G.R. No.

L-66419 July 31, 1987

FILINVEST CREDIT CORPORATION, petitioner,

vs.
IVAN MENDEZ, respondent.

GUTIERREZ, JR., J.:

This is a petition to review on certiorari the decision of the Intermediate Appellate

Court, now Court of Appeals, rendered in AC-G.R. CV No. 63673 affirming in toto the
decision of the Court of First Instance of Davao, Branch 6, 16th Judicial District.

The factual background of this case, as summarized in the trial court's decision and
adopted by the appellate court, is as follows:

On August 6, 1974, Ivan Mendez purchased a Ford Cortina from the Davao
Motor Sales Company and to secure balance of P49,428.40 plaintiff executed
and delivered a promissory note and chattel mortgage in favor of Davao Motor
Sales Company.

On August 11, 1974, Davao Motor Sales Company assigned to Filinvest Credit
Corp., its rights, title and interest in the promissory note and chattel mortgage.
According to the terms of the promissory note, the monthly installments of
Pl,373.00 would begin on September 13, 1974, and on or before the 13th day of
the month thereafter until August 13, 1977, with interest and such other charges
customarily imposed by defendant on transactions of the same nature.

It appears that Ivan Mendez failed to pay the February 13, March 13, and April
13, 1976 installments due on the promissory note, Thus, defendant financing
company sent written demands to Ivan Mendez to update his account.

On May 3, 1976, Ivan Mendez paid the financing company P2,000.00 through
Philippine Veteran's Bank Check No. 58166 which was credited to payments for
the following months:

Month Amount
Feb. P200.49 (full
1976 payment)
Mar. 1,373.00 (full payment
1976 )
Apr. 415.05 (partial)
1976
Sub-total 1,988.54
 Interest 11.46

Total P2,000.00

On May 6, 1976, the check was returned to the financing corporation on the
ground of insufficient funds by the Philippine Veterans Bank.

On May 10, 1976, defendant financing company filed an action for recovery of
personal property and/or sum of money docketed as Civil Case No. 9468 in the
Court of First Instance against Ivan Mendez, et al.

On May 13, 1976 (or May 26, 1976), the check was finally cleared and
considered payment for the February, March and April, 1976, installments.

On May 24, 1976, this Court issued Order of Seizure which states, among
others:

WHEREAS, it is further alleged in the complaint that in violation of their

undertakings the defendants defaulted in complying with the terms and
conditions of the said promissory note and chattel mortgage (Annexes "A"
and "B"), by failing to pay part of the installment which fell due on February
13, 1976, as well as the subsequent two (2) consecutive installments which
fell due on March 12 — April 13, 1976; (Exh. "B ").

Early in the morning of June 8, 1976, Ivan Mendez used the car to fetch a certain
Col. Coronel at the airport who came to the city to speak at a gathering of
reserve officers. Ivan Mendez, a Captain in the reserve force, brought Col.
Coronel to a hotel thence to an eatery downtown where the conference was
being held. After which, Mendez instructed his driver to take the car home to the
Central Park Subdivision, Davao City. Shortly before noon, personnel of the
financing company and a deputy sheriff arrived at the house of Mendez and
seized the car pursuant to the Order dated May 24, 1976. The car was driven
back to the eatery where Ivan Mendez was called and he pleaded with the
FILINVEST people to release his car in the meantime. Refused, Mendez then
went to the office of the financing company and reiterated his plea. He was told
by Benjamin Bontia, collection and credit manager of the financing company that
he had to pay the whole amount due in order to get back the car. After further
negotiations, Bontia relented and permitted Mendez to pay his April, May and
June installments plus repossession expenses as a condition to the release of
the car.

On June 11, 1976, Mendez paid P3,000.00, which was credited to the following
months: April — P957.95; May — Pl,373.00; and, June — P643.67 plus interest
 of P25.38 (Exh. "6-B"). On June 18, 1976, Mendez paid Pl,894.00 as and for
repossession expenses (Exh. "C "). After payments of these amounts, the
financing company finally released the car to Ivan Mendez.

On June 21, 1976. the financing company filed a motion in court seeking the
dismissal of Civil Case No. 9468 "on the ground that defendants have updated
their obligation to the plaintiff", and which was granted by virtue of the Order of
this Court dated June 24, 1976. (pp. 105-106, Rollo)

On July 14, 1976, respondent Mendez filed a complaint for Solution Indebiti and
damages against the petitioner before the Court of First Instance of Davao, Branch 6,
16th Judicial District. His amended complaint dated July 28, 1976, alleged, among
others, "that the seizure order was illegal, as the unpaid installments for the months of
February, March, April, 1976 subject of Civil Case No. 9468 had previously been
updated by the clearing of the PVB check, and that petitioner was therefore without
any right to claim from him the repossession expenses and, that due to the alleged
unjustified repossession of the car and the factual circumstances attendant thereto, he
is entitled to moral damages." (p. 24, Rollo)

In its answer to the complaint, the petitioner countered: "that since the PVB check was
only cleared subsequent to May 10, 1976, respondent was in default of the February,
March and April installments at the time it filed its complaint for the repossession of the
car on the aforesaid dated; and, that the subsequent updating of respondent's account
did not invalidate the seizure order, as the basis therefor was the failure of respondent
to pay the installments when they fell due, and not the failure to pay the February,
March and April installments in particular." (pp. 24-25, Rollo)

On December 10, 1977, the trial court rendered its judgment, the dispositive portion of
which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered infavor of plaintiff

Ivan Mendez, and against the defendant Filinvest Credit Corporation:

1. Ordering the defendant Filinvest Credit Corporation, to return to plaintiff the

sum of P1,894.80 representing the repossession expenses paid by Ivan Mendez
to the financing company with legal rate of interest from June 17, 1976, the date
of payment up to the time the full amount is returned;

2. Ordering the defendant to pay to plaintiff the sum of P80,000.00, as and for
moral damages; and

3. Ordering the defendant to pay to plaintiff the amount of P80,000.00 as and for
attorney's fees.
The defendant Filinvest Credit Corporation shall pay the costs of suit. (pp, 101-102,
Rollo)

The petitioner appealed to the Intermediate Appellate Court which affirmed in toto the
decision of the trial court. Its motion for reconsideration having been denied, the
petitioner filed the present petition.

The petitioner now comes before this Court with the following assignments of errors:

THE TRIAL COURT ERRED IN HOLDING THAT THE SEIZURE OF THE CAR WAS
TOTALLY UNJUSTIFIED AND IN ORDERING PETITIONER TO REIMBURSE
RESPONDENT THE SUM OF ONE THOUSAND EIGHT HUNDRED NINETY FOUR
PESOS & 80/100 (P1,894.80) REPRESENTING THE REPOSSESSION EXPENSES.

II

THE TRIAL COURT ERRED IN AWARDING RESPONDENT MORAL DAMAGES IN

THE AMOUNT OF EIGHTY THOUSAND PESOS (P80,000.00)

III

THE TRIAL COURT ERRED IN ORDERING PETITIONER TO PAY RESPONDENT

THE SUM OF EIGHT THOUSAND PESOS (P8,000.00) AS AND FOR ATTORNEY'S
FEES.

IV

THE TRIAL COURT ERRED IN NOT DISMISSING CIVIL CASE NO, 9621 AND IN
NOT AWARDING PETITIONER ITS LEGITIMATE COUNTERCLAIM FOR DAMAGES.
(p. 28, Rollo)

The arguments of the petitioner are centered on its having a clear cause of action and
a right to the corresponding remedy at the time the complaint was filed on May 10,
1976. The respondent had not paid the February, March, and April 1976 installments
or more than two installments due on the promissory note.

On the other hand, the respondent claims that the acceleration clause stipulated in the
promissory note and in the chattel mortgage cannot justify the action taken by the
petitioner because it contravenes the letter and the avowed public policy of the
installment sales law, and, therefore, is illegal and unenforceable.

The respondent states that since the petitioner was exacting fulfillment of the obligation
it should have desisted from repossessing the car. It cannot exercise its remedies
cumulatively. It cannot pretend that it was recovering the car preparatory to
cancellation of the sale or foreclosure of the chattel mortgage because it had elected to
exact fulfillment of the obligation when it filed Civil Case No. 9468.

