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EN BANC [G.R. No. L-7817. October 31, 1956.] ALFREDO M.

VELAYO, in his capacity as Assignee of the insolvent COMMERCIAL AIR LINES, INC. (CALI), Plaintiff-Appellant, vs. SHELL COMPANY OF THE PHILIPPINE ISLANDS, LTD., Defendant-Appellee, YEK HUA TRADING CORPORATION, PAUL SYCIP and MABASA & CO., intervenors.

Liwag, C. Dominguez and Pacifico Agcaoili, representing National Airports Corporation; chan roblesvirtualawlibraryMessrs. W. J. Bunnel and Manuel Chan, representing Goodrich International Rubber Co.; chan roblesvirtualawlibraryMr. G. E. Adair, representing Goodyear Tire & Rubber Co.; chan roblesvirtualawlibraryMr. J. T. Chuidian, representing Gibbs, Gibbs, Chuidian & Quasha; chan roblesvirtualawlibraryMr. E. Valera, representing Mabasa & Co.; chan roblesvirtualawlibraryMr. D. Fitzgerald, representing Shell Co. P.I. Ltd.; chan roblesvirtualawlibraryand Mr. Alfonso Z. Sycip, representing himself, Yek Hua Trading Corporation and Paul Sycip (Exhs. NN, JJJ, MM, QQQ, II-4, SS, TT, UU, VV, WW, XX, YY, ZZ, AAA, BBB, CCC, DDD, EEE, FFF, GGG, and HHH). The persons present, including Mr. Desmond Fitzgerald, signed their names and the names of the companies they represented on a memorandum pad of the law firm Quisumbing, Sycip, and Quisumbing (Exhs. VV and VV-1). In that meeting at noontime of August 6, 1948, out of the 194 creditors in all (Exh. OO) 15 were listed as principal creditors having big balances (Exh. NN), to wit:chanroblesvirtuallawlibrary 13th Air Force P12,880.00 Civil Aeronautics Administration 98,127.00 Gibbs, Giibs, Chuidian & Quasha 5,544.90 Goodrich Intl Rubber Co. 3,142.47 Goodyear Tire & Rubber Co. 1,727.50 Mabasa & Co. 4,867.72 Manila Intl Airport 55,280.04 Manila Intl Air Terminal (PAL) 36,163.68 Shell Co. of the Phil., Ltd. 152,641.68 Smith, Bell & Co., Ltd. 45,534.00 Paul Sycip 8,189.33 Mrs. Buenaventura 20,000.00 Firestone Tire & Rubber Co. 4,911.72 Alfonso Sycip 575,880.83 Yek Hua Trading Corp. 487,871.20 P1,512,762.87 What occurred in that meeting may be summarized as follows:chanroblesvirtuallawlibrary Mr. Alexander Sycip, Secretary of the Board of Directors of the CALI, informed the creditors present that this corporation was insolvent and had to stop operations. He explained the memorandum agreement executed by the CALI with the Philippine Air Lines, Inc., on August 4, 1948, regarding the proposed sale to the latter of the aviation equipments of the former (Exhs. MM and QQQ, par. 1 memo of meeting; chan roblesvirtualawlibraryExhs. III and PPP

DECISION FELIX, J.: Antecedents The Commercial Air Lines, Inc., which will be hereinafter referred to as CALI, is a corporation duly organized and existing in accordance with the Philippines laws, with offices in the City of Manila and previously engaged in air transportation business. The Shell Company of the P. I., Ltd., which will be designated as the Defendant, is on the other hand, a corporation organized under the laws of England and duly licensed to do business in the Philippines, with principal offices at the Hongkong and Shanghai Bank building in the City of Manila. Since the start of CALIs operations, its fuel needs were all supplied by the Defendant. Mr. Desmond Fitzgerald, its Credit Manager who extended credit to CALI, was in charge of the collection thereof. However, all matters referring to extensions of the term of payment had to be decided first by Mr. Stephen Crawford and later by Mr. Wildred Wooding, who represented in this country Defendants Board of Directors, the residence of which is in London, England (Exhs. 4-B and 4-A). As of August, 1948, the books of the Defendant showed a balance of P170,162.58 in its favor for goods it sold and delivered to CALI. Even before August 6, 1948, Defendant had reasons to believe that the financial condition of the CALI was for from being satisfactory. As a matter of fact, according to Mr. Fitzgerald, CALIs Douglas C-54 plane, then in California, was offered to him by Mr. Alfonso Sycip, CALIs President of the Board of Directors, in partial settlement of their accounts, which offer was, however, declined by Mr. Crawford, probably because upon inquiries made by Mr. Fitzgerald sometime before August 6, 1948, for the purpose of preparing the report for its London office regarding CALIs indebtedness, Col. Lambert, CALIs Vice President and General Manager, answered that the total outstanding liabilities of his corporation was only P550,000, and the management of Defendant probably assumed that the assets of the CALI could very well meet said liabilities and were not included to take charge of the sale of CALIs said Douglas C-54 plane to collect its credit. On August 6, 1948, the management of CALI informally convened its principal creditors (excepting only the insignificant small claims) who were invited to a luncheon that was held between 12:chanroblesvirtuallawlibrary00 and 2:chanroblesvirtuallawlibrary00 oclock in the afternoon of that day in the Trade and Commerce Building at 123 Juan Luna St., Manila, and informed them that CALI was in a state of insolvency and had to stop operation. The creditors present, or represented at the meeting, were:chanroblesvirtuallawlibrary Mr. A. L. Bartolini, representing Firestone Tire & Rubber Co.; chan roblesvirtualawlibraryMr. Quintin Yu, representing Commercial News; chan roblesvirtualawlibraryMr. Mark Pringle, representing Smith, Bell & Co. (Lloyds of London); chan roblesvirtualawlibraryMessrs. Vicente

