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G.R. No. L-23145 November 29, 1968 of Court.

of Court. The domiciliary administrator did not comply with the order, and on
February 11, 1964, the ancillary administrator petitioned the court to "issue
TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. an order declaring the certificate or certificates of stocks covering the 33,002
TAYAG, ancillary administrator-appellee, shares issued in the name of Idonah Slade Perkins by Benguet Consolidated,
vs. Inc., be declared [or] considered as lost."3
BENGUET CONSOLIDATED, INC., oppositor-appellant.
It is to be noted further that appellant Benguet Consolidated, Inc. admits
Cirilo F. Asperillo, Jr., for ancillary administrator-appellee. that "it is immaterial" as far as it is concerned as to "who is entitled to the
Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-appellant. possession of the stock certificates in question; appellant opposed the
FERNANDO, J.: petition of the ancillary administrator because the said stock certificates are
in existence, they are today in the possession of the domiciliary
Confronted by an obstinate and adamant refusal of the domiciliary
administrator, the County Trust Company, in New York, U.S.A...."4
administrator, the County Trust Company of New York, United States of
America, of the estate of the deceased Idonah Slade Perkins, who died in New It is its view, therefore, that under the circumstances, the stock certificates
York City on March 27, 1960, to surrender to the ancillary administrator in cannot be declared or considered as lost. Moreover, it would allege that there
the Philippines the stock certificates owned by her in a Philippine was a failure to observe certain requirements of its by-laws before new stock
corporation, Benguet Consolidated, Inc., to satisfy the legitimate claims of certificates could be issued. Hence, its appeal.
local creditors, the lower court, then presided by the Honorable Arsenio As was made clear at the outset of this opinion, the appeal lacks merit. The
Santos, now retired, issued on May 18, 1964, an order of this tenor: "After challenged order constitutes an emphatic affirmation of judicial authority
considering the motion of the ancillary administrator, dated February 11, sought to be emasculated by the wilful conduct of the domiciliary
1964, as well as the opposition filed by the Benguet Consolidated, Inc., the administrator in refusing to accord obedience to a court decree. How, then,
Court hereby (1) considers as lost for all purposes in connection with the can this order be stigmatized as illegal?
administration and liquidation of the Philippine estate of Idonah Slade
Perkins the stock certificates covering the 33,002 shares of stock standing in As is true of many problems confronting the judiciary, such a response was
her name in the books of the Benguet Consolidated, Inc., (2) orders said called for by the realities of the situation. What cannot be ignored is that
certificates cancelled, and (3) directs said corporation to issue new conduct bordering on wilful defiance, if it had not actually reached it, cannot
certificates in lieu thereof, the same to be delivered by said corporation to without undue loss of judicial prestige, be condoned or tolerated. For the law
either the incumbent ancillary administrator or to the Probate Division of this is not so lacking in flexibility and resourcefulness as to preclude such a
Court."1 solution, the more so as deeper reflection would make clear its being
buttressed by indisputable principles and supported by the strongest policy
From such an order, an appeal was taken to this Court not by the domiciliary considerations.
administrator, the County Trust Company of New York, but by the Philippine
corporation, the Benguet Consolidated, Inc. The appeal cannot possibly It can truly be said then that the result arrived at upheld and vindicated the
prosper. The challenged order represents a response and expresses a policy, honor of the judiciary no less than that of the country. Through this
to paraphrase Frankfurter, arising out of a specific problem, addressed to the challenged order, there is thus dispelled the atmosphere of contingent
attainment of specific ends by the use of specific remedies, with full and frustration brought about by the persistence of the domiciliary administrator
ample support from legal doctrines of weight and significance. to hold on to the stock certificates after it had, as admitted, voluntarily
submitted itself to the jurisdiction of the lower court by entering its
The facts will explain why. As set forth in the brief of appellant Benguet appearance through counsel on June 27, 1963, and filing a petition for relief
Consolidated, Inc., Idonah Slade Perkins, who died on March 27, 1960 in from a previous order of March 15, 1963.
New York City, left among others, two stock certificates covering 33,002
shares of appellant, the certificates being in the possession of the County Thus did the lower court, in the order now on appeal, impart vitality and
Trust Company of New York, which as noted, is the domiciliary administrator effectiveness to what was decreed. For without it, what it had been decided
of the estate of the deceased.2 Then came this portion of the appellant's brief: would be set at naught and nullified. Unless such a blatant disregard by the
"On August 12, 1960, Prospero Sanidad instituted ancillary administration domiciliary administrator, with residence abroad, of what was previously
proceedings in the Court of First Instance of Manila; Lazaro A. Marquez was ordained by a court order could be thus remedied, it would have entailed,
appointed ancillary administrator, and on January 22, 1963, he was insofar as this matter was concerned, not a partial but a well-nigh complete
substituted by the appellee Renato D. Tayag. A dispute arose between the paralysis of judicial authority.
domiciary administrator in New York and the ancillary administrator in the 1. Appellant Benguet Consolidated, Inc. did not dispute the power of the
Philippines as to which of them was entitled to the possession of the stock appellee ancillary administrator to gain control and possession of all assets of
certificates in question. On January 27, 1964, the Court of First Instance of the decedent within the jurisdiction of the Philippines. Nor could it. Such a
Manila ordered the domiciliary administrator, County Trust Company, to power is inherent in his duty to settle her estate and satisfy the claims of
"produce and deposit" them with the ancillary administrator or with the Clerk
local creditors.5 As Justice Tuason speaking for this Court made clear, it is a the decedent to the ancillary administrator in the Philippines, there was
"general rule universally recognized" that administration, whether principal nothing unreasonable or arbitrary in considering them as lost and requiring
or ancillary, certainly "extends to the assets of a decedent found within the the appellant to issue new certificates in lieu thereof. Thereby, the task
state or country where it was granted," the corollary being "that an incumbent under the law on the ancillary administrator could be discharged
administrator appointed in one state or country has no power over property and his responsibility fulfilled.
in another state or country."6
Any other view would result in the compliance to a valid judicial order being
It is to be noted that the scope of the power of the ancillary administrator made to depend on the uncontrolled discretion of the party or entity, in this
was, in an earlier case, set forth by Justice Malcolm. Thus: "It is often case domiciled abroad, which thus far has shown the utmost persistence in
necessary to have more than one administration of an estate. When a person refusing to yield obedience. Certainly, appellant would not be heard to
dies intestate owning property in the country of his domicile as well as in a contend in all seriousness that a judicial decree could be treated as a mere
foreign country, administration is had in both countries. That which is scrap of paper, the court issuing it being powerless to remedy its flagrant
granted in the jurisdiction of decedent's last domicile is termed the principal disregard.
administration, while any other administration is termed the ancillary
It may be admitted of course that such alleged loss as found by the lower
administration. The reason for the latter is because a grant of administration
court did not correspond exactly with the facts. To be more blunt, the quality
does not ex proprio vigore have any effect beyond the limits of the country in
of truth may be lacking in such a conclusion arrived at. It is to be
which it is granted. Hence, an administrator appointed in a foreign state has
remembered however, again to borrow from Frankfurter, "that fictions which
no authority in the [Philippines]. The ancillary administration is proper,
the law may rely upon in the pursuit of legitimate ends have played an
whenever a person dies, leaving in a country other than that of his last
important part in its development."11
domicile, property to be administered in the nature of assets of the deceased
liable for his individual debts or to be distributed among his heirs."7 Speaking of the common law in its earlier period, Cardozo could state fictions
"were devices to advance the ends of justice, [even if] clumsy and at times
It would follow then that the authority of the probate court to require that
offensive."12 Some of them have persisted even to the present, that eminent
ancillary administrator's right to "the stock certificates covering the 33,002
jurist, noting "the quasi contract, the adopted child, the constructive trust,
shares ... standing in her name in the books of [appellant] Benguet
all of flourishing vitality, to attest the empire of "as if" today."13 He likewise
Consolidated, Inc...." be respected is equally beyond question. For appellant
noted "a class of fictions of another order, the fiction which is a working tool
is a Philippine corporation owing full allegiance and subject to the
of thought, but which at times hides itself from view till reflection and
unrestricted jurisdiction of local courts. Its shares of stock cannot therefore
analysis have brought it to the light."14
be considered in any wise as immune from lawful court orders.
What cannot be disputed, therefore, is the at times indispensable role that
Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue8
fictions as such played in the law. There should be then on the part of the
finds application. "In the instant case, the actual situs of the shares of stock
appellant a further refinement in the catholicity of its condemnation of such
is in the Philippines, the corporation being domiciled [here]." To the force of
judicial technique. If ever an occasion did call for the employment of a legal
the above undeniable proposition, not even appellant is insensible. It does
fiction to put an end to the anomalous situation of a valid judicial order being
not dispute it. Nor could it successfully do so even if it were so minded.
disregarded with apparent impunity, this is it. What is thus most obvious is
2. In the face of such incontrovertible doctrines that argue in a rather that this particular alleged error does not carry persuasion.
conclusive fashion for the legality of the challenged order, how does
3. Appellant Benguet Consolidated, Inc. would seek to bolster the above
appellant, Benguet Consolidated, Inc. propose to carry the extremely heavy
contention by its invoking one of the provisions of its by-laws which would
burden of persuasion of precisely demonstrating the contrary? It would
set forth the procedure to be followed in case of a lost, stolen or destroyed
assign as the basic error allegedly committed by the lower court its
stock certificate; it would stress that in the event of a contest or the
"considering as lost the stock certificates covering 33,002 shares of Benguet
pendency of an action regarding ownership of such certificate or certificates
belonging to the deceased Idonah Slade Perkins, ..."9 More specifically,
of stock allegedly lost, stolen or destroyed, the issuance of a new certificate or
appellant would stress that the "lower court could not "consider as lost" the
certificates would await the "final decision by [a] court regarding the
stock certificates in question when, as a matter of fact, his Honor the trial
ownership [thereof]."15
Judge knew, and does know, and it is admitted by the appellee, that the said
stock certificates are in existence and are today in the possession of the Such reliance is misplaced. In the first place, there is no such occasion to
domiciliary administrator in New York."10 apply such by-law. It is admitted that the foreign domiciliary administrator
did not appeal from the order now in question. Moreover, there is likewise the
There may be an element of fiction in the above view of the lower court. That
express admission of appellant that as far as it is concerned, "it is immaterial
certainly does not suffice to call for the reversal of the appealed order. Since
... who is entitled to the possession of the stock certificates ..." Even if such
there is a refusal, persistently adhered to by the domiciliary administrator in
were not the case, it would be a legal absurdity to impart to such a provision
New York, to deliver the shares of stocks of appellant corporation owned by
conclusiveness and finality. Assuming that a contrariety exists between the often within the ken of the judiciary than the other two coordinate branches.
above by-law and the command of a court decree, the latter is to be followed. It institutes the appropriate court action to enforce its right. Correlatively, it
is not immune from judicial control in those instances, where a duty under
It is understandable, as Cardozo pointed out, that the Constitution overrides
the law as ascertained in an appropriate legal proceeding is cast upon it.
a statute, to which, however, the judiciary must yield deference, when
appropriately invoked and deemed applicable. It would be most highly To assert that it can choose which court order to follow and which to
unorthodox, however, if a corporate by-law would be accorded such a high disregard is to confer upon it not autonomy which may be conceded but
estate in the jural order that a court must not only take note of it but yield to license which cannot be tolerated. It is to argue that it may, when so minded,
its alleged controlling force. overrule the state, the source of its very existence; it is to contend that what
any of its governmental organs may lawfully require could be ignored at will.
The fear of appellant of a contingent liability with which it could be saddled
So extravagant a claim cannot possibly merit approval.
unless the appealed order be set aside for its inconsistency with one of its by-
laws does not impress us. Its obedience to a lawful court order certainly 5. One last point. In Viloria v. Administrator of Veterans Affairs,22 it was
constitutes a valid defense, assuming that such apprehension of a possible shown that in a guardianship proceedings then pending in a lower court, the
court action against it could possibly materialize. Thus far, nothing in the United States Veterans Administration filed a motion for the refund of a
circumstances as they have developed gives substance to such a fear. certain sum of money paid to the minor under guardianship, alleging that
Gossamer possibilities of a future prejudice to appellant do not suffice to the lower court had previously granted its petition to consider the deceased
nullify the lawful exercise of judicial authority. father as not entitled to guerilla benefits according to a determination arrived
at by its main office in the United States. The motion was denied. In seeking
4. What is more the view adopted by appellant Benguet Consolidated, Inc. is
a reconsideration of such order, the Administrator relied on an American
fraught with implications at war with the basic postulates of corporate
federal statute making his decisions "final and conclusive on all questions of
law or fact" precluding any other American official to examine the matter
We start with the undeniable premise that, "a corporation is an artificial anew, "except a judge or judges of the United States court."23 Reconsideration
being created by operation of law...."16 It owes its life to the state, its birth was denied, and the Administrator appealed.
being purely dependent on its will. As Berle so aptly stated: "Classically, a
In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus:
corporation was conceived as an artificial person, owing its existence through
"We are of the opinion that the appeal should be rejected. The provisions of
creation by a sovereign power."17 As a matter of fact, the statutory language
the U.S. Code, invoked by the appellant, make the decisions of the U.S.
employed owes much to Chief Justice Marshall, who in the Dartmouth
Veterans' Administrator final and conclusive when made on claims property
College decision defined a corporation precisely as "an artificial being,
submitted to him for resolution; but they are not applicable to the present
invisible, intangible, and existing only in contemplation of law."18
case, where the Administrator is not acting as a judge but as a litigant. There
The well-known authority Fletcher could summarize the matter thus: "A is a great difference between actions against the Administrator (which must
corporation is not in fact and in reality a person, but the law treats it as be filed strictly in accordance with the conditions that are imposed by the
though it were a person by process of fiction, or by regarding it as an Veterans' Act, including the exclusive review by United States courts), and
artificial person distinct and separate from its individual stockholders.... It those actions where the Veterans' Administrator seeks a remedy from our
owes its existence to law. It is an artificial person created by law for certain courts and submits to their jurisdiction by filing actions therein. Our
specific purposes, the extent of whose existence, powers and liberties is fixed attention has not been called to any law or treaty that would make the
by its charter."19 Dean Pound's terse summary, a juristic person, resulting findings of the Veterans' Administrator, in actions where he is a party,
from an association of human beings granted legal personality by the state, conclusive on our courts. That, in effect, would deprive our tribunals of
puts the matter neatly.20 judicial discretion and render them mere subordinate instrumentalities of the
There is thus a rejection of Gierke's genossenchaft theory, the basic theme of Veterans' Administrator."
which to quote from Friedmann, "is the reality of the group as a social and It is bad enough as the Viloria decision made patent for our judiciary to
legal entity, independent of state recognition and concession."21 A corporation accept as final and conclusive, determinations made by foreign governmental
as known to Philippine jurisprudence is a creature without any existence agencies. It is infinitely worse if through the absence of any coercive power by
until it has received the imprimatur of the state according to law. It is our courts over juridical persons within our jurisdiction, the force and
logically inconceivable therefore that it will have rights and privileges of a effectivity of their orders could be made to depend on the whim or caprice of
higher priority than that of its creator. More than that, it cannot legitimately alien entities. It is difficult to imagine of a situation more offensive to the
refuse to yield obedience to acts of its state organs, certainly not excluding dignity of the bench or the honor of the country.
the judiciary, whenever called upon to do so.
Yet that would be the effect, even if unintended, of the proposition to which
As a matter of fact, a corporation once it comes into being, following appellant Benguet Consolidated seems to be firmly committed as shown by
American law still of persuasive authority in our jurisdiction, comes more its failure to accept the validity of the order complained of; it seeks its
reversal. Certainly we must at all pains see to it that it does not succeed. The 1978, over three (3) parcels of land situated in Los Baños, Laguna. During
deplorable consequences attendant on appellant prevailing attest to the the existence of the mortgage, AGRIX went bankrupt. It was for the expressed
necessity of negative response from us. That is what appellant will get. purpose of salvaging this and the other Agrix companies that the
aforementioned decree was issued by President Marcos.
That is all then that this case presents. It is obvious why the appeal cannot
succeed. It is always easy to conjure extreme and even oppressive Pursuant thereto, the private respondent filed a claim with the AGRIX Claims
possibilities. That is not decisive. It does not settle the issue. What carries Committee for the payment of its loan credit. In the meantime, the New Agrix,
weight and conviction is the result arrived at, the just solution obtained, Inc. and the National Development Company, petitioners herein, invoking
grounded in the soundest of legal doctrines and distinguished by its Sec. 4 (1) of the decree, filed a petition with the Regional Trial Court of
correspondence with what a sense of realism requires. For through the Calamba, Laguna, for the cancellation of the mortgage lien in favor of the
appealed order, the imperative requirement of justice according to law is private respondent. For its part, the private respondent took steps to
satisfied and national dignity and honor maintained. extrajudicially foreclose the mortgage, prompting the petitioners to file a
second case with the same court to stop the foreclosure. The two cases were
WHEREFORE, the appealed order of the Honorable Arsenio Santos, the
Judge of the Court of First Instance, dated May 18, 1964, is affirmed. With
costs against oppositor-appelant Benguet Consolidated, Inc. After the submission by the parties of their respective pleadings, the trial
court rendered the impugned decision. Judge Francisco Ma. Guerrero
Makalintal, Zaldivar and Capistrano, JJ., concur.
annulled not only the challenged provision, viz., Sec. 4 (1), but the entire
Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez and Castro, JJ., concur in the
Pres. Decree No. 1717 on the grounds that: (1) the presidential exercise of
legislative power was a violation of the principle of separation of powers; (2)
the law impaired the obligation of contracts; and (3) the decree violated the
[G.R. Nos. 84132-33 : December 10, 1990.] equal protection clause. The motion for reconsideration of this decision
having been denied, the present petition was filed.: rd
192 SCRA 257
The petition was originally assigned to the Third Division of this Court but
NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX, INC., because of the constitutional questions involved it was transferred to the
Petitioners, vs. PHILIPPINE VETERANS BANK, THE EX-OFFICIO Court en banc. On August 30, 1988, the Court granted the petitioner's
SHERIFF and GODOFREDO QUILING, in his capacity as Deputy Sheriff prayer for a temporary restraining order and instructed the respondents to
of Calamba, Laguna, Respondents. cease and desist from conducting a public auction sale of the lands in
question. After the Solicitor General and the private respondent had filed
their comments and the petitioners their reply, the Court gave due course to
DECISION the petition and ordered the parties to file simultaneous memoranda. Upon
compliance by the parties, the case was deemed submitted.
