G.R. No.
L-39587             March 24, 1934 The following facts have been proven at the trial, some without question and the others by a
ALEKO E. LILIUS, ET AL., plaintiffs-appellants,
vs.
THE MANILA RAILROAD COMPANY, defendant-appellant.
Harvey and O'Brien for plaintiffs-appellants.
Jose C. Abreu for defendant-appellant.
VILLA-REAL, J.:
This case involves two appeals, one by the defendant the Manila Railroad Company, and the
other by the plaintiffs Aleko E. Lilius et al., from the judgment rendered by the Court of First
Instance of Manila, the dispositive part of which reads as follows:
Wherefore, judgment is rendered ordering the defendant company to pay to the
plaintiffs, for the purposes above stated, the total amount of P30,865, with the costs
of the suit. And although the suit brought by the plaintiffs has the nature of a joint
action, it must be understood that of the amount adjudicated to the said plaintiffs in
this judgment, the sum of P10,000 personally belongs to the plaintiff Sonja Maria
Lilius; the sum of P5,000, to the plaintiff Brita Marianne Lilius; the sum of P250, to Dr.
Marfori of the Calauan Hospital, Province of Laguna, and the balance to the plaintiff
Aleko E. Lilius.
In support of its appeal, the appellant the Manila Railroad Company assigns nine alleged
errors committed by the trial court in its said judgment, which will be discussed in the course
of this decision.
As a ground of their appeal, the appellants Aleko E. Lilius et al., in turn, assign two alleged
errors as committed by the same court a quo in its judgment in question, which will be
discussed later.
This case originated from a complaint filed by Aleko E. Lilius et al., praying, under the facts
therein alleged, that the Manila Railroad Company be ordered to pay to said plaintiffs, by way
of indemnity for material and moral damages suffered by them through the fault and
negligence of the said defendant entity's employees, the sum of P50,000 plus legal interest
thereon from the date of the filing of the complaint, with costs.
The defendant the Manila Railroad Company, answering the complaint, denies each and
every allegation thereof and, by way of special defense, alleges that the plaintiff Aleko E.
Lilius, with the cooperation of his wife and coplaintiff, negligently and recklessly drove his car,
and prays that it be absolved from the complaint.
preponderance of evidence, to wit:
The plaintiff Aleko E. Lilius has, for many years, been a well-known and reputed journalist,
author and photographer. At the time of the collision in question, he was a staff
correspondent in the Far East of the magazines The American Weekly of New York and The
Sphere of London.
Some of his works have been translated into various languages. He had others in preparation
when the accident occurred. According to him, his writings netted him a monthly income of
P1,500. He utilized the linguistic ability of his wife Sonja Maria Lilius, who translated his
articles and books into English, German, and Swedish. Furthermore, she acted as his
secretary.
At about 7 o'clock on the morning of May 10, 1931, the plaintiff, his wife Sonja Maria Lilius,
and his 4-year old daughter Brita Marianne Lilius, left Manila in their Studebaker car — driven
by the said plaintiff Aleko E. Lilius — for the municipality of Pagsanjan, Province of Laguna,
on a sight-seeing trip. It was the first time that he made said trip although he had already
been to many places, driving his own car, in and outside the Philippines. Where the road was
clear and unobstructed, the plaintiff drove at the rate of from 19 to 25 miles an hour. Prior
thereto, he had made the trip as far as Calauan, but never from Calauan to Pagsanjan, via
Dayap. He was entirely unacquainted with the conditions of the road at said points and had
no knowledge of the existence of a railroad crossing at Dayap. Before reaching the crossing
in question, there was nothing to indicate its existence and inasmuch as there were many
houses, shrubs and trees along the road, it was impossible to see an approaching train. At
about seven or eight meters from the crossing, coming from Calauan, the plaintiff saw an
autotruck parked on the left side of the road. Several people, who seemed to have alighted
from the said truck, were walking on the opposite side. He slowed down to about 12 miles an
hour and sounded his horn for the people to get out of the way. With his attention thus
occupied, he did not see the crossing but he heard two short whistles. Immediately
afterwards, he saw a huge black mass fling itself upon him, which turned out to be locomotive
No. 713 of the defendant company's train coming eastward from Bay to Dayap station. The
locomotive struck the plaintiff's car right in the center. After dragging the said car a distance of
about ten meters, the locomotive threw it upon a siding. The force of the impact was so great
that the plaintiff's wife and daughter were thrown from the car and were picked up from the
ground unconscious and seriously hurt. In spite of the efforts of engineer Andres Basilio, he
was unable to stop the locomotive until after it had gone about seventy meters from the
crossing.
On the afternoon of the same day, the plaintiff's entered St. Paul's Hospital in the City of
Manila where they were treated by Dr. Waterous. The plaintiff Aleko E. Lilius suffered from a
fractured nose, a contusion above the left eye and a lacerated wound on the right leg, in
addition to multiple contusions and scratches on various parts of the body. As a result of the
accident, the said plaintiff was highly nervous and very easily irritated, and for several months
he had great difficulty in concentrating his attention on any matter and could not write articles
nor short stories for the newspapers and magazines to which he was a contributor, thus
losing for some time his only means of livelihood.
The plaintiff Sonja Maria Lilius suffered from fractures of the pelvic bone, the tibia and fibula
of the right leg, below the knee, and received a large lacerated wound on the forehead. She
underwent two surgical operations on the left leg for the purpose of joining the fractured
bones but said operations notwithstanding, the leg in question still continues deformed. In the
opinion of Dr. Waterous, the deformity is permanent in character and as a result the plaintiff
will have some difficulty in walking. The lacerated wound, which she received on her
forehead, has left a disfiguring scar.
The child Brita Marianne Lilius received two lacerated wounds, one on the forehead and the
other on the left side of the face, in addition to fractures of both legs, above and below the
knees. Her condition was serious and, for several days, she was hovering between life and
death. Due to a timely and successful surgical operation, she survived her wounds. The
lacerations received by the child have left deep scars which will permanently disfigure her
face, and because of the fractures of both legs, although now completely cured, she will be
forced to walk with some difficulty and continuous extreme care in order to keep her balance.
Prior to the accident, there had been no notice nor sign of the existence of the crossing, nor
was there anybody to warn the public of approaching trains. The flagman or switchman
arrived after the collision, coming from the station with a red flag in one hand and a green one
in the other, both of which were wound on their respective sticks. The said flagman and
switchman had many times absented himself from his post at the crossing upon the arrival of
a train. The train left Bay station a little late and therefore traveled at great speed.
Upon examination of the oral as well as of the documentary evidence which the parties
presented at the trial in support of their respective contentions, and after taking into
consideration all the circumstances of the case, this court is of the opinion that the accident
was due to negligence on the part of the defendant-appellant company, for not having had on
that occasion any semaphore at the crossing at Dayap, to serve as a warning to passers-by
of its existence in order that they might take the necessary precautions before crossing the
railroad; and, on the part of its employees — the flagman and switchman, for not having
remained at his post at the crossing in question to warn passers-by of the approaching train;
the stationmaster, for failure to send the said flagman and switchman to his post on time; and
the engineer, for not having taken the necessary precautions to avoid an accident, in view of
the absence of said flagman and switchman, by slackening his speed and continuously
ringing the bell and blowing the whistle before arriving at the crossing. Although it is probable
that the defendant-appellant entity employed the diligence of a good father of a family in
selecting its aforesaid employees, however, it did not employ such diligence in supervising
their work and the discharge of their duties because, otherwise, it would have had a
semaphore or sign at the crossing and, on previous occasions as well as on the night in
question, the flagman and switchman would have always been at his post at the crossing
upon the arrival of a train. The diligence of a good father of a family, which the law requires in
order to avoid damage, is not confined to the careful and prudent selection of subordinates or
employees but includes inspection of their work and supervision of the discharge of their
duties.
However, in order that a victim of an accident may recover indemnity for damages from the
person liable therefor, it is not enough that the latter has been guilty of negligence, but it is
also necessary that the said victim has not, through his own negligence, contributed to the
accident, inasmuch as nobody is a guarantor of his neighbor's personal safety and property,
but everybody should look after them, employing the care and diligence that a good father of
a family should apply to his own person, to the members of his family and to his property, in
order to avoid any damage. It appears that the herein plaintiff-appellant Aleko E. Lilius took all
precautions which his skill and the presence of his wife and child suggested to him in order
that his pleasure trip might be enjoyable and have a happy ending, driving his car at a speed
which prudence demanded according to the circumstances and conditions of the road,
slackening his speed in the face of an obstacle and blowing his horn upon seeing persons on
the road, in order to warn them of his approach and request them to get out of the way, as he
did when he came upon the truck parked on the left hand side of the road seven or eight
meters from the place where the accident occurred, and upon the persons who appeared to
have alighted from the said truck. If he failed to stop, look and listen before going over the
crossing, in spite of the fact that he was driving at 12 miles per hour after having been free
from obstacles, it was because, his attention having been occupied in attempting to go
ahead, he did not see the crossing in question, nor anything, nor anybody indicating its
existence, as he knew nothing about it beforehand. The first and only warning, which he
received of the impending danger, was two short blows from the whistle of the locomotive
immediately preceding the collision and when the accident had already become inevitable.
In view of the foregoing considerations, this court is of the opinion that the defendant the
Manila Railroad Company alone is liable for the accident by reason of its own negligence and
that of its employees, for not having employed the diligence of a good father of a family in the
supervision of the said employees in the discharge of their duties.
The next question to be decided refers to the sums of money fixed by the court a quo as
indemnities for damages which the defendant company should pay to the plaintiffs-
appellants.
With respect to the plaintiff-appellant Aleko E. Lilius, although this court believes his claim of
a net income of P1,500 a month to be somewhat exaggerated, however, the sum of P5,000,
adjudicated to him by the trial court as indemnity for damages, is reasonable.
As to the sum of P10,635 which the court awards to the plaintiffs by way of indemnity for
damages, the different items thereof representing doctor's fees, hospital and nursing
services, loss of personal effects and torn clothing, have duly been proven at the trial and the
sum in question is not excessive, taking into consideration the circumstances in which the
said expenses have been incurred.
Taking into consideration the fact that the plaintiff Sonja Maria Lilius, wife of the plaintiff Aleko
E. Lilius is — in the language of the court, which saw her at the trial — "young and beautiful
and the big scar, which she has on her forehead caused by the lacerated wound received by
her from the accident, disfigures her face and that the fracture of her left leg has caused a
permanent deformity which renders it very difficult for her to walk", and taking into further
consideration her social standing, neither is the sum of P10,000, adjudicated to her by the
said trial court by way of indemnity for patrimonial and moral damages, excessive. In the case
of Gutierrez vs. Gutierrez (56 Phil., 177), the right leg of the plaintiff Narciso Gutierrez was
fractured as a result of a collision between the autobus in which he was riding and the
defendant's car, which fractured required medical attendance for a considerable period of
time. On the day of the trial the fracture had not yet completely healed but it might cause him
permanent lameness. The trial court sentenced the defendants to indemnify him in the sum of
P10,000 which this court reduced to P5,000, in spite of the fact that the said plaintiff therein
was neither young nor good-looking, nor had he suffered any facial deformity, nor did he have
the social standing that the herein plaintiff-appellant Sonja Maria Lilius enjoys.1ªvvphi1.ne+
As to the indemnity of P5,000 in favor of the child Brita Marianne Lilius, daughter of Aleko E.
Lilius and Sonja Maria Lilius, neither is the same excessive, taking into consideration the fact
that the lacerations received by her have left deep scars that permanently disfigure her face
and that the fractures of both her legs permanently render it difficult for her to walk freely,
continuous extreme care being necessary in order to keep her balance in addition to the fact
that all of this unfavorably and to a great extent affect her matrimonial future.
With respect to the plaintiffs' appeal, the first question to be decided is that raised by the
plaintiff Aleko E. Lilius relative to the insufficiency of the sum of P5,000 which the trial court
adjudicated to him by way of indemnity for damages consisting in the loss of his income as
journalist and author as a result of his illness. This question has impliedly been decided in the
negative when the defendant-appellant entity's petition for the reduction of said indemnity was
denied, declaring it to be reasonable.
As to the amount of P10,000 claimed by the plaintiff Aleko E. Lilius as damages for the loss of
his wife's services in his business as journalist and author, which services consisted in going
over his writings, translating them into English, German and Swedish, and acting as his
secretary, in addition to the fact that such services formed part of the work whereby he
realized a net monthly income of P1,500, there is no sufficient evidence of the true value of
said services nor to the effect that he needed them during her illness and had to employ a
translator to act in her stead.
The plaintiff Aleko E. Lilius also seeks to recover the sum of P2,500 for the loss of what is
called Anglo-Saxon common law "consortium" of his wife, that is, "her services, society and
conjugal companionship", as a result of personal injuries which she had received from the
accident now under consideration.
In the case of Goitia vs. Campos Rueda (35 Phil., 252, 255, 256), this court, interpreting the
provisions of the Civil Marriage Law of 1870, in force in these Islands with reference to the
mutual rights and obligations of the spouses, contained in articles 44-48 thereof, said as
follows:
The above quoted provisions of the Law of Civil Marriage and the Civil Code fix the
duties and obligations of the spouses. The spouses must be faithful to, assist, and
support each other. The husband must live with and protect his wife. The wife must
obey and live with her husband and follow him when he changes his domicile or
residence, except when he removes to a foreign country. . . .
Therefore, under the law and the doctrine of this court, one of the husband's rights is to count
on his wife's assistance. This assistance comprises the management of the home and the
performance of household duties, including the care and education of the children and
attention to the husband upon whom primarily devolves the duty of supporting the family of
which he is the head. When the wife's mission was circumscribed to the home, it was not
difficult to assume, by virtue of the marriage alone, that she performed all the said tasks and
her physical incapacity always redounded to the husband's prejudice inasmuch as it deprived
him of her assistance. However, nowadays when women, in their desire to be more useful to
society and to the nation, are demanding greater civil rights and are aspiring to become
man's equal in all the activities of life, commercial and industrial, professional and political,
many of them spending their time outside the home, engaged in their businesses, industry,
profession and within a short time, in politics, and entrusting the care of their home to a
housekeeper, and their children, if not to a nursemaid, to public or private institutions which
take charge of young children while their mothers are at work, marriage has ceased to create
the presumption that a woman complies with the duties to her husband and children, which
the law imposes upon her, and he who seeks to collect indemnity for damages resulting from
deprivation of her domestic services must prove such services. In the case under
consideration, apart from the services of his wife Sonja Maria Lilius as translator and
secretary, the value of which has not been proven, the plaintiff Aleko E. Lilius has not
presented any evidence showing the existence of domestic services and their nature,
rendered by her prior to the accident, in order that it may serve as a basis in estimating their
value.
Furthermore, inasmuch as a wife's domestic assistance and conjugal companionship are
purely personal and voluntary acts which neither of the spouses may be compelled to render
(Arroyo vs. Vazquez de Arroyo, 42 Phil., 54), it is necessary for the party claiming indemnity
for the loss of such services to prove that the person obliged to render them had done so
before he was injured and that he would be willing to continue rendering them had he not
been prevented from so doing.
In view of the foregoing considerations this court is of the opinion and so holds: (1) That a
railroad company which has not installed a semaphore at a crossing an does not see to it that
its flagman and switchman faithfully complies with his duty of remaining at the crossing when
a train arrives, is guilty of negligence and is civilly liable for damages suffered by a motorist
and his family who cross its line without negligence on their part; (2) that an indemnity of
P10,000 for a permanent deformity on the face and on the left leg, suffered by a young and
beautiful society woman, is not excessive; (3) that an indemnity of P5,000 for a permanent
deformity on the face and legs of a four-year old girl belonging to a well-to-do family, is not
excessive; and (4) that in order that a husband may recover damages for deprivation of his
wife's assistance during her illness from an accident, it is necessary for him to prove the
existence of such assistance and his wife's willingness to continue rendering it had she not
been prevented from so doing by her illness.
The plaintiffs-appellants are entitled to interest of 6 percent per annum on the amount of the
indemnities adjudicated to them, from the date of the appealed judgment until this judgment
becomes final, in accordance with the provisions of section 510 of Act No. 190.
Wherefore, not finding any error in the judgment appealed from, it is hereby affirmed in toto,
with the sole modification that interest of 6 per cent per annum from the date of the appealed
judgment until this judgment becomes final will be added to the indemnities granted, with the
costs of both instances against the appellant. So ordered.
[G.R. No. 49155. December 14, 1948.]
JUAN CASTRO, demandante y apelado, contra ACRO TAXICAB CO., INC., demandada
y apelante.
Los hechos aparecen relacionados en la decisi on del Tribunal.
Sres. Delgado y Dizon (Delgado y Flores) en representacion de la apelante.
D. Salvador E. Imperial y D. Amador Constantino en representaci on del apelado.
SYLLABUS
1. CONTRATOS; NEGLIGENCIA; CULPA CONTRACTUAL Y CULPA AQUILIANA,
DISTINGUIDA. — La culpa aquiliana determina y engendra la responsabilidad, y por eso es
sustantiva, independiente; mientras que la culpa contractual presupone la preexistencia de
una obligacion, por tanto es s olo incidental — es decir, la infracciono incumplimiento de esa
obligaci on es lo que genera la culpa contractual. Una implicacion o consecuencia
caracteristica de la diferencia entre ambos conceptos juridicos es que, tratandose de la culpa
extracontractual o aquiliana, el demandante que reclame indemnizacion de daños y
perjuicios tiene que probar, como requisito indispensable para que prospere su accion, la
culpa o negligencia del demandado, mientras que, trat andose de la culpa contractual, es
bastante que se pruebe la existencia del contrato y que la obligacion resultante del mismo se
ha infringido ono se ha cumplido, siguiendose daños da esta infraccione incumplimiento.
2. APELACION; APRECIACIONES Y CONCLUSIONES DE HECHO POR EL JUZGADO "A
QUO." — Dentro del marco de nuestra jurisdiccion en alzada, tal como lo define la ley, no
estamos autorizados para abrogar o alterar estas apreciaciones y conclusiones de hecho
establecidas tanto por el Juzgado de Primera Instancia como por el Tribunal de Apelaci on:
tenemos que darlas por buenas y resolver solamente cualquier cuestion de derecho
suscitada sobre las mismas.
3. PRINCIPAL Y EMPLEADO; CULPA AQUILIANA; NEGLIGENCIA. — De la culpa
imputable al dependiente de un establecimiento o empresa, al ocurrir el acto u omisi on
negligente, nace simultaneamente la presuncion de negligencia de parte de los dueños o
directores, si bien esa presunci on essolo juris tantum y puede ser enervada por la prueba de
que estos ejercitaron el cuidado y diligencia de un buen padre de familia no solo en la
seleccion del dependiente sino tambi en en la direccion, supervision y vigilencia de su
conducta y de sus actos. Establecida suficientemente esta prueba, los dueños y directores
de la empresa quedan exentos de responsabilidad por los daños causados.
4 ID.; CULPA CONTRACTUAL; NEGLIGENCIA. — Con respecto a la culpa o negligencia
contractual (articulos 1.101 y 1.104 del Codigo Civil), la regla es completamente diferente.
Ambas responsabilidades — la del dependiente y la del amo — son solidarias, se confunden
en una sola. Asi que el patrono no puede exculparse alegando que ejercito el cuidado y
diligencia de un buen padre de familia tanto en la selecci on del dependiente como en la
direccion o inspeccion de sus actos.
5. DAÑOS Y PERJUICIOS; INDEMNIZACION POR EL DOLOR Y LOS SUFRIMIENTOS. —
Se reafirma la doctrina sentada en el asunto de Lilius (59 Jur. Fil., 800), en el sentido de que
cabe indemnizar por daños morales y patrimoniales, incluy endose en estos el dolor y
sufrimiento f isico. Con esto efectuamos en esta jurisdicci on una verdadera simbiosis del
derecho hispano y derecho americano, y nos ponemos, adem as, justamente a tono con el
espiritu y la marcha progresiva de los tiempos.
6. ID.; ID. — No introducimos ninguna reforma en el Codigo Civil; todo lo que hacemos es
ampliar la interpretacion del concepto juridico del daño, incluyendo en el mismo al daño
moral y el dolor o sufrimiento f isico; pero todo dentro del codigo. La famosa sentencia de
1912 del Tribunal Supremo de España de que habla el Sr. Castan no solo no extravasa los
confines del c odigo civil, sino que va a las ra ices del mismo, "invocando precedentes del
derecho patrio — ley 21, t it. IX, Partida VII," segun palabras mismas del insigne tratadista.
7. THE BAHIA DOCTRINE. — The diligence of the owner of a taxicab in the selection of his
chauffeur cannot exempt him from responsibility for the damages caused by the latter, the
doctrine in Bahia v. Litonjua (30 Phil., 624) being illegal, wrong and unjust.
8. ONE-SIDED LEGAL PHILOSOPHY. — The doctrine in the Bahia case is based on a
philosophy intended to serve the unilateral interest of capitalists. It offers a shield of
irresponsibility to the owner of public services and other enterprises dealing with the public in
general, in utter discrimination against the defenseless public. There is no single word in the
law on which the doctrine may stand.
9. THE WORD "DAMAGE" IN ARTICLES 1902 AND 1903 OF THE CIVIL CODE. — The
word "damage" in these articles comprehends all that are embraced in its meaning. It
includes any and all damages that a human being may suffer in any and all the
manifestations of his life: physical or material, moral or psychological, mental or spiritual,
financial, economic, social, political, religious.
10. PAINS ARE DAMAGES IN THE CONTEMPLATION OF THE LAW. — The pains suffered
by the victim of an accident constitute the largest and more important item of his damages. DECISION
They entail the loss of positive economic values. The shock resulting from the fracture of five
ribs will remain forever in his memory as a sad experience and will leave in his organism a
permanent scar or internal deformity. BRIONES, J.:
11. LOSS OF PERSONAL FREEDOM. — The loss of personal freedom resulting from
hospitalization and compulsory confinement at home for the duration of medical treatment is
Esta es una apelacion, por via de certiorari, en que se pide que revisemos la sentencia del
loss of a thing of unquestionable economic value. Every individual would be willing to give a
Tribunal de Apelaci on condenando a la demandada y apelante Acro Taxicab Co., Inc., a
price to avoid losing that freedom.
pagar al demandante y apelado Juan Castro la suma de P4,000 — P1,000, por gastos de
tratamiento facultativo; y P3,000, como una "adecuada compensacion por los sufrimientos y
12. LEGAL OPINION IN CIVILIZED COUNTRIES. — Physical pain and injured feelings are
por la incapacidad para trabajar durante el tiempo en que el (el demandante) habia estado
among the damages recognized in the most civilized countries of the world, United States of
actualmente incapacitado para realizar el trabajo previamente desempañado por el mismo."
America, England, France, Germany, Italy, Austria and Switzerland.
La sentencia del Tribunal de Apelaci on confirma sustancialmente la del Juzgado de Primera
Instancia de Manila, reduciendo solo la indemnizacion de P6,000 a P4,000.
13. THE MARCELO CASE. — The decision of the pre-Commonwealth Supreme Court in
Marcelo v. Velasco (11 Phil., 287) is based on a judgment rendered by the Supreme Court of
Para una acabada comprension de los hechos esenciales del caso, reproducimos a
Spain on December 6, 1882, which the same Court has already abandoned. 14. WRONG
continuacion toda la sentencia del Tribunal de Apelaci on, a saber:jgc:chanrobles.com.ph
DOXASTIC PROCESS. 0151 — The pre-Commonwealth Supreme Court in laying down the
doctrine in the Marcelo case had followed, by wrong doxastic process, the traditional
"Defendant, a domestic corporation, appeals from a judgment directing it to pay the sum of
procedure of deciding litigations by looking for precedents first and reading the law as a last
P6,000 as damages, with interest at 6 per cent from the filing of the complaint until paid, and
resort, when the logical procedure should be the reverse, law first and precedents after.
costs.
Paying latreutic worship to precedents is a sure way to miscarriage of justice.
"It appears that on July 14, 1939, about 4 a.m., after taking a cup of coffee at the Central
15. FLAWS AND WEAKNESSES OF THE MARCELO DOCTRINE. — The Marcelo doctrine
Hotel, Juan Castro boarded taxicab No. 962, a car for hire owned by appellant corporation
even tested under the authority of the Spanish Supreme Court decision of December 6, 1882,
and driven by Sancho Ruedas, to go home. The cab proceeded northward on Rizal Avenue
and of Viada, appears full of flaws and weaknesses.
and before reaching Calle Lope de Vega, the passenger told the driver to turn to the right or
east of Calle Zurbaran, the next cross street. Ruedas drove the cab so fast that when he had
16. THE 19TH CENTURY SPANISH DOCTRINE UNREALISTIC. — The 1882 judgment of
to turn it to the right or east of Calle Zurbaran, it collided with another taxicab No. 936 owned
the Spanish Supreme Court is based on a premise which is unrealistic. It asserts an absolute,
by the same corporation coming from the north. Both cars were heavily damaged, and the
which is incompatible with the relativities of human nature. It is based on a failure to grasp the
first hit the fire hydrant that was on the sidewalk, east of Rizal Avenue and southeast of Calle
idea that a court of justice may make an appraisal of the minimum value of physical and
Zurbaran. Without losing time Castro boarded another car and directed the driver to take him
moral pains. The doctrine has been abandoned by the same Spanish Supreme Court since
to the Philippine General Hospital, and upon reaching Calle Carriedo in front of Tom’s Dixie,
December 6, 1912.
he ordered the driver to stop and requested patrolman Jose Lomboy to accompany him to the
hospital. Upon arriving there, Dr. Eriberto Aguilar asked him to undress, looked over his body,
17. AN OBSOLETE DOCTRINE IN THE ATOMIC ERA. — Our Supreme Court has no
applied ointment to aching parts, and told him to return home. The following day, as he was
reason to stick to the 19th century doctrine of the Spanish Supreme Court which the same
still suffering from acute pains on the left side of the chest, difficult breathing, fever, and
has relegated as outworn in the century of fuller enlightenment. It would be anachronistic for
coughs, he called Dr. Herrera who prescribed some palliative medicines, and on the 17th, Dr.
our Supreme Court to persist holding it in this Atomic era, when human mind has undergone
Herrera advised him to go to a hospital because it was a case for a surgeon. On July 18, he
a wonderful awakening and reason has conquered new ever widening fields of the spirit.
entered St. Luke’s Hospital and was treated there by Dr. Fores who advised him to have an
x-ray taken. Dr. Paulino J. Garcia took an x-ray picture (Exhibits A-1 and A-2) and this
18. MR. JUSTICE MALCOLM. — In his concurring opinion in Manzanares v. Moreta (38 Phil.,
revealed that five left ribs were fractured. After three days stay in the hospital he was advised
821), Mr. Justice Malcolm has paved the way since 1918 for the revision of the doctrine in the
to go home because the hospital charges were rather heavy, and was told by Dr. Fores that
Marcelo case.
he would continue treating him at the house (pp. 23-25, t.s.n., July 15, 1940). Twice a week
for two consecutive weeks and once in the third week after his discharge from the hospital (p.
48, t.s.n., Sept. 3, 1940), or three or four times, he was visited in his house and treated by Dr. the game of cards conducted by his principal (pp. 30-31, 33, 34, t.s.n., Sept. 4). Whether it be
Fores (p. 19, t.s.n., July 15), and after one month he was told to report to the surgeon once the first or the second, certainly his work required no physical exertion and the ossification of
every two weeks (p. 20, t.s.n., July 15), and reported twice (p. 48, t.s.n., Sept. 3). The the fractural ribs rendered him fit to perform again the work. On the whole, P3,000 would be
honorarium of Dr. Herrera is P100; of Dr. Fores, P150; and the hospital bill was P40. Castro an adequate compensation for pains and disability to work during the time he had been
testifies that prior to the accident he was a sort of a utility man of Eleuterio Navoa, and for actually disabled to perform the work previously done by him.
that work he was paid a salary of P250 a month (p. 6, t.s.n., Sept. 4), but he could no longer
work after the accident, he lost his job. Feria, J., Me reservo el derecho de escribir una opinion disidente.