P. Agcaoilis memorandum dated August 7, 1948, to the General Manager of the National Airports Corp.). Mr. Alexander Sycip was assisted in the explanation by CPA Alfredo Velayo of Washington, Sycip & Company, Auditors of the CALI, who discussed the balance sheets and distributed copies thereof to the creditors present (Exhs. NN, NN-1 to 7; chan roblesvirtualawlibraryExh. JJ P. Agcaoilis copy of balance sheet p. 229- 230 t.s.n., Nov. 27, 1951, of the testimony of D. Fitzgerald). The said balance sheet made mention of a C-54 plane in the United States, the property now involved in this suit. He was likewise assisted in his explanation by Mr. Curtis L. Lambert, Vice President and General Manager of the CALI, who described in greater detail the assets of the CALI. There was a general understanding among all the creditors present on the desirability of consummating the sale in favor of the Philippine Air Lines Inc. (Exhs. MM and QQQ, par. 2 Memo of meeting; chan roblesvirtualawlibraryExhs. III and PPP, par. 5 P. Agcoailis memorandum dated August 7, 1948, to the General Manager of the National Airports Corp.; chan roblesvirtualawlibraryand pp. 299-300 t.s.n., January 15, 1952, of the testimony of Desmond Fitzgerald). Then followed a discussion on the payment of claims of creditors and the preferences claimed for the accounts due to the employees, the Government and the National Airports Corporation. The representatives of the latter Messrs. Vicente H. Liwag, C. Dominguez and Pacifico V. Agcaoili, contended that their accounts were preferred. The other creditors disputed such contention of preference (Exhs. MM and QQQ, par. 3 0151 Memo of meeting; chan roblesvirtualawlibraryExhs. III and PPP, par. 3 P. Agcaoilis memorandum dated August 1, 1948, to the General Manager of the National Airports Corp.; chan roblesvirtualawlibraryand pp. 247-248 t.s.n., January 10, 1952, of the testimony of D. Fitzgerald). No understanding was reached on this point and it was then generally agreed that the matter of preference be further studied by a working committee to be formed (Exhs. MM, par. 3 Memo of meeting). The creditors present agreed to the formation of a working committee to continue the discussion of the payment of claims and preferences alleged by certain creditors, and it was further agreed that said working committee would supervise the preservation of the properties of the corporation while the creditors attempted to come to an understanding as to a fair distribution of the assets among them (Exhs. MM and QQQ, Memo of meeting). From the latter exhibit the following is copied:chanroblesvirtuallawlibrary 4. Certain specific matters such as the amount owing to the Philippine Air Lines, Inc., and the claims of Smith, Bell vs. Co., (representing Lloyds of London) that its claim should be offset against the payments which may be due to CALI from insurance claims were not taken up in detail. It was agreed that these matters together with the general question of what are preferred claims should be the subject of further discussions, but shall not interfere with the consummation of the sale in favor of PAL. 5. The creditors present agreed to the formation of the working committee to supervise the preservation of the properties of the corporation and agreed further that Mr. Fitzgerald shall represent the creditors as a whole in this committee. It was understood, however, that all questions relating to preference of claims can be decided only by the creditors assembled. 6. It was the sense of the persons present that, if possible, the insolvency court be avoided but that should the creditors not meet in agreement, then all the profits from the sale will be submitted to an insolvency court for proper division among the creditors. To this working committee, Mr. Desmond Fitzgerald, Credit Manager, of the Defendant, Atty. Agcaoili of the National Airports Corporation and Atty. Alexander Sycip (Exhs. III and PPP, par.

5 P. Agcaoilis memorandum dated August 7, 1948, to the General Manager of the National Airports (Corp.) were appointed. After the creditors present knew the balance sheet and heard the explanations of the officers of the CALI, it was their unanimous opinion that it would be advantageous not to present suits against this corporation but to strive for a fair pro-rata division of its assets (Exh. MM, par 6, Memo of meeting), although the management of the CALI announced that in case of non-agreement of the creditors on a pro-rata division of the assets, it would file insolvency proceedings (p. 70, t.s.n., October 22, 1951). Mr. Fitzgerald did not decline the nomination to form part of said working committee and on August 9, 1948, the 3 members thereof discussed methods of achieving the objectives of the committee as decided at the creditors meeting, which were to preserve the assets of the CALI and to study the way of making a fair division of all the assets among the creditors. Atty. Sycip made an offer to Mr. D. Fitzgerald to name a representative to oversee the preservation of the assets of the CALI, but Mr. Fitzgerald replied that the creditors could rely on Col. Lambert. Atty. Pacifico Agcaoili promised to refer the arguments adduced at the second meeting to the General Manager of the National Airports Corporations and to obtain the advice of the Corporate Counsel, so the negotiation with respect to the division of assets of the CALI among the creditors was left pending or under advice when on that very day of the meeting of the working committee, August 9, 1948, which Mr. Fitzgerald attended, Defendant effected a telegraphic transfer of its credit against the CALI to the American corporation Shell Oil Company, Inc., assigning its credit, amounting to $79,440.00, which was subsequently followed by a deed of assignment of credit dated August 10, 1948, the credit amounting this time to the sum of $85,081.29 (Exh. I). On August 12, 1948, the American corporation Shell Oil Company, Inc., filed a complaint against the CALI in the Superior Court of the State of California, U.S.A. in and for the County of San Bernardino, for the collection of an assigned credit of $79,440.00 Case No. 62576 of said Court (Exhs. A, E, F, G, H, V, and Z) and a writ of attachment was applied for and issued on the same date against a C-54 plane (Exhs. B, C, D, Y, W, X, and X-1). On September 17, 1948, an amended complaint was filed to recover an assigned credit of $85,081.29 (Exhs. I, K, L, M, Q, R, S, T, U, DD) and a supplemental attachment for a higher sum was applied for and issued against the C-54 plane, plus miscellaneous personal properties held by Pacific Overseas Air Lines for the CALI (Exhs. N, O, P, AA, BB, BB-1 and CC) and on January 5, 1949, a judgment by default was entered by the American court (Exhs. J, EE, FF, GG, and HH). Unaware of Defendants assignments of credit and attachment suit, the stockholders of CALI resolved in a special meeting of August 12, 1948, to approve the memorandum agreement of sale to the Philippine Air Lines, Inc, and noted that the Board had been trying to reach a n agreement with the creditors of the corporation to prevent insolvency proceedings, but so far no definite agreement had been reached (Exh. OO Minutes of August 12, 1948, stockholders meeting). By the first week of September, 1948, the National Airports Corporation learned of Defendants action in the United States and hastened to file its own complaint with attachment against the CALI in the Court of First Instance of Manila (Exhs. KKK, LLL, and MMM). The CALI, also prompted by Defendants action in getting the alleged undue preference over the other creditors by attaching the C-54 plane in the United States, beyond the jurisdiction of the Philippines, filed on October 7, 1948, a petition for voluntary insolvency. On this date, an order of insolvency was issued by the court (Exh. JJ) which