CRUZ, J.: The petitioners contend that the private respondent is now estopped from
contesting the validity of the decree. In support of this contention, it cites the
recent case of Mendoza v. Agrix Marketing, Inc., 1 where the constitutionality
This case involves the constitutionality of a presidential decree which, like all of Pres. Decree No. 1717 was also raised but not resolved. The Court, after
other issuances of President Marcos during his regime, was at that time noting that the petitioners had already filed their claims with the AGRIX
regarded as sacrosanct. It is only now, in a freer atmosphere, that his acts Claims Committee created by the decree, had simply dismissed the petition
are being tested by the touchstone of the fundamental law that even then on the ground of estoppel.
was supposed to limit presidential action.: rd The petitioners stress that in the case at bar the private respondent also
The particular enactment in question is Pres. Decree No. 1717, which invoked the provisions of Pres. Decree No. 1717 by filing a claim with the
ordered the rehabilitation of the Agrix Group of Companies to be AGRIX Claims Committee. Failing to get results, it sought to foreclose the
administered mainly by the National Development Company. The law real estate mortgage executed by AGRIX in its favor, which had been
outlined the procedure for filing claims against the Agrix companies and extinguished by the decree. It was only when the petitioners challenged the
created a Claims Committee to process these claims. Especially relevant to foreclosure on the basis of Sec. 4 (1) of the decree, that the private
this case, and noted at the outset, is Sec. 4(1) thereof providing that "all respondent attacked the validity of the provision. At that stage, however,
mortgages and other liens presently attaching to any of the assets of the consistent with Mendoza, the private respondent was already estopped from
dissolved corporations are hereby extinguished." questioning the constitutionality of the decree.
Earlier, the Agrix Marketing, Inc. (AGRIX) had executed in favor of private The Court does not agree that the principle of estoppel is applicable.
respondent Philippine Veterans Bank a real estate mortgage dated July 7,
It is not denied that the private respondent did file a claim with the AGRIX A legislative act based on the police power requires the concurrence of a
Claims Committee pursuant to this decree. It must be noted, however, that lawful subject and a lawful method. In more familiar words, a) the interests
this was done in 1980, when President Marcos was the absolute ruler of this of the public generally, as distinguished from those of a particular class,
country and his decrees were the absolute law. Any judicial challenge to should justify the interference of the state; and b) the means employed are
them would have been futile, not to say foolhardy. The private respondent, no reasonably necessary for the accomplishment of the purpose and not unduly
less than the rest of the nation, was aware of that reality and knew it had no oppressive upon individuals. 2
choice under the circumstances but to conform.: nad
Applying these criteria to the case at bar, the Court finds first of all that the
It is true that there were a few venturesome souls who dared to question the interests of the public are not sufficiently involved to warrant the interference
dictator's decisions before the courts of justice then. The record will show, of the government with the private contracts of AGRIX. The decree speaks
however, that not a single act or issuance of President Marcos was ever vaguely of the "public, particularly the small investors," who would be
declared unconstitutional, not even by the highest court, as long as he was in prejudiced if the corporation were not to be assisted. However, the record
power. To rule now that the private respondent is estopped for having abided does not state how many there are of such investors, and who they are, and
with the decree instead of boldly assailing it is to close our eyes to a cynical why they are being preferred to the private respondent and other creditors of
fact of life during that repressive time. AGRIX with vested property rights.:-cralaw
This case must be distinguished from Mendoza, where the petitioners, after The public interest supposedly involved is not identified or explained. It has
filing their claims with the AGRIX Claims Committee, received in settlement not been shown that by the creation of the New Agrix, Inc. and the extinction
thereof shares of stock valued at P40,000.00 without protest or reservation. of the property rights of the creditors of AGRIX, the interests of the public as
The herein private respondent has not been paid a single centavo on its a whole, as distinguished from those of a particular class, would be promoted
claim, which was kept pending for more than seven years for alleged lack of or protected. The indispensable link to the welfare of the greater number has
supporting papers. Significantly, the validity of that claim was not questioned not been established. On the contrary, it would appear that the decree was
by the petitioner when it sought to restrain the extrajudicial foreclosure of issued only to favor a special group of investors who, for reasons not given,
the mortgage by the private respondent. The petitioner limited itself to the have been preferred to the legitimate creditors of AGRIX.
argument that the private respondent was estopped from questioning the
Assuming there is a valid public interest involved, the Court still finds that
decree because of its earlier compliance with its provisions.
the means employed to rehabilitate AGRIX fall far short of the requirement
Independently of these observations, there is the consideration that an that they shall not be unduly oppressive. The oppressiveness is patent on the
affront to the Constitution cannot be allowed to continue existing simply face of the decree. The right to property in all mortgages, liens, interests,
because of procedural inhibitions that exalt form over substance. penalties and charges owing to the creditors of AGRIX is arbitrarily
destroyed. No consideration is paid for the extinction of the mortgage rights.
The Court is especially disturbed by Section 4(1) of the decree, quoted above,
The accrued interests and other charges are simply rejected by the decree.
extinguishing all mortgages and other liens attaching to the assets of AGRIX.
The right to property is dissolved by legislative fiat without regard to the
It also notes, with equal concern, the restriction in Subsection (ii) thereof that
private interest violated and, worse, in favor of another private interest.
all "unsecured obligations shall not bear interest" and in Subsection (iii) that
"all accrued interests, penalties or charges as of date hereof pertaining to the A mortgage lien is a property right derived from contract and so comes under
obligations, whether secured or unsecured, shall not be recognized." the protection of the Bill of Rights. So do interests on loans, as well as
penalties and charges, which are also vested rights once they accrue. Private
These provisions must be read with the Bill of Rights, where it is clearly
property cannot simply be taken by law from one person and given to
provided in Section 1 that "no person shall be deprived of life, liberty or
another without compensation and any known public purpose. This is plain
property without due course of law nor shall any person be denied the equal
arbitrariness and is not permitted under the Constitution.
protection of the law" and in Section 10 that "no law impairing the obligation
of contracts shall be passed." And not only is there arbitrary taking, there is discrimination as well. In
extinguishing the mortgage and other liens, the decree lumps the secured
In defending the decree, the petitioners argue that property rights, like all
creditors with the unsecured creditors and places them on the same level in
rights, are subject to regulation under the police power for the promotion of
the prosecution of their respective claims. In this respect, all of them are
the common welfare. The contention is that this inherent power of the state
considered unsecured creditors. The only concession given to the secured
may be exercised at any time for this purpose so long as the taking of the
creditors is that their loans are allowed to earn interest from the date of the
property right, even if based on contract, is done with due process of law.
decree, but that still does not justify the cancellation of the interests earned
This argument is an over-simplification of the problem before us. The police before that date. Such interests, whether due to the secured or the
power is not a panacea for all constitutional maladies. Neither does its mere unsecured creditors, are all extinguished by the decree. Even assuming such
invocation conjure an instant and automatic justification for every act of the cancellation to be valid, we still cannot see why all kinds of creditors,
government depriving a person of his life, liberty or property. regardless of security, are treated alike.
Under the equal protection clause, all persons or things similarly situated argument that the amendment in Section 110 of the Labor Code was a
must be treated alike, both in the privileges conferred and the obligations proper exercise of the police power.: nad
imposed. Conversely, all persons or things differently situated should be
The Court reaffirms and applies that ruling in the case at bar.
treated differently. In the case at bar, persons differently situated are
similarly treated, in disregard of the principle that there should be equality Our finding, in sum, is that Pres. Decree No. 1717 is an invalid exercise of
only among equals.- nad the police power, not being in conformity with the traditional requirements of
a lawful subject and a lawful method. The extinction of the mortgage and
One may also well wonder why AGRIX was singled out for government help,
other liens and of the interest and other charges pertaining to the legitimate
among other corporations where the stockholders or investors were also
creditors of AGRIX constitutes taking without due process of law, and this is
swindled. It is not clear why other companies entitled to similar concern were
compounded by the reduction of the secured creditors to the category of
not similarly treated. And surely, the stockholders of the private respondent,
unsecured creditors in violation of the equal protection clause. Moreover, the
whose mortgage lien had been cancelled and legitimate claims to accrued
new corporation, being neither owned nor controlled by the Government,
interests rejected, were no less deserving of protection, which they did not
should have been created only by general and not special law. And insofar as
get. The decree operated, to use the words of a celebrated case, 3 "with an
the decree also interferes with purely private agreements without any
evil eye and an uneven hand."
demonstrated connection with the public interest, there is likewise an
On top of all this, New Agrix, Inc. was created by special decree impairment of the obligation of the contract.
notwithstanding the provision of Article XIV, Section 4 of the 1973
With the above pronouncements, we feel there is no more need to rule on the
Constitution, then in force, that:
authority of President Marcos to promulgate Pres. Decree No. 1717 under
SEC. 4. The Batasang Pambansa shall not, except by general law, provide for Amendment No. 6 of the 1973 Constitution. Even if he had such authority,
the formation, organization, or regulation of private corporations, unless the decree must fall just the same because of its violation of the Bill of
such corporations are owned or controlled by the Government or any Rights.
subdivision or instrumentality thereof. 4
WHEREFORE, the petition is DISMISSED. Pres. Decree No. 1717 is declared
The new corporation is neither owned nor controlled by the government. The UNCONSTITUTIONAL. The temporary restraining order dated August 30,
National Development Corporation was merely required to extend a loan of 1988, is LIFTED. Costs against the petitioners.- nad
not more than P10,000,000.00 to New Agrix, Inc. Pending payment thereof,
NDC would undertake the management of the corporation, but with the
obligation of making periodic reports to the Agrix board of directors. After Fernan (C.J.), Narvasa, Gutierrez, Jr., Paras, Gancayco Padilla, Bidin,
payment of the loan, the said board can then appoint its own management. Sarmiento, Griño-Aquino, Medialdea and Regalado, JJ., concur.
The stocks of the new corporation are to be issued to the old investors and Melencio-Herrera, J., In the result. In Dumlao v. COMELEC, 95 SCRA
stockholders of AGRIX upon proof of their claims against the abolished 392 (1980), a portion of the second paragraph of section 4 of Batas
corporation. They shall then be the owners of the new corporation. New Pambansa Blg. 52 was declared null and void for being
Agrix, Inc. is entirely private and so should have been organized under the unconstitutional.
Corporation Law in accordance with the above-cited constitutional provision.
Feliciano, J., is on leave.
The Court also feels that the decree impairs the obligation of the contract
between AGRIX and the private respondent without justification. While it is
true that the police power is superior to the impairment clause, the principle G.R. No. 120077 October 13, 2000
will apply only where the contract is so related to the public welfare that it
will be considered congenitally susceptible to change by the legislature in the THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners,
interest of the greater number. 5 Most present-day contracts are of that vs.
nature. But as already observed, the contracts of loan and mortgage executed NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J.
by AGRIX are purely private transactions and have not been shown to be DIOSANA AND MARCELO G. SANTOS, respondents.
affected with public interest. There was therefore no warrant to amend their PARDO, J.:
provisions and deprive the private respondent of its vested property rights.
The case before the Court is a petition for certiorari1 to annul the following
It is worth noting that only recently in the case of the Development Bank of orders of the National Labor Relations Commission (hereinafter referred to as
the Philippines v. NLRC, 6 we sustained the preference in payment of a "NLRC") for having been issued without or with excess jurisdiction and with
mortgage creditor as against the argument that the claims of laborers should grave abuse of discretion:2
take precedence over all other claims, including those of the government. In
arriving at this ruling, the Court recognized the mortgage lien as a property (1) Order of May 31, 1993.3 Reversing and setting aside its
right protected by the due process and contract clauses notwithstanding the earlier resolution of August 28, 1992.4 The questioned order
declared that the NLRC, not the Philippine Overseas On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a
Employment Administration (hereinafter referred to as ready to sign employment contract to respondent Santos. Mr. Henk advised
"POEA"), had jurisdiction over private respondent's respondent Santos that if the contract was acceptable, to return the same to
complaint; Mr. Henk in Manila, together with his passport and two additional pictures
for his visa to China.
(2) Decision of December 15, 1994.5 Directing petitioners to
jointly and severally pay private respondent twelve thousand On May 30, 1988, respondent Santos resigned from the Mazoon Printing
and six hundred dollars (US$ 12,600.00) representing Press, effective June 30, 1988, under the pretext that he was needed at home
salaries for the unexpired portion of his contract; three to help with the family's piggery and poultry business.
thousand six hundred dollars (US$3,600.00) as extra four
On June 4, 1988, respondent Santos wrote the Palace Hotel and
months salary for the two (2) year period of his contract,
acknowledged Mr. Henk's letter. Respondent Santos enclosed four (4) signed
three thousand six hundred dollars (US$3,600.00) as "14th
copies of the employment contract (dated June 4, 1988) and notified them
month pay" or a total of nineteen thousand and eight
that he was going to arrive in Manila during the first week of July 1988.
hundred dollars (US$19,800.00) or its peso equivalent and
attorney's fees amounting to ten percent (10%) of the total The employment contract of June 4, 1988 stated that his employment would
award; and commence September 1, 1988 for a period of two years.12 It provided for a
monthly salary of nine hundred dollars (US$900.00) net of taxes, payable
(3) Order of March 30, 1995.6 Denying the motion for
fourteen (14) times a year.13
reconsideration of the petitioners.
On June 30, 1988, respondent Santos was deemed resigned from the Mazoon
In May, 1988, private respondent Marcelo Santos (hereinafter referred to as
Printing Press.
"Santos") was an overseas worker employed as a printer at the Mazoon
Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was On July 1, 1988, respondent Santos arrived in Manila.
directly hired by the Palace Hotel, Beijing, People's Republic of China and On November 5, 1988, respondent Santos left for Beijing, China. He started
later terminated due to retrenchment. to work at the Palace Hotel.14
Petitioners are the Manila Hotel Corporation (hereinafter referred to as Subsequently, respondent Santos signed an amended "employment
"MHC") and the Manila Hotel International Company, Limited (hereinafter agreement" with the Palace Hotel, effective November 5, 1988. In the
referred to as "MHICL"). contract, Mr. Shmidt represented the Palace Hotel. The Vice President
When the case was filed in 1990, MHC was still a government-owned and (Operations and Development) of petitioner MHICL Miguel D. Cergueda
controlled corporation duly organized and existing under the laws of the signed the employment agreement under the word "noted".
Philippines. From June 8 to 29, 1989, respondent Santos was in the Philippines on
MHICL is a corporation duly organized and existing under the laws of Hong vacation leave. He returned to China and reassumed his post on July 17,
Kong.7 MHC is an "incorporator" of MHICL, owning 50% of its capital stock.8 1989.
By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna
Company Limited), MHICL10 trained the personnel and staff of the Palace suggested in a handwritten note that respondent Santos be given one (1)
Hotel at Beijing, China. month notice of his release from employment.
Now the facts. On August 10, 1989, the Palace Hotel informed respondent Santos by letter
signed by Mr. Shmidt that his employment at the Palace Hotel print shop
During his employment with the Mazoon Printing Press in the Sultanate of
would be terminated due to business reverses brought about by the political
Oman, respondent Santos received a letter dated May 2, 1988 from Mr.
upheaval in China.15 We quote the letter:16
Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr.
Schmidt informed respondent Santos that he was recommended by one "After the unfortunate happenings in China and especially
Nestor Buenio, a friend of his. Beijing (referring to Tiannamen Square incidents), our
business has been severely affected. To reduce expenses, we
Mr. Shmidt offered respondent Santos the same position as printer, but with
will not open/operate printshop for the time being.
a higher monthly salary and increased benefits. The position was slated to
open on October 1, 1988.11 "We sincerely regret that a decision like this has to be made,
but rest assured this does in no way reflect your past
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his
performance which we found up to our expectations."
acceptance of the offer.
"Should a turnaround in the business happen, we will "c) P40,000.00 as exemplary damages; and
contact you directly and give you priority on future
"d) Ten (10) percent of the total award as attorney's
On September 5, 1989, the Palace Hotel terminated the employment of
respondent Santos and paid all benefits due him, including his plane fare
back to the Philippines. On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA,
not the NLRC had jurisdiction over the case.
On October 3, 1989, respondent Santos was repatriated to the Philippines.
On August 28, 1992, the NLRC promulgated a resolution, stating:20
On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave
wrote Mr. Shmidt, demanding full compensation pursuant to the employment "WHEREFORE, let the appealed Decision be, as it is hereby,
agreement. declared null and void for want of jurisdiction. Complainant
is hereby enjoined to file his complaint with the POEA.