The respondent stresses that the PVB check bounced on May 6, 1976, but the
petitioner re-deposited it and in due course of business it cleared on May 13, 1976.
Thus, as of May 13, 1976, the remaining unpaid installment was only part of the April,
1976 installment, in the amount of P957.95. Having redeposited the check before May
13, 1976, the petitioner should have waited until the check bounced before filing the
complaint.

According to the private respondent, the complaint in Civil Case No. 9468 not only
alleged a cause of action for specific performance but also alternatively asked for the
issuance of a writ of replevin. The petitioner, therefore, acted cumulatively in pursuing
its various remedies which is against the intent and spirit of the installment sales law.

We agree with the petitioner.

The remittance of the PVB check on May 3, 1976 could not have cured the defaults in
payment because the check bounced when it was presented for payment. The
respondent's account had no funds at the time to back up the check he used as
payment.

Article 1249 of the Civil Code provides:

xxx xxx xxx

The delivery of promissory notes payable to order, or bills of exchange or other

mercantile documents shall produce the effect of payment only when they have
been cashed, or when through the fault of the creditor they have been impaired.

xxx xxx xxx

The petitioner stresses that the seizure order was anchored on the respondent's failure
to pay installments on time and not on the mere unqualified failure to pay the February,
March, and April installments. It states that the making of timely payments was an
absolute undertaking in the promissory note and the deed of chattel mortgage. The
grievance sought to be vindicated by the replevin suit was the non-compliance with this
undertaking.

The records sustain the petitioner's arguments that it had a valid cause of action when
the complaint was filed. It filed suit for the total balance of P25,597.56 in accordance
with the stipulated acceleration clause in case of default. The consideration for the
seizure order prayed for by the petitioner included the non-payment of the remaining
total obligation.
With respect to the trial court's ordering the petitioner to reimburse Pl,894.80
representing the expenses incurred because of the seizure of the car and as a
condition for its release, the petitioner maintains that it had sufficient justification to
proceed with Civil Case No. 9468 and to repossess the car. It disclaims any obligation
to withdraw the replevin suit upon the clearing of the PVB check, because the fact that
it was cleared did not wipe out the bases of the proceedings.

Insofar as the P1,894.80 are concerned, the petitioner is correct that the repossession
expenses must be for the account of the respondents whose duty was to immediately
surrender the car upon valid demand and thereby prevent the necessity of the
petitioner's having to spend in order to repossess it.

The petitioner also questions the award of attorney's fees. It asserts that according to
decisions of this Court, an award of attorney's fees is improper on the sole basis of an
adverse decision (Ramos v. Ramos, 61 SCRA 284), or if one considers the good faith
of parties in prosecuting a cause of action though declared to be unfounded (Salao v.
Salao, 70 SCRA 65), or in the absence of clear proof that an action was intended
merely to prejudice the other party (Mercader v. Manila Polo Club, L-8373, September
28, 1956). The records sustain the contention that there is no basis for entitlement to
attorney's fees.

Concerning the award of moral damages in the amount of P80,000.00, the petitioner
argues that moral damages may be recovered if they are the proximate result of a
wrongful act or omission. The petitioner points out that it repossessed the car as a
matter of right and upon faithful compliance with all the legal requirements. As the
exercise of a right within legal bounds is not wrongful, the basic requirement for an
award of moral damages is absent. It was the respondent and not the petitioner, who
was guilty of a wrongful act. The failure to abide by one's express financial obligations
is deplorable. To hold otherwise is to reward contractual breach and penalize one who
avails of contractual and legal remedies to correct the prejudice resulting from any
such breach. The petitioner argues that the respondent alone must bear the
consequences of his wrongful omission.

On the other hand, the private respondent bases his claim to moral damages on the
alleged failure of the petitioner, to act with caution and to observe honesty and good
faith with due regard to the respondent's rights under the installment sales law as wen
as on the act of the petitioner in deliberately repossessing the car in violation of law.

The award for moral damages has no factual and legal basis.

The respondent claims that it was while he was attending a seminar for home defense
in Davao City that the car was repossessed by the petitioner. When he pleaded with
the petitioner not to seize the car at that very moment because he was using it for his
visitor from Manila, the petitioner chose to brandish the seizure order as its weapon to
enforce collection of his whole account. The respondent claims that he was humiliated
and embarrassed most especially before his visitor and among those attending the
seminar as well as among his friends and business associates. The shock and
humiliation he suffered resulted to his hospitalization immediately, thereafter, for about
a week.

The testimony, however, of the driver of the respondent shows that the car was seized
at the residence of the respondent while the said driver was cleaning the same. It is,
therefore, not true that the respondent was humiliated and embarrassed before his
visitor and among those attending the seminar,

The rule is settled that moral damages cannot be awarded in the absence of a
wrongful act or omission or fraud or bad faith. (R & B Surety & Insurance Co., v.
Intermediate Appellate Court, 129 SCRA 736; and Siasat v. Intermediate Appellate
Court, 139 SCRA 238). When the action is filed in good faith there should be no
penalty on the right to litigate. (Expiritu v. Court of Appeals, 137 SCRA 50). The
petitioner may have erred but error alone is not a ground for moral damages.1avvphi1

The petitioner filed an action for recovery of personal property and/or sum of money
against the respondent (Civil Case No. 9468) when the latter's PVB check intended for
the February, March, and April installments bounced due to insufficiency of funds. By
virtue of an order of seizure issued by the court, the car was repossessed. The check
was later redeposited and credited for the months mentioned. When the respondent
negotiated with the petitioner for the release of the car, the latter demanded payment
of the total outstanding balance on the promissory note. Due to the persistent pleas of t
he respondent, the petitioner released the car to him upon payment of the installment
remaining unpaid for the months of April, May, and June, 1976, in addition to the costs
incurred in repossessing the car amounting to P1,897.80. On June 21, 1976, Civil
Case No. 9468 was dismissed upon motion of the petitioner. The willingness of the
petitioner to allow the respondent to pay only the unpaid installments for April, May,
and June instead of the total outstanding balance and to release the car as well as its
voluntary motion to dismiss the case indicates lack of fraud or bad faith on the part of
the petitioner. The private respondent was not without fault. He was three months
behind in his payments and he issued a bouncing check. The dismissal of Civil Case
No. 9468 rendered moot and academic the issues of whether or not the acceleration
clause in the promissory note is illegal and unenforceable as well as the other issue of
whether or not the petitioner acted cumulatively in pursuing its various remedies to
effect collection.

WHEREFORE, the petition is hereby GRANTED. The decisions of the trial court and
the Intermediate Appellate Court are REVERSED and SET ASIDE. The complaint of
the respondent is DISMISSED.

SO ORDERED.

G.R. No. 125031 January 24, 2000

PERMEX INC. and/or JANE (JEAN) PUNZALAN, PERSONNEL MANAGER and
EDGAR LIM, MANAGER,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EMMANUEL
FILOTEO, respondents.

QUISUMBING, J.:

This special civil action for certiorari impugns the Resolution of the National Labor
Relations Commission, Fifth Division, dated March 14, 1996, which reversed the
decision of the Labor Arbiter in NLRC Case No. RAB-09-00259-94, as well as its
Resolution, dated April 17, 1996, denying the motion for reconsideration.

Petitioner, Permex Producer and Exporter Corporation (hereinafter Permex), is a

company engaged in the business of canning tuna and sardines, both for export and
domestic consumption. Its office and factory are both located in Zamboanga City.

Co-petitioners Edgar Lim and Jean Punzalan1 are its Manager and Personnel
Manager, respectively.

Private respondent Emmanuel Filoteo, an employee of Permex, was terminated by

petitioners allegedly for flagrantly and deliberately violating company rules and
regulations. More specifically, he was dismissed allegedly for falsifying his daily time
record.

The pertinent facts, as found by both the NLRC and the Labor Arbiter, are as follows:

Permex initially hired Emmanuel Filoteo on October 1, 1990, as a mechanic.

Eventually, Filoteo was promoted to water treatment operator, a position he held until
his termination on August 29, 1994. As water treatment operator, Filoteo did not have a
fixed working schedule. His hours of work were dependent upon the company's shifting
production schedules.