necessarily stayed the National Airports Corporations action against the CALI and dissolved its attachment (Exh. NNN), thus compelling the National Airports Corporation to file its claims with the insolvency court (Exh. SS). By order of October 28, 1948, the Court confirmed the appointment of Mr. Alfredo M. Velayo, who was unanimously elected by the creditors as Assignee in the proceedings, and ordered him to qualify as such by taking the oath of office within 5 days from notice and filing a bond in the sum of P30,000.00 to be approved by the Court conditioned upon the faithful performance of his duties, and providing further that all funds that the Assignee may collect or receive from the debtors of the corporation, or from any other source or sources, be deposited in a local bank (Exh. KK). On November 3, 1948, the clerk of court executed a deed of conveyance in favor of the Assignee (Alfredo M. Velayo) over all the assets of the CALI (Exh. LL). The Case. After properly qualifying as Assignee, Alfredo M. Velayo instituted this case (No. 6966 of the Court of First Instance of Manila) on December 17, 1948, against the Shell Company of P. I., Ltd., for the purpose of securing from the Court a writ of injunction restraining Defendant, its agents, servants, attorneys and solicitors from prosecuting in and for the County of San Bernardino in the Superior Court of the State of California, U.S.A. the aforementioned Civil Case No. 62576 against the insolvent Commercial Air Lines, Inc., begun by it in the name of the American corporation Shell Oil Company, Inc., and as an alternative remedy, in case the purported assignment of Defendants alleged credit to the American corporation Shell Oil Company, Inc., and the attachment issued against CALI in the said Superior Court of California shall have the effect of defeating the procurement by Plaintiff as Assignee in insolvency of the above- mentioned airplane, which is the property of the insolvent CALI, situated in the Ontario International Airport, with in the County of San Bernardino, State of California, U.S.A., that judgment for damages in double the value of the airplane be awarded in favor of Plaintiff against Defendant, with costs. The complaint further prays that upon the filing of a bond executed to the Defendant in an amount to be fixed by the Court, to the effect that Plaintiff will pay to Defendant all damages the latter may sustain by reason of the injunction if the Court should finally decide that the Plaintiff was not entitled thereto, the Court issued a writ of preliminary injunction enjoining the Defendant, its agent, servants, attorneys and solicitor, from prosecuting the aforementioned case No. 62576, the same writ of preliminary injunction to issue without notice to the Defendant it appearing by verified complaint that the great irreparable injury will result to the Plaintiff-Appellant before the matter could be on notice. The Plaintiff also prays for such other remedies that the Court may deem proper in the premises. On December 20, 1948, the Defendant filed an opposition to the Plaintiffs petition for the issuance of a writ of the preliminary injunction, and on December 22, 1948, the Court denied the same because whether the conveyance of Defendants credit was fraudulent or not, the Philippine court would not be in position to enforce its orders as against the American corporation Shell Oil Company, Inc., which is outside of the jurisdiction of the Philippines. Plaintiff having failed to restrain the progress of the attachment suit in the United States by denial of his application for a writ of preliminary injunction and the consequences on execution of the C-54 plane in the County of San Bernardino, State of California, U. S. A., he confines his action to the recovery of damages against the Defendant.