On November 11, 1989, Mr. Shmidt replied, to wit:17
His service with the Palace Hotel, Beijing was not abruptly
terminated but we followed the one-month notice clause and On September 18, 1992, respondent Santos moved for reconsideration of the
Mr. Santos received all benefits due him. afore-quoted resolution. He argued that the case was not cognizable by the
POEA as he was not an "overseas contract worker."21
"For your information the Print Shop at the Palace Hotel is
still not operational and with a low business outlook, On May 31, 1993, the NLRC granted the motion and reversed itself. The
retrenchment in various departments of the hotel is going on NLRC directed Labor Arbiter Emerson Tumanon to hear the case on the
which is a normal management practice to control costs. question of whether private respondent was retrenched or dismissed.22
"When going through the latest performance ratings, please On January 13, 1994, Labor Arbiter Tumanon completed the proceedings
also be advised that his performance was below average and based on the testimonial and documentary evidence presented to and heard
a Chinese National who is doing his job now shows a better by him.23
approach. Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the
"In closing, when Mr. Santos received the letter of notice, he National Capital Region, Arbitration Branch, and the case was transferred to
hardly showed up for work but still enjoyed free Labor Arbiter Jose G. de Vera.24
accommodation/laundry/meals up to the day of his On November 25, 1994, Labor Arbiter de Vera submitted his report.25 He
departure." found that respondent Santos was illegally dismissed from employment and
On February 20, 1990, respondent Santos filed a complaint for illegal recommended that he be paid actual damages equivalent to his salaries for
dismissal with the Arbitration Branch, National Capital Region, National the unexpired portion of his contract.26
Labor Relations Commission (NLRC). He prayed for an award of nineteen On December 15, 1994, the NLRC ruled in favor of private respondent, to
thousand nine hundred and twenty three dollars (US$19,923.00) as actual wit:27
damages, forty thousand pesos (P40,000.00) as exemplary damages and
attorney's fees equivalent to 20% of the damages prayed for. The complaint "WHEREFORE, finding that the report and recommendations
named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents. of Arbiter de Vera are supported by substantial evidence,
judgment is hereby rendered, directing the respondents to
The Palace Hotel and Mr. Shmidt were not served with summons and neither jointly and severally pay complainant the following computed
participated in the proceedings before the Labor Arbiter.18 contractual benefits: (1) US$12,600.00 as salaries for the
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case unexpired portion of the parties' contract; (2) US$3,600.00
against petitioners, thus:19 as extra four (4) months salary for the two (2) years period
(sic) of the parties' contract; (3) US$3,600.00 as "14th month
"WHEREFORE, judgment is hereby rendered:
pay" for the aforesaid two (2) years contract stipulated by the
"1. directing all the respondents to pay complainant jointly parties or a total of US$19,800.00 or its peso equivalent,
and severally; plus (4) attorney's fees of 10% of complainant's total award.
"a) $20,820 US dollars or its equivalent in Philippine "SO ORDERED."
currency as unearned salaries;
On February 2, 1995, petitioners filed a motion for reconsideration arguing
"b) P50,000.00 as moral damages; that Labor Arbiter de Vera's recommendation had no basis in law and in
On March 30, 1995, the NLRC denied the motion for reconsideration.29 in the Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk
are non-residents of the Philippines.
Hence, this petition.30
No power to determine applicable law. — Neither can an intelligent decision
On October 9, 1995, petitioners filed with this Court an urgent motion for the
be made as to the law governing the employment contract as such was
issuance of a temporary restraining order and/or writ of preliminary
perfected in foreign soil. This calls to fore the application of the principle of
injunction and a motion for the annulment of the entry of judgment of the
lex loci contractus (the law of the place where the contract was made).38
NLRC dated July 31, 1995.31
The employment contract was not perfected in the Philippines. Respondent
On November 20, 1995, the Court denied petitioner's urgent motion. The
Santos signified his acceptance by writing a letter while he was in the
Court required respondents to file their respective comments, without giving
Republic of Oman. This letter was sent to the Palace Hotel in the People's
due course to the petition.32
Republic of China.
On March 8, 1996, the Solicitor General filed a manifestation stating that
No power to determine the facts. — Neither can the NLRC determine the facts
after going over the petition and its annexes, they can not defend and sustain
surrounding the alleged illegal dismissal as all acts complained of took place
the position taken by the NLRC in its assailed decision and orders. The
in Beijing, People's Republic of China. The NLRC was not in a position to
Solicitor General prayed that he be excused from filing a comment on behalf
determine whether the Tiannamen Square incident truly adversely affected
of the NLRC33
operations of the Palace Hotel as to justify respondent Santos' retrenchment.
On April 30,1996, private respondent Santos filed his comment.34
Principle of effectiveness, no power to execute decision. — Even assuming that
On June 26, 1996, the Court granted the manifestation of the Solicitor a proper decision could be reached by the NLRC, such would not have any
General and required the NLRC to file its own comment to the petition.35 binding effect against the employer, the Palace Hotel. The Palace Hotel is a
On January 7, 1997, the NLRC filed its comment. corporation incorporated under the laws of China and was not even served
with summons. Jurisdiction over its person was not acquired.
The petition is meritorious.
This is not to say that Philippine courts and agencies have no power to solve
I. Forum Non-Conveniens controversies involving foreign employers. Neither are we saying that we do
The NLRC was a seriously inconvenient forum. not have power over an employment contract executed in a foreign country. If
Santos were an "overseas contract worker", a Philippine forum, specifically the
We note that the main aspects of the case transpired in two foreign POEA, not the NLRC, would protect him.39 He is not an "overseas contract
jurisdictions and the case involves purely foreign elements. The only link that worker" a fact which he admits with conviction.40
the Philippines has with the case is that respondent Santos is a Filipino
citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases Even assuming that the NLRC was the proper forum, even on the merits, the
involving our citizens can be tried here. NLRC's decision cannot be sustained.

The employment contract. — Respondent Santos was hired directly by the II. MHC Not Liable
Palace Hotel, a foreign employer, through correspondence sent to the Even if we assume two things: (1) that the NLRC had jurisdiction over the
Sultanate of Oman, where respondent Santos was then employed. He was case, and (2) that MHICL was liable for Santos' retrenchment, still MHC, as a
hired without the intervention of the POEA or any authorized recruitment separate and distinct juridical entity cannot be held liable.
agency of the government.36
True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its
Under the rule of forum non conveniens, a Philippine court or agency may capital stock. However, this is not enough to pierce the veil of corporate
assume jurisdiction over the case if it chooses to do so provided: (1) that the fiction between MHICL and MHC.
Philippine court is one to which the parties may conveniently resort to; (2)
that the Philippine court is in a position to make an intelligent decision as to Piercing the veil of corporate entity is an equitable remedy. It is resorted to
the law and the facts; and (3) that the Philippine court has or is likely to have when the corporate fiction is used to defeat public convenience, justify
power to enforce its decision.37 The conditions are unavailing in the case at wrong, protect fraud or defend a crime. 41 It is done only when a corporation
bar. is a mere alter ego or business conduit of a person or another corporation.

Not Convenient. — We fail to see how the NLRC is a convenient forum given In Traders Royal Bank v. Court of Appeals,42 we held that "the mere
that all the incidents of the case — from the time of recruitment, to ownership by a single stockholder or by another corporation of all or nearly
employment to dismissal occurred outside the Philippines. The inconvenience all of the capital stock of a corporation is not of itself a sufficient reason for
is compounded by the fact that the proper defendants, the Palace Hotel and disregarding the fiction of separate corporate personalities."
MHICL are not nationals of the Philippines. Neither .are they "doing business The tests in determining whether the corporate veil may be pierced are: First,
the defendant must have control or complete domination of the other
corporation's finances, policy and business practices with regard to the Schmidt and Mr. Henk, who were officers and representatives of the Palace
transaction attacked. There must be proof that the other corporation had no Hotel and not MHICL. Neither did respondent Santos adduce any proof that
separate mind, will or existence with respect the act complained of. Second, MHICL had the power to control his conduct. Finally, it was the Palace Hotel,
control must be used by the defendant to commit fraud or wrong. Third, the through Mr. Schmidt and not MHICL that terminated respondent Santos'
aforesaid control or breach of duty must be the proximate cause of the injury services.
or loss complained of. The absence of any of the elements prevents the
Neither is there evidence to suggest that MHICL was a "labor-only
piercing of the corporate veil.43
contractor."52 There is no proof that MHICL "supplied" respondent Santos or
It is basic that a corporation has a personality separate and distinct from even referred him for employment to the Palace Hotel.
those composing it as well as from that of any other legal entity to which it
Likewise, there is no evidence to show that the Palace Hotel and MHICL are
may be related.44 Clear and convincing evidence is needed to pierce the veil of
one and the same entity. The fact that the Palace Hotel is a member of the
corporate fiction.45 In this case, we find no evidence to show that MHICL and
"Manila Hotel Group" is not enough to pierce the corporate veil between
MHC are one and the same entity.
MHICL and the Palace Hotel.
III. MHICL not Liable
IV. Grave Abuse of Discretion
Respondent Santos predicates MHICL's liability on the fact that MHICL
Considering that the NLRC was forum non-conveniens and considering
"signed" his employment contract with the Palace Hotel. This fact fails to
further that no employer-employee relationship existed between MHICL, MHC
persuade us.
and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no
First, we note that the Vice President (Operations and Development) of jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-90.
MHICL, Miguel D. Cergueda signed the employment contract as a mere
Labor Arbiters have exclusive and original jurisdiction only over the
witness. He merely signed under the word "noted".
When one "notes" a contract, one is not expressing his agreement or
"1. Unfair labor practice cases;
approval, as a party would.46 In Sichangco v. Board of Commissioners of
Immigration,47 the Court recognized that the term "noted" means that the "2. Termination disputes;
person so noting has merely taken cognizance of the existence of an act or "3. If accompanied with a claim for reinstatement, those
declaration, without exercising a judicious deliberation or rendering a cases that workers may file involving wages, rates of pay,
decision on the matter. hours of work and other terms and conditions of
Mr. Cergueda merely signed the "witnessing part" of the document. The employment;
"witnessing part" of the document is that which, "in a deed or other formal "4. Claims for actual, moral, exemplary and other forms of
instrument is that part which comes after the recitals, or where there are no damages arising from employer-employee relations;
recitals, after the parties (emphasis ours)."48 As opposed to a party to a
contract, a witness is simply one who, "being present, personally sees or "5. Cases arising from any violation of Article 264 of this
perceives a thing; a beholder, a spectator, or eyewitness."49 One who "notes" Code, including questions involving legality of strikes and
something just makes a "brief written statement"50 a memorandum or lockouts; and
observation. "6. Except claims for Employees Compensation, Social
Second, and more importantly, there was no existing employer-employee Security, Medicare and maternity benefits, all other claims,
relationship between Santos and MHICL. In determining the existence of an arising from employer-employee relations, including those of
employer-employee relationship, the following elements are considered:51 persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00)
"(1) the selection and engagement of the employee; regardless of whether accompanied with a claim for
"(2) the payment of wages; reinstatement."
"(3) the power to dismiss; and In all these cases, an employer-employee relationship is an indispensable
jurisdictional requirement.
"(4) the power to control employee's conduct."
The jurisdiction of labor arbiters and the NLRC under Article 217 of the
MHICL did not have and did not exercise any of the aforementioned powers.
Labor Code is limited to disputes arising from an employer-employee
It did not select respondent Santos as an employee for the Palace Hotel. He
relationship which can be resolved by reference to the Labor Code, or other
was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not
labor statutes, or their collective bargaining agreements.54
engage respondent Santos to work. The terms of employment were negotiated
and finalized through correspondence between respondent Santos, Mr.
"To determine which body has jurisdiction over the present controversy, we agreement (Exhs. 1 par. 2, 2, 2-A and 2-B Viva). ABS-CBN, however through
rely on the sound judicial principle that jurisdiction over the subject matter Mrs. Concio, can tick off only ten (10) titles (from the list) we can purchase
is conferred by law and is determined by the allegations of the complaint (Exh. 3 Viva) and therefore did not accept said list (TSN, June 8, 1992, pp. 9-
irrespective of whether the plaintiff is entitled to all or some of the claims 10). The titles ticked off by Mrs. Concio are not the subject of the case at bar
asserted therein."55 except the film Maging Sino Ka Man.
The lack of jurisdiction of the Labor Arbiter was obvious from the allegations For further enlightenment, this rejection letter dated January 06, 1992
of the complaint. His failure to dismiss the case amounts to grave abuse of (Exh 3 Viva) is hereby quoted:
6 January 1992
V. The Fallo
Dear Vic,
WHEREFORE, the Court hereby GRANTS the petition for certiorari and
This is not a very formal business letter I am writing to you as I
ANNULS the orders and resolutions of the National Labor Relations
would like to express my difficulty in recommending the purchase of the
Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in
three film packages you are offering ABS-CBN.
NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).
From among the three packages I can only tick off 10 titles we can
No costs.
purchase. Please see attached. I hope you will understand my position.
SO ORDERED. 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
Davide, Jr., C .J ., Puno, Kapunan, Pardo and Ynares-Santiago, JJ ., concur.
I have not scheduled for telecast several action pictures in our very first
contract because of the cheap production value of these movies as well
[G.R. No. 128690. January 21, 1999] 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
PRODUCTIONS, INC., and VICENTE DEL ROSARIO, respondents. In fact, I would like to request two (2) additional runs for these
movies as I can only schedule them in out non-primetime slots. We have
DECISION to cover the amount that was paid for these movies because as you very
DAVIDE, JR., C.J.: well know that non-primetime advertising rates are very low. These are
the unaired titles in the first contract.
In this petition for review on certiorari, petitioners ABS-CBN
Broadcasting Corp. (hereinafter ABS-CBN) seeks to reverse and set aside the 1. Kontra Persa [sic]
decision of 31 October 1996 and the resolution of 10 March 1997 of the 2. Raider Platoon
Court of Appeals in CA-G.R. CV No. 44125. The former affirmed with
modification the decision of 28 April 1993 of the Regional Trial Court (RTC) of 3. Underground guerillas
Quezon City, Branch 80, in Civil Case No. Q-12309. The latter denied the 4. Tiger Command
motion to reconsider the decision of 31 October 1996.
5. Boy de Sabog
The antecedents, as found by the RTC and adopted by the Court of
6. lady Commando
Appeals, are as follows:
7. Batang Matadero
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 8. Rebelyon
films. Sometime in December 1991, in accordance with paragraph 2.4 [sic] of
I hope you will consider this request of mine.
said agreement stating that-
The other dramatic films have been offered to us before and have
1.4 ABS-CBN shall have the right of first refusal to the next twenty-
been rejected because of the ruling of MTRCB to have them aired at 9:00
four (24) Viva films for TV telecast under such terms as may be agreed
p.m. due to their very adult themes.
upon by the parties hereto, provided, however, that such right shall be
exercised by ABS-CBN from the actual offer in writing. As for the 10 titles I have choosen [sic] from the 3 packages please
consider including all the other Viva movies produced last year, I have
Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-
quite an attractive offer to make.
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 Thanking you and with my warmest regards.
(Signed) performance with a prayer for a writ of preliminary injunction and/or
temporary restraining order against private respondents Republic
Charo Santos-Concio
Broadcasting Corporation (hereafter RBS), Viva Production (hereafter VIVA),
On February 27, 1992, defendant Del Rosario approached ABS-CBNs Ms. and Vicente del Rosario. The complaint was docketed as Civil Case No. Q-92-
Concio, with a list consisting of 52 original movie titles (i.e., not yet aired on 12309.
television) including the 14 titles subject of the present case, as well as 104
On 28 May 1992, the RTC issued a temporary restraining order
re-runs (previously aired on television) from which ABS-CBN may choose
enjoining private respondents from proceeding with the airing, broadcasting,
another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN airing
and televising of the fourteen VIVA films subject of the controversy, starting
rights over this package of 52 originals and 52 re-runs for P60,000,000.00 of
with the film Maging Sino Ka Man, which was scheduled to be shown on
which P30,000,000.00 will be in cash and P30,000,000.00 worth of television
private respondent RBS channel 7 at seven oclock in the evening of said date.
spots (Exh. 4 to 4-C Viva; 9 Viva).
On 17 June 1992, after appropriate proceedings, the RTC issued an
On April 2, 1992, defendant Del Rosario and ABS-CBNs general
order directing the issuance of a writ of preliminary injunction upon ABS-
manager, Eugenio Lopez III, met at the Tamarind Grill Restaurant in Quezon
CBNs posting of a P35 million bond. ABS-CBN moved for the reduction of the
City to discuss the package proposal of VIVA. What transpired in that lunch
bond, while private respondents moved for reconsideration of the order and
meeting is the subject of conflicting versions. Mr. Lopez testified that he and
offered to put up a counterbond.