On July 31, 1994, Filoteo was scheduled for the night shift from 7:00 p.m. to 7:00 a.m.
the following day. That night he reported for work together with his co-workers, Felix
Pelayo and Manuel Manzan. They logged in at the main gate and guardhouse of the
petitioner's factory. Filoteo entered his time-in at 8:45 p.m. and since he was scheduled
to work until 7:00 a.m. the next day, he wrote 7:00 a.m. in his scheduled time-out. This
practice of indicating the time out at the moment they time in, was customarily done by
most workers for convenience and practicality since at the end of their work shift, they
were often tired and in a hurry to catch the available service vehicle for their trip home,
so they often forgot to log out. There were times also when the Log Book was brought
to the Office of the Personnel Manager and they could not enter their time out. The
company had tolerated the practice.1âwphi1.nêt
On the evening of July 31, 1994, at around 9:20 p.m., Filoteo, together with Pelayo,
went to see the Assistant Production Manager to inquire if "butchering" of fish would be
done that evening so they could start operating the boiler. They were advised to wait
from 9:30 p.m. to 10:00 p.m. for confirmation.

At or about 10:00 p.m., Filoteo and Pelayo went back to the Assistant Production
Manager's office. There they were informed that there would be no "butchering" of tuna
that night. Filoteo then sought permission to go home, which was granted. Filoteo then
hurriedly got his things and dashed off to the exit gate to catch the service jeep
provided by Permex.

The next day, August 1, 1994, Filoteo reported for work as usual. He then remembered
that he had to make a re-entry in his daily time record for the previous day. He
proceeded to the Office of the Personnel Manager to retime his DTR entry. Later, he
received a memorandum from the Assistant Personnel Officer asking him to explain, in
writing, the entry he made in his DTR. Filoteo complied and submitted his written
explanation that same evening.

On August 8, 1994, Filoteo was suspended indefinitely. His explanation was found
unsatisfactory. He was dismissed from employment on August 23, 1994.

The dismissal arose from Filoteo's alleged violation of Article 2 of the company rules
and regulations. The offense charged was entering in his DTR that he had worked from
8:45 p.m. of July 31, 1994 to 7:00 a.m. of August 1, 1994, when in fact he had worked
only up to 10:00 p.m.

On September 5, 1994, Filoteo filed a complaint for illegal dismissal with claims for
separation pay, damages, and attorney's fees with the Labor Arbiter. His complaint
was docketed as NLRC Case No. RAB 09-09-00259-94.

On June 9, 1995, the Labor Arbiter dismissed the complaint for lack of merit. The
decretal portion of the decision reads:

WHEREFORE, in view of the foregoing considerations, judgment is hereby

rendered dismissing the complaint for lack of merit. However, for violation of
compliance of (sic) procedural due process, the respondent is hereby ordered
thru its Authorized Officer to pay complainant P1,000.00 by way of indemnity
pay. Furthermore, complainant's claims for damages and attorney's fees be
dismissed for lack of merit.

SO ORDERED.2

Filoteo appealed to the NLRC. Finding merit therein, the Commission's Fifth Division
promulgated its resolution, reversing and setting aside the Labor Arbiter's decision, by
disposing as follows:
 WHEREFORE, the decision appealed from, is Vacated and Set Aside and a new
one entered declaring the complainant to have been illegally dismissed by
respondent company. Accordingly, respondent Permex, Inc., through its
corporate officers, is hereby ordered and directed to pay complainant, Emmanuel
Filoteo, separation pay at the rate of one (1) month salary for every year of
service or in the equivalent of four (4) months separation pay and backwages
effective August 23, 1994 up to the promulgation of this decision, inclusive of
fringe benefits, if any. Further, respondent company is ordered to pay
complainant moral and exemplary damages in the sum of P10,000.00 and
P5,000.00, respectively, as well as attorney's fees equivalent to ten (10%)
percent of the total monetary award after computation thereof at the execution
stage.

SO ORDERED.3

On April 3, 1996, petitioners filed a motion for reconsideration. It was denied for lack of
merit by the NLRC in a resolution dated April 17, 1996.

Hence, the present petition, assigning the following errors:

PUBLIC RESPONDENT'S RESOLUTIONS ARE CONTRARY TO THE

EVIDENCE ON RECORD AND ADMITTED FACTS.

II

PUBLIC RESPONDENT ERRED WHEN IT RULED THAT PRIVATE

RESPONDENT WAS ILLEGALLY DISMISSED.

III

PUBLIC RESPONDENT ERRED WHEN IT AWARDED PRIVATE

RESPONDENT SEPARATION PAY, BACKWAGES, DAMAGES AND
ATTORNEY'S FEES SANS FACTUAL AND LEGAL BASIS.

We will now consider these assigned errors to resolve the principal issue of whether or
not private respondent was illegally terminated from his employment.

Note that, firstly, petitioners seek a reversal of the public respondent's findings of the
facts. But as the Court has repeatedly ruled the findings of facts of the NLRC,
particularly where the NLRC and the Labor Arbiter are in agreement, are deemed
binding and conclusive upon the Court.4 For the Court is not a trier of facts.5 Second,
resort to judicial review of the decisions of the NLRC in a special civil action
for certiorari under Rule 65 of the Rules of Court, is limited only to the question
generally of grave abuse of discretion amounting to lack or excess of
jurisdiction.6 Thirdly, in this case, the NLRC's factual findings are supported by the
evidence on record. We are therefore constrained not to disturb said findings of fact.

Whether private respondent was illegally dismissed or not is governed by Article 282 of
the Labor Code.7 To constitute a valid dismissal from employment, two requisites must
concur: (a) the dismissal must be for any of the causes provided for in Article 282 of
the Labor Code; and (b) the employee must be afforded an opportunity to be heard
and defend himself.8 This means that an employer can terminate the services of an
employee for just and valid causes, which must be supported by clear and convincing
evidence.9 It also means that, procedurally, the employee must be given notice, with
adequate opportunity to be heard,10 before he is notified of his actual dismissal for
cause.

In the present case, the NLRC found that the two-fold requirements for a valid
dismissal were not satisfied by the petitioners.

First, petitioner's charge of serious misconduct of falsification or deliberate

misrepresentation was not supported by the evidence on the record contrary to Art.
277 of the Labor Code which provides that:

Art. 277. Miscellaneous provisions. —

xxx xxx xxx

(b) Subject to the constitutional right of workers to security of tenure and their
right to be protected against dismissal except for a just and authorized cause. . .
The burden of proving that the termination was for a valid or authorized cause
shall rest on the employer. . .

Second, the private respondent was not afforded an opportunity to be heard. As found
by the NLRC:

. . . Aside from the fact that there was no valid and justifiable cause for his
outright dismissal from the service, complainant's dismissal as correctly held by
the Labor Arbiter was tainted with arbitrariness for failure of respondent company
(petitioner herein) to observe procedural due process in effecting his dismissal.
Admittedly, complainant was suspended indefinitely on August 8, 1994 and
subsequently dismissed on August 23, 1994 without any formal investigation to
enable complainant to defend himself.11

Such dismissal, in our view, was too harsh a penalty for an unintentional infraction, not
to mention that it was his first offense committed without malice, and committed also by
others who were not equally penalized.12

It is clear that the alleged false entry in private respondent's DTR was actually the
result of having logged his scheduled time-out in advance on July 31, 1994. But it
appears that when he timed in, he had no idea that his work schedule (night shift)
would be cancelled. When it was confirmed at 10:00 p.m. that there was no
"butchering" of tuna to be done, those who reported for work were allowed to go home,
including private respondent. In fact, Filoteo even obtained permission to leave from
the Assistant Production Manager.

Considering the factory practice which management tolerated, we are persuaded that
Filoteo, in his rush to catch the service vehicle, merely forgot to correct his initial time-
out entry. Nothing is shown to prove he deliberately falsified his daily time record to
deceive the company. The NLRC found that even management's own evidence
reflected that a certain Felix Pelayo, a co-worker of private respondent, was also
allowed to go home that night and like private respondent logged in advance 7:00 a.m.
as his time-out. This supports Filoteo's claim that it was common practice among night-
shift workers to log in their usual time-out in advance in the daily time record.