On December 28, 1948, Defendant filed its answer to the complaint, which was amended on February 3, 1949. In its answer, Defendant, besides denying certain averments of the complaint alleged, among other reasons, that the assignment of its credit in favor of the Shell Oil Company, Inc., in the United States was for a valuable consideration and made in accordance with the established commercial practices, there being no law prohibiting a creditor from assigning his credit to another; chan roblesvirtualawlibrarythat it had no interest whatsoever in Civil Case No. 62576 instituted in the Superior Court in the State of California by the Shell Oil Company, Inc., which is a separate and distinct corporation organized and existing in the State of Virginia and doing business in the State of California, U. S. A., the Defendant having as its stockholders the Shell Petroleum Company of London and other persons residing in that City, while the Shell Oil Company Inc., of the United State has its principal stockholders the Shell Union Oil Company of the U.S. and presumably countless American investors inasmuch as its shares of stock are being traded daily in the New York stock market; chan roblesvirtualawlibrarythat Mr. Fitzgerald, Defendants Credit Manager, was merely invited to a luncheon-meeting at the Trade and Commerce Building in the City of Manila on August 6, 1948, without knowing the purpose for which it was called; chan roblesvirtualawlibraryand that Mr. Fitzgerald could not have officially represented the Defendant at that time because such authority resides on Mr. Stephen Crawfurd. Defendant, therefore, prays that the complaint be dismissed with costs against the Plaintiff. Then Alfonso Sycip, Yek Hua Trading Corporation and Paul Sycip, as well as Mabasa & Co., filed, with permission of the Court, their respective complaints in intervention taking the side of the Plaintiff. These complaints in intervention were timely answered by Defendant which prayed that they be dismissed. After proper proceedings and hearing, the Court rendered decision on February 26, 1954, dismissing the complaint as well as the complaints in intervention, with costs against the Plaintiff. In view of this outcome, Plaintiff comes to us praying that the judgment of the lower court be reversed and that the Defendant be ordered to pay him damages in the sum of P660,000 (being double the value of the airplane as established by evidence, i.e., P330,000), with costs, and for such other remedy as the Court may deem just and equitable in the premises. The Issues. Either admission of the parties, or by preponderance of evidence, or by sheer weight of the circumstance attending the transactions herein involved, We find that the facts narrated in the preceding statement of the antecedents have been sufficiently established, and the questions at issue submitted to our determination in this instance may be boiled down to the following propositions:chanroblesvirtuallawlibrary (1) Whether or not under the facts of the case, the Defendant Shell Company of the P. I., Ltd., taking advantage of its knowledge of the existence of CALIs airplane C-54 at the Ontario International Airport within the Country of San Bernardino, State of California, U. S. A., (Which knowledge it acquired:chanroblesvirtuallawlibrary first at the informal luncheonmeeting of the principal creditors of CALI on August 5, 1948, where its Credit Manager, Mr. Desmond Fitzgerald, was selected to form part of the Working Committee to supervise the preservation of CALIs properties and to study the way of making a fair division of all the assets among the creditors and thus avoid the institution of insolvency proceedings in court; chan roblesvirtualawlibraryand

Subsequently, at the meeting of August 9, 1948, when said Mr. Fitzgerald met the other members of the said Working Committee and heard and discussed the contention of certain creditors of CALI on the accounts due the employees, the Government and the National Airports Corporation who alleged that their claims were preferred), acted in bad faith and betrayed the confidence and trust of the other creditors of CALI present in said meeting by affecting a hasty telegraphic transfer of its credit to the American corporation Shell Oil Company, Inc., for the sum of $79,440 which was subsequently followed by a deed of assignment of credit dated August 10, 1948, amounting this time to the sum of $85,081.28 (Exhs. Z), thus defeating the purpose of the informal meetings of CALIs principal creditors end depriving the Plaintiff, as its Assignee, of the means of obtaining said C-54 plane, or the value thereof, to the detriment and prejudice of the other CALIs creditors who were consequently deprived of their share in the distribution of said value; chan roblesvirtualawlibraryand (2) Whether or not by reason of said betrayal of confidence and trust, Defendant may be made under the law to answer for the damages prayed by the Plaintiff; chan roblesvirtualawlibraryand if so, what should be the amount of such damages. DISCUSSION OF THE CONTROVERSY I. The mere enunciation of the first proposition can lead to no other conclusion than that Defendant, upon learning the precarious economic situation of CALI and that with all probability, it could not get much of its outstanding credit because of the preferred claims of certain other creditors, forgot that Man does not live by bread alone and entirely disregarded all moral inhibitory tenets. So, on the very day its Credit Manager attended the meeting of the Working Committee on August 9, 1948, it hastily made a telegraphic assignment of its credit against the CALI to its sister American Corporation, the Shell Oil Company, Inc., and by what is stated in the preceding pages hereof, We know that were the damaging effects of said assignment upon the right of other creditors of the CALI to participate in the proceeds of said CALIs plane C-54. Defendants endeavor to extricate itself from any liability caused by such evident misdeed of its part, alleging that Mr. Fitzgerald had no authority from his principal to commit the latter on any agreement; chan roblesvirtualawlibrarythat the assignment of its credit in favor of its sister corporation, Shell Oil Company, Inc., was for a valuable consideration and in accordance with the established commercial practices; chan roblesvirtualawlibrarythat there is no law prohibiting a creditor from assigning his credit to another; chan roblesvirtualawlibraryand that the Shell Oil Company Inc., of the United States is a corporation different and independent from the Defendant. But all these defenses are entirely immaterial and have no bearing on the main question at issue in this appeal. Moreover, we might say that Defendant could not have accomplished the transfer of its credit to its sister corporation if all the Shell companies throughout the world would not have a sort of union, relation or understanding among themselves to come to the aid of each other. The telegraphic transfer made without knowledge and at the back of the other creditors of CALI may be a shrewd and surprise move that enabled Defendant to collect almost all if not the entire amount of its credit, but the Court of Justice cannot countenance such attitude at all, and much less from a foreign corporation to the detriment of our Government and local business. To justify its actions, Defendant may also claim that Mr. Fitzgerald, based on his feeling of distrust and apprehension, entertained the conviction that intervenors Alfonso Sycip and Yek Hua Trading Corporation tried to take undue advantage by infiltrating their credits. But even

