Você está na página 1de 20

G.R. No. 139868 June 8, 2006 Richard’s three children.

Richard’s three children. This was opposed by respondent on the ground that under the law of the State of Maryland,
"a legacy passes to the legatee the entire interest of the testator in the property subject of the
legacy."14 Since Richard left his entire estate to respondent, except for his rights and interests over the A/G Interiors,
ALONZO Q. ANCHETA, Petitioner,
Inc, shares, then his entire ¾ undivided interest in the Makati property should be given to respondent.
vs.
CANDELARIA GUERSEY-DALAYGON, Respondent.
The trial court found merit in respondent’s opposition, and in its Order dated December 6, 1991, disapproved the
project of partition insofar as it affects the Makati property. The trial court also adjudicated Richard’s entire ¾
AUSTRIA-MARTINEZ, J.:
undivided interest in the Makati property to respondent.15

Spouses Audrey O’Neill (Audrey) and W. Richard Guersey (Richard) were American citizens who have resided in the
On October 20, 1993, respondent filed with the Court of Appeals (CA) an amended complaint for the annulment of
Philippines for 30 years. They have an adopted daughter, Kyle Guersey Hill (Kyle). On July 29, 1979, Audrey died,
the trial court’s Orders dated February 12, 1988 and April 7, 1988, issued in Special Proceeding No.
leaving a will. In it, she bequeathed her entire estate to Richard, who was also designated as executor.1 The will was
9625.16Respondent contended that petitioner willfully breached his fiduciary duty when he disregarded the laws of
admitted to probate before the Orphan’s Court of Baltimore, Maryland, U.S.A, which named James N. Phillips as
the State of Maryland on the distribution of Audrey’s estate in accordance with her will. Respondent argued that
executor due to Richard’s renunciation of his appointment.2 The court also named Atty. Alonzo Q. Ancheta
since Audrey devised her entire estate to Richard, then the Makati property should be wholly adjudicated to him, and
(petitioner) of the Quasha Asperilla Ancheta Pena & Nolasco Law Offices as ancillary administrator.3
not merely ¾ thereof, and since Richard left his entire estate, except for his rights and interests over the A/G
Interiors, Inc., to respondent, then the entire Makati property should now pertain to respondent.
In 1981, Richard married Candelaria Guersey-Dalaygon (respondent) with whom he has two children, namely,
Kimberly and Kevin.
Petitioner filed his Answer denying respondent’s allegations. Petitioner contended that he acted in good faith in
submitting the project of partition before the trial court in Special Proceeding No. 9625, as he had no knowledge of
On October 12, 1982, Audrey’s will was also admitted to probate by the then Court of First Instance of Rizal, Branch the State of Maryland’s laws on testate and intestate succession. Petitioner alleged that he believed that it is to the
25, Seventh Judicial District, Pasig, in Special Proceeding No. 9625. 4 As administrator of Audrey’s estate in the "best interests of the surviving children that Philippine law be applied as they would receive their just shares."
Philippines, petitioner filed an inventory and appraisal of the following properties: (1) Audrey’s conjugal share in real Petitioner also alleged that the orders sought to be annulled are already final and executory, and cannot be set
estate with improvements located at 28 Pili Avenue, Forbes Park, Makati, Metro Manila, valued at P764,865.00 aside.
(Makati property); (2) a current account in Audrey’s name with a cash balance of P12,417.97; and (3) 64,444 shares
of stock in A/G Interiors, Inc. worth P64,444.00.5
On March 18, 1999, the CA rendered the assailed Decision annulling the trial court’s Orders dated February 12,
1988 and April 7, 1988, in Special Proceeding No. 9625.17 The dispositive portion of the assailed Decision provides:
On July 20, 1984, Richard died, leaving a will, wherein he bequeathed his entire estate to respondent, save for his
rights and interests over the A/G Interiors, Inc. shares, which he left to Kyle. 6 The will was also admitted to probate
WHEREFORE, the assailed Orders of February 12, 1998 and April 7, 1988 are hereby ANNULLED and, in lieu
by the Orphan’s Court of Ann Arundel, Maryland, U.S.A, and James N. Phillips was likewise appointed as executor,
thereof, a new one is entered ordering:
who in turn, designated Atty. William Quasha or any member of the Quasha Asperilla Ancheta Pena & Nolasco Law
Offices, as ancillary administrator.
(a) The adjudication of the entire estate of Audrey O’Neill Guersey in favor of the estate of W. Richard
Guersey; and
Richard’s will was then submitted for probate before the Regional Trial Court of Makati, Branch 138, docketed as
Special Proceeding No. M-888.7 Atty. Quasha was appointed as ancillary administrator on July 24, 1986. 8
(b) The cancellation of Transfer Certificate of Title No. 15583 of the Makati City Registry and the issuance
of a new title in the name of the estate of W. Richard Guersey.
On October 19, 1987, petitioner filed in Special Proceeding No. 9625, a motion to declare Richard and Kyle as heirs
of Audrey.9 Petitioner also filed on October 23, 1987, a project of partition of Audrey’s estate, with Richard being
apportioned the ¾ undivided interest in the Makati property, 48.333 shares in A/G Interiors, Inc., and P9,313.48 from SO ORDERED.18
the Citibank current account; and Kyle, the ¼ undivided interest in the Makati property, 16,111 shares in A/G
Interiors, Inc., and P3,104.49 in cash.10
Petitioner filed a motion for reconsideration, but this was denied by the CA per Resolution dated August 27, 1999. 19

The motion and project of partition was granted and approved by the trial court in its Order dated February 12,
Hence, the herein petition for review on certiorari under Rule 45 of the Rules of Court alleging that the CA gravely
1988.11 The trial court also issued an Order on April 7, 1988, directing the Register of Deeds of Makati to cancel TCT
erred in not holding that:
No. 69792 in the name of Richard and to issue a new title in the joint names of the Estate of W. Richard Guersey (¾
undivided interest) and Kyle (¼ undivided interest); directing the Secretary of A/G Interiors, Inc. to transfer 48.333
shares to the Estate of W. Richard Guersey and 16.111 shares to Kyle; and directing the Citibank to release the A) THE ORDERS OF 12 FEBRUARY 1988 AND 07 APRIL 1988 IN SPECIAL PROCEEDINGS NO. 9625
amount of P12,417.97 to the ancillary administrator for distribution to the heirs. 12 "IN THE MATTER OF THE PETITION FOR PROBATE OF THE WILL OF THE DECEASED AUDREY
GUERSEY, ALONZO Q. ANCHETA, ANCILLARY ADMINISTRATOR", ARE VALID AND BINDING AND
HAVE LONG BECOME FINAL AND HAVE BEEN FULLY IMPLEMENTED AND EXECUTED AND CAN
Consequently, the Register of Deeds of Makati issued on June 23, 1988, TCT No. 155823 in the names of the Estate
NO LONGER BE ANNULLED.
of W. Richard Guersey and Kyle.13

B) THE ANCILLARY ADMINISTRATOR HAVING ACTED IN GOOD FAITH, DID NOT COMMIT FRAUD,
Meanwhile, the ancillary administrator in Special Proceeding No. M-888 also filed a project of partition wherein 2/5of
EITHER EXTRINSIC OR INTRINSIC, IN THE PERFORMANCE OF HIS DUTIES AS ANCILLARY
Richard’s ¾ undivided interest in the Makati property was allocated to respondent, while 3/5 thereof were allocated to
ADMINISTRATOR OF AUDREY O’NEIL GUERSEY’S ESTATE IN THE PHILIPPINES, AND THAT NO
FRAUD, EITHER EXTRINSIC OR INTRINSIC, WAS EMPLOYED BY [HIM] IN PROCURING SAID the pertinent law of the State of Maryland that is the fraudulent act, or in this case, omission, alleged to have been
ORDERS.20 committed against respondent, and therefore, the four-year period should be counted from the time of respondent’s
discovery thereof.
Petitioner reiterates his arguments before the CA that the Orders dated February 12, 1988 and April 7, 1988 can no
longer be annulled because it is a final judgment, which is "conclusive upon the administration as to all matters Records bear the fact that the filing of the project of partition of Richard’s estate, the opposition thereto, and the
involved in such judgment or order, and will determine for all time and in all courts, as far as the parties to the order of the trial court disallowing the project of partition in Special Proceeding No. M-888 were all done in
proceedings are concerned, all matters therein determined," and the same has already been executed. 21 1991.32Respondent cannot be faulted for letting the assailed orders to lapse into finality since it was only through
Special Proceeding No. M-888 that she came to comprehend the ramifications of petitioner’s acts. Obviously,
respondent had no other recourse under the circumstances but to file the annulment case. Since the action for
Petitioner also contends that that he acted in good faith in performing his duties as an ancillary administrator. He
annulment was filed in 1993, clearly, the same has not yet prescribed.
maintains that at the time of the filing of the project of partition, he was not aware of the relevant laws of the State of
Maryland, such that the partition was made in accordance with Philippine laws. Petitioner also imputes knowledge on
the part of respondent with regard to the terms of Aubrey’s will, stating that as early as 1984, he already apprised Fraud takes on different shapes and faces. In Cosmic Lumber Corporation v. Court of Appeals, 33 the Court stated
respondent of the contents of the will and how the estate will be divided.22 that "man in his ingenuity and fertile imagination will always contrive new schemes to fool the unwary."

Respondent argues that petitioner’s breach of his fiduciary duty as ancillary administrator of Aubrey’s estate There is extrinsic fraud within the meaning of Sec. 9 par. (2), of B.P. Blg. 129, where it is one the effect of which
amounted to extrinsic fraud. According to respondent, petitioner was duty-bound to follow the express terms of prevents a party from hearing a trial, or real contest, or from presenting all of his case to the court, or where it
Aubrey’s will, and his denial of knowledge of the laws of Maryland cannot stand because petitioner is a senior operates upon matters, not pertaining to the judgment itself, but to the manner in which it was procured so that there
partner in a prestigious law firm and it was his duty to know the relevant laws. is not a fair submission of the controversy. In other words, extrinsic fraud refers to any fraudulent act of the prevailing
party in the litigation which is committed outside of the trial of the case, whereby the defeated party has been
prevented from exhibiting fully his side of the case by fraud or deception practiced on him by his opponent. Fraud is
Respondent also states that she was not able to file any opposition to the project of partition because she was not a
extrinsic where the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception
party thereto and she learned of the provision of Aubrey’s will bequeathing entirely her estate to Richard only after
practiced on him by his opponent, as by keeping him away from court, a false promise of a compromise; or where
Atty. Ancheta filed a project of partition in Special Proceeding No. M-888 for the settlement of Richard’s estate.
the defendant never had any knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an
attorney fraudulently or without authority connives at his defeat; these and similar cases which show that there has
A decree of distribution of the estate of a deceased person vests the title to the land of the estate in the distributees, never been a real contest in the trial or hearing of the case are reasons for which a new suit may be sustained to set
which, if erroneous may be corrected by a timely appeal. Once it becomes final, its binding effect is like any other aside and annul the former judgment and open the case for a new and fair hearing. 34
judgment in rem.23 However, in exceptional cases, a final decree of distribution of the estate may be set aside for
lack of jurisdiction or fraud.24 Further, in Ramon v. Ortuzar,25 the Court ruled that a party interested in a probate
The overriding consideration when extrinsic fraud is alleged is that the fraudulent scheme of the prevailing litigant
proceeding may have a final liquidation set aside when he is left out by reason of circumstances beyond his control
prevented a party from having his day in court.35
or through mistake or inadvertence not imputable to negligence.26

Petitioner is the ancillary administrator of Audrey’s estate. As such, he occupies a position of the highest trust and
The petition for annulment was filed before the CA on October 20, 1993, before the issuance of the 1997 Rules of
confidence, and he is required to exercise reasonable diligence and act in entire good faith in the performance of that
Civil Procedure; hence, the applicable law is Batas Pambansa Blg. 129 (B.P. 129) or the Judiciary Reorganization
trust. Although he is not a guarantor or insurer of the safety of the estate nor is he expected to be infallible, yet the
Act of 1980. An annulment of judgment filed under B.P. 129 may be based on the ground that a judgment is void for
same degree of prudence, care and judgment which a person of a fair average capacity and ability exercises in
want of jurisdiction or that the judgment was obtained by extrinsic fraud.27 For fraud to become a basis for annulment
similar transactions of his own, serves as the standard by which his conduct is to be judged. 36
of judgment, it has to be extrinsic or actual,28 and must be brought within four years from the discovery of the fraud.29

