Case # 1 Art 19 – Principle of Abuse Rights

Republic of the Philippines

SUPREME COURT

SECOND DIVISION

G.R. No. 157314 July 29, 2005

FAR EAST BANK AND TRUST COMPANY, NOW BANK OF THE PHILIPPINE
ISLANDS, Petitioners,
vs.
THEMISTOCLES PACILAN, JR., Respondent.

DECISION

CALLEJO, SR., J.:

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-G.R. CV No. 36627 which ordered it, together with its branch
accountant, Roger Villadelgado, to pay respondent Themistocles Pacilan, Jr.2 the total sum of
₱100,000.00 as moral and exemplary damages. The assailed decision affirmed with modification
that of the Regional Trial Court (RTC) of Negros Occidental, Bacolod City, Branch 54, in Civil Case
No. 4908. Likewise sought to be reversed and set aside is the Resolution dated January 17, 2003 of
the appellate court, denying petitioner bank’s motion for reconsideration.

The case stemmed from the following undisputed facts:

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 issued Check No. 2434886 in the amount of
₱680.00 and the same was presented for payment to petitioner bank on April 4, 1988.

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 accepted by petitioner bank; hence, increasing the balance of the
respondent’s deposit to ₱1,051.43.

Subsequently, when the respondent verified with petitioner bank about the dishonor of Check No.
2434866, he discovered that his current account was closed on the ground that it was "improperly
handled." The records of petitioner bank disclosed that between the period of March 30,
1988 and April 5, 1988, the respondent issued four checks, to wit: Check No. 2480416 for
₱6,000.00; Check No. 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 respondent’s deposit in his
account. For this reason, petitioner bank, through its branch accountant, Villadelgado, closed the
respondent’s current account effective the evening of April 4, 1988 as it then had an overdraft of
₱428.57. As a consequence of the overdraft, Check No. 2434886 was dishonored.
On April 18, 1988, the respondent wrote to petitioner bank complaining that the closure of his
account was 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 account by petitioner bank was
unjustified because on the first banking hour of April 5, 1988, he already deposited an amount
sufficient to fund his checks. The respondent pointed out that Check No. 2434886, in particular, was
delivered to petitioner bank at the close of banking hours on April 4, 1988 and, following normal
banking procedure, it
(petitioner bank) had until the last clearing hour of the following day, or on April 5, 1988, to honor the
check or return it, if not funded. In disregard of this banking procedure and practice, however,
petitioner bank hastily closed the respondent’s current account and dishonored his Check No.
2434886.

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 of Batas Pambansa Blg. 22.

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 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 caused him "social humiliation,
wounded feelings, insurmountable worries and sleepless nights" entitling him to an award of
damages.

In their answer, petitioner bank and Villadelgado maintained that the respondent’s current account
was subject to petitioner bank’s Rules and Regulations Governing the Establishment and Operation
of Regular Demand
Deposits which provide that "the Bank reserves the right to close an account if the depositor
frequently draws checks against insufficient funds and/or uncollected deposits" and that "the Bank
reserves the right at any time to return checks of the depositor which are drawn against insufficient
funds or for any reason."3

They showed that the respondent had improperly and irregularly handled his current account. For
example, in 1986, 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.

When the respondent made the deposit on April 5, 1988, it was obviously to cover for issuances
made the previous day against an insufficiently funded account. When his Check No. 2434886 was
presented for payment on April 4, 1988, he had already incurred an overdraft; hence, petitioner bank
rightfully dishonored the same for insufficiency of funds.

After due proceedings, the court a quo rendered judgment in favor of the respondent as it ordered
the petitioner bank 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 up as a returned item due to
‘insufficiency of funds’ on the date of receipt from the clearing office even if said check is honored
and/or covered by sufficient deposit the following banking day." The same rules and regulations also
provide that "a check returned for insufficiency of funds for any reason of similar import may be
subsequently recleared for one more time only, subject to the same charges."

According to the court a quo, following these rules and regulations, the respondent, as depositor,
had the right to put up sufficient funds for a check that was taken as a returned item for insufficient
funds the day following the receipt of said check from the clearing office. In fact, the said check could
still be recleared for one more time. In previous 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
funds therefor the following day.

As a result of the closure of his current account, several of the respondent’s checks were
subsequently dishonored and because of this, the respondent was humiliated, embarrassed and lost
his credit standing in the business community. The court a quo further ratiocinated that even
granting arguendo that petitioner bank had the right to close the respondent’s account, the manner
which attended the closure constituted an abuse of the
said right. Citing Article 19 of the Civil Code of the Philippines which states that "[e]very person must,
in the exercise of his rights and in the performance of his duties, act with justice, give everyone his
due, and observe honesty and good faith" and Article 20 thereof which states that "[e]very person
who, contrary to law, wilfully or negligently causes 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, PREMISES CONSIDERED, judgment is hereby rendered:

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;

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

3. Dismissing [the] defendants’ counterclaim for lack of merit.

SO ORDERED.4

On appeal, the CA rendered the Decision dated August 30, 2002, affirming with modification the
decision of the court a quo.

The appellate court substantially affirmed the factual findings of the court a quo as it held that
petitioner bank unjustifiably closed the respondent’s account notwithstanding that its own rules and
regulations

allow that a check returned for insufficiency of funds or any reason of similar import, may be
subsequently recleared for one more time, subject to standard charges. Like the court a quo, the
appellate court observed that in several instances in previous years, petitioner bank would inform the
respondent when he incurred an overdraft and allowed him to make a timely deposit to fund the
checks that were initially dishonored for insufficiency of funds. However, on April 4, 1988, petitioner
bank immediately closed the respondent’s account without even notifying him that he had 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.

Echoing the reasoning of the court a quo, the CA declared that even as it may be conceded that
petitioner bank had reserved the right to close an account for repeated overdrafts by the respondent,
the exercise of that right must 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 which petitioner bank
closed the account of the respondent runs afoul of Article 19 of the Civil Code which enjoins every
person, in the exercise of his rights, "to give every one his due, and observe honesty and good faith."

The CA concluded that petitioner bank’s precipitate and imprudent closure of the respondent’s
account had caused him, a respected officer of several civic and banking associations, serious
anxiety and humiliation. It had, likewise, tainted his credit standing. Consequently, the award of
damages is warranted. The CA, however, reduced the amount of damages awarded by the court a
quo as it found the same to be excessive:

We, however, find excessive the amount of damages awarded by the RTC. In our view the reduced
amount of ₱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 to obviate the moral suffering he has undergone. The
award is aimed at the restoration, within limits possible, of the status quo ante, and should be
proportionate to the suffering inflicted.5

The dispositive portion of the assailed CA 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.

SO ORDERED.6

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.

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

regular demand deposit which reserves to the bank "the right to close an account if the depositor
frequently draws checks against insufficient funds and/or uncollected deposits." The same rules and
regulations also provide that "the 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."

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 bank was constrained to close the respondent’s account for improper and
irregular handling and returned his Check No. 2434886 which was presented to the bank for
payment on April 4, 1988.

Petitioner bank further posits that there is no law or rule which gives the respondent a legal right to
make good his check or to deposit the corresponding amount to cover said check within 24 hours
after the same is dishonored or returned by the bank for having been drawn against insufficient
funds. It vigorously denies having violated Article 19 of the Civil Code as it insists that it acted in
good faith and in accordance with the pertinent banking rules and regulations.

The petition is impressed with merit.

A perusal of the respective decisions of the court a quo and the appellate court show that the award
of damages in the respondent’s favor was anchored mainly on Article 19 of the Civil Code which,
quoted anew below, reads:

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

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 mind which is manifested by the
acts of the individual concerned. It consists of the intention to abstain from taking an unconscionable
and unscrupulous advantage of another.10 Bad faith does not simply connote bad judgment or simple
negligence, dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach 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 faith or bad motive.12

Undoubtedly, petitioner bank has the right to close the account of the respondent based on the
following provisions of its Rules and Regulations Governing the Establishment and Operation of
Regular Demand Deposits:

10) The Bank reserves the right to close an account if the depositor frequently draws checks against
insufficient funds and/or uncollected deposits.

12) …

However, it is clearly understood that the 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 other reason.

The facts, as found by the court a quo and the appellate court, do not establish that, in the exercise
of this right, petitioner bank committed an abuse thereof. Specifically, the second and third elements
for abuse of rights are not 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 balance of his current account
deposit was only ₱6,981.43. Thus, he incurred an overdraft of ₱428.57 which resulted 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 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 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 duty should be the
proximate cause of the injury.17
Whatever damages the respondent may have suffered as a consequence, e.g., dishonor of his other
insufficiently funded checks, would have to be borne by him alone. It was the respondent’s repeated
improper

and irregular handling of his account which constrained petitioner bank to close the same in
accordance with the rules and regulations governing its depositors’ current accounts. The
respondent’s case is clearly one of damnum absque injuria.

WHEREFORE, the petition is GRANTED. The Decision dated August 30, 2002 and Resolution
dated January 17, 2003 of the Court of Appeals in CA-G.R. CV No. 36627 are REVERSED AND
SET ASIDE.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice

WE CONCUR:

REYNATO S. PUNO

Associate Justice

Chairman

MA. ALICIA AUSTRIA-MARTINEZ DANTE O. TINGA

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Associate Justice
Chairman, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairman’s Attestation, it is
hereby certified that the conclusions in the above decision were reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.

HILARIO G. DAVIDE, JR.

Chief Justice

Footnotes

1Penned by Associate Justice Oswaldo D. Agcaoili, with Associate Justices Eliezer R. Delos
Santos and Danilo B. Pine, concurring.

2In the Resolution dated July 1, 2004 of the Court of Appeals, the Court was furnished a
copy of the Notice of Death of respondent Pacilan, Jr. In compliance with the Court’s
Resolution dated September 27, 2004, his counsel averred that the respondent was survived
by his children, namely, Jesus Rey, Jesus Rhoel, Jesus Rene and Jesus Ryan, all surnamed
Pacilan.

3 Exhibit "1," Records, p. 195. (Vol. I)

4 Records, p. 344. (Vol. II)

5 Rollo, p. 21.

6 Ibid.

7Development Bank of the Philippines v. Court of Appeals, G.R. No. 137916, 8 December
2004, 445 SCRA 500.

8ABS-CBN Broadcasting Corporation v. Court of Appeals, G.R. No. 128690, 21 January

1999, 301 SCRA 572.

9 Chua v. Court of Appeals, G.R. No. 112660, 14 March 1995, 242 SCRA 341.

10 Saber v. Court of Appeals, G.R. No. 132981, 31 August 2004, 437 SCRA 259.

11 Id. at 278-279.

12 Id. at 279.

13 Exhibits "3" up to "3-X," Records, pp. 197-221. (Vol. I)

14 Exhibits "4" up to "4-U," Id. at 222-243. (Vol. I)

15 Exhibits "5" up to "5-E," Id. at 244-249.

16 Exhibits "6" up to "6-C," Id. at 250-253.

17BPI Express Card Corporation v. Court of Appeals, G.R. No. 120639, 25 September 1998,
296 SCRA 260.
Case # 2 Art 19 – Principle of Abuse of rights

SECOND DIVISION

G.R. No. 146322 December 6, 2006

ERNESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC., petitioners,

vs.
ERNESTO QUIAMCO, respondent.

DECISION

CORONA, J.:

Honeste vivere, non alterum laedere et jus suum cuique tribuere. To live virtuously, not to injure
others and to give 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 decision1 and October 18, 2000 resolution of the Court of Appeals (CA) in CA-G.R. CV No.
47571.

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 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 visible and
accessible to the public.

It turned out that, in October 1981, the motorcycle had been sold on installment basis to Gabutero by
petitioner 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

When Gabutero could no longer pay the installments, Davalan assumed the obligation and
continued the payments. In September 1982, however, Davalan stopped paying the remaining
installments and told petitioner corporation’s collector, Wilfredo Veraño, that the motorcycle had
allegedly been "taken by respondent’s men."

Nine years later, on January 26, 1991, petitioner Uypitching, accompanied by policemen,5 went to
Avesco-AVNE Enterprises to recover the motorcycle. The leader of the police team, P/Lt. Arturo
Vendiola, talked to the clerk in charge and asked for respondent. While P/Lt. Vendiola and the clerk
were talking, petitioner Uypitching paced back and forth inside the establishment uttering "Quiamco
is a thief of a motorcycle."

On learning that respondent was not in Avesco-AVNE Enterprises, the policemen left to look for
respondent in his residence while petitioner Uypitching stayed in the establishment to take
photographs of the motorcycle. Unable to find respondent, the policemen went back to Avesco-
AVNE Enterprises and, on petitioner Uypitching’s instruction and over the clerk’s objection, took the
motorcycle.