"The first point to decide is whether the chauffeur of the taxicab, owned and operated for hire [G.R. No. 143008. June 10, 2002
by appellant, had been imprudent in driving the car before and when he turned it to the right
or east of Calle Zurbaran, for if he had been, the fact that the driver of the second car that SMITH BELL DODWELL SHIPPING AGENCY CORPORATION,, Petitioner, vs. CATALINO
collided with the first had also been reckless would be immaterial and would not affect BORJA and INTERNATIONAL TO WAGE AND TRANSPORT
appellant’s obligation arising from the imprudent or reckless act of its servant. If, on the other CORPORATION, Respondents.
hand, only the driver of the second car had been imprudent, appellant would not be relieved
just the same from its liability arising from the reckless act, as correctly held by the trial court.
The determination of the accident’s cause is only necessary to ascertain and fix the source of DECISION
appellant’s liability. If the cause of the accident was the imprudent act of the first car’s driver,
then appellant’s obligation would be contractual. If it was the recklessness on the second PANGANIBAN, J.:
car’s driver, then its liability would arise from tort or culpa aquiliana. A review of the evidence
discloses that the driver of the first car ran his car at an immoderate speed, so much so that The owner or the person in possession and control of a vessel is liable for all natural and
instead of passing the lamp post in the middle of the avenue and cross street to turn to the proximate damages caused to persons and property by reason of negligence in its
right or east of Calle Zurbaran, as required by law and ordinance, he did not pass it, an act management or navigation. The liability for the loss of the earning capacity of the deceased is
which indicates clearly that because of the speed he was going he could not pass it but fixed by taking into account the net income of the victim at the time of death -- of the incident
turned his car to the right passing on the south of the post, and after turning it in that way, the in this case -- and that persons probable life expectancy.
two cars collided at a point on the east of Rizal Avenue and on the south of Calle Zurbaran.
The point where the collision took place must be the one indicated by appellee (Exhibit 1; p. The Case
11, t.s.n., Sept. 4), because the fire hydrant located at the curve on the east of Rizal Avenue
and southeast of Calle Zurbaran was hit by the first car and damaged as a result thereof. For
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
this damage appellant and its driver undertook to pay, as they did pay, the Metropolitan
challenging the March 6, 2000 Decision1 and the April 25, 2000 Resolution2 of the Court of
Water District (Exhibits E, F, G, H; pp. 54-59, 77, t.s.n., Sept. 3). "The other point to
Appeals3 (CA) in CA-GR CV No. 57470. The assailed Decision disposed as follows:
determine is the amount of damages. The evidence shows that appellee has to pay for the X-
ray picture (p. 15, t.s.n., Sept. 4); Dr. Herrera, P100 (p. 10, t.s.n., July 15); Dr. Fores, P150 (p.
21, t.s.n., July 15; p. 49, t.s.n., Sept. 3); and had paid the hospital P40 (p. 15, t.s.n., Sept. 4). WHEREFORE, premises considered, the instant appeal is hereby DENIED. The questioned
It is not clear as to other expenses, such as the amount spent for medicines prescribed for decision of the lower court is hereby AFFIRMED in toto. No pronouncement as to
and applied to appellee (p. 8, t.s.n., Sept. 4). Nevertheless, P1,000 for all fees and expenses costs.4cräläwvirtualibräry
would still be reasonable. On the other hand, the award of P5,000 for injuries suffered is
speculative. There is no sufficient evidence to support it. If it is true that he only stayed 3 days Reconsideration was denied in the assailed Resolution.
in the hospital and was treated in his house by Dr. Fores 3 or 4 times (p. 19, t.s.n., July 15; p.
48, t.s.n., Sept. 3), then he was not disabled for the rest of his life, as claimed by him, to The Facts
perform his previous work which required no physical exertion, for it was most likely that the
fracture of the ribs had been cured by ossification, this kind of fracture being curable from 4 to The facts of the case are set forth by the CA as follows:
8 weeks (pp. 22, 33, 43, t.s.n., July 15; p. 37, t.s.n., Sept. 4), as shown by the fact that
appellee was stout and healthy when seen at the trial of this case (p. 38, t.s.n., Sept. 4). If this
fact be accepted, as it must, then P5,000 as compensation for damages suffered by appellee It appears that on September 23, 1987, Smith Bell [herein petitioner] filed a written request
is certainly excessive. According to appellee, his work before the accident was that of a utility with the Bureau of Customs for the attendance of the latters inspection team on vessel M/T
man of Eleuterio Navoa; according to appellant’s witnesses his work was that of a dealer in King Family which was due to arrive at the port of Manila on September 24, 1987.
Said vessel contained 750 metric tons of alkyl benzene and methyl methacrylate monomer.
On the same day, Supervising Customs Inspector Manuel Ma. D. Nalgan instructed
[Respondent Catalino Borja] to board said vessel and perform his duties as inspector upon
the vessels arrival until its departure. At that time, [Borja] was a customs inspector of the
Bureau of Customs receiving a salary of P31,188.25 per annum.
"At about 11 oclock in the morning on September 24, 1987, while M/T King Family was
unloading chemicals unto two (2) barges [--] ITTC 101 and CLC-1002 [--] owned by
[Respondent] ITTC, a sudden explosion occurred setting the vessels afire. Upon hearing the
explosion, [Borja], who was at that time inside the cabin preparing reports, ran outside to
check what happened. Again, another explosion was heard.
Seeing the fire and fearing for his life, [Borja] hurriedly jumped over board to save himself.
However, the [water] [was] likewise on fire due mainly to the spilled chemicals. Despite the
tremendous heat, [Borja] swam his way for one (1) hour until he was rescued by the people
living in the squatters area and sent to San Juan De Dios Hospital.
After weeks of intensive care at the hospital, his attending physician diagnosed [Borja] to be
permanently disabled due to the incident. [Borja] made demands against Smith Bell and ITTC
for the damages caused by the explosion. However, both denied liabilities and attributed to
each other negligence.5cräläwvirtualibräry
The trial court6 (RTC) ruled in favor of Respondent Borja and held petitioner liable for
damages and loss of income. The RTC disposed as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering [Petitioner] Smith
Bell Dodwell [S]hipping Agency Corporation to pay [Borja]:
1. The amount of P495,360.00 as actual damages for loss of earning capacity:
2. The amount of P100,000.00 for moral damages; and
3. The amount of P50,000.00 for and as reasonable attorneys fees.
The cross-claim of [Petitioner] Smith Bell Dodwell Shipping Agency Corporation against co-
defendant International Towage and Transport Corporation and the latters counterclaim
against [Borja] and cross-claim with compulsory counterclaim against Smith Bell are hereby
ordered dismissed.7
Ruling of the Court of Appeals
Affirming the trial court, the CA rejected the plea of petitioner that it be exonerated from
liability for Respondent Borjas injuries. Contrary to the claim of petitioner that no physical
evidence was shown to prove that the explosion had originated from its vessel, the CA held
that the fire had originated from M/T King Family.  This conclusion was amply supported by
the testimonies of Borja and Eulogio Laurente (the eyewitness of International Towage and
Transport Corporation or ITTC) as well as by the investigation conducted by the Special
Board of Marine Inquiry and affirmed by the secretary of the Department of National Defense.
On the other hand, the RTC, which the CA sustained, had not given probative value to the
evidence of petitioner, whose sole eyewitness had not shown up for cross-examination.
Hence, this Petition.8
The Issues
In its Memorandum,9 petitioner raises the following issues:
1. Whether petitioner should be held liable for the injuries of Respondent Catalino Borja.
2. Whether Respondent ITTC should be held liable for the injuries of Respondent Catalino
Borja.
3. Assuming without admitting that Respondent Catalino Borja is entitled to damages,
whether Respondent Borja is entitled to the amount of damages awarded to him by the trial
court.10cräläwvirtualibräry
Simply put, these issues can be summed up in these two questions: (1) Who, if any, is liable
for Borjas injuries? (2) What is the proper amount of liability?
This Courts Ruling
The Petition is partly meritorious.
First Issue:
Responsibility for Injuries
Petitioner avers that both lower courts labored under a misapprehension of the facts. It claims
that the documents adduced in the RTC conclusively revealed that the explosion that caused
the fire on M/T King Family  had originated from the barge ITTC-101,  a conclusion based on
three grounds. First, the Survey Report (Exh. 10) dated October 21, 1987 submitted by the
Admiral Surveyors and Adjusters, Inc., showed that no part of M/T King Family  sustained any
sharp or violent damage that would otherwise be observed if indeed an explosion had
occurred on it. On the other hand, the fact that the vessel sustained cracks on its shell plating
was noted in two Survey Reports from Greutzman Divers Underwater Specialist, dated
October 6, 1987 (Exh. 11), and during the underwater inspection on the sunken barge ITTC-
101.
Second,  external fire damage on the hull of M/T King Family  indicated that the fire had
started from outside the vessel and from ITTC-101.  The port side of the vessel to which the
ITTC barge was tied was completely gutted by fire, while the starboard side to which the
barge CLC-1002 was tied sustained only slight fire damage.
Third, testimonial evidence proved that the explosion came from the barge of the ITTC and
not from its vessel. Security Guard Vivencio Estrella testified that he had seen the sudden
explosion of monomer on the barge with fire that went up to about 60 meters. Third Mate
Choi Seong Hwan and Second Mate Nam Bang Choun of M/T King Family narrated that
while they were discharging the chemicals, they saw and heard an explosion from the
barge ITTC-101. Chief Security Guard Reynaldo Patron, in turn, testified that he was 7 to 10
meters away from the barge when he heard the explosion from the port side of M/T King
Family and saw the barge already on fire.
We are not persuaded. Both the RTC and the CA ruled that the fire and the explosion had
originated from petitioners vessel. Said the trial court:
The attempts of [Petitioner] Smith Bell to shift the blame on x x x ITTC were all for naught.
First, the testimony of its alleged eyewitness was stricken off the record for his failure to
appear for cross-examination (p. 361, Record). Second, the documents offered to prove that
the fire originated from barge ITTC-101 were all denied admission by the [c]ourt for being, in
effect, hearsay (pp. 335 and 362). x x x Thus, there is nothing in the record to support
[petitioners] contention that the fire and explosion originated from barge ITTC-
101.11cräläwvirtualibräry
We find no cogent reason to overturn these factual findings. Nothing is more settled in
jurisprudence than that this Court is bound by the factual findings of the Court of Appeals
when these are supported by substantial evidence and are not under any of the exceptions
in Fuentes v. Court of Appeals;12  more so, when such findings affirm those of the trial
court.13 Verily, this Court reviews only issues of law.
Negligence is conduct that creates undue risk of harm to another. It is the failure to observe
that degree of care, precaution and vigilance that the circumstances justly demand, whereby
that other person suffers injury.14 Petitioners vessel was carrying chemical cargo -- alkyl
benzene and methyl methacrylate monomer.15 While knowing that their vessel was carrying
dangerous inflammable chemicals, its officers and crew failed to take all the necessary
precautions to prevent an accident. Petitioner was, therefore, negligent.
The three elements of quasi delict are: (a) damages suffered by the plaintiff, (b) fault or
negligence of the defendant, and (c) the connection of cause and effect between the fault or
negligence of the defendant and the damages inflicted on the plaintiff. 16 All these elements
were established in this case. Knowing fully well that it was carrying dangerous chemicals,
petitioner was negligent in not taking all the necessary precautions in transporting the cargo.
As a result of the fire and the explosion during the unloading of the chemicals from petitioners
vessel, Respondent Borja suffered the following damage: and injuries: (1) chemical burns of
the face and arms; (2) inhalation of fumes from burning chemicals; (3) exposure to the
elements [while] floating in sea water for about three (3) hours; (4)
homonymous hemianopsia  or blurring of the right eye [which was of] possible toxic origin;
and (5) [c]erebral infract with neo-vascularization, left occipital region with right sided
headache and the blurring of vision of right eye.17cräläwvirtualibräry
Hence, the owner or the person in possession and control of a vessel and the vessel are
liable for all natural and proximate damage caused to persons and property by reason of
negligent management or navigation.18
Second Issue:
Amount of Liability
Petitioner insists that Borja is not entitled to the full amount of damages awarded by the lower
courts. It disputes the use of his gross earning as basis for the computation of the award for
loss of earning capacity. Both courts, in computing the value of such loss, used the remaining
years of the victim as a government employee and the amount he had been receiving per
annum at the time of the incident.
Counsel for Respondent Borja, on the other hand, claims that petitioner had no cause to
complain, because the miscomputation had ironically been in its favor. The multiplier used in
the computation was erroneously based on the remaining years in government service,
instead of the life expectancy, of the victim. Borjas counsel also points out that the award was
based on the formers meager salary in 1987, or about 23 years ago when the foreign
exchange was still P14 to $1. Hence, the questioned award is consistent with the primary
purpose of giving what is just, moral and legally due the victim as the aggrieved party.
Both parties have a point. In determining the reasonableness of the damages awarded under
Article 1764 in conjunction with Article 2206 of the Civil Code, the factors to be considered
are: (1) life expectancy (considering the health of the victim and the mortality table which is
deemed conclusive) and loss of earning capacity; (b) pecuniary loss, loss of support and
service; and (c) moral and mental sufferings.19 The loss of earning capacity is based mainly
on the number of years remaining in the persons expected life span. In turn, this number is
the basis of the damages that shall be computed and the rate at which the loss sustained by
the heirs shall be fixed.20cräläwvirtualibräry
The formula for the computation of loss of earning capacity is as follows:21
Net earning capacity = Life expectancy x [Gross Annual Income - Living Expenses
(50% of gross annual income)], where life expectancy = 2/3 (80 - the age of
the deceased).22cräläwvirtualibräry
Petitioner is correct in arguing that it is net income (or gross income less living expenses)
which is to be used in the computation of the award for loss of income. Villa Rey Transit v.
Court of Appeals23 explained that the amount recoverable is not the loss of the entire earning,
but rather the loss of that portion of the earnings which the beneficiary would have received.
Hence, in fixing the amount of the said damages, the necessary expenses of the deceased
should be deducted from his earnings.
In other words, only net earnings, not gross earnings, are to be considered; that is, the total of
the earnings less expenses necessary in the creation of such earnings or income, less living
and other incidental expenses. When there is no showing that the living expenses constituted
a smaller percentage of the gross income, we fix the living expenses at half of the gross
income. To hold that one would have used only a small part of the income, with the larger
part going to the support of ones children, would be conjectural and
unreasonable.24cräläwvirtualibräry
Counsel for Respondent Borja is also correct in saying that life expectancy should not be
based on the retirement age of government employees, which is pegged at 65. In Negros
Navigation Co, Inc. v. CA,25 the Court resolved that in calculating the life expectancy of an
individual for the purpose of determining loss of earning capacity under Article 2206(1) of the
Civil Code, it is assumed that the deceased would have earned income even after retirement
from a particular job.
Respondent Borja should not be situated differently just because he was a government
employee. Private employees, given the retirement packages provided by their companies,
usually retire earlier than government employees; yet, the life expectancy of the former is not
pegged at 65 years.
Petitioner avers that Respondent Borja died nine years after the incident and, hence, his life
expectancy of 80 years should yield to the reality that he was only 59 when he actually died.
We disagree. The Court uses the American Experience/Expectancy Table of Mortality or the
Actuarial or Combined Experience Table of Mortality, which consistently pegs the life span of
the average Filipino at 80 years, from which it extrapolates the estimated income to be
earned by the deceased had he or she not been killed.26cräläwvirtualibräry
Respondent Borjas demise earlier than the estimated life span is of no moment. For purposes
of determining loss of earning capacity, life expectancy remains at 80. Otherwise, the
computation of loss of earning capacity will never become final, being always subject to the
eventuality of the victims death. The computation should not change even if Borja lived
beyond 80 years. Fair is fair.
Based on the foregoing discussion, the award for loss of earning capacity should be
computed as follows:
Loss of earning = [2 (80-50)] x [(P2,752x12)-16,512]
capacity 3
= P330,240
Having been duly proven, the moral damages and attorneys fees awarded are justified under
the Civil Codes Article 2219, paragraph 2; and Article 2208, paragraph 11, respectively.
WHEREFORE, the Petition is PARTLY GRANTED.  The assailed Decision is AFFIRMED  with
the following MODIFICATIONS: petitioner is ordered to pay the heirs of the victim damages
in the amount of P320,240 as loss of earning capacity, moral damages in the amount
of P100,000, plus another P50,000 as attorneys fees. Costs against petitioner.
SO ORDERED.
JAMES TODD BEASON and DARA BEASON, Plaintiffs/Appellants/Counter-Appellees,
v.
I. E. MILLER SERVICES, INC., Defendant/Appellee/Counter-Appellant.
APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY
¶0 Plaintiffs brought a personal-injury action, and a jury returned a verdict in their favor. The
Honorable Patricia Parrish, District Judge, reduced the amount of the actual noneconomic
damages awarded by the jury to comply with the statutory cap on damages contained in 23
O.S. 2011 § 61.2, and then entered judgment on the verdict as modified. Plaintiffs appealed,
challenging the statutory cap on damages, as well as other matters. Defendant filed a
counter-appeal, also attacking the judgment on various grounds. A motion to retain the
appeal in this Court was granted. We hold that 23 O.S. 2011 § 61.2(B)--(F) is an
impermissible special law that violates Article 5, Section 46 of the Oklahoma Constitution
because it singles out for different treatment less than the entire class of similarly situated
persons who may sue to recover for bodily injury. We further hold that none of the
defendant's assignments of error in its counter-appeal is sufficient to reverse the judgment.
JUDGMENT OF THE DISTRICT COURT REVERSED IN PART;
CAUSE REMANDED WITH DIRECTIONS TO ENTER JUDGMENT
ON THE JURY'S VERDICT
Ed Abel, Lynn B. Mares, Kelly S. Bishop, and T. Luke Abel, Abel Law Firm, Oklahoma City,
Oklahoma, and Valerie M. Nannery, pro hac vice, and Robert S. Peck, pro hac vice, Center
for Constitutional Litigation, P.C., Washington, D.C., for James Todd Beason and Dara
Beason, Plaintiffs/Appellants/Counter-Appellees.
Robert Todd Goolsby, Perry E. Kaufman, and Megan C. Lee, Goolsby, Proctor, Heefner and
Gibbs, P.C., Oklahoma City, Oklahoma, for I. E. Miller Services, Inc.,
Defendant/Appellee/Cross-Appellant.
Mithun Mansinghani, Solicitor General, and Sarah A. Greenwalt, Assistant Solicitor General,
Office of the Oklahoma Attorney General, Oklahoma City, Oklahoma, for the State of
Oklahoma.
Amy Sherry Fischer, Foliart Huff Ottaway & Bottom, Oklahoma City, Oklahoma, and Mark
Alan Behrens, pro hac vice, Shook, Hardy & Bacon L.L.P., Washington, D.C., for Amici
Curiae, American Tort Reform Association, NFIB Small Business Legal Center, and Coalition
for Litigation Justice, Inc.
Rex Travis and Paul Kouri, Travis Law Office, Oklahoma City, Oklahoma, and Simone
Gosnell Fulmer, Fulmer Group PLLC, Oklahoma City, Oklahoma, for Amicus Curiae,
Oklahoma Association for Justice.
¶4 The full text of 23 O.S. 2011 § 61.2 provides:
A. In any civil action arising from a claimed bodily injury, the amount of compensation which
the trier of fact may award a plaintiff for economic loss shall not be subject to any limitation.
B. Except as provided in subsection C of this section, in any civil action arising from a claimed
bodily injury, the amount of compensation which a trier of fact may award a plaintiff for
noneconomic loss shall not exceed Three Hundred Fifty Thousand Dollars ($350,000.00),
regardless of the number of parties against whom the action is brought or the number of
actions brought. C. Notwithstanding subsection B of this section, there shall be no limit on the
amount of noneconomic damages which the trier of fact may award the plaintiff in a civil
action arising from a claimed bodily injury resulting from negligence if the judge and jury finds,
by clear and convincing evidence, that the defendant's acts or failures to act were:

Erin A. Renegar and Carline J. Lewis, Wiggins, Sewell & Ogletree, Oklahoma City, 1. In reckless disregard for the rights of others;
Oklahoma, for Amicus Curiae, Oklahoma Association of Defense Counsel. 2. Grossly negligent;
3. Fraudulent; or
4. Intentional or with malice.
V. Glenn Coffee and Denise K. Lawson, Glenn Coffee & Associates, PLLC, Oklahoma City,
Oklahoma, for Amici Curiae, Oklahoma State Chamber of Commerce and Industry, Inc., and
Chamber of Commerce of the United States of America. D. In the trial of a civil action arising from claimed bodily injury, if the verdict is for the plaintiff,
the court, in a nonjury trial, shall make findings of fact, and the jury, in a trial by jury, shall
return a general verdict accompanied by answers to interrogatories, which shall specify all of
REIF, J.
the following:
¶1 At issue is the constitutionality of a legislative enactment--23 O.S. 2011 § 61.2--that
1. The total compensatory damages recoverable by the plaintiff;
statutorily limits a plaintiff's recovery of noneconomic damages to $350,000 unless special
2. That portion of the total compensatory damages representing the plaintiff's economic loss;
findings are made. In this case, the trial court significantly reduced the jury's award based on
3. That portion of the total compensatory damages representing the plaintiff's noneconomic
its application of 23 O.S. 2011 § 61.2(B)--(F). We conclude that the challenged statutory
loss; and
provision--the cap on actual noneconomic damages--is wrought with an irremediable
4. If alleged, whether the conduct of the defendant was or amounted to:
constitutional infirmity: It is a special law categorically prohibited by Article 5, Section 46 of
the Oklahoma Constitution. We hold that 23 O.S. 2011 § 61.2(B)--(F) is unconstitutional in its
entirety, and we reverse the trial court's judgment to the extent it modified--and reduced--the a. reckless disregard for the rights of others,
jury's verdict in favor of the plaintiffs. b. gross negligence,
c. fraud, or
d. intentional or malicious conduct.
I.

E. In any civil action to recover damages arising from claimed bodily injury, after the trier of
¶2 The facts underlying this controversy may be briefly stated. A boom from a crane fell and
fact makes the findings required by subsection D of this section, the court shall enter
hit Todd Beason. The crane was operated by an employee of the defendant, I. E. Miller
judgment in favor of the plaintiff for economic damages in the amount determined pursuant to
Services, Inc. The employee was attempting to move an 82,000-pound mud pump without the
paragraph 2 of subsection D of this section, and subject to paragraph 4 of subsection D of
assistance of another crane or vehicle. As a result of his injury, Beason underwent two
this section, the court shall enter a judgment in favor of the plaintiff for noneconomic
amputations on parts of his arm.
damages. Except as provided in subsection C of this section, in no event shall a judgment for
noneconomic damages exceed the maximum recoverable amounts set forth in subsection B
¶3 Beason and his wife, Dara Beason, brought an action against the defendant. The matter of this section. Subsection B of this section shall be applied in a jury trial only after the trier of
went to trial in Oklahoma County. The jury awarded $14,000,000 to Todd Beason and fact has made its factual findings and determinations as to the amount of the plaintiff's
$1,000,000 to Dara Beason. The jurors then signed a "supplemental verdict form" allocating damages.
$5,000,000 of the $14,000,000 awarded to Todd Beason as actual noneconomic damages.
The trial judge determined that all of Dara Beason's damages were noneconomic in nature.
F. In any civil action arising from claimed bodily injury which is tried to a jury, the jury shall not
be instructed with respect to the limit on noneconomic damages set forth in subsection B of
this section, nor shall counsel for any party nor any witness inform the jury or potential jurors
of such limitations.
G. This section shall not apply to actions brought under The Governmental Tort Claims Act or
actions for wrongful death.
H. As used in this section:
1. "Bodily injury" means actual physical injury to the body of a person and sickness or
disease resulting therefrom;
2. "Economic damages" means any type of pecuniary harm including, but not limited to:
a. all wages, salaries or other compensation lost as a result of a bodily injury that is the
subject of a civil action,
b. all costs incurred for medical care or treatment, rehabilitation services, or other care,
treatment, services, products or accommodations as a result of a bodily injury that is the
subject of a civil action,
c. any other costs incurred as a result of a bodily injury that is the subject of a civil action;
3. "Fraudulent" or "fraud" means "actual fraud" as defined pursuant to Section 58 of Title 15
of the Oklahoma Statutes;
4. "Gross negligence" means the want of slight care and diligence;
5. "Malice" involves hatred, spite or ill will, or the doing of a wrongful act intentionally without
just cause or excuse;
6. "Noneconomic damages" means nonpecuniary harm that arises from a bodily injury that is
the subject of a civil action, including damages for pain and suffering, loss of society,
consortium, companionship, care, assistance, attention, protection, advice, guidance,
counsel, instruction, training, education, disfigurement, mental anguish and any other
intangible loss; and
7. "Reckless disregard of another's rights" shall have the same meaning as willful and wanton
conduct and shall mean that the defendant was either aware, or did not care, that there was a
substantial and unnecessary risk that his, her or its conduct would cause serious injury to
others. In order for the conduct to be in reckless disregard of another's rights, it must have
been unreasonable under the circumstances and there must have been a high probability that
the conduct would cause serious harm to another person.
I. This section shall apply to civil actions filed on or after November 1, 2011.
Applying the provisions of 23 O.S. 2011 § 61.2(B)--(F), the district court reduced the verdict to
$9,700,000. That is, the jury's total award of $6,000,000 in noneconomic damages to the
Beasons was lowered to $700,000 (or $350,000 per person) in accordance with the statute's
cap on damages.
¶5 The Beasons filed a motion to conform the judgment to the jury's verdict and the evidence,
and reiterated their pretrial argument that 23 O.S. 2011 § 61.2 was unconstitutional. The trial
court denied the Beasons' motion, rejecting their constitutional challenge to the statute. The
Beasons timely appealed the judgment, arguing that 23 O.S. 2011 § 61.2 is unconstitutional
because--in the main--the statute is a special law in violation of Article 5, Section 46 of the
Oklahoma Constitution.1 The defendant also brought a counter-appeal from the judgment,
asserting various trial errors. We retained the appeal.
II.
A.
¶6 Article 5, Section 46 of the Oklahoma Constitution provides that the Legislature shall not
pass special laws affecting certain subjects. It enacts a "mandatory prohibition against special
laws." Zeier v. Zimmer, Inc., 2006 OK 98, ¶ 7, 152 P.3d 861, 865. A statute is a special law
when part of an entire class of similarly affected persons is segregated and targeted for
different treatment. Reynolds v. Porter, 1988 OK 88, ¶ 14, 760 P.2d 816, 822. To be sure,
"the Legislature has a wide latitude to create statutory classifications, but they must be
or reasonable." Ponca Iron & Metal, Inc. v. Wilkinson, 2010 OK 75, ¶ 6, 242 P.3d 534, 536; see
also Loyal Order of Moose, Lodge 1785 v. Cavaness, 1977 OK 70, ¶ 16, 563 P.2d 143, 147
(statutory classifications must "above all be reasonable"). "The Legislature runs afoul of the
prohibition on enacting special laws set forth in Oklahoma Const. Art. 5 § 46 when it adopts a
classification that is arbitrary and capricious and bears no reasonable relationship to the
object of the Legislation." Ponca Iron & Metal, 2010 OK 75, ¶ 6, 242 P.3d at 536. Stated
another way, Article 5, Section 46 requires uniformity of treatment when like-situated litigants
arrive at the courthouse door: "[C]ourt procedure [must] be symmetrical and apply equally
across the board for an entire class of similarly situated persons or things." Zeier, 2006 OK
98, ¶ 13, 152 P.3d at 868; see also State ex rel. Macy v. Bd. of Cty. Comm'rs of Cty. of
Oklahoma, 1999 OK 53, ¶ 14, 986 P.2d 1130, 1138; Tate v. Browning--Ferris, Inc., 1992 OK
72, ¶ 18, 833 P.2d 1218, 1229--30.
¶7 Here, the statutory cap on noneconomic damages resulting from bodily injury--contained
in 23 O.S. 2011 § 61.2(B)--(F)--is the type of special law that is forbidden by Article 5, Section
46 of the Oklahoma Constitution. It is a special law because it targets for different treatment
less than the entire class of similarly situated persons who sue to recover for bodily injury.2
Ponca Iron & Metal, 2010 OK 75, ¶ 6, 242 P.3d at 536; see also Zeier, 2006 OK 98, ¶ 13, 152
P.3d at 867 ("In a special laws attack under art. 5, § 46, the only issue to be resolved is
whether a statute upon a subject enumerated in the constitutional provision targets for
different treatment less than an entire class of similarly situated persons or things."). "The
shortcoming of a special law is that it does not embrace all the classes that it should naturally
embrace . . . ." Wall v. Marouk, 2013 OK 36, ¶ 5, 302 P.3d 775, 779. The failing of the statute
is that it purports to limit recovery for pain and suffering in cases where the plaintiff survives
the injury-causing event, while persons who die from the injury-causing event face no such
limitation. See Okla. Const. art. 23, § 7 ("The right of action to recover damages for injuries
resulting in death shall never be abrogated, and the amount recoverable shall not be subject
to any statutory limitation . . . .").
¶8 But these two categories are not just similarly situated: They stand on identical footing with
respect to recovery. The personal representative of a person who dies from the injury-causing
event can maintain an action to the same extent as if the deceased "might have maintained
an action, had he or she lived." 12 O.S. 2011 § 1053(A). Such recovery includes "mental pain
and anguish" suffered by the decedent. Id. § 1053(B). As noted, the people of Oklahoma
have expressly forbidden "any statutory limitation" on the amount recoverable for damages
for injuries resulting in death. Okla. Const. art. 23, § 7. If a decedent can recover without
limitation for pain and suffering during the time between the harm-causing event and his or
her death, no good reason exists to treat a person who survives the harm-causing event
differently with respect to recovery for the very same detriment.
¶9 The fact that the statutory cap can be lifted, if the injured party can show certain degrees
of culpability on the part of the harm-causing agent, does not save the statute from its
discriminatory effect. The shared experience of everyday life teaches that a collapsing brick
wall can inflict bodily injuries on one person that result in death and bodily injuries on another
person that do not result in death, and that the resulting pain and suffering in each case can
be substantially the same. Pain and suffering do not vary depending upon the source of the
collapse and do not care if the source of the collapse is the result of a tornado, an
earthquake, a terrorist act, intentional conduct, negligent design, or strict-liability activity.
Culpability or lack of culpability has no bearing whatsoever on the extent of the suffering a
victim--deceased or surviving--sustains.
¶10 By forbidding limits on recovery for injuries resulting in death, the people have left it to
juries to determine the amount of compensation for pain and suffering in such cases, and no
good reason exists for the Legislature to provide a different rule for the same detriment simply
because the victim survives the harm-causing event. And the people have demonstrated their
intent that the Legislature not discriminate in this way by expressly prohibiting the Legislature
from enacting special laws. Okla. Const. art. 5, § 46; see also Reynolds, 1988 OK 88, ¶ 21,
760 P.2d at 824 ("Those who participated in the formation of our Constitution expressed in
Art. 5, § 46 a strong fear that those with political power would carve out for themselves
special exceptions to our general laws."). In addition, the people have commanded that
"where a general law can be made applicable, no special law shall be enacted." Okla. Const.
art 5, § 59. Again, it should be stressed that the pain and suffering for which a personal
representative can recover in a wrongful-death suit is the same detriment for which the
decedent would have the right to recover had the decedent lived.
¶11 Unlike the Legislature (which has imposed a discriminatory cap that favors only one
party), the people of Oklahoma have shown a clear preference that damages for personal
injury be based on an assessment of evidence by a jury in a proceeding where the interested
parties have the equal right to be heard on that issue. This process also has the further
protection of judicial review that includes new trial, judgment notwithstanding the verdict,
additur, remittitur, and--finally--appeal.
¶12 Given the fact that the people have vested the jury with constitutional responsibility to
determine the amount of recovery for pain and suffering from an injury resulting in death, this
Court must presume a jury would be equally competent to make the same determination in a
case where the injury does not result in death. This faith and confidence of the people in the
jury system are enshrined within our sacrosanct Bill of Rights, expressed through the
command that "[t]he right of trial by jury shall be and remain inviolate." Okla. Const. art. 2, §
19.
¶13 "The manifest intent of our Constitution's framers was that all persons under the same
conditions and in the same circumstances be treated alike and that the legislature be
prohibited from tampering with limitations by fashioning special acts." Reynolds, 1988 OK 88,
¶ 19, 760 P.2d at 823. If the people of Oklahoma ever believe the jury system and judicial
review are no longer effective to balance the competing interests over compensation in
private personal-injury cases, then constitutional amendment--not a special law--is the proper
way to provide such change. See Okla. Const. art. 2, § 1 ("All political power is inherent in the
people; and government is instituted for their protection, security, and benefit, and to promote
their general welfare; and they have the right to alter or reform the same whenever the public
good may require it . . . .").
¶14 It is noteworthy that the only power the people have given the Legislature to enact
statutory limits on the amount recoverable in civil actions is found in Article 23, Section 7 of
our Constitution, and is addressed to "civil actions or claims against the state or any of its
political subdivisions." Cases of this nature--as well as cases to compensate for death
resulting from work-related injuries--involve public-policy interests, like sovereign immunity
and the "Grand Bargain" of the workers' compensation system, that are not present in a
private-rights dispute like the case at hand.
¶15 In holding that 23 O.S. 2011 § 61.2(B)--(F) is unconstitutional, we take care to emphasize
that "[t]his Court does not correct the Legislature, nor do we take upon ourselves the
responsibility of legislating by judicial fiat." Zeier, 2006 OK 98, ¶ 31, 152 P.3d at 874. We
"recognize[] that a statute is the solemn act of the Legislature." Id. ¶ 12, 152 P.3d at 866. But
we are required to apply the Oklahoma Constitution with absolute fidelity. And "a special
statute under § 46 is never permissible."3 Reynolds, 1988 OK 88, ¶ 17, 760 P.2d at 823. As
the "independent department of government charged with the responsibility of protecting the
constitution," we have the solemn yet urgent duty to act when a "statute is clearly, palpably
and plainly inconsistent with the constitution"--as here. Zeier, 2006 OK 98, ¶ 12, 152 P.3d at
866--67. We hold that 23 O.S. 2011 § 61.2(B)--(F) violates Article 5, Section 46 of the
Oklahoma Constitution.
B.
¶16 As a final matter, we turn to the defendant's counter-appeal from the trial court's
judgment. The defendant argues that (1) 12 O.S. § 3009.1 applies to both past and future
medical expenses; (2) the testimony of two witnesses failed to satisfy the requirements of 12
O.S. § 702, and also that their testimony was prejudicial; (3) evidence on the issue of
warranties covering costs for future repair of prosthetics should have been allowed; (4) the
jury should have been informed whether personal-injury awards for personal damages are
subject to state and federal taxation; (5) the statutory cap on damages codified in 23 O.S.
2011 § 61.2 should have been applied "per lawsuit rather than per plaintiff"; (6) the trial court
committed error when refusing to allow the jury to consider the negligence of nonparties; and
(7) the trial court committed further error by allowing the defendant's investigation report for
the plaintiffs' use without allowing the defendant to explain the basis for the conclusions in the
report or admit the report in its entirety.
¶17 We find the defendant's seven assignments of error lack merit because (1) 12 O.S. §
3009.1 does not apply to future medical expenses not yet incurred; (2) the asserted errors
raised on appeal concerning the testimony of the life-care planner and the plaintiffs'
economist do not show abuses of discretion by the trial court; (3) the trial court did not abuse
its discretion in failing to instruct the jury on tax liability; (4) the trial court correctly ruled
evidence of warranties for medical devices was not proper; (5) any alleged error concerning a
cap on actual noneconomic damages applied on a "per lawsuit" basis was not preserved for
appeal; (6) the defendant was not entitled to a "ghost tortfeasor" instruction, and the trial
court's ruling on the same was not error; and (7) the trial court did not commit reversible error
by allowing the defendant's employee to testify concerning his conclusions found in the
investigation report, although the witness used the statements of others in forming some of
his conclusions.
¶18 We conclude that none of the defendant's assignments of error is sufficient to reverse the
judgment of the trial court.
III.
¶19 In conclusion, special acts "create preferences and establish inequality." Reynolds, 1988
OK 88, ¶ 19, 760 P.2d at 823. Because that is precisely what the Legislature has done here,
we hold that 23 O.S. 2011 § 61.2(B)--(F) is a special law absolutely proscribed by Article 5,
Section 46 of the Oklahoma Constitution. Accordingly, we reverse that part of the trial court's
judgment modifying the jury's award of noneconomic damages to the plaintiffs. We remand
this cause to the district court with directions to enter judgment in the full amount of the jury's
verdict.
JUDGMENT OF THE DISTRICT COURT REVERSED IN PART;
CAUSE REMANDED WITH DIRECTIONS TO ENTER JUDGMENT
ON THE JURY'S VERDICT.
¶20 Darby, V.C.J., Colbert and Reif, JJ., and Goodman, S.J. and Walkley, S.J., concur;
¶21 Gurich, C.J., concurs in part and dissents in part;
¶22 Gurich, C.J., concurring in part and dissenting in part:
I concur in the majority opinion except I conclude that 23 O.S 2011 § 61.2 (B) is constitutional
but would sever §61(E) & (F) as unconstitutional.
¶23 Winchester (by separate writing), Edmondson (by separate writing), JJ., and Fischer,
S.J., dissent;
¶24 Kauger, J., recused;
¶25 Combs, J., disqualified.
FOOTNOTES
1 The Beasons raise several other constitutional challenges on appeal. Having determined
that 23 O.S. 2011 § 61.2(B)--(F) is unconstitutional as a special law prohibited by Article 5,
Section 46 of the Oklahoma Constitution, we find that addressing their additional
constitutional arguments is unnecessary for the disposition of this appeal.
2 Although the precepts of equal protection may echo in Oklahoma's constitutional injunction
against enactment of special laws, the doctrines exist independently of each other. Article 5,
Section 46 "is not just a mirror of equal protection notions but rather an absolute and
unequivocal prohibition against applying statutory limitations to less than an entire class of
like-situated litigants." Reynolds v. Porter, 1988 OK 88, ¶ 21, 760 P.2d 816, 824.
3 Our state constitution is a "unique document." Wall v. Marouk, 2013 OK 36, ¶ 4, 302 P.3d
775, 779. "Some of its provisions"--including Article 5, Section 46--"are unlike those in the
constitutions of any other state, and some are more detailed and restrictive than those of
other states." Id. We also note--and not for the first time--that Oklahoma's "prohibition against
special laws is not new." Id. ¶ 7, 302 P.3d at 779. "Even before statehood and the adoption of
the Oklahoma Constitution, special laws were not permissible." Id. (citing Guthrie Daily
Leader v. Cameron, 1895 OK 71, 41 P. 635); see also Chickasha Cotton Oil Co. v. Lamb &
Tyner, 1911 OK 68, ¶ 0, 114 P. 333, 333 (early post-statehood decision interpreting Article 5,
Section 46 as prohibiting "the enactment of special or local laws"). The people's distaste for
the discrimination and favoritism of special laws was given lasting force through the 1907
Constitution and retains its vitality today.
MARGARET C. SPADE vs. LYNN AND BOSTON RAILROAD COMPANY
168 Mass. 285
January 15, 1897 - May 19, 1897
Suffolk County
Present: Field, C. J., Allen, Holmes, Knowlton, Morton, Lathrop, & Barker, JJ.
No Recovery for Bodily Injury caused by Fright and Mental Disturbance.
In an action to recover damages for an injury sustained through the negligence of another,
there can be no recovery for a bodily injury caused by mere fright and mental disturbance.