Petitioner’s failure to proficiently manage the distribution of Audrey’s estate according to the terms of her will and as
In the present case, respondent alleged extrinsic fraud as basis for the annulment of the RTC Orders dated February
dictated by the applicable law amounted to extrinsic fraud. Hence the CA Decision annulling the RTC Orders dated
12, 1988 and April 7, 1988. The CA found merit in respondent’s cause and found that petitioner’s failure to follow the
February 12, 1988 and April 7, 1988, must be upheld.
terms of Audrey’s will, despite the latter’s declaration of good faith, amounted to extrinsic fraud. The CA ruled that
under Article 16 of the Civil Code, it is the national law of the decedent that is applicable, hence, petitioner should
have distributed Aubrey’s estate in accordance with the terms of her will. The CA also found that petitioner was It is undisputed that Audrey Guersey was an American citizen domiciled in Maryland, U.S.A. During the reprobate of
prompted to distribute Audrey’s estate in accordance with Philippine laws in order to equally benefit Audrey and her will in Special Proceeding No. 9625, it was shown, among others, that at the time of Audrey’s death, she was
Richard Guersey’s adopted daughter, Kyle Guersey Hill. residing in the Philippines but is domiciled in Maryland, U.S.A.; her Last Will and Testament dated August 18, 1972
was executed and probated before the Orphan’s Court in Baltimore, Maryland, U.S.A., which was duly authenticated
and certified by the Register of Wills of Baltimore City and attested by the Chief Judge of said court; the will was
Petitioner contends that respondent’s cause of action had already prescribed because as early as 1984, respondent
admitted by the Orphan’s Court of Baltimore City on September 7, 1979; and the will was authenticated by the
was already well aware of the terms of Audrey’s will,30 and the complaint was filed only in 1993. Respondent, on the
Secretary of State of Maryland and the Vice Consul of the Philippine Embassy.
other hand, justified her lack of immediate action by saying that she had no opportunity to question petitioner’s acts
since she was not a party to Special Proceeding No. 9625, and it was only after Atty. Ancheta filed the project of
partition in Special Proceeding No. M-888, reducing her inheritance in the estate of Richard that she was prompted Being a foreign national, the intrinsic validity of Audrey’s will, especially with regard as to who are her heirs, is
to seek another counsel to protect her interest.31 governed by her national law, i.e., the law of the State of Maryland, as provided in Article 16 of the Civil Code, to wit:

It should be pointed out that the prescriptive period for annulment of judgment based on extrinsic fraud commences Art. 16. Real property as well as personal property is subject to the law of the country where it is situated.
to run from the discovery of the fraud or fraudulent act/s. Respondent’s knowledge of the terms of Audrey’s will is
immaterial in this case since it is not the fraud complained of. Rather, it is petitioner’s failure to introduce in evidence
However, intestate and testamentary succession, both with respect to the order of succession and to the amount the absence of evidence adduced to prove the latter law (Slade Perkins vs. Perkins, 57 Phil. 205, 210). In defending
of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the his actions in the light of the foregoing principle, however, it appears that the defendant lost sight of the fact that his
national law of the person whose succession is under consideration, whatever may be the nature of the primary responsibility as ancillary administrator was to distribute the subject estate in accordance with the will of
property and regardless of the country wherein said property may be found. (Emphasis supplied) Audrey O’Neill Guersey. Considering the principle established under Article 16 of the Civil Code of the Philippines, as
well as the citizenship and the avowed domicile of the decedent, it goes without saying that the defendant was also
duty-bound to prove the pertinent laws of Maryland on the matter.
Article 1039 of the Civil Code further provides that "capacity to succeed is governed by the law of the nation of the
decedent."
The record reveals, however, that no clear effort was made to prove the national law of Audrey O’Neill Guersey
during the proceedings before the court a quo. While there is claim of good faith in distributing the subject estate in
As a corollary rule, Section 4, Rule 77 of the Rules of Court on Allowance of Will Proved Outside the Philippines and
accordance with the Philippine laws, the defendant appears to put his actuations in a different light as indicated in a
Administration of Estate Thereunder, states:
portion of his direct examination, to wit:

SEC. 4. Estate, how administered.—When a will is thus allowed, the court shall grant letters testamentary, or letters
xxx
of administration with the will annexed, and such letters testamentary or of administration, shall extend to all the
estate of the testator in the Philippines. Such estate, after the payment of just debts and expenses of
administration, shall be disposed of according to such will, so far as such will may operate upon it; and the It would seem, therefore, that the eventual distribution of the estate of Audrey O’Neill Guersey was prompted by
residue, if any, shall be disposed of as is provided by law in cases of estates in the Philippines belonging to persons defendant Alonzo H. Ancheta’s concern that the subject realty equally benefit the plaintiff’s adopted daughter Kyle
who are inhabitants of another state or country. (Emphasis supplied) Guersey.

While foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice Well-intentioned though it may be, defendant Alonzo H. Ancheta’s action appears to have breached his duties and
of them;37 however, petitioner, as ancillary administrator of Audrey’s estate, was duty-bound to introduce in evidence responsibilities as ancillary administrator of the subject estate. While such breach of duty admittedly cannot be
the pertinent law of the State of Maryland.38 considered extrinsic fraud under ordinary circumstances, the fiduciary nature of the said defendant’s
position, as well as the resultant frustration of the decedent’s last will, combine to create a circumstance
that is tantamount to extrinsic fraud. Defendant Alonzo H. Ancheta’s omission to prove the national laws of the
Petitioner admitted that he failed to introduce in evidence the law of the State of Maryland on Estates and Trusts,
decedent and to follow the latter’s last will, in sum, resulted in the procurement of the subject orders without a fair
and merely relied on the presumption that such law is the same as the Philippine law on wills and succession. Thus,
submission of the real issues involved in the case.41 (Emphasis supplied)
the trial court peremptorily applied Philippine laws and totally disregarded the terms of Audrey’s will. The obvious
result was that there was no fair submission of the case before the trial court or a judicious appreciation of the
evidence presented. This is not a simple case of error of judgment or grave abuse of discretion, but a total disregard of the law as a result
of petitioner’s abject failure to discharge his fiduciary duties. It does not rest upon petitioner’s pleasure as to which
law should be made applicable under the circumstances. His onus is clear. Respondent was thus excluded from
Petitioner insists that his application of Philippine laws was made in good faith. The Court cannot accept petitioner’s
enjoying full rights to the Makati property through no fault or negligence of her own, as petitioner’s omission was
protestation. How can petitioner honestly presume that Philippine laws apply when as early as the reprobate of
beyond her control. She was in no position to analyze the legal implications of petitioner’s omission and it was
Audrey’s will before the trial court in 1982, it was already brought to fore that Audrey was a U.S. citizen, domiciled in
belatedly that she realized the adverse consequence of the same. The end result was a miscarriage of justice. In
the State of Maryland. As asserted by respondent, petitioner is a senior partner in a prestigious law firm, with a "big
cases like this, the courts have the legal and moral duty to provide judicial aid to parties who are deprived of their
legal staff and a large library."39 He had all the legal resources to determine the applicable law. It was incumbent
rights.42
upon him to exercise his functions as ancillary administrator with reasonable diligence, and to discharge the trust
reposed on him faithfully. Unfortunately, petitioner failed to perform his fiduciary duties.
The trial court in its Order dated December 6, 1991 in Special Proceeding No. M-888 noted the law of the State of
Maryland on Estates and Trusts, as follows:
Moreover, whether his omission was intentional or not, the fact remains that the trial court failed to consider said law
when it issued the assailed RTC Orders dated February 12, 1988 and April 7, 1988, declaring Richard and Kyle as
Audrey’s heirs, and distributing Audrey’s estate according to the project of partition submitted by petitioner. This Under Section 1-301, Title 3, Sub-Title 3 of the Annotated Code of the Public General Laws of Maryland on Estates
eventually prejudiced respondent and deprived her of her full successional right to the Makati property. and Trusts, "all property of a decedent shall be subject to the estate of decedents law, and upon his death shall pass
directly to the personal representative, who shall hold the legal title for administration and distribution," while Section
4-408 expressly provides that "unless a contrary intent is expressly indicated in the will, a legacy passes to the
In GSIS v. Bengson Commercial Bldgs., Inc.,40 the Court held that when the rule that the negligence or mistake of
legatee the entire interest of the testator in the property which is the subject of the legacy". Section 7-101, Title 7,
counsel binds the client deserts its proper office as an aid to justice and becomes a great hindrance and chief
Sub-Title 1, on the other hand, declares that "a personal representative is a fiduciary" and as such he is "under the
enemy, its rigors must be relaxed to admit exceptions thereto and to prevent a miscarriage of justice, and the court
general duty to settle and distribute the estate of the decedent in accordance with the terms of the will and the estate
has the power to except a particular case from the operation of the rule whenever the purposes of justice require it.
of decedents law as expeditiously and with as little sacrifice of value as is reasonable under the circumstances". 43

The CA aptly noted that petitioner was remiss in his responsibilities as ancillary administrator of Audrey’s estate. The
In her will, Audrey devised to Richard her entire estate, consisting of the following: (1) Audrey’s conjugal share in the
CA likewise observed that the distribution made by petitioner was prompted by his concern over Kyle, whom
Makati property; (2) the cash amount of P12,417.97; and (3) 64,444 shares of stock in A/G Interiors, Inc.
petitioner believed should equally benefit from the Makati property. The CA correctly stated, which the Court adopts,
worth P64,444.00. All these properties passed on to Richard upon Audrey’s death. Meanwhile, Richard, in his will,
thus:
bequeathed his entire estate to respondent, except for his rights and interests over the A/G Interiors, Inc. shares,
which he left to Kyle. When Richard subsequently died, the entire Makati property should have then passed on to
In claiming good faith in the performance of his duties and responsibilities, defendant Alonzo H. Ancheta invokes the respondent. This, of course, assumes the proposition that the law of the State of Maryland which allows "a legacy to
principle which presumes the law of the forum to be the same as the foreign law (Beam vs. Yatco, 82 Phil. 30, 38) in pass to the legatee the entire estate of the testator in the property which is the subject of the legacy," was sufficiently
proven in Special Proceeding No. 9625. Nevertheless, the Court may take judicial notice thereof in view of the ruling In any case, the Court has also ruled that if land is invalidly transferred to an alien who subsequently becomes a
in Bohanan v. Bohanan.44 Therein, the Court took judicial notice of the law of Nevada despite failure to prove the citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the transferee
same. The Court held, viz.: is rendered valid.49 In this case, since the Makati property had already passed on to respondent who is a Filipino,
then whatever flaw, if any, that attended the acquisition by the Guerseys of the Makati property is now
inconsequential, as the objective of the constitutional provision to keep our lands in Filipino hands has been
We have, however, consulted the records of the case in the court below and we have found that during the hearing
achieved.
on October 4, 1954 of the motion of Magdalena C. Bohanan for withdrawal of P20,000 as her share, the foreign law,
especially Section 9905, Compiled Nevada Laws, was introduced in evidence by appellants' (herein) counsel as
Exhibit "2" (See pp. 77-79, Vol. II, and t.s.n. pp. 24-44, Records, Court of First Instance). Again said law was WHEREFORE, the petition is denied. The Decision dated March 18, 1999 and the Resolution dated August 27, 1999
presented by the counsel for the executor and admitted by the Court as Exhibit "B" during the hearing of the case on of the Court of Appeals are AFFIRMED.
January 23, 1950 before Judge Rafael Amparo (see Records, Court of First Instance, Vol. 1).
Petitioner is ADMONISHED to be more circumspect in the performance of his duties as an official of the court.
In addition, the other appellants, children of the testator, do not dispute the above-quoted provision of the laws of the
State of Nevada. Under all the above circumstances, we are constrained to hold that the pertinent law of Nevada,
No pronouncement as to costs.
especially Section 9905 of the Compiled Nevada Laws of 1925, can be taken judicial notice of by us, without proof of
such law having been offered at the hearing of the project of partition.

In this case, given that the pertinent law of the State of Maryland has been brought to record before the CA, and the
trial court in Special Proceeding No. M-888 appropriately took note of the same in disapproving the proposed project
of partition of Richard’s estate, not to mention that petitioner or any other interested person for that matter, does not
dispute the existence or validity of said law, then Audrey’s and Richard’s estate should be distributed according to
their respective wills, and not according to the project of partition submitted by petitioner. Consequently, the entire
Makati property belongs to respondent.

Decades ago, Justice Moreland, in his dissenting opinion in Santos v. Manarang, 45 wrote:

A will is the testator speaking after death. Its provisions have substantially the same force and effect in the probate
court as if the testator stood before the court in full life making the declarations by word of mouth as they appear in
the will. That was the special purpose of the law in the creation of the instrument known as the last will and
testament. Men wished to speak after they were dead and the law, by the creation of that instrument, permitted them
to do so x x x All doubts must be resolved in favor of the testator's having meant just what he said.