Mr. Del Rosario allegedly agreed that ABS-CBN was granted exclusive film
rights to fourteen (14) films for a total consideration of P36 million; that he In the meantime, private respondents filed separate answer with
allegedly put this agreement as to the price and number of films in a napkin counterclaim. RBS also set up a cross-claim against VIVA.
and signed it and gave it to Mr. Del Rosario (Exh. D; TSN, pp. 24-26, 77-78,
On 3 August 1992, the RTC issued an order dissolving the writ of
June 8, 1992). On the other hand. Del Rosario denied having made any
preliminary injunction upon the posting by RBS of a P30 million counterbond
agreement with Lopez regarding the 14 Viva films; denied the existence of a
to answer for whatever damages ABS-CBN might suffer by virtue of such
napkin in which Lopez wrote something; and insisted that what he and Lopez
dissolution. However, it reduced petitioners injunction bond to P15 million as
discussed at the lunch meeting was Vivas film package offer of 104 films (52
a condition precedent for the reinstatement of the writ of preliminary
originals and 52 re-runs) for a total price of P60 million. Mr. Lopez promising
injunction should private respondents be unable to post a counterbond.
[sic]to make a counter proposal which came in the form of a proposal
contract Annex C of the complaint (Exh. 1 Viva; Exh C ABS-CBN). At the pre-trial on 6 August 1992, the parties upon suggestion of the
court, agreed to explore the possibility of an amicable settlement. In the
On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior
meantime, RBS prayed for and was granted reasonable time within which to
vice-president for Finance discussed the terms and conditions of Vivas offer
put up a P30 million counterbond in the event that no settlement would be
to sell the 104 films, after the rejection of the same package by ABS-CBN.
On April 07, 1992, defendant Del Rosario received through his secretary
As the parties failed to enter into an amicable settlement, RBS posted on
, a handwritten note from Ms. Concio, (Exh. 5 Viva), which reads: Heres the
1 October 1992 a counterbond, which the RTC approved in its Order of 15
draft of the contract. I hope you find everything in order, to which was
October 1992.
attached a draft exhibition agreement (Exh. C ABS-CBN; Exh. 9 Viva p. 3) a
counter-proposal covering 53 films, 52 of which came from the list sent by On 19 October 1992, ABS-CBN filed a motion for reconsideration of the
defendant Del Rosario and one film was added by Ms. Concio, for a 3 August and 15 October 1992 Orders, which RBS opposed.
consideration of P35 million. Exhibit C provides that ABS-CBN is granted On 29 October, the RTC conducted a pre-trial.
film rights to 53 films and contains a right of first refusal to 1992 Viva Films.
The said counter proposal was however rejected by Vivas Board of Directors Pending resolution of its motion for reconsideration, ABS-CBN filed with
[in the] evening of the same day, April 7, 1992, as Viva would not sell the Court of Appeals a petition challenging the RTCs Order of 3 August and
anything less than the package of 104 films for P60 million pesos (Exh. 9 15 October 1992 and praying for the issuance of a writ of preliminary
Viva), and such rejection was relayed to Ms. Concio. injunction to enjoin the RTC from enforcing said orders. The case was
docketed as CA-G.R. SP No. 29300.
On April 29, 1992, after the rejection of ABS-CBN and following several
negotiations and meetings defendant Del Rosario and Vivas President On 3 November 1992, the Court of Appeals issued a temporary
Teresita Cruz, in consideration of P60 million, signed a letter of agreement restraining order to enjoin the airing, broadcasting, and televising of any or
dated April 24, 1992, granting RBS the exclusive right to air 104 Viva- all of the films involved in the controversy.
produced and/or acquired films (Exh. 7-A - RBS; Exh. 4 RBS) including the On 18 December 1992, the Court of Appeals promulgated a decision
fourteen (14) films subject of the present case. dismissing the petition in CA-G.R. SP No. 29300 for being premature. ABS-
On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific CBN challenged the dismissal in a petition for review filed with this Court on
19 January 1993, which was docketed s G.R. No. 108363.
In the meantime the RTC received the evidence for the parties in Civil agreement on a napkin, as the same was never produced in court. It likewise
Case No. Q-92-12309. Thereafter, on 28 April 1993, it rendered a decision in rejected ABS-CBNs insistence on its right of first refusal and ratiocinated as
favor of RBS and VIVA and against ABS-CBN disposing as follows: follows:
WHEREFORE, under cool reflection and prescinding from the foregoing, As regards the matter of right of first refusal, it may be true that a Film
judgment is rendered in favor of defendants and against the plaintiff. 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) The complaint is hereby dismissed;
1.4 ABS-CBN shall have the right of first refusal to the next twenty-
(2) Plaintiff ABS-CBN is ordered to pay defendant RBS the following:
four (24) VIVA films for TV telecast under such terms as may be agreed
a) P107,727.00 the amount of premium paid by RBS to the upon by the parties hereto, provided, however, that such right shall be
surety which issued defendants RBSs bond to lift the exercised by ABS-CBN within a period of fifteen (15) days from the
injunction; actual offer in writing (Records, p. 14).
b) P191,843.00 for the amount of print advertisement for [H]owever, it is very clear that said right of first refusal in favor of ABS-CBN
Maging Sino Ka Man in various newspapers; shall still be subjected to such terms as may be agreed upon by the parties
c) Attorneys fees in the amount of P1 million; thereto, and that the said right shall be exercised by ABS-CBN within fifteen
(15) days from the actual offer in writing.
d) P5 million as and by way of moral damages;
Said parag. 1.4 of the agreement Exhibit A on the right of first refusal
e) P5 million as and by way of exemplary damages; did not fix the price of the film right to the twenty-four (24) films, nor did it
(3) For the defendant VIVA, plaintiff ABS-CBN is ordered to pay specify the terms thereof. The same are still left to be agreed upon by the
P212,000.00 by way of reasonable attorneys fees. parties.

(4) The cross-claim of defendant RBS against defendant VIVA is In the instant case, ABS-CBNs letter of rejection Exhibit 3 (Records, p.
dismissed. 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
(5) Plaintiff to pay the costs. speaks of the next twenty-four (24) films.
According to the RTC, there was no meeting of minds on the price and The offer of VIVA was sometime in December 1991, (Exhibits 2, 2-A, 2-
terms of the offer. The alleged agreement between Lopez III and Del Rosario B; Records, pp. 86-88; Decision, p. 11, Records, p. 1150), when the first list
was subject to the approval of the VIVA Board of Directors, and said of VIVA films was sent by Mr. Del Rosario to ABS-CBN. The Vice President of
agreement was disapproved during the meeting of the Board on 7 April 1992. ABS-CBN, Mrs. Charo Santos-Concio, sent a letter dated January 6, 1992
Hence, there was no basis for ABS-CBNs demand that VIVA signed the 1992 (Exhibit 3, Records, p. 89) where ABS-CBN exercised its right of refusal by
Film Exhibition Agreement. Furthermore, the right of first refusal under the rejecting the offer of VIVA. As aptly observed by the trial court, with the said
1990 Film Exhibition Agreement had previously been exercised per Ms. letter of Mrs. Concio of January 6, 1992, ABS-CBN had lost its right of first
Concios letter to Del Rosario ticking off ten titles acceptable to them, which refusal. And even if We reckon the fifteen (15) day period from February 27,
would have made the 1992 agreement an entirely new contract. 1992 (Exhibit 4 to 4-C) when another list was sent to ABS-CBN after the
On 21 June 1993, this Court denied ABS-CBNs petition for review in letter of Mrs. Concio, still the fifteen (15) day period within which ABS-CBN
G.R. No. 108363, as no reversible error was committed by the Court of shall exercise its right of first refusal has already expired.
Appeals in its challenged decision and the case had become moot and Accordingly, respondent court sustained the award factual damages
academic in view of the dismissal of the main action by the court a quo in its consisting in the cost of print advertisements and the premium payments for
decision of 28 April 1993. the counterbond, there being adequate proof of the pecuniary loss which RBS
Aggrieved by the RTCs decision, ABS-CBN appealed to the Court of has suffered as a result of the filing of the complaint by ABS-CBN. As to the
Appeals claiming that there was a perfected contract between ABS-CBN and award of moral damages, the Court of Appeals found reasonable basis
VIVA granting ABS-CBN the exclusive right to exhibit the subject films. therefor, holding that RBSs reputation was debased by the filing of the
Private respondents VIVA and Del Rosario also appealed seeking moral and complaint in Civil Case No. Q-92-12309 and by the non-showing of the film
exemplary damages and additional attorneys fees. 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
In its decision of 31 October 1996, the Court of Appeals agreed with the view of the filing of the complaint despite petitioners knowledge that the
RTC that the contract between ABS-CBN and VIVA had not been perfected, contract with VIVA had not been perfected. It also upheld the award of
absent the approval by the VIVA Board of Directors of whatever Del Rosario, attorneys fees, reasoning that with ABS-CBNs act of instituting Civil Case No.
its agent, might have agreed with Lopez III. The appellate court did not even Q-92-12309, RBS was unnecessarily forced to litigate. The appellate court,
believe ABS-CBNs evidence that Lopez III actually wrote down such an
however, reduced the awards of moral damages to P 2 million, exemplary convincingly established that this was a loss attributable to the non-showing
damages to P2 million, and attorneys fees to P500,000.00. of Maging Sino Ka Man; on the contrary, it was brought out during trial that
with or without the case or injunction, RBS would have spent such an
On the other hand, respondent Court of Appeals denied VIVA and Del
amount to generate interest in the film.
Rosarios appeal because it was RBS and not VIVA which was actually
prejudiced when the complaint was filed by ABS-CBN. ABS-CBN further contends that there was no other clear basis for the
awards of moral and exemplary damages. The controversy involving ABS-
Its motion for reconsideration having been denied, ABS-CBN filed the
CBN and RBS did not in any way originate from business transaction
petition in this case, contending that the Court of Appeals gravely erred in
between them. The claims for such damages did not arise from any
I contractual dealings or from specific acts committed by ABS-CBN against
RULING THAT THERE WAS NO PERFECTED CONTRACT BETWEEN RBS that may be characterized as wanton, fraudulent, or reckless; they arose
PETITIONER AND PRIVATE RESPONDENT VIVA by virtue only of the filing of the complaint. An award of moral and exemplary
NOTWITHSTANDING PREPONFERANCE OF EVIDENCE ADDUCED damages is not warranted where the record is bereft of any proof that a party
BY PETITIONER TO THE CONTRARY. acted maliciously or in bad faith in filing an action. In any case, free resort to
courts for redress of wrongs is a matter of public policy. The law recognizes
II the right of every one to sue for that which he honestly believes to be his
IN AWARDING ACTUAL AND COMPENSATORY DAMAGES IN FAVOR right without fear of standing trial for damages where by lack of sufficient
OF PRIVATE RESPONDENT RBS. evidence, legal technicalities, or a different interpretation of the laws on the
matter, the case would lose ground. One who, makes use of his own legal
III right does no injury. If damage results from filing of the complaint, it is
IN AWARDING MORAL AND EXEMPLARY DAMAGES IN FAVOR OF damnum absque injuria. Besides, moral damages are generally not awarded
PRIVATE RESPONDENT RBS. in favor of a juridical person, unless it enjoys a good reputation that was
debased by the offending party resulting in social humiliation.
As regards the award of attorneys fees, ABS-CBN maintains that the
IN AWARDING ATORNEYS FEES OF RBS. same had no factual, legal, or equitable justification. In sustaining the trial
ABS-CBN claims that it had yet to fully exercise its right of first refusal courts award, the Court of Appeals acted in clear disregard of the doctrine
over twenty-four titles under the 1990 Film Exhibition Agreement, as it had laid down in Buan v. Camaganacan that the text of the decision should state
chosen only ten titles from the first list. It insists that we give credence to the reason why attorneys fees are being awarded; otherwise, the award
Lopezs testimony that he and Del Rosario met at the Tamarind Grill should be disallowed. Besides, no bad faith has been imputed on, much less
Restaurant, discussed the terms and conditions of the second list (the 1992 proved as having been committed by, ABS-CBN. It has been held that where
Film Exhibition Agreement) and upon agreement thereon, wrote the same on no sufficient showing of bad faith would be reflected in a partys persistence
a paper napkin. It also asserts that the contract has already been effective, in a case other than an erroneous conviction of the righteousness of his
as the elements thereof, namely, consent, object, and consideration were cause, attorneys fees shall not be recovered as cost.
established. It then concludes that the Court of Appeals pronouncements On the other hand, RBS asserts that there was no perfected contract
were not supported by law and jurisprudence, as per our decision of 1 between ABS-CBN and VIVA absent meeting of minds between them
December 1995 in Limketkai Sons Milling, Inc. v. Court of Appeals, which regarding the object and consideration of the alleged contract. It affirms that
cited Toyota Shaw, Inc. v. Court of Appeals; Ang Yu Asuncion v. Court of ABS-CBNs claim of a right of first refusal was correctly rejected by the trial
Appeals, and Villonco Realty Company v. Bormaheco, Inc. court. RBS insists the premium it had paid for the counterbond constituted a
Anent the actual damages awarded to RBS, ABS-CBN disavows liability pecuniary loss upon which it may recover. It was obliged to put up the
therefor. RBS spent for the premium on the counterbond of its own volition counterbond due to the injunction procured by ABS-CBN. Since the trial
in order to negate the injunction issued by the trial court after the parties court found that ABS-CBN had no cause of action or valid claim against RBS
had ventilated their respective positions during the hearings for the purpose. and, therefore not entitled to the writ of injunction, RBS could recover from
The filing of the counterbond was an option available to RBS, but it can ABS-CBN the premium paid on the counterbond. Contrary to the claim of
hardly be argued that ABS-CBN compelled RBS to incur such expense. ABS-CBN, the cash bond would prove to be more expensive, as the loss
Besides, RBS had another available option, i.e., move for the dissolution of would be equivalent to the cost of money RBS would forego in case the P30
the injunction; or if it was determined to put up a counterbond, it could have million came from its funds or was borrowed from banks.
presented a cash bond. Furthermore under Article 2203 of the Civil Code, the RBS likewise asserts that it was entitled to the cost of advertisements
party suffering loss injury is also required to exercise the diligence of a good for the cancelled showing of the film Maging Sino Ka Man because the print
father of a family to minimize the damages resulting from the act or advertisements were out to announce the showing on a particular day and
omission. As regards the cost of print advertisements, RBS had not hour on Channel 7, i.e., in its entirety at one time, not as series to be shown
on a periodic basis. Hence, the print advertisements were good and relevant and attorneys fees, they adopted the arguments of RBS.
for the particular date of showing, and since the film could not be shown on
The key issues for our consideration are (1) whether there was a
that particular date and hour because of the injunction, the expenses for the
perfected contract between VIVA and ABS-CBN, and (2) whether RBS is
advertisements had gone to waste.
entitled to damages and attorneys fees. It may be noted that that award of
As regards moral and exemplary damages, RBS asserts that ABS-CBN attorneys fees of P212,000 in favor of VIVA is not assigned as another error.
filed the case and secured injunctions purely for the purpose of harassing
and prejudicing RBS. Pursuant then to Articles 19 and 21 of the Civil Code,
ABS-CBN must be held liable for such damages. Citing Tolentino, damages The first issue should be resolved against ABS-CBN. A contract is a
may be awarded in cases of abuse of rights even if the done is not illicit, and meeting of minds between two persons whereby one binds himself to give
there is abuse of rights where a plaintiff institutes an action purely for the something or render some service to another for a consideration. There is no
purpose of harassing or prejudicing the defendant. 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
In support of its stand that a juridical entity can recover moral and
of the obligation, which is established. A contract undergoes three stages:
exemplary damages, private respondent RBS cited People v. Manero, where it
was stated that such entity may recover moral and exemplary damages if it (a) preparation, conception, or generation, which is the period of
has a good reputation that is debased resulting in social humiliation. It then negotiation and bargaining, ending at the moment of agreement of
ratiocinates; thus: the parties;
There can be no doubt that RBS reputation has been debased by ABS- (b) perfection or birth of the contract, which is the moment when the
CBNs acts in this case. When RBS was not able to fulfill its commitment to parties come to agree on the terms of the contract; and
the viewing public to show the film Maging Sino Ka Man on the scheduled (c) consummation or death, which is the fulfillment or performance of
dates and times (and on two occasions that RBS advertised), it suffered the terms agreed upon in the contract.
serious embarrassment and social humiliation. When the showing was
cancelled, irate viewers called up RBS offices and subjected RBS to verbal Contracts that are consensual in nature are perfected upon mere
abuse (Announce kayo ng announce, hindi ninyo naman ilalabas, nanloloko meeting of the minds. Once there is concurrence between the offer and the
yata kayo) (Exh. 3-RBS, par.3). This alone was not something RBS brought acceptance upon the subject matter, consideration, and terms of payment a
upon itself. It was exactly what ABS-CBN had planted to happen. 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 amount of moral and exemplary damages cannot be said to be the offer; it must be plain, unequivocal, unconditional, and without variance
excessive. Two reasons justify the amount of the award. of any sort from the proposal. A qualified acceptance, or one that involves a
The first is that the humiliation suffered by RBS, is national in extent. new proposal, constitutes a counter-offer and is a rejection of the original
RBS operations as a broadcasting company is [sic] nationwide. Its clientele, offer. Consequently, when something is desired which is not exactly what is
like that of ABS-CBN, consists of those who own and watch television. It is proposed in the offer, such acceptance is not sufficient to generate consent
not an exaggeration to state, and it is a matter of judicial notice that almost because any modification or variation from the terms of the offer annuls the
every other person in the country watches television. The humiliation offer.
suffered by RBS is multiplied by the number of televiewers who had When Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN at the
anticipated the showing of the film, Maging Sino Ka Man on May 28 and Tamarind Grill on 2 April 1992 to discuss the package of films, said package
November 3, 1992 but did not see it owing to the cancellation. Added to this of 104 VIVA films was VIVAs offer to ABS-CBN to enter into a new Film
are the advertisers who had placed commercial spots for the telecast and to Exhibition Agreement. But ABS-CBN, sent through Ms. Concio, counter-
whom RBS had a commitment in consideration of the placement to show the proposal in the form a draft contract proposing exhibition of 53 films for a
film in the dates and times specified. consideration of P35 million. This counter-proposal could be nothing less
The second is that it is a competitor that caused RBS suffer the than the counter-offer of Mr. Lopez during his conference with Del Rosario at
humiliation. The humiliation and injury are far greater in degree when Tamarind Grill Restaurant. Clearly, there was no acceptance of VIVAs offer,
caused by an entity whose ultimate business objective is to lure customers for it was met by a counter-offer which substantially varied the terms of the
(viewers in this case) away from the competition. offer.