On February 18, 1991, petitioner Uypitching filed a criminal complaint for qualified theft and/or
violation of the Anti-Fencing Law6 against respondent in the Office of the City Prosecutor of
Dumaguete City.7 Respondent moved for dismissal because the complaint did not charge an offense
as he had neither stolen nor bought the motorcycle. The Office of the City Prosecutor dismissed the
complaint8 and denied petitioner Uypitching’s subsequent motion for reconsideration.

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. These acts humiliated and embarrassed the
respondent and injured his reputation and integrity.

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 complaint for qualified theft and/or violation of the Anti-Fencing
Law. Petitioners’ acts were found to be contrary to 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.

Petitioners appealed the RTC decision but the CA affirmed the trial court’s decision with
modification, reducing the award of moral and exemplary damages to P300,000 and P100,000,
respectively.13 Petitioners sought reconsideration but it was denied. Thus, this petition.

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 warranted the award of moral damages, exemplary damages,
attorney’s fees and costs in favor of respondent.

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.

Correctness of the Findings of the RTC and CA

As they never questioned the findings of the RTC and CA that malice and ill will attended not only
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 respondent.

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 "precipitate act."15 Petitioners were bent on portraying
respondent as a thief. In this connection, we quote with approval the following findings of the RTC,
as adopted by the CA:

x x x There was malice or ill-will [in filing the complaint before the City Prosecutor’s Office]
because Atty. Ernesto Ramas Uypitching knew or ought to have known as he is a lawyer,
that there was no probable cause at all for filing a criminal complaint for qualified theft and
fencing activity against [respondent]. Atty. Uypitching had no personal knowledge that
[respondent] stole the motorcycle in question. He was merely 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 Atty. Ernesto Ramas Uypitching of the refusal of Juan Dabalan to pay for the
remaining installment was [‘]taken[’], not [‘]unlawfully taken[’] or ‘stolen.’ Yet, despite the
double hearsay, Atty. Ernesto Ramas Uypitching not only executed the [complaint-affidavit]
wherein he named [respondent] as ‘the suspect’ of 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 malice.
What is deplorable in all these is that Juan Dabalan, the owner of the motorcycle, did not
accuse [respondent] or the latter’s men of stealing the motorcycle[,] much less bother[ed] to
file a case for qualified theft before the authorities. That Atty. Uypitching’s act in charging
[respondent] with qualified theft and fencing activity is tainted with malice is also shown by
his answer to the question of Cupid 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

Moreover, the existence of malice, ill will or bad faith is a factual matter. As a rule, findings of fact of
the trial court, 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.

Petitioners Abused Their Right of Recovery as Mortgagee(s)

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.

Puno, J., Chairperson, Sandoval-Gutierrez, Azcuna and Garcia, JJ., concur.

Footnotes

1 Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Presiding Justice
Salome A. Montoya (retired) and Associate Justice Romeo J. Callejo, Sr. (now a member of
the Supreme Court) of the First Division of the Court of Appeals; rollo, pp. 26-36.

2 "Juan Dabalan" in some parts of the records.

3The case was filed in the Regional Trial Court (RTC) of Negros Oriental, Dumaguete City,
Branch 31 where it was docketed as Criminal Case No. 5630. On March 3, 1986, the trial
court (through Judge Rolando R. Villaraza) convicted Davalan and Generoso and acquitted
Gabutero.

4 The certificate of registration issued to Gabutero bore the notation "Mortgaged."

5These policemen were P/Lt. Arturo Vendiola, Pfc. Damiola, Capt. Tayco, Pat. Romeo Tan
and Pat. Catigtig.

6 Presidential Decree No. 1612.

7 Docketed as I.S. No. 91-74.

8 Resolution dated June 14, 1991; rollo, pp. 147-151.

9 Presided by Judge Temistocles B. Diez. The case was docketed as Civil Case No. 10492.

10 Penned by Judge Temistocles B. Diez.

11Art. 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.

12Art. 20. Every person who, contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.

13The modification was based on the principle that moral and exemplary damages are not
imposed to enrich a party.

14 In fact, malice is presumed from a defamatory imputation.

15 Petition, p. 5; rollo, p.17.

16 One of respondent’s witnesses.

17 CA Decision, supra note 1.

18Filinvest Credit Corporation v. Court of Appeals, G.R. No. 115902, 27 September 1995,
248 SCRA 549.

Hongkong Shanghai Banking Corporation, Ltd. v. Catalan, G.R. Nos. 159590-91, 18

19

October 2004, 440 SCRA 498.

20 Id.

21 Id.

22 Civil Code, Art. 20.

Case # 3 Art 19 – Principle of abuse of rights

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 160273 January 18, 2008

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,
vs.
RICARDO F. ELIZAGAQUE, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant Petition for Review on Certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, 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.

The facts are:

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.

Sometime in 1987, San Miguel Corporation, a special company proprietary member of CCCI,
designated respondent Ricardo F. Elizagaque, its Senior Vice President and Operations Manager for
the Visayas and Mindanao, as a special non-proprietary member. The designation was thereafter
approved by the CCCI’s Board of Directors.

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

As the price of a proprietary share was 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.

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. 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.

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 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.

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.

After trial, the RTC rendered its Decision dated February 14, 2001 in favor of respondent, thus:

WHEREFORE, judgment is hereby rendered in favor of plaintiff:

1. Ordering defendants to pay, jointly and severally, plaintiff the amount of P2,340,000.00 as
actual or compensatory damages.

2. Ordering defendants to pay, jointly and severally, plaintiff the amount of P5,000,000.00 as
moral damages.

3. Ordering defendants to pay, jointly and severally, plaintiff the amount of P1,000,000.00 as
exemplary damages.

4. Ordering defendants to pay, jointly and severally, plaintiff the amount of P1,000,000.00 as
and by way of attorney’s fees and P80,000.00 as litigation expenses.

5. Costs of suit.

Counterclaims are hereby DISMISSED for lack of merit.

SO ORDERED.2

On appeal by petitioners, the Court of Appeals, in its Decision dated January 31, 2003, affirmed the
trial court’s Decision with modification, thus:

WHEREFORE, premises considered, the assailed Decision dated February 14, 2001 of the
Regional Trial Court, Branch 71, Pasig City in Civil Case No. 67190 is hereby AFFIRMED
with MODIFICATION as follows:

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

of P2,000,000.00 as moral damages;

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

of P1,000,000.00 as exemplary damages;

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

4. Costs of the suit.

The counterclaims are DISMISSED for lack of merit.

SO ORDERED.3
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.

Hence, the present petition.

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.

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 defense of damnum absque injuria.

For his part, respondent maintains that the petition lacks merit, hence, should be denied.

CCCI’s Articles of Incorporation provide in part:

SEVENTH: That this is a non-stock corporation and membership therein as well as the right
of participation in its assets shall be limited to qualified persons who are duly accredited
owners of Proprietary Ownership Certificates issued by the corporation in accordance with its
By-Laws.

Corollary, Section 3, Article 1 of CCCI’s Amended By-Laws provides:

SECTION 3. HOW MEMBERS ARE ELECTED – The procedure for the admission of new
members of the Club shall be as follows:

(a) Any proprietary member, seconded by another voting proprietary member, shall submit to
the Secretary a written proposal for the admission of a candidate to the "Eligible-for-
Membership List";

(b) Such proposal shall be posted by the Secretary for a period of thirty (30) days on the
Club bulletin board during which time any member may interpose objections to the admission
of the applicant by communicating the same to the Board of Directors;

(c) After the expiration of the aforesaid thirty (30) days, if no objections have been filed or if
there are, the Board considers the objections unmeritorious, the candidate shall be qualified
for inclusion in the "Eligible-for-Membership List";

(d) Once included in the "Eligible-for-Membership List" and after the candidate shall have
acquired in his name a valid POC duly recorded in the books of the corporation as his own,
he shall become a Proprietary Member, upon a non-refundable admission fee of P1,000.00,
provided that admission fees will only be collected once from any person.

On March 1, 1978, Section 3(c) was amended to read as follows:

(c) After the expiration of the aforesaid thirty (30) days, the Board may, by unanimous vote
of all directors present at a regular or special meeting, approve the inclusion of the
candidate in the "Eligible-for-Membership List".
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.

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:

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

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.

In GF Equity, Inc. v. Valenzona,5 we expounded Article 19 and correlated it with Article 21, thus:

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 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. A right, though by 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 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 its violation. Generally, an
action for damages under either Article 20 or Article 21 would be proper. (Emphasis in the
original)

In rejecting respondent’s application for proprietary membership, we find that petitioners violated the
rules governing 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 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.

It bears stressing that the amendment to Section 3(c) of CCCI’s Amended By-Laws requiring the
unanimous vote of the directors present at a special or regular meeting was not printed on the
application form respondent filled and submitted to CCCI. What was printed thereon was the original
provision of Section 3(c) which was silent on the required number of votes needed for admission of
an applicant as a proprietary member.

Petitioners explained that the amendment was not printed on the application form due to economic
reasons. We find this excuse flimsy and unconvincing. Such amendment, aside from being
extremely significant, was introduced way back in 1978 or almost twenty (20) years before
respondent filed his application. We cannot fathom why such a 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.

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 reconsideration and an inquiry whether there was an objection to his
application, petitioners apparently ignored him. Certainly, respondent did not deserve this kind of
treatment. Having been designated by San Miguel Corporation as 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.

The exercise of a right, though legal by itself, must nonetheless be in accordance with the proper
norm. When the right is exercised arbitrarily, unjustly or excessively and results in damage to
another, a legal wrong is committed for which the wrongdoer must be held responsible.6 It bears
reiterating that the trial court and the Court of Appeals held that petitioners’ disapproval of
respondent’s application is characterized by bad faith.

As to petitioners’ reliance on the principle of damnum absque injuria or damage without injury,
suffice it to state that the same is misplaced. In Amonoy v. Gutierrez,7 we held that this principle
does not apply when there is an abuse of a person’s right, as in this case.

As to the appellate court’s award to respondent of moral damages, we find the same in order. Under
Article 2219 of the New Civil Code, moral damages may be recovered, among others, in acts and
actions referred to in Article 21. 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 hard-and-fast rule in
determining what would be a fair and reasonable amount of moral damages, the same should 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.

Puno, C.J., Chairperson, Corona, Azcuna, Leonardo-de Castro, JJ., concur.

Footnotes

* Also referred to as "Ramonito" in the records of the case.

1Penned by Associate Justice Remedios A. Salazar-Fernando and concurred in by then

Associate Justice Ruben T. Reyes (now a member of this Court) and Associate Justice
Edgardo F. Sundiam.

2 Annex "C" of the petition, rollo, pp. 65-91.

3 Annex "A" of the petition, id., pp. 40-62.

4 Annex "B" of the petition, id., pp. 63-64.

5 G.R. No. 156841, June 30, 2005, 462 SCRA 466.

6Solidbank Corporation v. Mindanao Ferroalloy Corporation, G.R. No. 153535, July 28,
2005, 464 SCRA 409, 428, citing Metropolitan Waterworks and Sewerage System v. Act
Theater, Inc., 432 SCRA 418, 422 (2004).

7 G.R. No. 140420, February 15, 2001, 351 SCRA 731.

8 Lamis v. Ong, G.R. No. 148923, August 11, 2005, 466 SCRA 510, 519.

9Country Bankers Insurance Corporation v. Lianga Bay and Community Multi-Purpose

Cooperative, Inc.,G.R. No. 136914, January 25, 2002, 374 SCRA 653.
Case # 4 Art 19 – Principle of abuse rights

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 165443 April 16, 2009

CALATAGAN GOLF CLUB, INC. Petitioner,

vs.
SIXTO CLEMENTE, JR., Respondent.

DECISION

TINGA, J.:

Seeking the reversal of the Decision1 dated 1 June 2004 of the Court of Appeals in CA-G.R. SP No.
62331 and the reinstatement of the Decision dated 15 November 2000 of the Securities and
Exchange Commission (SEC) in SEC Case No. 04-98-5954, petitioner Calatagan Golf Club, Inc.
(Calatagan) filed this Rule 45 petition against respondent Sixto Clemente, Jr. (Clemente).

The key facts are undisputed.

Clemente applied to purchase one share of stock of Calatagan, indicating in his application for
membership his mailing address at "Phimco Industries, Inc. – P.O. Box 240, MCC," complete
residential address, office and residence telephone numbers, as well as the company (Phimco) with
which he was connected, Calatagan issued to him Certificate of Stock No. A-01295 on 2 May 1990
after paying ₱120,000.00 for the share.2

Calatagan charges monthly dues on its members to meet expenses for general operations, as well
as costs for upkeep and improvement of the grounds and facilities. The provision on monthly dues is
incorporated in Calatagan’s Articles of Incorporation and By-Laws. It is also reproduced at the back
of each certificate of stock.3As reproduced in the dorsal side of Certificate of Stock No. A-01295, the
provision reads:

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 general operations of the club, and the maintenance and
improvement of its premises and facilities, in addition to such fees as may be charged for the actual
use of the facilities x x x

When Clemente became a member the monthly charge stood at ₱400.00. He paid ₱3,000.00 for his
monthly dues on 21 March 1991 and another ₱5,400.00 on 9 December 1991. Then he ceased
paying the dues. At that point, his balance amounted to ₱400.00.4

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 note that the address had been closed.5
Calatagan declared Clemente delinquent for having failed to pay his monthly dues for more than
sixty (60) days, specifically ₱5,600.00 as of 31 October 1992. Calatagan also included Clemente’s
name in the list of delinquent members posted on the club’s bulletin board. On 1 December 1992,
Calatagan’s board of directors adopted a resolution authorizing the foreclosure of shares of
delinquent members, including Clemente’s; and the public auction of these shares.