TORT, for personal injuries occasioned to the plaintiff by the alleged negligence of the
defendant. The declaration alleged that while, on February 16, 1895, the plaintiff was a
passenger in the defendant's car, and in the exercise of due care, "one of the defendant's
agents or servants, in attempting to remove from said car a certain person claimed and
alleged by said defendant's agent to be noisy, turbulent, and unfit to remain as a passenger in
said car, conducted himself with such carelessness, negligence, and with the use of such
unnecessary force, that said agent and servant, acting thus negligently, created a disorder,
disturbance, and quarrel in said car, and thereby frightened the plaintiff and
Page 286
subjected her to a severe nervous shock, by which nervous shock the plaintiff was physically
prostrated and suffered, and has continued to suffer, great mental and physical pain and
anguish, and has been put to great expense."
At the trial in the Superior Court, before Mason, C. J., there was evidence tending to show
that the accident complained of occurred while the plaintiff was being conveyed to her home
in Chelsea upon a crowded car of the defendant company, after 10.30 p. m., on February 16,
1895.
The plaintiff testified in substance that two men somewhat intoxicated were allowed, during a
part of the trip from Boston to Chelsea, to stand near her in the car, one of them in a position
where he was leaning or lurching toward her in such a way that she was obliged to move to
avoid him; that a controversy occurred between one of the intoxicated persons and the
conductor about the payment of a fare, and that the conductor said to the intoxicated person,
after some other conversation, that if he did not keep quiet he would throw him off the car,
even if he broke his head; that as she neared the place where she was to leave the car, "the
first thing I saw was the conductor . . . grab this man by the collar; the next thing I saw
was . . . another man from the other end of the car, whom I did not know, come down; but the
other man, as he pulled him, lurched over on me; then it seemed as though I turned to solid
ice. My breath was cut right off. I could not have spoken; I tried to speak, but I chilled so I
kept growing stiffer and stiffer, until I did not know, I do not know when they got me off the
car." She further stated that nothing had occurred of any sort or description that gave any
suggestion of a warning that the conductor was going to rush at the drunken man at this time;
that he did it "just as quick as a man could jump"; and that the intoxicated person standing
directly in front of her "lurched over so it kind of pushed me back against the car."
The plaintiff further testified:
"Q. Your body was not injured in any way by contact with this man? A. Oh, no, I was not
injured. There were not any marks on me, anything like that.
"Q. You suffered no pain from this man touching you? A. No, not any injury from that.
Page 287
"Q. What was the cause of this man's touching you, the one that lurched forward? A. When
the conductor jumped and grabbed this man that I told about, on the opposite side of the car,
that made a commotion, and as he twitched him it pushed this other man over on to me."
The jury returned a verdict for the plaintiff; and the defendant alleged exceptions, the nature
of which appears in the opinion.
The case was argued at the bar in January, 1897, and afterwards was submitted on briefs to
all the justices. C. K. Cobb, for the defendant.
S. L. Whipple, (W. R. Sears with him,) for the plaintiff.
ALLEN, J. This case presents a question which has not heretofore been determined in this
Commonwealth, and in respect to which the decisions elsewhere have not been uniform. It is
this: whether in an action to recover damages for an injury sustained through the negligence
of another, there can be a recovery for a bodily injury caused by mere fright and mental
disturbance. The jury were instructed that a person cannot recover for mere fright, fear, or
mental distress occasioned by the negligence of another, which does not result in bodily
injury; but that when the fright or fear or nervous shock produces a bodily injury, there may be
a recovery for that bodily injury, and for all the pain, mental or otherwise, which may arise out
of that bodily injury.
In Canning v. Williamstown, 1 Cush. 451 , it was held, in an action against a town to recover
damages for an injury sustained by the plaintiff in consequence of a defective bridge, that he
could not recover if he sustained no injury to his person, but merely incurred risk and peril
which caused fright and mental suffering. In Warren v. Boston & Maine Railroad, 163 Mass.
484 , the evidence tended to show that the defendant's train struck the carriage of the
plaintiff, thereby throwing him out upon the ground, and it was held to be a physical injury to
the person to be thrown out of a wagon, or to be compelled to jump out, even although the
harm consists mainly of nervous shock. It was not therefore a case of mere fright, and
resulting nervous shock.
The case calls for a consideration of the real ground upon which the liability or non-liability of
a defendant guilty of
Page 288
negligence in a case like the present depends. The exemption from liability for mere fright,
terror, alarm, or anxiety does not rest on the assumption that these do not constitute an
actual injury. They do in fact deprive one of enjoyment and of comfort, cause real suffering,
and to a greater or less extent disqualify one for the time being from doing the duties of life. If
these results flow from a wrongful or negligent act, a recovery therefor cannot be denied on
the ground that the injury is fanciful and not real. Nor can it be maintained that these results
may not be the direct and immediate consequence of the negligence. Danger excites alarm.
Few people are wholly insensible to the emotions caused by imminent danger, though some
are less affected than others.
It must also be admitted that a timid or sensitive person may suffer not only in mind, but also
in body, from such a cause. Great emotion may and sometimes does produce physical
effects. The action of the heart, the circulation of the blood, the temperature of the body, as
well as the nerves and the appetite, may all be affected. A physical injury may be directly
traceable to fright, and so may be caused by it. We cannot say, therefore, that such
consequences may not flow proximately from unintentional negligence, and if compensation
in damages may be recovered for a physical injury so caused, it is hard on principle to say
why there should not also be a recovery for the mere mental suffering when not accompanied
by any perceptible physical effects.
It would seem therefore that the real reason for refusing damages sustained from mere fright
must be something different; and it probably rests on the ground that in practice it is
impossible satisfactorily to administer any other rule. The law must be administered in the
courts according to general rules. Courts will aim to make these rules as just as possible,
bearing in mind that they are to be of general application. But as the law is a practical
science, having to do with the affairs of life, any rule is unwise if in its general application it
will not as a usual result serve the purposes of justice. A new rule cannot be made for each
case, and there must therefore be a certain generality in rules of law, which in particular
cases may fail to meet what would be desirable if the single case were alone to be
considered.
Rules of law respecting the recovery of damages are framed
Page 289
with reference to the just rights of both parties; not merely what it might be right for an injured
person to receive, to afford just compensation for his injury, but also what it is just to compel
the other party to pay. One cannot always look to others to make compensation for injuries
received. Many accidents occur, the consequences of which the sufferer must bear alone.
And in determining the rules of law by which the right to recover compensation for unintended
injury from others is to be governed, regard must chiefly be paid to such conditions as are
usually found to exist. Not only the transportation of passengers and the running of trains, but
the general conduct of business and of the ordinary affairs of life, must be done on the
assumption that persons who are liable to be affected thereby are not peculiarly sensitive,
and are of ordinary physical and mental strength. If, for example, a traveller is sick or infirm,
delicate in health, specially nervous or emotional, liable to be upset by slight causes, and
therefore requiring precautions which are not usual or practicable for travellers in general,
notice should be given, so that, if reasonably practicable, arrangements may be made
accordingly, and extra care be observed. But, as a general rule, a carrier of passengers is not
bound to anticipate or to guard against an injurious result which would only happen to a
person of peculiar sensitiveness. This limitation of liability for injury of another description is
intimated in Allsop v. Allsop, 5 Hurl. & N. 534, 538, 539. One may be held bound to anticipate
and guard against the probable consequences to ordinary people, but to carry the rule of
damages further imposes an undue measure of responsibility upon those who are guilty only
of unintentional negligence. The general rule limiting damages in such a case to the natural
and probable consequences of the acts done is of wide application, and has often been
expressed and applied. Lombard v. Lennox, 155 Mass. 70 . White v. Dresser, 135 Mass.
150 . Fillebrown v. Hoar, 124 Mass. 580 . Derry v. Flitner, 118 Mass. 131 . Milwaukee & St.
Paul Railway v. Kellogg, 94 U.S. 469, 475. Wyman v. Leavitt, 71 Me. 227. Ellis v. Cleveland,
55 Vt. 358. Phillips v. Dickerson, 85 Ill. 11. Hampton v. Jones, 58 Iowa 317. Renner v.
Canfield, 36 Minn. 90. Lynch v. Knight, 9 H. L. 577, 591, 595, 598. The Notting Hill, 9 P. & D.
105. Hobbs v. London & Southwestern Railway, L. R. 10 QB 111, 122.
Page 290
The law of negligence in its special application to cases of accidents has received great
development in recent years. The number of actions brought is very great. This should lead
courts well to consider the grounds on which claims for compensation properly rest, and the
necessary limitations of the right to recover. We remain satisfied with the rule that there can
be no recovery for fright, terror, alarm, anxiety, or distress of mind, if these are
unaccompanied by some physical injury; and if this rule is to stand, we think it should also be
held that there can be no recovery for such physical injuries as may be caused solely by such
mental disturbance, where there is no injury to the person from without. The logical
vindication of this rule is, that it is unreasonable to hold persons who are merely negligent
bound to anticipate and guard against fright and the consequences of fright; and that this
would open a wide door for unjust claims, which could not successfully be met. These views
are supported by the following decisions. Victorian Railways Commissioners v. Coultas, 13
App. D.C. 222. Mitchell v. Rochester Railway, 151 N.Y. 107. Ewing v. Pittsburgh, Cincinnati,
Chicago, & St. Louis Railway, 147 Pa. 40. Haile v. Texas & Pacific Railway, 60 F. 557.
In the following cases, a different view was taken. Bell v. Great Northern Railway, 26 Law
Rep. 428. Purcell v. St. Paul City Railway, 48 Minn. 134. Fitzpatrick v. Great Western
Railway, 12 U.C.Q.B. 645. See also Beven, Negligence, 77 et seq.
It is hardly necessary to add that this decision does not reach those classes of actions where
an intention to cause mental distress or to hurt the feelings is shown, or is reasonably to be
inferred, as, for example, in cases of seduction, slander, malicious prosecution, or arrest, and
some others. Nor do we include cases of acts done with gross carelessness or recklessness,
showing utter indifference to such consequences, when they must have been in the actor's
mind. Lombard v. Lennox, and Fillebrown v. Hoar, already cited. Meagher v. Driscoll, 99
Mass. 281 .
In the present case, no such considerations entered into the rulings or were presented by the
facts. The entry therefore must be,
Exceptions sustained.
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 (1) Interest at 6% per annum from Aug. 2, 1956 to Nov. 21, 1961 8,751.78
unconscionable. 4
(b) Promissory note dated October 19, 1956 P15,500.00
Since then this Court has invariably fixed counsel fees on a quantum meruit basis whenever (1) Interest at 6% per annum from Oct.19, 1956 to Nov. 21, 1961 4,734.08
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 II. Sheriff's fees [for two (2) day's work] 10.00
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 III. Attorney's fee 1,000.00
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
Total obligation as of Nov. 21, 1961 P57,495.86
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 B. -
like this, inserted in a mortgage contract, is valid. 6
Proceeds of the foreclosure sale of the real estate mortgage on Nov. 21,
I. P56,908.00
In determining the compensation of an attorney, the following circumstances should be 1961
considered: the amount and character of the services rendered; the responsibility imposed; II. Additional amount remitted to the PNB on Dec. 18, 1961 738.59
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 Total amount of Payment made to PNB as of Dec. 18, 1961 P57,646.59
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 Deduct: Total obligation to the PNB P57,495.86
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 Excess Payment to the PNB P 150.73
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, From the foregoing illustration or computation, it is clear that there was no further necessity to
we believe the amount of P5,821.35 is far too excessive a fee for such services. Considering foreclose the mortgage of herein appellant's chattels on December 21, 1961; and on this
the above circumstances mentioned, it is our considered opinion that the amount of ground alone, we may declare the sale of appellant's chattels on the said date, illegal and
P1,000.00 would be more than sufficient to compensate the work aforementioned. void. But we take into consideration the fact that the PNB must have been led to believe that
the stipulated 10% of the unpaid loan for attorney's fees in the real estate mortgage was
The next issue raised deals with the claim that the proceeds of the sale of the real properties legally maintainable, and in accordance with such belief, herein appellee bank insisted that
alone together with the amount it remitted to the PNB later was more than sufficient to the proceeds of the sale of appellant's real property was deficient to liquidate the latter's total
liquidate its total obligation to herein appellee bank. Again, we find merit in this claim. From indebtedness. Be that as it may, however, we still find the subsequent sale of herein
the foregoing discussion of the first two errors assigned, and for purposes of determining the appellant's chattels illegal and objectionable on other grounds.
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 That appellant vigorously objected to the foreclosure of its chattel mortgage after the
conclusion:1äwphï1.ñët foreclosure of its real estate mortgage on November 21, 1961, can 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
A. - sheriff of Camarines Norte on the same date. These letters were followed by another letter to
the appellee bank on December 14, 1961, wherein herein appellant, in no uncertain terms,
I. Principal Loan reiterated its objection to the scheduled sale of its chattels on December 21, 1961 at Jose
Panganiban, Camarines Norte for the reasons therein stated that: (1) it had settled in full its
(a) Promissory note dated August 2, 1956 P27,500.00 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 embodied under paragraph (i) in the Chattel Mortgage which provides as
follows:
(i) In case of both judicial and extra-judicial foreclosure under Act 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 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 it be less
than P100.00, exclusive of all costs and fees allowed by law and of other expenses
incurred in connection with the said foreclosure. [Emphasis supplied]
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 chattels. The trial court, however, justified said action of the PNB in
the decision appealed from in the following rationale:
While it is true that it was stipulated in the chattel mortgage contract that a petition for
the extra-judicial foreclosure thereof should be filed with the Sheriff of the City of
Manila, nevertheless, the effect thereof was merely to provide another place where
the mortgage chattel could be sold in addition to those specified in the Chattel
Mortgage Law. Indeed, a stipulation in a contract cannot abrogate much less
impliedly repeal a specific provision of the statute. Considering that Section 14 of Act
No. 1508 vests in the mortgagee the choice where the foreclosure sale should be
held, hence, in the case under consideration, the PNB had three places from which to
select, namely: (1) the place of residence of the mortgagor; (2) the place of the
mortgaged chattels were situated; and (3) the place stipulated in the contract. The
PNB selected the second and, accordingly, the foreclosure sale held in Jose
Panganiban, Camarines Norte, was legal and valid.
To the foregoing conclusion, We disagree. While the law grants power and authority to the
mortgagee to sell the mortgaged property at a public place in the municipality where the
mortgagor resides or where the property is situated, 8 this Court has held that the sale of a
mortgaged chattel may be made in a place other than that where it is found, provided that the
owner thereof consents thereto; or that there is an agreement to this effect between the
mortgagor and the mortgagee. 9 But when, as in this case, the parties agreed to have the sale
of the mortgaged chattels in the City of Manila, which, any way, is the residence of the
mortgagor, it cannot be rightly said that mortgagee still retained the power and authority to
select from among the places provided for in the law and the place designated in their
agreement over the objection of the mortgagor. In providing that the mortgaged chattel may
be sold at the place of residence of the mortgagor or the place where it is situated, at the
option of the mortgagee, the law clearly contemplated benefits not only to the mortgagor but
to the mortgagee as well. Their right arising thereunder, however, are personal to them; they
do not affect either public policy or the rights of third persons. They may validly be waived.
So, when herein mortgagor and mortgagee agreed in the mortgage contract that in cases of
both judicial and extra-judicial foreclosure under Act 1508, as amended, the corresponding
complaint for foreclosure or the petition for sale should be filed with the courts or the Sheriff
of Manila, as the case may be, they waived their corresponding rights under the law. The
correlative obligation arising from that agreement have the force of law between them and
should be complied with in good faith. 10
By said agreement the parties waived the legal venue, and such waiver is valid and
legally effective, because it, was merely a personal privilege they waived, which is
not contrary, to public policy or to the prejudice of third persons. It is a general
principle that a person may renounce any right which the law gives unless such
renunciation is expressly prohibited or the right conferred is of such nature that its
renunciation would be against public policy. 11
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 properly conducted in that
place. Indeed, in the absence of a statute to the contrary, a sale conducted at a place
other than that stipulated for in the mortgage is invalid, unless the mortgagor
consents to such sale. 12
Moreover, Section 14 of Act 1508, as amended, provides that the officer making the sale
should make a return of his doings which shall particularly describe the articles sold and the
amount received from each article. From this, it is clear that the law requires that sale be
made article by article, otherwise, it would be impossible for him to state the amount received
for each item. This requirement was totally disregarded by the Deputy Sheriff of Camarines
Norte when he sold the chattels in question in bulk, notwithstanding the fact that the said
chattels consisted of no less than twenty different items as shown in the bill of sale. 13 This
makes the sale of the chattels manifestly objectionable. And in the absence of any evidence
to show that the mortgagor had agreed or consented to such sale in gross, the same should
be set aside.
It is said that the mortgagee is guilty of conversion when he sells under the mortgage but not
in accordance with its terms, or where the proceedings as to the sale of foreclosure do not
comply with the statute. 14 This rule applies squarely to the facts of this case where, as earlier
shown, herein appellee bank insisted, and the appellee deputy sheriff of Camarines Norte
proceeded with the sale of the mortgaged chattels at Jose Panganiban, Camarines Norte, in
utter disregard of the valid objection of the mortgagor thereto for the reason that it is not the
place of sale agreed upon in the mortgage contract; and the said deputy sheriff sold all the
chattels (among which were a skagit with caterpillar engine, three GMC 6 x 6 trucks, a
Herring Hall Safe, and Sawmill equipment consisting of a 150 HP Murphy Engine, plainer,
large circular saws etc.) as a single lot in violation of the requirement of the law to sell the
same article by article. The PNB has resold the chattels to another buyer with whom it
appears to have actively cooperated in subsequently taking possession of and removing the
chattels from appellant compound by force, as shown by the circumstance that they had to
take along PC soldiers and municipal policemen of Jose Panganiban who placed the chief
security officer of the premises in jail to deprive herein appellant of its possession thereof. To
exonerate itself of any liability for the breach of peace thus committed, the PNB would want
us to believe that it was the subsequent buyer alone, who is not a party to this case, that was
responsible for the forcible taking of the property; but assuming this to be so, still the PNB
cannot escape liability for the conversion of the mortgaged chattels by parting with its interest
in the property. Neither would its claim that it afterwards gave a chance to herein appellant to
repurchase or redeem the chattels, improve its position, for the mortgagor is not under
obligation to take affirmative steps to repossess the chattels that were converted by the
mortgagee. 15 As a consequence of the said wrongful acts of the PNB and the Deputy Sheriff
of Camarines Norte, therefore, We have to declare that herein appellant is entitled to collect
from them, jointly and severally, the full value 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
The effect of this irregularity was, in our opinion to make the plaintiff 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.
G.R. No. 128690 January 21, 1999
ABS-CBN BROADCASTING CORPORATION, petitioner,
vs.
HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP, VIVA
PRODUCTION, INC., and VICENTE DEL ROSARIO, respondents.
DAVIDE, JR., CJ.:
In this petition for review on certiorari, petitioner ABS-CBN Broadcasting Corp. (hereafter
ABS-CBN) seeks to reverse and set aside the decision 1 of 31 October 1996 and the
resolution 2 of 10 March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The former
affirmed with modification the decision 3 of 28 April 1993 of the Regional Trial Court (RTC) of
Quezon City, Branch 80, in Civil Case No. Q-92-12309. 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 out 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 our 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 On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior vice-
rejected because of the ruling of MTRCB to have them aired at 9:00 p.m. due president for Finance discussed the terms and conditions of Viva's offer to
to their very adult themes. sell the 104 films, after the rejection of the same package by ABS-CBN.

As for the 10 titles I have choosen [sic] from the 3 packages please consider On April 07, 1992, defendant Del Rosario received through his secretary, a
including all the other Viva movies produced last year. I have quite an handwritten note from Ms. Concio, (Exh. "5" - Viva), which reads: "Here's the
attractive offer to make. 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.
Thanking you and with my warmest regards. 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
(Sig
films right to 53 films and contains a right of first refusal to "1992 Viva Films."
ned
The said counter proposal was however rejected by Viva's 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" -
Cha Viva), and such rejection was relayed to Ms. Concio.
ro
San
On April 29, 1992, after the rejection of ABS-CBN and following several
tos-
negotiations and meetings defendant Del Rosario and Viva's President
Con
Teresita Cruz, in consideration of P60 million, signed a letter of agreement
cio
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
On February 27, 1992, defendant Del Rosario approached ABS-CBN's Ms. Concio, with a list the fourteen (14) films subject of the present case. 4
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
On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance with a
ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN
prayer for a writ of preliminary injunction and/or temporary restraining order against private
airing rights over this package of 52 originals and 52 re-runs for P60,000,000.00 of which
respondents Republic Broadcasting Corporation 5 (hereafter RBS ), Viva Production
P30,000,000.00 will be in cash and P30,000,000.00 worth of television spots (Exh. "4" to "4-
(hereafter VIVA), and Vicente Del Rosario. The complaint was docketed as Civil Case No. Q-
C" Viva; "9" -Viva).
92-12309.
On April 2, 1992, defendant Del Rosario and ABS-CBN general manager,
On 27 May 1992, RTC issued a temporary restraining order 6 enjoining private respondents
Eugenio Lopez III, met at the Tamarind Grill Restaurant in Quezon City to
from proceeding with the airing, broadcasting, and televising of the fourteen VIVA films
discuss the package proposal of Viva. What transpired in that lunch meeting
subject of the controversy, starting with the film Maging Sino Ka Man, which was scheduled
is the subject of conflicting versions. Mr. Lopez testified that he and Mr. Del
to be shown on private respondents RBS' channel 7 at seven o'clock in the evening of said
Rosario allegedly agreed that ABS-CRN was granted exclusive film rights to
date.
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 On 17 June 1992, after appropriate proceedings, the RTC issued an
8, 1992). On the other hand, Del Rosario denied having made any order 7 directing the issuance of a writ of preliminary injunction upon ABS-CBN's posting of
agreement with Lopez regarding the 14 Viva films; denied the existence of a P35 million bond. ABS-CBN moved for the reduction of the bond, 8 while private respondents
napkin in which Lopez wrote something; and insisted that what he and Lopez moved for reconsideration of the order and offered to put up a counterbound. 9
discussed at the lunch meeting was Viva's film package offer of 104 films (52
originals and 52 re-runs) for a total price of P60 million. Mr. Lopez promising In the meantime, private respondents filed separate answers with counterclaim. 10 RBS also
[sic]to make a counter proposal which came in the form of a proposal set up a cross-claim against VIVA..
contract Annex "C" of the complaint (Exh. "1"·- Viva; Exh. "C" - ABS-CBN).
On 3 August 1992, the RTC issued an order 11 dissolving the writ of preliminary injunction a) P107,727.00, the amount of premium
upon the posting by RBS of a P30 million counterbond to answer for whatever damages ABS- paid by RBS to the surety which issued
CBN might suffer by virtue of such dissolution. However, it reduced petitioner's injunction defendant RBS's bond to lift the 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. b) P191,843.00 for the amount of print
advertisement for "Maging Sino Ka Man" in
At the pre-trial 12 on 6 August 1992, the parties, upon suggestion of the court, agreed to various newspapers;
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 c) Attorney's fees in the amount of P1
settlement would be reached. million;

As the parties failed to enter into an amicable settlement RBS posted on 1 October 1992 a d) P5 million as and by way of moral
counterbond, which the RTC approved in its Order of 15 October 1992.13 damages;

On 19 October 1992, ABS-CBN filed a motion for reconsideration 14 of the 3 August and 15 e) P5 million as and by way of exemplary
October 1992 Orders, which RBS opposed. 15 damages;

On 29 October 1992, the RTC conducted a pre-trial. 16
Pending resolution of its motion for reconsideration, ABS-CBN filed with the Court of Appeals
a petition17 challenging the RTC's Orders 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 order18 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 19 dismissing the
petition in CA -G.R. 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 as G.R. No.
108363.
In the meantime the RTC received the evidence for the parties in Civil Case No. Q-192-1209.
Thereafter, on 28 April 1993, it rendered a decision 20 in favor of RBS and VIVA and against
ABS-CBN disposing as follows:
WHEREFORE, under cool reflection and prescinding from the foregoing,
judgments is rendered in favor of defendants and against the plaintiff.
(3) For defendant VIVA, plaintiff ABS-CBN is ordered to pay
P212,000.00 by way of reasonable attorney's 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-CBN's 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. Concio's 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 denied21 ABS-CBN's 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.