Honorable as it seems, petitioner’s motive in equitably distributing Audrey’s estate cannot prevail over Audrey’s and
Richard’s wishes. As stated in Bellis v. Bellis:46

x x x whatever public policy or good customs may be involved in our system of legitimes, Congress has not intended
to extend the same to the succession of foreign nationals. For it has specifically chosen to leave, inter alia, the
amount of successional rights, to the decedent's national Law. Specific provisions must prevail over general ones. 47

Before concluding, the Court notes the fact that Audrey and Richard Guersey were American citizens who owned
real property in the Philippines, although records do not show when and how the Guerseys acquired the Makati
property.

Under Article XIII, Sections 1 and 4 of the 1935 Constitution, the privilege to acquire and exploit lands of the public
domain, and other natural resources of the Philippines, and to operate public utilities, were reserved to Filipinos and
entities owned or controlled by them. In Republic v. Quasha,48 the Court clarified that the Parity Rights Amendment
of 1946, which re-opened to American citizens and business enterprises the right in the acquisition of lands of the
public domain, the disposition, exploitation, development and utilization of natural resources of the Philippines, does
not include the acquisition or exploitation of private agricultural lands. The prohibition against acquisition of private
lands by aliens was carried on to the 1973 Constitution under Article XIV, Section 14, with the exception of private
lands acquired by hereditary succession and when the transfer was made to a former natural-born citizen, as
provided in Section 15, Article XIV. As it now stands, Article XII, Sections 7 and 8 of the 1986 Constitution explicitly
prohibits non-Filipinos from acquiring or holding title to private lands or to lands of the public domain, except only by
way of legal succession or if the acquisition was made by a former natural-born citizen.
Ancheta vs. Guersey-Dalaygon

Ancheta vs. Guersey-Dalaygon, GR No. 139868 June 8, 2006

Facts:

2 American citizens have resided in the Philippines. They have an adopted daughter.
The wife died and left a will where she left her entire estate to her husband. 2 years
after the wife's death, the husband married a Candelaria. 4 years after, Richard died
and left a will where he left his entire estate to Candelaria except for some of his
shares in a company which he left to his adopted daughter. Audrey’s will was
admitted to probate in CFI Rizal. Inventory was taken on their conjugal properties.
Ancheta, as the administrator, filed for a partition of the first wife's estate. The will
was also admitted in a court in her native land (Maryland).

Issue: Whether or not the properties in issue should be governed by the law where
the property is situated

Ruling:

Yes, properties in issue should be governed by the law where the property is
situated. However, since the first wife is a foreign national, the intrinsic validity of
her will is governed by her national law. The national law of the person who made
the will shall regulate whose succession is in consideration whatever the nature of
the property and regardless of the country where the property maybe found (Art 16
CC). The first wife's properties may be found in the Philipppines, however the
successional rights over those properties are governed by the national law of the
testator.
G.R. No. 157314 July 29, 2005 The respondent further alleged that prior to the closure of his current account, he had issued several other postdated
checks. The petitioner bank’s act of closing his current account allegedly preempted the deposits that he intended to
make to fund those checks. Further, the petitioner bank’s act exposed him to criminal prosecution for violation
FAR EAST BANK AND TRUST COMPANY, NOW BANK OF THE PHILIPPINE ISLANDS, Petitioners,
of Batas Pambansa Blg. 22.
vs.
THEMISTOCLES PACILAN, JR., Respondent.
According to the respondent, the indecent haste that attended the closure of his account was patently malicious and
intended to embarrass him. He claimed that he is a Cashier of Prudential Bank and Trust Company, whose branch
DECISION
office is located just across that of petitioner bank, and a prominent and respected leader both in the civic and
banking communities. The alleged malicious acts of petitioner bank besmirched the respondent’s reputation and
CALLEJO, SR., J.: caused him "social humiliation, wounded feelings, insurmountable worries and sleepless nights" entitling him to an
award of damages.
Before the Court is the petition for review on certiorari filed by Far East Bank and Trust Company (now Bank of the
Philippines Islands) seeking the reversal of the Decision1 dated August 30, 2002 of the Court of Appeals (CA) in CA- In their answer, petitioner bank and Villadelgado maintained that the respondent’s current account was subject to
G.R. CV No. 36627 which ordered it, together with its branch accountant, Roger Villadelgado, to pay respondent petitioner bank’s Rules and Regulations Governing the Establishment and Operation of Regular Demand
Themistocles Pacilan, Jr.2 the total sum of ₱100,000.00 as moral and exemplary damages. The assailed decision Deposits which provide that "the Bank reserves the right to close an account if the depositor frequently draws checks
affirmed with modification that of the Regional Trial Court (RTC) of Negros Occidental, Bacolod City, Branch 54, in against insufficient funds and/or uncollected deposits" and that "the Bank reserves the right at any time to return
Civil Case No. 4908. Likewise sought to be reversed and set aside is the Resolution dated January 17, 2003 of the checks of the depositor which are drawn against insufficient funds or for any reason."3
appellate court, denying petitioner bank’s motion for reconsideration.
They showed that the respondent had improperly and irregularly handled his current account. For example, in 1986,
The case stemmed from the following undisputed facts: the respondent’s account was overdrawn 156 times, in 1987, 117 times and in 1988, 26 times. In all these instances,
the account was overdrawn due to the issuance of checks against insufficient funds. The respondent had also signed
several checks with a different signature from the specimen on file for dubious reasons.
Respondent Pacilan opened a current account with petitioner bank’s Bacolod Branch on May 23, 1980. His account
was denominated as Current Account No. 53208 (0052-00407-4). The respondent had since then issued several
postdated checks to different payees drawn against the said account. Sometime in March 1988, the respondent When the respondent made the deposit on April 5, 1988, it was obviously to cover for issuances made the previous
issued Check No. 2434886 in the amount of ₱680.00 and the same was presented for payment to petitioner bank on day against an insufficiently funded account. When his Check No. 2434886 was presented for payment on April 4,
April 4, 1988. 1988, he had already incurred an overdraft; hence, petitioner bank rightfully dishonored the same for insufficiency of
funds.
Upon its presentment on the said date, Check No. 2434886 was dishonored by petitioner bank. The next day, or on
April 5, 1988, the respondent deposited to his current account the amount of ₱800.00. The said amount was After due proceedings, the court a quo rendered judgment in favor of the respondent as it ordered the petitioner bank
accepted by petitioner bank; hence, increasing the balance of the respondent’s deposit to ₱1,051.43. and Villadelgado, jointly and severally, to pay the respondent the amounts of ₱100,000.00 as moral damages and
₱50,000.00 as exemplary damages and costs of suit. In so ruling, the court a quo also cited petitioner bank’s rules
and regulations which state that "a charge of ₱10.00 shall be levied against the depositor for any check that is taken
Subsequently, when the respondent verified with petitioner bank about the dishonor of Check No. 2434866, he up as a returned item due to ‘insufficiency of funds’ on the date of receipt from the clearing office even if said check
discovered that his current account was closed on the ground that it was "improperly handled." The records of is honored and/or covered by sufficient deposit the following banking day." The same rules and regulations also
petitioner bank disclosed that between the period of March 30, provide that "a check returned for insufficiency of funds for any reason of similar import may be subsequently
1988 and April 5, 1988, the respondent issued four checks, to wit: Check No. 2480416 for ₱6,000.00; Check No. recleared for one more time only, subject to the same charges."
2480419 for ₱50.00; Check No. 2434880 for ₱680.00 and; Check No. 2434886 for ₱680.00, or a total amount of
₱7,410.00. At the time, however, the respondent’s current account with petitioner bank only had a deposit of
₱6,981.43. Thus, the total amount of the checks presented for payment on April 4, 1988 exceeded the balance of the According to the court a quo, following these rules and regulations, the respondent, as depositor, had the right to put
respondent’s deposit in his account. For this reason, petitioner bank, through its branch accountant, Villadelgado, up sufficient funds for a check that was taken as a returned item for insufficient funds the day following the receipt of
closed the respondent’s current account effective the evening of April 4, 1988 as it then had an overdraft of ₱428.57. said check from the clearing office. In fact, the said check could still be recleared for one more time. In previous
As a consequence of the overdraft, Check No. 2434886 was dishonored. instances, petitioner bank notified the respondent when he incurred an overdraft and he would then deposit sufficient
funds the following day to cover the overdraft. Petitioner bank thus acted unjustifiably when it immediately closed the
respondent’s account on April 4, 1988 and deprived him of the opportunity to reclear his check or deposit sufficient
On April 18, 1988, the respondent wrote to petitioner bank complaining that the closure of his account was funds therefor the following day.
unjustified. When he did not receive a reply from petitioner bank, the respondent filed with the RTC of Negros
Occidental, Bacolod City, Branch 54, a complaint for damages against petitioner bank and Villadelgado. The case
was docketed as Civil Case No. 4908. The respondent, as complainant therein, alleged that the closure of his current As a result of the closure of his current account, several of the respondent’s checks were subsequently dishonored
account by petitioner bank was unjustified because on the first banking hour of April 5, 1988, he already deposited and because of this, the respondent was humiliated, embarrassed and lost his credit standing in the business
an amount sufficient to fund his checks. The respondent pointed out that Check No. 2434886, in particular, was community. The court a quo further ratiocinated that even granting arguendo that petitioner bank had the right to
delivered to petitioner bank at the close of banking hours on April 4, 1988 and, following normal banking procedure, close the respondent’s account, the manner which attended the closure constituted an abuse of the
it said right. Citing Article 19 of the Civil Code of the Philippines which states that "[e]very person must, in the exercise
(petitioner bank) had until the last clearing hour of the following day, or on April 5, 1988, to honor the check or return of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and
it, if not funded. In disregard of this banking procedure and practice, however, petitioner bank hastily closed the good faith" and Article 20 thereof which states that "[e]very person who, contrary to law, wilfully or negligently causes
respondent’s current account and dishonored his Check No. 2434886. damage to another, shall indemnify the latter for the same," the court a quo adjudged petitioner bank of acting in bad
faith. It held that, under the foregoing circumstances, the respondent is entitled to an award of moral and exemplary
damages.
The decretal portion of the court a quo’s decision reads: WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the MODIFICATION that the award of
moral damages is reduced to ₱75,000.00 and the award of exemplary damages reduced to ₱25,000.00.
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:
SO ORDERED.6
1. Ordering the defendants [petitioner bank and Villadelgado], jointly and severally, to pay plaintiff [the respondent]
the sum of ₱100,000.00 as moral damages; Petitioner bank sought the reconsideration of the said decision but in the assailed Resolution dated January 17,
2003, the appellate court denied its motion. Hence, the recourse to this Court.
2. Ordering the defendants, jointly and severally, to pay plaintiff the sum of ₱50,000.00 as exemplary damages plus
costs and expenses of the suit; and Petitioner bank maintains that, in closing the account of the respondent in the evening of April 4, 1988, it acted in
good faith and in accordance with the rules and regulations governing the operation of a
3. Dismissing [the] defendants’ counterclaim for lack of merit.
regular demand deposit which reserves to the bank "the right to close an account if the depositor frequently draws
4 checks against insufficient funds and/or uncollected deposits." The same rules and regulations also provide that "the
SO ORDERED.
depositor is not entitled, as a matter of right, to overdraw on this deposit and the bank reserves the right at any time
to return checks of the depositor which are drawn against insufficient funds or for any reason."
On appeal, the CA rendered the Decision dated August 30, 2002, affirming with modification the decision of the
court a quo.
It cites the numerous instances that the respondent had overdrawn his account and those instances where he
deliberately signed checks using a signature different from the specimen on file. Based on these facts, petitioner
The appellate court substantially affirmed the factual findings of the court a quo as it held that petitioner bank bank was constrained to close the respondent’s account for improper and irregular handling and returned his Check
unjustifiably closed the respondent’s account notwithstanding that its own rules and regulations No. 2434886 which was presented to the bank for payment on April 4, 1988.

allow that a check returned for insufficiency of funds or any reason of similar import, may be subsequently recleared Petitioner bank further posits that there is no law or rule which gives the respondent a legal right to make good his
for one more time, subject to standard charges. Like the court a quo, the appellate court observed that in several check or to deposit the corresponding amount to cover said check within 24 hours after the same is dishonored or
instances in previous years, petitioner bank would inform the respondent when he incurred an overdraft and allowed returned by the bank for having been drawn against insufficient funds. It vigorously denies having violated Article 19
him to make a timely deposit to fund the checks that were initially dishonored for insufficiency of funds. However, on of the Civil Code as it insists that it acted in good faith and in accordance with the pertinent banking rules and
April 4, 1988, petitioner bank immediately closed the respondent’s account without even notifying him that he had regulations.
incurred an overdraft. Even when they had already closed his account on April 4, 1988, petitioner bank still accepted
the deposit that the respondent made on April 5, 1988, supposedly to cover his checks.
The petition is impressed with merit.