assuming for the sake of argument, that these intervenors really resorted to such strategem or fraudulent device, yet Defendants act finds not justification for no misdeed on the part of a person is cured by any misdeed of another, and it is to be noted that neither Alfonso Z. Sycip, nor Yek Hua Trading Corporation were the only creditors of CALI, nor even preferred ones, and that the infiltration of ones credit is of no sequence if it cannot be proven in the insolvency proceedings to the satisfaction of the court. Under the circumstances of the case, Defendants transfer of its aforementioned credit would have been justified only if Mr. Fitzgerald had declined to take part in the Working Committee and frankly and honestly informed the other creditors present that he had no authority to bind his principal and that the latter was to be left free to collect its credit from CALI by whatever means his principal deemed wise and were available to it. But then such information would have immediately dissolved all attempts to come to an amicable conciliation among the creditors and would have precipitated the filing in court of CALIs voluntary insolvency proceedings and nulified the intended transfer of Defendants credit to its above-mentioned sister corporation. II. We may agree with the trial judge, that the assignment of Defendants credit for a valuable consideration is not violative of the provisions of sections 32 and 70 of the Insolvency Law (Public Act No. 1956), because the assignment was made since August 9, 1948, the original complaint in the United States was filed on August 12, 1948, and the writ of attachment issued on this same date, while CALI filed its petition for insolvency on October 7, 1948. At his Honor correctly states, said Sections 32 and 70 only contemplate acts and transactions occuring within 30 days prior to the commencement of the proceedings in insolvency and, consequently, all other acts outside of the 30-day period cannot possibly be considered as coming within the orbit of the operation. In addition to this, We may add that Article 70 of the Insolvency Law refers to acts of the debtor (in this case the insolvent CALI) and not of the creditor, the Shell Company of the P. I. Ltd. But section 70 does not constitute the only provisions of the law pertinent to the matter. The Insolvency Law also provides the following:chanroblesvirtuallawlibrary SEC. 33. The assignee shall have the right to recover all the estate, debt and effects of said insolvent. If at the time of the commencement of the proceedings in insolvency, an action is pending in the name of the debtor, for the recovery of a debt or other thing might or ought to pass to the assignee by the assignment, the assignee shall be allowed to prosecute the action, in like manner and with life effect as if it had been originally commenced by him. If there are any rights of action in favor of the insolvency for damages, on any account, for which an action is not pending the assignee shall have the right to prosecute the same with effect as the insolvent might have done himself if no proceedings in insolvency had been instituted cralaw . It must not be forgotten that in accordance with the spirit of the Insolvency Law and with the provisions of Chapter V thereof which deal with the powers and duties of a receiver, the assignee represents the insolvent as well as the creditors in voluntary and involuntary proceedings Intestate of Mariano G. Veloso, etc. vs. Vda. de Veloso S. C. G. R. No. 42454; chan roblesvirtualawlibraryHunter, Kerr & Co. vs. Samuel Murray, 48 Phil. 449; chan roblesvirtualawlibraryChartered Bank vs. Imperial, 48 Phil. 931; chan roblesvirtualawlibraryAsia Banking Corporation vs. Herridge, 45 Phil. 527 (II Tolentinos Commercial Laws of the Philippines, 633). See also Section 36 of the Insolvency Law.From the foregoing, We see that Plaintiff, as Assignee of the Insolvent CALI, had personality and authority to institute this case for damages, and the only question that remains

determination is whether the payment of damages sought to be recovered from Defendant may be ordered under the Law and the evidence of record. IF ANY PERSON, before the assignment is made, having notice of the commencement of the proceedings in insolvency, or having reason to believe that insolvency proceedings are about to be commenced, embezzles or disposes of any money, goods, chattels, or effects of the insolvent, he is chargeable therewith, and liable to an action by the assignee for double the value of the property sought to be embezzled or disposed of, to be received for the benefit of the insolvent estate. The writer of this decision does not entertain any doubt that the Defendant taking advantage of his knowledge that insolvency proceedings were to be instituted by CALI if the creditors did not come to an understanding as to the manner of distribution of the insolvent asset among them, and believing it most probable that they would not arrive at such understanding as it was really the case schemed and effected the transfer of its sister corporation in the United States, where CALIs plane C-54 was by that swift and unsuspected operation efficaciously disposed of said insolvents property depriving the latter and the Assignee that was latter appointed, of the opportunity to recover said plane. In addition to the aforementioned Section 37, Chapter 2 of the PRELIMINARY TITLE of the Civil Code, dealing on Human Relations, provides the following:chanroblesvirtuallawlibrary Art 19. Any person must, in the exercise of his rights and in the performances of his duties, act with justice, give everyone his due and observe honesty and good faith. It maybe said that this article only contains a mere declarations of principles and while such statement may be is essentially correct, yet We find that such declaration is implemented by Article 21 and sequence of the same Chapter which prescribe the following:chanroblesvirtuallawlibrary Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. The Code Commission commenting following:chanroblesvirtuallawlibrary on this article, says the