Moreover, as early as Tide Water Associated Oil Co. v. Victory Employees and
Laborers' Association, 85 Phil. 166 (1949), we ruled that, where a violation of company
policy or breach of company rules and regulations was found to have been tolerated by
management, then the same could not serve as a basis for termination.

All told we see no reason to find that the NLRC gravely abused its discretion when it
ruled that private respondent was illegally dismissed. Hence we concur in that ruling.
Nonetheless, we find that the award of moral and exemplary damages by the public
respondent is not in order and must be deleted. Moral damages are recoverable only
where the dismissal of the employee was tainted by bad faith or fraud, or where it
constituted an act oppressive to labor, and done in a manner contrary to morals, good
customs, or public policy.13 Exemplary damages may be awarded only if the dismissal
was done in a wanton, oppressive, or malevolent manner.14 None of these
circumstances exist in the present case.

WHEREFORE, the petition is DENIED. The assailed resolutions of the National Labor
Relations Commission dated March 14, 1996 and April 17, 1996 in NLRC CA No. M-
002808-95 are AFFIRMED with MODIFICATION. Petitioner Permex, through its
corporate officers, is ORDERED to pay jointly and solidarily the private respondent
separation pay at the rate of one (1) month salary for every year of service as well as
backwages effective August 23, 1994, inclusive of fringe benefits if any, with legal
interest until fully paid, and attorney's fees equivalent to ten (10%) percent of the total
monetary award computed at the execution stage hereof. The award of moral and
exemplary damages, however, is DELETED. Costs against petitioners.1âwphi1.nêt

SO ORDERED.
G.R. No. L-68138 May 13, 1991

AGUSTIN Y. GO and THE CONSOLIDATED BANK AND TRUST CORPORATION

(Solidbank), petitioners,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT and FLOVERTO
JAZMIN, respondents.

C.M. De los Reyes & Associates for petitioners.

Millora & Maningding Law Offices for private respondent.

FERNAN, C.J.:

The instant petition for review on certiorari questions the propriety of the respondent
appellate court's award of nominal damages and attorney's fees to private respondent
whose name was used by a syndicate in encashing two U.S. treasury checks at
petitioner bank.

Floverto Jazmin is an American citizen and retired employee of the United States
Federal Government. He had been a visitor in the Philippines since 1972 residing at 34
Maravilla Street, Mangatarem, Pangasinan. As pensionado of the U.S. government, he
received annuity checks in the amounts of $ 67.00 for disability and $ 620.00 for
retirement through the Mangatarem post office. He used to encash the checks at the
Prudential Bank branch at Clark Air Base, Pampanga.

In January, 1975, Jazmin failed to receive one of the checks on time thus prompting
him to inquire from the post offices at Mangatarem and Dagupan City. As the result of
his inquiries proved unsatisfactory, on March 4, 1975, Jazmin wrote the U.S. Civil
Service Commission, Bureau of Retirement at Washington, D.C. complaining about the
delay in receiving his check. Thereafter, he received a substitute check which he
encashed at the Prudential Bank at Clark Air Base.

Meanwhile, on April 22, 1975, Agustin Go, in his capacity as branch manager of the
then Solidbank (which later became the Consolidated Bank and Trust Corporation) in
Baguio City, allowed a person named "Floverto Jazmin" to open Savings Account No.
BG 5206 by depositing two (2) U. S. treasury checks Nos. 5-449-076 and 5-448-890 in
the respective amounts of $1810.00 and $913.401 equivalent to the total amount of P
20,565.69, both payable to the order of Floverto Jasmin of Maranilla St., Mangatarem,
Pangasinan and drawn on the First National City Bank, Manila.
The savings account was opened in the ordinary course of business. Thus, the bank,
through its manager Go, required the depositor to fill up the information sheet for new
accounts to reflect his personal circumstances. The depositor indicated therein that he
was Floverto Jazmin with mailing address at Mangatarem, Pangasinan and home
address at Maravilla St., Mangatarem, Pangasinan; that he was a Filipino citizen and a
security officer of the US Army with the rank of a sergeant bearing AFUS Car No. H-
2711659; that he was married to Milagros Bautista; and that his initial deposit was
P3,565.35. He wrote CSA No. 138134 under remarks or instructions and left blank the
spaces under telephone number, residence certificate/alien certificate of
registration/passport, bank and trade performance and as to who introduced him to the
bank.2 The depositor's signature specimens were also taken.

Thereafter, the deposited checks were sent to the drawee bank for clearance.
Inasmuch as Solidbank did not receive any word from the drawee bank, after three (3)
weeks, it allowed the depositor to withdraw the amount indicated in the checks.

On June 29, 1976 or more than a year later, the two dollar cheeks were returned to
Solidbank with the notation that the amounts were altered.3 Consequently, Go reported
the matter to the Philippine Constabulary in Baguio City.

On August 3, 1976, Jazmin received radio messages requiring him to appear before
the Philippine Constabulary headquarters in Benguet on September 7, 1976 for
investigation regarding the complaint filed by Go against him for estafa by passing
altered dollar checks. Initially, Jazmin was investigated by constabulary officers in
Lingayen, Pangasinan and later, at Camp Holmes, La Trinidad, Benguet. He was
shown xerox copies of U.S. Government checks Nos. 5-449-076 and 5-448-890
payable to the order of Floverto Jasmin in the respective amounts of $1,810.00 and
$913.40. The latter amount was actually for only $13.40; while the records do not show
the unaltered amount of the other treasury check.

Jazmin denied that he was the person whose name appeared on the checks; that he
received the same and that the signature on the indorsement was his. He likewise
denied that he opened an account with Solidbank or that he deposited and encashed
therein the said checks. Eventually, the investigators found that the person named
"Floverto Jazmin" who made the deposit and withdrawal with Solidbank was an
impostor.

On September 24, 1976, Jazmin filed with the then Court of First Instance of
Pangasinan, Branch II at Lingayen a complaint against Agustin Y. Go and the
Consolidated Bank and Trust Corporation for moral and exemplary damages in the
total amount of P90,000 plus attorney's fees of P5,000. He alleged therein that Go
allowed the deposit of the dollar checks and the withdrawal of their peso equivalent
"without ascertaining the identity of the depositor considering the highly suspicious
circumstances under which said deposit was made; that instead of taking steps to
establish the correct identity of the depositor, Go "immediately and recklessly filed (the)
complaint for estafa through alteration of dollar check" against him; that Go's complaint
was "an act of vicious and wanton recklessness and clearly intended for no other
purpose than to harass and coerce the plaintiff into paying the peso equivalent of said
dollar checks to the CBTC branch office in Baguio City" so that Go would not be
"disciplined by his employer;" that by reason of said complaint, he was "compelled to
present and submit himself" to investigations by the constabulary authorities; and that
he suffered humiliation and embarrassment as a result of the filing of the complaint
against him as well as "great inconvenience" on account of his age (he was a
septuagenarian) and the distance between his residence and the constabulary
headquarters. He averred that his peace of mind and mental and emotional tranquility
as a respected citizen of the community would not have suffered had Go exercised "a
little prudence" in ascertaining the identity of the depositor and, for the "grossly
negligent and reckless act" of its employee, the defendant CBTC should also be held
responsible.4

In their answer, the defendants contended that the plaintiff had no cause of action
against them because they acted in good faith in seeking the "investigative assistance"
of the Philippine Constabulary on the swindling operations against banks by a
syndicate which specialized in the theft, alteration and encashment of dollar checks.
They contended that contrary to plaintiff s allegations, they verified the signature of the
depositor and their tellers conducted an Identity check. As counterclaim, they prayed
for the award of P100,000 as compensatory and moral damages; P20,000 as
exemplary damages; P20,000 as attorney's fees and P5,000 as litigation, incidental
expenses and costs.5

In its decision of March 27, 19786 the lower court found that Go was negligent in failing
to exercise "more care, caution and vigilance" in accepting the checks for deposit and
encashment. It noted that the checks were payable to the order of Floverto Jasmin,
Maranilla St., Mangatarem, Pangasinan and not to Floverto Jazmin, Maravilla St.,
Mangatarem, Pangasinan and that the differences in name and address should have
put Go on guard. It held that more care should have been exercised by Go in the
encashment of the U.S. treasury checks as there was no time limit for returning them
for clearing unlike in ordinary checks wherein a two to three-week limit is allowed.