(1) The complaint is hereby dismissed; Aggrieved by the RTC's 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
(2) Plaintiff ABS-CBN is ordered to pay defendant RBS the right to exhibit the subject films. Private respondents VIVA and Del Rosario also appealed
following: seeking moral and exemplary damages and additional attorney's 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, it's agent, might have agreed with Lopez III.
The appellate court did not even believe ABS-CBN's 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-CBN's 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 subject 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-CBN's 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 V1VA 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, Ms. 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.22
Accordingly, respondent court sustained the award of actual 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 had 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 RBS's 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
petitioner's knowledge that the contract with VIVA had not been perfected, It also upheld the
award of attorney's fees, reasoning that with ABS-CBN's act of instituting Civil Case No, Q-
92-1209, RBS was "unnecessarily forced to litigate." The appellate court, however, reduced
the awards of moral damages to P2 million, exemplary damages to P2 million, and attorney's
fees to P500, 000.00.
On the other hand, respondent Court of Appeals denied VIVA and Del Rosario's 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
. . . RULING THAT THERE WAS NO PERFECTED CONTRACT BETWEEN
PETITIONER AND PRIVATE RESPONDENT VIVA NOTWITHSTANDING
PREPONDERANCE 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 ATTORNEY'S FEES IN FAVOR 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 Lopez's 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, 23 which cited Toyota
Shaw, Inc. v. Court of Appeals, 24 Ang Yu Asuncion v. Court of Appeals, 25 and Villonco
Realty Company v. Bormaheco. Inc.26
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 or 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 or 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 "Maging Sino Ka Man"; on the contrary, it
was brought out during trial that with or without the case or the injunction, RBS would have
spent such an amount to generate interest in the film.
ABS-CBN further contends that there was no 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 contractual dealings or from specific acts committed by ABS-CBN against 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. 27 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. 28 One who makes use of his own legal right does no injury. 29 If damage results front
the filing of the complaint, it is damnum absque injuria. 30 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.31
As regards the award of attorney's fees, ABS-CBN maintains that the same had no factual,
legal, or equitable justification. In sustaining the trial court's award, the Court of Appeals acted
in clear disregard of the doctrines laid down in Buan v.  Camaganacan  32 that the text of the
decision should state the reason why attorney's 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 party' s persistence in a case other than an erroneous
conviction of the righteousness of his cause, attorney's fees shall not be recovered as
cost." 33
On the other hand, RBS asserts that there was no perfected contract between ABS-CBN and
VIVA absent any meeting of minds between them regarding the object and consideration of
the alleged contract. It affirms that the ABS-CBN's claim of a right of first refusal was correctly
rejected by the trial court. RBS insist the premium it had paid for the counterbond constituted
a pecuniary loss upon which it may recover. It was obliged to put up the counterbound 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 put out to
announce the showing on a particular day and hour on Channel 7, i.e., in its entirety at one
time, not a series to be shown on a periodic basis. Hence, the print advertisement were good
and relevant for the particular date 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 Article 19 and 21 of the Civil Code, ABS-CBN must be held liable for such
damages. Citing Tolentino,34 damages may be awarded in cases of abuse of rights even if
the act done is not illicit and there is abuse of rights were plaintiff institutes and 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 respondents RBS cited People v. Manero,35 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-
CBN's 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
canceled, late viewers called up RBS' offices and subjected RBS to verbal
abuse ("Announce kayo nang 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 planned 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 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 to 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. 36
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-CBN's 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 attorney's fees. It may
be noted that the award of attorney's 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 to render some service
to another 37 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.38 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. 39
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.40
When Mr. Del Rosario of VIVA met with 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 VIVA's offer
to ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent, through Ms.
Concio, a counter-proposal in the form of 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 VIVA's offer, for it was met by a counter-offer which
substantially varied the terms of the offer.
ABS-CBN's reliance in Limketkai Sons Milling, Inc. v.  Court of
Appeals 41 and Villonco Realty Company v. Bormaheco, Inc., 42 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, 43 which ruled that the acceptance of all 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 meeting 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.44 that "a vendor's 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." 45 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 VIVA's offer. Hence, they
underwent a 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 Corporation Code,46 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, 47 Delegation to officers makes the latter agents of the corporation; accordingly, the
general rules of agency as to the bindings effects of their acts would
apply. 48 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-CBN's counter-offer was best evidenced by his submission of the
draft contract to VIVA's Board of Directors for the latter's 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-CBN's 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 a 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 Exhibits "C" reflected the true intent of the parties, then ABS-CBN's
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 contracts, so as to preclude perfection thereof. For
settled is the rule that there can be no contract where there is no object
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 (P19,950,000.00 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-CBN's
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-CBN's 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 Tamarind 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 Board of 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 Barner  [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 contract 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 140 films be maintained (Exh. "7-1"
- Viva ). 49
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-CBN 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 the 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 rights of the first refusal
when his list of 36 titles were rejected (Tsn, June 9, 1992, pp. 10-11) 50
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. 51 The indemnification shall comprehend not only the value of the loss suffered,
but also that of the profits that the obligee failed to obtain. 52 In contracts and quasi-contracts
the damages which may be awarded are dependent on whether the obligor acted with good
faith or otherwise, It 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. 53 In crimes and quasi-delicts, the defendant 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 has been foreseen or could have reasonably been foreseen by
the defendant.54
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 plaintiff's business
standing or commercial credit.55
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-CBN's alleged
knowledge of lack of cause of action. Thus paragraph 12 of RBS's 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 RBS. As a result thereof, RBS suffered actual damages in the amount
of P6,621,195.32. 56
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 his 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 tile 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. 57 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 attorney's fees, the law is clear that in the absence of stipulation, attorney's fees
may be recovered as actual or compensatory damages under any of the circumstances
provided for in Article 2208 of the Civil Code. 58
The general rule is that attorney's fees cannot be recovered as part of damages because of
the policy that no premium should be placed on the right to litigate. 59 They are not to be
awarded every time a party wins a suit. The power of the court to award attorney's fees under
Article 2208 demands factual, legal, and equitable justification. 60 Even when claimant is
compelled to litigate with third persons or to incur expenses to protect his rights, still
attorney's fees may not be awarded where no sufficient showing of bad faith could be
reflected in a party's persistence in a case other than erroneous conviction of the
righteousness of his cause. 61
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. RBS's 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. 62 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 then 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.63 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 on the part of the trial court. 64
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 call be experienced only by one having a nervous system. 65 The statement in People
v.  Manero 66 and Mambulao Lumber Co.  v. PNB  67 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. 68 They are recoverable in criminal
cases as part of the civil liability when the crime was committed with one or more aggravating
circumstances; 69 in quasi-contracts, if the defendant acted with gross negligence; 70 and in
contracts and quasi-contracts, if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.71
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 other 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. 72
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. 73 Such must be substantiated by evidence. 74
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 to impose a penalty on the right to litigate. If
damages result from a person's exercise of a right, it is damnum absque injuria.75
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
attorney's fees in favor of VIVA Productions, Inc.1âwphi1.nêt
No pronouncement as to costs.
SO ORDERED.
G.R. No. 141994             January 17, 2005
FILIPINAS BROADCASTING NETWORK, INC., petitioner,
vs.
AGO MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF
MEDICINE, (AMEC-BCCM) and ANGELITA F. AGO, respondents.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 4 January 1999 Decision2 and 26 January 2000
Resolution of the Court of Appeals in CA-G.R. CV No. 40151. The Court of Appeals affirmed
with modification the 14 December 1992 Decision3 of the Regional Trial Court of Legazpi City,
Branch 10, in Civil Case No. 8236. The Court of Appeals held Filipinas Broadcasting
Network, Inc. and its broadcasters Hermogenes Alegre and Carmelo Rima liable for libel and
ordered them to solidarily pay Ago Medical and Educational Center-Bicol Christian College of
Medicine moral damages, attorney’s fees and costs of suit.
The Antecedents
"Exposé" is a radio documentary4 program hosted by Carmelo ‘Mel’ Rima ("Rima") and
Hermogenes ‘Jun’ Alegre ("Alegre").5 Exposé is aired every morning over DZRC-AM which is
owned by Filipinas Broadcasting Network, Inc. ("FBNI"). "Exposé" is heard over Legazpi City,
the Albay municipalities and other Bicol areas.6
In the morning of 14 and 15 December 1989, Rima and Alegre exposed various alleged
complaints from students, teachers and parents against Ago Medical and Educational Center-
Bicol Christian College of Medicine ("AMEC") and its administrators. Claiming that the
broadcasts were defamatory, AMEC and Angelita Ago ("Ago"), as Dean of AMEC’s College
of Medicine, filed a complaint for damages7 against FBNI, Rima and Alegre on 27 February
1990. Quoted are portions of the allegedly libelous broadcasts:
JUN ALEGRE:
Let us begin with the less burdensome: if you have children taking medical course at
AMEC-BCCM, advise them to pass all subjects because if they fail in any subject they
will repeat their year level, taking up all subjects including those they have passed
already. Several students had approached me stating that they had consulted with the DECS
which told them that there is no such regulation. If [there] is no such regulation why is AMEC
doing the same?
xxx
Second: Earlier AMEC students in Physical Therapy had complained that the course is
not recognized by DECS. xxx
Third: Students are required to take and pay for the subject even if the subject does not
have an instructor - such greed for money on the part of AMEC’s administration. Take
the subject Anatomy: students would pay for the subject upon enrolment because it is offered
by the school. However there would be no instructor for such subject. Students would be
informed that course would be moved to a later date because the school is still searching for
the appropriate instructor.
xxx
It is a public knowledge that the Ago Medical and Educational Center has survived and has
been surviving for the past few years since its inception because of funds support from
foreign foundations. If you will take a look at the AMEC premises you’ll find out that the
names of the buildings there are foreign soundings. There is a McDonald Hall. Why not Jose
Rizal or Bonifacio Hall? That is a very concrete and undeniable evidence that the support of
foreign foundations for AMEC is substantial, isn’t it? With the report which is the basis of the
expose in DZRC today, it would be very easy for detractors and enemies of the Ago family to
stop the flow of support of foreign foundations who assist the medical school on the basis of
the latter’s purpose. But if the purpose of the institution (AMEC) is to deceive students at
cross purpose with its reason for being it is possible for these foreign foundations to lift or
suspend their donations temporarily.8
xxx
On the other hand, the administrators of AMEC-BCCM, AMEC Science High School and
the AMEC-Institute of Mass Communication in their effort to minimize expenses in
terms of salary are absorbing or continues to accept "rejects". For example how many
teachers in AMEC are former teachers of Aquinas University but were removed because of
immorality? Does it mean that the present administration of AMEC have the total definite
moral foundation from catholic administrator of Aquinas University. I will prove to you my
friends, that AMEC is a dumping ground, garbage, not merely of moral and physical
misfits. Probably they only qualify in terms of intellect. The Dean of Student Affairs of AMEC
is Justita Lola, as the family name implies. She is too old to work, being an old woman. Is the
AMEC administration exploiting the very [e]nterprising or compromising and undemanding
Lola? Could it be that AMEC is just patiently making use of Dean Justita Lola were if she is
very old. As in atmospheric situation – zero visibility – the plane cannot land, meaning she is
very old, low pay follows. By the way, Dean Justita Lola is also the chairman of the committee
on scholarship in AMEC. She had retired from Bicol University a long time ago but AMEC has
patiently made use of her.
xxx
MEL RIMA:
xxx My friends based on the expose, AMEC is a dumping ground for moral and physically
misfit people. What does this mean? Immoral and physically misfits as teachers.
May I say I’m sorry to Dean Justita Lola. But this is the truth. The truth is this, that your are no
longer fit to teach. You are too old. As an aviation, your case is zero visibility. Don’t insist.
xxx Why did AMEC still absorb her as a teacher, a dean, and chairman of the scholarship
committee at that. The reason is practical cost saving in salaries, because an old person is
not fastidious, so long as she has money to buy the ingredient of beetle juice. The elderly can
get by – that’s why she (Lola) was taken in as Dean.
xxx
xxx On our end our task is to attend to the interests of students. It is likely that the students
would be influenced by evil. When they become members of society outside of campus
will be liabilities rather than assets. What do you expect from a doctor who while studying
at AMEC is so much burdened with unreasonable imposition? What do you expect from a
student who aside from peculiar problems – because not all students are rich – in their
struggle to improve their social status are even more burdened with false regulations.
xxx9 (Emphasis supplied)
The complaint further alleged that AMEC is a reputable learning institution. With the
supposed exposés, FBNI, Rima and Alegre "transmitted malicious imputations, and as such,
destroyed plaintiffs’ (AMEC and Ago) reputation." AMEC and Ago included FBNI as
defendant for allegedly failing to exercise due diligence in the selection and supervision of its
employees, particularly Rima and Alegre.
On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an
Answer10 alleging that the broadcasts against AMEC were fair and true. FBNI, Rima and
Alegre claimed that they were plainly impelled by a sense of public duty to report the "goings-
on in AMEC, [which is] an institution imbued with public interest."
Thereafter, trial ensued. During the presentation of the evidence for the defense, Atty.
Edmundo Cea, collaborating counsel of Atty. Lozares, filed a Motion to Dismiss11 on FBNI’s
behalf. The trial court denied the motion to dismiss. Consequently, FBNI filed a separate
Answer claiming that it exercised due diligence in the selection and supervision of Rima and
Alegre. FBNI claimed that before hiring a broadcaster, the broadcaster should (1) file an
application; (2) be interviewed; and (3) undergo an apprenticeship and training program after
passing the interview. FBNI likewise claimed that it always reminds its broadcasters to
"observe truth, fairness and objectivity in their broadcasts and to refrain from using libelous
and indecent language." Moreover, FBNI requires all broadcasters to pass the Kapisanan ng
mga Brodkaster sa Pilipinas  ("KBP") accreditation test and to secure a KBP permit.
On 14 December 1992, the trial court rendered a Decision12 finding FBNI and Alegre liable for
libel except Rima. The trial court held that the broadcasts are libelous per se. The trial court
rejected the broadcasters’ claim that their utterances were the result of straight reporting
because it had no factual basis. The broadcasters did not even verify their reports before
airing them to show good faith. In holding FBNI liable for libel, the trial court found that FBNI
failed to exercise diligence in the selection and supervision of its employees.
In absolving Rima from the charge, the trial court ruled that Rima’s only participation was
when he agreed with Alegre’s exposé. The trial court found Rima’s statement within the
"bounds of freedom of speech, expression, and of the press." The dispositive portion of the
decision reads:
WHEREFORE, premises considered, this court finds for the plaintiff. Considering the
degree of damages caused by the controversial utterances, which are not found by
this court to be really very serious and damaging, and there being no showing that
indeed the enrollment of plaintiff school dropped, defendants Hermogenes "Jun" Alegre,
Jr. and Filipinas Broadcasting Network (owner of the radio station DZRC), are hereby jointly
and severally ordered to pay plaintiff Ago Medical and Educational Center-Bicol Christian
College of Medicine (AMEC-BCCM) the amount of ₱300,000.00 moral damages, plus
₱30,000.00 reimbursement of attorney’s fees, and to pay the costs of suit.
SO ORDERED. 13 (Emphasis supplied)
Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago, on the
other, appealed the decision to the Court of Appeals. The Court of Appeals affirmed the trial
court’s judgment with modification. The appellate court made Rima solidarily liable with FBNI
and Alegre. The appellate court denied Ago’s claim for damages and attorney’s fees because
the broadcasts were directed against AMEC, and not against her. The dispositive portion of
the Court of Appeals’ decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the modification
that broadcaster Mel Rima is SOLIDARILY ADJUDGED liable with FBN[I] and Hermo[g]enes
Alegre.
SO ORDERED.14
FBNI, Rima and Alegre filed a motion for reconsideration which the Court of Appeals denied
in its 26 January 2000 Resolution.
15
Hence, FBNI filed this petition.
The Ruling of the Court of Appeals
The Court of Appeals upheld the trial court’s ruling that the questioned broadcasts are
libelous per se and that FBNI, Rima and Alegre failed to overcome the legal presumption of
malice. The Court of Appeals found Rima and Alegre’s claim that they were actuated by their
moral and social duty to inform the public of the students’ gripes as insufficient to justify the
utterance of the defamatory remarks.
Finding no factual basis for the imputations against AMEC’s administrators, the Court of
Appeals ruled that the broadcasts were made "with reckless disregard as to whether they
were true or false." The appellate court pointed out that FBNI, Rima and Alegre failed to
present in court any of the students who allegedly complained against AMEC. Rima and
Alegre merely gave a single name when asked to identify the students. According to the
Court of Appeals, these circumstances cast doubt on the veracity of the broadcasters’ claim
that they were "impelled by their moral and social duty to inform the public about the students’
gripes."
The Court of Appeals found Rima also liable for libel since he remarked that "(1) AMEC-
BCCM is a dumping ground for morally and physically misfit teachers; (2) AMEC obtained the
services of Dean Justita Lola to minimize expenses on its employees’ salaries; and (3) AMEC
burdened the students with unreasonable imposition and false regulations."16
The Court of Appeals held that FBNI failed to exercise due diligence in the selection and
supervision of its employees for allowing Rima and Alegre to make the radio broadcasts
without the proper KBP accreditation. The Court of Appeals denied Ago’s claim for damages
and attorney’s fees because the libelous remarks were directed against AMEC, and not
against her. The Court of Appeals adjudged FBNI, Rima and Alegre solidarily liable to pay
AMEC moral damages, attorney’s fees and costs of suit.1awphi1.nét
Issues
FBNI raises the following issues for resolution:
I. WHETHER THE BROADCASTS ARE LIBELOUS;
II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;
III. WHETHER THE AWARD OF ATTORNEY’S FEES IS PROPER; and
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE FOR
PAYMENT OF MORAL DAMAGES, ATTORNEY’S FEES AND COSTS OF SUIT.
The Court’s Ruling
We deny the petition.
This is a civil action for damages as a result of the allegedly defamatory remarks of Rima and
Alegre against AMEC.17 While AMEC did not point out clearly the legal basis for its complaint,
a reading of the complaint reveals that AMEC’s cause of action is based on Articles 30 and
33 of the Civil Code. Article 3018 authorizes a separate civil action to recover civil liability
arising from a criminal offense. On the other hand, Article 3319 particularly provides that the
injured party may bring a separate civil action for damages in cases of defamation, fraud, and
physical injuries. AMEC also invokes Article 1920 of the Civil Code to justify its claim for
damages. AMEC cites Articles 217621 and 218022 of the Civil Code to hold FBNI solidarily
liable with Rima and Alegre.
I.
Whether the broadcasts are libelous
A libel23 is a public and malicious imputation of a crime, or of a vice or defect, real or
imaginary, or any act or omission, condition, status, or circumstance tending to cause the
dishonor, discredit, or contempt of a natural or juridical person, or to blacken the memory of
one who is dead.24
There is no question that the broadcasts were made public and imputed to AMEC defects or
circumstances tending to cause it dishonor, discredit and contempt. Rima and Alegre’s
remarks such as "greed for money on the part of AMEC’s administrators"; "AMEC is a
dumping ground, garbage of xxx moral and physical misfits"; and AMEC students who
graduate "will be liabilities rather than assets" of the society are libelous per se. Taken as a
whole, the broadcasts suggest that AMEC is a money-making institution where physically and
morally unfit teachers abound.
However, FBNI contends that the broadcasts are not malicious. FBNI claims that Rima and
Alegre were plainly impelled by their civic duty to air the students’ gripes. FBNI alleges that
there is no evidence that ill will or spite motivated Rima and Alegre in making the broadcasts.
FBNI further points out that Rima and Alegre exerted efforts to obtain AMEC’s side and gave
Ago the opportunity to defend AMEC and its administrators. FBNI concludes that since there
is no malice, there is no libel.
FBNI’s contentions are untenable.
Every defamatory imputation is presumed malicious.25 Rima and Alegre failed to show
adequately their good intention and justifiable motive in airing the supposed gripes of the
students. As hosts of a documentary or public affairs program, Rima and Alegre should have
presented the public issues "free from inaccurate and misleading information."26 Hearing the
students’ alleged complaints a month before the exposé,27 they had sufficient time to verify
their sources and information. However, Rima and Alegre hardly made a thorough
investigation of the students’ alleged gripes. Neither did they inquire about nor confirm the
purported irregularities in AMEC from the Department of Education, Culture and Sports.
Alegre testified that he merely went to AMEC to verify his report from an alleged AMEC
official who refused to disclose any information. Alegre simply relied on the words of the
students "because they were many and not because there is proof that what they are saying
is true."28 This plainly shows Rima and Alegre’s reckless disregard of whether their report was
true or not.
Contrary to FBNI’s claim, the broadcasts were not "the result of straight reporting."
Significantly, some courts in the United States apply the privilege of "neutral reportage" in
libel cases involving matters of public interest or public figures. Under this privilege, a
republisher who accurately and disinterestedly reports certain defamatory statements made
against public figures is shielded from liability, regardless of the republisher’s subjective
awareness of the truth or falsity of the accusation.29 Rima and Alegre cannot invoke the
privilege of neutral reportage because unfounded comments abound in the broadcasts.
Moreover, there is no existing controversy involving AMEC when the broadcasts were made.
The privilege of neutral reportage applies where the defamed person is a public figure who is
involved in an existing controversy, and a party to that controversy makes the defamatory
statement.30
However, FBNI argues vigorously that malice in law does not apply to this case. Citing Borjal
v. Court of Appeals,31 FBNI contends that the broadcasts "fall within the coverage of
qualifiedly privileged communications" for being commentaries on matters of public interest.
Such being the case, AMEC should prove malice in fact or actual malice. Since AMEC
allegedly failed to prove actual malice, there is no libel.
FBNI’s reliance on Borjal is misplaced. In Borjal, the Court elucidated on the "doctrine of fair
comment," thus:
[F]air commentaries on matters of public interest are privileged and constitute a valid defense
in an action for libel or slander. The doctrine of fair comment means that while in general
every discreditable imputation publicly made is deemed false, because every man is
presumed innocent until his guilt is judicially proved, and every false imputation is deemed
malicious, nevertheless, when the discreditable imputation is directed against a public person
in his public capacity, it is not necessarily actionable. In order that such discreditable
imputation to a public official may be actionable, it must either be a false allegation of
fact or a comment based on a false supposition. If the comment is an expression of
opinion, based on established facts, then it is immaterial that the opinion happens to be
mistaken, as long as it might reasonably be inferred from the facts.32 (Emphasis supplied)
True, AMEC is a private learning institution whose business of educating students is
"genuinely imbued with public interest." The welfare of the youth in general and AMEC’s
students in particular is a matter which the public has the right to know. Thus, similar to the
newspaper articles in Borjal, the subject broadcasts dealt with matters of public interest.
However, unlike in Borjal, the questioned broadcasts are not based on established facts.
The record supports the following findings of the trial court:
xxx Although defendants claim that they were motivated by consistent reports of students and
parents against plaintiff, yet, defendants have not presented in court, nor even gave name of
a single student who made the complaint to them, much less present written complaint or
petition to that effect. To accept this defense of defendants is too dangerous because it could
easily give license to the media to malign people and establishments based on flimsy
excuses that there were reports to them although they could not satisfactorily establish it.
Such laxity would encourage careless and irresponsible broadcasting which is inimical to
public interests.
Secondly, there is reason to believe that defendant radio broadcasters, contrary to the
mandates of their duties, did not verify and analyze the truth of the reports before they aired
it, in order to prove that they are in good faith.
Alegre contended that plaintiff school had no permit and is not accredited to offer Physical
Therapy courses. Yet, plaintiff produced a certificate coming from DECS that as of Sept. 22,
1987 or more than 2 years before the controversial broadcast, accreditation to offer Physical
Therapy course had already been given the plaintiff, which certificate is signed by no less
than the Secretary of Education and Culture herself, Lourdes R. Quisumbing (Exh. C-
rebuttal). Defendants could have easily known this were they careful enough to verify. And
yet, defendants were very categorical and sounded too positive when they made the
erroneous report that plaintiff had no permit to offer Physical Therapy courses which they
were offering.
The allegation that plaintiff was getting tremendous aids from foreign foundations like
Mcdonald Foundation prove not to be true also. The truth is there is no Mcdonald Foundation
existing. Although a big building of plaintiff school was given the name Mcdonald building,
that was only in order to honor the first missionary in Bicol of plaintiffs’ religion, as explained
by Dr. Lita Ago. Contrary to the claim of defendants over the air, not a single centavo appears
to be received by plaintiff school from the aforementioned McDonald Foundation which does
not exist.
Defendants did not even also bother to prove their claim, though denied by Dra. Ago, that
when medical students fail in one subject, they are made to repeat all the other subject[s],
even those they have already passed, nor their claim that the school charges laboratory fees
even if there are no laboratories in the school. No evidence was presented to prove the bases
for these claims, at least in order to give semblance of good faith.
As for the allegation that plaintiff is the dumping ground for misfits, and immoral teachers,
defendant[s] singled out Dean Justita Lola who is said to be so old, with zero visibility already.
Dean Lola testified in court last Jan. 21, 1991, and was found to be 75 years old. xxx Even
older people prove to be effective teachers like Supreme Court Justices who are still very
much in demand as law professors in their late years. Counsel for defendants is past 75 but
is found by this court to be still very sharp and effective.l^vvphi1.net So is plaintiffs’ counsel.
Dr. Lola was observed by this court not to be physically decrepit yet, nor mentally infirmed,
but is still alert and docile.
The contention that plaintiffs’ graduates become liabilities rather than assets of our society is
a mere conclusion. Being from the place himself, this court is aware that majority of the
medical graduates of plaintiffs pass the board examination easily and become prosperous
and responsible professionals.33
Had the comments been an expression of opinion based on established facts, it is immaterial
that the opinion happens to be mistaken, as long as it might reasonably be inferred from the
facts.34 However, the comments of Rima and Alegre were not backed up by facts. Therefore,
the broadcasts are not privileged and remain libelous per se.
The broadcasts also violate the Radio Code35 of the Kapisanan ng mga Brodkaster sa
Pilipinas, Ink.  ("Radio Code"). Item I(B) of the Radio Code provides:
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES
1. x x x
4. Public affairs program shall present public issues free from personal bias,
prejudice and inaccurate and misleading information. x x x Furthermore, the
station shall strive to present balanced discussion of issues. x x x.
xxx
7. The station shall be responsible at all times in the supervision of public affairs,
public issues and commentary programs so that they conform to the provisions and
standards of this code.
8. It shall be the responsibility of the newscaster, commentator, host and announcer
to protect public interest, general welfare and good order in the presentation of public
affairs and public issues.36 (Emphasis supplied)
The broadcasts fail to meet the standards prescribed in the Radio Code, which lays down the
code of ethical conduct governing practitioners in the radio broadcast industry. The Radio
Code is a voluntary code of conduct imposed by the radio broadcast industry on its own
members. The Radio Code is a public warranty by the radio broadcast industry that radio
broadcast practitioners are subject to a code by which their conduct are measured for lapses,
liability and sanctions.
The public has a right to expect and demand that radio broadcast practitioners live up to the
code of conduct of their profession, just like other professionals. A professional code of
conduct provides the standards for determining whether a person has acted justly, honestly
and with good faith in the exercise of his rights and performance of his duties as required by
Article 1937 of the Civil Code. A professional code of conduct also provides the standards for
determining whether a person who willfully causes loss or injury to another has acted in a
manner contrary to morals or good customs under Article 2138 of the Civil Code.
II.
Whether AMEC is entitled to moral damages
FBNI contends that AMEC is not entitled to moral damages because it is a corporation.39
A juridical person is generally not entitled to moral damages because, unlike a natural
person, it cannot experience physical suffering or such sentiments as wounded feelings,
serious anxiety, mental anguish or moral shock.40 The Court of Appeals cites Mambulao
Lumber Co. v. PNB, et al.41 to justify the award of moral damages. However, the Court’s
statement in Mambulao that "a corporation may have a good reputation which, if besmirched,
may also be a ground for the award of moral damages" is an obiter dictum.42
Nevertheless, AMEC’s claim for moral damages falls under item 7 of Article 2219 43 of the Civil
Code. This provision expressly authorizes the recovery of moral damages in cases of libel,
slander or any other form of defamation. Article 2219(7) does not qualify whether the plaintiff
is a natural or juridical person. Therefore, a juridical person such as a corporation can validly
complain for libel or any other form of defamation and claim for moral damages.44
Moreover, where the broadcast is libelous per se, the law implies damages.45 In such a case,
evidence of an honest mistake or the want of character or reputation of the party libeled goes
only in mitigation of damages.46 Neither in such a case is the plaintiff required to introduce
evidence of actual damages as a condition precedent to the recovery of some damages.47 In
this case, the broadcasts are libelous per se. Thus, AMEC is entitled to moral damages.
However, we find the award of ₱300,000 moral damages unreasonable. The record shows
that even though the broadcasts were libelous per se, AMEC has not suffered any substantial
or material damage to its reputation. Therefore, we reduce the award of moral damages from
₱300,000 to ₱150,000.
III.
Whether the award of attorney’s fees is proper
FBNI contends that since AMEC is not entitled to moral damages, there is no basis for the
award of attorney’s fees. FBNI adds that the instant case does not fall under the enumeration
in Article 220848 of the Civil Code.
The award of attorney’s fees is not proper because AMEC failed to justify satisfactorily its
claim for attorney’s fees. AMEC did not adduce evidence to warrant the award of attorney’s
fees. Moreover, both the trial and appellate courts failed to explicitly state in their respective
decisions the rationale for the award of attorney’s fees.49 In Inter-Asia Investment
Industries, Inc. v. Court of Appeals ,50 we held that:
[I]t is an accepted doctrine that the award thereof as an item of damages is the exception
rather than the rule, and counsel’s fees are not to be awarded every time a party wins a
suit. The power of the court to award attorney’s fees under Article 2208 of the Civil
Code demands factual, legal and equitable justification, without which the award is a
conclusion without a premise, its basis being improperly left to speculation and
conjecture. In all events, the court must explicitly state in the text of the decision, and not
only in the decretal portion thereof, the legal reason for the award of attorney’s
fees.51 (Emphasis supplied)
While it mentioned about the award of attorney’s fees by stating that it "lies within the
discretion of the court and depends upon the circumstances of each case," the Court of
Appeals failed to point out any circumstance to justify the award.
IV.
Whether FBNI is solidarily liable with Rima and Alegre for moral damages, attorney’s fees
and costs of suit
FBNI contends that it is not solidarily liable with Rima and Alegre for the payment of damages
and attorney’s fees because it exercised due diligence in the selection and supervision of its
employees, particularly Rima and Alegre. FBNI maintains that its broadcasters, including
Rima and Alegre, undergo a "very regimented process" before they are allowed to go on air.
"Those who apply for broadcaster are subjected to interviews, examinations and an
apprenticeship program."
FBNI further argues that Alegre’s age and lack of training are irrelevant to his competence as
a broadcaster. FBNI points out that the "minor deficiencies in the KBP accreditation of Rima
and Alegre do not in any way prove that FBNI did not exercise the diligence of a good father
of a family in selecting and supervising them." Rima’s accreditation lapsed due to his non-
payment of the KBP annual fees while Alegre’s accreditation card was delayed allegedly for
reasons attributable to the KBP Manila Office. FBNI claims that membership in the KBP is
merely voluntary and not required by any law or government regulation.
FBNI’s arguments do not persuade us.
The basis of the present action is a tort. Joint tort feasors are jointly and severally liable for
the tort which they commit.52 Joint tort feasors are all the persons who command, instigate,
promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort,
or who approve of it after it is done, if done for their benefit. 53 Thus, AMEC correctly anchored
its cause of action against FBNI on Articles 2176 and 2180 of the Civil Code.1a\^/phi1.net
As operator of DZRC-AM and employer of Rima and Alegre, FBNI is solidarily liable to pay for
damages arising from the libelous broadcasts. As stated by the Court of Appeals, "recovery
for defamatory statements published by radio or television may be had from the owner of the
station, a licensee, the operator of the station, or a person who procures, or participates in,
the making of the defamatory statements."54 An employer and employee are solidarily liable
for a defamatory statement by the employee within the course and scope of his or her
employment, at least when the employer authorizes or ratifies the defamation.55 In this case,
Rima and Alegre were clearly performing their official duties as hosts of FBNI’s radio program
Exposé when they aired the broadcasts. FBNI neither alleged nor proved that Rima and
Alegre went beyond the scope of their work at that time. There was likewise no showing that
FBNI did not authorize and ratify the defamatory broadcasts.
Moreover, there is insufficient evidence on record that FBNI exercised due diligence in
the selection and supervision of its employees, particularly Rima and Alegre. FBNI merely
showed that it exercised diligence in the selection of its broadcasters without introducing any
evidence to prove that it observed the same diligence in the supervision of Rima and Alegre.
FBNI did not show how it exercised diligence in supervising its broadcasters. FBNI’s alleged
constant reminder to its broadcasters to "observe truth, fairness and objectivity and to refrain
from using libelous and indecent language" is not enough to prove due diligence in the
supervision of its broadcasters. Adequate training of the broadcasters on the industry’s code
of conduct, sufficient information on libel laws, and continuous evaluation of the broadcasters’
performance are but a few of the many ways of showing diligence in the supervision of
broadcasters.
FBNI claims that it "has taken all the precaution in the selection of Rima and Alegre as
broadcasters, bearing in mind their qualifications." However, no clear and convincing
evidence shows that Rima and Alegre underwent FBNI’s "regimented process" of application.
Furthermore, FBNI admits that Rima and Alegre had deficiencies in their KBP
accreditation,56 which is one of FBNI’s requirements before it hires a broadcaster.
Significantly, membership in the KBP, while voluntary, indicates the broadcaster’s strong
commitment to observe the broadcast industry’s rules and regulations. Clearly, these
circumstances show FBNI’s lack of diligence in selecting and supervising Rima and Alegre.
Hence, FBNI is solidarily liable to pay damages together with Rima and Alegre.
WHEREFORE, we DENY the instant petition. We AFFIRM the Decision of 4 January 1999
and Resolution of 26 January 2000 of the Court of Appeals in CA-G.R. CV No. 40151 with the
MODIFICATION that the award of moral damages is reduced from ₱300,000 to ₱150,000
and the award of attorney’s fees is deleted. Costs against petitioner.
SO ORDERED.
G.R. No. L-16439             July 20, 1961
ANTONIO GELUZ, petitioner,
vs.
THE HON. COURT OF APPEALS and OSCAR LAZO, respondents.
Mariano H. de Joya for petitioner.
A.P. Salvador for respondents.
REYES, J.B.L., J.:
This petition for certiorari brings up for review question whether the husband of a woman,
who voluntarily procured her abortion, could recover damages from physician who caused the
same.
The litigation was commenced in the Court of First Instance of Manila by respondent Oscar
Lazo, the of Nita Villanueva, against petitioner Antonio Geluz, a physician. Convinced of the
merits of the complaint upon the evidence adduced, the trial court rendered judgment favor of
plaintiff Lazo and against defendant Geluz, ordering the latter to pay P3,000.00 as damages,
P700.00 attorney's fees and the costs of the suit. On appeal, Court of Appeals, in a special
division of five, sustained the award by a majority vote of three justices as against two, who
rendered a separate dissenting opinion.
The facts are set forth in the majority opinion as follows:
Nita Villanueva came to know the defendant (Antonio Geluz) for the first time in 1948
— through her aunt Paula Yambot. In 1950 she became pregnant by her present
husband before they were legally married. Desiring to conceal her pregnancy from
her parent, and acting on the advice of her aunt, she had herself aborted by the
defendant. After her marriage with the plaintiff, she again became pregnant. As she
was then employed in the Commission on Elections and her pregnancy proved to be
inconvenient, she had herself aborted again by the defendant in October 1953. Less
than two years later, she again became pregnant. On February 21, 1955,
accompanied by her sister Purificacion and the latter's daughter Lucida, she again
repaired to the defendant's clinic on Carriedo and P. Gomez streets in Manila, where
the three met the defendant and his wife. Nita was again aborted, of a two-month old
foetus, in consideration of the sum of fifty pesos, Philippine currency. The plaintiff
was at this time in the province of Cagayan, campaigning for his election to the
provincial board; he did not know of, nor gave his consent, to the abortion.
It is the third and last abortion that constitutes plaintiff's basis in filing this action and award of
damages. Upon application of the defendant Geluz we granted certiorari.
The Court of Appeals and the trial court predicated the award of damages in the sum of
P3,000.06 upon the provisions of the initial paragraph of Article 2206 of the Civil Code of the
Philippines. This we believe to be error, for the said article, in fixing a minimum award of
P3,000.00 for the death of a person, does not cover the case of an unborn foetus that is not
endowed with personality. Under the system of our Civil Code, "la criatura abortiva no
alcanza la categoria de persona natural y en consscuencia es un ser no nacido a la vida del
Derecho" (Casso-Cervera, "Diccionario de Derecho Privado", Vol. 1, p. 49), being incapable
of having rights and obligations.
Since an action for pecuniary damages on account of personal injury or death pertains
primarily to the one injured, it is easy to see that if no action for such damages could be
instituted on behalf of the unborn child on account of the injuries it received, no such right of
action could derivatively accrue to its parents or heirs. In fact, even if a cause of action did
accrue on behalf of the unborn child, the same was extinguished by its pre-natal death, since
no transmission to anyone can take place from on that lacked juridical personality (or juridical
capacity as distinguished from capacity to act). It is no answer to invoke the provisional
personality of a conceived child (conceptus pro nato habetur) under Article 40 of the Civil
Code, because that same article expressly limits such provisional personality by imposing the
condition that the child should be subsequently born alive: "provided it be born later with the
condition specified in the following article". In the present case, there is no dispute that the
child was dead when separated from its mother's womb.
The prevailing American jurisprudence is to the same effect; and it is generally held that
recovery can not had for the death of an unborn child (Stafford vs. Roadway Transit Co., 70
F. Supp. 555; Dietrich vs. Northampton, 52 Am. Rep. 242; and numerous cases collated in
the editorial note, 10 ALR, (2d) 639).
This is not to say that the parents are not entitled to collect any damages at all. But such
damages must be those inflicted directly upon them, as distinguished from the injury or
violation of the rights of the deceased, his right to life and physical integrity. Because the
parents can not expect either help, support or services from an unborn child, they would
normally be limited to moral damages for the illegal arrest of the normal development of
the spes hominis that was the foetus, i.e., on account of distress and anguish attendant to its
loss, and the disappointment of their parental expectations (Civ. Code Art. 2217), as well as
to exemplary damages, if the circumstances should warrant them (Art. 2230). But in the case
before us, both the trial court and the Court of Appeals have not found any basis for an award
of moral damages, evidently because the appellee's indifference to the previous abortions of
his wife, also caused by the appellant herein, clearly indicates that he was unconcerned with
the frustration of his parental hopes and affections. The lower court expressly found, and the
majority opinion of the Court of Appeals did not contradict it, that the appellee was aware of
the second abortion; and the probabilities are that he was likewise aware of the first. Yet
despite the suspicious repetition of the event, he appeared to have taken no steps to
investigate or pinpoint the causes thereof, and secure the punishment of the responsible
practitioner. Even after learning of the third abortion, the appellee does not seem to have
taken interest in the administrative and criminal cases against the appellant. His only concern
appears to have been directed at obtaining from the doctor a large money payment, since he
sued for P50,000.00 damages and P3,000.00 attorney's fees, an "indemnity" claim that,
under the circumstances of record, was clearly exaggerated.
The dissenting Justices of the Court of Appeals have aptly remarked that:
It seems to us that the normal reaction of a husband who righteously feels outraged
by the abortion which his wife has deliberately sought at the hands of a physician
would be highminded rather than mercenary; and that his primary concern would be
to see to it that the medical profession was purged of an unworthy member rather
than turn his wife's indiscretion to personal profit, and with that idea in mind to press
either the administrative or the criminal cases he had filed, or both, instead of
abandoning them in favor of a civil action for damages of which not only he, but also
his wife, would be the beneficiaries.
It is unquestionable that the appellant's act in provoking the abortion of appellee's wife,
without medical necessity to warrant it, was a criminal and morally reprehensible act, that can
not be too severely condemned; and the consent of the woman or that of her husband does
not excuse it. But the immorality or illegality of the act does not justify an award of damage
that, under the circumstances on record, have no factual or legal basis.
The decision appealed from is reversed, and the complaint ordered dismissed. Without costs.
Let a copy of this decision be furnished to the Department of Justice and the Board of
Medical Examiners for their information and such investigation and action against the
appellee Antonio Geluz as the facts may warrant.
G.R. No. 108670 September 21, 1994
LBC EXPRESS, INC., petitioner,
vs.
THE COURT OF APPEALS, ADOLFO M. CARLOTO, and RURAL BANK OF LABASON,
INC., respondents.
Emmanuel D. Agustin for petitioner.
Bernardo P. Concha for private respondents.
PUNO, J.:
In this Petition for Review on Certiorari, petitioner LBC questions the decision 1 of respondent
Court of Appeals affirming the judgment of the Regional Trial Court of Dipolog City, Branch 8,
awarding moral and exemplary damages, reimbursement of P32,000.00, and costs of suit;
but deleting the amount of attorney's fees.
Private respondent Adolfo Carloto, incumbent President-Manager of private respondent Rural
Bank of Labason, alleged that on November 12, 1984, he was in Cebu City transacting
business with the Central Bank Regional Office. He was instructed to proceed to Manila on or
before November 21, 1984 to follow-up the Rural Bank's plan of payment of rediscounting
obligations with Central Bank's main office in Manila. 2 He then purchased a round trip plane
ticket to Manila. He also phoned his sister Elsie Carloto-Concha to send him ONE
THOUSAND PESOS (P1,000.00) for his pocket money in going to Manila and some
rediscounting papers thru petitioner's LBC Office at Dipolog City. 3
On November 16, 1984, Mrs. Concha thru her clerk, Adelina Antigo consigned thru LBC
Dipolog Branch the pertinent documents and the sum of ONE THOUSAND PESOS
(P1,000.00) to respondent Carloto at No. 2 Greyhound Subdivision, Kinasangan, Pardo,
Cebu City. This was evidenced by LBC Air Cargo, Inc., Cashpack Delivery Receipt No.
34805.
On November 17, 1984, the documents arrived without the cashpack. Respondent Carloto
made personal follow-ups on that same day, and also on November 19 and 20, 1984 at
LBC's office in Cebu but petitioner failed to deliver to him the cashpack.
Consequently, respondent Carloto said he was compelled to go to Dipolog City on November
24, 1984 to claim the money at LBC's office. His effort was once more in vain. On November
27, 1984, he went back to Cebu City at LBC's office. He was, however, advised that the
money has been returned to LBC's office in Dipolog City upon shipper's request. Again, he
demanded for the ONE THOUSAND PESOS (P1,000.00) and refund of FORTY-NINE
PESOS (P49.00) LBC revenue charges. He received the money only on December 15, 1984
less the revenue charges.
Respondent Carloto claimed that because of the delay in the transmittal of the cashpack, he
failed to submit the rediscounting documents to Central Bank on time. As a consequence, his
rural bank was made to pay the Central Bank THIRTY-TWO THOUSAND PESOS
(P32,000.00) as penalty interest. 4 He allegedly suffered embarrassment and humiliation.
Petitioner LBC, on the other hand, alleged that the cashpack was forwarded via PAL to LBC
Cebu City branch on November 22, 1984. 5 On the same day, it was delivered at respondent
Carloto's residence at No. 2 Greyhound Subdivision, Kinasangan, Pardo, Cebu City.
However, he was not around to receive it. The delivery man served instead a claim notice to
insure he would personally receive the money. This was annotated on Cashpack Delivery
Receipt No. 342805. Notwithstanding the said notice, respondent Carloto did not claim the
cashpack at LBC Cebu. On November 23, 1984, it was returned to the shipper, Elsie Carloto-
Concha at Dipolog City.
Claiming that petitioner LBC wantonly and recklessly disregarded its obligation, respondent
Carloto instituted an action for Damages Arising from Non-performance of Obligation
docketed as Civil Case No. 3679 before the Regional Trial Court of Dipolog City on January
4, 1985. On June 25, 1988, an amended complaint was filed where respondent rural bank
joined as one of the plaintiffs and prayed for the reimbursement of THIRTY-TWO
THOUSAND PESOS (P32,000.00).
After hearing, the trial court rendered its decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered:
1. Ordering the defendant LBC Air Cargo, Inc. to pay unto plaintiff Adolfo M.
Carloto and Rural Bank of Labason, Inc., moral damages in the amount of
P10,000.00; exemplary damages in the amount of P5,000.00; attorney's fees
in the amount of P3,000.00 and litigation expenses of P1,000.00;
2. Sentencing defendant LBC Air Cargo, Inc., to reimburse plaintiff Rural
Bank of Labason, Inc. the sum of P32,000.00 which the latter paid as penalty
interest to the Central Bank of the Philippines as penalty interest for failure to
rediscount its due bills on time arising from the defendant's failure to deliver
the cashpack, with legal interest computed from the date of filing of this case;
and
3. Ordering defendant to pay the costs of these proceedings.
SO ORDERED. 6
On appeal, respondent court modified the judgment by deleting the award of attorney's fees.
Petitioner's Motion for Reconsideration was denied in a Resolution dated January 11, 1993.
Hence, this petition raising the following questions, to wit:
1. Whether or not respondent Rural Bank of Labason Inc., being an artificial person should be
awarded moral damages.
2. Whether or not the award of THIRTY-TWO THOUSAND PESOS (P32,000.00) was made
with grave abuse of discretion.
3. Whether or not the respondent Court of Appeals gravely abused its discretion in affirming
the trial court's decision ordering petitioner LBC to pay moral and exemplary damages
despite performance of its obligation.
We find merit in the petition.
The respondent court erred in awarding moral damages to the Rural Bank of Labason, Inc.,
an artificial person.
Moral damages are granted in recompense for physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,
and similar injury. 7 A corporation, being an artificial person and having existence only in legal
contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience
physical suffering and mental anguish. 8 Mental suffering can be experienced only by one
having a nervous system and it flows from real ills, sorrows, and griefs of life 9 — all of which
cannot be suffered by respondent bank as an artificial person.
We can neither sustain the award of moral damages in favor of the private respondents. The
right to recover moral damages is based on equity. Moral damages are recoverable only if the
case falls under Article 2219 of the Civil Code in relation to Article 21. 10 Part of conventional
wisdom is that he who comes to court to demand equity, must come with clean hands.
In the case at bench, respondent Carloto is not without fault. He was fully aware that his rural
bank's obligation would mature on November 21, 1984 and his bank has set aside cash for
these bills payable. 11 He was all set to go to Manila to settle this obligation. He has received
the documents necessary for the approval of their rediscounting application with the Central
Bank. He has also received the plane ticket to go to Manila. Nevertheless, he did not
immediately proceed to Manila but instead tarried for days allegedly claiming his ONE
THOUSAND PESOS (P1,000.00) pocket money. Due to his delayed trip, he failed to submit
the rediscounting papers to the Central Bank on time and his bank was penalized THIRTY-
TWO THOUSAND PESOS (P32,000.00) for failure to pay its obligation on its due date. The
undue importance given by respondent Carloto to his ONE THOUSAND PESOS (P1,000.00)
pocket money is inexplicable for it was not indispensable for him to follow up his bank's
rediscounting application with Central Bank. According to said respondent, he needed the
money to "invite people for a snack or dinner." 12 The attitude of said respondent speaks ill of
his ways of business dealings and cannot be countenanced by this Court. Verily, it will be
revolting to our sense of ethics to use it as basis for awarding damages in favor of private
respondent Carloto and the Rural Bank of Labason, Inc.
We also hold that respondents failed to show that petitioner LBC's late delivery of the
cashpack was motivated by personal malice or bad faith, whether intentional or thru gross
negligence. In fact, it was proved during the trial that the cashpack was consigned on
November 16, 1984, a Friday. It was sent to Cebu on November 19, 1984, the next business
day. Considering this circumstance, petitioner cannot be charged with gross neglect of duty.
Bad faith under the law can not be presumed; it must be established by clearer and
convincing evidence. 13 Again, the unbroken jurisprudence is that in breach of contract cases
where the defendant is not shown to have acted fraudulently or in bad faith, liability for
damages is limited to the natural and probable consequences of the branch of the obligation
which the parties had foreseen or could reasonable have foreseen. The damages, however,
will not include liability for moral damages. 14
Prescinding from these premises, the award of exemplary damages made by the respondent
court would have no legal leg to support itself. Under Article 2232 of the Civil Code, in a
contractual or quasi-contractual relationship, exemplary damages may be awarded only if the
defendant had acted in "a wanton, fraudulent, reckless, oppressive, or malevolent manner."
The established facts of not so warrant the characterization of the action of petitioner LBC.
IN VIEW WHEREOF, the Decision of the respondent court dated September 30, 1992 is
REVERSED and SET ASIDE; and the Complaint in Civil Case No. 3679 is ordered
DISMISSED. No costs.
SO ORDERED.
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 and Arson5 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."
x x x           x x x          x x x
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.
x x x           x x x          x x x
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.
G.R. No. 100468 May 6, 1997
LAUREANO INVESTMENT & DEVELOPMENT CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and BORMAHECO, INC., respondents.
PANGANIBAN, J.:
May a plaintiff/petitioner which purports to be a corporation validly bring suit under a name
other than that registered with the Securities and Exchange Commission?
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner seeks
the reversal of the Decision1 of the Court of Appeals2 in CA-G.R. SP No. 22763, promulgated
on February 28, 1991, which resolved the above question in the negative; and its
Resolution3 promulgated on June 10, 1991, denying petitioner's motion for reconsideration.
The assailed Decision upheld the following questioned orders of the Regional Trial Court of
Makati, Branch 141:4 (1) the Order dated September 8, 1989, ruling that "Lideco Corporation"
(the name under which herein petitioner represented itself before the trial court) lacked
personality to intervene;5 (2) the Order dated May 7, 1990, denying the motion of petitioner to
take the place of "Lideco Corporation" as party-intervenor and adopt the latter's complaint in
intervention and other pleadings;6 and (3) the Order dated August 8, 1990, which denied the
motion for reconsideration of petitioner.7
The Facts
The antecedents of this petition are summarized by the Respondent Court as follows:
The records show that spouses Reynaldo Laureano and Florence Laureano
are majority stockholders of petitioner Corporation who entered into a series
of loan and credit transactions with Philippine National Cooperative Bank
(PNCB for short). To secure payment of the loans, they executed Deeds of
Real Estate Mortgage dated December 11, 1962, January 9, 1963, July 2,
1963 and September 5, 1964, for the following amounts: P100,000.00,
P20,000.00, P70,000.00 and P13,424.04, respectively. In view of their failure
to pay their indebtedness, PNCB applied for extrajudicial foreclosure of the
real estate mortgages. The bank was the purchaser of the properties in
question in the foreclosure sale and titles thereof were consolidated in
PNCB's name on February 20, 1984. PNCB did not secure a writ of
possession nor did it file ejectment proceedings against the Laureano
spouses, because there were then pending cases, such as . . . involving the
titles of ownership of subject two lots, which are situated at Bel-Air
Subdivision[,] Makati, Metro Manila.
Private respondent Bormaheco, Inc. became the successor of the obligations
and liabilities of PNCB over subject lots by virtue of a Deed of
Sale/Assignment on September 26, 1988 wherein Bormaheco bought from
PNCB under a bulk sale 114 titled and untitled properties including the two
parcels of land in question, formerly registered in the name of the Laureano
spouses. Transfer Certificate of Title Nos. 157724 and 157725 over the lots
in question were issued on October 12, 1988 in the name of Bormaheco.
Five (5) days after securing titles over the said properties, Bormaheco filed
an "Ex-Parte Petition for the Issuance of Writ of Possession of Lots 4 and 5,
Block 4 situated at Bel-Air Village, Makati, Metro Manila and embraced in
TCT Nos. 157724 and 157725 of the Registry of Deeds of Makati, Metro
Manila," docketed as LRC Case No. M-1530 before respondent Court.
Petitioner Corporation filed on January 18, 1989 its Motion for Intervention
and to Admit Attached Complaint in Intervention in said case. After an
exchange of pleadings, respondent Court issued its order dated February 9,
1988, which reads:
There being a prima facie  showing in the attached complaint
in intervention that herein intervenor LIDECO
CORPORATION has an interest which may eventually and
adversely be affected in whatever decision the Court may
render in the instant case; to enable the parties concerned to
properly ventilate and litigate all the issues involving the
subject property thereby avoid multiplicity of suits, and in the
interest of justice, the Motion for Intervention, filed by
LIDECO CORPORATION is hereby GRANTED; and the
attached complaint in intervention ADMITTED.
On July 26, 1989, respondent Bormaheco filed its Motion to Strike out the
Complaint in Intervention and all related pleadings filed by LIDECO
Corporation. The motion was granted in the first questioned order dated
September 8, 1989, which reads:
x x x           x x x          x x x
On the instant motion, the records show that LIDECO
Corporation appeared thru counsel and filed its complaint in
intervention, representing therein that it is a corporation duly
organized and registered in accordance with law.
The Corporation Code explicitly provides that the use of the
word corporation presupposes that an entity is duly
registered (with the SEC) in accordance with law.
Intervening in the instant petition, with the use of the name
LIDECO Corporation, the latter, in effect, represents to this
court that it is a corporation whose personality is distinct and
separate from its stockholders and/or any other corporation
bearing different names. Hence, herein intervenor LIDECO
Corporation and LAUREANO INVESTMENT AND
DEVELOPMENT CORPORATION, to the mind of this Court,
are two (2) separate and distinct entities. Inasmuch as the
documents in support of its complaint in intervention — tax
declarations — are in the names of Laureano Investment
and Development Corporation, and it appearing that LIDECO
Corporation is not a corporation or partnership duly
organized and registered with the SEC, there is, therefore,
no way whatsoever that LIDECO Corporation's interests will
be adversely affected by the outcome of the instant case.
WHEREFORE, for intervenor's lack of personality to
intervene in the instant proceedings, petitioner's motion to
strike out complaint in intervention is hereby GRANTED.
Accordingly, all pleadings filed relative thereto are ordered
expunged from the records.
xxx xxx xxx
After the issuance of the above-cited order, petitioner Corporation filed on
October 4, 1989, its Urgent Motion to Substitute Party Intervenor and to
Adopt Complaint in Intervention and All Pleadings. An opposition thereto was
filed by BORMAHECO, after which the lower court issued its second
questioned order quoted below:
xxx xxx xxx
The court has painstakingly examined the two (2) tax declarations and has
found out that the said tax declarations refer to two houses erected on Lot 3,
Block 4 and Lot 3, Block 4 of the Bel-Air Village, Makati, Metro Manila. On
the other hand, the subject matter of the instant petition are Lot 4, Block 4
and Lot 5, Block 4 of Bel-Air Village, Makati, Metro Manila. Clearly, therefore,
the properties upon which the herein movant-corporation has interests refer
to properties different from those subject of the instant petition.
Not only that. As correctly pointed out by the petitioner, the afore-mentioned
tax declarations according to the records of the Makati Assessor's Office
were canceled on July 22, 1982 or five (5) years, two (2) months and four (4)
days before the petitioner (BORMAHECO) purchased from the Philippine
National Cooperative Bank the two (2) lots and the improvements found
thereon evidenced by the copies of Tax Declaration Nos. A-002-00512 and
6103 attached as Annexes A and B respectively to the petitioner's rejoinder
dated October 26, 1989.
The movant-corporation not having shown documentary evidence showing
that it has interest on the two lots subject of the complaint and the
improvements found therein, it has, therefore, no personality to file the instant
motion. . . .
There is yet another reason why the motion should not be granted. The
movant corporation's request to be substituted as party intervenor is not one
of the instances provided for in Sec. 20, Rule 3 of the Rules of Court.
Substitution of party litigant may be requested in the following:
(a) When a party dies and the claim is not extinguished, upon proper motion,
the Honorable Court may order the legal representative of the deceased to
appear and to be substituted for the deceased within the period of thirty (30)
days or within such time as may be granted. (Sec. 17, Rule 3, Rules of Court)
(b) In case of any transfer of interest, upon motion, the Honorable Court may
direct the person to whom the interest is transferred to be substituted in the
action or joined with the original party. (Sec. 20, Rule 30 [should be Rule
3], supra.)
which is not so in the case.
x x x           x x x          x x x
 WHEREFORE, in view of the foregoing considerations, the
motions under consideration are hereby DENIED.
A Motion for Reconsideration of the above-cited order was
denied by respondent Court in its third questioned order dated August 8,
1990, . . .8
In likewise denying the petition of Laureano Investment and Development Corporation
(petitioner corporation), Respondent Court ratiocinated:
Petitioner Corporation contends that respondent Bormaheco's motion to
strike out the complaint in intervention and all related pleadings filed by
LIDECO Corporation was based on misleading and confusing assertions that
LIDECO Corporation is not a registered corporation despite its admission
and/or use of the word LIDECO as acronym for Laureano Investment and
Development Corporation. The contention is untenable. BORMAHECO has
shown that LIDECO Corporation is not organized and existing under
Philippine laws. Neither has it been registered with the Securities and
Exchange Commission. In support of said claim, BORMAHECO presented a
certification to the effect that the records of the Commission do not show the
registration of LIDECO, INC. either as a corporation or as partnership.
Petitioner also contends that the motion . . . should have been denied
outright because it was filed in bad faith and without legal and factual basis.
On the contrary, from the very first motion and pleading filed by petitioner in
LRC No. M-1530 pending before respondent Court, it is very clear that the
intervenor therein is LIDECO Corporation. Nowhere in its complaint does it
appear that LIDECO Corporation is the brevity or acronym for Laureano
Investment and Development Corporation. The claim that Lideco Corporation
is the name of a corporation which is duly registered and organized in
accordance with law has been belied by the absence of SEC record showing
the registration of Lideco, Inc. either as corporation or as a partnership. It
was only when intervenor (petitioner herein) filed its opposition to the motion
to strike out that it clarified that Lideco Corporation is the acronym for
Laureano Investment and Development Corporation.
xxx xxx xxx
Moreover, even assuming that Lideco Corporation and Laureano Investment
and Development Corporation are one and the same, it was found by
respondent Court that the properties being claimed by petitioner are different
from those for which private respondent is seeking the issuance of a writ of
possession; hence, the complaint in intervention was correctly dismissed.9
In conclusion, the appellate court said:
We, therefore, fail to see the alleged grave abuse of discretion on the part of
respondent Court in issuing the questioned orders, as they were issued after
the Court had considered the arguments of the parties and the evidence on
record. Clearly, the lower court acted within its authority and sound discretion
in issuing the said orders. 10
Petitioner's motion for reconsideration of the above ruling was, as earlier stated, denied by
Respondent Court in its Resolution 11 promulgated on June 10, 1991. Hence, this petition.
Issues
Petitioner raises for resolution the following questions:
1. Whether Respondent Bormaheco, Inc. is estopped from contesting the legal personality to
sue of "Lideco Corporation";
2. Whether bad faith attended the filing of private respondent's motion to strike out the
complaint in intervention and related pleadings. 12
Petitioner contends that private respondent is estopped from, and is in bad faith for, denying
its knowledge that "Lideco Corporation" and Laureano Investment and Development
Corporation are one and the same entity since it has previously used LIDECO as an acronym
for the latter corporation.
Private respondent submitted a lengthy (sixty-page) amended comment 13 to the petition,
giving a detailed background to the instant case including various actions allegedly
commenced by the Spouses Laureano questioning the foreclosure of the subject properties.
In sum, Bormaheco, Inc. maintains that Respondent Court did not commit reversible error in
disallowing "Lideco Corporation" to intervene for the reason that said entity did not satisfy the
essential requisites for being a party to an action, to wit: (1) natural or juridical personality; (2)
legal capacity to sue or be sued, i.e., having all the qualifications and none of the
disqualifications provided for by law; and (3) real interest in the subject matter of the action. 14
Private respondent adds that petitioner corporation is merely an alter ego of the Laureano
spouses who have lost their rights over the subject properties in favor of Bormaheco's
predecessor-in-interest, the Philippine National Cooperative Bank (PNCB), by virtue of
extrajudicial foreclosures. Petitioner's motion to intervene in the case below is just another
ploy of the spouses to prevent subsequent owners from effectively exercising their rights of
ownership over the properties.
Private respondent also filed before us a motion 15 to declare petitioner as engaged in forum
shopping and to resolve the instant petition. In support of its motion, private respondent
enumerates a string of civil actions allegedly commenced by the Laureano spouses before
the trial court as well as petitions before the appellate court concerning the properties in
question. As a result, Bormaheco claims, an "issue which could have been laid to rest in 1967
is still being litigated." Furthermore, in an omnibus motion 16 filed on February 11, 1997,
private respondent claims that it is being unduly deprived of rental income by as much as
P40,000.00 a month for each property, or a total of eight million pesos since 1988. On the
other hand, it claims to have been assessed for and to have actually paid real estate taxes
and Bel-Air Village Association dues since such date
The Court's Ruling
The petition is not meritorious.
Petitioner's Issues:
Estoppel
Petitioner contends that it was private respondent which first made use of LIDECO as a
shorter term for Laureano Investment and Development Corporation when it filed its first
motion to strike dated January 9, 1989, 17 prior to the filing by "Lideco Corporation" of its
motion for intervention and complaint in intervention 18 on January 18, 1989. Hence, private
respondent should be considered estopped from denying that petitioner and "Lideco
Corporation" are one and the same corporation.
The equitable doctrine of estoppel was explained by this Court in  Caltex (Philippines),
Inc. vs. Court of Appeals 19:
Under the doctrine of estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon. A party may not go back on his own acts
and representations to the prejudice of the other party who relied upon them.
In the law of evidence, whenever a party has, by his own declaration, act, or
omission, intentionally and deliberately led another to believe a particular
thing true, to act upon such belief, he cannot, in any litigation arising out of
such declaration, act, or omission, be permitted to falsify it. (footnotes
omitted)
We elaborated in Maneclang vs. Baun  20 :
In estoppel by  pais, as related to the party sought to be estopped, it is
necessary that there be a concurrence of the following requisites: (a) conduct
amounting to false representation or concealment of material facts or at least
calculated to convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to assert; (b)
intent, or at least expectation that this conduct shall be acted upon, or at least
influenced by the other party; and (c) knowledge, actual or constructive of the
actual facts." (citing Kalalo vs. Luz, 34 SCRA 337, 1974)
Examining the records of the case, we observe that the motion 21 adverted to indeed made
use of LIDECO as an acronym for Laureano Investment and Development Corporation. But
said motion distinctly specified that LIDECO was the shorter term for Laureano Investment
and Development Corporation. It is obvious that no false representation or concealment can
be attributed to private respondent. Neither can it be charged with conveying the impression
that the facts are other than, or inconsistent with, those which it now asserts since LIDECO,
as an acronym, is clearly different from "Lideco Corporation" which represented itself as a
corporation duly registered and organized in accordance with law. 22 Nor can it be logically
inferred that petitioner relied or acted upon such representation of private respondent in
thereafter referring to itself as "Lideco Corporation;" for petitioner is presumed to know by
which name it is registered, and the legal provisions on the use of its corporate name.
Section 1, Rule 3 of the Rules of Court provides that only natural or juridical persons or
entities authorized by law may be parties to a civil action. Under the Civil Code, a corporation
has a legal personality of its own (Article 44), and may sue or be sued in its name, in
conformity with the laws and regulations of its organization (Article 46). 23 Additionally, Article
36 of the Corporation Code similarly provides:
Art. 36. Corporate powers and capacity. — Every corporation incorporated
under this Code has the power and capacity:
1. To sue and be sued in its corporate name;
. . . (emphasis supplied)
As the trial and appellate courts have held, "Lideco Corporation" had no personality to
intervene since it had not been duly registered as a corporation. If petitioner legally and truly
wanted to intervene, it should have used its corporate name as the law requires and not
another name which it had not registered. Indeed, as the Respondent Court found, nowhere
in the motion for intervention and complaint in intervention does it appear that "Lideco
Corporation" stands for Laureano Investment and Development Corporation. Bormaheco,
Inc., thus, was not estopped from questioning the juridical personality of "Lideco Corporation,"
even after the trial court had allowed it to intervene in the case.
Granting arguendo that the name "Lideco Corporation" could be used by petitioner
corporation in its motion, there is an even more cogent reason for denying the petition. The
trial court concluded, and we have no reason to disagree, that the intervention of Lideco or
petitioner corporation was not proper because neither had any legal interest in the subject of
litigation. The evidence (tax declarations) attached to the petition for intervention and the
complaint for intervention pertained to properties not being litigated in the instant case. Lideco
and petitioner corporation both claimed to have an interest in two houses constructed in Lot
3, Block 4 in Bel Air Village, Makati. 24 The subject matter of the instant petition, on the other
hand, are Lots 4 and 5, Block 4, of Bel Air Village. This factual finding was affirmed by the
Court of Appeals.
Since the conclusion of the trial and appellate courts is based on facts, and since the SO ORDERED.
Supreme Court is not a trier of facts — our function not being to examine and evaluate the
evidence presented to the concerned tribunal which formed the basis of its questioned G.R. No. 199022, April 07, 2014
decision, resolution or order 25 — it is clear that we cannot review such holding. We note
further that petitioner has failed to show that the factual findings of the trial and appellate MAGSAYSAY MARITIME CORPORATION, Petitioner, v. OSCAR D. CHIN,
courts were arbitrary and/or constituted one of the exceptions allowing review by this Court. 26 JR., Respondent.