On 7 December 1992, Calatagan sent a third and final letter to Clemente, this time signed by its
Corporate Secretary, Atty. Benjamin Tanedo, Jr. The letter contains a warning that unless Clemente
settles his outstanding dues, his share would be included among the delinquent shares to be sold at
public auction on 15 January 1993. Again, this letter was sent to Clemente’s mailing address that
had already been closed.6

On 5 January 1993, a notice of auction sale was posted on the Club’s bulletin board, as well as on
the club’s premises. The auction sale took place as scheduled on 15 January 1993, and Clemente’s
share sold for ₱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

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.

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) months from the date of sale, the SEC concluded that Clemente’s
claim, filed four (4) years after the sale, had already prescribed. The SEC further held that Calatagan
had complied with all the requirements for a valid sale of the subject share, Clemente having failed
to inform Calatagan that the address he had earlier supplied was no longer 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."

Clemente filed a petition for review with the Court of Appeals. On 1 June 2004, the Court of Appeals
promulgated a decision reversing the SEC. The appellate court restored Clemente’s one share with
a directive to Calatagan to issue in his a new share, and awarded to Clemente a total of
₱400,000.00 in damages, less the unpaid monthly dues of ₱5,200.00.

In rejecting the SEC’s finding that the action had prescribed, the Court of Appeals cited the SEC’s
own ruling in SEC Case No. 4160, Caram v. Valley Golf Country Club, Inc., that Section 69 of the
Corporation Code specifically refers to unpaid subscriptions to capital stock, and not to any other
debt of stockholders. With the insinuation that Section 69 does not apply to unpaid membership
dues in non-stock corporations, the appellate court employed Article 1140 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.

The Court of Appeals also pointed out that since that Calatagan’s first two demand letters had been
returned to it as sender with the notation about the closure of the mailing address, it very well knew
that its third and final demand 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, the Court of Appeals
ratiocinated that "a person who is in danger of the imminent loss of his property has the right to be
notified and be given the chance to prevent the loss."12

Hence, the present appeal.

Calatagan maintains that the action of Clemente had prescribed pursuant to Section 69 of the
Corporation Code, and that the requisite notices under both the law and the by-laws had been
rendered to Clemente.

Section 69 of the Code provides that an action to recover delinquent stock sold must be commenced
by the filing of a complaint within six (6) months from the date of sale. As correctly pointed out by the
Court of Appeals, Section 69 is part of Title VIII of the Code entitled "Stocks and Stockholders" and
refers specifically to unpaid subscriptions to capital stock, the sale of which is governed by the
immediately preceding Section 68.

The Court of Appeals debunked both Calatagan’s and the SEC’s reliance on Section 69 by citing
another SEC ruling in the case of Caram v. Valley Golf. In connection with Section 69, Calatagan
raises a peripheral point made in the SEC’s Caram ruling. In Caram, the SEC, using as take-off
Section 6 of the Corporation Code which refers to "such rights, privileges or restrictions as may be
stated in the articles of incorporation," pointed out that the Articles of 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 the club, "shall constitute a first lien on the shares… and in the
event of delinquency such shares may be ordered 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 Section
69 should also apply to the sale of Clemente’s share as the lien that Calatagan perceives to be a
restriction is stated in the articles of incorporation and not only in the by-laws.

We remain unconvinced.

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 the share or shares subscribed. In this
case, Clemente had already fully paid for the share in Calatagan and no longer had any outstanding
obligation to deprive him of full title to his share. Perhaps the analogy could have been made if
Clemente had not yet fully paid for his share and the non-stock corporation, pursuant to an article or
by-law provision designed to address that situation, decided to sell such share as a consequence.
But that is not the case here, and there is no purpose for us to apply Section 69 to the case at bar.

Calatagan argues in the alternative that Clemente’s suit is barred by Article 1146 of the Civil Code
which establishes four (4) years as the prescriptive period for actions based upon injury to the rights
of the plaintiff on the hypothesis 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 prescriptive periods are not fixed in
the Civil Code or in any other law. Neither article is applicable but Article 1140 of the Civil Code
which provides that an action to recover movables shall prescribe in eight (8) years. Calatagan’s
action is for the recovery of a share of stock, plus damages.
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 Articles of Incorporation states that the "dues, together with all other
obligations of members to the club, shall constitute a first lien on the shares, second only to any lien
in favor of the national or local government, and in the event of delinquency such shares may be
ordered sold by the Board of Directors in the manner provided in the By-Laws to satisfy said dues or
other obligations of the stockholders."14 In turn, there are several provisions in the By-laws that
govern the payment of dues, the lapse into delinquency of the member, and the constitution and
execution on the lien. We quote these provisions:

ARTICLE XII – MEMBER’S ACCOUNT

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 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 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.

(b) Members on the delinquent list for more than 60 days shall be reported to the Board and
their shares or the shares of the juridical entities they represent shall thereafter be ordered
sold by the Board at auction to satisfy the claims of the Club as provided for in Section 32
hereon. A member may pay his overdue account at any time before the auction sale.

Sec. 32. Lien on Shares; Sale of Share at Auction- The club shall have a first lien on every share of
stock to secure debts of the members to the Club. This lien shall be annotated on the certificates of
stock and may be enforced by the Club in the following manner:

(a) Within ten (10) days after the Board has ordered the sale at auction of a member’s share
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.

(b) The Membership Committee shall then notify all applicants on the Waiting List and all
registered stockholders of the availability of a share of stock for sale at auction at a specified
date, time and place, and shall post a notice to that effect in the Club bulletin board for at
least ten (10) days prior to the auction sale.

(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.

(d) The purchase price shall be paid by the winning bidder to the Club within twenty-four (24)
hours after the bidding. The winning bidder or the representative in the case of a juridical
entity shall become a Regular Member upon payment of the purchase price and issuance of
a new stock certificate in his name or in the name of the juridical entity he represents. The
proceeds of the sale shall be paid by the Club to the selling stockholder after deducting his
obligations to the Club.

(e) If no bids be received or if the winning bidder fails to pay the amount of this bid within
twenty-four (24) hours after the bidding, the auction procedures may be repeated from time
to time at the discretion of the Membership Committee until the share of stock be sold.
 (f) If the proceeds from the sale of the share of stock are not sufficient to pay in full the
indebtedness of the member, the member shall continue to be obligated to the Club for the
unpaid balance. If the member whose share of stock is sold fails or refuse to surrender the
stock certificate for cancellation, cancellation 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.

It is plain that Calatagan had endeavored to install a clear and comprehensive procedure to govern
the payment of monthly dues, the declaration of a member as delinquent, and the constitution of a
lien on the shares and its eventual public sale to answer for the member’s debts. Under Section 91
of the Corporation Code, membership in a non-stock corporation "shall be terminated in the manner
and for the causes provided in the articles of incorporation or the by-laws." The By-law provisions
are elaborate in explaining the manner and the causes for the termination of membership in
Calatagan, through the execution on the lien of the share. The Court is satisfied that the By-Laws, as
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 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.

Yet, did Calatagan actually comply with the by-law provisions when it sold Clemente’s share? The
appellate court’s finding on this point warrants our approving citation, thus:

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 shares to be sold at public auction. This letter was signed by Atty.
Benjamin Tanedo, Jr., Calatagan Golf’s Corporate Secretary. It was again sent to Clemente’s
mailing address – Phimco Industries Inc., P.O. Box 240, MCC Makati. As expected, it was
returned because the post office box had been closed.

Under the By-Laws, the Corporate Secretary is tasked to "give or cause to be given, all notices
required by law or by these By-Laws. .. and … keep a record of the addresses of all stockholders. As
quoted above, Sec. 32 (a) of the By-Laws further provides that "within ten (10) days after the Board
has ordered the sale at auction of a member’s share 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
requirement is to give the Membership Committee the opportunity to find out, before the share is
sold, if proper notice has been made to the shareholder member.

We presume that the Corporate Secretary, as a lawyer is knowledgeable on the law and on the
standards of good faith and fairness that the law requires. As custodian of corporate records, he
should also have known that the first 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 chance before his share is
sold and his membership lost – to the same P.O. Box that had been closed.

Calatagan argues that it "exercised due diligence before the foreclosure sale" and "sent several
notices to Clemente’s specified mailing address." We do not agree; we cannot label as due diligence
Calatagan’s act of sending the December 7, 1992 letter to Clemente’s mailing address knowing fully
well that the P.O. Box had been closed. Due diligence or good faith imposes upon the Corporate
Secretary – the chief repository of all corporate records – the obligation to check Clemente’s other
address which, under the By-Laws, have to be kept on file and are in fact on file. One obvious
purpose of giving the Corporate Secretary the duty to keep the addresses of members on file is
specifically for matters of this kind, when the member cannot be reached through his or her 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 impending loss.

Ultimately, the petition must fail because Calatagan had failed to duly observe both the spirit and
letter of its own by-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 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. 1avv phi 1

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 Appeals15 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 Appeals instead directed that
Calatagan to issue to Clemente a new certificate of stock. That sufficiently redresses the actual
damages sustained by Clemente. After all, the certificate of stock is simply the evidence of the
share.
The Court of Appeals also awarded Clemente ₱200,000.00 as moral damages, ₱100,000.00 as
exemplary damages, and ₱100,000.00 as attorney’s fees. We agree that the award of such
damages is warranted.

The Court of Appeals cited Calatagan for violation of Article 32 of the Civil Code, which allows
recovery of damages from any private individual "who directly or indirectly obstructs, defeats,
violates or in any manner impedes or impairs" the right "against deprivation of property without due
process of laws." The plain letter of the provision squarely entitles Clemente to damages from
Calatagan. Even without Article 32 itself, Calatagan will still be bound to pay moral and exemplary
damages to Clemente. The latter was able to duly prove that he had sustained mental anguish,
serious anxiety and wounded feelings by reason of Calatagan’s acts, thereby entitling him to moral
damages under Article 2217 of the Civil Code. Moreover, it is evident that Calatagan’s bad faith as
exhibited in the

course of its corporate actions warrants correction for the public good, thereby justifying exemplary
damages under Article 2229 of the Civil Code.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. Costs
against petitioner.

SO ORDERED.

DANTE O. TINGA
Associate Justice

<p

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CONSUELO YNARES-SANTIAGO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.*

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson, Second Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it
is hereby certified that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

*Justice Consuelo Ynares-Santiago as Raffle dated April 13, 2009 as additional member in
lieu of Justice Antonio D. Brion who inhibited himself in this case.

1Rollo, pp. 47-64; Penned by Associate Justice Arturo D. Brion (now a member of this Court,
with Associate Justices Ruben T. Reyes (later appointed to and retired from this Court) and
Eliezer de los Santos, concurring.

2 Rollo, pp. 47-48, 145.

3 Id at 48, 145.

4 Id. at 48, 145-146.

5 Id. at 48, 146.

6 Id. at 48-49, 146-147.

7 Rollo, p. 49.

8 Records, p. 250.

9 Id.

10 Records, p. 250.

11 Rollo, pp. 49, 147.

12 Id. at 13.

13 Rollo, p. 20.

14 See rollo, pp. 79-80.

15 G.R. No. 133107, 25 March 1999, 305 SCRA 449.

16Art. 19. Every person must in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith.
Art. 20. Every person who, contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.

Art. 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.
Case # 5 Art 19 – Principle of Abuse Rights

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 161921 July 17, 2013

JOYCE V. ARDIENTE, PETITIONER,

vs.
SPOUSES JAVIER AND MA. THERESA PASTORFIDE, CAGAYAN DE ORO WATER DISTRICT
AND GASPAR GONZALEZ,* JR., RESPONDENTS.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
reverse and set aside the Decision1 and Resolution2 of the Court of Appeals (CA), dated August 28,
2003 and December 17, 2003, respectively, in CA-G.R. CV No. 73000. The CA Decision affirmed
with modification the August 15, 2001 Decision3 of the Regional Trial Court (RTC) of Cagayan de
Oro City, Branch 24, while the CA Resolution denied petitioner's Motion for Reconsideration.