Emphasizing that the main thrust of the complaint was "the failure of the defendants to
take steps to ascertain the identity of the depositor," the court noted that the depositor
was allegedly a security officer while the plaintiff was a retiree-pensioner. It considered
as "reckless" the defendants' filing of the complaint with the Philippine Constabulary
noting that since the article on a fake dollar check ring appeared on July 18, 1976 in
the Baguio Midland Courier, it was only on August 24, 1976 or more than a month after
the bank had learned of the altered checks that it filed the complaint and therefore, it
had sufficient time to ascertain the identity of the depositor.

The court also noted that instead of complying with the Central Bank Circular Letter of
January 17, 1973 requesting all banking institutions to report to the Central Bank all
crimes involving their property within 48 hours from knowledge of the crime, the bank
reported the matter to the Philippine Constabulary.

Finding that the plaintiff had sufficiently shown that prejudice had been caused to him
in the form of mental anguish, moral shock and social humiliation on account of the
defendants' gross negligence, the court, invoking Articles 2176, 2217 and 2219 (10) in
conjunction with Article 21 of the Civil Code, ruled in favor of the plaintiff. The
dispositive portion of the decision states:

WHEREFORE, this Court finds for plaintiff and that he is entitled to the reliefs
prayed for in the following manner: Defendant Agustin Y. Co and the
CONSOLIDATED BANK AND TRUST CORPORATION are hereby ordered to
pay, jointly and severally, to the plaintiff the amount of SIX THOUSAND PESOS
(P6,000.00) as moral damages; ONE THOUSAND PESOS (P1,000.00) as
attorney's fees and costs of litigation and to pay the costs and defendant
AGUSTIN Y. Go in addition thereto in his sole and personal capacity to pay the
plaintiff the amount of THREE THOUSAND PESOS (P3,000.00) as exemplary
damages, all with interest at six (6) percent per annum until fully paid.

SO ORDERED.

The defendants appealed to the Court of Appeals. On January 24, 1984, said court
(then named Intermediate Appellate Court) rendered a decision7 finding as evident
negligence Go's failure to notice the substantial difference in the identity of the
depositor and the payee in the check, concluded that Go's negligence in the
performance of his duties was "the proximate cause why appellant bank was swindled"
and that denouncing the crime to the constabulary authorities "merely aggravated the
situation." It ruled that there was a cause of action against the defendants although
Jazmin had nothing to do with the alteration of the checks, because he suffered
damages due to the negligence of Go. Hence, under Article 2180 of the Civil Code, the
bank shall be held liable for its manager's negligence.

The appellate court, however, disallowed the award of moral and exemplary damages
and granted nominal damages instead. It explained thus:

While it is true that denouncing a crime is not negligence under which a claim for
moral damages is available, still appellants are liable under the law for nominal
damages. The fact that appellee did not suffer from any loss is of no moment for
nominal damages are adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, maybe vindicated or recognized and
not for the purpose of indemnifying the plaintiff for any loss suffered by him
(Article 2221, New Civil Code). These are damages recoverable where a legal
right is technically violated and must be vindicated against an invasion that has
produced no actual present loss of any kind, or where there has been a breach of
contract and no substantial injury or actual damages whatsoever have been or
 can be shown (Elgara vs. Sandijas, 27 Phil. 284). They are not intended for
indemnification of loss suffered but for the vindication or recognition of a right
violated or invaded (Ventanilla vs. Centeno, L-14333, January 28, 1961). And,
where the plaintiff as in the case at bar, the herein appellee has established a
cause of action, but was not able to adduce evidence showing actual damages
then nominal damages may be recovered (Sia vs. Espenilla CA-G.R. Nos.
45200-45201-R, April 21, 1975). Consequently, since appellee has no right to
claim for moral damages, then he may not likewise be entitled to exemplary
damages (Estopa vs. Piansay, No. L-14503, September 30, 1960). Considering
that he had to defend himself in the criminal charges filed against him, and that
he was constrained to file the instant case, the attorney's fees to be amended
(sic) to plaintiff should be increased to P3,000.00.

Accordingly, the appellate court ordered Go and Consolidated Bank and Trust
Corporation to pay jointly and severally Floverto Jazmin only NOMINAL DAMAGES in
the sum of Three Thousand Pesos (P 3,000.00) with interest at six (6%) percent per
annum until fully paid and One Thousand Pesos (P 1,000.00) as attorney's fees and
costs of litigation.

Go and the bank filed a motion for the reconsideration of said decision contending that
in view of the finding of the appellate court that "denouncing a crime is not negligence
under which a claim for moral damages is available," the award of nominal damages is
unjustified as they did not violate or invade Jazmin's rights. Corollarily, there being no
negligence on the part of Go, his employer may not be held liable for nominal
damages.

The motion for reconsideration having been denied, Go and the bank interposed the
instant petition for review on certiorari arguing primarily that the employer bank may
not be held "co-equally liable" to pay nominal damages in the absence of proof that it
was negligent in the selection of and supervision over its employee.8

The facts of this case reveal that damages in the form of mental anguish, moral shock
and social humiliation were suffered by private respondent only after the filing of the
petitioners' complaint with the Philippine Constabulary. It was only then that he had to
bear the inconvenience of travelling to Benguet and Lingayen for the investigations as
it was only then that he was subjected to embarrassment for being a suspect in the
unauthorized alteration of the treasury checks. Hence, it is understandable why
petitioners appear to have overlooked the facts antecedent to the filing of the complaint
to the constabulary authorities and to have put undue emphasis on the appellate
court's statement that "denouncing a crime is not negligence."

Although this Court has consistently held that there should be no penalty on the right to
litigate and that error alone in the filing of a case be it before the courts or the proper
police authorities, is not a ground for moral damages,9 we hold that under the peculiar
circumstances of this case, private respondent is entitled to an award of damages.
Indeed, it would be unjust to overlook the fact that petitioners' negligence was the root
of all the inconvenience and embarrassment experienced by the private respondent
albeit they happened after the filing of the complaint with the constabulary authorities.
Petitioner Go's negligence in fact led to the swindling of his employer. Had Go
exercised the diligence expected of him as a bank officer and employee, he would
have noticed the glaring disparity between the payee's name and address on the
treasury checks involved and the name and address of the depositor appearing in the
bank's records. The situation would have been different if the treasury checks were
tampered with only as to their amounts because the alteration would have been
unnoticeable and hard to detect as the herein altered check bearing the amount of $
913.40 shows. But the error in the name and address of the payee was very patent
and could not have escaped the trained eyes of bank officers and employees. There is
therefore, no other conclusion than that the bank through its employees (including the
tellers who allegedly conducted an identification check on the depositor) was grossly
negligent in handling the business transaction herein involved.1âwphi1

While at that stage of events private respondent was still out of the picture, it definitely
was the start of his consequent involvement as his name was illegally used in the illicit
transaction. Again, knowing that its viability depended on the confidence reposed upon
it by the public, the bank through its employees should have exercised the caution
expected of it.

In crimes and quasi-delicts, the defendant shall be liable for all damages which are the
natural and probable consequences of the act or omission complained of. It is not
necessary that such damages have been foreseen or could have reasonably been
foreseen by the defendant.10 As Go's negligence was the root cause of the complained
inconvenience, humiliation and embarrassment, Go is liable to private respondents for
damages.

Anent petitioner bank's claim that it is not "co-equally liable" with Go for damages,
under the fifth paragraph of Article 2180 of the Civil Code, "(E)mployers shall be liable
for the damages caused by their employees . . . acting within the scope of their
assigned tasks." Pursuant to this provision, the bank is responsible for the acts of its
employee unless there is proof that it exercised the diligence of a good father of a
family to prevent the damage.11Hence, the burden of proof lies upon the bank and it
cannot now disclaim liability in view of its own failure to prove not only that it exercised
due diligence to prevent damage but that it was not negligent in the selection and
supervision of its employees.

WHEREFORE, the decision of the respondent appellate court is hereby affirmed.

Costs against the petitioners.