Bad Faith DECISION

(B)ad faith implies a conscious and intentional design to do a wrongful act for ABAD, J.:
a dishonest purpose or moral obliquity; . . . bad faith contemplates a state of
mind affirmatively operating with furtive design or ill will. 27
The Facts and the Case
Other than its bare allegations that private respondent acted in bad faith, petitioner failed to Thome Ship Management Pte. Ltd., acting through its agent petitioner Magsaysay Maritime
show that the former acted consciously and deliberately to achieve a dishonest purpose or Corporation (Magsaysay) hired respondent Oscar D. Chin, Jr. to work for nine months as able
moral obliquity, or was motivated by ill will. Rather, as discussed above, no false seaman on board MV Star Siranger.1  Chin was to receive a basic pay of US$515 per
representation was contrived nor concealment made by private respondent. Neither did it month.2 Magsaysay deployed him on July 20, 1996.
deliberately convey facts other than, or inconsistent with, what it now asserts and upon which
petitioner had relied or acted upon due to the representations of private respondent. Hence, On October 22, 1996 Chin sustained injuries while working on his job aboard the vessel.  Dr.
we hold that petitioner failed to demonstrate that private respondent acted in bad faith in filing Solan of Wilmington, North Carolina, USA, examined him on November 29, 1996 and found
its assailed second motion. him to have suffered from lumbosacral strain due to heavy lifting of pressurized machine. 
The doctor gave him medications and advised him to see an orthopedist and a cardiologist. 
Private Respondent's Issue: Chin was repatriated on November 30, 1996.