Echoing the reasoning of the court a quo, the CA declared that even as it may be conceded that petitioner bank had
A perusal of the respective decisions of the court a quo and the appellate court show that the award of damages in
reserved the right to close an account for repeated overdrafts by the respondent, the exercise of that right must
the respondent’s favor was anchored mainly on Article 19 of the Civil Code which, quoted anew below, reads:
never be despotic or arbitrary. That petitioner bank chose to close the account outright and return the check, even
after accepting a deposit sufficient to cover the said check, is contrary to its duty to handle the respondent’s account
with utmost fidelity. The exercise of the right is not absolute and good faith, at least, is required. The manner by Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
which petitioner bank closed the account of the respondent runs afoul of Article 19 of the Civil Code which enjoins everyone his due, and observe honesty and good faith.
every person, in the exercise of his rights, "to give every one his due, and observe honesty and good faith."
The elements of abuse of rights are the following: (a) the existence of a legal right or duty; (b) which is exercised in
bad faith; and (c) for the sole intent of prejudicing or injuring another.7 Malice or bad faith is at the core of the said
provision.8 The law always presumes good faith and any person who seeks to be awarded damages due to acts of
another has the burden of proving that the latter acted in bad faith or with ill-motive.9 Good faith refers to the state of
The CA concluded that petitioner bank’s precipitate and imprudent closure of the respondent’s account had caused
the mind which is manifested by the acts of the individual concerned. It consists of the intention to abstain from
him, a respected officer of several civic and banking associations, serious anxiety and humiliation. It had, likewise,
taking an unconscionable and unscrupulous advantage of another. 10 Bad faith does not simply connote bad
tainted his credit standing. Consequently, the award of damages is warranted. The CA, however, reduced the
judgment or simple negligence, dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach
amount of damages awarded by the court a quo as it found the same to be excessive:
of known duty due to some motives or interest or ill-will that partakes of the nature of fraud.11 Malice connotes ill-will
or spite and speaks not in response to duty. It implies an intention to do ulterior and unjustifiable harm. Malice is bad
We, however, find excessive the amount of damages awarded by the RTC. In our view the reduced amount of faith or bad motive.12
₱75,000.00 as moral damages and ₱25,000.00 as exemplary damages are in order. Awards for damages are not
meant to enrich the plaintiff-appellee [the respondent] at the expense of defendants-appellants [the petitioners], but
Undoubtedly, petitioner bank has the right to close the account of the respondent based on the following provisions
to obviate the moral suffering he has undergone. The award is aimed at the restoration, within limits possible, of
of its Rules and Regulations Governing the Establishment and Operation of Regular Demand Deposits:
the status quo ante, and should be proportionate to the suffering inflicted.5

10) The Bank reserves the right to close an account if the depositor frequently draws checks against insufficient
The dispositive portion of the assailed CA decision reads:
funds and/or uncollected deposits.
… of injury to the plaintiff and legal responsibility by the person causing it. The underlying basis for the award of tort
damages is the premise that the individual was injured in contemplation of law. Thus, there must first be a breach of
some duty and the imposition of liability for that breach before damages may be awarded; and the breach of such
12) …
duty should be the proximate cause of the injury.17

However, it is clearly understood that the depositor is not entitled, as a matter of right, to overdraw on this deposit
Whatever damages the respondent may have suffered as a consequence, e.g., dishonor of his other insufficiently
and the bank reserves the right at any time to return checks of the depositor which are drawn against insufficient
funded checks, would have to be borne by him alone. It was the respondent’s repeated improper
funds or for any other reason.

and irregular handling of his account which constrained petitioner bank to close the same in accordance with the
The facts, as found by the court a quo and the appellate court, do not establish that, in the exercise of this right,
rules and regulations governing its depositors’ current accounts. The respondent’s case is clearly one of damnum
petitioner bank committed an abuse thereof. Specifically, the second and third elements for abuse of rights are not
absque injuria.
attendant in the present case. The evidence presented by petitioner bank negates the existence of bad faith or
malice on its part in closing the respondent’s account on April 4, 1988 because on the said date the same was
already overdrawn. The respondent issued four checks, all due on April 4, 1988, amounting to ₱7,410.00 when the WHEREFORE, the petition is GRANTED. The Decision dated August 30, 2002 and Resolution dated January 17,
balance of his current account deposit was only ₱6,981.43. Thus, he incurred an overdraft of ₱428.57 which resulted 2003 of the Court of Appeals in CA-G.R. CV No. 36627 are REVERSED AND SET ASIDE.
in the dishonor of his Check No. 2434886. Further, petitioner bank showed that in 1986, the current account of the
respondent was overdrawn 156 times due to his issuance of checks against insufficient funds. 13 In 1987, the said
SO ORDERED.
account was overdrawn 117 times for the same

reason.14 Again, in 1988, 26 times.15 There were also several instances when the respondent issued checks
deliberately using a signature different from his specimen signature on file with petitioner bank. 16 All these
circumstances taken together justified the petitioner bank’s closure of the respondent’s account on April 4, 1988 for
"improper handling."

It is observed that nowhere under its rules and regulations is petitioner bank required to notify the respondent, or any
depositor for that matter, of the closure of the account for frequently drawing checks against insufficient funds. No
malice or bad faith could be imputed on petitioner bank for so acting since the records bear out that the respondent
had indeed been improperly and irregularly handling his account not just a few times but hundreds of times. Under
the circumstances, petitioner bank could not be faulted for exercising its right in accordance with the express rules
and regulations governing the current accounts of its depositors. Upon the opening of his account, the respondent
had agreed to be bound by these terms and conditions.

Neither the fact that petitioner bank accepted the deposit made by the respondent the day following the closure of his
account constitutes bad faith or malice on the part of petitioner bank. The same could be characterized as simple
negligence by its personnel. Said act, by itself, is not constitutive of bad faith.

The respondent had thus failed to discharge his burden of proving bad faith on the part of petitioner bank or that it
was motivated by ill-will or spite in closing his account on April 4, 1988 and in inadvertently accepting his deposit on
April 5, 1988.

Further, it has not been shown that these acts were done by petitioner bank with the sole intention of prejudicing and
injuring the respondent. It is conceded that the respondent may have suffered damages as a result of the closure of
his current account. However, there is a material distinction between damages and injury. The Court had the
occasion to explain the distinction between damages and injury in this wise:

… Injury is the illegal invasion of a legal right; damage is the loss, hurt or harm which results from the injury; and
damages are the recompense or compensation awarded for the damage suffered. Thus, there can be damage
without injury in those instances in which the loss or harm was not the result of a violation of a legal duty. In such
cases, the consequences must be borne by the injured person alone, the law affords no remedy for damages
resulting from an act which does not amount to a legal injury or wrong. These situations are often called damnum
absque injuria.

In other words, in order that a plaintiff may maintain an action for the injuries of which he complains, he must
establish that such injuries resulted from a breach of duty which the defendant owed to the plaintiff – a concurrence
The records also showed that indeed plaintiff has mishandled his account by issuing
FEBTC v. Pacilan Digest checks previously against insufficient funds not just once, but more than a hundred
Far East Bank vs. Pacilan times.
G.R. 157314 July 29, 2005
Callejo Sr, J.: Moreover, the acceptance by the bank of the deposit the day after the closure of the
account cannot be considered as bad faith nor done with malice but a mere simple
Facts: negligence of its personnel.
1. Pacilan maintains a current account with petitioner bank (now BPI). He issued several
As a result, whatever damage the plaintiff has suffered (by virtue of the subsequent
postdated checks, the last one being check no. 2434886 amounting to P680. The said
dishonor of the other checks he issued) should be borne by him alone as these was the
check was presented to petitioner bank for payment on April 4, 1988 but was dishonored. result of his own act in irregularly handling his account.
It appeared that the account of Pacilan has been closed on the evening of April 4 on the
ground that it was 'improperly handled'.

2. It appeared that the plaintiff issued four checks from March 30 - April 4, 1988
amounting in total to P7,410, on one hand, his funds in the bank only amounted to
P6,981.43, thus an overdraft of P 428.57 resulted therefrom. Consequently, the last
check was dishonored despite the fact that plaintiff deposited the amount the following
day.

3. Pacilan wrote a complaint to the bank but after the bank did not reply, he filed an
action for damages against it and the employee (Villadelgado) who closed the account.
The plaintiff alleged that the immediate closure of his account was malicious and
intended to embarrass him.

4. The lower court ruled in favor of the plaintiff and awarded actual damages (P100,000)
and exemplary damages (P50,000). The bank appealed, but the CA affirmed the lower
court's decision with modifications and held that the closure of the bank of plaintiff's
account despite its rules and regulation allowing a re-clearing of a check returned for
insufficiency of funds, is patently malicious and unjustifiable. Hence, this appeal.

5. The petitioner contended that in closing the account, it acted in good faith and in
accordance with the pertinent banking rules and regulations governing the operations of
a regular demand deposit, allowing it to close an account if the depositor frequently
draws checks against insufficient funds or uncollected deposits.