For their part, VIVA and Vicente del Rosario contend that the findings of ABS-CBNs reliance in Limketkai Sons Milling, Inc. v. Court of Appeals
fact of the trial court and the Court of Appeals do not support ABS-CBNs and Villonco Realty Company v. Bormaheco, Inc., is misplaced. In these cases,
claim that there was a perfected contract. Such factual findings can no it was held that an acceptance may contain a request for certain changes in
longer be disturbed in this petition for review under Rule 45, as only the terms of the offer and yet be a binding acceptance as long as it is clear
questions of law can be raised, not questions of fact. On the issue of damages that the meaning of the acceptance is positively and unequivocally to accept
the offer, whether such request is granted or not. This ruling was, however,
reversed in the resolution of 29 March 1996, which ruled that the acceptance which? If Exhibit C reflected the true intent of the parties, then ABS-CBNs
of an offer must be unqualified and absolute, i.e., it must be identical in all claim for 14 films in its complaint is false or if what it alleged in the
respects with that of the offer so as to produce consent or meetings of the complaint is true, then Exhibit C did not reflect what was agreed upon by the
minds. parties. This underscores the fact that there was no meeting of the minds as
to the subject matter of the contract, so as to preclude perfection thereof. For
On the other hand, in Villonco, cited in Limketkai, the alleged changes in
settled is the rule that there can be no contract where there is no object
the revised counter-offer were not material but merely clarificatory of what
certain which is its subject matter (Art. 1318, NCC).
had previously been agreed upon. It cited the statement in Stuart v. Franklin
Life Insurance Co. that a vendors change in a phrase of the offer to purchase, THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit testimony
which change does not essentially change the terms of the offer, does not (Exh. D) States:
amount to a rejection of the offer and the tender of a counter-offer. However,
We were able to reach an agreement. VIVA gave us the exclusive
when any of the elements of the contract is modified upon acceptance, such
license to show these fourteen (14) films, and we agreed to pay Viva the
alteration amounts to a counter-offer.
amount of P16,050,000.00 as well as grant Viva commercial slots worth
In the case at bar, ABS-CBN made no unqualified acceptance of VIVAs P19,950,000.00. We had already earmarked this P16,050,000.00.
offer hence, they underwent period of bargaining. ABS-CBN then formalized
which gives a total consideration of P36 million (P19,951,000.00 plus
its counter-proposals or counter-offer in a draft contract. VIVA through its
P16,050,000.00 equals P36,000,000.00).
Board of Directors, rejected such counter-offer. Even if it be conceded
arguendo that Del Rosario had accepted the counter-offer, the acceptance did On cross-examination Mr. Lopez testified:
not bind VIVA, as there was no proof whatsoever that Del Rosario had the Q What was written in this napkin?
specific authority to do so.
A The total price, the breakdown the known Viva movies, the 7
Under the Corporation Code, unless otherwise provided by said Code, blockbuster movies and the other 7 Viva movies because the price
corporate powers, such as the power to enter into contracts, are exercised by was broken down accordingly. The none [sic] Viva and the seven
the Board of Directors. However, the Board may delegate such powers to other Viva movies and the sharing between the cash portion and the
either an executive committee or officials or contracted managers. The concerned spot portion in the total amount of P35 million pesos.
delegation, except for the executive committee, must be for specific purposes.
Delegation to officers makes the latter agents of the corporation; accordingly, Now, which is which? P36 million or P35 million? This weakens ABS-CBNs
the general rules of agency as to the binding effects of their acts would apply. claim.
For such officers to be deemed fully clothed by the corporation to exercise a FOURTH. Mrs. Concio, testifying for ABS-CBN stated that she
power of the Board, the latter must specially authorize them to do so. that transmitted Exhibit C to Mr. Del Rosario with a handwritten note, describing
Del Rosario did not have the authority to accept ABS-CBNs counter-offer was said Exhibit C as a draft. (Exh. 5 Viva; tsn pp. 23-24, June 08, 1992). The
best evidenced by his submission of the draft contract to VIVAs Board of said draft has a well defined meaning.
Directors for the latters approval. In any event, there was between Del
Rosario and Lopez III no meeting of minds. The following findings of the trial Since Exhibit C is only a draft, or a tentative, provisional or preparatory
court are instructive: 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
A number of considerations militate against ABS-CBNs claim that a therefore legally bind Viva, not having agreed thereto. In fact, Ms. Concio
contract was perfected at that lunch meeting on April 02, 1992 at the admitted that the terms and conditions embodied in Exhibit C were prepared
Tamarind Grill. by ABS-CBNs lawyers and there was no discussion on said terms and
FIRST, Mr. Lopez claimed that what was agreed upon at the Tamarind conditions.
Grill referred to the price and the number of films, which he wrote on a As the parties had not yet discussed the proposed terms and conditions
napkin. However, Exhibit C contains numerous provisions which were not in Exhibit C, and there was no evidence whatsoever that Viva agreed to the
discussed at the Tamarind Grill, if Lopez testimony was to be believed nor terms and conditions thereof, said document cannot be a binding contract.
could they have been physically written on a napkin. There was even doubt The fact that Viva refused to sign Exhibit C reveals only two [sic] well that it
as to whether it was a paper napkin or cloth napkin. In short what were did not agree on its terms and conditions, and this court has no authority to
written in Exhibit C were not discussed, and therefore could not have been compel Viva to agree thereto.
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? 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
SECOND, Mr. Lopez claimed that what was agreed upon as the subject was subject to approval by the Board of Directors of Viva. He testified:
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 Q Now, Mr. Witness, and after that Tamarinf meeting the second
meeting wherein you claimed that you have the meeting of the minds already exercised by Ms. Concio (as she had). (TSN, June 8, 1992, pp.
between you and Mr. Vic del Rosario, what happened? 71-75). Del Rosario himself knew and understand [sic] that ABS-CBN
has lost its right of first refusal when his list of 36 titles were rejected
A Vic Del Rosario was supposed to call us up and tell us specifically
(Tsn, June 9, 1992, pp. 10-11).
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? 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
A Yes, sir.
the specific law on actual or compensatory damages. Except as provided by
Q So, he was going to forward that to the board of Directors for law or by stipulation, one is entitled to compensation for actual damages only
approval? for such pecuniary loss suffered by him as he has duly proved. The
A Yes, sir (Tsn, pp. 42-43, June 8, 1992) indemnification shall comprehend not only the value of the loss suffered, but
also that of the profits that the obligee failed to obtain. In contracts and
Q Did Mr. Del Rosario tell you that he will submit it to his Board for quasi-contracts the damages which may be awarded are dependent on
approval? whether the obligor acted with good faith or otherwise. In case of good faith,
A Yes, sir. (Tsn, p. 69, June 8, 1992). the damages recoverable are those which are the natural and probable
consequences of the breach of the obligation and which the parties have
The above testimony of Mr. Lopez shows beyond doubt that he knew Mr. foreseen or could have reasonably foreseen at the time of the constitution of
Del Rosario had no authority to bind Viva to a contract with ABS-CBN until the obligation. If the obligor acted with fraud, bad faith, malice, or wanton
and unless its Board of Directors approved it. The complaint, in fact, alleges attitude, he shall be responsible for all damages which may be reasonably
that Mr. Del Rosario is the Executive Producer of defendant Viva which is a attributed to the non-performance of the obligation. In crimes and quasi-
corporation. (par. 2, complaint). As a mere agent of Viva, Del Rosario could delicts, the defendants shall be liable for all damages which are the natural
not bind Viva unless what he did is ratified by its Directors. (Vicente and probable consequences of the act or omission complained of, whether or
vs.Geraldez, 52 SCRA 210; Arnold vs. Willets and Paterson, 44 Phil. 634). As not such damages have been foreseen or could have reasonably been
a mere agent, recognized as such by plaintiff, Del Rosario could not be held foreseen by the defendant.
liable jointly and severally with Viva and his inclusion as party defendant has
no legal basis. (Salonga vs. Warner Barnes [sic],COLTA, 88 Phil. 125; Salmon Actual damages may likewise be recovered for loss or impairment of
vs. Tan, 36 Phil. 556). earning capacity in cases of temporary or permanent personal injury, or for
injury to the plaintiffs business standing or commercial credit.
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 The claim of RBS for actual damages did not arise from contract, quasi-
Tamarind Grill between Mr. Lopez and Del Rosario was not a binding contract, delict, or quasi-delict. It arose from the fact of filing of the
agreement. It is as it should be because corporate power to enter into a complaint despite ABS-CBNs alleged knowledge of lack of cause of action.
contract is lodged in the Board of Directors. (Sec. 23, Corporation Code). Thus paragraph 12 of RBSs Answer with Counterclaim and Cross-claim
Without such board approval by the Viva board, whatever agreement Lopez under the heading COUNTERCLAIM specifically alleges:
and Del Rosario arrived at could not ripen into a valid binding upon Viva 12. ABS-CBN filed the complaint knowing fully well that it has no cause
(Yao Ka Sin Trading vs. Court of Appeals, 209 SCRA 763). The evidence of action against RBS. As a result thereof, RBS suffered actual
adduced shows that the Board of Directors of Viva rejected Exhibit C and damages in the amount of P6,621,195.32.
insisted that the film package for 104 films be maintained (Exh. 7-1 Cica).
Needless to state the award of actual damages cannot be comprehended
The contention that ABS-CBN had yet to fully exercise its right of first under the above law on actual damages. RBS could only probably take refuge
refusal over twenty-four films under the 1990 Film Exhibition Agreement and under Articles 19, 20, and 21 of the Civil Code, which read as follows:
that the meeting between Lopez and Del Rosario was a continuation of said
previous contract is untenable. As observed by the trial court, ABS-CBNs ART. 19. Every person must, in the exercise of hid rights and in the
right of first refusal had already been exercised when Ms. Concio wrote to performance of his duties, act with justice, give everyone his due, and
Viva ticking off ten films. Thus: observe honesty and good faith.

[T]he subsequent negotiation with ABS-CBN two (2) months after this ART. 20. Every person who, contrary to law, wilfully or negligently
letter was sent, was for an entirely different package. Ms. Concio herself causes damage to another shall indemnify the latter for the same.
admitted on cross-examination to having used or exercised the right of ART. 21. Any person who wilfully causes loss or injury to another in a
first refusal. She stated that the list was not acceptable and was indeed manner that is contrary to morals, good customs or public policy shall
not accepted by ABS-CBN, (Tsn, June 8, 1992, pp. 8-10). Even Mr. compensate the latter for the damage.
Lopez himself admitted that the right of first refusal may have been
It may further be observed that in cases where a writ of preliminary The award of moral damages cannot be granted in favor of a corporation
injunction is issued, the damages which the defendant may suffer by reason because, being an artificial person and having existence only in legal
of the writ are recoverable from the injunctive bond. In this case, ABS-CBN contemplation, it has no feelings, no emotions, no senses. It cannot,
had not yet filed the required bond; as a matter of fact, it asked for reduction therefore, experience physical suffering and mental anguish, which can be
of the bond and even went to the Court of Appeals to challenge the order on experienced only by one having a nervous system. The statement in People v.
the matter. Clearly then, it was not necessary for RBS to file a counterbond. Manero and Mambulao Lumber Co. v. PNB that a corporation may recover
Hence, ABS-CBN cannot be held responsible for the premium RBS paid for moral damages if it has a good reputation that is debased, resulting in social
the counterbond. humiliation is an obiter dictum. On this score alone the award for damages
must be set aside, since RBS is a corporation.
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 The basic law on exemplary damages is Section 5 Chapter 3, Title XVIII,
restraining order and later, a writ of preliminary injunction on the basis of its Book IV of the Civil Code. These are imposed by way of example or correction
determination that there existed sufficient ground for the issuance thereof. for the public good, in addition to moral, temperate, liquidated, or
Notably, the RTC did not dissolve the injunction on the ground of lack of compensatory damages. They are recoverable in criminal cases as part of the
legal and factual basis, but because of the plea of RBS that it be allowed to civil liability when the crime was committed with one or more aggravating
put up a counterbond. circumstances; in quasi-delicts, if the defendant acted with gross negligence;
and in contracts and quasi-contracts, if the defendant acted in a wanton,
As regards attorneys fees, the law is clear that in the absence of
fraudulent, reckless, oppressive, or malevolent manner.
stipulation, attorneys fees may be recovered as actual or compensatory
damages under any of the circumstances provided for in Article 2208 of the It may be reiterated that the claim of RBS against ABS-CBN is not based
Civil Code. 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
The general rule is that attorneys fees cannot be recovered as part of
of the Civil Code.
damages because of the policy that no premium should be placed on the
right to litigate. They are not to be awarded every time a party wins a suit. The elements of abuse of right under Article 19 are the following: (1) the
The power of the court t award attorneys fees under Article 2208 demands existence of a legal right or duty, (2) which is exercised in bad faith, and (3)
factual, legal, and equitable justification. Even when a claimant is compelled for the sole intent of prejudicing or injuring another. Article 20 speaks of the
to litigate with third persons or to incur expenses to protect his rights, still general sanction for all provisions of law which do not especially provide for
attorneys fees may not be awarded where no sufficient showing of bad faith their own sanction; while Article 21 deals with acts contra bonus mores, and
could be reflected in a partys persistence in a case other than an erroneous has the following elements: (1) there is an act which is legal, (2) but which is
conviction of the righteousness of his cause. contrary to morals, good custom, public order, or public policy, and (3) and it
is done with intent to injure.
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 Verily then, malice or bad faith is at the core of Articles 19, 20, and 21.
damages, while Article 2219 enumerates the cases where they may be Malice or bad faith implies a conscious and intentional design to do a
recovered. Article 2220 provides that moral damages may be recovered in wrongful act for a dishonest purpose or moral obliquity. Such must be
breaches of contract where the defendant acted fraudulently or in bad faith. substantiated by evidence.
RBSs claim for moral damages could possibly fall only under item (10) of
There is no adequate proof that ABS-CBN was inspired by malice or bad
Article 2219, thereof which reads:
faith. It was honestly convinced of the merits of its cause after it had
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, undergone serious negotiations culminating in its formal submission of a
34 and 35. 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
Moral damages are in the category of an award designed to compensate
law could not have meant impose a penalty on the right to litigate. If
the claimant for actual injury suffered and not to impose a penalty on the
damages result from a persons exercise of a right, it is damnum absque
wrongdoer. The award is not meant to enrich the complainant at the expense
of the defendant, but to enable the injured party to obtain means, diversion,
or amusements that will serve to obviate the moral suffering he has WHEREFORE, the instant petition is GRANTED. The challenged
undergone. It is aimed at the restoration, within the limits of the possible, of decision of the Court of Appeals in CA-G.R. CV No. 44125 is hereby
the spiritual status quo ante, and should be proportionate to the suffering REVERSED except as to unappealed award of attorneys fees in favor of VIVA
inflicted. Trial courts must then guard against the award of exorbitant Productions, Inc.
damages; they should exercise balanced restrained and measured objectivity
No pronouncement as to costs.
to avoid suspicion that it was due to passion, prejudice, or corruption or the
part of the trial court. SO ORDERED.
Melo, Kapunan, Martinez, and Pardo, JJ., concur. 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
G.R. Nos. 86883-85 January 29, 1993 congregation to which Father Tulio Favali belonged, a civil
PEOPLE OF THE PHILIPPINES, plaintiff-appellee, indemnity of P12,000.00; attorney's fees in the sum of
vs. P50,000.00 for each of the eight (8) accused or a total sum of
NORBERTO MANERO, JR., EDILBERTO MANERO, ELPIDIO MANERO, P400,000.00; court appearance fee of P10,000.00 for every
SEVERINO LINES, RUDY LINES, EFREN PLEÑAGO, ROGER BEDAÑO, day the case was set for trial; moral damages in the sum of
RODRIGO ESPIA, ARSENIO VILLAMOR, JR., JOHN DOE and PETER DOE, P100,000.00; and to pay proportionately the costs.
accused. Further, the Court finds the accused Norberto Manero, Jr.