SO ORDERED.
G.R. No. L-31931 August 31, 1988

FORTUNATO DE LEON & JUANA F. GONZALES-DE LEON, petitioners-appellants,

vs.
HONORABLE COURT OF APPEALS (Sixth Division composed of Justices
Concepcion, Serrano & San Diego) DR. CORNELIO S. TANTOCO and JUAN
BRIONES represented by Administratrix MAGDALENA BERNARDO, respondents-
appellees.

Fortunato de Leon, Celso B. Jamora and Guillermo B. Ilagan for petitioners-appellants.

Jose B. Puerto for respondent-appellee Juan Briones.

Diogracias T. Reyes & Associates and Jose M. Luison for respondent-appellee

Cornelio S. Tantoco.

PARAS, J.:

This is an appeal by certiorari from the decision * of the Court of Appeals (Sixth
Division) in C.A., G.R. No. 40201-R promulgated on February 21, 1970 affirming the
judgment ** of the Court of First Instance of Bulacan, with modification of the amount of
moral and exemplary damages from P100,000.00 to P60,000.00 and the amount of
attorney's fees from P10,000.00 to P5,000.00 the dispositive portion of which appellate
court's decision reads as follows:

WHEREFORE, the decision appealed from is hereby modified as above

indicated respecting the award of moral and exemplary damages as well as
attorney's fees. The rest are hereby affirmed with costs against plaintiffs-
appellants. (pp. 6-7, Decision of the Court of Appeals; pp. 61-62, Rollo)
The facts of the case as drawn by respondent court from the evidence on record are
quoted as follows:

The third-party defendants spouses Juan Briones and Magdalena Bernardo

were the former registered owners of the fishpond situated at San Roque,
Paombong, Bulcacan, which was covered by Transfer Certificate of Title
No. 28296 (Exhibit 2). This fishpond was the subject of a deed of mortgage
executed by the spouses Briones on January 22, 1954, in favor of
Hermogenes Tantoco involving the consideration of P20,000.00 (Exh. 2),
which amount was later assigned by the mortgagee to his father herein
defendant and thirdparty plaintiff Dr. Cornelio S. Tantoco (Exh. 10). Apart
from this first mortgage, the spouses Briones likewise executed a deed of
second mortgage for P68,824.00 with 10% interest per annum in favor of
Cornelio S. Tantoco dated May 26, 1959 (Exh. 1). Both mortgages were
duly registered in the Office of the Register of Deeds of Bulacan and duly
annotated at the back of Transfer Certificate of Title No. 28296 (Exh. 2) of
the Briones. While these two mortgages were still subsisting the Briones
spouses sold the fishpond, which is the subject matter of said two
mortgages, to plaintiff spouses Fortunato de Leon and Juana F. Gonzales
de Leon in the amount of P120,000.00 (Exh. 5). Of the amount of
P120,000.00, the Briones spouses actually received only the amount of
P31,000.00 on June 2, 1959, as the amount of P89,000.00 was withheld by
the plaintiff de Leon who assumed to answer the mortgage indebtedness of
the Briones to the Tantocos (Exhs. 3, 3-a, 3-a-1 to 3-b). After the sale
plaintiffs de Leon satisfied the mortgage loan of P20,000.00 including 10%
interest per annum to Hermogenes Tantoco who then accordingly executed
a deed of discharge of mortgage (Exhs. Z & Z-1), but the mortgage in favor
of Cornelio S. Tantoco in the amount of P68,824 was not satisfied. On
February 5, 1962 plaintiffs made payment of P29,382.50 to the defendant
Cornelio Tantocos." (Decision of the Court of Appeals, pp. 23).

In his letter to private respondent Cornelio Tantoco dated February 5, 1962, petitioner
Fortunato de Leon made it clear that he was tendering the sum of P29,382.50,
represented by PNB Cashier's Check No. 119874 in full discharge of the legitimate
obligation of his clients, the spouses Juan Briones and Magdalena Bernardo. He
requested acknowledgment of the receipt of his letter and the execution of the
necessary document (Exhibits, p. 103). Through counsel private respondent, trying to
set the records straight for petitioners, made the clarification that the principal
obligation of the Briones as of May 25, 1959 was P68,824.00 and on January 26, 1962
when a letter of demand was sent to them their total obligation including the agreed
interest amounted to P88,888.98. Hence the above mentioned PNB check will be held
in abeyance pending remittance of the total obligation after which the necessary
document will be executed (Exhibits, p. 105).
On April 5, 1962 Juan Briones executed an affidavit denying ever having hired
petitioner Fortunato de Leon as counsel nor having authorized petitioner to pay any
obligation of his to private respondent for as a matter of fact all obligations he had with
private respondent had been assumed by petitioner in a document executed by
petitioner himself in his own handwriting (Exhibits, p. 108).

On May 8, 1962 the spouses Fortunato de Leon and Juana F. de Leon, petitioners
herein, filed a complaint with the Court of First Instance of Bulacan against defendant
Cornelio S. Tantoco, respondent herein, Civil Case No. 2554, for discharge of
mortgage (Record on Appeal, p. 4). On May 31, 1962 defendant filed his answer with
counterclaim and third party complaint against the Briones spouses with petition for
leave to file third party complaint (Record on Appeal, p. 7). He alleged by way of
special and affirmative defenses, among others, that the true and real amount of
obligation of the Briones spouses is the sum of P68,824.00, Philippine currency, with
10% interest secured by a second mortgage in favor of defendant, executed
and signed by the Briones spouses on May 26,1959, which deed of second mortgage
was duly registered in the Office of the Register of Deeds of Malolos, Bulacan on May
27, 1959 and properly annotated at the back of Transfer Certificate of Title No. 28296
issued in the names of Juan Briones and Magdalena Bernardo; that the amount of
P29,382.50 sent by plaintiff as alleged counsel of the spouses Juan Briones and
Magdalena Bernardo was accepted by the said defendant as part payment or partial
extinguishment of the mortgage loan of P68,824.00 with 10% interest thereon per
annum from May 22, 1959, and plaintiffs have been informed of the tenor of said
acceptance and application thereof as partial payment of the mortgage obligation in
question; and, that defendant did not accede to the demand of the plaintiff to have the
mortgage lien on the property in question cancelled or discharged because the full
amount of the mortgage debt of P68,824.00 plus the 10% interest thereon from May
22, 1959 has not yet been fully paid either by the plaintiffs or by the spouses Juan
Briones and Magdalena Bernardo. Defendant prayed under the counterclaim that
plaintiffs be ordered to pay defendant the following amounts:

(1) P62,245.04 plus lO% interest thereon per annum from May 22, 1962
until the full amount thereon has been paid in the event that the assumption
of obligation (Annex "2") is found by the Court to be true, valid and binding
between the parties thereto;

(2) P100,000.00 for moral damages with 6% interest thereon from the date
of the filing of the counterclaim until full payment thereof;

(3) P10,000.00 for exemplary damages with 6% interest thereon from the
date of the filing of the counterclaim until full payment thereof; and

(4) P5,000.00 for attorney's fee with 6% interest thereon from the date of
the filing of the counterclaim until full payment thereof."
On June 8, 1962 plaintiffs filed an answer to defendants' counterclaim, by way of
counterclaim to the counterclaim and praying for judgment (Record on Appeal, p. 24)
as follows:

A. Dismissing defendants' counterclaim with costs against them;

B. Sentencing defendants to pay unto the plaintiffs the sum of P200,00o.oo

by way of moral damages with legal interest thereon from date hereof;

C. Sentencing defendants to pay not less than P20,000.00 to Plaintiffs by

way of exemplary damages with legal interest from date hereof;

D. Sentencing defendants to pay unto plaintiffs the sum of P30,000.00 by

way of actual damages;

E. Declaring the lien on Transfer Certificate of Title No. T-25079 of plaintiffs

duly discharged;

F. Ordering defendant Cornelio S. Tantoco to execute the covering

Release and Discharge of Mortgage;

G. Ordering defendant Cornelio S. Tantoco to return his mortgagee's copy

of Transfer Certificate of Title No. T-25079 to the Register of Deeds of
Bulacan;

H. Sentencing defendant Cornelio S. Tantoco to pay unto the plaintiffs the

sum of P5,000.00 by way of attorney's fees;

I. Plaintiffs further pray for such additional relief just and proper in the
premises.

On June 22, 1962, long before defendant's third party complaint was admitted, the
Briones spouses filed an answer to the third-party complaint (Record on Appeal, p. 32)
which was stricken out by order of the trial court dated September 3, 1962 (Record on
Appeal, p. 35) on petition of plaintiffs dated July 18, 1962 (Record on Appeal, p. 33).
Third-party defendants filed their second answer to third-party complaint on October 6,
1962, virtually confessing judgment in behalf of third-party plaintiff (Record on Appeal,
p. 35). They alleged by way of special and affirmative defense that plaintiff Fortunato
de Leon at the time of the sale knew of the obligations of herein third-party defendants
to third-party plaintiff and as a matter of fact said plaintiff assumed said obligations.