Issue: Whether or not the petitioner is liable for damages

NO. The award of damages under Art. 19 of the Civil Code is unjustifiable. The petitioner
has the right to close the account of plaintiff based on the rules and regulations on
regular demand deposits. The facts do not show that the petitioner abused its rights in
the exercise of its duties. The evidence negates the existence of bad faith and malice on
the part of the petitioner bank, which are the second and third elements necessary to
prove an abuse of right in violation of Art. 19.
G.R. No. 146322 December 6, 2006 Articles 1911 and 2012 of the Civil Code. Hence, the trial court held petitioners liable to respondent for P500,000 moral
damages, P200,000 exemplary damages and P50,000 attorney’s fees plus costs.
ERNESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC., petitioners,
vs. Petitioners appealed the RTC decision but the CA affirmed the trial court’s decision with modification, reducing the
ERNESTO QUIAMCO, respondent. award of moral and exemplary damages to P300,000 and P100,000, respectively.13 Petitioners sought
reconsideration but it was denied. Thus, this petition.
CORONA, J.:
In their petition and memorandum, petitioners submit that the sole (allegedly) issue to be resolved here is whether
the filing of a complaint for qualified theft and/or violation of the Anti-Fencing Law in the Office of the City Prosecutor
Honeste vivere, non alterum laedere et jus suum cuique tribuere. To live virtuously, not to injure others and to give
warranted the award of moral damages, exemplary damages, attorney’s fees and costs in favor of respondent.
everyone his due. These supreme norms of justice are the underlying principles of law and order in society. We
reaffirm them in this petition for review on certiorari assailing the July 26, 2000 decision 1 and October 18, 2000
resolution of the Court of Appeals (CA) in CA-G.R. CV No. 47571. Petitioners’ suggestion is misleading. They were held liable for damages not only for instituting a groundless
complaint against respondent but also for making a slanderous remark and for taking the motorcycle from
respondent’s establishment in an abusive manner.
In 1982, respondent Ernesto C. Quiamco was approached by Juan Davalan, 2 Josefino Gabutero and Raul Generoso
to amicably settle the civil aspect of a criminal case for robbery3 filed by Quiamco against them. They surrendered to
him a red Honda XL-100 motorcycle and a photocopy of its certificate of registration. Respondent asked for the Correctness of the Findings of the RTC and CA
original certificate of registration but the three accused never came to see him again. Meanwhile, the motorcycle was
parked in an open space inside respondent’s business establishment, Avesco-AVNE Enterprises, where it was
As they never questioned the findings of the RTC and CA that malice and ill will attended not only the public
visible and accessible to the public.
imputation of a crime to respondent14 but also the taking of the motorcycle, petitioners were deemed to have
accepted the correctness of such findings. This alone was sufficient to hold petitioners liable for damages to
It turned out that, in October 1981, the motorcycle had been sold on installment basis to Gabutero by petitioner respondent.
Ramas Uypitching Sons, Inc., a family-owned corporation managed by petitioner Atty. Ernesto Ramas Uypitching. To
secure its payment, the motorcycle was mortgaged to petitioner corporation. 4
Nevertheless, to address petitioners’ concern, we also find that the trial and appellate courts correctly ruled that the
filing of the complaint was tainted with malice and bad faith. Petitioners themselves in fact described their action as a
When Gabutero could no longer pay the installments, Davalan assumed the obligation and continued the payments. "precipitate act."15 Petitioners were bent on portraying respondent as a thief. In this connection, we quote with
In September 1982, however, Davalan stopped paying the remaining installments and told petitioner corporation’s approval the following findings of the RTC, as adopted by the CA:
collector, Wilfredo Veraño, that the motorcycle had allegedly been "taken by respondent’s men."
x x x There was malice or ill-will [in filing the complaint before the City Prosecutor’s Office] because Atty.
Nine years later, on January 26, 1991, petitioner Uypitching, accompanied by policemen, 5 went to Avesco-AVNE Ernesto Ramas Uypitching knew or ought to have known as he is a lawyer, that there was no probable
Enterprises to recover the motorcycle. The leader of the police team, P/Lt. Arturo Vendiola, talked to the clerk in cause at all for filing a criminal complaint for qualified theft and fencing activity against [respondent]. Atty.
charge and asked for respondent. While P/Lt. Vendiola and the clerk were talking, petitioner Uypitching paced back Uypitching had no personal knowledge that [respondent] stole the motorcycle in question. He was merely
and forth inside the establishment uttering "Quiamco is a thief of a motorcycle." told by his bill collector ([i.e.] the bill collector of Ramas Uypitching Sons, Inc.)[,] Wilfredo Veraño[,] that
Juan Dabalan will [no longer] pay the remaining installment(s) for the motorcycle because the motorcycle
was taken by the men of [respondent]. It must be noted that the term used by Wilfredo Veraño in informing
On learning that respondent was not in Avesco-AVNE Enterprises, the policemen left to look for respondent in his
Atty. Ernesto Ramas Uypitching of the refusal of Juan Dabalan to pay for the remaining installment was
residence while petitioner Uypitching stayed in the establishment to take photographs of the motorcycle. Unable to
[‘]taken[’], not [‘]unlawfully taken[’] or ‘stolen.’ Yet, despite the double hearsay, Atty. Ernesto Ramas
find respondent, the policemen went back to Avesco-AVNE Enterprises and, on petitioner Uypitching’s instruction
Uypitching not only executed the [complaint-affidavit] wherein he named [respondent] as ‘the suspect’ of
and over the clerk’s objection, took the motorcycle.
the stolen motorcycle but also charged [respondent] of ‘qualified theft and fencing activity’ before the City
[Prosecutor’s] Office of Dumaguete. The absence of probable cause necessarily signifies the presence of
On February 18, 1991, petitioner Uypitching filed a criminal complaint for qualified theft and/or violation of the Anti- malice. What is deplorable in all these is that Juan Dabalan, the owner of the motorcycle, did not accuse
Fencing Law6 against respondent in the Office of the City Prosecutor of Dumaguete City.7 Respondent moved for [respondent] or the latter’s men of stealing the motorcycle[,] much less bother[ed] to file a case for qualified
dismissal because the complaint did not charge an offense as he had neither stolen nor bought the motorcycle. The theft before the authorities. That Atty. Uypitching’s act in charging [respondent] with qualified theft and
Office of the City Prosecutor dismissed the complaint8 and denied petitioner Uypitching’s subsequent motion for fencing activity is tainted with malice is also shown by his answer to the question of Cupid
reconsideration. Gonzaga16[during one of their conversations] - "why should you still file a complaint? You have already
recovered the motorcycle…"[:] "Aron motagam ang kawatan ug motor." ("To teach a lesson to the thief of
motorcycle.")17
Respondent filed an action for damages against petitioners in the RTC of Dumaguete City, Negros Oriental, Branch
37.9 He sought to hold the petitioners liable for the following: (1) unlawful taking of the motorcycle; (2) utterance of a
defamatory remark (that respondent was a thief) and (3) precipitate filing of a baseless and malicious complaint. Moreover, the existence of malice, ill will or bad faith is a factual matter. As a rule, findings of fact of the trial court,
These acts humiliated and embarrassed the respondent and injured his reputation and integrity. when affirmed by the appellate court, are conclusive on this Court. We see no compelling reason to reverse the
findings of the RTC and the CA.
On July 30, 1994, the trial court rendered a decision10 finding that petitioner Uypitching was motivated with malice
and ill will when he called respondent a thief, took the motorcycle in an abusive manner and filed a baseless Petitioners Abused Their Right of Recovery as Mortgagee(s)
complaint for qualified theft and/or violation of the Anti-Fencing Law. Petitioners’ acts were found to be contrary to
Petitioners claim that they should not be held liable for petitioner corporation’s exercise of its right as seller-
mortgagee to recover the mortgaged vehicle preliminary to the enforcement of its right to foreclose on the mortgage
in case of default. They are clearly mistaken.

True, a mortgagee may take steps to recover the mortgaged property to enable it to enforce or protect its foreclosure
right thereon. There is, however, a well-defined procedure for the recovery of possession of mortgaged property: if a
mortgagee is unable to obtain possession of a mortgaged property for its sale on foreclosure, he must bring a civil
action either to recover such possession as a preliminary step to the sale, or to obtain judicial foreclosure.18

Petitioner corporation failed to bring the proper civil action necessary to acquire legal possession of the motorcycle.
Instead, petitioner Uypitching descended on respondent’s establishment with his policemen and ordered the seizure
of the motorcycle without a search warrant or court order. Worse, in the course of the illegal seizure of the
motorcycle, petitioner Uypitching even mouthed a slanderous statement.

No doubt, petitioner corporation, acting through its co-petitioner Uypitching, blatantly disregarded the lawful
procedure for the enforcement of its right, to the prejudice of respondent. Petitioners’ acts violated the law as well as
public morals, and transgressed the proper norms of human relations.

The basic principle of human relations, embodied in Article 19 of the Civil Code, provides:

Art. 19. Every person must in the exercise of his rights and in the performance of his duties, act with
justice, give every one his due, and observe honesty and good faith.

Article 19, also known as the "principle of abuse of right," prescribes that a person should not use his right unjustly or
contrary to honesty and good faith, otherwise he opens himself to liability. 19 It seeks to preclude the use of, or the
tendency to use, a legal right (or duty) as a means to unjust ends.

There is an abuse of right when it is exercised solely to prejudice or injure another. 20 The exercise of a right must be
in accordance with the purpose for which it was established and must not be excessive or unduly harsh; there must
be no intention to harm another.21 Otherwise, liability for damages to the injured party will attach.

In this case, the manner by which the motorcycle was taken at petitioners’ instance was not only attended by bad
faith but also contrary to the procedure laid down by law. Considered in conjunction with the defamatory statement,
petitioners’ exercise of the right to recover the mortgaged vehicle was utterly prejudicial and injurious to respondent.
On the other hand, the precipitate act of filing an unfounded complaint could not in any way be considered to be in
accordance with the purpose for which the right to prosecute a crime was established. Thus, the totality of
petitioners’ actions showed a calculated design to embarrass, humiliate and publicly ridicule respondent. Petitioners
acted in an excessively harsh fashion to the prejudice of respondent. Contrary to law, petitioners willfully caused
damage to respondent. Hence, they should indemnify him.22

WHEREFORE, the petition is hereby DENIED. The July 26, 2000 decision and October 18, 2000 resolution of the
Court of Appeals in CA-G.R. CV No. 47571 are AFFIRMED.

Triple costs against petitioners, considering that petitioner Ernesto Ramas Uypitching is a lawyer and an officer of the
court, for his improper behavior.

SO ORDERED.
ARTICLE 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, exercised solely to prejudice or injure another. In this case, the manner by which
give everyone his due, and observe honesty and good faith.
the motorcycle was taken at petitioners’ instance was not only attended by bad faith
Ernesto Ramas Uypitching and Ramas Uypitching Sons, Inc., petitioner vs. but also contrary to the procedure laid down by law. Considered in conjunction with
the defamatory statement, petitioners’ exercise of the right to recover the
Ernesto Quiamco, respondent (G.R. No. 146322, December 6, 2006) mortgaged vehicle was utterly prejudicial and injurious to respondent. On the other
FACTS: In 1982, respondent Ernesto Quiamco was approached by Juan Davalan, hand, the precipitate act of filing an unfounded complaint could not in any way be
Josefino Gabutero and Raul Generoso to amicably settle the civil aspect of a criminal considered to be in accordance with the purpose for which the right to prosecute a
case for robbery filed by Quiamco against them. They surrendered to him a red crime was established. Thus, the totality of petitioner’s actions showed a calculated
Honda XL-100 motorcycle and a photocopy of its certificate of registration. design to embarrass, humiliate and publicly ridicule respondent. Petitioners acted in
Respondent asked for the original certificate of registration but the three accused an excessively harsh fashion to the prejudice of respondent. Contrary to law,
never came to see him again. The motorcycle was parked in an open space inside petitioners willfully caused damage to respondent. Hence, they should indemnify
respondent’s business establishment, Avesco AVNE Enterprises, where it is visible him.
and accessible to the public. It turned out that the motorcycle had been sold on
installment basis to Gabutero by the petitioner Ramas Uypitching Sons, Inc.,
managed by Atty. Ernesto Ramas Uypitching. To secure its payment, the motorcycle
was mortgaged to petitioner corporation. When Gabutero could no longer pay the
installments, Davalan assumed the obligation but stopped paying the remaining
installments and told the collector that the motorcycle had been allegedly “taken by
respondent’s men”. Nine years later, Uypitching, accompanied by policemen went
to Avesco-AVNE Enterprise to recover the motorcycle. While the police leader and
the clerk in charge were taking, Uypitching paced back and forth inside the
establishment uttering “Quiamco is a thief of motorcycle.” The policemen left to
look for respondent in his residence while the petitioner stayed in the establishment
and take photographs of the motorcycle. Unable to find the respondent, he
instructed the policemen to take the motorcycle regardless of the cleck’s objection.

ISSUE: Whether or not the acts of the petitioner are contrary to the principle of
abuse of right.

RULING: YES. Article 19, also known as the “principle of abuse of right” prescribes
that a person should not use his right unjustly or contrary to honesty and good
faith, otherwise he opens himself to liability. There is an abuse of right when it is
G.R. No. 160273 January 18, 2008 2. Ordering defendants to pay, jointly and severally, plaintiff the amount of P5,000,000.00 as moral
damages.
CEBU COUNTRY CLUB, INC., SABINO R. DAPAT, RUBEN D. ALMENDRAS, JULIUS Z. NERI, DOUGLAS L.
LUYM, CESAR T. LIBI, RAMONTITO* E. GARCIA and JOSE B. SALA, petitioners, 3. Ordering defendants to pay, jointly and severally, plaintiff the amount of P1,000,000.00 as exemplary
vs. damages.
RICARDO F. ELIZAGAQUE, respondent.
4. Ordering defendants to pay, jointly and severally, plaintiff the amount of P1,000,000.00 as and by way of
SANDOVAL-GUTIERREZ, J.: attorney’s fees and P80,000.00 as litigation expenses.

For our resolution is the instant Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, 5. Costs of suit.
as amended, assailing the Decision1 dated January 31, 2003 and Resolution dated October 2, 2003 of the Court of
Appeals in CA-G.R. CV No. 71506.
Counterclaims are hereby DISMISSED for lack of merit.

The facts are:


SO ORDERED.2

Cebu Country Club, Inc. (CCCI), petitioner, is a domestic corporation operating as a non-profit and non-stock private
On appeal by petitioners, the Court of Appeals, in its Decision dated January 31, 2003, affirmed the trial court’s
membership club, having its principal place of business in Banilad, Cebu City. Petitioners herein are members of its
Decision with modification, thus:
Board of Directors.

WHEREFORE, premises considered, the assailed Decision dated February 14, 2001 of the Regional Trial
Sometime in 1987, San Miguel Corporation, a special company proprietary member of CCCI, designated respondent
Court, Branch 71, Pasig City in Civil Case No. 67190 is hereby AFFIRMED with MODIFICATION as
Ricardo F. Elizagaque, its Senior Vice President and Operations Manager for the Visayas and Mindanao, as a
follows:
special non-proprietary member. The designation was thereafter approved by the CCCI’s Board of Directors.

1. Ordering defendants-appellants to pay, jointly and severally, plaintiff-appellee the amount


In 1996, respondent filed with CCCI an application for proprietary membership. The application was indorsed by
of P2,000,000.00 as moral damages;
CCCI’s two (2) proprietary members, namely: Edmundo T. Misa and Silvano Ludo.