break any law of the State, though he may be defying the most sacred postulates of morality. What is more, the victim loses faith in the ability of the government to afford him protection or relief. A provision similar to the one under consideration is embodied in article 826 of the Ger man Civil Code. The same observations may be made concerning injurious acts that are contrary to public policy but are not forbidden by statute. There are countless acts of such character, but have not been foreseen by the lawmakers. Among these are many business practices that are unfair or oppressive, and certain acts of landholders and employers affecting their tenants and employees which contravene the public policy of social justice. Another rule is expressed in Article 24 which compels the return of a thing acquired without just or legal grounds. This provision embodies the doctrine that no person should unjustly enrich himself at the expense of another, which has been one of the mainstays of every legal system for centuries. It is most needful that this ancient principles be clearly and specifically consecrated in the proposed Civil Code to the end that in cases not foreseen by the lawmaker, no one may unjustly benefit himself to the prejudice of another. The German Civil Code has a similar provision (art. 812). (Report of the Code Commission on the Proposed Civil Code of the Philippines, p. 40- 41). From the Civil Code Annotated by Ambrosio Padilla, Vol. I, p. 51, 1956 edition, We also copy the following:chanroblesvirtuallawlibrary A moral wrong or injury, even if it does not constitute a violation of a statute law, should be compensated by damages. Moral damages (Art. 2217) may be recovered (Art. 2219). In Article 20, the liability for damages arises from a willful or negligent act contrary to law. In this article, the act is contrary to morals, good customs or public policy. Now, if Article 23 of the Civil Code goes as far as to provide that:chanroblesvirtuallawlibrary Even if an act or event causing damage to anothers property was not due to the fault or negligence of the Defendant, the latter shall be liable for indemnity if through the act or event he was benefited. with mere much more reason the Defendant should be liable for indemnity for acts it committed in bad faith and with betrayal of confidence. It may be argued that the aforequoted provisions of the Civil Code only came into effect on August 30, 1950, and that they cannot be applicable to acts that took place in 1948, prior to its effectivity. But Article 2252 of the Civil Code, though providing that:chanroblesvirtuallawlibrary Changes made and new provisions and rules laid down by this Code which may be prejudice or impair vested or acquired rights in accordance with the old legislation, shall have no retroactive effect cralaw . implies that when the new provisions of the Code does nor prejudice or impair vested or acquired rights in accordance with the old legislation and it cannot be alleged that in the case at bar Defendant had any vested or acquired right to betray the confidence of the insolvent CALI or of its creditors said new provisions, like those on Human Relations, can be given retroactive effect. Moreover, Article 2253 of the Civil Code further provides:chanroblesvirtuallawlibrary

Thus at one stroke, the legislator, if the forgoing rule is approved (as it was approved), would vouchsafe adequate legal remedy for that untold numbers of moral wrongs which is impossible for human foresight to provide for specifically in the statutes. But, it may be asked, would this proposed article obliterate the boundary line between morality and law? The answer is that, in the last analysis, every good law draws its breath of life from morals, from those principles which are written with words of fire in the conscience of man. If this premises is admitted, then the proposed rule is a prudent earnest of justice in the face of the impossibility of enumerating, one by one, all wrongs which cause damages. When it is reflected that while codes of law and statutes have changed from age to age, the conscience of man has remained fixed to its ancient moorings, one cannot but feel that it is safe and salutary to transmute, as far as may be, moral norms into legal rules, thus imparting to every legal system that enduring quality which ought to be one of its superlative attributes. Furthermore, there is no belief of more baneful consequence upon the social order than that a person may with impunity cause damage to his fellow-men so long as he does not

cralaw But if a right should be declared for the first time in this Code, it shall be effective at once, even though the act or event which may give rise thereto may have been done or may have occurred under the prior legislation, provided said new right does not prejudice or impair any vested or acquired right, of the same origin. and according to Article 2254, no vested or acquired right can arise from acts or omissions which are against the law or which infringe upon the right of others. In case of Juan Castro vs. Acro Taxicab Company, (82 Phil., 359; chan roblesvirtualawlibrary47 Off. Gaz., [5] 2023), one of the question at issue was whether or not the provisions of the New Civil Code of the Philippines on moral damages should be applied to an act of negligence which occurred before the effectivity of said code, and this Court, through Mr. Justice Briones, sustaining the affirmative proposition and citing decisions of the Supreme Court of Spain of February 14, 1941, and November 14, 1934, as well as the comment of Mr. Castan, Chief Justice of the Supreme Court of Spain, about the revolutionary tendency of Spanish jurisprudence, said the following:chanroblesvirtuallawlibrary We conclude, therefore, reaffirming the doctrine laid down in the case of Lilius (59 J. F. 800) in the sense that indemnity lies for moral and patrimonial damages which include physical and pain sufferings. With this (doctrine), We effect in this jurisdiction a real symbiosis 1 of the Spanish and American Laws and, at the same time, We act in consonance with the spirit and progressive march of time (translation) The writer of this decision does not see any reason for not applying the provisions of Section 37 of the Insolvency Law to the case at bar, specially if We take into consideration that the term any person used therein cannot be limited to the officers or employee of the insolvent, as no such limitation exist in the wording of the section (See also Sec. 38 of the same Act), and that, as stated before, the Defendant schemed and affected the transfer of its credits (from which it could derive practically nothing) to its sister corporation in the United States where CALIs plane C-54 was then situated, succeeding by such swift and unsuspected operation in disposing of said insolvents property by removing it from the possession and ownership of the insolvent. However, some members of this Court entertain doubt as to the applicability of said section 37 because in their opinion what Defendant in reality disposed of was its own credit and not the insolvents property, although this was practically the effect and result of the scheme. Having in mind this objection and that the provisions of Article 37 making the person coming within its purview liable for double the value of the property sought to be disposed of constitute a sort of penal clause which shall be strictly construed, and considering further that the same result may be obtained, by applying only the provisions of the Civil Code, the writer of this decision yields to the objection aforementioned. Articles 2229, 2232, 2234, 2142, follows:chanroblesvirtuallawlibrary and 2143 of the Civil Code read as