The facts, as summarized by the CA, are as follows:

[Herein petitioner] Joyce V. Ardiente and her husband Dr. Roberto S. Ardiente are owners of a
housing unit at Emily Homes, Balulang, Cagayan de Oro City with a lot area of one hundred fifty-
three (153) square meters and covered by Transfer Certificate of Title No. 69905.

On June 2, 1994, Joyce Ardiente entered into a Memorandum of Agreement (Exh. "B", pp. 470-473,
Records) selling, transferring and conveying in favor of [respondent] Ma. Theresa Pastorfide all their
rights and interests in the housing unit at Emily Homes in consideration of ₱70,000.00. The
Memorandum of Agreement carries a stipulation:

"4. That the water and power bill of the subject property shall be for the account of the Second Party
(Ma. Theresa Pastorfide) effective June 1, 1994." (Records, p. 47)

vis-a-vis Ma. Theresa Pastorfide's assumption of the payment of the mortgage loan secured by
Joyce Ardiente from the National Home Mortgage (Records, Exh. "A", pp. 468-469)

For four (4) years, Ma. Theresa's use of the water connection in the name of Joyce Ardiente was
never questioned nor perturbed (T.S.N., October 31, 2000, pp. 7-8) until on March 12, 1999, without
notice, the water connection of Ma. Theresa was cut off. Proceeding to the office of the Cagayan de
Oro Water District (COWD) to complain, a certain Mrs. Madjos told Ma. Theresa that she was
delinquent for three (3) months corresponding to the months of December 1998, January 1999, and
February 1999. Ma. Theresa argued that the due date of her payment was March 18, 1999 yet
(T.S.N., October 31, 2000, pp. 11-12). Mrs. Madjos later told her that it was at the instance of Joyce
Ardiente that the water line was cut off (T.S.N., February 5, 2001, p. 31).
On March 15, 1999, Ma. Theresa paid the delinquent bills (T.S.N., October 31, 2000, p. 12). On the
same date, through her lawyer, Ma. Theresa wrote a letter to the COWD to explain who authorized
the cutting of the water line (Records, p. 160).

On March 18, 1999, COWD, through the general manager, [respondent] Gaspar Gonzalez, Jr.,
answered the letter dated March 15, 1999 and reiterated that it was at the instance of Joyce Ardiente
that the water line was cut off (Records, p. 161).

Aggrieved, on April 14, 1999, Ma. Theresa Pastorfide [and her husband] filed [a] complaint for
damages [against petitioner, COWD and its manager Gaspar Gonzalez] (Records, pp. 2-6).

In the meantime, Ma. Theresa Pastorfide's water line was only restored and reconnected when the
[trial] court issued a writ of preliminary mandatory injunction on December 14, 1999 (Records, p.
237).4

After trial, the RTC rendered judgment holding as follows:

xxxx

In the exercise of their rights and performance of their duties, defendants did not act with justice,
gave plaintiffs their due and observe honesty and good faith. Before disconnecting the water supply,
defendants COWD and Engr. Gaspar Gonzales did not even send a disconnection notice to plaintiffs
as testified to by Engr. Bienvenido Batar, in-charge of the Commercial Department of defendant
COWD. There was one though, but only three (3) days after the actual disconnection on March 12,
1999. The due date for payment was yet on March 15. Clearly, they did not act with justice. Neither
did they observe honesty.

They should not have been swayed by the prodding of Joyce V. Ardiente. They should have
investigated first as to the present ownership of the house. For doing the act because Ardiente told
them, they were negligent. Defendant Joyce Ardiente should have requested before the cutting off of
the water supply, plaintiffs to pay. While she attempted to tell plaintiffs but she did not have the
patience of seeing them. She knew that it was plaintiffs who had been using the water four (4) years
ago and not hers. She should have been very careful. x x x5

The dispositive portion of the trial court's Decision reads, thus:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendants [Ardiente,

COWD and Gonzalez] to pay jointly and severally plaintiffs, the following sums:

(a) ₱200,000.00 for moral damages;

(b) 200,000.00 for exemplary damages; and

(c) 50,000.00 for attorney's fee.

The cross-claim of Cagayan de Oro Water District and Engr. Gaspar Gonzales is hereby dismissed.
The Court is not swayed that the cutting off of the water supply of plaintiffs was because they were
influenced by defendant Joyce Ardiente. They were negligent too for which they should be liable.

SO ORDERED.6
Petitioner, COWD and Gonzalez filed an appeal with the CA.

On August 28, 2003, the CA promulgated its assailed Decision disposing as follows:

IN VIEW OF ALL THE FOREGOING, the appealed decision is AFFIRMED, with the modification that
the awarded damages is reduced to ₱100,000.00 each for moral and exemplary damages, while
attorney's fees is lowered to ₱25,000.00. Costs against appellants.

SO ORDERED.7

The CA ruled, with respect to petitioner, that she has a "legal duty to honor the possession and use
of water line by Ma. Theresa Pastorfide pursuant to their Memorandum of Agreement" and "that
when [petitioner] applied for its disconnection, she acted in bad faith causing prejudice and [injury to]
Ma. Theresa Pastorfide."8

As to COWD and Gonzalez, the CA held that they "failed to give a notice of disconnection and
derelicted in reconnecting the water line despite payment of the unpaid bills by the [respondent
spouses Pastorfide]."9

Petitioner, COWD and Gonzalez filed their respective Motions for Reconsideration, but these were
denied by the CA in its Resolution dated December 17, 2003.

COWD and Gonzalez filed a petition for review on certiorari with this Court, which was docketed as
G.R. No. 161802. However, based on technical grounds and on the finding that the CA did not
commit any reversible error in its assailed Decision, the petition was denied via a Resolution10 issued
by this Court on March 24, 2004. COWD and Gonzalez filed a motion for reconsideration, but the
same was denied with finality through this Court's Resolution11 dated June 28, 2004.

Petitioner, on the other hand, timely filed the instant petition with the following Assignment of Errors:

7.1 HONORABLE COURT OF APPEALS (ALTHOUGH IT HAS REDUCED THE LIABILITY

INTO HALF) HAS STILL COMMITTED GRAVE AND SERIOUS ERROR WHEN IT UPHELD
THE JOINT AND SOLIDARY LIABILITY OF PETITIONER JOYCE V. ARDIENTE WITH
CAGAYAN DE ORO WATER DISTRICT (COWD) AND ENGR. GASPAR D. GONZALES
FOR THE LATTER'S FAILURE TO SERVE NOTICE UPON RESPONDENTS SPOUSES
PASTORFIDE PRIOR TO THE ACTUAL DISCONNECTION DESPITE EVIDENCE
ADDUCED DURING TRIAL THAT EVEN WITHOUT PETITIONER'S REQUEST, COWD
WAS ALREADY SET TO EFFECT DISCONNECTION OF RESPONDENTS' WATER
SUPPLY DUE TO NON-PAYMENT OF ACCOUNT FOR THREE (3) MONTHS.

7.2 THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS

ERROR WHEN IT RULED TOTALLY AGAINST PETITIONER AND FAILED TO FIND THAT
RESPONDENTS ARE GUILTY OF CONTRIBUTORY NEGLIGENCE WHEN THEY FAILED
TO PAY THEIR WATER BILLS FOR THREE MONTHS AND TO MOVE FOR THE
TRANSFER OF THE COWD ACCOUNT IN THEIR NAME, WHICH WAS A VIOLATION OF
THEIR MEMORANDUM OF AGREEMENT WITH PETITIONER JOYCE V. ARDIENTE.
RESPONDENTS LIKEWISE DELIBERATELY FAILED TO EXERCISE DILIGENCE OF A
GOOD FATHER OF THE FAMILY TO MINIMIZE THE DAMAGE UNDER ART. 2203 OF
THE NEW CIVIL CODE.
 7.3 THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT
DISREGARDED THE FACT THAT RESPONDENT SPOUSES PASTORFIDE ARE
LIKEWISE BOUND TO OBSERVE ARTICLE 19 OF THE NEW CIVIL CODE, i.e., IN THE
EXERCISE OF THEIR RIGHTS AND IN THE PERFORMANCE OF THEIR DUTIES TO ACT
WITH JUSTICE, GIVE EVERYONE HIS DUE AND OBSERVE HONESTY AND GOOD
FAITH.

7.4 THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT GRANTED AN

AWARD OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES AS
AGAINST PETITIONER ARDIENTE.12

At the outset, the Court noticed that COWD and Gonzalez, who were petitioner's co-defendants
before the RTC and her co-appellants in the CA, were impleaded as respondents in the instant
petition. This cannot be done. Being her co-parties before the RTC and the CA, petitioner cannot, in
the instant petition for review on certiorari, make COWD and Gonzalez, adversary parties. It is a
grave mistake on the part of petitioner's counsel to treat COWD and Gonzalez as respondents.
There is no basis to do so, considering that, in the first place, there is no showing that petitioner filed
a cross-claim against COWD and Gonzalez. Under Section 2, Rule 9 of the Rules of Court, a cross-
claim which is not set up shall be barred. Thus, for failing to set up a cross-claim against COWD and
Gonzalez before the RTC, petitioner is already barred from doing so in the present petition.

More importantly, as shown above, COWD and Gonzalez's petition for review on certiorari filed with
this Court was already denied with finality on June 28, 2004, making the presently assailed CA
Decision final and executory insofar as COWD and Gonzalez are concerned. Thus, COWD and
Gonzalez are already precluded from participating in the present petition. They cannot resurrect their
lost cause by filing pleadings this time as respondents but, nonetheless, reiterating the same prayer
in their previous pleadings filed with the RTC and the CA.

As to the merits of the instant petition, the Court likewise noticed that the main issues raised by
petitioner are factual and it is settled that the resolution of factual issues is the function of lower
courts, whose findings on these matters are received with respect and considered binding by the
Supreme Court subject only to certain exceptions, none of which is present in this instant
petition.13 This is especially true when the findings of the RTC have been affirmed by the CA as in
this case.14

In any case, a perusal of the records at hand would readily show that the instant petition lacks merit.

Petitioner insists that she should not be held liable for the disconnection of respondent spouses'
water supply, because she had no participation in the actual disconnection. However, she admitted
in the present petition that it was she who requested COWD to disconnect the Spouses Pastorfide's
water supply. This was confirmed by COWD and Gonzalez in their cross-claim against petitioner.
While it was COWD which actually discontinued respondent spouses' water supply, it cannot be
denied that it was through the instance of petitioner that the Spouses Pastorfide's water supply was
disconnected in the first place.

It is true that it is within petitioner's right to ask and even require the Spouses Pastorfide to cause the
transfer of the former's account with COWD to the latter's name pursuant to their Memorandum of
Agreement. However, the remedy to enforce such right is not to cause the disconnection of the
respondent spouses' water supply. 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.15 Otherwise, liability for damages to the injured party will attach.16 In the present
case, intention to harm was evident on the part of petitioner when she requested for the
disconnection of respondent spouses’ water supply without warning or informing the latter of such
request. Petitioner claims that her request for disconnection was based on the advise of COWD
personnel and that her intention was just to compel the Spouses Pastorfide to comply with their
agreement that petitioner's account with COWD be transferred in respondent spouses' name. If such
was petitioner's only intention, then she should have advised respondent spouses before or
immediately after submitting her request for disconnection, telling them that her request was simply
to force them to comply with their obligation under their Memorandum of Agreement. But she did not.
What made matters worse is the fact that COWD undertook the disconnection also without prior
notice and even failed to reconnect the Spouses Pastorfide’s water supply despite payment of their
arrears. There was clearly an abuse of right on the part of petitioner, COWD and Gonzalez. They are
guilty of bad faith.

The principle of abuse of rights as enshrined in Article 19 of the Civil Code provides that every
person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.

In this regard, the Court's ruling in Yuchengco v. The Manila Chronicle Publishing Corporation17 is
instructive, to wit:

xxxx

This provision of law sets standards which must be observed in the exercise of one’s rights as well
as in the performance of its duties, to wit: to act with justice; give everyone his due; and observe
honesty and good faith.

In Globe Mackay Cable and Radio Corporation v. Court of Appeals, it was elucidated that 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 its violation. Generally, an action for
damages under either Article 20 or Article 21 would be proper." The Court said:

One of the more notable innovations of the New Civil Code is the codification of "some basic
principles that are to be observed for the rightful relationship between human beings and for the
stability of the social order." [REPORT ON THE CODE COMMISSION ON THE PROPOSED CIVIL
CODE OF THE PHILIPPINES, p. 39]. The framers of the Code, seeking to remedy the defect of the
old Code which merely stated the effects of the law, but failed to draw out its spirit, incorporated
certain fundamental precepts which were "designed to indicate certain norms that spring from the
fountain of good conscience" and which were also meant to serve as "guides for human conduct
[that] should run as golden threads through society, to the end that law may approach its supreme
ideal, which is the sway and dominance of justice." (Id.) Foremost among these principles is that
pronounced in Article 19 x x x.

xxxx

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 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. A right, though by 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 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 its violation. Generally, an action for damages under either
Article 20 or Article 21 would be proper.