Forum Shopping On return to the Philippines, Chin underwent a surgical procedure called laminectomy and
discectomy L–4–L–5.  A year after the operation, Dr. Robert D. Lim of the Metropolitan
Private respondent, in turn, accuses petitioner and/or its chairman of the board and majority Hospital diagnosed Chin to have a moderate rigidity of his tract.
stockholder, Reynaldo Laureano, of forum shopping, alleging that both have improperly
instituted a string of cases through deliberate splitting of causes of action thereby trifling with On August 6, 1998 Chin filed a claim for disability with Pandiman Phils., Inc. which is the local
the courts and abusing their processes. agent of P & I Club of which Magsaysay Maritime is a member. Pandiman offered
US$30,000.00 as disability compensation which Chin accepted on August 6, 1998.  He then
executed a Release and Quitclaim in favor of Magsaysay Maritime.
There is forum shopping whenever, as a result of an adverse opinion in one forum, a party
seeks a favorable opinion (other than appeal or certiorari) in another, 28 raising identical
On September 29, 1998 Chin filed a complaint with the National Labor Relations Commission
causes of action, subject matter, and issues. 29 However, private respondent, other than the
(NLRC), claiming underpayment of disability benefits and attorney’s fees.  He later amended
enumeration in its motion 30 of the case number and titles, nature of the actions and decisions
his complaint to include claims for damages.
therein, failed to substantiate its allegations. It did not show convincingly that the cases
enumerated had identical causes of action, subject matter and issues. From its bare
The Labor Arbiter dismissed Chin’s complaint for lack of merit.  The NLRC affirmed the
assertions, the Court cannot intelligently make a valid finding of whether petitioner, indeed,
dismissal on May 17, 2001.  On appeal, however, the Court of Appeals (CA) reversed the
engaged in forum shopping. In any event, a ruling on this issue is not necessary to the final
dismissal and ruled that Chin was entitled to permanent total disability benefit of
resolution of the entire case.
US$60,000.00.  The CA remanded the case to the Labor Arbiter for determination of the other
monetary claims of Chin.  This prompted petitioner Magsaysay to come before this court on a
WHEREFORE, premises considered, the petition is hereby DENIED for its failure to show petition for review on certiorari.  The Court denied the petition, however, in a Resolution dated
any reversible error on the part of Respondent Court. The questioned Decision of the Court of September 8, 2003.  This Resolution became final and executory on February 23, 2004.
Appeals is AFFIRMED. Costs against petitioner.
On September 28, 2004 petitioner Magsaysay paid the deficiency award of US$30,000.00 in
full and final settlement of Chin’s disability compensation claim.  On February 26, 2007,
however, the Labor Arbiter rendered a Decision ordering it to pay Chin: a) P19,279.75 as
reimbursement for medical expenses; b) US$147,026.43 as loss of future wages; c)
P200,000.00 as moral damages; d) P75,000.00 as exemplary damages; and e) 10% of the
total award as attorney’s fees.
On November 25, 2008 the NLRC modified the Labor Arbiter’s Decision by deleting the
awards of loss of future wages and moral and exemplary damages for lack of factual and
legal bases.  On appeal, the CA reversed the NLRC’s Decision and ordered the
reinstatement of the Labor Arbiter’s Decision, hence, this petition.
The Issue Presented
The key issue in this case is whether or not the CA erred in affirming the Labor Arbiter’s
award of loss of future earnings on top of his disability benefits as well as awards of moral
and exemplary damages and attorney’s fees.
Ruling of the Court
Respondent Chin contends that the petition should be dismissed on the ground of res
judicata in that the CA’s Decision in CA–G.R. SP 67803 authorized the determination of
Chin’s other monetary claims.  The additional award to him of actual, compensatory, moral
and exemplary damages as well as attorney’s fees was a determination of those other claims.
These awards, he claims, can no longer be disturbed.
But res judicata applies to second actions involving substantially the same parties, the same
subject matter, and cause or causes of action.3  Here, there is no second action to speak of
since the subsequent awards were merely the result of a remand from the CA for the Labor
Arbiter to determine the amounts to which Chin is entitled to receive aside from the full
US$60,000.00 permanent total disability compensation.
Definitely, the Labor Arbiter’s award of loss of earning is unwarranted since Chin had already
been given disability compensation for loss of earning capacity.  An additional award for loss
of earnings will result in double recovery.  In a catena of cases,4 the Court has consistently
ruled that disability should not be understood more on its medical significance but on the loss
of earning capacity.  Permanent total disability means disablement of an employee to earn
wages in the same kind of work, or work of similar nature that he was trained for or
accustomed to perform, or any kind of work which a person of his mentality and attainment
could do.  Disability, therefore, is not synonymous with “sickness” or “illness.”  What is
compensated is one’s incapacity to work resulting in the impairment of his earning capacity.5
Moreover, the award for loss of earning lacks basis since the Philippine Overseas
Employment Agency (POEA) Standard Contract of Employment (POEA SCE), the governing
law between the parties, does not provide for such a grant.  What Section 20, paragraph (G)
of the POEA SCE provides is that payment for injury, illness, incapacity, disability, or death of
the seafarer covers “all claims arising from or in relation with or in the course of the seafarer’s
employment, including but not limited to damages arising from the contract, tort, fault or
negligence under the laws of the Philippines or any other country.”  The permanent disability
compensation of US$60,000 clearly amounts to reasonable compensation for the injuries and
loss of earning capacity of the seafarer.
In awarding damages for loss of earning capacity, the Labor Arbiter relies on the rulings
in Villa Rey Transit v. Court of Appeals 6 and Baliwag Transit, Inc. v. Court of Appeals.7  But
these cases involve essentially claims for damages arising from quasi–delict.  The present
case, on the other hand, involves a claim for disability benefits under Chin’s contract of
employment and the governing POEA set standards of recovery.  The long–standing rule is
that loss of earning is recoverable if the action is based on the quasi–delict provision of
Article 2206 of the Civil Code.8
While the Labor Arbiter can grant moral and exemplary damages, the amounts he fixed in this
case are quite excessive in the absence of evidence to prove the degree of moral suffering or
injury that Chin suffered.  It has been held that in order to arrive at a judicious approximation
of emotional or moral injury, competent and substantial proof of the suffering experienced
must be laid before the court.9  It is worthy to stress that moral damages are awarded as
compensation for actual injury suffered and not as a penalty.  The Court believes that an
award of P30,000.00 as moral damages is commensurate to the anxiety and inconvenience
that Chin suffered.
As for exemplary damages, the award of P25,000.00 is already sufficient to discourage
petitioner Magsaysay from entering into iniquitous agreements with its employees that violate
their right to collect the amounts to which they are entitled under the law.  Exemplary
damages are imposed not to enrich one party or impoverish another but to serve as a
deterrent against or as a negative incentive to curb socially deleterious actions.10
WHEREFORE, the Court PARTIALLY GRANTS the petition and AFFIRMS the February 28,
2011 Decision of the Court of Appeals and its October 11, 2011 Resolution
with MODIFICATION.  The award of loss of earning is DELETED and petitioner Magsaysay
Maritime Corporation is ORDERED to pay respondent Oscar D. Chin, Jr. P19,279.95 as
reimbursement for medical expenses, P30,000.00 as moral damages, P25,000.00 as
exemplary damages, and attorney’s fees equivalent to 10% of the total of these amounts.
SO ORDERED.
G.R. No. 184917
JESSIE M. DOROTEO (Deceased), represented by his sister, LUCIDA D.
HERMIS,, Petitioner
vs
PHILIMARE INCORPORATED, BONIFACIO GOMEZ, and/or FIL CARGO SHIPPING
CORP., Respondents
x-----------------------x
G.R. No. 184932
PHILIMARE INCORPORATED, BONIFACIO GOMEZ, and/or FIL CARGO SHIPPING
CORP., Petitioners,
vs.
JESSIE M. DOROTEO (Deceased), represented by his sister, LUCIDA D.
HERMIS, Respondent.
DECISION
SERENO, CJ.:
For resolution by this Court is a consolidated case involving Jessie M. Doroteo, now
deceased and represented by his sister, and his employer Philimare, Incorporated, a dispute
springing from Doroteo' s claims for disability and other monetary claims against
Philimare.1 G.R. No. 184917 is a petition filed by Doroteo contesting the Decision and
Resolution of the Court of Appeals (CA) dated 4 April 2008 and 9 October 2008 respectively,
that partially granted damages to Doroteo in the amount of ₱300,000 but denied all other
claims against Philimare.2 G.R. No. 184932 is a petition filed by Philimare against the same
Decision and Resolution, contesting the award of damages to Doroteo. The CA Decision and
Resolution had partly granted Doroteo's petition against the Resolutions of the National Labor
Relations Commission (NLRC) dated 28 February 20073 and 31 May 2007,4 by awarding
Doroteo damages in the amount of ₱300,000.00,5 but affirming the rulings of the NLRC and
Labor Arbiter.6
The facts of this case present a consensus of facts by both parties in respect of the most
essential incidents.
Philimare is a local manning agency that hired Doroteo as an engineer on behalf of Fil-Cargo
Shipping Corporation.7 The contract of employment was executed on 13 February 2004 for a
period of 3 months. Doroteo was assigned to the vessel M/V Tungenes on 24 February
2004.8
As the vessel passed through the coast of Spain between 25 March 2004 to 30 March 2004,
petitioner claimed that he felt the engine room's temperature rising, and he drank cold water
to cool himself.9 On 30 March 2004 in Haiti, Doroteo felt pain in his throat and took antibiotics
for five days on his own initiative to ease the pain.10 Upon arrival at the Caribbean, he
allegedly requested for a medical check-up at the hospital but was refused by the ship
master.11
On 4 April 2004, he forced the ship master to allow him a medical check-up due to worsening
pain and experiencing difficulty swallowing and breathing.12 On 26 April 2004 he claimed to
have been brought to a government hospital in Las Palmas in Europe, where he was only
given antibiotics and a pain reliever since there were no specialists to attend to his needs.13
The vessel arrived in Denmark on 2 May 2004 and he again requested for a medical check-
up.14 A biopsy was conducted due to the presence of lymph nodes in his voice box.15 On 3
May 2004, his condition deteriorated and a request for medicine with the ship master was
denied due to a lack of antibiotics.16 On 5 May 2004, Doroteo was subject to medical
repatriation on order of Philimare and he arrived in the Philippines on 16 June 2004.17
Doroteo was examined by Philimare's physician, Dr. Emmanuel Cruz of Supercare Medical
Services, Inc., on 23 June 2004, and was advised to undergo direct laryngoscopy and biopsy
with possible tracheotomy due to possible laryngeal cancer, but did not come back to the
company physician.18
Subsequently, Doroteo filed a Complaint on 3 November 2004 before the NLRC for non-
payment of sick leave pay and disability/medical benefits.19
In his Position Paper dated 23 May 2005, Doroteo claimed that the company-designated
physician refused to accord him the proper medication if he would not pay the amount of
₱200,000.20 Thus, he shouldered the cost of his major surgery which consisted of a total
laryngectomy and pectoralis major myocutaneous flap on 4 October 2004.21 On 7 October
2004, he underwent tomography at St. Luke's Medical Center which showed that he had
"laryngeal mass probably malignant."22 St. Luke's issued a medical certificate finding him
physically unfit for work.23
Philimare contested the claim, asserting that Doroteo's illness is not a compensable
occupational disease because cancer of the larynx or voice box was primarily cause by
excessive and repeated exposure to tobacco, either smoked or chewed, as well as alcohol
consumption.24 Hence, Philimare contended that the illness was not work-related and that the
disease was present even before Doroteo's employment.25 Moreover, Philimare decried
Doroteo's failure to disclose his condition as a violation of his contract and equivalent to
fraudulent misrepresentation.26
Before the resolution of the dispute, Doroteo died of cancer on 29 May 2005, and was
substituted by his sister, Lucida Heramis.27
The Labor Arbiter decided on 7 September 2005 that Doroteo's cancer was not work-related
and was a pre-existing illness.28 It cited the fact that he was in the employ of Phi Ii mare for
less than three months before he fell ill.29 Based on the evidence presented by Philimare, the
Labor Arbiter concluded that the cancer was acquired prior to Doroteo's
employment.30 Agreeing completely with Philimare, the Labor Arbiter likewise ruled that
Doroteo violated his contract when he knowingly concealed his past medical condition,
disability, and history of cancer.31 In addition, the Labor Arbiter did not believe Doroteo' s
claim that the vessel he worked in was unseaworthy and that the engine room had no air
exhaust, relying completely on the arguments and evidence presented by Philimare.32 Finally,
the Labor Arbiter rejected Dorotea's claims that he was not given immediate medical attention
and cited the medical report of the doctor in Denmark and the medical certificate of Dr. Cruz
who was the company-designated physician.33 As a result, the Labor Arbiter dismissed the
claim.34
The NLRC upheld the Labor Arbiter upon appeal and motion for reconsideration, essentially
reiterating the decision of the Labor Arbiter on the same grounds.35
Doroteo's sister appealed to the CA, which ruled that the NLRC did not commit grave abuse
of discretion when it decided that Doroteo's disease was not work-related and therefore non-
compensable.36 The appellate court noted that Doroteo's history as a heavy smoker and
drinker was established by the record, and that the medical reports presented alongside the
very short time of employment demonstrably proved that the cause of the disease was
Doroteo's smoking habit and alcohol intake.37 The CA however noted that the claims made by
Philimare as to bad faith, fraud, and concealment of a disease on the part of Doroteo was
inconsistent with the situation, since Doroteo was not a medical practitioner and could not be
expected to know what ailed him.38
However, the CA found grave abuse of discretion on the part of the NLRC when it dismissed
Doroteo's claim for damages based on the allegation that he was not given proper medical
attention.39
For the court, it was clear that there were several instances when Doroteo was refused
medical attention by the ship master, and when finally allowed to be examined, was not given
a thorough examination but merely provided pain-relief medication. 40 In fact, Philimare was
unable to provide evidence that it immediately addressed Doroteo' s health concerns, or any
explanation for the delay.41 To this the court ascribed bad faith on the part of Philimare
because of the continued refusal by the ship master to provide all the necessary assistance
to a sick person in its employ, in violation of article 161 of the Labor Code.42
Hence, for not providing immediate medical attention to Doroteo, the CA partly granted the
petition and found Philimare liable for damages in the amount of ₱300,000.00.43 It is this
Decision and its subsequent affirmation that is being contested by both Doroteo' s sister and
Philimare before this Court.
In the petition of Doroteo's sister, she argues that the CA erred when it ruled that the cancer
of Doroteo was not work-related. Specifically, she argues that the fact that Doroteo was
declared fit to work by the company-designated physician contradicted the ruling that the
disease was preexisting.44 Citing this Court's jurisprudence, she argues that every workman
brings with him certain infirmities in health, and that the employer - while not the insurer of the
employee's health - assumes the risk of having an employee with a weakened condition
aggravate his injury during employment that would not have bothered a perfectly normal,
healthy person.45
Moreover given the uncertainty as to the cause of cancer even by the standards of medical
science, it would be unfair for the courts to require that an employee prove that the disease
was caused by or aggravated by the conditions of employment. 46 She also cites United States
jurisprudence to the effect that throat cancer is compensable for a fire-fighter who is exposed
to heavy smoke, gases, and fumes,47 and further argues that occupational or industrial
diseases could be procured even within a short time.48
Finally, Doroteo's sister argues that assuming the cancer was preexisting, the requirement of
the law for compensability is that the disease was aggravated by working conditions such that
its presence was work-related.49 In support of this, she cited the American doctrine of "last
injurious exposure," which allegedly assigns liability to the last employer whose conditions
last contributed to the totality of the disease.50 She also disputed the statements of the CA
and NLRC that alluded to Doroteo's smoking habit as the cause of his cancer, stating that
there are several risk factors involved and that creating that presumption violated the
constitutional mandate to protect labor.51
In response, Philimare reiterates its arguments before the CA: that throat cancer is not listed
in the occupational diseases clause in the Philippine Overseas Employment Administration
standard contract,52 that the additional conditions for diseases not listed to be compensable
were not satisfied,53 and that there was no reasonable proof that the work of Doroteo
increased his risk of contracting throat cancer.54
In sum, the case will live or die upon one question: did the work of Doroteo for Philimare
result in or aggravate the throat cancer of which he died?
It appears that both parties are well aware of this crucial issue, and have presented their own
evidence in support of their conclusions:
Doroteo's evidence explicitly states that working in an engine room exposes the worker to
harmful conditions, including but not limited to chemical exposure and heat. Apart from this is
the allegation that the engine room had poor exhaust which increased the heat therein, and
most importantly the constant refusal of Philimare's ship master to allow Doroteo medical
attention.
Philimare's evidence is broader and lists the risk factors for throat cancer: genetics, age,
tobacco use, and alcohol consumption. It also relies on the diagnosis of the physician in
Denmark that the cancer most likely existed for more than 3 months prior to the time of the
check-up, such that it was a pre-existing illness. Contending with Doroteo's claims about the
engine room, it presented a ship assessment that listed the engine room as compliant with
safety standards.
To be sure, this Court has held that a worker brings with him possible infirmities in the course
of his employment, and while the employer does not insure the health of the employees, he
takes the employee as found and assumes the risk of liability.55 However, claimants in
compensation proceedings must show credible information that there is probably a relation
between the illness and the work.56 They cannot rely on the fact that the employer's
designated physician had declared the employee fit pursuant to the pre-employment medical
examination (PEME), since the PEME cannot be a conclusive proof that the seafarer was
free from any ailment - and specifically for cancer - prior to his deployment.57
The PEME is not exploratory in nature. It is not intended to be a totally in-depth and thorough
examination of an applicant's medical condition. It merely determines whether one is "fit to
work" at sea or "fit for sea service"; it does not state the real state of health of an applicant.
Thus, we held in NYK-FIL Ship Management, Inc. v. NLRC as follows:
While a PEME may reveal enough for the petitioner (vessel) to decide whether a seafarer is
fit for overseas employment, it may not be relied upon to inform petitioners of a seafarer's true
state of health. The PEME could not have divulged respondent's illness considering that the
examinations were not exploratory.58
Cancer is an especially difficult illness to predict. Despite increased knowledge on risk
factors, its causality is not determinable with any degree of certainty:
In Raro v. Employees' Compensation Commission,  we stated that medical science cannot, as
yet, positively identify the causes of various types of cancer. It is a disease that strikes people
in general. The nature of a person's employment appears to have no relevance. Cancer can
strike a lowly paid laborer, or a highly paid executive, or one who works on land, in water, or
in the bowels of the earth. It makes no difference whether the victim is employed or
unemployed, a white collar employee or a blue collar worker, a housekeeper, an urban
dweller or the resident of a rural area.
By way of exception, ce1iain cancers have reasonably been traced to or considered as
strongly induced by specific causes. For example, heavy doses of radiation (as in Chernobyl,
USSR), cigarette smoke over a long period for lung cancer, certain chemicals for specific
cancers, and asbestos dust, among others, are generally accepted as increasing the risks of
contracting specific cancers. In the absence of such clear and established empirical
evidence, the law requires proof of causation or aggravation.59 (Emphasis supplied)
As the aforementioned case states, there is strong evidence linking specific circumstances
with specific cancers. In this case, however, there seems to be a no clarity. To recall, the
cancer Doroteo succumbed to was throat or laryngeal cancer and not lung cancer, which is
the cancer more commonly associated with heavy cigarette use. In the same vein, there was
no definitive proof presented that the engine room of the M/V Tungenes had unreasonable
amounts of carcinogenic chemicals, nor the presence of asbestos dust without proper safety
equipment apart from the allegations made by Doroteo in the pleadings. In other words, the
evidence of both sides lack the substance required to establish their respective claims.
In Sealanes Marine Services, Inc. v. National Labor Relations Commission, we noted that
under the 1996 POEA standard contract, proof that the working conditions increased the risk
of a disease is not required for a seaman to claim the benefits under his employment contract
for the illness acquired by seamen during the course of their employment.60 Subsequently,
the 2000 POEA standard contract was created which specifically required work-relation as a
condition for compensation:
Under Sec. 20(b), paragraph 6, of the 2000 POEA Amended Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels, viz.:
SEC. 20. Compensation and Benefits. -
xxxx
B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related injury or illness during
the term of his contract are as follows:
xxxx
6. In case of permanent total or partial disability of the seafarer caused by either injury or
illness the seafarer shall be compensated in accordance with the schedule of benefits
enumerated in Section 32 of this Contract. Computation of his benefits arising from an illness
or disease shall be governed by the rates and the rules of compensation applicable at the
time the illness or disease was contracted.
Evident from the afore-quoted provision is that the permanent total or partial disability
suffered by a seafarer during the term of his contract must be caused by work-related illness
or injury. In other words, to be entitled to compensation and benefits under said provision, it is
not sufficient to establish that the seafarer's illness or injury has rendered him permanently or
partially disabled, but it must also be shown that there is a causal connection between the
seafarer's illness or injury and the work for which he had been contracted for. 61 (Emphases
supplied)
This is consistent with the logic behind the court's interpretation of the 1996 POEA standard
contract, hence several decisions denying compensability due to the illness proving to be pre-
existing.62 The prevailing rule under the 1996 POEA-SEC was that the illness leading to the
eventual death of seafarer need not be shown to be work-related in order to be compensable,
but must be proven to have been contracted during the term of the contract and not pre-
existing.63 The evolution of this rule for the 2000 POEA-SEC is that the illness is further
required to be work-related, work-caused, or work-aggravated.64
Therefore the evidence presents more questions than answers as to what caused Doroteo's
throat cancer. Doroteo claims that the engine room was akin to a "gas chamber"65 but did not
give proof other than a generalized opinion about the risks present in engine
rooms.66 Philimare claims that the ship was given safety and health clearances, but submitted
a certificate well past the date of Doroteo' s employment. 67 Doroteo claims that he was
exposed to noxious chemicals, but fails to substantiate this claim.68 Philimare claims that
Doroteo was a heavy tobacco and alcohol user, but fails to link its evidence to the specific
cancer involved.69 Doroteo presents opinions that allege the possibility of short-term
acquisition of cancer.70 Philimare presents a physician's diagnosis that the cancer seemed to
have already existed more than 3 months prior to the examination.71
What these arguments show is that there is no clear nexus between the disease Doroteo
acquired and the working conditions he encountered. Therefore, the disputable presumption
of work-relation cannot be applied, since based on the evidence presented the Court cannot
reasonably conclude that his work as an engineer in the engine room led to Doroteo's throat
cancer.
We are not experts in the field of medicine and disease and have stated as much previously
in Jebsen Maritime, Inc. v. Ravena, as follows:
As a final word and a cautionary clarification, we do not here rule with absolute precision on
the non-causing, non-aggravating, or noncontributing effect that any or all
substances/chemicals and a processed-and- red-meat-rich diet may have on ampullary
cancer. We are not experts on the matter and we recognize the considerable degree of
uncertainty inherent in the field of medicine and its study. Our ruling on this petition should,
therefore, be understood strictly in the light of and limited to the surrounding circumstances of
this case.
Stated differently, we declare that Ravena's ampullary cancer is not work-related, and
therefore not compensable, because he failed to prove, by substantial evidence, its work-
relatedness and his compliance with the parameters that the law had precisely set out in
disability benefits claim. For, while we adhere to the principle of liberality in favour of the
seafarer in construing the POEA-SEC, we cannot allow claims for disability compensation
based on surmises. Liberal construction is never a license to disregard the evidence on
record and to misapply the law.72
In as much as we condole with the family of Doroteo, the CA correctly denied his claims that
his throat cancer was work-related or work-aggravated, and thus compensable.1âwphi1
However, the CA is equally correct in finding gross negligence on the part of Philimare.
Philimare failed to rebut the allegation made by Doroteo that on several instances, he was
refused medical attention by the ship master.73 In contention thereto, Philimare makes a
simple assertion that it had allowed him a medical check-up in Denmark, and repatriated him
to the Philippines to be checked by its physician, but did not specifically deny the accusation
that the ship master had refused him treatment.74 In fact, Philimare also failed to rebut
Doroteo's claim that the physician asked him for ₱200,000.00 prior to rendering
treatment.75 The disregard shown by Philimare to Doroteo was uncontroverted.
Understandably upset, he instead went to a different physician in St. Luke's Medical Center
and underwent treatment there, which ultimately failed to save him from the ravages of
cancer.76 In sum, Philimare did not extend any help to its dying seaman both in the immediate
time of need while he was still under its employ, and in the throes of his final moments. This
is a clear case of gross negligence, tantamount to bad faith.
On this basis, the CA awarded moral damages to Doroteo. From the appellate court's
appreciation of the established facts, Philimare clearly violated the provisions of the Labor
Code, as well as the civil code provisions on the exercise of rights in good faith with proper
legal reasoning.77
To this we strongly agree. Neglecting employee's immediate medical requirements has a
legal consequence.78 Hence the award of moral damages, as in the following case:
We affirm the appellate court's finding that petitioners are guilty of negligence in failing to
provide immediate medical attention to private respondent. It has been sufficiently
established that, while the M/V T.A. VOYAGER was docked at the port of New Zealand,
private respondent was taken ill, causing him to lose his memory and rendering him
incapable of performing his work as radio officer of the vessel. The crew immediately notified
the master of the vessel of private respondent's worsening condition. However, instead of
disembarking private respondent so that he may receive immediate medical attention at a
hospital in New Zealand or at a nearby port, the master of the vessel proceeded with the
voyage, in total disregard of the urgency of private respondent's condition. Private respondent
was kept on board without any medical attention whatsoever for the entire duration of the trip
from New Zealand to the Philippines, a voyage of ten days. To make matters worse, when
the vessel finally arrived in Manila, petitioners failed to directly disembark private respondent
for immediate hospitalization. Private respondent was made to suffer a wait of several more
hours until a vacant slot was available at the pier for the vessel to dock. It was only upon the
insistence of private respondent's relatives that petitioners were compelled to disembark
private respondent and finally commit him to a hospital. There is no doubt that the failure of
petitioners to provide private respondent with the necessary medical care caused the rapid
deterioration and inevitable worsening of the latter's condition, which eventually resulted in his
sustaining a permanent disability.79
Moreover, exemplary damages are also proper.80 In the same case, we awarded exemplary
damages to the employee whose treatment was delayed by the ship captain without a valid
ground:
Meanwhile, exemplary damages are imposed by way of example or correction for the public
good, pursuant to Article 2229 of the Civil Code. They are imposed not to enrich one party or
impoverish another but to serve as a deterrent against or as a negative incentive to curb
socially deleterious actions. While exemplary damages cannot be recovered as a matter of
right, they need not be proved, although plaintiff must show that he is entitled to moral,
temperate, or compensatory damages before the court may consider the question of whether
or not exemplary damages should be awarded. In quasi-delicts, exemplary damages may be
granted if the defendant acted with gross negligence.81
Thus, apart from the CA's grant of moral damages in the amount of ₱300,000.00, we deem it
apt to award exemplary damages in the amount of ₱l00,000.00. In furtherance thereof, we
also grant attorney's fees valued at 10% of the total monetary award in favor of Doroteo's
heirs.82
WHEREFORE, the petition in G.R. No. 184932 is DENIED. The petition in G.R. No. 184917
is PARTLY GRANTED. Respondents Philimare, Inc., Bonifacio F. Gomez, and Fil Cargo
Shipping Corp. are declared LIABLE for MORAL DAMAGES in the amount of THREE
HUNDRED THOUSAND PESOS (₱300,000.00), EXEMPLARY DAMAGES in the amount
of ONE HUNDRED THOUSAND PESOS (₱l00,000.00), and 10% of the total monetary
award in ATTORNEY'S FEES, and DIRECTED to pay the heirs of petitioner Jessie M.
Doroteo the total amount immediately.
SO ORDERED.
G.R. No. 175587               September 21, 2007
PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner,
vs.
JOSEPH ANTHONY M. ALEJANDRO, Respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the May 31, 2006 Decision 1 of the Court of Appeals in CA-G.R.
CV No. 78200 affirming the August 30, 2000 Decision 2 of the Regional Trial Court of Makati,
which granted respondent Joseph Anthony M. Alejandro’s claim for damages arising from
petitioner Philippine Commercial International Bank’s (PCIB) invalid garnishment of
respondent’s deposits.
On October 23, 1997, petitioner filed against respondent a complaint3 for sum of money with
prayer for the issuance of a writ of preliminary attachment. Said complaint alleged that on
September 10, 1997, respondent, a resident of Hong Kong, executed in favor of petitioner a
promissory note obligating himself to pay ₱249,828,588.90 plus interest. In view of the
fluctuations in the foreign exchange rates which resulted in the insufficiency of the deposits
assigned by respondent as security for the loan, petitioner requested the latter to put up
additional security for the loan. Respondent, however, sought a reconsideration of said
request pointing out petitioner’s alleged mishandling of his account due to its failure to carry
out his instruction to close his account as early as April 1997, when the prevailing rate of
exchange of the US Dollar to Japanese yen was US$1.00:JPY127.50. 4 It appears that the
amount of ₱249,828,588.90 was the consolidated amount of a series of yen loans granted by
petitioner to respondent during the months of February and April 1997.5
In praying for the issuance of a writ of preliminary attachment under Section 1 paragraphs (e)
and (f) of Rule 57 of the Rules of Court, petitioner alleged that (1) respondent fraudulently
withdrew his unassigned deposits notwithstanding his verbal promise to PCIB Assistant Vice
President Corazon B. Nepomuceno not to withdraw the same prior to their assignment as
security for the loan; and (2) that respondent is not a resident of the Philippines. The
application for the issuance of a writ was supported with the affidavit of Nepomuceno.6
On October 24, 1997, the trial court granted the application and issued the writ ex parte 7 after
petitioner posted a bond in the amount of ₱18,798,734.69, issued by Prudential Guarantee &
Assurance Inc., under Bond No. HO-46764-97. On the same date, the bank deposits of
respondent with Rizal Commercial Banking Corporation (RCBC) were garnished. On October
27, 1997, respondent, through counsel, filed a manifestation informing the court that he is
voluntarily submitting to its jurisdiction.8
Subsequently, respondent filed a motion to quash9 the writ contending that the withdrawal of
his unassigned deposits was not fraudulent as it was approved by petitioner. He also alleged
that petitioner knew that he maintains a permanent residence at Calle Victoria, Ciudad
Regina, Batasan Hills, Quezon City, and an office address in Makati City at the Law Firm
Romulo Mabanta Buenaventura Sayoc & De los Angeles, 10 where he is a partner. In both
addresses, petitioner regularly communicated with him through its representatives.
Respondent added that he is the managing partner of the Hong Kong branch of said Law
Firm; that his stay in Hong Kong is only temporary; and that he frequently travels back to the
Philippines.
On December 24, 1997, the trial court issued an order quashing the writ and holding that the
withdrawal of respondent’s unassigned deposits was not intended to defraud petitioner. It
also found that the representatives of petitioner personally transacted with respondent
through his home address in Quezon City and/or his office in Makati City. It thus concluded
that petitioner misrepresented and suppressed the facts regarding respondent’s residence
considering that it has personal and official knowledge that for purposes of service of
summons, respondent’s residence and office addresses are located in the Philippines. The
dispositive portion of the court’s decision is as follows:
WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby GRANTED,
and the ORDER of 24 October 1997 is hereby RECONSIDERED and SET ASIDE and the
WRIT OF attachment of the same is hereby DISCHARGED.
SO ORDERED.11
With the denial12 of petitioner’s motion for reconsideration, it elevated the case to the Court of
Appeals (CA-G.R. SP No. 50748) via a petition for certiorari. On May 10, 1999, the petition
was dismissed for failure to prove that the trial court abused its discretion in issuing the
aforesaid order.13 Petitioner filed a motion for reconsideration but was denied on October 28,
1999.14 On petition with this Court, the case was dismissed for late filing in a minute
resolution (G.R. No. 140605) dated January 19, 2000. 15 Petitioner filed a motion for
reconsideration but was likewise denied with finality on March 6, 2000.16
Meanwhile, on May 20, 1998, respondent filed a claim for damages in the amount of P25
Million17 on the attachment bond (posted by Prudential Guarantee & Assurance, Inc., under
JCL(4) No. 01081, Bond No. HO-46764-97) on account of the wrongful garnishment of his
deposits. He presented evidence showing that his ₱150,000.00 RCBC check payable to his
counsel as attorney’s fees, was dishonored by reason of the garnishment of his deposits. He
also testified that he is a graduate of the Ateneo de Manila University in 1982 with a double
degree of Economics and Management Engineering and of the University of the Philippines in
1987 with the degree of Bachelor of Laws. Respondent likewise presented witnesses to prove
that he is a well known lawyer in the business community both in the Philippines and in Hong
Kong.18 For its part, the lone witness presented by petitioner was Nepomuceno who claimed
that she acted in good faith in alleging that respondent is a resident of Hong Kong.19
On August 30, 2000, the trial court awarded damages to respondent in the amount of P25
Million without specifying the basis thereof, thus:
WHEREFORE, premises above considered, and defendant having duly established his claim
in the amount of ₱25,000,000.00, judgment is hereby rendered ordering Prudential
Guarantee & [Assurance] Co., which is solidarily liable with plaintiff to pay defendant the full
amount of bond under Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081, [Bond No.
HO-46764-97], dated 24 October 1997 in the amount of ₱18,798,734.69. And, considering
that the amount of the bond is insufficient to fully satisfy the award for damages, plaintiff is
hereby ordered to pay defendant the amount of ₱6,201,265.31.
SO ORDERED.20
The trial court denied petitioner’s motion for reconsideration on October 24, 2000.21
Petitioner elevated the case to the Court of Appeals which affirmed the findings of the trial
court. It held that in claiming that respondent was not a resident of the Philippines, petitioner
cannot be said to have been in good faith considering that its knowledge of respondent’s
Philippine residence and office address goes into the very issue of the trial court’s jurisdiction
which would have been defective had respondent not voluntarily appeared before it.
The Court of Appeals, however, reduced the amount of damages awarded to petitioner and
specified their basis. The dispositive portion of the decision of the Court of Appeals states:
WHEREFORE, the appeal is PARTIALLY GRANTED and the decision appealed from is
hereby MODIFIED. The award of damages in the amount of ₱25,000,000.00 is deleted. In
lieu thereof, Prudential Guarantee & [Assurance, Inc.], which is solidarily liable with appellant
[herein petitioner], is ORDERED to pay appellee [herein respondent] ₱2,000,000.00 as
nominal damages; ₱5,000,000.00 as moral damages; and ₱1,000,000.00 as attorney’s fees,
to be satisfied against the attachment bond under Prudential Guarantee & Assurance, Inc.
JCL (4) No. 01081.
SO ORDERED.22
Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals denied
petitioner’s motion for reconsideration but granted that of respondent’s by ordering petitioner
to pay additional ₱5Million as exemplary damages.23
Hence, the instant petition.
At the outset, it must be noted that the ruling of the trial court that petitioner is not entitled to a
writ of attachment because respondent is a resident of the Philippines and that his act of
withdrawing his deposits with petitioner was without intent to defraud, can no longer be
passed upon by this Court. More importantly, the conclusions of the court that petitioner bank
misrepresented that respondent was residing out of the Philippines and suppressed the fact
that respondent has a permanent residence in Metro Manila where he may be served with
summons, are now beyond the power of this Court to review having been the subject of a
final and executory order. Said findings were sustained by the Court of Appeals in CA-G.R.
SP No. 50784 and by this Court in G.R. No. 140605. The rule on conclusiveness of judgment,
which obtains under the premises, precludes the relitigation of a particular fact or issue in
another action between the same parties even if based on a different claim or cause of
action. The judgment in the prior action operates as estoppel as to those matters in issue or
points controverted, upon the determination of which the finding or judgment was rendered.
The previous judgment is conclusive in the second case, as to those matters actually and
directly controverted and determined.24 Hence, the issues of misrepresentation by petitioner
and the residence of respondent for purposes of service of summons can no longer be
questioned by petitioner in this case.
The core issue for resolution is whether petitioner bank is liable for damages for the improper
issuance of the writ of attachment against respondent.
We rule in the affirmative.
Notwithstanding the final judgment that petitioner is guilty of misrepresentation and
suppression of a material fact, the latter contends that it acted in good faith. Petitioner also
contends that even if respondent is considered a resident of the Philippines, attachment is
still proper under Section 1, paragraph (f), Rule 57 of the Rules of Court since he
(respondent) is a resident who is temporarily out of the Philippines upon whom service of
summons may be effected by publication.
Petitioner’s contentions are without merit.
While the final order of the trial court which quashed the writ did not categorically use the
word "bad faith" in characterizing the representations of petitioner, the tenor of said order
evidently considers the latter to have acted in bad faith by resorting to a deliberate strategy to
mislead the court. Thus –
In the hearings of the motion, and oral arguments of counsels before the Court, it appears
that plaintiff BANK through its contracting officers Vice President Corazon B. Nepomuceno
and Executive Vice President Jose Ramon F. Revilla, personally transacted with defendant
mainly through defendant’s permanent residence in METRO-MANILA, either in defendant’s
home address in Quezon City or his main business address at the Romulo Mabanta
Buenaventura Sayoc & Delos Angeles in MAKATI and while at times follow ups were made
through defendant’s temporary home and business addresses in Hongkong. It is therefore
clear that plaintiff could not deny their personal and official knowledge that defendant’s
permanent and official residence for purposes of service of summons is in the Philippines. In
fact, this finding is further confirmed by the letter of Mr. JOHN GOKONGWEI, JR. Chairman,
Executive Committee of plaintiff BANK, in his letter dated 6 October 1997 on the subject loan
to defendant of the same law firm was addressed to the ROMULO LAW FIRM in MAKATI.
[Anent the] second ground of attachment x x x [t]he Court finds that the amount withdrawn
was not part of defendant’s peso deposits assigned with the bank to secure the loan and as
proof that the withdrawal was not intended to defraud plaintiff as creditor is that plaintiff
approved and allowed said withdrawals. It is even noted that when the Court granted the
prayer for attachment it was mainly on the first ground under Section 1(f) of Rule 57 of the
1997 Rules of Civil Procedure, that defendant resides out of the Philippines.
On the above findings, it is obvious that plaintiff already knew from the beginning the
deficiency of its second ground for attachment [i.e.,] disposing properties with intent to
defraud his creditors, and therefore plaintiff had to resort to this misrepresentation that
defendant was residing out of the Philippines and suppressed the fact that defendant’s
permanent residence is in METRO MANILA where he could be served with summons.
On the above findings, and mainly on the misrepresentations made by plaintiff on the grounds
for the issuance of the attachment in the verified complaint, the Court concludes that
defendant has duly proven its grounds in the MOTION and that plaintiff is not entitled to the
attachment.25
Petitioner is therefore barred by the principle of conclusiveness of judgment from again
invoking good faith in the application for the issuance of the writ. Similarly, in the case
of Hanil Development Co., Ltd. v. Court of Appeals,26 the Court debunked the claim of good
faith by a party who maliciously sought the issuance of a writ of attachment, the bad faith of
said party having been previously determined in a final decision which voided the assailed
writ. Thus –
Apropos the Application for Judgment on the Attachment Bond, Escobar claims in its petition
that the award of attorney’s fees and injunction bond premium in favor of Hanil is [contrary] to
law and jurisprudence. It contends that no malice or bad faith may be imputed to it in
procuring the writ.
Escobar’s protestation is now too late in the day. The question of the illegality of the
attachment and Escobar’s bad faith in obtaining it has long been settled in one of the earlier
incidents of this case. The Court of Appeals, in its decision rendered on February 3, 1983 in
C.A.-G.R. No. SP-14512, voided the challenged writ, having been issued with grave abuse of
discretion. Escobar’s bad faith in procuring the writ cannot be doubted. Its Petition for the
Issuance of Preliminary Attachment made such damning allegations that: Hanil was already
able to secure a complete release of its final collection from the MPWH; it has moved out
some of its heavy equipments for unknown destination, and it may leave the country anytime.
Worse, its Ex Parte  Motion to Resolve Petition alleged that "after personal verification by
(Escobar) of (Hanil’s) equipment in Cagayan de Oro City, it appears that the equipments
were no longer existing from their compound." All these allegations of Escobar were found to
be totally baseless and untrue.
Even assuming that the trial court did not make a categorical pronouncement of
misrepresentation and suppression of material facts on the part of petitioner, the factual
backdrop of this case does not support petitioner’s claim of good faith. The facts and
circumstances omitted are highly material and relevant to the grant or denial of writ of
attachment applied for.
Finally, there is no merit in petitioner’s contention that respondent can be considered a
resident who is temporarily out of the Philippines upon whom service of summons may be
effected by publication, and therefore qualifies as among those against whom a writ of
attachment may be issued under Section 1, paragraph (f), Rule 57 of the Rules of Court
which provides:
(f) In an action against a party x x x on whom summons may be served by publication.
In so arguing, petitioner attempts to give the impression that although it erroneously invoked
the ground that respondent does not reside in the Philippines, it should not be made to pay
damages because it is in fact entitled to a writ of attachment had it invoked the proper ground
under Rule 57. However, even on this alternative ground, petitioner is still not entitled to the
issuance of a writ of attachment.
The circumstances under which a writ of preliminary attachment may be issued are set forth
in Section 1, Rule 57 of the Rules of Court, to wit:
SEC. 1. Grounds upon which attachment may issue. — At the commencement of the action
or at any time before entry of judgment, a plaintiff or any proper party may have the property
of the adverse party attached as security for the satisfaction of any judgment that may be
recovered in the following cases:
 (a) In an action for the recovery of a specified amount of money or damages, other
than moral and exemplary, on a cause of action arising from law, contract, quasi-
contract, delict or quasi-delict against a party who is about to depart from the
Philippines with intent to defraud his creditors;
(b) In an action for money or property embezzled or fraudulently misapplied or
converted to his own use by a public officer, or an officer of a corporation or an
attorney, factor, broker, agent, or clerk, in the course of his employment as such, or
by any other person in a fiduciary capacity, or for a willful violation of duty;
(c) In an action to recover the possession of personal property unjustly or fraudulently
taken, detained, or converted, when the property, or any part thereof, has been
concealed, removed, or disposed of to prevent its being found or taken by the
applicant or an authorized person;
(d) In an action against a party who has been guilty of a fraud in contracting the debt
or incurring the obligation upon which the action is brought, or in the performance
thereof;
(e) In an action against a party who has removed or disposed of his property, or is
about to do so, with intent to defraud his creditors;
(f) In an action against a party who resides out of the Philippines, or on whom
summons may be served by publication.
The purposes of preliminary attachment are: (1) to seize the property of the debtor in
advance of final judgment and to hold it for purposes of satisfying said judgment, as in the
grounds stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or (2) to
acquire jurisdiction over the action by actual or constructive seizure of the property in those
instances where personal or substituted service of summons on the defendant cannot be
effected, as in paragraph (f) of the same provision.27
Corollarily, in actions in personam, such as the instant case for collection of sum of
money,28 summons must be served by personal or substituted service, otherwise the court
will not acquire jurisdiction over the defendant. In case the defendant does not reside and is
not found in the Philippines (and hence personal and substituted service cannot be effected),
the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is to
convert the action into a proceeding in rem or quasi in rem by attaching the property of the
defendant.29 Thus, in order to acquire jurisdiction in actions in personam where defendant
resides out of and is not found in the Philippines, it becomes a matter of course for the court
to convert the action into a proceeding in rem or quasi in rem by attaching the defendant’s
property. The service of summons in this case (which may be by publication coupled with the
sending by registered mail of the copy of the summons and the court order to the last known
address of the defendant), is no longer for the purpose of acquiring jurisdiction but for
compliance with the requirements of due process.30
However, where the defendant is a resident who is temporarily out of the Philippines,
attachment of his/her property in an action in personam, is not always necessary in order for
the court to acquire jurisdiction to hear the case.
Section 16, Rule 14 of the Rules of Court reads:
Sec. 16. Residents temporarily out of the Philippines. – When an action is commenced
against a defendant who ordinarily resides within the Philippines, but who is temporarily out of
it, service may, by leave of court, be also effected out of the Philippines, as under the
preceding section.
The preceding section referred to in the above provision is Section 15 which provides for
extraterritorial service – (a) personal service out of the Philippines, (b) publication coupled
with the sending by registered mail of the copy of the summons and the court order to the last
known address of the defendant; or (c) in any other manner which the court may deem
sufficient.
In Montalban v. Maximo,31 however, the Court held that substituted service of summons
(under the present Section 7, Rule 14 of the Rules of Court) is the normal mode of service of
summons that will confer jurisdiction on the court over the person of residents temporarily out
of the Philippines. Meaning, service of summons may be effected by (a) leaving copies of the
summons at the defendant’s residence with some person of suitable discretion residing
therein, or (b) by leaving copies at the defendant’s office or regular place of business with
some competent person in charge thereof.32 Hence, the court may acquire jurisdiction over an
action in personam by mere substituted service without need of attaching the property of the
defendant.
The rationale in providing for substituted service as the normal mode of service for residents
temporarily out of the Philippines, was expounded in Montalban v. Maximo,33 in this wise:
A man temporarily absent from this country leaves a definite place of residence, a dwelling
where he lives, a local base, so to speak, to which any inquiry about him may be directed and
where he is bound to return. Where one temporarily absents himself, he leaves his affairs in
the hands of one who may be reasonably expected to act in his place and stead; to do all that
is necessary to protect his interests; and to communicate with him from time to time any
incident of importance that may affect him or his business or his affairs. It is usual for such a
man to leave at his home or with his business associates information as to where he may be
contacted in the event a question that affects him crops up.
Thus, in actions in personam against residents temporarily out of the Philippines, the court
need not always attach the defendant’s property in order to have authority to try the case.
Where the plaintiff seeks to attach the defendant’s property and to resort to the concomitant
service of summons by publication, the same must be with prior leave, precisely because, if
the sole purpose of the attachment is for the court to acquire jurisdiction, the latter must
determine whether from the allegations in the complaint, substituted service (to persons of
suitable discretion at the defendant’s residence or to a competent person in charge of his
office or regular place of business) will suffice, or whether there is a need to attach the
property of the defendant and resort to service of summons by publication in order for the
court to acquire jurisdiction over the case and to comply with the requirements of due
process.
In the instant case, it must be stressed that the writ was issued by the trial court mainly on the
representation of petitioner that respondent is not a resident of the Philippines.34 Obviously,
the trial court’s issuance of the writ was for the sole purpose of acquiring jurisdiction to hear
and decide the case. Had the allegations in the complaint disclosed that respondent has a
residence in Quezon City and an office in Makati City, the trial court, if only for the purpose of
acquiring jurisdiction, could have served summons by substituted service on the said
addresses, instead of attaching the property of the defendant. The rules on the application of
a writ of attachment must be strictly construed in favor of the defendant. For attachment is
harsh, extraordinary, and summary in nature; it is a rigorous remedy which exposes the
debtor to humiliation and annoyance.35 It should be resorted to only when necessary and as a
last remedy.
It is clear from the foregoing that even on the allegation that respondent is a resident
temporarily out of the Philippines, petitioner is still not entitled to a writ of attachment because
the trial court could acquire jurisdiction over the case by substituted service instead of
attaching the property of the defendant. The misrepresentation of petitioner that respondent
does not reside in the Philippines and its omission of his local addresses was thus a
deliberate move to ensure that the application for the writ will be granted.
In light of the foregoing, the Court of Appeals properly sustained the finding of the trial court
that petitioner is liable for damages for the wrongful issuance of a writ of attachment against
respondent.
Anent the actual damages, the Court of Appeals is correct in not awarding the same
inasmuch as the respondent failed to establish the amount garnished by petitioner. It is a well
settled rule that one who has been injured by a wrongful attachment can recover damages for
the actual loss resulting therefrom. But for such losses to be recoverable, they must
constitute actual damages duly established by competent proofs, which are, however,
wanting in the present case.36
Nevertheless, nominal damages may be awarded to a plaintiff whose right has been violated
or invaded by the defendant, for the purpose of vindicating or recognizing that right, and not
for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose
of indemnification for a loss but for the recognition and vindication of a right. Indeed, nominal
damages are damages in name only and not in fact. 37 They are recoverable where some
injury has been done but the pecuniary value of the damage is not shown by evidence and
are thus subject to the discretion of the court according to the circumstances of the case.38
In this case, the award of nominal damages is proper considering that the right of respondent
to use his money has been violated by its garnishment. The amount of nominal damages
must, however, be reduced from ₱2 million to ₱50,000.00 considering the short period of 2
months during which the writ was in effect as well as the lack of evidence as to the amount
garnished.1âwphi1
Likewise, the award of attorney’s fees is proper when a party is compelled to incur expenses
to lift a wrongfully issued writ of attachment. The basis of the award thereof is also the
amount of money garnished, and the length of time respondents have been deprived of the
use of their money by reason of the wrongful attachment. 39 It may also be based upon (1) the
amount and the character of the services rendered; (2) the labor, time and trouble involved;
(3) the nature and importance of the litigation and business in which the services were
rendered; (4) the responsibility imposed; (5) the amount of money and the value of the
property affected by the controversy or involved in the employment; (6) the skill and the
experience called for in the performance of the services; (7) the professional character and
the social standing of the attorney; (8) the results secured, it being a recognized rule that an
attorney may properly charge a much larger fee when it is contingent than when it is not.40
All the aforementioned weighed, and considering the short period of time it took to have the
writ lifted, the favorable decisions of the courts below, the absence of evidence as to the
professional character and the social standing of the attorney handling the case and the
amount garnished, the award of attorney’s fees should be fixed not at ₱1 Million, but only at
₱200,000.00.
The courts below correctly awarded moral damages on account of petitioner’s
misrepresentation and bad faith; however, we find the award in the amount of ₱5 Million
excessive. Moral damages are to be fixed upon the discretion of the court taking into
consideration the educational, social and financial standing of the parties.41 Moral damages
are not intended to enrich a complainant at the expense of a defendant. 42 They are awarded
only to enable the injured party to obtain means, diversion or amusements that will serve to
obviate the moral suffering he has undergone, by reason of petitioner’s culpable action. Moral
damages must be commensurate with the loss or injury suffered. Hence, the award of moral
damages is reduced to ₱500,000.00.
Considering petitioner’s bad faith in securing the writ of attachment, we sustain the award of
exemplary damages by way of example or correction for public good. This should deter
parties in litigations from resorting to baseless and preposterous allegations to obtain writs of
attachments. While as a general rule, the liability on the attachment bond is limited to actual
(or in some cases, temperate or nominal) damages, exemplary damages may be recovered
where the attachment was established to be maliciously sued out.43 Nevertheless, the award
of exemplary damages in this case should be reduced from ₱5M to ₱500,000.00.
Finally, contrary to the claim of petitioner, the instant case for damages by reason of the On March 24, 2004, an article entitled "Malinis ba talaga o naglilinis-linisan lang (Sino si
invalid issuance of the writ, survives the dismissal of the main case for sum of money. Suffice Finance Sec. Juanita Amatong?)"5 was published in Abante Tonite, a newspaper of general
it to state that the claim for damages arising from such wrongful attachment may arise and be circulation in the Philippines.6
decided separately from the merits of the main action.44
Written by Raffy T. Tulfo (Tulfo), the article reported that a certain Michael C. Guy (Guy), who
WHEREFORE, the petition is PARTIALLY GRANTED. The May 31, 2006 Decision of the was then being investigated by the Revenue Integrity Protection Service of the Department of
Court of Appeals in CA-G.R. CV No. 78200 is AFFIRMED with MODIFICATIONS. As Finance for tax fraud, went to former Department of Finance Secretary Juanita Amatong
modified, petitioner Philippine Commercial International Bank is ordered to pay respondent (Secretary Amatong)'s house to ask for help.7 Secretary Amatong then purportedly called the
Joseph Anthony M. Alejandro the following amounts: ₱50,000.00 as nominal damages, head of the Revenue Integrity Protection Service and directed that all the documents that the
₱200,000.00 as attorney’s fees; and ₱500,000.00 as moral damages, and ₱500,000.00 as Revenue Integrity Protection Service had obtained on Guy's case be surrendered to her.8 The
exemplary damages, to be satisfied against the attachment bond issued by Prudential article read:
Guarantee & Assurance Inc.,45 under JCL (4) No. 01081, Bond No. HO-46764-97.
Ang mga tanong ngayon, may katotohanan kaya ang akusasyon ni Salanga laban kay
No pronouncement as to costs. Amatong? Nagsasabi naman kaya ng totoo si Amatong nang itanggi niya ang akusasyon ni
Salanga laban sa kanya?
SO ORDERED. Narito ang isang balitang natanggap ng SHOOT TO KILL mula sa isang mapagkakatiwalaan
at A-1 source na kung saan ay inarbor ni Amatong sa kanyang mga tauhan ang isang
G.R. No. 213023, April 10, 2019 negosyanteng iniimb[e]st[i]gahan ng DoF dahil sa katiwalian sa tax refund. Narito ang kwento
at kayo na ang bahalang manghusga kung sino ang may kredibilidad, si Amatong o si
MICHAEL C. GUY, PLAINTIFF-APPELLEE, v. RAFFY TULFO, ALLEN MACASAET, Salanga?
NICOLAS V. QUIJANO, JR., JANET BAY, JESUS P. GALANG, RANDY HAGOS, JEANY
LACORTE, AND VENUS TANDOC, ACCUSED-APPELLANT. Noong March 20, 2004, Sabado ng hapon pumunta ang isang negosyanteng nagngangalang
Michael Guy sa bahay ni Amatong. Si Guy ay iniimb[e]st[i]gahan ng mga tauhan ng Revenue
DECISION Integrity Protection Service (RIPS) ng DOF dahil sa kahinahinalang mga tax refund na
natanggap nito mula sa BIR simula 1998 hanggang 2003.
LEONEN, J.:
Problemado si Guy sapagkat natunugan niyang iniimbestigahan na siya ng RIPS. Ito'y
matapos magpadala ng sulat ang RIPS sa Central Bank at hinihingi rito ang lahat ng mga
The degree of freedom by which journalists operate to uncover and write the news is an transaksyon ng kumpanya ni Guy sa lahat ng mga bangko. Ang nakatanggap ng sulat sa
indication of the current state of our country's democracy. By freely obtaining vital information Central Bank ay kakilala ni Guy.
on matters of public concern, citizens become socially aware and well-equipped to participate
in different political processes to exercise their rights enshrined in the fundamental law. Noong Sabado ng hapon din, ayon sa aking source, tinawagan ni Amatong ang hepe ng
Journalists are the sentinels who keep watch over the actions of the government. They are RIPS para hilingin dito na ihinto imbestigasyon laban kay Guy at isurender sa kanyang
the eyes and ears of the citizenry. In today's digital age, the work of journalists is held to a opisina ang lahat ng mga dokumentong nakalap ng RIPS laban dito!!!9
higher standard more than ever. Beyond the multitude that participate on social media, they
have value as part of a profession that should be trusted with the truth.