On July 29,1963 Magdalena Bernardo Vda. de Briones was substituted third-party

defendant as administratrix of the estate of Juan Briones who died in the course of the
proceedings, upon petition of defendant Tantoco (Record on Appeal, p. 64).
On September 16, 1963 plaintiffs filed a petition for leave to intervene in defendant's
third-party complaint, with their answer in intervention, which was granted by the Court
on October 14, 1963 (Record on Appeal, p. 64).

On May 16, 1967 the trial court rendered its decision on the case (Record on Appeal,
p. 74) the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered ordering: the dismissal of the

complaint; payment by its plaintiffs to the defendant Third-party plaintiff by
way of counterclaim the sum of P64,921.00 wth interest thereon at 10% per
annum from February 5, 1962 until fully paid; payment by plaintiff to
defendant the sum of P100,000.00 as moral and exemplary damages, and
the further sum of P10,000.00 as attorney's fees; payment of costs of
plaintiff.

On appeal respondent Court affirmed the judgment of the trial court with modification
respecting the award of moral and exemplary damages as well as attorney's fees.
Petitioner spouses filed on March 7, 1970 their motion for reconsideration of the
decision of respondent court which motion was denied on April 20, 1970. On April 23,
1979 petitioners filed their motion for leave to file a second motion for reconsideration.

On July 5, 1970, barely two days before the expiration date of the period of appeal with
their motion still unacted upon, petitioners filed with this Court their motion for
extension of time to file petition for certiorari by way of appeal (Rollo, p. 1) which
motion was granted in the Resolution of May 8, 1970 (Rollo, p. 2). The motion to file a
second motion for reconsideration was denied by respondent Court on May 15, 1970
(Rollo, p. 53).

The instant petition for certiorari by way of appeal with preliminary injunction was filed
with this Court on May 20, 1970 (Rollo, P. 7).

In the resolution of June 8, 1970 the petition was given due course solely on the issue
of the propriety of the award made by the respondent Cornelio S. Tantoco in "the
amount of P60,000 in the concept of moral and exemplary damages" (Rollo, p. 75).

On June 20, 1970 petitioners moved for reconsideration of the Resolution of the Court
dated June 8, 1979 (Rollo, p. 82), to include other issues.

On the same date private respondent Corn elio Tantoco moved for the issuance of
partial entry of final judgment with respect to the portion of the decision appealed from
which is not the subject of the instant appeal by certiorari (Rollo, p. 102).

On June 25, 1970 the Court resolved to require respondents to comment on the
aforementioned motion for reconsideration (Rollo, p. 101). Said comment was filed on
July 8, 1970 (Rollo, p. 109).
On July 8, 1970 petitioner spouses filed a consolidated opposition to private
respondent Tantoco motion for partial entry of final judgment and reply to his
manifestation-motion (Rollo, p. 121) and on July 9, 1970 filed a reply to respondent
Tantoco's motion to dismiss appeal (Rollo, p. 128).

On July 20, 1970 the Court resolved among others to deny: (1) respondent Tantoco's
motion to dismiss appeal; (2) petitioners motion for reconsideration of the Court's
resolution of June 8, 1970; and (3) respondent Tantoco's motion for partial entry of
judgment insofar as the portion of the decision appealed from which is not the subject
of the instant appeal by certiorari is concerned, without prejudice to respondent's
presenting the same motion to respondent Court of Appeals for consideration and
action at the proper time (Rollo, p. 133).

Respondent Cornelio S. Tantoco filed with this Court on July 21, 1970 reply to
consolidated opposition and rejoinder to reply to respondent Tantoco's motion to
dismiss appeal (Rollo, p. 134).

Brief for petitioners was filed on August 5, 1970 (Rollo, p. 159); brief for respondents
was filed on October 28, 1970 (Rollo, p. 187).

On November 14,1970 petitioners filed an "Urgent Petition ex-parte For Issuance of

Restraining Order and To Declare Respondent Cornelio S. Tantoco Guilty of Contempt
of Court" stating that respondent Tantoco filed with the Court of Appeals on August 14,
1970 the same motion for partial entry of judgment which was filed with this Court and
denied in the resolution of July 20, 1970 but which was granted by the Court of
Appeals in its resolution of October 31, 1970 over petitioners-appellants' objection
(Rollo, p. 192). On November 18, 1970 respondents were required to comment
thereon (Rollo, p. 197) and the required comment was filed by private respondent on
November 26, 1970 (Rollo, p. 200).

On December 2, 1970 a partial remanding of the records of this case to the Court of
Appeals was made in compliance with Section 11 of Rule 51 of the Rules of Court
(Rollo, P. 220).

The Reply brief of the petitioners was filed on December 3, 1970 (Rollo, p. 210). On
the same date petitioners-appellants' "Urgent Petition for Issuance of Restraining Order
and To Declare Respondent Cornelio's Tantoco Guilty of Contempt of Court" was
denied. (Rollo, p. 212).

On February 12, 1971 petitioners spouses again filed a petition for issuance of a
restraining order (Rollo, p. 227) and private respondent was required to comment
thereon (Rollo, p. 233). Said comment was filed on February 23, 1971 (Rollo, p. 236).

On February 24, 1971 petitioner spouses filed an urgent manifestation informing the
Court of the urgency of the issuance of a restraining order or writ of preliminary
injunction because the Court of First Instance of Bulacan had presumably granted
respondent Cornelio S. Tantoco's motion for partial execution of judgment in an order
dated February 11, 1971 which petitioners had not yet received, notwithstanding
petitioners' urgent motion to postpone hearing of same scheduled for February 15,
1971 because of the pendency of petitioner's motion before this Court for issuance of a
restraining order or writ of preliminary injunctions filed on February 11, 1971 (Rollo, p.
241). In the resolution of February 26, 1971 private respondent Cornelio S. Tantoco
was required to comment thereon (Rollo, p. 248) and said comment was filed by
respondent on March 6, 1971 (Rollo, p. 251). In the resolution of March 10, 1971
petitioners' petition for issuance of a restraining order was denied (Rollo, p. 265).

Petitioners assign the following errors (Brief for Petitioners, p. 1):

I.

The respondent Court erred in awarding in favor of respondent Cornelio S.

Tantoco moral and exemplary damages in the amount of P60,000.00 in the
absence of supporting evidence and reasons notwithstanding that no actual
and compensatory damages have been allegedly proved and awarded in
respondent's favor.

II.

The respondent Court erred in awarding P5,000.00 attorney's fees in favor

of respondent Cornelio S. Tantoco and in sentencing petitioners de Leons
to pay same; instead of awarding the latter (Petitioners) reasonable
attorney's fees as prayed for in their complaint.

III.

The respondent Court erred in sentencing herein petitioners de Leons to

pay respondent Tantoco P60,000.00 moral and exemplary damages and
P5,000.00 attorney's fees when there exist no contractual or juridical
relations whatsoever between them.

IV.

That the decision of respondent Court of Appeals of February 21, 1970 and
its adverse Resolutions of April 20, 1970 and of May 15, 1970 are all
nullities.