Corollarilly, Article 20 provides that "every person who, contrary to law, willfully or negligently causes
damage to another shall indemnify the latter for the same." It speaks of the general sanctions of all
other provisions of law which do not especially provide for its own sanction. When a right is
exercised in a manner which does not conform to the standards set forth in the said provision and
results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be
responsible. Thus, if the provision does not provide a remedy for its violation, an action for damages
under either Article 20 or Article 21 of the Civil Code would be proper.

The question of whether or not the principle of abuse of rights has been violated resulting in
damages under Article 20 or other applicable provision of law, depends on the circumstances of
each case. x x x18

To recapitulate, petitioner's acts which violated the abovementioned provisions of law is her
unjustifiable act of having the respondent spouses' water supply disconnected, coupled with her
failure to warn or at least notify respondent spouses of such intention. On the part of COWD and
Gonzalez, it is their failure to give prior notice of the impending disconnection and their subsequent
neglect to reconnect respondent spouses' water supply despite the latter's settlement of their
delinquent account.

On the basis of the foregoing, the Court finds no cogent reason to depart from the ruling of both the
RTC and the CA that petitioner, COWD and Gonzalez are solidarily liable.

The Spouses Pastorfide are entitled to moral damages based on the provisions of Article 2219,19 in
connection with Articles 2020 and 2121 of the Civil Code.

As for exemplary damages, Article 2229 provides that exemplary damages may be imposed by way
of example or correction for the public good. Nonetheless, 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.22 In the instant case, the Court agrees with the CA in sustaining
the award of exemplary damages, although it reduced the amount granted, considering that
respondent spouses were deprived of their water supply for more than nine (9) months, and such
deprivation would have continued were it not for the relief granted by the RTC.

With respect to the award of attorney's fees, Article 2208 of the Civil Code provides, among others,
that such fees may be recovered when exemplary damages are awarded, when the defendant's act
or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect
his interest, and where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiffs’ plainly valid, just and demandable claim.

WHEREFORE, instant petition for review on certiorari is DENIED. The Decision and Resolution of
the Court of Appeals, dated August 28, 2003 and December 17, 2003, respectively, in CA-G.R. CV
No. 73000 are AFFIRMED.

SO ORDERED.

Velasco, Jr., (Chairperson), Abad, Mendoza, and Leonen, JJ., concur.

July 24, 2013

N O T I C E OF J U D G M E N T

Sirs/Mesdames:

Please take notice that on ___July 17, 2013___ a Decision, copy attached herewith, was rendered
by the Supreme Court in the above-entitled case, the original of which was received by this Office on
July 19, 2013 at 2:25 p.m.

Very truly yours,

(SGD)
LUCITA ABJELINA SORIANO
Division Clerk of Court

Footnotes

* Spelled as Gonzales in other parts of the rollo and records.

1Penned by Associate Justice Conrado M. Vasquez, Jr., with Associate Justices Edgardo P.
Cruz and Noel G. Tijam, concurring; rollo, pp. 60-67.

2 Id. at 68.

3 Penned by Judge Leonardo N. Demecillo, id. at 27-37.

4 Rollo, pp. 60-62.

5 Id. at 35-36.

6 Id. at 37.

7 Id. at 67. (Emphasis in the original)

8 Id. at 65.

9 Id. at 64.

10 Id. at 219.

11 Id. at 220.

12 Id. at 14.

13Philippine National Bank v. DKS International, Inc., G.R. No. 179161, January 22, 2010,
610 SCRA 603, 621.
14 Id.

15 Uypitching v. Quiamco, G.R. No. 146322, December 6, 2006, 510 SCRA 172, 179.

16 Id.

17 G.R. No. 184315, November 28, 2011, 661 SCRA 392.

18 Id. at 402-404. (Emphasis supplied)

19 Art. 2219. Moral damages may be recovered in the following and analogous cases:

xxxx

(10) Acts and actions referred to in Articles 21, 26, 27, 28. 29, 30, 32, 34 and 35.

xxxx

20Every person who, contrary to law, willfully or negligently causes damage to another, shall
indemnify the latter for the same.

Any person who willfully causes loss or injury to another in a manner that is contrary to
21

morals, good customs or public policy shall compensate the latter for the damage.

22 Yuchengco v. The Manila Chronicle Publishing Corporation, supra note 17, at 405.
Case # 6 Art 19 – Principle of abuse of rights

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 160689 March 26, 2014

RAUL H. SESBREÑO, Petitioner,

vs.
HONORABLE COURT OF APPEALS, JUAN I. COROMINA (SUBSTITUTED BY ANITA
COROMINA, ELIZABETH COROMINA and ROSIEMARIE COROMINA), VICENTE E. GARCIA
(SUBSTITUTED BY EDGAR JOHN GARCIA), FELIPE CONSTANTINO, RONALD ARCILLA,
NORBETO ABELLANA, DEMETRIO BALICHA, ANGELITA LHUILLIER, JOSE E. GARCIA, AND
VISA YAN ELECTRIC COMPANY (VECO), Respondents.

DECISION

BERSAMIN, J.:

This case concerns the claim for damages of petitioner Raul H. Sesbreño founded on abuse of
rights. Sesbreño accused the violation of contract (VOC) inspection team dispatched by the Visayan
Electric Company (VECO) to check his electric meter with conducting an unreasonable search in his
residential premises. But the Regional Trial Court (RTC), Branch 13, in Cebu City rendered
judgment on August 19, 1994 dismissing the claim;1 and the Court of Appeals (CA) affirmed the
dismissal on March 10, 2003.2

Hence, this appeal by Sesbreño.

Antecedents

At the time material to the petition, VECO was a public utility corporation organized and existing
under the laws of the Philippines. VECO engaged in the sale and distribution of electricity within
Metropolitan Cebu. Sesbreño was one of VECO’s customers under the metered service contract
they had entered into on March 2, 1982.3Respondent Vicente E. Garcia was VECO’s President,
General Manager and Chairman of its Board of Directors. Respondent Jose E. Garcia was VECO’s
Vice-President, Treasurer and a Member of its Board of Directors. Respondent Angelita Lhuillier was
another Member of VECO’s Board of Directors. Respondent Juan Coromina was VECO’s Assistant
Treasurer, while respondent Norberto Abellana was the Head of VECO’s Billing Section whose main
function was to compute back billings of customers found to have violated their contracts.

To ensure that its electric meters were properly functioning, and that none of it meters had been
tampered with, VECO employed respondents Engr. Felipe Constantino and Ronald Arcilla as
violation of contract (VOC) inspectors.4 Respondent Sgt. Demetrio Balicha, who belonged to the
341st Constabulary Company, Cebu Metropolitan Command, Camp Sotero Cabahug, Cebu City,
accompanied and escorted the VOC inspectors during their inspection of the households of its
customers on May 11, 1989 pursuant to a mission order issued to him.5

The CA summarized the antecedent facts as follows:

x x x. Reduced to its essentials, however, the facts of this case are actually simple enough, although
the voluminous records might indicate otherwise. It all has to do with an incident that occurred at
around 4:00 o’clock in the afternoon of May 11, 1989. On that day, the Violation of Contracts (VOC)
Team of defendants-appellees Constantino and Arcilla and their PC escort, Balicha, conducted a
routine inspection of the houses at La Paloma Village, Labangon, Cebu City, including that of
plaintiff-appellant Sesbreño, for illegal connections, meter tampering, seals, conduit pipes, jumpers,
wiring connections, and meter installations. After Bebe Baledio, plaintiff-appellant Sesbreño’s maid,
unlocked the gate, they inspected the electric meter and found that it had been turned upside down.
Defendant-appellant Arcilla took photographs of the upturned electric meter. With Chuchie Garcia,
Peter Sesbreño and one of the maids present, they removed said meter and replaced it with a new
one. At that time, plaintiff-appellant Sesbreño was in his office and no one called to inform him of the
inspection. The VOC Team then asked for and received Chuchie Garcia’s permission to enter the
house itself to examine the kind and number of appliances and light fixtures in the household and
determine its electrical load. Afterwards, Chuchie Garcia signed the Inspection Division Report,
which showed the condition of the electric meter on May 11, 1989 when the VOC Team inspected it,
with notice that it would be subjected to a laboratory test. She also signed a Load Survey Sheet that
showed the electrical load of plaintiff-appellant Sesbreño.

But according to plaintiff-appellant Sesbreño there was nothing routine or proper at all with what the
VOC Team did on May 11, 1989 in his house. Their entry to his house and the surrounding premises
was effected without his permission and over the objections of his maids. They threatened, forced or
coerced their way into his house. They unscrewed the electric meter, turned it upside down and took
photographs thereof. They then replaced it with a new electric meter. They searched the house and
its rooms without his permission or a search warrant. They forced a visitor to sign two documents,
making her appear to be his representative or agent. Afterwards, he found that some of his personal
effects were missing, apparently stolen by the VOC Team when they searched the house.6

Judgment of the RTC

On August 19, 1994, the RTC rendered judgment dismissing the complaint.7 It did not accord
credence to the testimonies of Sesbreño’s witnesses, Bebe Baledio, his housemaid, and Roberto
Lopez, a part-time salesman, due to inconsistencies on material points in their respective
testimonies. It observed that Baledio could not make up her mind as to whether Sesbreño’s children
were in the house when the VOC inspection team detached and replaced the electric meter.
Likewise, it considered unbelievable that Lopez should hear the exchanges between Constantino,
Arcilla and Balicha, on one hand, and Baledio, on the other, considering that Lopez could not even
hear the conversation between two persons six feet away from where he was seated during the
simulation done in court, the same distance he supposedly had from the gate of Sesbreño’s house
during the incident. It pointed out that Lopez’s presence at the gate during the incident was even
contradicted by his own testimony indicating that an elderly woman had opened the gate for the
VECO personnel, because it was Baledio, a lady in her 20s, who had repeatedly stated on her direct
and cross examinations that she had let the VECO personnel in. It concluded that for Lopez to do
nothing at all upon seeing a person being threatened by another in the manner he described was
simply contrary to human experience.

In contrast, the RTC believed the evidence of the respondents showing that the VOC inspection
team had found the electric meter in Sesbreño’s residence turned upside down to prevent the
accurate registering of the electricity consumption of the household, causing them to detach and
replace the meter. It held as unbelievable that the team forcibly entered the house through threats
and intimidation; that they themselves turned the electric meter upside down in order to incriminate
him for theft of electricity, because the fact that the team and Sesbreño had not known each other
before then rendered it unlikely for the team to fabricate charges against him; and that Sesbreño’s
non-presentation of Chuchie Garcia left her allegation of her being forced to sign the two documents
by the team unsubstantiated.

Decision of the CA

Sesbreño appealed, but the CA affirmed the RTC on March 10, 2003,8 holding thusly:

x x x. plaintiff-appellant Sesbreño’s account is simply too implausible or far-fetched to be believed.

For one thing, the inspection on his household was just one of many others that the VOC Team had
conducted in that subdivision. Yet, none but plaintiff-appellant Sesbreño complained of the alleged
acts of the VOC Team. Considering that there is no proof that they also perpetrated the same illegal
acts on other customers in the guise of conducting a Violation of Contracts inspection, plaintiff-
appellant Sesbreño likewise failed to show why he alone was singled out. It is also difficult to believe
that the VOC Team would be brazen enough to want to antagonize a person such as plaintiff-
appellant Sesbreño. There is no evidence that the VOC Team harbored any evil motive or grudge
against plaintiff-appellant Sesbreño, who is a total stranger to them. Until he came along, they did
not have any prior criminal records to speak of, or at least, no evidence thereof was presented. It is
equally difficult to believe that their superiors would authorize or condone their alleged illegal acts.
Especially so since there is no indication that prior to the incident on May 11, 1989, there was
already bad blood or animosity between plaintiff-appellant Sesbreño and defendant appellees to
warrant such a malevolent response. In fact, since availing of defendant-appellee VECO’s power
services, the relationship between them appears to have been uneventful.

It becomes all the more apparent that the charges stemming from the May 11, 1989 incident were
fabricated when taken together with the lower court’s evaluation of the alleged theft of plaintiff-
appellant Sesbreño’s personal effects. It stated that on August 8, 1989, plaintiff-appellant Sesbreño
wrote the barangay captain of Punta Princesa and accused Chuchie Garcia and Victoria Villarta
alias Victoria Rocamora of theft of some of his things that earlier he claimed had been stolen by
members of the VOC Team. When he was confronted with these facts, plaintiff-appellant Sesbreño
further claimed that the items allegedly stolen by Chuchie Garcia were part of the loot taken by
defendants-appellees Constantino and Arcilla. Yet not once did plaintiff-appellant Sesbreño or any of
his witnesses mention that a conspiracy existed between these people. Clearly, much like his other
allegations, it is nothing more than an afterthought by plaintiff-appellant Sesbreño.

