recover the same. We find enough
evidence of record, however, which may be used as a guide to ascertain their
value. The record shows that at the time herein appellant applied for its loan
with the PNB in 1956, for which the chattels in question were mortgaged as
part of the security therefore, herein appellant submitted a list of the chattels
together with its application for the loan with a stated value of P107,115.85.
An official of the PNB made an inspection of the chattels in the same year
giving it an appraised value of P42,850.00 and a market value of P85,700.00.
17 The same chattels with some additional equipment acquired by herein
appellant with part of the proceeds of the loan were reappraised in a re-
inspection conducted by the same official in 1958, in the report of which he
gave all the chattels an appraised value of P26,850.00 and a market value of
P48,200.00. 18 Another re-inspection report in 1959 gave the appraised value
as P19,400.00 and the market value at P25,600.00. 19 The said official of the
PNB who made the foregoing reports of inspection and re-inspections testified
in court that in giving the values appearing in the reports, he used a
conservative method of appraisal which, of course, is to be expected of an
official of the appellee bank. And it appears that the values were considerably
reduced in all the re-inspection reports for the reason that when he went to
herein appellant's premises at the time, he found the chattels no longer in
use with some of the heavier equipments dismantled with parts thereof kept
in the bodega; and finding it difficult to ascertain the value of the dismantled
chattels in such condition, he did not give them anymore any value in his
reports. Noteworthy is the fact, however, that in the last re-inspection report
he made of the chattels in 1961, just a few months before the foreclosure
sale, the same inspector of the PNB reported that the heavy equipment of
herein appellant were "lying idle and rusty" but were "with a shed free from
rains" 20 showing that although they were no longer in use at the time, they
were kept in a proper place and not exposed to the elements. The President of
the appellant company, on the other hand, testified that its caterpillar
(tractor) alone is worth P35,000.00 in the market, and that the value of its
two trucks acquired by it with part of the proceeds of the loan and included
as additional items in the mortgaged chattels were worth no less than
P14,000.00. He likewise appraised the worth of its Murphy engine at
P16,000.00 which, according to him, when taken together with the heavy
equipments he mentioned, the sawmill itself and all other equipment forming
part of the chattels under consideration, and bearing in mind the current
cost of equipments these days which he alleged to have increased by about
five (5) times, could safely be estimated at P120,000.00. This testimony,
except for the appraised and market values appearing in the inspection and
re-inspection reports of the PNB official earlier mentioned, stand
uncontroverted in the record; but We are not inclined to accept such
testimony at its par value, knowing that the equipments of herein appellant
had been idle and unused since it stopped operating its sawmill in 1958 up
to the time of the sale of the chattels in 1961. We have no doubt that the
value of chattels was depreciated after all those years of inoperation,
although from the evidence aforementioned, We may also safely conclude
that the amount of P4,200.00 for which the chattels were sold in the
foreclosure sale in question was grossly unfair to the mortgagor. Considering,
however, the facts that the appraised value of P42,850.00 and the market
value of P85,700.00 originally given by the PNB official were admittedly
conservative; that two 6 x 6 trucks subsequently bought by the appellant
company had thereafter been added to the chattels; and that the real value
thereof, although depreciated after several years of inoperation, was in a way
maintained because the depreciation is off-set by the marked increase in the
cost of heavy equipment in the market, it is our opinion that the market
value of the chattels at the time of the sale should be fixed at the original
appraised value of P42,850.00.
Herein appellant's claim for moral damages, however, seems to have no legal
or factual basis. Obviously, an artificial person like herein appellant
corporation cannot experience physical sufferings, mental anguish, fright,
serious anxiety, wounded feelings, moral shock or social humiliation which
are basis of moral damages. 21 A corporation may have a good reputation
which, if besmirched, may also be a ground for the award of moral damages.
The same cannot be considered under the facts of this case, however, not
only because it is admitted that herein appellant had already ceased in its
business operation at the time of the foreclosure sale of the chattels, but also
for the reason that whatever adverse effects of the foreclosure sale of the
chattels could have upon its reputation or business standing would
undoubtedly be the same whether the sale was conducted at Jose
Panganiban, Camarines Norte, or in Manila which is the place agreed upon
by the parties in the mortgage contract.
But for the wrongful acts of herein appellee bank and the deputy sheriff of
Camarines Norte in proceeding with the sale in utter disregard of the
agreement to have the chattels sold in Manila as provided for in the mortgage
contract, to which their attentions were timely called by herein appellant,
and in disposing of the chattels in gross for the miserable amount of
P4,200.00, herein appellant should be awarded exemplary damages in the
sum of P10,000.00. The circumstances of the case also warrant the award of
P3,000.00 as attorney's fees for herein appellant.
WHEREFORE AND CONSIDERING ALL THE FOREGOING, the decision
appealed from should be, as hereby, it is set aside. The Philippine National
Bank and the Deputy Sheriff of the province of Camarines Norte are ordered
to pay, jointly and severally, to Mambulao Lumber Company the total
amount of P56,000.73, broken as follows: P150.73 overpaid by the latter to
the PNB, P42,850.00 the value of the chattels at the time of the sale with
interest at the rate of 6% per annum from December 21, 1961, until fully
paid, P10,000.00 in exemplary damages, and P3,000.00 as attorney's fees.
Costs against both appellees.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro
and Fernando, JJ., concur.
Bengzon, J.P. J., took no part