In accordance with the Resolution of the Court dated June 8, 1970 (Rollo, p. 75) the
sole issue that has to be resolved by the Court is the question of whether or not the
award of P60,000.00 in the concept of moral and exemplary damages is proper.
Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and similar
injury. Though incapable of pecuniary computation, moral damages may be recovered
if they are the proximate result of the defendant's wrongful act or omission (People v.
Baylon, 129 SCRA 625 [1984]; Bagumbayan Corporation v. Intermediate Appellate
Court, 132 SCRA 441 [1984]; Guita v. Court of Appeals, 139 SCRA 576 [1985]);
(Prudenciado v. Alliance Transport System, Inc., 148 SCRA 440 [1987]). On the other
hand, jurisprudence sets certain conditions when exemplary damages may be
awarded, to wit: (1) They may be imposed by way of example or correction only in
addition, among others, to compensatory damages and cannot be recovered as a
matter of right, their determination depending upon the amount of compensatory
damages that may be awarded to the claimant; (2) the claimant must first establish his
right to moral, temperate, liquidated or compensatory damages; and (3) the wrongful
act must be accompanied by bad faith, and the award would be allowed only if the
guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolant manner
(Octot v. Ybañez, III SCRA 79 [1982]); Sweet Lines, Inc., v. Court of Appeals, 121
SCRA 769 [19831); Dee Hua Liong Electrical Equipment Corporation v. Reyes, 145
SCRA 713 [1985]); Tan Kapoc v. Masa, 134 SCRA 231 [1985]). It may be awarded for
breach of contract or quasicontract as when a telegraph company personnel
transmitted the wrong telegram (Radio Communication of the Philippines, Inc. v. Court
of Appeals, 103 SCRA 359 [1981].

Respondent Court found malice in petitioners'refusal to satisfy respondent Tantocos

lawful claim and in their subsequent filing of the present case against respondent, and
took into consideration the worries and mental anxiety of respondent as a result
thereof. In the words of respondent court:

The evidence shows that plaintiff-appellants'refusal to satisfy appellee's

lawful claims clearly amounted to malice on their part when they filed the
present case resulting as it were in worries and mental anxiety of the
defendant Tantoco who was dragged to court to litigate this case for almost
10 years up to now. He was even branded as a money lender, and
accused forgery and of entering into collusion with the end in view of
extracting extra amount ... from the herein plaintiff. All these tried to picture
defendant Cornelio Tantoco with alleged dishonesty who respecting the
legitimate obligation of the Briones to defendant Cornelio Tantoco, thereby
blemishing his honor, integrity and reputation as a prominent doctor and a
businessman. With all these extant circumstances which served as a
guidepost for us in determining the reasonable amount of damages
sustained by the defendant-appellee, this Court hereby fixes the amount of
P60,000.00 representing moral and exemplary damages and the further
sum of P5,000.00 as attorney's fees, which plaintiffs-appellants should pay
the defendant-appellee. (Rollo, p. 61)
As a lawyer in the practice of law since his admission to the Bar in 1929, who has held
several important positions in the government (TSN, April 22, 1965, p. 127) petitioner
Fortunato de Leon could not have missed the import of the annotation at the back of
TCT No. 28296 regarding the second mortgage for the sum of sixty eight thousand
eight hundred twenty-four pesos (P68,824.00) of the property he was buying, in favor
of respondent Cornelio Tantoco, entry No. 54835 in the registry of deeds of Bulacan
(Exhibits, p. 93). The same annotation was transferred to TCT No. T-25079 in the
name of petitioner after the sale of the property was effected and entered in the
registry of deeds of Bulacan on June 3, 1959 (Exhibits, p. 102). Furthermore,
petitioners cannot deny having assumed the mortgage debts of the Briones spouses
amounting to P89,000.00 in favor of the Tantocos. The "Patunay" (Exhibits 3-a)
executed by the Briones spouses on June 3, 1959 gives the information that their
property, and fishpond, was sold by them to the spouses Fortunato de Leon and Juana
F. Gonzales for the amount of one hundred twenty thousand pesos (Pl20,000.00),
payment made to them, as follows:

Pinanagutan
na aming
pagkakautang
kay
G. P
Hermogenes 89,000.00
Tantoco
hanggang
Mayo 1959
Cash na 11,000.00
tinanggap
namin PBC
Check No.
57040
Pagare No. 1 10,000.00
Junio 1, 1959
Pagare No. 2 10,000.00
Junio 1, 1959
Kabuuan P
120,000.00

At the bottom of the "Patunay" in the handwriting of petitioner Fortunato de Leon is a

statement signed by him (Exh. 3b) signifying that he was assuming the spouses'debt of
P89,000.00 to respondent Tantoco, in the following words:
 Ang pagkautang na P89,000.00 sa mga Tantoco ay aking inaasumihan.
(Exhibits, p. 97).

Petitioner retained P89,000.00 out of the P120,000.00, representing the mortgage loan
of the Briones spouses to the Tantocos, including interest. Immediately after the sale of
the fishpond was effected and registered with the registry of deeds of Bulacan
petitioner paid the P20,000.00 loan of the Briones spouses to Hermogenes Tantoco
including 10% interest on the loan, covered by a first mortgage on the property.
Accordingly, Hermogenes Tantoco executed a deed of discharge from the mortgage.
Out of the P68,000.00 mortgage loan of the Briones spouses from respondent Cornelio
Tantoco, petitioner, however made only a payment of P29,382.50 but would want
respondent to execute the necessary discharge document. The documents speak for
themselves. They are mute but plain and visible evidence of the deliberate intent of
petitioner to defraud respondent of the amount withheld from the Briones spouses to
cover the amount of the mortgage loan in favor of respondent.

The filing of the case against respondent being unfounded and maliciously prosecuted
satisfactorily proves the existence of the factual basis for moral damages and the
causal relation to petitioners' acts (Hawpia v. Court of Appeals, 20 SCRA 535 [1967];
Ventura v. Bernabe, 38 SCRA 587 [1971]; Enervida v. de la Torre, 55 SCRA 340
[1974]; Tan Kapoe v. Masa, 134 SCRA 231 [1985]). Private respondent has a good
name to protect. He is a surgeon by profession, had been Chief of the Bulacan
Provincial Hospital since 1946 until he put up a hospital of his own, the Rosary General
Hospital.He is a member of the Knights of Columbus, a Cursillista, a member of the
Lions, a fellow of the Philippine College of Surgeons in good standing from 1946 up to
the present, a member of the Philippine Medical Association and of the Bulacan
Medical Association. He has been humiliated, embarrassed, maligned and has been
charged in bad faith as a money lender in petitioner's complaint accusing him of
defrauding the Briones spouses (TSN, pp. 227-250).

The entitlement to moral damages having been established the award of exemplary
damages is proper (Bert Osmeña & Associates v. Court of Appeals, 120 SCRA 395
[1983]; Tan Kapoe v. Masa, 134 SCRA 231 [1985]).

While the award of moral and exemplary damages in an aggregate amount may not be
the usual way of awarding said damages there is no question of respondent's
entitlement to moral and exemplary damage (Tan Kapoe v. Masa, supra). The amount
should be reduced, however, for being excessive compared to the actual losses
sustained by the aggrieved party (Prudenciado v. Alliance Transport System, Inc., 148
SCRA 440 [1987]). Moral damages though incapable of pecuniary estimations, are in
the category of an award designed to compensate the claimant for actual injury
suffered and not to impose a penalty of the wrongdoer (San Andres v. Court of
Appeals, 116 SCRA 85 [1982] cited in Prudenciado v. Alliance Transport System,
Inc. supra).
Time and again the Court has ruled that "moral damages are emphatically not intended
to enrich a complainant at the expense of a defendant. They are awarded only to
enable the injured party to obtain means, diversion or amusements that will serve to
alleviate the moral suffering he has undergone, by reason of the defendants' culpable
action" (Grand Union Supermarket, Inc. v. Espino, Jr., 94 SCRA 966 [1979]); R & B
Surety & Insurance Co., Inc. v. Intermediate Appellate Court, 129 SCRA 736 [1984];
Prudenciado v. Alliance Transport System, Inc., supra).

In the case of Miranda Ribaya v. Bautista (95 SCRA 672 [1980]), this Court considered
25% of the principal amount as reasonable. In the case at bar, the Court of Appeals
found on February 21, 1970 that the outstanding balance of the disputed loan was
P64,921.69. Twenty five percent thereof is P16,230.00 but considering the
depreciation of the Philippine peso today, it is believed that the award of moral and
exemplary damages in the amount of P25,000.00 is reasonable.

PREMISES CONSIDERED, the assailed decision of the Court of Appeals is

AFFIRMED but the aggregate award of moral and exemplary damages is reduced to
P25,000.00.

SO ORDERED.