All in all, the allegations against defendants-appellees appear to be nothing more than a put-on to
save face. For the simple truth is that the inspection exposed plaintiff-appellant Sesbreño as a likely
cheat and thief.

xxxx

Neither is this Court swayed by the testimonies of Baledio and Lopez. The lower court rightly
1âw phi 1

described their testimonies as fraught by discrepancies and inconsistencies on material points and
even called Lopez a perjured witness. On the other hand, it is odd that plaintiff-appellant Sesbreño
chose not to present the witness whose testimony was very crucial. But even though Chuchie Garcia
never testified, her absence speaks volumes. Whereas plaintiff-appellant Sesbreño claimed that the
VOC Team forced her to sign two documents that made her appear to be his authorized agent or
representative, the latter claimed otherwise and that she also gave them permission to enter and
search the house. The person most qualified to refute the VOC Team’s claim is Chuchie Garcia
herself. It is axiomatic that he who asserts a fact or claim must prove it. He cannot transfer that
burden to the person against whom he asserts such fact or claim. When certain evidence is
suppressed, the presumption is that it will adversely affect the cause of the party suppressing it,
should it come to light. x x x9
Upon denial of his motion for reconsideration,10 Sesbreño appealed.

Issue

Was Sesbreño entitled to recover damages for abuse of rights?

Ruling

The appeal has no merit.

Sesbreño’s main contention is that the inspection of his residence by the VOC team was an
unreasonable search for being carried out without a warrant and for being allegedly done with malice
or bad faith.

Before dealing with the contention, we have to note that two distinct portions of Sesbreño’s
residence were inspected by the VOS team – the garage where the electric meter was installed, and
the main premises where the four bedrooms, living rooms, dining room and kitchen were located.

Anent the inspection of the garage where the meter was installed, the respondents assert that the
VOC team had the continuing authority from Sesbreño as the consumer to enter his premises at all
reasonable hours to conduct an inspection of the meter without being liable for trespass to dwelling.
The authority emanated from paragraph 9 of the metered service contract entered into between
VECO and each of its consumers, which provided as follows:

9. The CONSUMER agrees to allow properly authorized employees or representatives of the

COMPANY to enter his premises at all reasonable hours without being liable to trespass to dwelling
for the purpose of inspecting, installing, reading, removing, testing, replacing or otherwise disposing
of its property, and/or removing the COMPANY’S property in the event of the termination of the
contract for any cause.11

Sesbreño contends, however, that paragraph 9 did not give Constantino, Arcilla and Balicha the
blanket authority to enter at will because the only property VECO owned in his premises was the
meter; hence, Constantino and Arcilla should enter only the garage. He denies that they had the
right to enter the main portion of the house and inspect the various rooms and the appliances therein
because those were not the properties of VECO. He posits that Balicha, who was not an employee
of VECO, had no authority whatsoever to enter his house and conduct a search. He concludes that
their search was unreasonable, and entitled him to damages in light of their admission that they had
entered and inspected his premises without a search warrant.12

We do not accept Sesbreño’s conclusion. Paragraph 9 clothed the entire VOC team with
1avv phi1

unquestioned authority to enter the garage to inspect the meter. The members of the team obviously
met the conditions imposed by paragraph 9 for an authorized entry. Firstly, their entry had the
objective of conducting the routine inspection of the meter.13 Secondly, the entry and inspection were
confined to the garage where the meter was installed.14Thirdly, the entry was effected at around 4
o’clock p.m., a reasonable hour.15 And, fourthly, the persons who inspected the meter were duly
authorized for the purpose by VECO.

Although Balicha was not himself an employee of VECO,16 his participation was to render police
assistance to ensure the personal security of Constantino and Arcilla during the inspection,
rendering him a necessary part of the team as an authorized representative. Under the
circumstances, he was authorized to enter considering that paragraph 9 expressly extended such
authority to "properly authorized employees or representatives" of VECO.

It is true, as Sesbreño urges, that paragraph 9 did not cover the entry into the main premises of the
residence. Did this necessarily mean that any entry by the VOS team into the main premises
required a search warrant to be first secured?

Sesbreño insists so, citing Section 2, Article III of the 1987 Constitution, the clause guaranteeing the
right of every individual against unreasonable searches and seizures, viz:

Section 2. The right of the people to be secure in their persons, houses, papers and effects against
unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and
no search warrant or warrant of arrest shall issue except upon probable cause to be determined
personally by the judge after examination under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the place to be searched and the persons or
things to be seized.

He states that a violation of this constitutional guaranty rendered VECO and its VOS team liable to
him for damages by virtue of Article 32 (9) of the Civil Code, which pertinently provides:

Article 32. Any public officer or employee, or any private individual, who directly or indirectly
obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and
liberties of another person shall be liable to the latter for damages:

xxxx

(9) The right to be secured in one’s person, house, papers, and effects against unreasonable
searches and seizures;

x x x x.

Sesbreño’s insistence has no legal and factual basis.

The constitutional guaranty against unlawful searches and seizures is intended as a restraint against
the Government and its agents tasked with law enforcement. It is to be invoked only to ensure
freedom from arbitrary and unreasonable exercise of State power. The Court has made this clear in
its pronouncements, including that made in People v. Marti,17 viz:

If the search is made upon the request of law enforcers, a warrant must generally be first secured if
it is to pass the test of constitutionality. However, if the search is made at the behest or initiative of
the proprietor of a private establishment for its own and private purposes, as in the case at bar, and
without the intervention of police authorities, the right against unreasonable search and seizure
cannot be invoked for only the act of private individual, not the law enforcers, is involved. In sum, the
protection against unreasonable searches and seizures cannot be extended to acts committed by
private individuals so as to bring it within the ambit of alleged unlawful intrusion by the government.18

It is worth noting that the VOC inspectors decided to enter the main premises only after finding the
meter of Sesbreño turned upside down, hanging and its disc not rotating. Their doing so would
enable them to determine the unbilled electricity consumed by his household. The circumstances
justified their decision, and their inspection of the main premises was a continuation of the
authorized entry. There was no question then that their ability to determine the unbilled electricity
called for them to see for themselves the usage of electricity inside. Not being agents of the State,
they did not have to first obtain a search warrant to do so.

Balicha’s presence participation in the entry did not make the inspection a search by an agent of the
State within the ambit of the guaranty. As already mentioned, Balicha was part of the team by virtue
of his mission order authorizing him to assist and escort the team during its routine
inspection.19 Consequently, the entry into the main premises of the house by the VOC team did not
constitute a violation of the guaranty.

Our holding could be different had Sesbreño persuasively demonstrated the intervention of malice or
bad faith on the part of Constantino and Arcilla during their inspection of the main premises, or any
excessiveness committed by them in the course of the inspection. But Sesbreño did not. On the
other hand, the CA correctly observed that the inspection did not zero in on Sesbreño’s residence
because the other houses within the area were similarly subjected to the routine inspection.20 This,
we think, eliminated any notion of malice or bad faith.

Clearly, Sesbreño did not establish his claim for damages if the respondents were not guilty of abuse
of rights. To stress, the concept of abuse of rights prescribes that a person should not use his right
unjustly or in bad faith; otherwise, he may be liable to another who suffers injury. The rationale for
the concept is to present some basic principles to be followed for the rightful relationship between
human beings and the stability of social order.21Moreover, according to a commentator,22 "the
exercise of right ends when the right disappears, and it disappears when it is abused, especially to
the prejudice of others[;] [i]t cannot be said that a person exercises a right when he unnecessarily
prejudices another." Article 19 of the Civil Code23 sets the standards to be observed in the exercise
of one’s rights and in the performance of one’s duties, namely: (a) to act with justice; (b) to give
everyone his due; and (c) to observe honesty and good faith. The law thereby recognizes the
primordial limitation on all rights – that in the exercise of the rights, the standards under Article 19
must be observed.24

Although the act is not illegal, liability for damages may arise should there be an abuse of rights, like
when the act is performed without prudence or in bad faith. In order that liability may attach under
the concept of abuse of rights, the following elements must be present, to wit: (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.25 There is no hard and fast rule that can be applied to ascertain whether or not the
principle of abuse of rights is to be invoked. The resolution of the issue depends on the
circumstances of each case.

Sesbreño asserts that he did not authorize Baledio or Chuchie Garcia to let anyone enter his
residence in his absence; and that Baledio herself confirmed that the members of the VOC team had
intimidated her into letting them in.

The assertion of Sesbreño is improper for consideration in this appeal. The RTC and the CA
1âwphi1

unanimously found the testimonies of Sesbreño’s witnesses implausible because of inconsistencies

on material points; and even declared that the non-presentation of Garcia as a witness was odd if
not suspect. Considering that such findings related to the credibility of the witnesses and their
testimonies, the Court cannot review and undo them now because it is not a trier of facts, and is not
also tasked to analyze or weigh evidence all over again.26 Verily, a review that may tend to supplant
the findings of the trial court that had the first-hand opportunity to observe the demeanor of the
witnesses themselves should be undertaken by the Court with prudent hesitation. Only when
Sesbreño could make a clear showing of abuse in their appreciation of the evidence and records by
the trial and the appellate courts should the Court do the unusual review of the factual findings of the
trial and appellate courts.27 Alas, that showing was not made here.
Nor should the Court hold that Sesbreño was denied due process by the refusal of the trial judge to
inhibit from the case. Although the trial judge had issued an order for his voluntary inhibition, he still
rendered the judgment in the end in compliance with the instruction of the Executive Judge, whose
exercise of her administrative authority on the matter of the inhibition should be respected.28 In this
connection, we find to be apt the following observation of the CA, to wit:

x x x. Both Judge Paredes and Judge Priscila Agana serve the Regional Trial Court and are
therefore of co-equal rank. The latter has no authority to reverse or modify the orders of Judge
Paredes. But in ordering Judge Paredes to continue hearing the case, Judge Agana did not violate
their co-equal status or unilaterally increased her jurisdiction. It is merely part of her administrative
responsibilities as Executive Judge of the Regional Trial Court of Cebu City, of which Judge Paredes
is also a member.29

Lastly, the Court finds nothing wrong if the writer of the decision in the CA refused to inhibit from
participating in the resolution of the motion for reconsideration filed by Sesbrefio. The motion for her
inhibition was grounded on suspicion of her bias and prejudice,30 but suspicion of bias and prejudice
were not enough grounds for inhibition.31

Suffice it to say that the records are bereft of any indication that even suggested that the Associate
Justices of the CA who participated in the promulgation of the decision were tainted with bias against
him.

WHEREFORE, the Court DENIES the pet1t1on for review on certiorari; AFFIRMS the decision
promulgated on March 10, 2003; and DIRECTS the petitioner to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

TERESITA J. LEONARDO-DE CASTRO MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ*

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice
Footnotes

* Vice Associate Justice Bienvenido L. Reyes, who inhibited from participation, per the raffle
of March 10, 2014.

1
CA rollo, pp. 234-285.

2
Rollo, 26-42; penned by Associate Justice Remedios A. Salazar-Fernando, and concurred
in by Associate Justice Ruben T. Reyes (later Presiding Justice, and Member of the
Court/retired) and Associate Justice Edgardo F. Sundiam (retired/deceased).

3
Records, Vol. 2, p. 1186.

4
Id. at 1185.

5
Id. at 1185-1186; 1198.

6
Rollo, pp. 37-38.

7
Supra note 1.

8
Supra note 1.

9
Id. at 39-41.

10
CA rollo, pp. 446-460.

11
Supra note 4, at 1199.

12
Id. at 12-17, 81.

TSN, Vol. 9, September 12, 1990, pp. 24-25; Vol. 8, September 13, 1990, pp. 56-57, 63,
13

65.

14
TSN, Vol. 3, June 5, 1990, pp. 27, 36.

TSN, Vol. 7, April 30, 1990, p. 4; Vol. 9, September 12, 1990, pp. 35-36; Vol. 8, September
15

13, 1990, p. 57.

16
Rollo, pp. 14-15.

17
G.R. No. 81561, January 18, 1991, 193 SCRA 57, 67.

Id. at 67-68 (bold emphasis supplied). See also People v. Bongcarawan, G.R. No. 143944,
18

July 11, 2002, 384 SCRA 525, 531; Tolentino v. Mendoza, Adm. Case No. 5151, October 19,
2004, 440 SCRA 519, 530-531.
19
Supra note 5, at 1187.

20
Supra note 13.

21
Paras, Persons and Family Relations, 2013, p. 122.

22
Pineda, Persons and Human Relations, 2010, p. 76.

Article 19. Every person must, in the exercise of his rights and in the performance of his
23

duties, act with justice, give everyone his due, and observe honesty and good faith.