SEVERINO LINES, RUDY LINES, EFREN PLEÑAGO and ROGER alias Commander Bucay GUILTY beyond reasonable doubt of
BENDAÑO, accused-appellants. the offense of Arson and with the application of the
Indeterminate Sentence Law, hereby sentences him to an
The Solicitor General for plaintiff-appellee. indeterminate penalty of imprisonment of not less than four
Romeo P. Jorge for accused-appellants. (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
BELLOSILLO, J.: Foreign Mission (PIME) Brothers, the congregation to which
Father Tulio Favali belonged, the sum of P19,000.00
This was gruesome murder in a main thoroughfare an hour before sundown. representing the value of the motorcycle and to pay the
A hapless foreign religious minister was riddled with bullets, his head costs.
shattered into bits and pieces amidst the revelling of his executioners as they
danced and laughed around their quarry, chanting the tune "Mutya Ka Finally, the Court finds the accused Norberto Manero, Jr.,
Baleleng", a popular regional folk song, kicking and scoffing at his prostrate, alias Commander Bucay, Edilberto Manero alias Edil, Elpidio
miserable, spiritless figure that was gasping its last. Seemingly unsatiated Manero, Severino Lines, Rudy Lines, Rodrigo Espia alias
with the ignominy of their manslaughter, their leader picked up pieces of the Rudy, Efren Pleñago and Roger Bedaño GUILTY beyond
splattered brain and mockingly displayed them before horrified spectators. reasonable doubt of the offense of Attempted Murder and
Some accounts swear that acts of cannibalism ensued, although they were with the application of the Indeterminate Sentence Law,
not sufficiently demonstrated. However, for their outrageous feat, the hereby sentences each of them to an indeterminate penalty
gangleader already earned the monicker "cannibal priest-killer" But, what is of imprisonment of not less than two (2) years, four (4)
indubitable is that Fr. Tulio Favali1 was senselessly killed for no apparent months and one (1) day of prision correccional, and
reason than that he was one of the Italian Catholic missionaries laboring in minimum, to eight (8) years and twenty (20) days of prision
heir vineyard in the hinterlands of Mindanao.2 mayor, as maximum, and to pay the complainant Rufino
Robles the sum of P20,000.00 as attorney's fees and
In the aftermath of the murder, police authorities launched a massive P2,000.00 as court appearance fee for every day of trial and
manhunt which resulted in the capture of the perpetrators except Arsenio to pay proportionately the costs.
Villamor, Jr., and two unidentified persons who eluded arrest and still
remain at large. The foregoing penalties shall be served by the said accused
successively in the order of their respective severity in
Informations for Murder,3 Attempted Murder4 andArson5 were accordingly accordance with the provisions of Article 70 of the Revised
filed against those responsible for the frenzied orgy of violence that fateful Penal Code, as amended.7
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, From this judgment of conviction only accused Severino Lines, Rudy Lines,
Cotabato.6 Efren Pleñago and Roger Bedaño appealed with respect to the cases for
Murder and Attempted Murder. The Manero brothers as well as Rodrigo
After trial, the court a quo held — Espia did not appeal; neither did Norberto Manero, Jr., in the Arson case.
WHEREFORE . . . the Court finds the accused Norberto Consequently, the decision as against them already became final.
Manero, Jr. alias Commander Bucay, Edilberto Manero alias Culled from the records, the facts are: On 11 April 1985, around 10:00
Edil, Elpidio Manero, Severino Lines, Rudy Lines, Rodrigo o'clock in the morning, the Manero brothers Norberto Jr., Edilberto and
Espia alias Rudy, Efren Pleñago and Roger Bedaño GUILTY Elpidio, along with Rodrigo Espia, Severino Lines, Rudy Lines, Efren Pleñago
beyond reasonable doubt of the offense of Murder, and with and Roger Bedaño, were inside the eatery of one Reynaldo Diocades at Km.
the aggravating circumstances of superior strength and
125, La Esperanza, Tulunan, Cotabato. They were conferring with Arsenio point, Edilberto asked the priest: "Ano ang gusto mo, padre (What is it you
Villamor, Jr., private secretary to the Municipal Mayor of Tulunan, Cotabato, want, Father)? Gusto mo, Father, bukon ko ang ulo mo (Do you want me,
and his two (2) unidentified bodyguards. Plans to liquidate a number of Father, to break your head)?" Thereafter, in a flash, Edilberto fired at the
suspected communist sympathizers were discussed. Arsenio Villamor, Jr. head of the priest. As Fr. Favali dropped to the ground, his hands clasped
scribbled on a cigarette wrapper the following "NPA v. NPA, starring Fr. Peter, against his chest, Norberto, Jr., taunted Edilberto if that was the only way he
Domingo Gomez, Bantil, Fred Gapate, Rene alias Tabagac and Villaning." "Fr. knew to kill a priest. Slighted over the remark, Edilberto jumped over the
Peter" is Fr. Peter Geremias, an Italian priest suspected of having links with prostrate body three (3) times, kicked it twice, and fired anew. The burst of
the communist movement; "Bantil" is Rufino Robles, a Catholic lay leader gunfire virtually shattered the head of Fr. Favali, causing his brain to scatter
who is the complaining witness in the Attempted Murder; Domingo Gomez is on the road. As Norberto, Jr., flaunted the brain to the terrified onlookers, his
another lay leader, while the others are simply "messengers". On the same brothers danced and sang "Mutya Ka Baleleng" to the delight of their
occasion, the conspirators agreed to Edilberto Manero's proposal that should comrades-in-arms who now took guarded positions to isolate the victim from
they fail to kill Fr. Peter Geremias, another Italian priest would be killed in possible assistance. 13
his stead.8
In seeking exculpation from criminal liability, appellants Severino Lines,
At about 1:00 o'clock that afternoon, Elpidio Manero with two (2) unidentified Rudy Lines, Efren Pleñago and Roger Bedaño contend that the trial court
companions nailed a placard on a street-post beside the eatery of Deocades. erred in disregarding their respective defenses of alibi which, if properly
The placard bore the same inscriptions as those found on the cigarette appreciated, would tend to establish that there was no prior agreement to
wrapper except for the additional phrase "versus Bucay, Edil and Palo." Some kill; that the intended victim was Fr. Peter Geremias, not Fr. Tulio Favali;
two (2) hours later, Elpidio also posted a wooden placard bearing the same that there was only one (1) gunman, Edilberto; and, that there was absolutely
message on a street cross-sign close to the eatery.9 no showing that appellants cooperated in the shooting of the victim despite
their proximity at the time to Edilberto.
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", But the evidence on record does not agree with the arguments of accused-
their first intended victim, which was also in the vicinity of Deocades' appellants.
carinderia. They were met by "Bantil" who confronted them why his name
On their defense of alibi, accused brothers Severino and Rudy Lines claim
was included in the placards. Edilberto brushed aside the query; instead, he
that they were harvesting palay the whole day of 11 April 1985 some one
asked "Bantil" if he had any qualms about it, and without any provocation,
kilometer away from the crime scene. Accused Roger Bedaño alleges that he
Edilberto drew his revolver and fired at the forehead of "Bantil". "Bantil" was
was on an errand for the church to buy lumber and nipa in M'lang, Cotabato,
able to parry the gun, albeit his right finger and the lower portion of his right
that morning of 11 April 1985, taking along his wife and sick child for
ear were hit. Then they grappled for its possession until "Bantil" was
medical treatment and arrived in La Esperanza, Tulunan, past noontime.
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 Interestingly, all appellants similarly contend that it was only after they
managed to seek refuge in the house of a certain Domingo Gomez. 10 heard gunshots that they rushed to the house of Norberto Manero, Sr.,
Norberto, Jr., ordered his men to surround the house and not to allow any Barangay Captain of La Esperanza, where they were joined by their fellow
one to get out so that "Bantil" would die of hemorrhage. Then Edilberto went CHDF members and co-accused, and that it was only then that they
back to the restaurant of Deocades and pistol-whipped him on the face and proceeded together to where the crime took place at Km. 125.
accused him of being a communist coddler, while appellants and their It is axiomatic that the accused interposing the defense of alibi must not only
cohorts relished the unfolding drama. 11 be at some other place but that it must also be physically impossible for him
Moments later, while Deocades was feeding his swine, Edilberto strewed him to be at the scene of the crime at the time of its commission. 14
with a burst of gunfire from his M-14 Armalite. Deocades cowered in fear as Considering the failure of appellants to prove the required physical
he knelt with both hands clenched at the back of his head. This again drew impossibility of being present at the crime scene, as can be readily deduced
boisterous laughter and ridicule from the dreaded desperados. from the proximity between the places where accused-appellants were
At 5:00 o'clock, Fr. Tulio Favali arrived at Km. 125 on board his motorcycle. allegedly situated at the time of the commission of the offenses and the locus
He entered the house of Gomez. While inside, Norberto, Jr., and his co- criminis, 15 the defense of alibi is definitely feeble. 16 After all, it has been the
accused Pleñago towed the motorcycle outside to the center of the highway. consistent ruling of this Court that no physical impossibility exists in
Norberto, Jr., opened the gasoline tank, spilled some fuel, lit a fire and instances where it would take the accused only fifteen to twenty minutes by
burned the motorcycle. As the vehicle was ablaze, the felons raved and jeep or tricycle, or some one-and-a-half hours by foot, to traverse the
rejoiced. 12 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
Upon seeing his motorcycle on fire, Fr. Favali accosted Norberto, Jr. But the
be no physical impossibility even if the distance between two places is merely
latter simply stepped backwards and executed a thumbs-down signal. At this
two (2) hours by bus. 18 More important, it is well-settled that the defense of
alibi cannot prevail over and Edilberto Manero in their enjoyment and merriment on
the positive identification of the authors of the crime by the prosecution the death of the priest. 26
witnesses. 19
From the foregoing narration of the trial court, it is clear that appellants were
In the case before Us, two (2) eyewitnesses, Reynaldo Deocades and Manuel not merely innocent bystanders but were in fact vital cogs in perpetrating the
Bantolo, testified that they were both inside the eatery at about 10:00 o'clock savage murder of Fr. Favali and the attempted murder of Rufino Robles by
in the morning of 11 April 1985 when the Manero brothers, together with the Manero brothers and their militiamen. For sure, appellants all assumed a
appellants, first discussed their plan to kill some communist sympathizers. fighting stance to discourage if not prevent any attempt to provide assistance
The witnesses also testified that they still saw the appellants in the company to the fallen priest. They surrounded the house of Domingo Gomez to stop
of the Manero brothers at 4:00 o'clock in the afternoon when Rufino Robles Robles and the other occupants from leaving so that the wounded Robles
was shot. Further, at 5:00 o'clock that same afternoon, appellants were very may die of hemorrhage. 27 Undoubtedly, these were overt acts to ensure
much at the scene of the crime, along with the Manero brothers, when Fr. success of the commission of the crimes and in furtherance of the aims of the
Favali was brutally murdered. 20 Indeed, in the face of such positive conspiracy. The appellants acted in concert in the murder of Fr. Favali and in
declarations that appellants were at the locus criminis from 10:00 o'clock in the attempted murder of Rufino Robles. While accused-appellants may not
the morning up to about 5:00 o'clock in the afternoon, the alibi of appellants have delivered the fatal shots themselves, their collective action showed a
that they were somewhere else, which is negative in nature, cannot prevail. 21 common intent to commit the criminal acts.
The presence of appellants in the eatery at Km. 125 having been positively
While it may be true that Fr. Favali was not originally the intended victim, as
established, all doubts that they were not privy to the plot to liquidate alleged
it was Fr. Peter Geremias whom the group targetted for the kill, nevertheless,
communist sympathizers are therefore removed. There was direct proof to
Fr. Favali was deemed a good substitute in the murder as he was an Italian
link them to the conspiracy.
priest. On this, the conspirators expressly agreed. As witness Manuel Bantolo
There is conspiracy when two or more persons come to an agreement to explained 28 —
commit a crime and decide to commit it. 22 It is not essential that all the
Q Aside from those persons listed in that
accused commit together each and every act constitutive of the offense. 23 It
paper to be killed, were there other persons
is enough that an accused participates in an act or deed where there is
who were to be liquidated?
singularity of purpose, and unity in its execution is present. 24
A There were some others.
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. Q Who were they?
Thus — A They said that if they could not kill those
The other six accused, 25 all armed with high powered persons listed in that paper then they will
firearms, were positively identified with Norberto Manero, Jr. (sic) kill anyone so long as he is (sic) an
and Edilberto Manero in the carinderia of Reynaldo Italian and if they could not kill the persons
Deocades in La Esperanza, Tulunan, Cotabato at 10:00 they like to kill they will (sic) make Reynaldo
o'clock in the morning of 11 April 1985 morning . . . they Deocades as their sample.
were outside of the carinderia by the window near the table That appellants and their co-accused reached a common understanding to
where Edilberto Manero, Norberto Manero, Jr., Jun Villamor, kill another Italian priest in the event that Fr. Peter Geremias could not be
Elpidio Manero and unidentified members of the airborne spotted was elucidated by Bantolo thus 29 —
from Cotabato were grouped together. Later that morning,
they all went to the cockhouse nearby to finish their plan Q Who suggested that Fr. Peter be the first
and drink tuba. They were seen again with Edilberto Manero to be killed?
and Norberto Manero, Jr., at 4:00 o'clock in the afternoon of A All of them in the group.
that day near the house of Rufino Robles (Bantil) when
Edilberto Manero shot Robles. They surrounded the house of Q What was the reaction of Norberto Manero
Domingo Gomez where Robles fled and hid, but later left with respect to the plan to kill Fr. Peter?
when Edilberto Manero told them to leave as Robles would A He laughed and even said, "amo ina"
die of hemorrhage. They followed Fr. Favali to Domingo meaning "yes, we will kill him ahead."
Gomez' house, witnessed and enjoyed the burning of the
motorcycle of Fr. Favali and later stood guard with their xxx xxx xxx
firearms ready on the road when Edilberto Manero shot to Q What about Severino Lines? What was his
death Fr. Favali. Finally, they joined Norberto Manero, Jr. reaction?
A He also laughed and so conformed and corpse, exemplary damages may be awarded to the lawful heirs, 36 even
agreed to it. though not proved nor expressly pleaded in the complaint, 37 and the amount
of P100,000.00 is considered reasonable.
Q Rudy Lines.
With respect to the civil indemnity of P12,000.00 for the death of Fr. Tulio
A He also said "yes".
Favali, the amount is increased to P50,000.00 in accordance with existing
Q What do you mean "yes"? jurisprudence, which should be paid to the lawful heirs, not the PIME as the
A He also agreed and he was happy and said trial court ruled.
"yes" we will kill him. WHEREFORE, the judgment appealed from being in accord with law and the
xxx xxx xxx 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
Q What about Efren Pleñago? the deceased plus exemplary damages of P100,000.00; however, the award of
A He also agreed and even commented moral damages is deleted.
laughing "go ahead". Costs against accused-appellants.
Q Roger Bedaño, what was his reaction to SO ORDERED.
that suggestion that should they fail to kill
Fr. Peter, they will (sic) kill anybody provided Cruz, Padilla and Griño-Aquino, JJ., concur
he is an Italian and if not, they will (sic)
make Reynaldo Deocades an example?
G.R. No. L-22973 January 30, 1968
A He also agreed laughing.
MAMBULAO LUMBER COMPANY, plaintiff-appellant,
Conspiracy or action in concert to achieve a criminal design being sufficiently vs.
shown, the act of one is the act of all the other conspirators, and PHILIPPINE NATIONAL BANK and ANACLETO HERALDO Deputy
the precise extent or modality of participation of each of them becomes Provincial Sheriff of Camarines Norte, defendants-appellees.
secondary. 30
Ernesto P. Vilar and Arthur Tordesillas for plaintiff-appellant.
The award of moral damages in the amount of P100,000.00 to the Tomas Besa and Jose B. Galang for defendants-appellees.
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 An appeal from a decision, dated April 2, 1964, of the Court of First Instance
any member thereof, when he joined his religious congregation. As a matter of Manila in Civil Case No. 52089, entitled "Mambulao Lumber Company,
of fact, Fr. Peter Geremias of the same congregation, who was then a parish plaintiff, versus Philippine National Bank and Anacleto Heraldo, defendants",
priest of Kidapawan, testified that "the religious family belongs to the natural dismissing the complaint against both defendants and sentencing the
family of origin." 31 Besides, as We already held, 32 a juridical person is not plaintiff to pay to defendant Philippine National Bank (PNB for short) the sum
entitled to moral damages because, not being a natural person, it cannot of P3,582.52 with interest thereon at the rate of 6% per annum from
experience physical suffering or such sentiments as wounded feelings, December 22, 1961 until fully paid, and the costs of suit.
serious anxiety, mental anguish or moral shock. It is only when a juridical
In seeking the reversal of the decision, the plaintiff advances several
person has a good reputation that is debased, resulting in social humiliation,
propositions in its brief which may be restated as follows:
that moral damages may be awarded.