Nevertheless, the probing done by journalists must be made "with good motives and for Claiming that the article had tainted his reputation, Guy filed before the Office of the City
justifiable ends[.]”1 The protection afforded by the Constitution2 to the press is not carte Prosecutor of Makati City a Complaint-Affidavit against Tulfo and the following
blanche that allows journalists to abandon their responsibility for truth and transparency. It is representatives of Abante Tonite's  publisher, Monica Publishing Corporation: (1) Allen
incumbent upon them to exercise a high degree of professionalism in their work, regardless Macasaet; (2) Nicolas V. Quijano, Jr.; (3) Janet Bay; (4) Jesus P. Galang; (5) Randy Hagos;
of the subject of their stories. (6) Jeany Lacorte; and (7) Venus Tandoc (collectively, Macasaet, et al.). 10

This resolves a Petition for Review on Certiorari3 assailing the Court of Appeals June 13, After a preliminary investigation, the Office of the City Prosecutor filed an Amended
2014 Amended Decision4 in CA-G.R. CR No. 33256. Information charging Tulfo and Macasaet, et al. with the crime of libel.11
On arraignment, Tulfo and Macasaet, et al. refused to enter a plea. Accordingly, the Regional Court's award of actual damages for lack of factual and legal basis.22 The dispositive portion
Trial Court ordered that a plea of not guilty be entered for all of them. 12 of its Amended Decision read:

In its February 24, 2010 Judgment, the Regional Trial Court convicted Tulfo and Macasaet, et WHEREFORE, the appeal is DENIED. The February 24,  2010 Judgment of the Regional
al. of the crime of libel. It ruled that the prosecution was able to establish by proof beyond Trial Court, Branch 132, Makati City in Criminal Case No. 04-3614 is hereby AFFIRMED
reasonable doubt the elements of the crime.13 with MODIFICATIONS that all accused-appellants are ORDERED to pay Michael Guy,
jointly and severally, P500,000.00 moral damages and P211,200.00 attorney's fees. The
The trial court ordered Tulfo and Macasaet, et al. to pay Guy: (1) P5,000,000.00 as actual award of P5,000,000.00 actual damages is DELETED for lack of factual and legal
damages; (2) P5,000,000.00 as moral damages; and (3) P211,200.00 as attorney's basis.23 (Emphasis in the original)
fees.14 The dispositive portion of its Judgment read:

WHEREFORE, the Court finds the accused Allen Macasaet, Nicolas V. Quijano, Jr., Janet On August 26, 2014, Guy filed this Petition for Review on Certiorari, 24 seeking the reversal of
Bay, Jesus P. Galang, Randy Hagos, Jeany Lacorte, Venus Tandoc and Raffy Tulfo, the Court of Appeals Amended Decision and the reinstatement of the Regional Trial Court
GUILTY beyond reasonable doubt of the crime of Libel, as defined in Article 353 of the Judgment.
Revised Penal Code, and sentences each of the accused to pay a fine of SIX THOUSAND
PESOS (P6,000.00) with subsidiary imprisonment, in case of insolvency. Petitioner maintains that contrary to the Court of Appeals' findings, there is factual and legal
basis for the award of actual damages.25 He avers that it had been established in the trial
They are likewise hereby ordered to pay private complainant Michael C. Guy, jointly and court proceedings that he may be able to earn P50,000,000.00 in 10 years. This possibility,
severally, the sum of FIVE MILLION PESOS (P5,000,000.00) as actual damages, FIVE he points out, constitutes the factual basis for the award of actual damages.26
MILLION PESOS (P5,000,000.00) as moral damages, and TWO HUNDRED ELEVEN
THOUSAND TWO HUNDRED PESOS (P211,200.00) as attorney's fees.15 (Emphasis in the Assuming that there is no sufficient basis for the award of actual damages, petitioner asserts
original) that he is still entitled to temperate damages. Citing Articles 2216, 2224, and 2225 of the Civil
Code, he claims that temperate damages may be awarded even without competent proof, as
long as the court finds that the victim has incurred some pecuniary loss.27 He insists that in
Aggrieved, Tulfo and Macasaet, et al. filed before the Court of Appeals separate Appeals his case, the libelous article tainted his reputation, causing some of his clients to terminate
assailing the Regional Trial Court February 24, 2010 Judgment. 16 their arrangements with him.28

In its August 30, 2013 Decision,17 the Court of Appeals affirmed the trial court's Judgment Petitioner further claims to have had good standing in the community, which the libelous
convicting Tulfo and Macasaet, et al. of libel. Nonetheless, it reduced the award of moral article destroyed. Thus, he argues that the amount of P5,000,000.00 as moral damages is a
damages to P500,000.00 and ordered them to pay Guy exemplary damages in the amount of reasonable recompense for the grief and suffering he has endured.29
P500,000.00.18 The dispositive portion of its Decision read:
Petitioner maintains that as the president of MG Forex Corporation, a company engaged in
WHEREFORE, the appeal is DENIED. The February 24, 2010 Judgment of the Regional Trial foreign exchange trading, he was a reputable businessman.30 However, as a result of the
Court, Branch 132, Makati City in Criminal Case No. 04-3614 libelous article, his business associates and clients lost trust in him. One (1) of his sisters,
is AFFIRMED with MODIFICATION that all accused-appellants are ordered to pay Michael who was also his business associate, sold him back her company shares after losing
Guy, jointly and severally, P500,000.00 moral damages and P500,000.00 exemplary confidence in his dealings. Clients refused to do business with him, terrified that they be
damages.19 (Emphasis in the original) linked with the accusations against him.31

Petitioner likewise avers that his family members doubted him. His mother berated him for
bringing shame to the family. His children were questioned in school for the article about their
Insisting on their innocence, Tulfo sought the reconsideration of the Court of Appeals August
father.32
30, 2013 Decision. Similarly, Guy moved for partial reconsideration and clarification of the
Decision.20
Finally, petitioner contends that exemplary damages should be awarded in his favor. He
21 maintains that respondent Tulfo deliberately took advantage of his standing as a renowned
In its June 13, 2014 Amended Decision,  the Court of Appeals modified its August 30, 2013
journalist to tarnish petitioner's reputation.33 He asserts that respondent Tulfo's penchant for
Decision and deleted the award of exemplary damages. It likewise deleted the Regional Trial
writing defamatory articles should be restrained.34

In its November 12, 2014 Resolution,35 this Court directed respondents to file their comment.
In its July 13, 2015 Resolution,36 this Court required the counsels of respondents Tulfo and
Macasaet, et al. to show cause why they should not be disciplinary dealt with for their failure
to file their respective comments. It also required them to comply with the November 12, 2014
Resolution.
On September 3, 2015, respondents Macasaet, et al. filed a Compliance,37 manifesting that
they would not submit any comment and instead leave the Petition to this Court's discretion.
In his Comment38 filed on August 26, 2016, respondent Tulfo avers that the Court of Appeals
correctly deleted the award of actual damages for lack of sufficient legal basis. 39 Maintaining
further that the deletion of the award of exemplary damages was proper, he argues that
exemplary damages may be awarded only when the crime was committed with one (1) or
more aggravating circumstances. He insists that the amount of moral damages should also
be deleted.40
In its September 21, 2016 Resolution,41 this Court required petitioner to file a reply.
In his Reply,42 petitioner reiterates that he is entitled to actual, moral, and exemplary
damages.
For this Court's resolution are the following issues:
First, whether or not there is sufficient factual basis for an award of actual damages;
Second, whether or not petitioner Michael C. Guy is entitled to moral damages; and
Finally, whether or not he is entitled to exemplary damages.
The Petition is partly meritorious.
I Similarly, in Malayan Insurance Company, Inc. v. Piccio:52
"Generally, a criminal case has two aspects, the civil and the criminal."43 This notion is rooted
in the fundamental theory that when a criminal act is committed, two (2) different entities are
offended: (1) the State, whose law has been violated; and (2) the person directly injured by
the offender's act or omission.44 As explained in Banal v. Tadeo, Jr.:45
Generally, the basis of civil liability arising from crime is the fundamental postulate of our law
that "Every man criminally liable is also civilly liable" (Art. 100, The Revised Penal Code).
Underlying this legal principle is the traditional theory that when a person commits a crime he
offends two entities namely (1) the society in which he lives in or the political entity called the
State whose law he had violated; and (2) the individual member of that society whose person,
right, honor, chastity or property was actually or directly injured or damaged by the same
punishable act or omission. . . . While an act or omission is felonious because it is punishable
by law, it gives rise to civil liability not so much because it is a crime but because it caused
damage to another. Viewing things pragmatically, we can readily see that what gives rise to
the civil liability is really the obligation and the moral duty of everyone to repair or make whole
the damage caused to another by reason of his own act or omission, done intentionally or
negligently, whether or not the same be punishable by law. In other words, criminal liability
will give rise to civil liability only if the same felonious act or omission results in damage or
injury to another and is the direct and proximate cause thereof. Damage or injury to another is
evidently the foundation of the civil action. Such is not the case in criminal actions for, to be
criminally liable, it is enough that the act or omission complained of is punishable, regardless
of whether or not it also causes material damage to another.46 (Citations omitted)
Nevertheless, the private offended party's interest in a criminal case is limited to the civil
liability arising from it.47 It is a fundamental principle in remedial law that if the trial court
dismisses the case or renders a judgment of acquittal, the private offended party cannot
appeal the criminal aspect of the case.48 Only the Office of the Solicitor General can
represent the State in actions brought before the Court of Appeals or this Court. 49 In People
v. Santiago:50
It is well-settled that in criminal cases where the offended party is the State, the interest of
the private complainant or the private offended party is limited to the civil liability. Thus, in the
prosecution of the offense, the complainant's role is limited to that of a witness for the
prosecution. If a criminal case is dismissed by the trial court or if there is an acquittal, an
appeal therefrom on the criminal aspect may be undertaken only by the State through the
Solicitor General.  Only the Solicitor General may represent the People of the Philippines on
appeal. The private offended party or complainant may not take such appeal. However, the
said offended party or complainant may appeal the civil aspect despite the acquittal of the
accused.51 (Emphasis supplied, citations omitted)
Accordingly, jurisprudence holds that if there is a dismissal of a criminal case by the trial court
or if there is an acquittal of the accused, it is only the OSG that may bring an appeal on the
criminal aspect representing the People. The rationale therefor is rooted in the principle that
the party affected by the dismissal of the criminal action is the People and not the petitioners
who are mere complaining witnesses. For this reason, the People are therefore deemed as
the real parties in interest in the criminal case and, therefore, only the OSG can represent
them in criminal proceedings pending in the CA or in this Court. In view of the corollary
principle that every action must be prosecuted or defended in the name of the real party-in-
interest who stands to be benefited or injured by the judgment in the suit, or by the party
entitled to the avails of the suit, an appeal of the criminal case not filed by the People as
represented by the OSG is perforce dismissible. The private complainant or the offended
party may, however, file an appeal without the intervention of the OSG but only insofar as the
civil liability of the accused is concerned. He may also file a special civil action for certiorari This is my problem. Now, Php50 Million is not a small amount of money and it has to be
even without the intervention of the OSG, but only to the end of preserving his interest in the based on, for example, the business standing. You did not give me any financial statement.
civil aspect of the case.53 (Emphasis supplied, citations omitted) Are you saying that you are making PhP50 Million a year?

MR. GUY:
Here, petitioner's sole purpose is to question the amount of damages awarded by the Court of
No, Your Honor. In my understanding, in moral damages, it is not only the amount of money
Appeals. He neither disputes nor challenges the Court of Appeals Amended Decision on
for a certain period of time. It also includes the sleepless nights. You do not know if there will
respondents' criminal liability. He only intends to protect his interest in the civil aspect of the
be new articles against you which are not true. So, I put them all together.
case. Accordingly, petitioner has the legal standing to file this Petition even without the
intervention of the Office of the Solicitor General.
COURT:
II
So; it is clear. You do not make PhP50 Million a year?

MR. GUY:
Significantly, "[t]he issue on the amount of damages is a factual question that this [C]ourt may
not resolve in a Rule 45 petition."54 Settled is the rule that only questions of law may be raised
No.
in a petition for review on certiorari. 55 "[This] Court is not a trier of facts and it is not its duty to
review, evaluate, and weigh the probative value of the evidence adduced before the lower
COURT:
courts."56 Absent "any clear showing that the trial court overlooked or misconstrued cogent
facts and circumstances that would justify altering or revising such findings and
Maybe in ten years, you can make that?
evaluation[,]"57 this Court will not disturb, let alone overturn the lower courts' findings of fact
and appreciation of the witnesses' testimonies.58
MR. GUY:
Nonetheless, jurisprudence has carved out certain exceptions to this rule:
It is possible.61 (Emphasis in the original)
(1) When the conclusion is a finding grounded entirely on speculation, surmises or
conjectures . . .; (2) When the inference made is manifestly mistaken, absurd or impossible . .
.; (3) Where there is a grave abuse of discretion . . .; (4) When the judgment is based on a Actual damages are "compensation for an injury that will put the injured party in the position
misapprehension of facts . . .; (5) When the findings of fact are conflicting . . .; (6) When the where it was before the injury. They pertain to such injuries or losses that are actually
Court of Appeals, in making its findings, went beyond the issues of the case and the same is sustained and susceptible of measurement."62 Actual damages constitute compensation for
contrary to the admissions of both appellant and appellee . . .; (7) The findings of the Court of sustained pecuniary loss. Nevertheless, a party may only be awarded actual damages when
Appeals are contrary to those of the trial court . . .; (8) When the findings of fact are the pecuniary loss he or she had suffered was duly proven.63 Thus:
conclusions without citation of specific evidence on which they are based . . .; (9) When the
facts set forth in the petition as well as in the petitioners' main and reply briefs are not Except as provided by law or by stipulation, a party is entitled to adequate compensation only
disputed by the respondents . . .; and (10) The finding of fact of the Court of Appeals is for such pecuniary loss as is duly proven. Basic is the rule that to recover actual damages,
premised on the supposed absence of evidence and is contradicted by the evidence on not only must the amount of loss be capable of proof; it must also be actually proven with a
record . . . .59 (Emphasis supplied, citations omitted) reasonable degree of certainty, premised upon competent proof or the best evidence
obtainable [.]

. . . .
Here, the Regional Trial Court awarded petitioner actual damages in the amount of
P5,000,000.00 based on his testimony that he could earn P50,000,000.00 in 10
This Court has, time and again, emphasized that actual damages cannot be presumed and
years.60 Petitioner's testimony read:
courts, in making an award, must point out specific facts which could afford a basis for
measuring whatever compensatory or actual damages are borne. An award of actual
COURT:
damages is "dependent upon competent proof of the damages suffered and the actual
amount thereof. The award must be based on the evidence presented, not on the personal
knowledge of the court;  and certainly not on flimsy, remote, speculative and
unsubstantial proof."64 (Emphasis supplied, citations omitted)
As the Court of Appeals correctly found, petitioner failed to substantiate the loss he had
allegedly sustained. Save for his testimony in court, he presented no evidence to support his
claim. His allegation of possibly earning P50,000,000.00 in 10 years is a mere assumption
without any foundation. This bare allegation is insufficient to prove that he has indeed lost
P5,000,000.00 as earnings. As this Court has previously held, "the award of unrealized profits
cannot be based on the sole testimony of the party claiming it."65
Notwithstanding the absence of any evidence on the amount of actual damages suffered,66 a
party may be awarded temperate damages should the court find that he or she has suffered
some pecuniary loss even if its amount cannot be determined with exact certainty.67
Unfortunately, petitioner failed to prove that he has suffered any pecuniary loss.68 While he
testified that he lost clients as a result of the libelous article, records reveal that he lost only
one (1) client, Jayson Mallari (Mallari). On cross-examination, Mallari even testified "that he
was not immediately convinced by the article and called [petitioner] before terminating his
business with him[.]"69 Moreover, as the records show, Mallari started transacting with
petitioner again sometime in 2005.70
III
Moral damages are "compensatory damages awarded for mental pain and suffering or mental
anguish resulting from a wrong."71 They are awarded to the injured party to enable him to
obtain means that will ease the suffering he sustained from respondent's reprehensible act. 72
"Moral damages are not punitive in nature,"73 but are instead a type of "award designed to
compensate the claimant for actual injury suffered[.]"74 As explained in Mangaliag v. Catubig-
Pastoral:75
It must be remembered that moral damages, though incapable of pecuniary estimation, are
designed to compensate and alleviate in some way the physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury unjustly caused a person. Moral damages are awarded to
enable the injured party to obtain means, diversions or amusements that will serve to
alleviate the moral suffering he/she has undergone, by reason of the defendant's culpable
action. Its award is aimed at restoration, as much as possible, of the spiritual status quo ante;
thus, it must be proportionate to the suffering inflicted. Since each case must be governed by
its own peculiar circumstances, there is no hard and fast rule in determining the proper
amount.76 (Citations omitted)
Similarly, in Equitable Leasing Corporation v. Suyom:77
Moral damages are not punitive in nature, but are designed to compensate and alleviate in
some way the physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly
caused a person. Although incapable of pecuniary computation, moral damages must
nevertheless be somehow proportional to and in approximation of the suffering inflicted. This
is so because moral damages are in the category of an award designed to compensate the
claimant for actual injury suffered, not to impose a penalty on the wrongdoer. 78 (Citations
omitted)
Unlike actual and temperate damages, moral damages may be awarded even if the injured
party failed to prove that he has suffered pecuniary loss. As long as it was established that
complainant's injury was the result of the offending party's action, the complainant may
recover moral damages.79
Article 221980 of the Civil Code specifically states that moral damages may be recovered in
cases of libel, slander, or defamation. The amount of moral damages that courts may award
depends upon the set of circumstances for each case. There is no fixed standard to
determine the amount of moral damages to be given. Courts are given the discretion to fix the
amount to be awarded in favor of the injured party, so long as there is sufficient basis for
awarding such amount.81
Here, petitioner insists that he is entitled to moral damages in the amount of P5,000,000.00.
He argues that he suffered social humiliation and anxiety from the libelous article. His 77-
year-old mother castigated him for disgracing their family. His children questioned him after
they had been interrogated in school for the article about their father.82 Finally, petitioner
claims that the article tainted his reputation, prompting his clients and business associates to
refuse to transact with him.83
While this Court recognizes the embarrassment and unease suffered by petitioner, it must be
emphasized that moral damages may only be awarded when the claimant has sufficiently
proved: (1) the factual foundation of the award; and (2) the causal connection of petitioner's
suffering to respondents' act.84 In Kierulf v. Court of Appeals:85
This Court cannot remind the bench and the bar often enough that in order that moral
damages may be awarded, there must be pleading and proof of moral suffering, mental
anguish, fright and the like. While no proof of pecuniary loss is necessary in order that
moral damages may be awarded, the amount of indemnity being left to the discretion
of the court, it is nevertheless essential that the claimant should satisfactorily show
the existence of the factual basis of damages and its causal connection to defendant's
acts.  This is so because moral damages, though incapable of pecuniary estimation, 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. In Francisco vs. GSIS,  the Court held that there
must be clear testimony on the anguish and other forms of mental suffering. Thus, if the
plaintiff fails to take the witness stand and testify as to his/her social humiliation, wounded
feelings and anxiety, moral damages cannot be awarded. In Cocoland Development
Corporation vs. National Labor Relations Commission, the Court held that "additional facts
must be pleaded and proven to warrant the grant of moral damages under the Civil Code,
these being, . . . social humiliation, wounded feelings, grave anxiety, etc., that resulted
therefrom."86 (Emphasis supplied, citations omitted)
In Mendoza v. Spouses Gomez,87 this Court disallowed the award of moral damages to the
respondents. It ruled that they failed to allege and present "evidence of besmirched reputation
or physical, mental[,] or psychological suffering incurred by them."88
89
Similarly, in Quezon City Government v. Dacara,  this Court deleted the award of moral
damages after finding that the respondent had failed to adduce proof of the emotional and
mental sufferings he experienced due to the petitioners' negligent act.90
Here, other than his bare allegations of besmirched reputation and loss of clientele, petitioner
failed to present evidence supporting his assertions. He submitted no evidence substantiating
his claimed loss. He also failed to adduce proof to support his claim that his reputation was
tainted due to the libelous article. Moreover, he did not present in court any testimony from
the business associates who had allegedly lost faith in him. Indeed, as the Court of Appeals
found, the client, whom he had supposedly lost due to the libelous article, has been
transacting business with him again.91
Nonetheless, moral damages should still be awarded. As he had testified during trial,
members of his family were displeased with him for being accused of committing illegal and
corrupt acts. He was berated by his mother Tor having humiliated their family. His children
were questioned at school. As such, an award of P500,000.00 as moral damages is an
adequate recompense to the mental anguish and wounded feelings that petitioner had
endured.
IV
The Court of Appeals deleted the award of exemplary damages and ruled that under Article
2230 of the Civil Code, exemplary damages may be awarded only when the crime was
committed with one (1) or more aggravating circumstances.92
Contrary to the Court of Appeals' pronouncement, exemplary damages may be awarded even
in the absence of aggravating circumstances. It may be awarded "where the circumstances of
the case show the highly reprehensible or outrageous conduct of the offender." 93
"Exemplary or corrective damages are imposed by way of example or correction for the public
good[.]"94 "It is imposed as a punishment for highly reprehensible conduct"95 and serves as a
notice to prevent the public from "the repetition of socially deleterious actions."96 "Such
damages are required by public policy, for wanton acts must be suppressed. They are an
antidote so that the poison of wickedness may not run through the body politic." 97
Kierulf laid down the requirements that must be satisfied before exemplary damages may be
awarded:
Exemplary damages are designed to permit the courts to mould behavior that has socially
deleterious consequences, and its imposition is required by public policy to suppress the
wanton acts of an offender. However, it cannot be recovered as a matter of right. It is based
entirely on the discretion of the court. Jurisprudence sets certain requirements before
exemplary damages may be awarded, to wit:
(1) (T)hey may be imposed by way of example or correction only in addition, among others, to
compensatory damages, and cannot be recovered as a matter of right, their determination
depending upon the amount of compensatory damages that may be awarded to the claimant;
(2) the claimant must first establish his right to moral, temperate, liquidated or compensatory
damages; and
(3) the wrongful act must be accompanied by bad faith, and the award would be allowed only
if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.98 (Citations omitted)
Here, respondents published the libelous article without verifying the truth of the allegations
against petitioner. As the Court of Appeals found, the Revenue Integrity Protection Service
only investigates officials of the Department of Finance and its attached agencies who are
accused of corruption. Petitioner, on the other hand, is no government official and, therefore,
beyond the Revenue Integrity Protection Service's jurisdiction. It only goes to show that
respondents did not verify the information on which the article was based. 99
Thus, to ensure that such conduct will no longer be repeated, and considering their
profession, respondents are directed to pay petitioner exemplary damages in the amount of
P1,000,000.00.
V
Among the advantages brought by modern technology is the ease by which news can be
shared and disseminated through different social media outlets. News matters are now
simultaneously cascaded in real-time. Society is swamped with a myriad of information
involving a wide array of topics. News dissemination has always been in a constant state of
flux. Occurrences across the globe, or the lack thereof, are immediately subject of the news
written by journalists.
More often than not, journalists are at the forefront of information publication and
dissemination. Owing to the nature of their work, they have the prerogative to shape the news
as they see fit. This Court does not turn a blind eye to some of them who twist the news to
give an ambiguous interpretation that is in reckless disregard of the truth.

Crafting inaccurate and misleading news is a blatant violation of the Society of Professional
Journalists Code of Ethics. The Society of Professional Journalists is a journalism
organization dedicated toward stimulating high standards of ethical behavior, promoting the
free flow of information vital to a well-informed citizenry, and inspiring and educating current
and future journalists through professional development.100 Its Code of Ethics espouses the
practice that journalism should be accurate and fair, and mandates accountability and
transparency in the profession.101
As such, journalists should observe high standards expected from their profession. They
must take responsibility for the accuracy of their work, careful never to deliberately distort
facts or context by verifying information before releasing it for public consumption.102
This case comes at a time when the credibility of journalists is needed more than ever; when
their tried-and-tested practice of adhering to their own code of ethics becomes more
necessary, so that their truth may provide a stronger bulwark against the recklessness in
social media. Respondents, then, should have been more circumspect in what they
published. They are not media practitioners with a lack of social following; their words
reverberate. Thus, exemplary damages in the amount of P1,000,000.00 is justifiable.
This Court can only hope that respondents appreciate the privilege their fame has brought
them and, in the future, become more circumspect in the exercise of their profession.
WHEREFORE, the Petition is PARTIALLY GRANTED. The June 13, 2014 Amended
Decision of the Court of Appeals in CA-G.R. CR No. 33256 is AFFIRMED WITH
MODIFICATION. Respondents Raffy Tulfo, Allen Macasaet, Nicolas V. Quijano, Jr., Janet
Bay, Jesus P. Galang, Randy Hagos, Jean y Lacorte, and Venus Tandoc are ORDERED to
solidarity pay petitioner Michael C. Guy: (1) Five Hundred Thousand Pesos (P500,000.00) as
moral damages; (2) One Million Pesos (P1,000.000.00) as exemplary damages; and (3) Two
Hundred Eleven Thousand Two Hundred Pesos (P211,200.00) as attorney's fees.
All damages awarded shall be subject to interest at the rate of six percent (6%) per annum
from the finality of this Decision until its full satisfaction.103
SO ORDERED.
[G.R. NO. 184315 : November 25, 2009]
ALFONSO T. YUCHENGCO, v. THE MANILA CHRONICLE PUBLISHING CORPORATION,
ROBERTO COYIUTO, JR., NOEL CABRERA, GERRY ZARAGOZA, DONNA GATDULA,
RODNEY P. DIOLA, RAUL VALINO and THELMA SAN JUAN, Respondents.
DECISION
CHICO-NAZARIO, J.:
When malice in fact is proven, assertions and proofs that the libelous articles are qualifiedly
privileged communications are futile, since being qualifiedly privileged communications
merely prevents the presumption of malice from attaching in a defamatory imputation.
This is a Petition for Review on Certiorari assailing the Amended Decision1 of the Court of
Appeals in CA-G.R. CV No. 76995 dated 28 August 2008. The Amended Decision reversed
on Motion for Reconsideration the 18 March 2008 Decision2 of the same court, which in turn
affirmed in toto the Decision of the Regional Trial Court (RTC) of Makati City in Civil Case No.
94-1114 dated 8 November 2002 finding herein respondents liable for damages.
The facts of the case, as summarized by the RTC, are as follows:
In his Complaint, plaintiff Alfonso T. Yuchengco alleges that in the last quarter of 1994,
Chronicle Publishing Corporation ("Chronicle Publishing" for brevity) published in the Manila
Chronicle a series of defamatory articles against him. In two of the subject articles (November
10 and 12, 1993 issues), he was imputed to be a "Marcos crony" or a "Marcos-Romualdez
crony," which term according to him is commonly used and understood in Philippine media to
describe an individual who was a recipient of special and underserving favors from former
President Ferdinand E. Marcos and/or his brother-in-law Benjamin "Kokoy" Romualdez due
to special and extra-ordinary closeness to either or both, and which favors allowed an
individual to engage in illegal and dishonorable business activities.
The plaintiff claims that the said articles further branded him as a mere front or dummy for the
Marcos and Romualdez clans in Benguet Corporation, which company sought to take-over
the management of Oriental Petroleum Mineral Corporation ("Oriental" for brevity). He
contends that such an imputation is untrue since his holdings in Benguet Corporation were
legally acquired by him.
Also, he was likewise accused of unsound and immoral business practices by insinuating that
he wanted to take control of Oriental in order to divert its resources to rescue the debt-ridden
Benguet Corporation. He claims that the accusation is untrue since he was merely interested
in being represented in the board thereof so as to protect his and his companies' interest
therein as shareholders.
The subject articles insinuated that he personally and intentionally caused the failure of
Benguet Corporation and that if even if he ever assumed control of Oriental, it would suffer
the same fate as the former. According to him, at the time he assumed chairmanship of
Benguet Corporation, it was already experiencing financial downturns caused by plummeting
world prices of gold and unprofitable investments it ventured into.
Moreover, one of the articles portrayed him as being an unfair and uncaring employer when
the employees of Grepalife Corporation, of which he is the Chairman, staged a strike, when
the truth being that he had nothing to do with it. And that if his group takes over Oriental, it will
experience the same labor problems as in Grepalife.
Furthermore, the subject articles accused him of inducing Rizal Commercial Banking
Corporation ("RCBC" for brevity) to violate the provisions of the General Banking Act on
DOSRI loans. He denies the imputations believing that there is nothing irregular in the RCBC-
Piedras transaction for the acquisition of shares of Oriental.
Also, the plaintiff claims that the subject articles insinuated that he induced others to disobey
lawful orders of the Securities and Exchange Commission ("SEC" for brevity) when the truth
is that the officials of RCBC and Alcorn never defied any SEC order, and that if ever they did,
he never induced them to do so.
Finally, the plaintiff asserts that the subject articles imputed to him the derogatory tag of
"corporate raider," implying that he was seeking to profit for something he did not work for. He
denies the imputation since he acquired his stake in Oriental for adequate and valuable
consideration at the time when no one was willing to bailout the government from its difficult
and losing position thereto.
In their Answer, the defendants deny liability claiming that the subject articles were not
defamatory since they were composed and published in good faith and only after having
ascertained their contents. In any event, they claim that these articles are privileged and/or
constitute reasonable and balance[d] comments on matters of legitimate public interest which
cannot serve as basis for the finding of libel against them. They likewise alleged that they
were acting within the bounds of constitutionally guaranteed freedom of speech and of the
press.
Furthermore, they contend that since plaintiff is a public figure, and assuming that the articles
were indeed defamatory, they cannot be held liable for damages since they were not impelled
by actual malice in the composition thereof. They did not compose and/or publish said articles
with the knowledge that they contained falsehoods, or with reckless disregard on whether or
not they contained falsehood.
As to defendant Coyiuto, he claims that he had no participation in the publication of the
subject articles nor consented or approved their publication.
PLAINTIFF'S EVIDENCE
During the trial, the plaintiff himself, ALFONSO T. YUCHENGCO, testified that prior to his
appointment as Ambassador to Japan, he was the chairman of various business
organizations notably: Benguet Corporation ("Benguet"), Philippine Long Distance Telephone
Company, Rizal Commercial Banking Corporation ("RCBC"), Bank of America Savings Bank,
House of Investments, Inc., Dole Philippines and Philippine Fuji Xerox Corporation. He was
also the President of the Philippine Ambassadors; chairman or vice president of Bantayog ng
Bayan; and chairman of AY Foundation, Inc. He was appointed Philippine Ambassador to
People's Republic of China after the EDSA Revolution.
As regards the article referring to the November 10, 1993 issue of the Manila Chronicle (Exh.
A), he stated that he had never been a Marcos crony nor had been a business partner of the
Romualdezes or had personal dealings with them; that during the shareholders' meeting, the
two (2) sons of Benjamin "Kokoy" Romualdez were elected as directors of Benguet
Corporation pursuant to a Court order; that he had no personal dealings with them; that he
had no intention of taking over Oriental and that Benguet Corporation did not lose the amount
as stated in the article; that Benguet Corporation experienced liquidity problems, and that
before he joined the corporation, it had already diversified into many other financial ventures;
that he denied having any business partnership with the Romualdezes at that time.
Regarding the November 12, 1993 issue of the Manila Chronicle (Exh. B), he denied having
any partnership with the Marcos family; that he denied responsibility for the losses incurred
by Benguet Corporation, as the losses were due to the drop of the commodity market, and for
having diversified into other non-profitable ventures; that he had no intention whatsoever of
taking over Oriental; that although the Yuchengco family owns a substantial block of shares
of RCBC, Sanwa Bank actually owns twenty-five percent (25%) thereof; that RCBC did not
finance his fund but it extended a loan to Piedras Petroleum, a subsidiary of the Presidential
Commission of Good Government ("PCGG" for brevity); admitted that Traders Royal Bank
also granted a loan to PCGG but such was an independent transaction of RCBC.
About the November 15, 1993 issue of the Manila Chronicle (Exh. C), he denied any
knowledge of what transpired at the Trust Department of RCBC because as Chairman he
was not involved in many of the bank's transactions.
Referring to November 16, 1993 issue of the Manila Chronicle (Exh. D), he considered the
attacks against him to be malicious considering that he does not see any connection between
the labor strike at Grepalife with the case of Alcorn and RCBC; that the article would like to
show that he was the reason for the huge losses incurred by Benguet Corporation.
As regards the November 22, 1993 issue of the Manila Chronicle (Exh. E), he denied giving
any interest free loan, the fact that they gave a loan to PCGG does not mean that they gave a
loan to Benedicto since the latter had already turned over the shares of Piedras to PCGG at
that time.
Regarding the November 23, 1993 issue of the Manila Chronicle (Exh. F), he denied
extending an interest free loan considering that he is not the only owner of RCBC; that these
series of attacks against him and RCBC were intended to cause a "bank run"; that the article
imputes that he was responsible for giving an interest free loan.
About the December 5, 1993 issue of the Manila Chronicle (Exh. G), he said the article was
intended to humiliate and embarrass him since he really had no intention of taking over
Oriental; that the reason for the attack against his person was because he and defendant
Coyiuto, Jr. were both rivals in the insurance business and that the latter has always been
envious of his position for having owned Malayan Insurance Company.
On cross-examination, plaintiff Yuchengco testified that he does not consider himself a public
figure; and that he felt maligned by the references to him as a "Marcos crony". [TSN, 07
February 1997; 10 February 1997; 12 February 1997]
ROSAURO ZARAGOZA testified that he is the Executive Vice-President of RCBC; that the
statement in Exhibits "D", "E" and "F" with regard to the interest free loan allegedly granted to
Piedras Petroleum Company, Inc. ("Piedras") are false because the Piedras deal was a trust
transaction which involved an advance in exchange for shares of stock; that plaintiff
Yuchengco did not have a personal interest in the Piedras deal; that Piedras or Oriental
Petroleum Mineral Corporation ("Oriental Petroleum") shares were not transferred to plaintiff
Yuchengco's name by virtue of the transaction; and that the defendants did not approach him
or RCBC to check the veracity of the subject articles. The affidavit of Mr. Zaragoza (Exhibit
"H") was adopted as part of his testimony.
On cross-examination, Mr. Zaragoza testified that he volunteered to testify in the instant case
because he was the most knowledgeable about the Piedras deal; that plaintiff Yuchengco
was aggrieved upon reading the subject articles; that under the Memorandum of Agreement
("MOA") between RCBC and Piedras, should the latter fail to comply with its obligations
under the MOA, it will pay interest at the prevailing market interest rate from the date of
advance until full payment; and that there was a complaint filed with the Bangko Sentral ng
Pilipinas against RCBC by Mr. Felipe Remollo questioning the Piedras deal. [TSN 28
February 1997; 26 June 1997; 27 June 1997; 04 July 1997]
JOSE REVILLA testified that he and Amb. Yuchengco were long time friends, where he
(Revilla) worked for him (Yuchengco) for thirty-two (32) years in his (Yuchengco) credit card
company - Industrial Finance Corporation Credit Cards; that knowing Amb. Yuchengco for a
considerable period of time, he does not believe the truth of the contents of the subject
articles; that plaintiff Yuchengco appeared distressed when he joked about the subject
articles; that other people approached him to ask whether the subject articles are true [TSN
25 August 1997].
xxx
DEFENDANTS' EVIDENCE
On the other hand, defendants Zaragoza, Gatdula, Cabrera and Valino substantially testified
on the following matters:
GERRY ZARAGOZA testified that he was the Managing Editor of Manila Chronicle in charge
of the national and political news; that defendant San Juan was the other Managing Editor in
charge of the lifestyle section; that a story conference is conducted everyday where the
articles, including the pages where they will appear, are discussed; that the editor-in-chief
(defendant Cruz), executive editor (defendant Tolentino) and deputy editor (defendant
Cabrera) were the ones responsible for the decisions of the story conference relative to the
printing of the newspaper; that he was not involved in the writing and editing of the subject
articles; that Exhibits "A" to "D" are classified as business news; that columns, specifically
Exhibits "E" and "F" are not discussed during story conferences; and that Exhibit "G", which
appeared in the "Money Section" did not pass thru him.
On cross-examination, defendant Zaragoza testified that except for the columns, Exhibits "A"
to "D" and Exhibit "G" are considered hard news; that he handled the hard news, while
defendant San Juan handled the soft news; and that defendant Valino was the business
editor in charge of the business section (TSN 22 July 1998; 23 September 1998]
DONNABELLE GATDULA claimed that she was a correspondent for Manila Chronicle
assigned to the Securities and Exchange Commission ("SEC") beat; that she had no
participation in the writing or publication of Exhibits "A" to "C" and "G" to "E"; that she
attended the hearing conducted by the SEC and interviewed the two lawyers of RCBC and
SEC Chairman Rosario Lopez regarding the Oriental Petroleum case; that her name appears
as a tag line in Exhibit "D", because she only wrote part of the story; and that she did not
write the entire article (Exhibit "D") as some of the statements therein were added by the
editor/s; and that she did not discuss Exhibit "D" with any of the editors.
On cross-examination, defendant Gatdula testified that she does not have a copy of the
original article which she wrote; that she read Exhibit "D" after it was published; that she did
not compare her original story with Exhibit "D" nor question the authority of the editor to edit
her story; and that she agreed to put her name on Exhibit "D". (TSN 23 September 1998; 05
October 1998).ςηαñrοblεš  Î½Î¹r†υαl  lαω  lιbrαrÿ
NOEL CABRERA contended that after having gone through the subject articles, he believes
that the news stories and commentaries were fair and that those who wrote the same
followed the proper standards; that as regard the contents of Exhibits "E" and "F", the opinion
of Mr. Raul Valino, as written in the said articles, were valid and based on documentary facts;
as to Exhibit "D", pertaining to the article of Ms. Donnabelle Gatdula, she based her article on
documents pertaining to the Oriental transaction, other documents, as well as interviews; that
at the time the subject articles were written, Amb. Yuchengco was a public figure, being a
very prominent businessman with vast interest in banks and other businesses; that during the
year 1993, the word "crony" was more or less accepted to mean as a big businessman or
close associate of the late President Marcos, and its use in the column was meant only to
supply the perspective as to the figure or subject involved in the news story, and there is thus
no malice or derogatory intent when the same was used.
On cross-examination, defendant Cabrera testified that defendant Coyiuto is one of the
owners of Manila Chronicle; and that he only saw the records of Exhibits "8" to "10" and "16"
to "20" after the publication of Exhibits "A" to "G" (TSN 21 April 1999; 28 April 1999 05 May
1999; 10 May 1999).
RAUL VALINO stated that he was the Acting Business Manager and later Managing Editor
and Business Editor-in-Chief of Manila Chronicle; that after having consulted several
dictionaries as to the meaning of the word "crony", he did not come across a definition
describing the word to mean someone who is a recipient of any undeserving or special favor
from anyone, that it merely refers to someone who is a friend or a special friend; there was no
mention whatsoever in the subject article that Amb. Yuchengco was being accused of fronting
for the late President Marcos (referring to par. 2.3.2 of the complaint); that nowhere in the
said paragraph was Amb. Yuchengco accused of having acted as a front to facilitate the
acquisition of a prohibited interest in a private corporation by a public official while occupying
a public office; that nowhere in the article was Amb. Yuchengco accused of being directly or
indirectly involved in unsound business practices (referring to par. 2.4 of the complaint); that
whatever imputation of ill-will in par. 2.4.1 of the complaint was only in plaintiff's mind; and as
regards par. 2.6 of the complaint, that he was merely reporting on what transpired at the
picket line and what the striking employees answered to him; and that he did not state in his
columns (Exhibits "E" and "F") that plaintiff Yuchengco violated banking laws. [TSN 23
February 2000]3
On 8 November 2002, the RTC rendered its Decision in favor of herein petitioner Alfonso T.
Yuchengco, disposing of the case as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:
1. On the First Cause of Action, ordering defendants Chronicle Publishing, Neil H. Cruz,
Ernesto Tolentino, Noel Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul
Valino and Rodney Diola to pay plaintiff Yuchengco, jointly and severally:
A. the amount of Ten Million Pesos (P10,000,000.00) as moral damages; andcralawlibrary
b. the amount of Ten Million Pesos (P10,000,000.00) as exemplary damages;
2. On the Second Cause of Action, ordering defendants Roberto Coyiuto, Jr. and Chronicle
Publishing to pay plaintiff Yuchengco, jointly and severally:
A. the amount of Fifty Million Pesos (P50,000,000.00) as moral damages; andcralawlibrary
b. the amount of Thirty Million Pesos (P30,000,000.00) as exemplary damages;
3. On the Third Cause of Action, ordering all defendants to pay plaintiff Yuchengco, jointly
and severally, the amount of One Million Pesos (P1,000,000.00) as attorney's fee and legal
costs.4
The respondents, namely the Manila Chronicle Publishing Corporation, Neal H. Cruz, Ernesto
Tolentino, Noel Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino,
Rodney P. Diola, and Roberto Coyiuto, Jr. appealed to the Court of Appeals. The appeal was
docketed as CA-G.R. CV No. 76995 and was raffled to the Fifth Division.
On 18 March 2008, the Court of Appeals promulgated its Decision affirming the RTC
Decision:
WHEREFORE, in consideration of the foregoing premises, judgment is hereby rendered
DISMISSING the appeals of defendants-appellants and AFFIRMING the decision dated
November 8, 2002 of the trial court IN TOTO.5
Respondents filed a Motion for Reconsideration. On 28 August 2008, the Court of Appeals
reversed itself in an Amended Decision:
WHEREFORE, the appeal is GRANTED. The Decision of this Court dated March 18, 2008 is
RECONSIDERED and SET ASIDE. The decision of the court a quo dated November 8, 2002
is REVERSED and SET ASIDE. The Amended Complaint for Damages against the
defendants-appellants is DISMISSED. No pronouncement as to costs.
Hence, this Petition for Review on Certiorari, where petitioner puts forth the following
Assignments of Error:
A. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR
IN RULING THAT THE CASE OF ARTURO BORJAL, ET AL. V. COURT OF APPEALS, ET
AL. CITED BY RESPONDENTS IN THEIR MOTION FOR RECONSIDERATION
WARRANTED THE REVERSAL OF THE CA DECISION DATED MARCH 18, 2008.
B. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR
IN RULING THAT THE SUBJECT ARTICLES IN THE COMPLAINT FALL WITHIN THE
CONCEPT OF PRIVILEGED COMMUNICATION.
C. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR
IN RULING THAT PETITIONER IS A PUBLIC OFFICIAL OR PUBLIC FIGURE.6
Libel is defined in Article 353 of the Revised Penal Code, which provides:
Art. 353. Definition of Libel. - A libel is a public and malicious imputation of a crime, or of a
vice or defect, real or imaginary, or any act, omission, condition, status, or circumstance
tending to cause the dishonor, discredit, or contempt of a natural or juridical person, or to
blacken the memory of one who is dead.
Based on this definition, this Court has held that four elements constitute the crime of libel,
namely (a) defamatory imputation tending to cause dishonor, discredit or contempt; (b)
malice, either in law or in fact; (c) publication; and (d) identifiability of the person defamed.7
Despite being defined in the Revised Penal Code, libel can also be instituted, like in the case
at bar, as a purely civil action, the cause of action for which is provided by Article 33 of the
Civil Code, which provides:
Article 33. In cases of defamation, fraud, and physical injuries, a civil action for damages,
entirely separate and distinct from the criminal action, may be brought by the injured party.
(no by-line)
Such civil action shall proceed independently of the criminal prosecution, and shall require
only a preponderance of evidence. 12 November 1993 "RCBC probed for violating B, B-1 to B-2
CB rules"
The above elements of libel were adopted as well in a purely civil action for damages. As held (no by-line)
by this Court in GMA Network, Inc. v. Bustos8 :
15 November 1993 "RCBC called to SEC"; C, C-1 to C-3
An award of damages under the premises presupposes the commission of an act amounting subtitled "Yuchengco Bank
to defamatory imputation or libel, which, in turn, presupposes malice. Libel is the public and (no by-line) defies government order"
malicious imputation to another of a discreditable act or condition tending to cause the
16 November 1993 "Alcorn, RCBC execs own D, D-1 to D-4
dishonor, discredit, or contempt of a natural or juridical person. Liability for libel attaches
guilt"
present the following elements: (a) an allegation or imputation of a discreditable act or
condition concerning another; (b) publication of the imputation; (c) identity of the person (Donna Gatdula)
defamed; and (d) existence of malice. 22 November 1993 "Bank runs and RCBC free E, E-1 to E-2
loans"
Of these four elements, the most apparent in the case at bar would be the publication of the (Raul Valino)
alleged imputation. Libel is published not only when it is widely circulated, but also when it is
made known or brought to the attention or notice of another person other than its author and 23 November 1993 "RCBC case bugs Bangko F, F-1 to F-3
the offended party.9 The circulation of an allegedly libelous matter in a newspaper is certainly Sentral"
sufficient publication. We are thus left with the determination of the existence of the three (Raul Valino)
remaining elements of libel, namely: (1) the defamatory imputation; (2) the identity of the
person defamed; and (3) the existence of malice. 5 December 1993 "The Battle for Oriental" G, G-1 to G-4