2. Ordering defendants-appellants to pay, jointly and severally, plaintiff-appellee the amount


As the price of a proprietary share was around the P5 million range, Benito Unchuan, then president of CCCI, offered
of P1,000,000.00 as exemplary damages;
to sell respondent a share for only P3.5 million. Respondent, however, purchased the share of a certain Dr. Butalid
for only P3 million. Consequently, on September 6, 1996, CCCI issued Proprietary Ownership Certificate No. 1446 to
respondent. 3. Ordering defendants-appellants to pay, jointly and severally, plaintiff-appellee the mount of P500,000.00
as attorney’s fees and P50,000.00 as litigation expenses; and
During the meetings dated April 4, 1997 and May 30, 1997 of the CCCI Board of Directors, action on respondent’s
application for proprietary membership was deferred. In another Board meeting held on July 30, 1997, respondent’s 4. Costs of the suit.
application was voted upon. Subsequently, or on August 1, 1997, respondent received a letter from Julius Z. Neri,
CCCI’s corporate secretary, informing him that the Board disapproved his application for proprietary membership.
The counterclaims are DISMISSED for lack of merit.

On August 6, 1997, Edmundo T. Misa, on behalf of respondent, wrote CCCI a letter of reconsideration. As CCCI did
not answer, respondent, on October 7, 1997, wrote another letter of reconsideration. Still, CCCI kept silent. On SO ORDERED.3
November 5, 1997, respondent again sent CCCI a letter inquiring whether any member of the Board objected to his
application. Again, CCCI did not reply. On March 3, 2003, petitioners filed a motion for reconsideration and motion for leave to set the motion for oral
arguments. In its Resolution4 dated October 2, 2003, the appellate court denied the motions for lack of merit.
Consequently, on December 23, 1998, respondent filed with the Regional Trial Court (RTC), Branch 71, Pasig City a
complaint for damages against petitioners, docketed as Civil Case No. 67190. Hence, the present petition.

After trial, the RTC rendered its Decision dated February 14, 2001 in favor of respondent, thus: The issue for our resolution is whether in disapproving respondent’s application for proprietary membership with
CCCI, petitioners are liable to respondent for damages, and if so, whether their liability is joint and several.
WHEREFORE, judgment is hereby rendered in favor of plaintiff:
Petitioners contend, inter alia, that the Court of Appeals erred in awarding exorbitant damages to respondent despite
the lack of evidence that they acted in bad faith in disapproving the latter’s application; and in disregarding their
1. Ordering defendants to pay, jointly and severally, plaintiff the amount of P2,340,000.00 as actual or
compensatory damages. defense of damnum absque injuria.
For his part, respondent maintains that the petition lacks merit, hence, should be denied. In GF Equity, Inc. v. Valenzona,5 we expounded Article 19 and correlated it with Article 21, thus:

CCCI’s Articles of Incorporation provide in part: This article, known to contain what is commonly referred to as the principle of abuse of rights, sets certain
standards which must be observed not only in the exercise of one's rights but also in the performance of
one's duties. These standards are the following: to act with justice; to give everyone his due; and to
SEVENTH: That this is a non-stock corporation and membership therein as well as the right of participation
observe honesty and good faith. The law, therefore, recognizes a primordial limitation on all rights; that in
in its assets shall be limited to qualified persons who are duly accredited owners of Proprietary Ownership
their exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by
Certificates issued by the corporation in accordance with its By-Laws.
itself legal because recognized or granted by law as such, may nevertheless become the source of
some illegality. When a right is exercised in a manner which does not conform with the norms
Corollary, Section 3, Article 1 of CCCI’s Amended By-Laws provides: enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for
which the wrongdoer must be held responsible. But while Article 19 lays down a rule of conduct for the
government of human relations and for the maintenance of social order, it does not provide a remedy for
SECTION 3. HOW MEMBERS ARE ELECTED – The procedure for the admission of new members of the its violation. Generally, an action for damages under either Article 20 or Article 21 would be proper.
Club shall be as follows:
(Emphasis in the original)

(a) Any proprietary member, seconded by another voting proprietary member, shall submit to the Secretary In rejecting respondent’s application for proprietary membership, we find that petitioners violated the rules governing
a written proposal for the admission of a candidate to the "Eligible-for-Membership List";
human relations, the basic principles to be observed for the rightful relationship between human beings and for the
stability of social order. The trial court and the Court of Appeals aptly held that petitioners committed fraud and
(b) Such proposal shall be posted by the Secretary for a period of thirty (30) days on the Club bulletin evident bad faith in disapproving respondent’s applications. This is contrary to morals, good custom or public policy.
board during which time any member may interpose objections to the admission of the applicant by Hence, petitioners are liable for damages pursuant to Article 19 in relation to Article 21 of the same Code.
communicating the same to the Board of Directors;
It bears stressing that the amendment to Section 3(c) of CCCI’s Amended By-Laws requiring the unanimous vote of
(c) After the expiration of the aforesaid thirty (30) days, if no objections have been filed or if there are, the the directors present at a special or regular meeting was not printed on the application form respondent filled and
Board considers the objections unmeritorious, the candidate shall be qualified for inclusion in the "Eligible- submitted to CCCI. What was printed thereon was the original provision of Section 3(c) which was silent on the
for-Membership List"; required number of votes needed for admission of an applicant as a proprietary member.

(d) Once included in the "Eligible-for-Membership List" and after the candidate shall have acquired in his Petitioners explained that the amendment was not printed on the application form due to economic reasons. We find
name a valid POC duly recorded in the books of the corporation as his own, he shall become a Proprietary this excuse flimsy and unconvincing. Such amendment, aside from being extremely significant, was introduced way
Member, upon a non-refundable admission fee of P1,000.00, provided that admission fees will only be back in 1978 or almost twenty (20) years before respondent filed his application. We cannot fathom why such a
collected once from any person. prestigious and exclusive golf country club, like the CCCI, whose members are all affluent, did not have enough
money to cause the printing of an updated application form.
On March 1, 1978, Section 3(c) was amended to read as follows:
It is thus clear that respondent was left groping in the dark wondering why his application was disapproved. He was
not even informed that a unanimous vote of the Board members was required. When he sent a letter for
(c) After the expiration of the aforesaid thirty (30) days, the Board may, by unanimous vote of all reconsideration and an inquiry whether there was an objection to his application, petitioners apparently ignored him.
directors present at a regular or special meeting, approve the inclusion of the candidate in the "Eligible- Certainly, respondent did not deserve this kind of treatment. Having been designated by San Miguel Corporation as
for-Membership List". a special non-proprietary member of CCCI, he should have been treated by petitioners with courtesy and civility. At
the very least, they should have informed him why his application was disapproved.
As shown by the records, the Board adopted a secret balloting known as the "black ball system" of voting wherein
each member will drop a ball in the ballot box. A white ball represents conformity to the admission of an applicant, The exercise of a right, though legal by itself, must nonetheless be in accordance with the proper norm. When the
while a black ball means disapproval. Pursuant to Section 3(c), as amended, cited above, a unanimous vote of the right is exercised arbitrarily, unjustly or excessively and results in damage to another, a legal wrong is committed for
directors is required. When respondent’s application for proprietary membership was voted upon during the Board which the wrongdoer must be held responsible.6 It bears reiterating that the trial court and the Court of Appeals held
meeting on July 30, 1997, the ballot box contained one (1) black ball. Thus, for lack of unanimity, his application was that petitioners’ disapproval of respondent’s application is characterized by bad faith.
disapproved.

As to petitioners’ reliance on the principle of damnum absque injuria or damage without injury, suffice it to state that
Obviously, the CCCI Board of Directors, under its Articles of Incorporation, has the right to approve or disapprove an the same is misplaced. In Amonoy v. Gutierrez,7 we held that this principle does not apply when there is an abuse
application for proprietary membership. But such right should not be exercised arbitrarily. Articles 19 and 21 of the of a person’s right, as in this case.
Civil Code on the Chapter on Human Relations provide restrictions, thus:

As to the appellate court’s award to respondent of moral damages, we find the same in order. Under Article 2219 of
Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with the New Civil Code, moral damages may be recovered, among others, in acts and actions referred to in Article 21.
justice, give everyone his due, and observe honesty and good faith. We believe respondent’s testimony that he suffered mental anguish, social humiliation and wounded feelings as a
result of the arbitrary denial of his application. However, the amount of P2,000,000.00 is excessive. While there is no
Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, hard-and-fast rule in determining what would be a fair and reasonable amount of moral damages, the same should
good customs or public policy shall compensate the latter for the damage. not be palpably and scandalously excessive. Moral damages are not intended to impose a penalty to the wrongdoer,
neither to enrich the claimant at the expense of the defendant. 8 Taking into consideration the attending
circumstances here, we hold that an award to respondent of P50,000.00, instead of P2,000,000.00, as moral
damages is reasonable.

Anent the award of exemplary damages, Article 2229 allows it by way of example or correction for the public good.
Nonetheless, since exemplary damages are imposed not to enrich one party or impoverish another but to serve as a
deterrent against or as a negative incentive to curb socially deleterious actions, 9 we reduce the amount
from P1,000,000.00 to P25,000.00 only.

On the matter of attorney’s fees and litigation expenses, Article 2208 of the same Code provides, among others, that
attorney’s fees and expenses of litigation may be recovered in cases when exemplary damages are awarded and
where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered, as in
this case. In any event, however, such award must be reasonable, just and equitable. Thus, we reduce the amount
of attorney’s fees (P500,000.00) and litigation expenses (P50,000.00) to P50,000.00 and P25,000.00, respectively.

Lastly, petitioners’ argument that they could not be held jointly and severally liable for damages because only one (1)
voted for the disapproval of respondent’s application lacks merit.

Section 31 of the Corporation Code provides:

SEC. 31. Liability of directors, trustees or officers. — Directors or trustees who willfully and knowingly vote
for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad
faithin directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with
their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other persons. (Emphasis ours)

WHEREFORE, we DENY the petition. The challenged Decision and Resolution of the Court of Appeals in CA-G.R.
CV No. 71506 are AFFIRMED with modification in the sense that (a) the award of moral damages is reduced
from P2,000,000.00 to P50,000.00; (b) the award of exemplary damages is reduced from P1,000,000.00
to P25,000.00; and (c) the award of attorney’s fees and litigation expenses is reduced from P500,000.00
and P50,000.00 to P50,000.00 and P25,000.00, respectively.

Costs against petitioners.

SO ORDERED.
Cebu country club v elizagaque case digest

FACTS Obviously, the CCCI Board of Directors, under its Articles of Incorporation, has the right to approve or disapprove an
application for proprietary membership. But such right should not be exercised arbitrarily. Articles 19 and 21 of the Civil Code
on the Chapter on Human Relations provide restrictions, thus:

Cebu Country Club, Inc. (CCCI), petitioner, is a domestic corporation operating as a non-profit and non-stock private
membership club, having its principal place of business in Banilad, Cebu City. Petitioners herein are members of its Board of
Directors. In 1996, respondent filed with CCCI an application for proprietary membership. The application was indorsed by Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone
CCCI’s two (2) proprietary members, namely: Edmundo T. Misa and Silvano Ludo. As the price of a proprietary share was his due, and observe honesty and good faith.
around the P5 million range, Benito Unchuan, then president of CCCI, offered to sell respondent a share for only P3.5 million.
Respondent, however, purchased the share of a certain Dr. Butalid for only P3 million. Consequently, on September 6, 1996,
CCCI issued Proprietary Ownership Certificate No. 1446 to respondent.
Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage.

During the meetings dated April 4, 1997 and May 30, 1997 of the CCCI Board of Directors, action on respondent’s application
for proprietary membership was deferred. In another Board meeting held on July 30, 1997, respondent’s application was voted
upon. As shown by the records, the Board adopted a secret balloting known as the “black ball system” of voting wherein each In GF Equity, Inc. v. Valenzona,5 we expounded Article 19 and correlated it with Article 21, thus:
member will drop a ball in the ballot box. A white ball represents conformity to the admission of an applicant, while a black ball
means disapproval. Pursuant to Section 3(c), as amended, cited above, a unanimous vote of the directors is required. When
respondent’s application for proprietary membership was voted upon during the Board meeting on July 30, 1997, the ballot
This article, known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards which
box contained one (1) black ball. Thus, for lack of unanimity, his application was disapproved.
must be observed not only in the exercise of one's rights but also in the performance of one's duties. These standards are the
following: to act with justice; to give everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a
primordial limitation on all rights; that in their exercise, the norms of human conduct set forth in Article 19 must be observed.
On August 6, 1997, Edmundo T. Misa, on behalf of respondent, wrote CCCI a letter of reconsideration. As CCCI did not answer, A right, though by itself legal because recognized or granted by law as such, may nevertheless become the source of some
respondent, on October 7, 1997, wrote another letter of reconsideration. Still, CCCI kept silent. On November 5, 1997, illegality. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in
respondent again sent CCCI a letter inquiring whether any member of the Board objected to his application. Again, CCCI did not damage to another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. But while Article
reply. Consequently, on December 23, 1998, respondent filed with the Regional Trial Court (RTC), Branch 71, Pasig City a 19 lays down a rule of conduct for the government of human relations and for the maintenance of social order, it does not
complaint for damages against petitioners provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21 would be proper.
(Emphasis in the original)

ISSUE
In rejecting respondent’s application for proprietary membership, we find that petitioners violated the rules governing human
Whether in disapproving respondent’s application for proprietary membership with CCCI, petitioners are liable to respondent relations, the basic principles to be observed for the rightful relationship between human beings and for the stability of social
for damages, and if so, whether their liability is joint and several. order. The trial court and the Court of Appeals aptly held that petitioners committed fraud and evident bad faith in
disapproving respondent’s applications. This is contrary to morals, good custom or public policy. Hence, petitioners are liable
for damages pursuant to Article 19 in relation to Article 21 of the same Code.