1. That its total indebtedness to the PNB as of November 21, 1961,
Neither can We award moral damages to the heirs of the deceased who may
was only P56,485.87 and not P58,213.51 as concluded by the court
otherwise be lawfully entitled thereto pursuant to par. (3), Art. 2206, of the
a quo; hence, the proceeds of the foreclosure sale of its real property
Civil Code, 33 for the reason that the heirs never presented any evidence
alone in the amount of P56,908.00 on that date, added to the sum of
showing that they suffered mental anguish; much less did they take the
P738.59 it remitted to the PNB thereafter was more than sufficient to
witness stand. It has been held 34 that moral damages and their causal
liquidate its obligation, thereby rendering the subsequent foreclosure
relation to the defendant's acts should be satisfactorily proved by the
sale of its chattels unlawful;
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 2. That it is not liable to pay PNB the amount of P5,821.35 for
brutal slaying of Fr. Tulio Favali was attended with abuse of superior attorney's fees and the additional sum of P298.54 as expenses of the
strength, cruelty and ignominy by deliberately and inhumanly augmenting foreclosure sale;
the pain and anguish of the victim, outraging or scoffing at his person or
3. That the subsequent foreclosure sale of its chattels is null and parcel of land, together with the improvements existing thereon,
void, not only because it had already settled its indebtedness to the covered by Transfer Certificate of Title No. 381 of the land records of
PNB at the time the sale was effected, but also for the reason that the Camarines Norte, and to sell it at public auction in accordance with
said sale was not conducted in accordance with the provisions of the the provisions of Act No. 3135, as amended, for the satisfaction of
Chattel Mortgage Law and the venue agreed upon by the parties in the unpaid obligation of the plaintiff, which as of September 22,
the mortgage contract; 1961, amounted to P57,646.59, excluding attorney's fees. In
compliance with the request, on October 16, 1961, the Provincial
4. That the PNB, having illegally sold the chattels, is liable to the
Sheriff of Camarines Norte issued the corresponding notice of extra-
plaintiff for its value; and
judicial sale and sent a copy thereof to the plaintiff. According to the
5. That for the acts of the PNB in proceeding with the sale of the notice, the mortgaged property would be sold at public auction at
chattels, in utter disregard of plaintiff's vigorous opposition thereto, 10:00 a.m. on November 21, 1961, at the ground floor of the Court
and in taking possession thereof after the sale thru force, House in Daet, Camarines Norte.
intimidation, coercion, and by detaining its "man-in-charge" of said
On November 6, 1961, the PNB sent a letter to the Provincial Sheriff
properties, the PNB is liable to plaintiff for damages and attorney's
of Camarines Norte requesting him to take possession of the chattels
mortgaged to it by the plaintiff and sell them at public auction also
The antecedent facts of the case, as found by the trial court, are as follows: on November 21, 1961, for the satisfaction of the sum of P57,646.59,
On May 5, 1956 the plaintiff applied for an industrial loan of plus 6% annual interest therefore from September 23, 1961,
P155,000 with the Naga Branch of defendant PNB and the former attorney's fees equivalent to 10% of the amount due and the costs
offered real estate, machinery, logging and transportation and expenses of the sale. On the same day, the PNB sent notice to
equipments as collaterals. The application, however, was approved the plaintiff that the former was foreclosing extrajudicially the
for a loan of P100,000 only. To secure the payment of the loan, the chattels mortgaged by the latter and that the auction sale thereof
plaintiff mortgaged to defendant PNB a parcel of land, together with would be held on November 21, 1961, between 9:00 and 12:00 a.m.,
the buildings and improvements existing thereon, situated in the in Mambulao, Camarines Norte, where the mortgaged chattels were
poblacion of Jose Panganiban (formerly Mambulao), province of situated.
Camarines Norte, and covered by Transfer Certificate of Title No. 381 On November 8, 1961, Deputy Provincial Sheriff Anacleto Heraldo
of the land records of said province, as well as various sawmill took possession of the chattels mortgaged by the plaintiff and made
equipment, rolling unit and other fixed assets of the plaintiff, all an inventory thereof in the presence of a PC Sergeant and a
situated in its compound in the aforementioned municipality. policeman of the municipality of Jose Panganiban. On November 9,
On August 2, 1956, the PNB released from the approved loan the 1961, the said Deputy Sheriff issued the corresponding notice of
sum of P27,500, for which the plaintiff signed a promissory note public auction sale of the mortgaged chattels to be held on November
wherein it promised to pay to the PNB the said sum in five equal 21, 1961, at 10:00 a.m., at the plaintiff's compound situated in the
yearly installments at the rate of P6,528.40 beginning July 31, 1957, municipality of Jose Panganiban, Province of Camarines Norte.
and every year thereafter, the last of which would be on July 31, On November 19, 1961, the plaintiff sent separate letters, posted as
1961. registered air mail matter, one to the Naga Branch of the PNB and
On October 19, 1956, the PNB made another release of P15,500 as another to the Provincial Sheriff of Camarines Norte, protesting
part of the approved loan granted to the plaintiff and so on the said against the foreclosure of the real estate and chattel mortgages on
date, the latter executed another promissory note wherein it agreed the grounds that they could not be effected unless a Court's order
to pay to the former the said sum in five equal yearly installments at was issued against it (plaintiff) for said purpose and that the
the rate of P3,679.64 beginning July 31, 1957, and ending on July foreclosure proceedings, according to the terms of the mortgage
31, 1961. 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
The plaintiff failed to pay the amortization on the amounts released would be suspended and the plaintiff would be given an extension of
to and received by it. Repeated demands were made upon the ninety (90) days, its obligation would be settled satisfactorily because
plaintiff to pay its obligation but it failed or otherwise refused to do an important negotiation was then going on for the sale of its "whole
so. Upon inspection and verification made by employees of the PNB, interest" for an amount more than sufficient to liquidate said
it was found that the plaintiff had already stopped operation about obligation.
the end of 1957 or early part of 1958.
The letter of the plaintiff to the Naga Branch of the PNB was
On September 27, 1961, the PNB sent a letter to the Provincial construed by the latter as a request for extension of the foreclosure
Sheriff of Camarines Norte requesting him to take possession of the 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 the advice but on the contrary it made known of its intention to file
and place. A copy of said advice was sent to the plaintiff for its appropriate action or actions for the protection of its interests.
information and guidance.
On May 24, 1962, several employees of the PNB arrived in the
The foreclosure sale of the parcel of land, together with the buildings compound of the plaintiff in Jose Panganiban, Camarines Norte, and
and improvements thereon, covered by Transfer Certificate of Title they informed Luis Salgado, Chief Security Guard of the premises,
No. 381, was, however, held on November 21, 1961, and the said that the properties therein had been auctioned and bought by the
property was sold to the PNB for the sum of P56,908.00, subject to PNB, which in turn sold them to Mariano Bundok. Upon being
the right of the plaintiff to redeem the same within a period of one advised that the purchaser would take delivery of the things he
year. On the same date, Deputy Provincial Sheriff Heraldo executed a bought, Salgado was at first reluctant to allow any piece of property
certificate of sale in favor of the PNB and a copy thereof was sent to to be taken out of the compound of the plaintiff. The employees of
the plaintiff. 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
In a letter dated December 14, 1961 (but apparently posted several
of money by way of damages. Apprehensive of the risk that he would
days later), the plaintiff sent a bank draft for P738.59 to the Naga
take, Salgado immediately sent a wire to the President of the plaintiff
Branch of the PNB, allegedly in full settlement of the balance of the
in Manila, asking advice as to what he should do. In the meantime,
obligation of the plaintiff after the application thereto of the sum of
Mariano Bundok was able to take out from the plaintiff's compound
P56,908.00 representing the proceeds of the foreclosure sale of
two truckloads of equipment.
parcel of land described in Transfer Certificate of Title No. 381. In the
said letter, the plaintiff reiterated its request that the foreclosure sale In the afternoon of the same day, Salgado received a telegram from
of the mortgaged chattels be discontinued on the grounds that the plaintiff's President directing him not to deliver the "chattels" without
mortgaged indebtedness had been fully paid and that it could not be court order, with the information that the company was then filing
legally effected at a place other than the City of Manila. an action for damages against the PNB. On the following day, May
25, 1962, two trucks and men of Mariano Bundok arrived but
In a letter dated December 16, 1961, the plaintiff advised the
Salgado did not permit them to take out any equipment from inside
Provincial Sheriff of Camarines Norte that it had fully paid its
the compound of the plaintiff. Thru the intervention, however, of the
obligation to the PNB, and enclosed therewith a copy of its letter to
local police and PC soldiers, the trucks of Mariano Bundok were able
the latter dated December 14, 1961.
finally to haul the properties originally mortgaged by the plaintiff to
On December 18, 1961, the Attorney of the Naga Branch of the PNB, the PNB, which were bought by it at the foreclosure sale and
wrote to the plaintiff acknowledging the remittance of P738.59 with subsequently sold to Mariano Bundok.
the advice, however, that as of that date the balance of the account
Upon the foregoing facts, the trial court rendered the decision appealed from
of the plaintiff was P9,161.76, to which should be added the
which, as stated in the first paragraph of this opinion, sentenced the
expenses of guarding the mortgaged chattels at the rate of P4.00 a
Mambulao Lumber Company to pay to the defendant PNB the sum of
day beginning December 19, 1961. It was further explained in said
P3,582.52 with interest thereon at the rate of 6% per annum from December
letter that the sum of P57,646.59, which was stated in the request
22, 1961 (day following the date of the questioned foreclosure of plaintiff's
for the foreclosure of the real estate mortgage, did not include the
chattels) until fully paid, and the costs. Mambulao Lumber Company
10% attorney's fees and expenses of the sale. Accordingly, the
interposed the instant appeal.
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 We shall discuss the various points raised in appellant's brief in seriatim.
interest thereon and guarding fees, would be made.
The first question Mambulao Lumber Company poses is that which relates to
On December 21, 1961, the foreclosure sale of the mortgaged the amount of its indebtedness to the PNB arising out of the principal loans
chattels was held at 10:00 a.m. and they were awarded to the PNB and the accrued interest thereon. It is contended that its obligation under the
for the sum of P4,200 and the corresponding bill of sale was issued terms of the two promissory notes it had executed in favor of the PNB
in its favor by Deputy Provincial Sheriff Heraldo. 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.
In a letter dated December 26, 1961, the Manager of the Naga
Branch of the PNB advised the plaintiff giving it priority to There is merit to this claim. Examining the terms of the promissory note
repurchase the chattels acquired by the former at public auction. executed by the appellant in favor of the PNB, we find that the agreed interest
This offer was reiterated in a letter dated January 3, 1962, of the on the loan of P43,000.00 — P27,500.00 released on August 2, 1956 as per
Attorney of the Naga Branch of the PNB to the plaintiff, with the promissory note of even date (Exhibit C-3), and P15,500.00 released on
suggestion that it exercise its right of redemption and that it apply October 19, 1956, as per promissory note of the same date (Exhibit C-4) —
for the condonation of the attorney's fees. The plaintiff did not follow 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, of the Rules of Court for purposes of arriving at the amount awarded. It is to
submitted by the PNB, it appears that in arriving at the total indebtedness of be borne in mind that the fees enumerated under paragraphs k and n,
P57,646.59 as of that date, the PNB had compounded the principal of the Section 7, of Rule 130 (now Rule 141) are demandable, only by a sheriff
loan and the accrued 6% interest thereon each time the yearly amortizations serving processes of the court in connection with judicial foreclosure of
became due, and on the basis of these compounded amounts charged mortgages under Rule 68 of the new Rules, and not in cases of extra-judicial
additional delinquency interest on them up to September 22, 1961; and to foreclosure of mortgages under Act 3135. The law applicable is Section 4 of
this erroneously computed total of P57,646.59, the trial court added 6% Act 3135 which provides that the officer conducting the sale is entitled to
interest per annum from September 23, 1961 to November 21 of the same collect a fee of P5.00 for each day of actual work performed in addition to his
year. In effect, the PNB has claimed, and the trial court has adjudicated to it, expenses in connection with the foreclosure sale. Admittedly, the PNB failed
interest on accrued interests from the time the various amortizations of the to prove during the trial of the case, that it actually spent any amount in
loan became due until the real estate mortgage executed to secure the loan connection with the said foreclosure sale. Neither may expenses for
was extra-judicially foreclosed on November 21, 1961. This is an error. publication of the notice be legally allowed in the absence of evidence on
Section 5 of Act No. 2655 expressly provides that in computing the interest record to support it. 1 It is true, as pointed out by the appellee bank, that
on any obligation, promissory note or other instrument or contract, courts should take judicial notice of the fees provided for by law which need
compound interest shall not be reckoned, except by agreement, or in default not be proved; but in the absence of evidence to show at least the number of
thereof, whenever the debt is judicially claimed. This is also the clear working days the sheriff concerned actually spent in connection with the
mandate of Article 2212 of the new Civil Code which provides that interest extra-judicial foreclosure sale, the most that he may be entitled to, would be
due shall earn legal interest only from the time it is judicially demanded, and the amount of P10.00 as a reasonable allowance for two day's work — one for
of Article 1959 of the same code which ordains that interest due and unpaid the preparation of the necessary notices of sale, and the other for conducting
shall not earn interest. Of course, the parties may, by stipulation, capitalize the auction sale and issuance of the corresponding certificate of sale in favor
the interest due and unpaid, which as added principal shall earn new of the buyer. Obviously, therefore, the award of P298.54 as expenses of the
interest; but such stipulation is nowhere to be found in the terms of the sale should be set aside.
promissory notes involved in this case. Clearly therefore, the trial court fell
But the claim of the appellant that the real estate mortgage does not provide
into error when it awarded interest on accrued interests, without any
for attorney's fees in case the same is extra-judicially foreclosed, cannot be
agreement to that effect and before they had been judicially demanded.
favorably considered, as would readily be revealed by an examination of the
Appellant next assails the award of attorney's fees and the expenses of the pertinent provision of the mortgage contract. The parties to the mortgage
foreclosure sale in favor of the PNB. With respect to the amount of P298.54 appear to have stipulated under paragraph (c) thereof, inter alia:
allowed as expenses of the extra-judicial sale of the real property, appellant
. . . For the purpose of extra-judicial foreclosure, the Mortgagor
maintains that the same has no basis, factual or legal, and should not have
hereby appoints the Mortgagee his attorney-in-fact to sell the
been awarded. It likewise decries the award of attorney's fees which,
property mortgaged under Act 3135, as amended, to sign all
according to the appellant, should not be deducted from the proceeds of the
documents and to perform all acts requisite and necessary to
sale of the real property, not only because there is no express agreement in
accomplish said purpose and to appoint its substitute as such
the real estate mortgage contract to pay attorney's fees in case the same is
attorney-in-fact with the same powers as above specified. In case of
extra-judicially foreclosed, but also for the reason that the PNB neither spent
judicial foreclosure, the Mortgagor hereby consents to the
nor incurred any obligation to pay attorney's fees in connection with the said
appointment of the Mortgagee or any of its employees as receiver,
extra-judicial foreclosure under consideration.
without any bond, to take charge of the mortgaged property at once,
There is reason for the appellant to assail the award of P298.54 as expenses and to hold possession of the same and the rents, benefits and
of the sale. In this respect, the trial court said: profits derived from the mortgaged property before the sale, less the
costs and expenses of the receivership; the Mortgagor hereby agrees
The parcel of land, together with the buildings and improvements
further that in all cases, attorney's fees hereby fixed at Ten Per cent
existing thereon covered by Transfer Certificate of Title No. 381, was
(10%) of the total indebtedness then unpaid which in no case shall
sold for P56,908. There was, however, no evidence how much was
be less than P100.00 exclusive of all fees allowed by law, and the
the expenses of the foreclosure sale although from the pertinent
expenses of collection shall be the obligation of the Mortgagor and
provisions of the Rules of Court, the Sheriff's fees would be P1 for
shall with priority, be paid to the Mortgagee out of any sums realized
advertising the sale (par. k, Sec. 7, Rule 130 of the Old Rules) and
as rents and profits derived from the mortgaged property or from the
P297.54 as his commission for the sale (par. n, Sec. 7, Rule 130 of
proceeds realized from the sale of the said property and this
the Old Rules) or a total of P298.54.
mortgage shall likewise stand as security therefor. . . .
There is really no evidence of record to support the conclusion that the PNB
We find the above stipulation to pay attorney's fees clear enough to cover
is entitled to the amount awarded as expenses of the extra-judicial
both cases of foreclosure sale mentioned thereunder, i.e., judicially or extra-
foreclosure sale. The court below committed error in applying the provisions
judicially. While the phrase "in all cases" appears to be part of the second 29 of the Code of Civil Procedure, an attorney is not entitled in the
sentence, a reading of the whole context of the stipulation would readily show absence of express contract to recover more than a reasonable
that it logically refers to extra-judicial foreclosure found in the first sentence compensation for his services; and even when an express contract is
and to judicial foreclosure mentioned in the next sentence. And the made the court can ignore it and limit the recovery to reasonable
ambiguity in the stipulation suggested and pointed out by the appellant by compensation if the amount of the stipulated fee is found by the
reason of the faulty sentence construction should not be made to defeat the court to be unreasonable. This is a very different rule from that
otherwise clear intention of the parties in the agreement. announced in section 1091 of the Civil Code with reference to the
obligation of contracts in general, where it is said that such
It is suggested by the appellant, however, that even if the above stipulation to
obligation has the force of law between the contracting parties. Had
pay attorney's fees were applicable to the extra-judicial foreclosure sale of its
the plaintiff herein made an express contract to pay his attorney an
real properties, still, the award of P5,821.35 for attorney's fees has no legal
uncontingent fee of P2,115.25 for the services to be rendered in
justification, considering the circumstance that the PNB did not actually
reducing the note here in suit to judgment, it would not have been
spend anything by way of attorney's fees in connection with the sale. In
enforced against him had he seen fit to oppose it, as such a fee is
support of this proposition, appellant cites authorities to the effect: (1) that
obviously far greater than is necessary to remunerate the attorney
when the mortgagee has neither paid nor incurred any obligation to pay an
for the work involved and is therefore unreasonable. In order to
attorney in connection with the foreclosure sale, the claim for such fees
enable the court to ignore an express contract for an attorney's fees,
should be denied; 2 and (2) that attorney's fees will not be allowed when the
it is not necessary to show, as in other contracts, that it is contrary
attorney conducting the foreclosure proceedings is an officer of the
to morality or public policy (Art. 1255, Civil Code). It is enough that it
corporation (mortgagee) who receives a salary for all the legal services
is unreasonable or unconscionable. 4
performed by him for the corporation. 3 These authorities are indeed
enlightening; but they should not be applied in this case. The very same Since then this Court has invariably fixed counsel fees on a quantum meruit
authority first cited suggests that said principle is not absolute, for there is basis whenever the fees stipulated appear excessive, unconscionable, or
authority to the contrary. As to the fact that the foreclosure proceeding's unreasonable, because a lawyer is primarily a court officer charged with the
were handled by an attorney of the legal staff of the PNB, we are reluctant to duty of assisting the court in administering impartial justice between the
exonerate herein appellant from the payment of the stipulated attorney's fees parties, and hence, the fees should be subject to judicial control. Nor should
on this ground alone, considering the express agreement between the parties it be ignored that sound public policy demands that courts disregard
in the mortgage contract under which appellant became liable to pay the stipulations for counsel fees, whenever they appear to be a source of
same. At any rate, we find merit in the contention of the appellant that the speculative profit at the expense of the debtor or mortgagor. 5 And it is not
award of P5,821.35 in favor of the PNB as attorney's fees is unconscionable material that the present action is between the debtor and the creditor, and
and unreasonable, considering that all that the branch attorney of the said not between attorney and client. As court have power to fix the fee as
bank did in connection with the foreclosure sale of the real property was to between attorney and client, it must necessarily have the right to say
file a petition with the provincial sheriff of Camarines Norte requesting the whether a stipulation like this, inserted in a mortgage contract, is valid. 6
latter to sell the same in accordance with the provisions of Act 3135.