24
According to Albenson Enterprises Corp. v. Court of Appeals (G.R. No. 88694, January 11,
1993, 217 SCRA 16, 25), Article 20 of the Civil Code, which prescribes that every person
who, contrary to law, wilfully or negligently causes damage to another shall indemnify the
latter for the same, speaks of a general sanction for violation of all other provisions of law
that do not provide their own sanction. Article 21 of the Civil Code deals with acts contra
bonus mores, and has the following elements, to wit; (1) there is an act that is legal; (2) but is
contrary to morals, good custom, public order, or public policy; and (3) it is done with intent to
injure. The common element under Article 19 and Article 21 is that the act is intentional. But
Article 20 does not distinguish whether the act is willful or negligent. Under any of the three
provisions of law, an act that causes injury to another may be made the basis for an award of
damages.

Far East Bank and Trust Company v. Pacilan Jr., G.R. No. 157314, July 29, 2005, 465
25

SCRA 372, 282.

Heirs of Margarito Pabaus v. Heirs of Amanda Yutiamco, G.R. No. 164356, July 27, 2011,
26

654 SCRA 521, 531-532.

27
There are several exceptions to the rule against the Court not reviewing the factual findings
of the CA, namely: (1) when the factual findings of the CA and those of the trial court are
contradictory; (2) when the findings are grounded entirely on speculation, surmises, or
conjectures; (3) when the inference made by the CA from its findings of fact is manifestly
mistaken, absurd, or impossible; (4) when there is grave abuse of discretion in the
appreciation of facts; (5) when the CA, in making its findings, went beyond the issues of the
case, and such findings were contrary to the admissions of both appellant and appellee; (6)
when the judgment of the CA was premised on a misapprehension of facts; (7) when the CA
failed to notice certain relevant facts that, if properly considered, would justify a different
conclusion; (8) when the findings of facts are themselves conflicting; (9) when the findings of
fact are conclusions without citation of the specific evidence on which they are based; and
(10) when the findings of fact of the CA were premised on the absence of evidence but such
findings are contradicted by the evidence on record (E.Y. Industrial Sales, Inc. v. Shen Dar
Electricity and Machinery Co., Ltd., G.R. No. 184850, October 20, 2010, 634 SCRA 363,
382).

28
Records, Vol. 5, p. 2479 (Order dated October 18, 1990).

29
Rollo, p. 41.

30
Id. at 20, 72-73.
31
See Duma v. Espinas, G.R. No. 141962, January 25, 2006, 480 SCRA 53, 65-66; Barnes
v. Reyes, G.R. No. 179583, September 3, 2009, 598 SCRA 107, 112; Pagoda Philippines.,
Inc. v. Universal Canning, Inc., G.R. No. 160966, October 11, 2005, 472 SCRA 355, 362.
Case # 7 Art 19 – Principle of abuse rights

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

A.C. No. 4697 November 25, 2014

FLORENCIO A. SALADAGA, Complainant,

vs.
ATTY. ARTURO B. ASTORGA, Respondent.

x-----------------------x

A.C. No. 4728

FLORENCIO A. SALADAGA, Complainant,

vs.
ATTY. ARTURO B. ASTORGA, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

Membership in the legal profession is a high personal privilege burdened with conditions,1 including
continuing fidelity to the law and constant possession of moral fitness. Lawyers, as guardians of the
law, play a vital role in the preservation of society, and a consequent obligation of lawyers is to
maintain the highest standards of ethical conduct.2 Failure to live by the standards of the legal
profession and to discharge the burden of the privilege conferred on one as a member of the bar
warrant the suspension or revocation of that privilege.

The Factual Antecedents

Complainant Florencio A. Saladaga and respondent Atty. Arturo B. Astorga entered into a "Deed of
Sale with Right to Repurchase" on December 2, 1981 where respondent sold (with rightof
repurchase) to complainant a parcel of coconut land located at Barangay Bunga, Baybay, Leyte
covered by Transfer Certificate of Title (TCT) No. T-662 for ₱15,000.00. Under the said deed,
respondent represented that he has "the perfect right to dispose as owner in fee simple" the subject
property and that the said property is "free from all liens and encumbrances."3 The deed also
provided that respondent, as vendor a retro, had two years within which to repurchase the property,
and if not repurchased within the said period, "the parties shall renew [the] instrument/agreement."4

Respondent failed to exercise his right of repurchase within the period provided in the deed, and no
renewal of the contract was made even after complainant sent respondent a final demand dated
May 10, 1984 for the latter to repurchase the property. Complainant remained in peaceful
possession of the property until December 1989 when he received letters from the Rural Bank of
Albuera (Leyte), Inc. (RBAI) informing him that the property was mortgaged by respondent to RBAI,
that the bank had subsequently foreclosed on the property, and that complainant should therefore
vacate the property.5
Complainant was alarmed and made aninvestigation. He learned the following:

(1) TCT No. T-662 was already cancelled by TCT No. T-3211 in the name of Philippine
National Bank (PNB) as early as November 17, 1972 after foreclosure proceedings;

(2) TCT No. T-3211 was cancelled by TCT No. T-7235 in the names of respondent and his
wife on January 4, 1982 pursuant to a deed of sale dated March 27,1979 between PNB and
respondent;

(3) Respondent mortgaged the subject property to RBAI on March 14, 1984, RBAI foreclosed
on the property, and subsequently obtained TCT No. TP-10635 on March 27,
1991.6 Complainant was subsequently dispossessed of the property by RBAI.7

Aggrieved, complainant instituted a criminal complaint for estafa against respondent with the Office
of the Provincial Prosecutor of Leyte, docketed as I.S. No. 95-144. The Provincial Prosecutor of
Leyte approved the Resolution8 dated April 21, 1995 in I.S. No. 95-144 finding that "[t]he facts of [the]
case are sufficient to engender a well-founded belief that Estafa x x x has been committed and that
respondent herein is probably guilty thereof."9Accordingly, an Information10 dated January 8,1996
was filed before the Municipal Trial Court (MTC) of Baybay, Leyte, formally charging respondent with
the crime of estafa under Article 316, paragraphs 1 and 2 of the Revised Penal Code,11 committed as
follows:

On March 14, 1984, accused representing himself as the owner of a parcel of land known as Lot No.
7661 of the Baybay Cadastre, mortgaged the same to the Rural Bank of Albuera, Albuera, Leyte,
within the jurisdiction of this Honorable Court, knowing fully well that the possessor and owner at that
time was private complainant Florencio Saladaga by virtue of a Pacto de Retro Sale which accused
executed in favor of private complainant on 2nd December, 1981, without first
redeeming/repurchasing the same. [P]rivate complainant knowing of accused[’s] unlawful act only on
or about the last week of February, 1991 when the rural bank dispossessed him of the property, the
mortgage having been foreclosed, private complainant thereby suffered damages and was
prejudiced by accused[’s] unlawful transaction and misrepresentation.

The aforementioned estafa case against respondent was docketed as Criminal Case No. 3112-A.

Complainant likewise instituted the instant administrative cases against respondent by filing before
this Court an Affidavit-Complaint12 dated January 28, 1997 and Supplemental Complaint13 dated
February 27, 1997, which were docketed as A.C. No. 4697 and A.C. No. 4728, respectively. In both
complaints, complainant sought the disbarment of respondent.

The administrative cases were referred to the Integrated Bar of the Philippines (IBP) for
investigation, report and recommendation.14

In his Consolidated Answer15 dated August 16, 2003 filed before the IBP, respondent denied that his
agreement with complainant was a pacto de retrosale. He claimed that it was an equitable mortgage
and that, if only complainant rendered an accounting of his benefits from the produce of the land, the
total amount would have exceeded ₱15,000.00.

Report and Recommendation of the Investigating Commissioner and Resolution of the IBP Board of
Governors
In a Report and Recommendation16 dated April 29, 2005, the Investigating Commissioner of the
IBP’s Commission on Bar Discipline found that respondent was in bad faith when he dealt with
complainant and executed the "Deed of Sale with Right to Repurchase" but later on claimed that the
agreement was one of equitable mortgage. Respondent was also guilty of deceit or fraud when he
represented in the "Deed of Sale with Right to Repurchase" dated December 2, 1981 that the
property was covered by TCT No. T-662, even giving complainant the owner’s copy of the said
certificate of title, when the said TCT had already been cancelled on November 17, 1972 by TCT No.
T-3211 in the name of Philippine National Bank (PNB). Respondent made matters even worse,
when he had TCT No. T-3211 cancelled with the issuance of TCT No. T-7235 under his and his
wife’s name on January 4,1982 without informing complainant. This was compounded by
respondent’s subsequent mortgage of the property to RBAI, which led to the acquisition of the
property by RBAI and the dispossession thereof of complainant. Thus, the Investigating
Commissioner recommended that respondent be (1) suspended from the practice of law for one
year, with warning that a similar misdeed in the future shall be dealt with more severity, and (2)
ordered to return the sum of ₱15,000.00, the amount he received as consideration for the pacto de
retrosale, with interest at the legal rate.

Considering respondent’s "commission of unlawful acts, especially crimes involving moral turpitude,
actsof dishonesty, grossly immoral conduct and deceit," the IBP Board of Governors adopted and
approved the Investigating Commissioner’s Report and Recommendation with modification as
follows: respondent is(1) suspended from the practice of law for two years, with warning that a
similar misdeed in the future shall be dealt with more severity, and (2) ordered to return the sum of
₱15,000.00 received in consideration of the pacto de retrosale, with legal interest.17

The Court’s Ruling

The Court agrees with the recommendation of the IBP Board of Governors to suspend respondent
from the practice of law for two years, but it refrains from ordering respondent to return the
₱15,000.00 consideration, plus interest.

Respondent does not deny executing the "Deed of Sale with Right to Repurchase" dated December
2, 1981 in favor of complainant. However, respondent insists that the deed is not one of sale with
pacto de retro, but one of equitable mortgage. Thus, respondent argues that he still had the legal
right to mortgage the subject property to other persons. Respondent additionally asserts that
complainant should render an accounting of the produce the latter had collected from the said
property, which would already exceed the ₱15,000.00 consideration stated in the deed.

There is no merit in respondent’s defense.

Regardless of whether the written contract between respondent and complainant is actually one of
sale with pacto de retroor of equitable mortgage, respondent’s actuations in his transaction with
complainant, as well as in the present administrative cases, clearly show a disregard for the highest
standards of legal proficiency, morality, honesty, integrity, and fair dealing required from lawyers, for
which respondent should be held administratively liable.

When respondent was admitted to the legal profession, he took an oath where he undertook to
"obey the laws," "do no falsehood," and "conduct [him]self as a lawyer according to the best of [his]
knowledge and discretion."18He gravely violated his oath.

The Investigating Commissioner correctly found, and the IBP Board of Governors rightly agreed, that
respondent caused the ambiguity or vagueness in the "Deed of Sale with Right to Repurchase" as
he was the one who prepared or drafted the said instrument. Respondent could have simply
denominated the instrument as a deed of mortgage and referred to himself and complainant as
"mortgagor" and "mortgagee," respectively, rather than as "vendor a retro" and "vendee a retro." If
only respondent had been more circumspect and careful in the drafting and preparation of the deed,
then the controversy between him and complainant could havebeen avoided or, at the very least,
easily resolved. His imprecise and misleading wording of the said deed on its face betrayed lack
oflegal competence on his part. He thereby fell short of his oath to "conduct [him]self as a lawyer
according to the best of [his] knowledge and discretion."

More significantly, respondent transgressed the laws and the fundamental tenet of human relations
asembodied in Article 19 of the Civil Code:

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

Respondent, as owner of the property, had the right to mortgage it to complainant but, as a lawyer,
he should have seen to it that his agreement with complainant is embodied in an instrument that
clearly expresses the intent of the contracting parties. A lawyer who drafts a contract must see to it
that the agreement faithfully and clearly reflects the intention of the contracting parties. Otherwise,
the respective rights and obligations of the contracting parties will be uncertain, which opens the
door to legal disputes between the said parties. Indeed, the uncertainty caused by respondent’s poor
formulation of the "Deed of Sale with Right to Repurchase" was a significant factor in the legal
controversy between respondent and complainant. Such poor formulation reflects at the very least
negatively on the legal competence of respondent.

Under Section 63 of the Land Registration Act,19 the law in effect at the time the PNB acquired the
subject property and obtained TCT No. T-3211 in its name in 1972, where a decree in favor of a
purchaser who acquires mortgaged property in foreclosure proceedings becomes final, such
purchaser becomes entitled to the issuance of a new certificate of title in his name and a
memorandum thereof shall be "indorsed upon the mortgagor’s original certificate."20 TCT No. T-662,
which respondent gave complainant when they entered into the "Deed of Sale with Right to
Repurchase" dated December 2, 1981, does not bearsuch memorandum but only a memorandum
on the mortgage of the property to PNB in 1963 and the subsequent amendment of the mortgage.