RULING: YES

As shown by the records, the Board adopted a secret balloting known as the "black ball system" of voting wherein each
member will drop a ball in the ballot box. A white ball represents conformity to the admission of an applicant, while a black ball
means disapproval. Pursuant to Section 3(c), as amended, cited above, a unanimous vote of the directors is required. When
respondent’s application for proprietary membership was voted upon during the Board meeting on July 30, 1997, the ballot
box contained one (1) black ball. Thus, for lack of unanimity, his application was disapproved.
G.R. No. 165443 April 16, 2009 ₱64,000.7 According to the Certificate of Sale issued by Calatagan after the sale, Clemente’s share was purchased
by a Nestor A. Virata.8 At the time of the sale, Clemente’s accrued monthly dues amounted to ₱5,200.00. 9 A notice of
foreclosure of Clemente’s share was published in the 26 May 1993 issue of the Business World. 10
CALATAGAN GOLF CLUB, INC. Petitioner,
vs.
SIXTO CLEMENTE, JR., Respondent. Clemente learned of the sale of his share only in November of 1997.11 He filed a claim with the Securities and
Exchange Commission (SEC) seeking the restoration of his shareholding in Calatagan with damages.
TINGA, J.:
On 15 November 2000, the SEC rendered a decision dismissing Clemente’s complaint. Citing Section 69 of the
Corporation Code which provides that the sale of shares at an auction sale can only be questioned within six (6)
Seeking the reversal of the Decision1 dated 1 June 2004 of the Court of Appeals in CA-G.R. SP No. 62331 and the
months from the date of sale, the SEC concluded that Clemente’s claim, filed four (4) years after the sale, had
reinstatement of the Decision dated 15 November 2000 of the Securities and Exchange Commission (SEC) in SEC
already prescribed. The SEC further held that Calatagan had complied with all the requirements for a valid sale of
Case No. 04-98-5954, petitioner Calatagan Golf Club, Inc. (Calatagan) filed this Rule 45 petition against respondent
the subject share, Clemente having failed to inform Calatagan that the address he had earlier supplied was no longer
Sixto Clemente, Jr. (Clemente).
his address. Clemente, the SEC ruled, had acted in bad faith in assuming as he claimed that his non-payment of
monthly dues would merely render his share "inactive."
The key facts are undisputed.
Clemente filed a petition for review with the Court of Appeals. On 1 June 2004, the Court of Appeals promulgated a
Clemente applied to purchase one share of stock of Calatagan, indicating in his application for membership his decision reversing the SEC. The appellate court restored Clemente’s one share with a directive to Calatagan to issue
mailing address at "Phimco Industries, Inc. – P.O. Box 240, MCC," complete residential address, office and in his a new share, and awarded to Clemente a total of ₱400,000.00 in damages, less the unpaid monthly dues of
residence telephone numbers, as well as the company (Phimco) with which he was connected, Calatagan issued to ₱5,200.00.
him Certificate of Stock No. A-01295 on 2 May 1990 after paying ₱120,000.00 for the share.2
In rejecting the SEC’s finding that the action had prescribed, the Court of Appeals cited the SEC’s own ruling in SEC
Calatagan charges monthly dues on its members to meet expenses for general operations, as well as costs for Case No. 4160, Caram v. Valley Golf Country Club, Inc., that Section 69 of the Corporation Code specifically refers
upkeep and improvement of the grounds and facilities. The provision on monthly dues is incorporated in Calatagan’s to unpaid subscriptions to capital stock, and not to any other debt of stockholders. With the insinuation that Section
Articles of Incorporation and By-Laws. It is also reproduced at the back of each certificate of stock.3As reproduced in 69 does not apply to unpaid membership dues in non-stock corporations, the appellate court employed Article 1140
the dorsal side of Certificate of Stock No. A-01295, the provision reads: of the Civil Code as the proper rule of prescription. The provision sets the prescription period of actions to recover
movables at eight (8) years.
5. The owners of shares of stock shall be subject to the payment of monthly dues in an amount as may be prescribed
in the by-laws or by the Board of Directors which shall in no case be less that [sic] ₱50.00 to meet the expenses for The Court of Appeals also pointed out that since that Calatagan’s first two demand letters had been returned to it as
the general operations of the club, and the maintenance and improvement of its premises and facilities, in addition to sender with the notation about the closure of the mailing address, it very well knew that its third and final demand
such fees as may be charged for the actual use of the facilities x x x letter also sent to the same mailing address would not be received by Clemente. It noted the by-law requirement that
within ten (10) days after the Board has ordered the sale at auction of a member’s share of stock for indebtedness,
the Corporate Secretary shall notify the owner thereof and advise the Membership Committee of such fact. Finally,
When Clemente became a member the monthly charge stood at ₱400.00. He paid ₱3,000.00 for his monthly dues the Court of Appeals ratiocinated that "a person who is in danger of the imminent loss of his property has the right to
on 21 March 1991 and another ₱5,400.00 on 9 December 1991. Then he ceased paying the dues. At that point, his be notified and be given the chance to prevent the loss."12
balance amounted to ₱400.00.4

Hence, the present appeal.


Ten (10) months later, Calatagan made the initial step to collect Clemente’s back accounts by sending a demand
letter dated 21 September 1992. It was followed by a second letter dated 22 October 1992. Both letters were sent to
Clemente’s mailing address as indicated in his membership application but were sent back to sender with the postal Calatagan maintains that the action of Clemente had prescribed pursuant to Section 69 of the Corporation Code, and
note that the address had been closed.5 that the requisite notices under both the law and the by-laws had been rendered to Clemente.

Calatagan declared Clemente delinquent for having failed to pay his monthly dues for more than sixty (60) days, Section 69 of the Code provides that an action to recover delinquent stock sold must be commenced by the filing of a
specifically ₱5,600.00 as of 31 October 1992. Calatagan also included Clemente’s name in the list of delinquent complaint within six (6) months from the date of sale. As correctly pointed out by the Court of Appeals, Section 69 is
members posted on the club’s bulletin board. On 1 December 1992, Calatagan’s board of directors adopted a part of Title VIII of the Code entitled "Stocks and Stockholders" and refers specifically to unpaid subscriptions to
resolution authorizing the foreclosure of shares of delinquent members, including Clemente’s; and the public auction capital stock, the sale of which is governed by the immediately preceding Section 68.
of these shares.
The Court of Appeals debunked both Calatagan’s and the SEC’s reliance on Section 69 by citing another SEC ruling
On 7 December 1992, Calatagan sent a third and final letter to Clemente, this time signed by its Corporate in the case of Caram v. Valley Golf. In connection with Section 69, Calatagan raises a peripheral point made in the
Secretary, Atty. Benjamin Tanedo, Jr. The letter contains a warning that unless Clemente settles his outstanding SEC’s Caram ruling. In Caram, the SEC, using as take-off Section 6 of the Corporation Code which refers to "such
dues, his share would be included among the delinquent shares to be sold at public auction on 15 January 1993. rights, privileges or restrictions as may be stated in the articles of incorporation," pointed out that the Articles of
Again, this letter was sent to Clemente’s mailing address that had already been closed.6 Incorporation of Valley Golf does not "impose any lien, liability or restriction on the Golf Share [of Caram]," but only
its (Valley Golf’s) By-Laws does. Here, Calatagan stresses that its own Articles of Incorporation does provide that the
monthly dues assessed on owners of shares of the corporation, along with all other obligations of the shareholders to
On 5 January 1993, a notice of auction sale was posted on the Club’s bulletin board, as well as on the club’s the club, "shall constitute a first lien on the shares… and in the event of delinquency such shares may be ordered
premises. The auction sale took place as scheduled on 15 January 1993, and Clemente’s share sold for sold by the Board of Directors in the manner provided in the By-Laws to satisfy said dues or other obligations of the
shareholders."13 With its illative but incomprehensible logic, Calatagan concludes that the prescriptive period under (b) The Membership Committee shall then notify all applicants on the Waiting List and all registered
Section 69 should also apply to the sale of Clemente’s share as the lien that Calatagan perceives to be a restriction stockholders of the availability of a share of stock for sale at auction at a specified date, time and place,
is stated in the articles of incorporation and not only in the by-laws. and shall post a notice to that effect in the Club bulletin board for at least ten (10) days prior to the auction
sale.
We remain unconvinced.
(c) On the date and hour fixed, the Membership Committee shall proceed with the auction by viva voce
bidding and award the sale of the share of stock to the highest bidder.
There are fundamental differences that defy equivalence or even analogy between the sale of delinquent stock under
Section 68 and the sale that occurred in this case. At the root of the sale of delinquent stock is the non-payment of
the subscription price for the share of stock itself. The stockholder or subscriber has yet to fully pay for the value of (d) The purchase price shall be paid by the winning bidder to the Club within twenty-four (24) hours after
the share or shares subscribed. In this case, Clemente had already fully paid for the share in Calatagan and no the bidding. The winning bidder or the representative in the case of a juridical entity shall become a
longer had any outstanding obligation to deprive him of full title to his share. Perhaps the analogy could have been Regular Member upon payment of the purchase price and issuance of a new stock certificate in his name
made if Clemente had not yet fully paid for his share and the non-stock corporation, pursuant to an article or by-law or in the name of the juridical entity he represents. The proceeds of the sale shall be paid by the Club to
provision designed to address that situation, decided to sell such share as a consequence. But that is not the case the selling stockholder after deducting his obligations to the Club.
here, and there is no purpose for us to apply Section 69 to the case at bar.
(e) If no bids be received or if the winning bidder fails to pay the amount of this bid within twenty-four (24)
Calatagan argues in the alternative that Clemente’s suit is barred by Article 1146 of the Civil Code which establishes hours after the bidding, the auction procedures may be repeated from time to time at the discretion of the
four (4) years as the prescriptive period for actions based upon injury to the rights of the plaintiff on the hypothesis Membership Committee until the share of stock be sold.
that the suit is purely for damages. As a second alternative still, Calatagan posits that Clemente’s action is governed
by Article 1149 of the Civil Code which sets five (5) years as the period of prescription for all other actions whose
(f) If the proceeds from the sale of the share of stock are not sufficient to pay in full the indebtedness of the
prescriptive periods are not fixed in the Civil Code or in any other law. Neither article is applicable but Article 1140 of
member, the member shall continue to be obligated to the Club for the unpaid balance. If the member
the Civil Code which provides that an action to recover movables shall prescribe in eight (8) years. Calatagan’s
whose share of stock is sold fails or refuse to surrender the stock certificate for cancellation, cancellation
action is for the recovery of a share of stock, plus damages.
shall be effected in the books of the Club based on a record of the proceedings. Such cancellation shall
render the unsurrendered stock certificate null and void and notice to this effect shall be duly published.
Calatagan’s advertence to the fact that the constitution of a lien on the member’s share by virtue of the explicit
provisions in its Articles of Incorporation and By-Laws is relevant but ultimately of no help to its cause. Calatagan’s
It is plain that Calatagan had endeavored to install a clear and comprehensive procedure to govern the payment of
Articles of Incorporation states that the "dues, together with all other obligations of members to the club, shall
monthly dues, the declaration of a member as delinquent, and the constitution of a lien on the shares and its
constitute a first lien on the shares, second only to any lien in favor of the national or local government, and in the
eventual public sale to answer for the member’s debts. Under Section 91 of the Corporation Code, membership in a
event of delinquency such shares may be ordered sold by the Board of Directors in the manner provided in the By-
non-stock corporation "shall be terminated in the manner and for the causes provided in the articles of incorporation
Laws to satisfy said dues or other obligations of the stockholders."14 In turn, there are several provisions in the By-
or the by-laws." The By-law provisions are elaborate in explaining the manner and the causes for the termination of
laws that govern the payment of dues, the lapse into delinquency of the member, and the constitution and execution
membership in Calatagan, through the execution on the lien of the share. The Court is satisfied that the By-Laws, as
on the lien. We quote these provisions:
written, affords due protection to the member by assuring that the member should be notified by the Secretary of the
looming execution sale that would terminate membership in the club. In addition, the By-Laws guarantees that after
ARTICLE XII – MEMBER’S ACCOUNT the execution sale, the proceeds of the sale would be returned to the former member after deducting the outstanding
obligations. If followed to the letter, the termination of membership under this procedure outlined in the By-Laws
would accord with substantial justice.
SEC. 31. (a) Billing Members, Posting of Delinquent Members – The Treasurer shall bill al members monthly. As
soon as possible after the end of every month, a statement showing the account of bill of a member for said month
will be prepared and sent to him. If the bill of any member remains unpaid by the 20th of the month following that in Yet, did Calatagan actually comply with the by-law provisions when it sold Clemente’s share? The appellate court’s
which the bill was incurred, the Treasurer shall notify him that if his bill is not paid in full by the end of the succeeding finding on this point warrants our approving citation, thus:
month his name will be posted as delinquent the following day at the Clubhouse bulletin board. While posted, a
member, the immediate members of his family, and his guests, may not avail of the facilities of the Club.
In accordance with this provision, Calatagan sent the third and final demand letter to Clemente on December 7,
1992. The letter states that if the amount of delinquency is not paid, the share will be included among the delinquent
(b) Members on the delinquent list for more than 60 days shall be reported to the Board and their shares or shares to be sold at public auction. This letter was signed by Atty. Benjamin Tanedo, Jr., Calatagan Golf’s Corporate
the shares of the juridical entities they represent shall thereafter be ordered sold by the Board at auction to Secretary. It was again sent to Clemente’s mailing address – Phimco Industries Inc., P.O. Box 240, MCC
satisfy the claims of the Club as provided for in Section 32 hereon. A member may pay his overdue Makati. As expected, it was returned because the post office box had been closed.
account at any time before the auction sale.
Under the By-Laws, the Corporate Secretary is tasked to "give or cause to be given, all notices required by law or by
Sec. 32. Lien on Shares; Sale of Share at Auction- The club shall have a first lien on every share of stock to secure these By-Laws. .. and … keep a record of the addresses of all stockholders. As quoted above, Sec. 32 (a) of the By-
debts of the members to the Club. This lien shall be annotated on the certificates of stock and may be enforced by Laws further provides that "within ten (10) days after the Board has ordered the sale at auction of a member’s share
the Club in the following manner: of stock for indebtedness under Section 31 (b) hereof, the Secretary shall notify the owner thereof and shall advise
the Membership Committee of such fact.," The records do not disclose what report the Corporate Secretary
transmitted to the Membership Committee to comply with Section 32(a). Obviously, the reason for this mandatory
(a) Within ten (10) days after the Board has ordered the sale at auction of a member’s share of stock for
requirement is to give the Membership Committee the opportunity to find out, before the share is sold, if proper
indebtedness under Section 31(b) hereof, the Secretary shall notify the owner thereof, and shall advise the
notice has been made to the shareholder member.
Membership Committee of such fact.
We presume that the Corporate Secretary, as a lawyer is knowledgeable on the law and on the standards of good Appeals instead directed that Calatagan to issue to Clemente a new certificate of stock. That sufficiently redresses
faith and fairness that the law requires. As custodian of corporate records, he should also have known that the first the actual damages sustained by Clemente. After all, the certificate of stock is simply the evidence of the share.
two letters sent to Clemente were returned because the P.O. Box had been closed. Thus, we are surprised – given
his knowledge of the law and of corporate records – that he would send the third and final letter – Clemente’s last
The Court of Appeals also awarded Clemente ₱200,000.00 as moral damages, ₱100,000.00 as exemplary
chance before his share is sold and his membership lost – to the same P.O. Box that had been closed.
damages, and ₱100,000.00 as attorney’s fees. We agree that the award of such damages is warranted.