Art. 2234. While the amount of the exemplary damages need not be proved, the Plaintiff must show that he is entitled to moral, temperate, or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded. In case liquidated damages should be upon, although no proof of loss is necessary in order that such liquidated damages be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the Plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages. Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another. Art, 2143. The provisions for quasi-contracts in this Chapter do not exclude other quasicontracts which may come within the purview of the preceding article. In accordance with these quoted provisions of the Civil Code, We hold Defendant liable to pay to the Plaintiff, for the benefit of the insolvent CALI and its creditors, as compensatory damages a sum equivalent to the value of the plane at the time aforementioned and another equal sum as exemplary damages. There is no clear proof in the record about the real value of CALIs plane C -54 at the time when Defendants credit was assigned to its sister corporation in the United States. Judgment Wherefore, and on the strength of the foregoing considerations, the decision appealed from is reversed and Defendant-Appellee-, Shell Company of the Philippine Islands, Ltd., is hereby sentenced to pay to Plaintiff-Appellant, as Assignee of the insolvent CALI, damages in a sum double the amount of the value of the insolvents airplane C-54 at the time Defendants credit against the CALI was assigned to its sister corporation in the United States, which value shall be determined in the corresponding incident in the lower court after this decision becomes final. Costs are taxed against Defendant-Appellee. It is SO ORDERED. Paras, C.J., Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., and Endencia, concur.

RESOLUTION July 30, 1957

FELIX, J.: Plaintiff-Appellant and intervenors on one hand and Defendant Shell Company of the Philippine Islands, Ltd., on the other, have filed their respective motions for reconsideration of Our decision rendered in this case. The motion of Plaintiff Appellant and the intervenors seeks the reconsideration of said decision in so far as it held that:chanroblesvirtuallawlibrary There is no clear proof in the record about the real value of CALIs plane C -54, at the time when Defendants credit was assigned to its sister corporation in the United States.

Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. Art. 2232. In contracts quasi-contracts, the Court may award exemplary damages if the Defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

and, upon such holding, it orders that the value of the C-54 plane be determined in the corresponding incident in the lower Court after this decision becomes final. The movants maintain that there is evidence sufficient to support a finding that CALIs C -54 plane had a fair market value of $165,000 at or about the time Defendant credit was assigned to its sister corporation in the United States and the plane attached. This motion was opposed by Defendant-Appellee which was replied by Plaintiff- Appellant with a supplemental motion for reconsideration, and then retorted with a manifestation and motion of Defendant-Appellant followed by Defendants answer to Plaintiffs motion for reconsideration. After considering the evidence pointed out by said parties in support of their respective contentions, we are more convinced that the proofs relative to the real value of CALI plane C54 at the time Defendants credit was assigned to its sister corporation in the United States, is not clear. Hence, Plaintiff-Appellants and intervenors motion for reconsideration is hereby overruled. The main grounds on which Defendant-Appellee bases its motion for reconsideration, as relied upon in its counsels memoranda and oral argument, may be reduced to the following:chanroblesvirtuallawlibrary (1) That the Defendant Appellee is not guilty of bad faith, it having done nothing but to protect legitimately its own interest or credit against the bad faith of its debtor, the insolvent CALI, under the control of the latters President Alfonso Sycip; (2) That Appellees transfer of its credit to its sister corporation in the United States, did not prejudice the Government, because its claims were fully paid, nor caused any loss or injury to other creditors, except the entities and groups controlled by Alfonso Z. Sycip; (3) That Appellee is not liable for exemplary damages because the provisions of the new Civil Code on the matter are not applicable to this case; (4) That the Plaintiff-Appellant has no cause of action against Defendant-Appellant and is not the real party in interest; chan roblesvirtualawlibraryand (5) That Plaintiffs right of action was based and prosecuted in the lower court un der the provisions of the Insolvency Law and consequently that he is stopped from pursuing another theory and is not entitled to damages under the provisions of the New Civil Code. I. The facts on which this Court based its conclusion that Defendant corporation acted in bad faith are plainly and explicitly narrated in the decision. They are not and cannot be denied or contradicted by said Defendant. On the contrary they are in many respects admitted by the Defendant and no amount of reasoning can make Us change that conclusion. II. As pointed out by counsel for Plaintiff, Defendant choses to ignore that besides the claims of intervenors Alfonso Z. Sycip and Yek Hua Trading Corporation, which counsel for the Shell says to constitute 10/11 of the approved ordinary claims, there is still 1/11 of the other creditors whose claims have been also approved by the insolvency Court, in addition to the ordinary creditors whose claims are yet unapproved by the insolvency Court, amounting to P560,296,32, and no good reason suggests itself why these unapproved but pending claims should be taken into account in considering the prejudice caused all the creditors of the insolvent CALI. As long as these claims are pending, the contingency exist, that these