Defamatory Imputation (Rodney P. Diola)

Defamation, which includes libel and slander, means the offense of injuring a person's
character, fame or reputation through false and malicious statements. It is that which tends to
injure reputation or to diminish esteem, respect, goodwill or confidence in the plaintiff, or to
excite derogatory feelings or opinions about the plaintiff. It is the publication of anything that is
injurious to the good name or reputation of another or tends to bring him into disrepute.10 In
determining whether certain utterances are defamatory, the words used are to be construed
in their entirety and taken in their plain, natural and ordinary meaning, as they would naturally
be understood by persons hearing (or reading, as in libel) them, unless it appears that they
were used and understood in another sense.11
In order to fully appreciate whether the subject articles are, in fact, defamatory, an analysis
thereof is in order. The following are what have been referred to as the subject articles:
Manila Chronicle Issue Title Exhibit
Date (Author)
10 November 1993 "Yuchengko joins forces A, A-1 to A-5
with Kokoy"
In two of the subject articles, respondents allegedly accused and labeled Yuchengco as a
Marcos crony, who took advantage of his relationship with the former President to gain
unwarranted benefits:
Yuchengco joins forces with Kokoy12
Alfonso Yuchengco, a Marcos crony who wants to takeover the ownership and management
of the highly profitable Oriental Petroleum Minerals Corp. (OMPC), has tied up with Marcos
brother-in-law Benjamin "Kokoy" Romualdez through two of his sons, records at the securities
and Exchange Commission (SEC) showed yesterday.
Kokoy's two sons, Benjamin Philip Gomez Romualdez, 32, and Ferdinand Martin G.
Romualdez, 29, are now members of the board of the debt-ridden and heavily losing Benguet
Corp., a company taken over by Marcos during his dictatorship, but which was sequestered
at the start of President Aquino's term.
xxx
Observers said they believed the elections of the Romualdez sons officially confirmed
suspicions that the Marcos and Romualdez clans really owned Benguet.
Benguet's former president, Jaime Ongpin, employed by the company for 10 years before he
was named finance secretary by then President Aquino, committed suicide after being
accused of being a Marcos-Romualdez crony.
Yuchengco Bank under CB probe13
xxx
The official said the case was recently brought to Bangko Sentral's attention by an RCBC
creditor who felt he was being cheated by the bank through interest-free loans granted to
related interests.
Under the interest-free loan scheme, Yuchengco was able to own OMPC shares of Piedras
since they were the same shares RCBC financed and which were turned over to the bank as
payment for the loan.
The Central Bank official said that Bangko Sentral is now determining whether RCBC violated
the rule on loans to directors, officers, stockholders and related interests (DOSRI).
Yuchengco is both a director (chairman) officer, stockholder, and a related interest of RCBC.
xxx
Violating the DOSRI rule is a criminal offense. The Bangko Sentral official stressed. "I believe
that that is tantamount, not only to cheating the depositor, but also robbing the bank of its
clients' money."
"If Bangko Sentral does not act decisively on this matter," the official asked "what will prevent
the other banks from resorting to this kind of transactions to enrich their owners and enable
them to acquire shares of stock from other companies?"
The interest-free loan controversy also involves Traders Royal Bank (TRB), a sequestered
bank, owned by Roberto Benedicto, a Marcos crony.
xxx
The deal could be from one crony to another since Yuchengco is very much associated with
the Marcoses and the Romualdezes, a source opined.
Yuchengco owns Benguet Corp., which is heavily losing since he joined the Company as
Chairman in 1989.
xxx
Since Benguet is encountering all kinds of financial problems, losses and overdue debts,
observers say they fear that Oriental may also suffer the same fate when and should
Yuchengco and his partners assume management of OMPC.
Already, it was noted the Oriental shares sold on the stock market are weakening, and stock
observers say this could be attributed to the planned entry into the company of Yuchengco,
Leonardo Siguion-Reyna and their minority partners.
In another of the subject articles, respondents allegedly insinuated that Yuchengco induced
others to disobey the lawful orders of the Securities and Exchange Commission (SEC):
Alcorn, RCBC execs own guilt14
Two officials of Alcorn Petroleum and Minerals Corporation (AMPC) and Rizal Commercial
Banking Corporation (RCBC) admitted before the Securities and Exchange Commission
(SEC) yesterday that they ignored the SEC order commanding them to process all Alcorn
shares in the name of R. Coyiuto Securities Inc. and its investor clients such as Oriental
Petroleum and Minerals Corporation (OMPC).
xxx
RCBC is owned by Alfonso Yuchengco, chairman of the debt-ridden and heavily-losing
Benguet Corp. He also owns Great Pacific Life Insurance Co., whose employees are on
strike because of the company's refusal to grant them better salaries and benefits.
xxx
SEC insiders said that while Monreal and Ricalde should be punished for disobeying a lawful
order from the SEC, people who masterminded the APMC order should also be penalized
once proven guilty.
xxx
Some observers said the APMC order to RCBC could be a ploy to prevent Robert Coyiuto,
Jr., chairman and president of OPMC, from retaining his majority control of Oriental, and a
scheme to put on the board members of the Yuchengco company.
In fact, when Yuchengco created his own OPMC "board of directors," he appointed Ricalde
as corporate secretary, OPMC officials pointed out.
"In our opinion," observers following the OPMC developments stated, 'this is a clear and
simple case of criminal conspiracy whose perpetrators must be meted the harshest
punishment to prevent corporate thieves from making a mockery of the law and from illegally
taking over corporations which they do not own in the first place."
Yuchengco further presented the following articles which allegedly accused him of inducing
Rizal Commercial Banking Corporation (RCBC) to violate the provisions of the General
Banking Act on Directors, Officers, stockholders, and Related Interest (DOSRI) loans:
Bank runs and RCBC free loans15
The Bank runs that devastated the economy in the recent past were, first and foremost,
instigated by rumors that bank owners were, themselves, using the public's money to
promote their own businesses and interests in violation of Central Bank rules and regulations.
xxx
Now here comes Rizal Commercial Banking Corporation (RCBC) being charged with
engaging in unsound banking by lending an interest-free loan of P101 million to one
company, Piedras Petroleum Corporation, which Marcos crony Roberto Benedicto had
surrendered to the Presidential Commission on Good Government (PCGG).
xxx
What would happen if all the other banks resort to this kind of lending activity, giving away
loans without interest? The entire banking system would certainly be compromised.
The owners or RCBC, therefore, should not be too liberal with their depositors' money. They
should also consider what fatal effects such a practice could inflict on the very system where
RCBC operates. The country, at this time, cannot afford another series of bank runs, nor a
run at RCBC.
RCBC case bugs Bangko Sentral16
xxx
The P101 million interest-free loan to Piedras is of national interest for not just one reason
alone.
First, the money involved came from the depositors, and not from the pockets of Yuchengco.
Second, banking rules dictate that a bank must be prudent in lending out its clients' money,
so that its financial viability must never be put in question.
Third, the money lent to a borrower must never end up in the pocket of the owner of the bank.
Fourth, such a practice could lead to a bank run, which the economy cannot afford at this
time, even if the run is confined to just one bank.
Yuchengco further claims that the following article, in labeling him as a "corporate raider,"
implies that he is seeking to profit from something he did not work for:
The Battle for Oriental17
Ledesma says Coyiuto will not wilt from Yuchengco's fabled financial power. 'Robert has a lot
of friends that will help him fend off a raider like Yuchengco', says Ledesma.
xxx
Ledesma of OPMC says that even if Coyiuto loses in the bid, he ll still remain a very
significant player in OPMC given his substantial personal holdings and proxies in the
company. Coyiuto's investment in OPMC is now valued at more than a billion pesos
compared to the Yuchengco block which, the Coyiuto group points out, has only minimal
investments.
That's our moral ascendancy over their group. Coyiuto virtually made Oriental what it is today
unlike Yuchengco who is just getting into the act now because Oriental has become an
attractive cash cow' says Ledesma.
War of Families
The fight for control of Oriental Petroleum gains particular poignancy given the long history of
feuding between the families of Yuchengco and Coyiuto. Their families were bitter rivals in
the insurance business way back in the seventies. The Yuchengcos own the Malayan Group
of Insurance Companies while the Coyiutos used to control Pioneer Insurance. That rivalry
seems to have come full circle with their battle in Oriental Petroleum.
Pomento says the best arrangement would have been a modus vivendi between the two
groups to stop their quarrel and work instead for the interest of the company. But given the
bad blood that exists between the two families, that might be a difficult proposition, he says.
The trial court and the Court of Appeals are in agreement that the above articles contain
defamatory imputations. Even the Amended Decision of the Court of Appeals, wherein the
appellate court reversed itself and held that respondents were not liable for damages, did not
modify its earlier ruling affirming the defamatory character of the imputations in the above
articles. The Court of Appeals merely reversed itself on account of the allegedly privileged
nature of the articles, which goes into the element of malice. Malice, as an element of libel,
and the defenses affecting the existence of the same shall be discussed later.
In arguing that the subject articles are not really derogatory, respondent Cabrera explains that
the word "crony" was more or less accepted to describe a big businessman or close
associate of the late President Marcos, and its use in the column was meant only to supply
the perspective as to the figure or subject involved in the news story. Respondent Valino
further claimed that after consulting several dictionaries as to the meaning of the word
"crony," he did not come across a definition describing the word to mean someone who is a
recipient of any undeserving or special favor from anyone.
We are not swayed by the explanations of respondents Cabrera and Valino. In determining
the defamatory character of words used, the explanation of the respondent should not prevail
over what the utterances (or writing) convey to an ordinary listener (or reader). 18 Furthermore,
as held by this Court in United States v. Sotto19 :
[F]or the purpose of determining the meaning of any publication alleged to be libelous "that
construction must be adopted which will give to the matter such a meaning as is natural and
obvious in the plain and ordinary sense in which the public would naturally understand what
was uttered. The published matter alleged to be libelous must be construed as a whole. In
applying these rules to the language of an alleged libel, the court will disregard any subtle or
ingenious explanation offered by the publisher on being called to account. The whole
question being the effect the publication had upon the minds of the readers, and they not
having been assisted by the offered explanation in reading the article, it comes too late to
have the effect of removing the sting, if any there be, from the word used in the publication."
(Emphasis supplied.)
In finding that the phrase "Marcos crony" is derogatory, the trial court took judicial notice of
the fact that the said phrase, as understood in Philippine context, refers to an individual who
was the recipient of special and/or undeserved favors from the late President Marcos due to a
special closeness to the latter. This finding, which was upheld by the Court of Appeals in its
original Decision and was not tackled in the Amended Decision, is even supported by one of
the subject articles. In particular, the 10 November 1993 article marked as Exhibit A
mentioned that Benguet's former president, Jaime Ongpin, committed suicide after being
accused of being a Marcos-Romualdez crony.20 This statement highlights the disgrace
respondents wanted to associate with the term "crony," which was used to describe
Yuchengco in the very same article.
Even a cursory reading of the subject articles would show the intention of the writers to injure
the reputation, credit and virtue of Yuchengco and expose him to public hatred, discredit,
contempt and ridicule. The indirect manner in which the articles attributed the insults to
Yuchengco (e.g., "the money involved came from depositors, and not from Yuchengco") does
not lessen the culpability of the writers and publishers thereof, but instead makes the
defamatory imputations even more effective. Words calculated to induce suspicion are
sometimes more effective to destroy reputation than false charges directly made. Ironical and
metaphorical language is a favored vehicle for slander.21
In sum, this Court upholds the ruling of the trial court and the Court of Appeals that the
subject articles contain defamatory imputations. All of the following imputations: (1) the
labeling of Yuchengco as a Marcos crony, who took advantage of his relationship with the
former President to gain unwarranted benefits; (2) the insinuations that Yuchengco induced
others to disobey the lawful orders of SEC; (3) the portrayal of Yuchengco as an unfair and
uncaring employer due to the strike staged by the employees of Grepalife; (4) the accusation
that he induced RCBC to violate the provisions of the General Banking Act on DOSRI loans;
and (5) the tagging of Yuchengco as a "corporate raider" seeking to profit from something he
did not work for, all exposed Yuchengco to public contempt and ridicule, for they imputed to
him a condition that was dishonorable.
Identification
Defamatory words must refer to an ascertained or ascertainable person, and that person
must be the plaintiff. Statements are not libelous unless they refer to an ascertained or
ascertainable person.22 However, the obnoxious writing need not mention the libeled party by
name. It is sufficient if it is shown that the offended party is the person meant or alluded to.23
In the case at bar, all but one of the subject articles explicitly mention the name of petitioner
Yuchengco. The lone article, which does not mention Yuchengco at all, "Bank runs & RCBC
free loans,"24 nevertheless chided the owners of RCBC:
The owners or RCBC, therefore, should not be too liberal with their depositors' money. They
should also consider what fatal effects such a practice could inflict on the very system where
RCBC operates. The country, at this time, cannot afford another series of bank runs, nor a
run at RCBC.25
Identifying Yuchengco in said article by name was, however, not necessary, since the other
subject articles, published a few days before and after this one, had already referred to
Yuchengco as the owner of RCBC, sometimes explicitly ("Benguet started to bleed in 1989,
the year Yuchengco, who owns Rizal Commercial Banking Corp. [RCBC], took over as
chairman of the company"26 ), and sometimes implicitly ("the money involved came from
depositors, and not from Yuchengco"). While the defamation of a large group does not give
rise to a cause of action on the part of an individual, this is subject to exception when it can
be shown that he is the target of the defamatory matter.27 This Court therefore finds that
Yuchengco was clearly identified as the libeled party in the subject defamatory imputations.
Malice
Malice connotes ill will or spite and speaks not in response to duty but merely to injure the
reputation of the person defamed, and implies an intention to do ulterior and unjustifiable
harm.28 It is present when it is shown that the author of the libelous remarks made such
remarks with knowledge that it was false or with reckless disregard as to the truth or falsity
thereof.29
Malice, however, does not necessarily have to be proven. There are two types of malice -
malice in law and malice in fact.30 Malice in law is a presumption of law. It dispenses with the
proof of malice when words that raise the presumption are shown to have been uttered. It is
also known as constructive malice, legal malice, or implied malice.31 On the other hand,
malice in fact is a positive desire and intention to annoy and injure. It may denote that the
defendant was actuated by ill will or personal spite. It is also called express malice, actual
malice, real malice, true malice, or particular malice.32
In this jurisdiction, malice in law is provided in Article 354 of the Revised Penal Code, which
also enumerates exceptions thereto:
Art. 354. Requirement of publicity. - Every defamatory imputation is presumed to be
malicious, even if it be true, if no good intention and justifiable motive for making it is shown,
except in the following cases:
1. A private communication made by any person to another in the performance of any legal,
moral or social duty; andcralawlibrary
2. A fair and true report, made in good faith, without any comments or remarks, of any
judicial, legislative or other official proceedings which are not of confidential nature, or of any
statement, report or speech delivered in said proceedings, or of any other act performed by
public officers in the exercise of their functions.
There is, thus, a presumption of malice in the case of every defamatory imputation, where
there is no showing of a good intention or justifiable motive for making such imputation.
The exceptions provided in Article 354 are also known as qualifiedly privileged
communications. The enumeration under said article is, however, not an exclusive list of
qualifiedly privileged communications since fair commentaries on matters of public interest
are likewise privileged.33 They are known as qualifiedly privileged communications, since they
are merely exceptions to the general rule requiring proof of actual malice in order that a
defamatory imputation may be held actionable. In other words, defamatory imputations
written or uttered during any of the three classes of qualifiedly privileged communications
enumerated above - (1) a private communication made by any person to another in the
performance of any legal, moral or social duty; (2) a fair and true report, made in good faith,
without any comments or remarks, of any judicial, legislative or other official proceedings
which are not of confidential nature, or of any statement, report or speech delivered in said
proceedings, or of any other act performed by public officers in the exercise of their functions;
and (3) fair commentaries on matters of public interest - may still be considered actionable if
actual malice is proven. This is in contrast with absolutely privileged communications,
wherein the imputations are not actionable, even if attended by actual malice:
A communication is said to be absolutely privileged when it is not actionable, even if its
author has acted in bad faith. This class includes statements made by members of Congress
in the discharge of their functions as such, official communications made by public officers in
the performance of their duties, and allegations or statements made by the parties or their
counsel in their pleadings or motions or during the hearing of judicial proceedings, as well as
the answers given by witnesses in reply to questions propounded to them, in the course of
said proceedings, provided that said allegations or statements are relevant to the issues, and
the answers are responsive or pertinent to the questions propounded to said witnesses. Upon
the other hand, conditionally or qualifiedly privileged communications are those which,
although containing defamatory imputations, would not be actionable unless made with
malice or bad faith.34
In the case at bar, both the trial court and the Court of Appeals found that the publication of
the subject articles was attended by actual malice:
In the instant case, there is preponderance of evidence showing that there exists malice in
fact in the writing and publication of the subject libelous articles.
As correctly found by the trial court, [petitioner] was able to show that [respondents] were
animated by a desire to inflict unjustifiable harm on his reputation as shown by the timing and
frequency of the publication of the defamatory articles. Further, as previously stated,
[respondents] failed to show that they had any good intention and justifiable motive for
composing and publishing the vicious and malicious accusations against [petitioner].
Moreover, [respondents] published or caused the publication of the subject defamatory
articles with reckless disregard as to the truth or falsity thereof. As previously stated, there is
no proof that the contents of the subject articles are true or that the respondents exercised a
reasonable degree of care before publishing the same. [Respondents] failed to present
evidence showing that they verified the truth of any of the subject articles, especially in light of
the categorical denial by [petitioner] of the accusations made against him.
[Respondents] did not exercise reasonable degree of care or good faith efforts to arrive at the
truth before publishing the subject defamatory articles. [Respondents] did not present any
competent evidence to establish the truth of their allegations against [petitioner]. There was
no showing that [respondents] made any attempt to talk to [petitioner] to verify the statements
contained in the defamatory articles, especially considering the gravity of the accusations
made against [petitioner]. At the very least, [respondents] should have exercised efforts to
talk to [petitioner] to clarify the issues and get his side. [Respondents'] failure to verify the
truth of the information from [petitioner] himself is in itself an evidence of their lack of bona
fide efforts to verify the accuracy of her information.
The incessant publication of the defamatory articles attacking the honor and reputation of
[petitioner] is also proof of [respondents'] malicious scheme to malign and defame the name,
honor and reputation of [petitioner]. As earlier pointed out, in a span of one (1) month,
[respondents] wrote and published and/or caused the publication of seven (7) libelous articles
against [petitioner] attacking his honor and reputation as a distinguished businessman,
philanthropist, his political inclination, and as an employer in his insurance company. In fact,
the presence of malice is made more evident by [respondents'] baseless and uncalled for
attack on the person of [petitioner] as an employer. As aptly noted by the trial court in the
assailed Decision:
"Also in one of the articles, herein plaintiff was portrayed as an unfair and uncaring employer
due to the strike staged by the employees of Grepalife suggesting that it was the [petitioner]
who was the cause, and of insinuating that if [petitioner's] group takes over control of Oriental,
it would experience the same labor problem as in Grepalife. The Court finds that
[respondents] failed to render an unbiased and fair report as to the real cause of the strike
except to lay the blame to [petitioner], without stating, much less describing, his participation
thereon, knowing fully well that Grepalife is an entity distinct from the plaintiff. In other words,
the labor policies implemented by Grepalife as regards its employees are obviously not that
of Yuchengco."
Such baseless and malicious accusation of [respondents] on [petitioner] only proves the
intention of the [respondents] in publishing the defamatory articles was not to present an
unbiased report on current issues but to launch a personal attack on the very person of
[petitioner].
As earlier explained, as correctly found by the trial court, even the timing of the publication of
these subject articles is highly suspicious inasmuch as the subject libelous articles came out
in the Manila Chronicle, a newspaper owned and under the control of [respondent] Coyiuto,
around November to December of 1993, a couple of months prior to the January stockholders
meeting of Oriental Corporation. From this, it is logical to conclude that the publication of the
subject defamatory articles defaming the good name and reputation of [petitioner] is but a
part of [a] grand scheme to create a negative image of [petitioner] so as to negatively affect
[petitioner's] credibility to the public, more particularly, to the then stockholders of Oriental
Corporation. Worth noting also is the fact that the subject articles did not only portray
[petitioner] in a bad light. Curiously, in these articles, [respondent] Coyiuto, a known rival of
[petitioner], was portrayed as the underdog, the "David" and [petitioner] as the "Goliath" in
their battle for control over Oriental Corporation. This does not escape the Court's attention.
These circumstances clearly indicate the presence of actual malice on the part of
[respondents] in the publication of the subject libelous articles.35 (Emphases supplied.)
When the Court of Appeals granted the Motion for Reconsideration, it did not touch upon its
earlier finding of actual malice on the part of respondents in publishing the subject articles.
Instead, the Court of Appeals merely held that the subject articles were fair commentaries on
matters of public interest, and thus fell within the scope of the third type of qualifiedly
privileged communications.
This was a glaring error on the part of the Court of Appeals. As discussed above, whereas
there is an absolute bar to an action in the case of absolutely privileged communication, the
same is not true with respect to qualifiedly privileged communication, wherein the law merely
raises a prima facie presumption in favor of the occasion. In the former, the freedom from
liability is absolute, regardless of the existence of actual malice, as contrasted with the
freedom in the latter, where it is conditioned on the want or absence of actual malice.
Conditionally or qualifiedly privileged communications are actionable when made with actual
malice.36
When malice in fact is proven, assertions and proofs that the libelous articles are qualifiedly
privileged communications are futile, since being qualifiedly privileged communications
merely prevents the presumption of malice from attaching to a defamatory imputation.
Neither is there any reason for this Court to reverse the findings of the trial court and the
Court of Appeals that there was actual malice on the part of the respondents. As held by the
courts a quo, Yuchengco was able to show by the attendant circumstances that respondents
were animated by a desire to inflict unjustifiable harm on his reputation, as shown by the
timing and frequency of the publication of the defamatory articles. The portrayal of then
Chronicle Publishing Chairman Coyiuto as an underdog and his rival Yuchengco as the
greedy Goliath in their battle for control over Oriental Corporation, taken with the timing of the
publication of these subject articles a couple of months prior to the January stockholders'
meeting of Oriental Corporation, clearly indicate that the articles constituted an orchestrated
attack to undermine the reputation of Yuchengco. Furthermore, respondents were shown to
have acted with reckless disregard as to the truth or falsity of the articles they published,
when they were unable to rebut the categorical denial by Yuchengco of the accusations made
against him, and his allegation that he was not approached by respondents for his side of the
stories before the publication thereof. Respondents' failure to present evidence showing that
they verified the truth of any of the subject articles is fatal to their cause. In In re: Emil P.
Jurado,37 this Court ruled that categorical denials of the truth of allegations in a publication
place the burden upon the party publishing it, either of proving the truth of the imputations or
of showing that the same was an honest mistake or error committed despite good efforts to
arrive at the truth. There is actual malice when there is either (1) knowledge of the
publication's falsity; or (2) reckless disregard of whether the contents of the publication were
false or not.38 Failure to even get the side of Yuchengco in the published articles clearly
constituted reckless disregard of the truth or falsity of said articles.
Finally, even if we assume for the sake of argument that actual malice was not proven in the
case at bar, we nevertheless cannot adhere to the finding of the Court of Appeals in the
Amended Decision that the subject articles were fair commentaries on matters of public
interest, and thus fell within the scope of the third type of qualifiedly privileged
communications.
In Philippine Journalists, Inc. (People's Journal) v. Theonen, 39 this Court adopted the
pronouncement in the United States Decision in Gertz v. Robert Welsch, Inc. 40 that, in order
to be considered as fair commentaries on matters of public interest, the individual to whom
the defamatory articles were imputed should either be a public officer or a public figure:
In Borjal v. Court of Appeals, we stated that "the enumeration under Art. 354 is not an
exclusive list of qualifiedly privileged communications since fair commentaries on matters of
public interest are likewise privileged. We stated that the doctrine of fair commentaries means
"that while in general every discreditable imputation publicly made is deemed false, because
every man is presumed innocent until his guilt is judicially proved, and every false imputation
is deemed malicious, nevertheless, when the discreditable imputation is directed against a
public person in his public capacity, it is not necessarily actionable. In order that such
discreditable imputation to a public official may be actionable, it must either be a false
allegation of fact or a comment based on a false supposition."
Again, this argument is unavailing to the petitioners. As we said, the respondent is a private
individual, and not a public official or public figure. We are persuaded by the reasoning of the
United States Supreme Court in Gertz v. Robert Welch, Inc., [418 U. S. 323 (1974)] that a
newspaper or broaster publishing defamatory falsehoods about an individual who is neither a
public official nor a public figure may not claim a constitutional privilege against liability, for
injury inflicted, even if the falsehood arose in a discussion of public interest. (Emphasis
supplied.)
Thus, in trying to prove that the subject articles delved on matters concerning public interest,
the Court of Appeals insisted that Yuchengco was a public official or public figure, who "must
not be too thin-skinned with reference to comment upon his official acts."41 The Court of
Appeals then noted that Yuchengco was, at the time of the Amended Decision, appointed as
a Presidential Adviser on Foreign Affairs with Cabinet rank, and proceeded to
enumerate42 the public positions held by Yuchengco through the years.
However, an examination of the subject articles reveals that the allegations therein pertain to
Yuchengco's private business endeavors and do not refer to his duties, functions and
responsibilities as a Philippine Ambassador to China and Japan, or to any of the other public
positions he occupied. A topic or story should not be considered a matter of public interest by
the mere fact that the person involved is a public officer, unless the said topic or story relates
to his functions as such. Assuming a public office is not tantamount to completely abdicating
one's right to privacy. Therefore, for the purpose of determining whether or not a topic is a
matter of public interest, Yuchengco cannot be considered a public officer.
Neither is Yuchengco a public figure. The above case Philippine Journalists continues to cite
the US case Gertz in describing who is a public figure:
More commonly, those classed as public figures have thrust themselves to the forefront of
particular public controversies in order to influence the resolution of the issues involved. In
either event, they invite attention and comment. Third, this would impose an additional
difficulty on trial court judges to decide which publications address issues of "general interest"
and which do not. Even if the foregoing generalities do not obtain in every instance, the
communications media are entitled to act on the assumption that public officials and public
figures have voluntarily exposed themselves to increased risk of injury from defamatory
falsehood concerning them. No such assumption is justified with respect to a private
individual. He has not accepted public office or assumed an "influential role in ordering
society." (Curtis Publishing Co. v. Butts, 388 U.S., at 164) He has relinquished no part of his
interest in the protection of his own good name, and consequently he has a more compelling
call on the courts for redress of injury inflicted by defamatory falsehood. Thus, private
individuals are not only more vulnerable to injury than public officials and public figures; they
are also more deserving of recovery.43 (Emphasis supplied.)
The records in the case at bar do not disclose any instance wherein Yuchengco had
voluntarily thrust himself to the forefront of particular public controversies in order to influence
the resolution of the issues involved. He cannot, therefore, be considered a public figure.
Since Yuchengco, the person defamed in the subject articles, is neither as public officer nor a
public figure, said articles cannot be considered as qualifiedly privileged communications
even if they deal with matters of public concern.
In view of the foregoing, this Court is constrained to grant the instant Petition and reinstate
the Decision of the trial court, as previously affirmed by the Court of Appeals in its original
Decision. This Court, however, finds the award of damages in the total amount of One
Hundred Million Pesos by the trial court to be rather excessive given the circumstances. This
Court, thus, further resolves to reduce the award of damages, as follows:
1. The damages for which Chronicle Publishing, Neil H. Cruz, Ernesto Tolentino, Noel
Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino and Rodney Diola
shall be jointly and severally liable under the first cause of action shall be reduced as follows:
A. The amount of moral damages shall be reduced from Ten Million Pesos (P10,000,000.00)
to Two Million Pesos (P2,000,000.00); andcralawlibrary
b. The amount of exemplary damages shall be reduced from Ten Million Pesos
(P10,000,000.00) to Five Hundred Thousand Pesos (P500,000.00);
2. The damages for which Roberto Coyuito, Jr. and Chronicle Publishing shall be jointly and
severally liable under the second cause of action shall be reduced as follows:
A. The amount of moral damages shall be reduced from Fifty Million Pesos (P50,000,000.00)
to Twenty-Five Million Pesos (P25,000,000.00); andcralawlibrary
b. The amount of exemplary damages shall be reduced from Thirty Million Pesos
(P30,000,000.00) Ten Million Pesos (P10,000,000.00).
WHEREFORE, the Petition is PARTIALLY GRANTED. The Amended Decision of the Court
of Appeals in CA-G.R. CV No. 76995 dated 28 August 2008, which reversed on Motion for
Reconsideration the 18 March 2008 Decision of the same Court is hereby REVERSED and
SET ASIDE. The Decision of the Regional Trial Court of Makati City in Civil Case No. 94-
1114 dated 8 November 2002 finding herein respondents liable for damages, is hereby
REINSTATED, but shall be MODIFIED to read as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:
1. On the First Cause of Action, ordering defendants Chronicle Publishing, Neil H. Cruz,
Ernesto Tolentino, Noel Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul
Valino and Rodney Diola to pay plaintiff Yuchengco, jointly and severally:

A. the amount of Two Million Pesos (P2,000,000.00) as moral damages; andcralawlibrary

b. the amount of Five Hundred Thousand Pesos (P500,000.00) as exemplary damages;

2. On the Second Cause of Action, ordering defendants Roberto Coyuito, Jr. and Chronicle
Publishing to pay plaintiff Yuchengco, jointly and severally:

A. the amount of Twenty-Five Million Pesos (P25,000,000.00) as moral damages;

andcralawlibrary

b. the amount of Ten Million Pesos (P10,000,000.00) as exemplary damages;

3. On the Third Cause of Action, ordering all defendants to pay plaintiff Yuchengco, jointly
and severally, the amount of One Million Pesos (P1,000,000.00) as attorney's fee and legal
costs.

Costs against respondents.