Calatagan argues that it "exercised due diligence before the foreclosure sale" and "sent several notices to
The Court of Appeals cited Calatagan for violation of Article 32 of the Civil Code, which allows recovery of damages
Clemente’s specified mailing address." We do not agree; we cannot label as due diligence Calatagan’s act of
from any private individual "who directly or indirectly obstructs, defeats, violates or in any manner impedes or
sending the December 7, 1992 letter to Clemente’s mailing address knowing fully well that the P.O. Box had been
impairs" the right "against deprivation of property without due process of laws." The plain letter of the provision
closed. Due diligence or good faith imposes upon the Corporate Secretary – the chief repository of all corporate
squarely entitles Clemente to damages from Calatagan. Even without Article 32 itself, Calatagan will still be bound to
records – the obligation to check Clemente’s other address which, under the By-Laws, have to be kept on file and
pay moral and exemplary damages to Clemente. The latter was able to duly prove that he had sustained mental
are in fact on file. One obvious purpose of giving the Corporate Secretary the duty to keep the addresses of
anguish, serious anxiety and wounded feelings by reason of Calatagan’s acts, thereby entitling him to moral
members on file is specifically for matters of this kind, when the member cannot be reached through his or her
damages under Article 2217 of the Civil Code. Moreover, it is evident that Calatagan’s bad faith as exhibited in the
mailing address. Significantly, the Corporate Secretary does not have to do the actual verification of other
addressees on record; a mere clerk can do the very simple task of checking the files as in fact clerks actually
undertake these tasks. In fact, one telephone call to Clemente’s phone numbers on file would have alerted him of his course of its corporate actions warrants correction for the public good, thereby justifying exemplary damages under
impending loss. Article 2229 of the Civil Code.

Ultimately, the petition must fail because Calatagan had failed to duly observe both the spirit and letter of its own by- WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. Costs against petitioner.
laws. The by-law provisions was clearly conceived to afford due notice to the delinquent member of the impending
sale, and not just to provide an intricate façade that would facilitate Calatagan’s sale of the share. But then, the bad
faith on Calatagan’s part is palpable. As found by the Court of Appeals, Calatagan very well knew that Clemente’s SO ORDERED.
postal box to which it sent its previous letters had already been closed, yet it persisted in sending that final letter to
the same postal box. What for? Just for the exercise, it appears, as it had known very well that the letter would never
actually reach Clemente.1avvphi1

It is noteworthy that Clemente in his membership application had provided his residential address along with his
residence and office telephone numbers. Nothing in Section 32 of Calatagan’s By-Laws requires that the final notice
prior to the sale be made solely through the member’s mailing address. Clemente cites our aphorism-like
pronouncement in Rizal Commercial Banking Corporation v. Court of Appeals 15 that "[a] simple telephone call and an
ounce of good faith x x x could have prevented this present controversy." That memorable observation is quite apt in
this case.

Calatagan’s bad faith and failure to observe its own By-Laws had resulted not merely in the loss of Clemente’s
privilege to play golf at its golf course and avail of its amenities, but also in significant pecuniary damage to him. For
that loss, the only blame that could be thrown Clemente’s way was his failure to notify Calatagan of the closure of the
P.O. Box. That lapse, if we uphold Calatagan would cost Clemente a lot. But, in the first place, does he deserve
answerability for failing to notify the club of the closure of the postal box? Indeed, knowing as he did that Calatagan
was in possession of his home address as well as residence and office telephone numbers, he had every reason to
assume that the club would not be at a loss should it need to contact him. In addition, according to Clemente, he was
not even aware of the closure of the postal box, the maintenance of which was not his responsibility but his employer
Phimco’s.

The utter bad faith exhibited by Calatagan brings into operation Articles 19, 20 and 21 of the Civil Code,16 under the
Chapter on Human Relations. These provisions, which the Court of Appeals did apply, enunciate a general obligation
under law for every person to act fairly and in good faith towards one another. A non-stock corporation like
Calatagan is not exempt from that obligation in its treatment of its members. The obligation of a corporation to treat
every person honestly and in good faith extends even to its shareholders or members, even if the latter find
themselves contractually bound to perform certain obligations to the corporation. A certificate of stock cannot be a
charter of dehumanization.

We turn to the matter of damages. The award of actual damages is of course warranted since Clemente has
sustained pecuniary injury by reason of Calatagan’s wrongful violation of its own By-Laws. It would not be feasible to
deliver Clemente’s original Certificate of Stock because it had already been cancelled and a new one issued in its
place in the name of the purchases at the auction who was not impleaded in this case. However, the Court of
Calatagan Golf Club v Clemente applicable if Clemente still has not fully paid for the share and the non-stock corporation
decided to sell such share as a consequence which is not the case at bar. Sec. 91 of the Corp.
Facts: Clemente applied to purchase one share stock of Calatagan, indicating in his Code provides that termination of membership in non-stock corporations are governed by
application his mailing address, complete residential address, office and residence its articles of incorporation or by-laws. In accordance with it's by-laws, Calatagan sent the
telephone numbers as well as the company with which he was connected. Calatagan issued third and final demand letter with the warning but it was sent ot the mailing address which
to him a Certificate of Stock. Calatagan charges monthly dues to meet expenses for general Calatagan knew was already closed. The Corporate Secretary under its by-laws is required by
operations, costs for upkeep and improvement of grounds and facilities as provided for by law to keep a record of the addresses of all stockholder and that the Secretary needs to
its Articles of Incorporation. After paying the monthly dues initially, Clemente failed to pay notify the shareholder of the order to sell at auction of said shareholder's stock. The
and Calatagan demanded payment for the monthly dues through letters which were sent to Corporate Secretary being a lawyer is knowledgeable on the law and of corporate records
his mailing address but were sent back to sender with the postal note that the address has and should have known that the third demand letter would still have been sent back to
been closed , twice. Calatagan declared Clemente delinquent for failing to pay his monthly them. Due diligence was not exercised by the Corporate Secretary, there was even no
dues and included him in its list of delinquent members. Calatagan's board of directors inquiry as to the mailing address or verification of the other addresses on record provided
adopted a resolution authorizing the foreclosure of shares of delinquent members and the by Clemente and knowing that the PO box was already closed it still persisted in sending the
public acution of these shares. Calatagan sent a third and final letter to the same address final demand and warning letter to the same PO box which constituted bad faith.
containing a warning that unless Clemente settles his outstanding dues, his share will be Calatagan's bad faith and failure to observe its own by-laws resulted not merely in the loss
included among the shares to be sold at the public auction. Clemente's share was sold with of Clemente's privilege to enjoy Calatagan's facilities but also in significant pecuniary
the notice of foreclosure published in the issue of Business World. Clemente learned of the damage to him. Knowing as Clemente did that Calatagan was in possession of his home
sale after 4 years and filed a claim with SEC seeking to restore his shareholding in Calatagan address as well as residence and office telephone numbers, he had every reason to assume
with damages. SEC dismissed the complaint, citing Sec. 69 of the Corporation Code which that the club would not be at a loss should it need to contact him. A non-stock corporation
provides that the sale of share at an auction sale can only be questioned within 6 months like Calatagan is not exempt from the obligation laid down by Articles 19-21 which obliges
and Clemente's claim was filed long after the period provided. SEC further held hat under law every person to act fairly and in good faith towards one another. Clemente has
Calatagan complied with all the requirements for a valid sale of the share, Clemente failing sustained pecuniary injry by reason of Calatagan's wrongful violation of its own by-laws and
to inform Calatagan that the address he supplied was no longer his address and that CA's award of moral and exemplary damages as well as attorney's fees are warranted.
Clemente acted in bad faith assuming as he claimed that his non-payment of dues would Calatagan was cited in violation of Art. 32 of the CC by CA which allows recovery of damages
merely render his share inactive. CA reversed SEC's ruling, restoring the share and awarded from any private individual who directly or indirectly obstructs, defeats, violates or in any
damages minnus the unpaid monthly dues Clemente owed. CA found that SEC erred in citing manner impeded or impairs the right against deprivation of property without due process of
a case it decided, Caram v Valley Golf Country Club that Sec. 69 specifically refers to unpaid laws. CA's decision is affirmed with costs against Calatagan.
subscriptions to capital stock and not to any other debt of stockholders. CA employed Art.
1140 of the Civil Code as the proper rule of prescription which is at 8 years since Sec. 69
does not apply to unpaid membership dues in non-stock corporations. Also Calatagan knew
that the previous 2 letters it sent were sent back to them and so the demand letter would
not be received by Clemente.

Issue: W/N Calatagan is liable for damages under Art. 19 of the Civil Code.

Ruling: Sec. 69 of the Corporation Code refers specifically to unpaid subscriptions to capital
stock. The sale of delinquent stock is the non-payment of the subscription price for the
share of stock itself and the stockholder has yet to fully pay for the value of the shares
subscribed. Clemente had already fully paid for the share and Calatagan no longer had any
outstanding obligation to deprive him of full title to his share. Section 69 will only be

Você também pode gostar