Respondent dealt with complainant with bad faith, falsehood, and deceit when he entered into the
"Deed of Sale with Right to Repurchase" dated December 2, 1981 with the latter. He made it appear
that the property was covered by TCT No. T-662 under his name, even giving complainant the
owner’s copy of the said certificate oftitle, when the truth is that the said TCT had already been
cancelled some nine years earlier by TCT No. T-3211 in the name of PNB. He did not evencare to
correct the wrong statement in the deed when he was subsequently issued a new copy of TCT No.
T-7235 on January 4, 1982,21 or barely a month after the execution of the said deed. All told,
respondent clearly committed an act of gross dishonesty and deceit against complainant.

Canon 1 and Rule 1.01 of the Codeof Professional Responsibility provide:

CANON 1 – A lawyer shall uphold the constitution, obey the laws of the land and promote respect for
law and legal processes.

Rule 1.01 – A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct. Under
Canon 1, a lawyer is not only mandated to personally obey the laws and the legal processes, he is
moreover expected to inspire respect and obedience thereto. On the other hand, Rule 1.01 states
the norm of conduct that is expected of all lawyers.22
Any act or omission that is contrary to, prohibited or unauthorized by, in defiance of, disobedient to,
or disregards the law is "unlawful." "Unlawful" conduct does not necessarily imply the element of
criminality although the concept is broad enough to include such element.23

To be "dishonest" means the disposition to lie, cheat, deceive, defraud or betray; be untrustworthy;
lacking inintegrity, honesty, probity, integrity in principle, fairness and straightforwardness. On the
other hand, conduct that is "deceitful" means as follows:

[Having] the proclivity for fraudulent and deceptive misrepresentation, artifice or device that is used
upon another who is ignorant of the true facts, to the prejudice and damage of the party imposed
upon. In order to be deceitful, the person must either have knowledge of the falsity or acted in
reckless and conscious ignorance thereof, especially if the parties are not on equal terms, and was
done with the intent that the aggrieved party act thereon, and the latter indeed acted in reliance of
the false statement or deed in the manner contemplated to his injury.24The actions of respondent in
connection with the execution of the "Deed of Sale with Right to Repurchase" clearly fall within the
concept of unlawful, dishonest, and deceitful conduct. They violate Article 19 of the Civil Code. They
show a disregard for Section 63 of the Land Registration Act. They also reflect bad faith, dishonesty,
and deceit on respondent’s part. Thus, respondent deserves to be sanctioned.

Respondent’s breach of his oath, violation of the laws, lack of good faith, and dishonesty are
compounded by his gross disregard of this Court’s directives, as well as the orders of the IBP’s
Investigating Commissioner (who was acting as an agent of this Court pursuant to the Court’s
referral of these cases to the IBP for investigation, report and recommendation), which caused delay
in the resolution of these administrative cases.

In particular, the Court required respondent to comment on complainant’s Affidavit-Complaint in A.C.

No. 4697 and Supplemental Complaint in A.C. No. 4728 on March 12, 1997 and June 25, 1997,
respectively.25 While he requested for several extensions of time within which to submit his comment,
no such comment was submitted prompting the Court to require him in a Resolution dated February
4,1998 to (1) show cause why he should not be disciplinarily dealt with or held in contempt for such
failure, and (2) submit the consolidated comment.26Respondent neither showed cause why he should
not be disciplinarily dealt with or held in contempt for such failure, nor submitted the consolidated
comment.

When these cases were referred to the IBP and during the proceedings before the IBP’s
Investigating Commissioner, respondent was again required several times to submit his consolidated
answer. He only complied on August 28, 2003, or more than six years after this Court originally
required him to do so. The Investigating Commissioner also directed the parties to submit their
respective position papers. Despite having been given several opportunities to submit the same,
respondent did not file any position paper.27

Respondent’s disregard of the directives of this Court and of the Investigating Commissioner, which
caused undue delay in these administrative cases, contravenes the following provisions of the Code
of Professional Responsibility:

CANON 11 – A lawyer shall observe and maintain the respect due to the courts and to judicial
officers and should insist on similar conduct by others.

xxxx

CANON 12 – A lawyer shall exert every effort and consider it his duty to assist in the speedy and
efficient administration of justice.
 xxxx

Rule 12.03 – A lawyer shall not, after obtaining extensions of time to file pleadings, memoranda or
briefs, let the period lapse without submitting the same or offering an explanation for his failure to do
so.

Rule 12.04 – A lawyer shall not unduly delay a case, impede the execution of a judgment or misuse
court processes.

Respondent’s infractions are aggravated by the fact that he has already been imposed a disciplinary
sanction before. In Nuñez v. Atty. Astorga,28 respondent was held liable for conduct unbecoming an
1âw phi 1

attorney for which he was fined ₱2,000.00.

Given the foregoing, the suspension of respondent from the practice of law for two years, as
recommended by the IBP Board of Governors, is proper.

The Court, however, will not adopt the recommendation of the IBP to order respondent to return the
sum of ₱15,000.00 he received from complainant under the "Deed of Sale with Right to
Repurchase." This is a civil liability best determined and awarded in a civil case rather than the
present administrative cases.

In Roa v. Moreno,29 the Court pronounced that "[i]n disciplinary proceedings against lawyers, the only
issue is whether the officer of the court is still fit to be allowed to continue as a member of the Bar.
Our only concern is the determination of respondent’s administrative liability. Our findings have no
material bearing on other judicial action which the parties may choose to file against each
other."While the respondent lawyer’s wrongful actuations may give rise at the same time to criminal,
civil, and administrative liabilities, each must be determined in the appropriate case; and every case
must be resolved in accordance with the facts and the law applicable and the quantum of proof
required in each. Section 5,30 in relation to Sections 131 and 2,32 Rule 133 of the Rules of Court states
that in administrative cases, such as the ones atbar, only substantial evidence is required, not proof
beyond reasonable doubt as in criminal cases, or preponderance of evidence asin civil cases.
Substantial evidence is that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.33

The Court notes that based on the same factual antecedents as the present administrative cases,
complainant instituted a criminal case for estafa against respondent, docketed as Criminal Case No.
3112-A, before the MTC. When a criminal action is instituted, the civil action for the recovery of civil
liability arising from the offense charged shall be deemed instituted with the criminal action unless
the offended party waives the civil action, reserves the right to institute it separately or institutes the
civil action prior to the criminal action.34 Unless the complainant waived the civil action, reserved the
right to institute it separately, or instituted the civil action prior to the criminal action, then his civil
action for the recovery of civil liability arising from the estafa committed by respondent is deemed
instituted with Criminal Case No. 3112-A. The civil liability that complainant may recover in Criminal
Case No. 3112-A includes restitution; reparation of the damage caused him; and/or indemnification
for consequential damages,35 which may already cover the ₱15,000.00 consideration complainant
had paid for the subject property.

WHEREFORE, respondent is hereby found GUILTY of the following: breach of the Lawyer’s Oath;
unlawful, dishonest, and deceitful conduct; and disrespect for the Court and causing undue delay of
these cases, for which he is SUSPENDED from the practice of law for a period of two (2) years,
reckoned from receipt of this Decision, with WARNING that a similar misconduct in the future shall
be dealt with more severely.
Let a copy of this Decision be furnished the Office of the Bar Confidant and the Integrated Bar of the
Philippines for their information and guidance. The Court Administrator is directed to circulate this
Decision to all courts in the country.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice

On leave
PRESBITERO J. VELASCO, JR.
ARTURO D. BRION*
Associate Justice
Associate Justice

DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice

On official leave
BIENVENIDO L. REYES
ESTELA M. PERLAS-BERNABE**
Associate Justice
Associate Justice

MARVIC MARIO VICTOR F. LEONEN FRANCIS H. JARDELEZA

Associate Justice Associate Justice

Footnotes

* On leave.

** On official leave.

1
Manzano v. Atty. Soriano, 602 Phil. 419, 421 (2009).

2
Preamble, 2nd paragraph, American Bar Association Model Code of Professional
Responsibility (1983), cited in Code of Professional Responsibility (Annotated), p. 1.

3
Joint Memorandum for complainant, rollo, Vol. III, pp. 173-205, 173-174, 192-193.
4
Id. at 192-193.

5
Id. at 174-175, 195-197.

6
Id. at 175, 198-203.

7
Id., Vol. II, p. 67.

8
Id. at 21-25.

9
Id. at 24.

10
Id. at 26.

11
ART. 316. Other forms of swindling.– The penalty of arresto mayorin its minimum and
medium periods and a fine of not less than the value of the damage caused and not more
than three times such value, shall be imposed upon:

1. Any person who, pretending to be the owner of any real property, shall convey,
sell, encumber, or mortgage the same;

2. Any person who, knowing that real property is encumbered, shall dispose of the
same, although such encumbrance be not recorded[.]

2
Rollo, Vol. I, pp. 2-5.

13
Id., Vol. II, pp. 1-7.

14
Id., Vol. I, p. 51; Resolution dated February 14, 2000.

15
Id., Vol. III, pp. 146-154.

16
Id., Vol. II, pp. 52-69.

17
Id. at 50-51, Notice of Resolution.

18
The Lawyer’s Oath states in full:

I, __________, do solemnly swear that I will maintain allegiance to the Republic of

the Philippines; I will support its Constitution and obey the lawsas well as the legal
orders of the duly constituted authorities therein; I will do no falsehood, nor consent
to the doing of any in court; I will not wittingly or willingly promote or sue any
groundless, false or unlawful suit, nor give aid nor consent to the same. I will delay
no man for money or malice, and will conduct myself as a lawyer according to the
best ofmy knowledge and discretion with all good fidelity as well to the courts as to
my clients; and I impose upon myself this voluntary obligation without any mental
reservation or purpose of evasion. So help me God. (Emphases supplied.)

19
Act No. 496 enacted on November 6, 1902.
20
Section 63 of the Land Registration Act provides: Sec. 63. Mortgages of registered land
may be foreclosed in the manner provided in the Code of Procedure in Civil Actions and
Special Proceedings. A certified copy of the final decree of the court affirming the sale under
foreclosure proceedings may be filed with the register of deeds after the time for appealing
therefrom has expired, and the purchaser shall thereupon be entitled to the entry of a new
certificate and to the issuance of a new owner’s duplicate certificate, a memorandum thereof
being at the same time likewise indorsed upon the mortgagor’s original certificate and the
mortgagee’s duplicate, if any, being first delivered up and canceled: Provided, however, That
nothing contained in this Act shall be construed to prevent the mortgagor or other person
interested fromdirectly impeaching by any proper legal proceedings any foreclosure
proceedings affecting registered land, prior to the entry of a new certificate of title. (Emphasis
supplied.)

It appears from the annotations/memoranda at the back of TCT No. T-3211 that said
21

certificate of title was cancelled by TCT No. T-7235 when the deed of sale dated March 27,
1979 between PNB and respondent was registered with the Register of Deeds. Respondent,
however, lost his owner’s duplicate and was issued a new copy of such owner’s duplicate on
January 4, 1982. (Rollo, Vol. III, p. 200.)

22
Code of Professional Responsibility (Annotated), pp. 1, 16.

23
Id., citing Black’s Law Dictionary (6th ed.), p. 1536.

24
Id. at 6-7.

25
Rollo, Vol. I, p. 25, and Vol. II, p. 37, respectively.

26
Id., Vol. I, p. 40.

27
Id., Vol. III, pp. 222-224, Order dated January 24, 2005.

28
492 Phil. 450, 460 (2005).

29
A.C. No. 8382, April 21, 2010, 618 SCRA 693, 700.

SECTION 5. Substantial evidence. – In cases filed before administrative or quasi-judicial

30

bodies, a fact may be deemed established if it is supported by substantial evidence, or that

amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.

31
SECTION 1. Preponderance of evidence, how determined. – In civil cases, the party
having the burden of proof must establish his case by a preponderance of evidence. In
determining where the preponderance or superior weight of evidence on the issues involved
lies, the court may consider all the facts and circumstances of the case, the witnesses’
manner of testifying, their intelligence, their means and opportunity of knowing the facts to
which they are testifying the nature of the facts to which they testify, the probability or
improbability of their testimony, their interest or want of interest, and also their personal
credibility so far as the same may legitimately appear upon the trial. The court may also
consider the number of witnesses, though the preponderance is not necessarily with the
greater number.
32
SECTION 2. Proof beyond reasonable doubt. – In a criminal case, the accused is entitled
to an acquittal, unless his guilt is shown beyond reasonable doubt. Proof beyond reasonable
doubt does not mean such a degree of proof as, excluding possibility of error, produces
absolute certainty. Moral certainty only is required, or that degree of proof which produces
conviction in an unprejudiced mind.

33
Peña v. Paterno, A.C. No. 4191, June 10, 2013, 698 SCRA 1, 12-13.

34
Rule 111, Section 1(a) of the Revised Rules of Criminal Procedure.

35
Articles 104 to 107 of the Revised Penal Code.