In determining the compensation of an attorney, the following circumstances
The principle that courts should reduce stipulated attorney's fees whenever it should be considered: the amount and character of the services rendered; the
is found under the circumstances of the case that the same is unreasonable, responsibility imposed; the amount of money or the value of the property
is now deeply rooted in this jurisdiction to entertain any serious objection to affected by the controversy, or involved in the employment; the skill and
it. Thus, this Court has explained: 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
But the principle that it may be lawfully stipulated that the legal
contingent or absolute, it being a recognized rule that an attorney may
expenses involved in the collection of a debt shall be defrayed by the
properly charge a much larger fee when it is to be contingent than when it is
debtor does not imply that such stipulations must be enforced in
not. 7 From the stipulation in the mortgage contract earlier quoted, it appears
accordance with the terms, no matter how injurious or oppressive
that the agreed fee is 10% of the total indebtedness, irrespective of the
they may be. The lawful purpose to be accomplished by such a
manner the foreclosure of the mortgage is to be effected. The agreement is
stipulation is to permit the creditor to receive the amount due him
perhaps fair enough in case the foreclosure proceedings is prosecuted
under his contract without a deduction of the expenses caused by
judicially but, surely, it is unreasonable when, as in this case, the mortgage
the delinquency of the debtor. It should not be permitted for him to
was foreclosed extra-judicially, and all that the attorney did was to file a
convert such a stipulation into a source of speculative profit at the
petition for foreclosure with the sheriff concerned. It is to be assumed
expense of the debtor.
though, that the said branch attorney of the PNB made a study of the case
Contracts for attorney's services in this jurisdiction stands upon an before deciding to file the petition for foreclosure; but even with this in mind,
entirely different footing from contracts for the payment of we believe the amount of P5,821.35 is far too excessive a fee for such
compensation for any other services. By express provision of section services. Considering the above circumstances mentioned, it is our
considered opinion that the amount of P1,000.00 would be more than
sufficient to compensate the work aforementioned.
Deduct: Total obligation to the PNB P57,495.86
The next issue raised deals with the claim that the proceeds of the sale of the
real properties alone together with the amount it remitted to the PNB later
was more than sufficient to liquidate its total obligation to herein appellee
bank. Again, we find merit in this claim. From the foregoing discussion of the Excess Payment to the PNB P 150.73
first two errors assigned, and for purposes of determining the total obligation
of herein appellant to the PNB as of November 21, 1961 when the real estate
mortgage was foreclosed, we have the following illustration in support of this
conclusion:1äwphï1.ñët From the foregoing illustration or computation, it is clear that there was no
further necessity to foreclose the mortgage of herein appellant's chattels on
A. - December 21, 1961; and on this ground alone, we may declare the sale of
appellant's chattels on the said date, illegal and void. But we take into
consideration the fact that the PNB must have been led to believe that the
I. Principal Loan stipulated 10% of the unpaid loan for attorney's fees in the real estate
mortgage was legally maintainable, and in accordance with such belief,
(a) Promissory note dated August 2, 1956 P27,500.00 herein appellee bank insisted that the proceeds of the sale of appellant's real
property was deficient to liquidate the latter's total indebtedness. Be that as
it may, however, we still find the subsequent sale of herein appellant's
(1) Interest at 6% per annum from Aug. 2, 1956 to Nov. chattels illegal and objectionable on other grounds.
21, 1961
That appellant vigorously objected to the foreclosure of its chattel mortgage
after the foreclosure of its real estate mortgage on November 21, 1961, can
(b) Promissory note dated October 19, 1956 P15,500.00 not be doubted, as shown not only by its letter to the PNB on November 19,
1961, but also in its letter to the provincial sheriff of Camarines Norte on the
same date. These letters were followed by another letter to the appellee bank
(1) Interest at 6% per annum from Oct.19, 1956 to Nov.
4,734.08 on December 14, 1961, wherein herein appellant, in no uncertain terms,
21, 1961
reiterated its objection to the scheduled sale of its chattels on December 21,
1961 at Jose Panganiban, Camarines Norte for the reasons therein stated
II. Sheriff's fees [for two (2) day's work] 10.00 that: (1) it had settled in full its total obligation to the PNB by the sale of the
real estate and its subsequent remittance of the amount of P738.59; and (2)
that the contemplated sale at Jose Panganiban would violate their agreement
III. Attorney's fee 1,000.00
embodied under paragraph (i) in the Chattel Mortgage which provides as
(i) In case of both judicial and extra-judicial foreclosure under Act
Total obligation as of Nov. 21, 1961 P57,495.86 1508, as amended, the parties hereto agree that the corresponding
complaint for foreclosure or the petition for sale should be filed with
the courts or the sheriff of the City of Manila, as the case may be; and
B. -
that the Mortgagor shall pay attorney's fees hereby fixed at ten per
cent (10%) of the total indebtedness then unpaid but in no case shall
Proceeds of the foreclosure sale of the real estate it be less than P100.00, exclusive of all costs and fees allowed by law
I. P56,908.00
mortgage on Nov. 21, 1961 and of other expenses incurred in connection with the said
foreclosure. [Emphasis supplied]
II. Additional amount remitted to the PNB on Dec. 18, 1961 738.59 Notwithstanding the abovequoted agreement in the chattel mortgage
contract, and in utter disregard of the objection of herein appellant to the
sale of its chattels at Jose Panganiban, Camarines Norte and not in the City
of Manila as agreed upon, the PNB proceeded with the foreclosure sale of said
Total amount of Payment made to PNB as of Dec. 18,
P57,646.59 chattels. The trial court, however, justified said action of the PNB in the
decision appealed from in the following rationale:
While it is true that it was stipulated in the chattel mortgage contract to the contrary, a sale conducted at a place other than that
that a petition for the extra-judicial foreclosure thereof should be stipulated for in the mortgage is invalid, unless the mortgagor
filed with the Sheriff of the City of Manila, nevertheless, the effect consents to such sale. 12
thereof was merely to provide another place where the mortgage
Moreover, Section 14 of Act 1508, as amended, provides that the officer
chattel could be sold in addition to those specified in the Chattel
making the sale should make a return of his doings which shall particularly
Mortgage Law. Indeed, a stipulation in a contract cannot abrogate
describe the articles sold and the amount received from each article. From
much less impliedly repeal a specific provision of the statute.
this, it is clear that the law requires that sale be made article by article,
Considering that Section 14 of Act No. 1508 vests in the mortgagee
otherwise, it would be impossible for him to state the amount received for
the choice where the foreclosure sale should be held, hence, in the
each item. This requirement was totally disregarded by the Deputy Sheriff of
case under consideration, the PNB had three places from which to
Camarines Norte when he sold the chattels in question in bulk,
select, namely: (1) the place of residence of the mortgagor; (2) the
notwithstanding the fact that the said chattels consisted of no less than
place of the mortgaged chattels were situated; and (3) the place
twenty different items as shown in the bill of sale. 13 This makes the sale of
stipulated in the contract. The PNB selected the second and,
the chattels manifestly objectionable. And in the absence of any evidence to
accordingly, the foreclosure sale held in Jose Panganiban, Camarines
show that the mortgagor had agreed or consented to such sale in gross, the
Norte, was legal and valid.
same should be set aside.
To the foregoing conclusion, We disagree. While the law grants power and
It is said that the mortgagee is guilty of conversion when he sells under the
authority to the mortgagee to sell the mortgaged property at a public place in
mortgage but not in accordance with its terms, or where the proceedings as
the municipality where the mortgagor resides or where the property is
to the sale of foreclosure do not comply with the statute. 14 This rule applies
situated, 8 this Court has held that the sale of a mortgaged chattel may be
squarely to the facts of this case where, as earlier shown, herein appellee
made in a place other than that where it is found, provided that the owner
bank insisted, and the appellee deputy sheriff of Camarines Norte proceeded
thereof consents thereto; or that there is an agreement to this effect between
with the sale of the mortgaged chattels at Jose Panganiban, Camarines
the mortgagor and the mortgagee. 9 But when, as in this case, the parties
Norte, in utter disregard of the valid objection of the mortgagor thereto for the
agreed to have the sale of the mortgaged chattels in the City of Manila,
reason that it is not the place of sale agreed upon in the mortgage contract;
which, any way, is the residence of the mortgagor, it cannot be rightly said
and the said deputy sheriff sold all the chattels (among which were a skagit
that mortgagee still retained the power and authority to select from among
with caterpillar engine, three GMC 6 x 6 trucks, a Herring Hall Safe, and
the places provided for in the law and the place designated in their
Sawmill equipment consisting of a 150 HP Murphy Engine, plainer, large
agreement over the objection of the mortgagor. In providing that the
circular saws etc.) as a single lot in violation of the requirement of the law to
mortgaged chattel may be sold at the place of residence of the mortgagor or
sell the same article by article. The PNB has resold the chattels to another
the place where it is situated, at the option of the mortgagee, the law clearly
buyer with whom it appears to have actively cooperated in subsequently
contemplated benefits not only to the mortgagor but to the mortgagee as well.
taking possession of and removing the chattels from appellant compound by
Their right arising thereunder, however, are personal to them; they do not
force, as shown by the circumstance that they had to take along PC soldiers
affect either public policy or the rights of third persons. They may validly be
and municipal policemen of Jose Panganiban who placed the chief security
waived. So, when herein mortgagor and mortgagee agreed in the mortgage
officer of the premises in jail to deprive herein appellant of its possession
contract that in cases of both judicial and extra-judicial foreclosure under Act
thereof. To exonerate itself of any liability for the breach of peace thus
1508, as amended, the corresponding complaint for foreclosure or the petition
committed, the PNB would want us to believe that it was the subsequent
for sale should be filed with the courts or the Sheriff of Manila, as the case
buyer alone, who is not a party to this case, that was responsible for the
may be, they waived their corresponding rights under the law. The correlative
forcible taking of the property; but assuming this to be so, still the PNB
obligation arising from that agreement have the force of law between them
cannot escape liability for the conversion of the mortgaged chattels by parting
and should be complied with in good faith. 10
with its interest in the property. Neither would its claim that it afterwards
By said agreement the parties waived the legal venue, and such gave a chance to herein appellant to repurchase or redeem the chattels,
waiver is valid and legally effective, because it, was merely a personal improve its position, for the mortgagor is not under obligation to take
privilege they waived, which is not contrary, to public policy or to the affirmative steps to repossess the chattels that were converted by the
prejudice of third persons. It is a general principle that a person may mortgagee. 15 As a consequence of the said wrongful acts of the PNB and the
renounce any right which the law gives unless such renunciation is Deputy Sheriff of Camarines Norte, therefore, We have to declare that herein
expressly prohibited or the right conferred is of such nature that its appellant is entitled to collect from them, jointly and severally, the full value
renunciation would be against public policy. 11 of the chattels in question at the time they were illegally sold by them. To this
effect was the holding of this Court in a similar situation. 16
On the other hand, if a place of sale is specified in the mortgage and
statutory requirements in regard thereto are complied with, a sale is The effect of this irregularity was, in our opinion to make the plaintiff
properly conducted in that place. Indeed, in the absence of a statute liable to the defendant for the full value of the truck at the time the
plaintiff thus carried it off to be sold; and of course, the burden is on to the time of the sale of the chattels in 1961. We have no doubt that the
the defendant to prove the damage to which he was thus subjected. . 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
This brings us to the problem of determining the value of the mortgaged
foreclosure sale in question was grossly unfair to the mortgagor. Considering,
chattels at the time of their sale in 1961. The trial court did not make any
however, the facts that the appraised value of P42,850.00 and the market
finding on the value of the chattels in the decision appealed from and denied
value of P85,700.00 originally given by the PNB official were admittedly
altogether the right of the appellant to recover the same. We find enough
conservative; that two 6 x 6 trucks subsequently bought by the appellant
evidence of record, however, which may be used as a guide to ascertain their
company had thereafter been added to the chattels; and that the real value
value. The record shows that at the time herein appellant applied for its loan
thereof, although depreciated after several years of inoperation, was in a way
with the PNB in 1956, for which the chattels in question were mortgaged as
maintained because the depreciation is off-set by the marked increase in the
part of the security therefore, herein appellant submitted a list of the chattels
cost of heavy equipment in the market, it is our opinion that the market
together with its application for the loan with a stated value of P107,115.85.
value of the chattels at the time of the sale should be fixed at the original
An official of the PNB made an inspection of the chattels in the same year
appraised value of P42,850.00.
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 Herein appellant's claim for moral damages, however, seems to have no legal
appellant with part of the proceeds of the loan were reappraised in a re- or factual basis. Obviously, an artificial person like herein appellant
inspection conducted by the same official in 1958, in the report of which he corporation cannot experience physical sufferings, mental anguish, fright,
gave all the chattels an appraised value of P26,850.00 and a market value of serious anxiety, wounded feelings, moral shock or social humiliation which
P48,200.00. 18 Another re-inspection report in 1959 gave the appraised value are basis of moral damages. 21 A corporation may have a good reputation
as P19,400.00 and the market value at P25,600.00. 19 The said official of the which, if besmirched, may also be a ground for the award of moral damages.
PNB who made the foregoing reports of inspection and re-inspections testified The same cannot be considered under the facts of this case, however, not
in court that in giving the values appearing in the reports, he used a only because it is admitted that herein appellant had already ceased in its
conservative method of appraisal which, of course, is to be expected of an business operation at the time of the foreclosure sale of the chattels, but also
official of the appellee bank. And it appears that the values were considerably for the reason that whatever adverse effects of the foreclosure sale of the
reduced in all the re-inspection reports for the reason that when he went to chattels could have upon its reputation or business standing would
herein appellant's premises at the time, he found the chattels no longer in undoubtedly be the same whether the sale was conducted at Jose
use with some of the heavier equipments dismantled with parts thereof kept Panganiban, Camarines Norte, or in Manila which is the place agreed upon
in the bodega; and finding it difficult to ascertain the value of the dismantled by the parties in the mortgage contract.
chattels in such condition, he did not give them anymore any value in his
But for the wrongful acts of herein appellee bank and the deputy sheriff of
reports. Noteworthy is the fact, however, that in the last re-inspection report
Camarines Norte in proceeding with the sale in utter disregard of the
he made of the chattels in 1961, just a few months before the foreclosure
agreement to have the chattels sold in Manila as provided for in the mortgage
sale, the same inspector of the PNB reported that the heavy equipment of
contract, to which their attentions were timely called by herein appellant,
herein appellant were "lying idle and rusty" but were "with a shed free from
and in disposing of the chattels in gross for the miserable amount of
rains" 20 showing that although they were no longer in use at the time, they
P4,200.00, herein appellant should be awarded exemplary damages in the
were kept in a proper place and not exposed to the elements. The President of
sum of P10,000.00. The circumstances of the case also warrant the award of
the appellant company, on the other hand, testified that its caterpillar
P3,000.00 as attorney's fees for herein appellant.
(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 WHEREFORE AND CONSIDERING ALL THE FOREGOING, the decision
as additional items in the mortgaged chattels were worth no less than appealed from should be, as hereby, it is set aside. The Philippine National
P14,000.00. He likewise appraised the worth of its Murphy engine at Bank and the Deputy Sheriff of the province of Camarines Norte are ordered
P16,000.00 which, according to him, when taken together with the heavy to pay, jointly and severally, to Mambulao Lumber Company the total
equipments he mentioned, the sawmill itself and all other equipment forming amount of P56,000.73, broken as follows: P150.73 overpaid by the latter to
part of the chattels under consideration, and bearing in mind the current the PNB, P42,850.00 the value of the chattels at the time of the sale with
cost of equipments these days which he alleged to have increased by about interest at the rate of 6% per annum from December 21, 1961, until fully
five (5) times, could safely be estimated at P120,000.00. This testimony, paid, P10,000.00 in exemplary damages, and P3,000.00 as attorney's fees.
except for the appraised and market values appearing in the inspection and Costs against both appellees.
re-inspection reports of the PNB official earlier mentioned, stand Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro
uncontroverted in the record; but We are not inclined to accept such and Fernando, JJ., concur.
testimony at its par value, knowing that the equipments of herein appellant Bengzon, J.P. J., took no part
had been idle and unused since it stopped operating its sawmill in 1958 up