creditors may recover from the insolvent estate and when they do, they will suffer to the diminution of CALIs asset resulting from the attachment of the plane by Appellee Shell. Answering Defendants contention that the transfer of its credit to its sister corporation in the United States did not prejudice the Government or the other creditors of CALI, counsel for Plaintiff-Appellant has the following to say:chanroblesvirtuallawlibrary So far as the claims of the Government are concerned, it is true that they were preferr ed claims and have all been paid. But this circumstance cannot erase the fact that the Appellees action jeopardised the Governments claims as well as the other claims. There was doubt as to the preferential character of the Governments claims. Indeed, the preferential character of one of the Governments claims necessitated a litigation to establish. Had it been held to be an ordinary claim, the Government would have suffered as other creditors. But that is neither here nor there; chan roblesvirtualawlibraryneither the character of the claim nor the identity of the claimant can possibly affect the application of a principle that no person may profit from his betrayal of a trust. And the Appellant continues thus:chanroblesvirtuallawlibrary Appellee had a credit of P170,000 against the insolvent CALI as of August 1948, which is assigned to its sister corporation in the United States for P120.000. Hence, Appellee recovered 70% of its credit and immediately upon making the assignment in 1948. More than this, the stated consideration was fixed by and and between two sister companies. The fact remains that Appellees sister company was enabled to get hold of a C-54 plane worth about P330,000. On the other hand, the ordinary creditors who filed their claims against the insolvent CALI had to wait until November 1956 to get their dividends and only at the rate of 30%, computed as follows:chanroblesvirtuallawlibrary Assets as of October 30, 1956 P668,605.15 Less:chanroblesvirtuallawlibrary Preferred claims still uncollected, assignee and attorneys fees and other reserves P138,719.56 Amount available for distribution P529,885.59 Divident:chanroblesvirtuallawlibrary Amount available for distribution P529,885.59 = 30% Total of all ordinary claims approved and unapproved P1,746,222.33 Had Appellee not assigned its credit in 1948, the insolvent CALI would have realized from the sale of the plane (which was attached by Appellee) P330,000 representing the fair market value of the plane at the time of the attachment. Therefore, if this amount of P330,000 is

added to the distributable amount of P529,- 885.59, the share of each of the ordinary creditos would certainly amount to approximately 1 1/2 times the dividend each of them has received; chan roblesvirtualawlibraryin other words, each ordinary creditors would received not 30% but approximately 45% of his claim, and Appellee would recover approximately only 45% and not 70% of its credit. And even if the sale of CALIs plane would not have obtained the sum of P330,000.00, the proceeds thereof that might be diminished though affecting, no doubt, the calculated dividend of each of the ordinary creditors, estimated at 45% by reducing it proportionately, such diminution would at the same time increase the difference between the dividend paid CALIs ordinary creditors in November, 1956, and the dividend of 70% secured by Defendant Shell in 1948. III and IV. That Appellee Shell is not liable for exemplary damages in this case and that Plaintiff-Appellant has no cause of action against Defendant-Appellee, for he is not the real party in interest, are matters fully discussed in Our decision and We find no sensible reason for disturbing the conclusions We reached therein. V. As to the fifth question raised by counsel for Appellee in the course of his oral argument at the hearing in the City of Baguio of his motion, i.e., that Plaintiffs right of action was based and prosecuted in the lower court under the provisions of the Insolvency Law and he is, therefore, stopped from pursuing on appeal another theory under which he might be entitled to damages in consonance with the provisions of the new Civil Code, We may invoke the decision in the case of Dimaliwat vs. Asuncion, 59 Phil., 396, 401. In that decision We said the following:chanroblesvirtuallawlibrary Vicente Dimaliwat contends that Esperanza Dimaliwat has no right to claim the ownership of the property in question to the exclusion of the children of the third marriage, under the foregoing provisions of the Civil Code, because the case was not tried on that theory in the lower court. We find no merit in that contention. The decision cited are not in point. Articles 968 and 969 of the Civil Code are rules of substantive law, and if they are applicable to the facts of this case they must be given effect. The same thing can be said in the case at bar. Articles 19, 21, 2229, 2232, 2234, 2142 and 2143 of the new Civil Code are rules of substantive law, and if they are applicable to the facts of this case, which We hold they do, they must be made operative and given effect in this litigation. xxx xxx xxx

by the assignee for double the value of the property sought to be embezzled or disposed of, to be received for the benefit of the insolvent estate. The writer of the decision was then and still is of the opinion that the provisions of this section were applicable to the case, and accordingly, that Defendant Shell was liable in this action instituted by the Assignee for double the value of the property disposed of, to be received for the benefit of the Insolvent estate. However, some of the members of this Court, for the reasons already stated in the decision, entertained some doubt as to the applicability of said Section 37, and yielding to their objections the writer of the decision turned his eyes to the provisions of the new Civil Code, inasmuch as the same result could be achieved. In the case at bar, it cannot be denied that:chanroblesvirtuallawlibrary Defendant taking advantage of his knowledge that insolvency proceedings were to be instituted by CALI if the creditors did not come to an understanding as to the manner of distribution of the insolvent assets among them, and believing as most probable that they would not arrive at such understanding, as it was really the case- schemed and effected the transfer of its credit to its sister corporation in the United States where CALIs plane C-54 was and by this swift and unsuspected operation efficaciously disposed of said insolvents property depriving the latter and the Assignee that was later appointed, of the opportunity to recover said plane. These acts of Defendant Shell come squarely within the sanction prescribed by Congress by similar acts and no reflection can be reasonably cast on Us if in the measure of the exemplary damages that were to be imposed upon Defendant-Appellee, We were influenced by the provisions of Section 37 of the Insolvency Law. In this connection it is to be noted that, according to the Civil Code, exemplary or corrective damages are imposed by way of example or correction for the public good, in addition of the moral, temperate, liquidated or compensatory damages Art. 2229, and that the amount of the exemplary damages need not be proved (Art. 2234), for it is left to the sound discretion of the Court. Notwithstanding the foregoing, a majority of this Court was of the belief that the value of CALIs plane C-54, at the time when Defendants credit was assigned to its sister corporation in the United States, might result quite high, and that exemplary damages should not be left to speculation but properly determined by a certain and fixed amount. So they voted for the reconsideration of the decision with regard to the amount of exemplary damages which this Court fixed at P25,000.00. Because of this attitude of the Court, the dispositive part of our decision rendered in this case is hereby amended to read as follows:chanroblesvirtuallawlibrary Wherefore, and on the strength of the foregoing considerations, the decision appealed from is reversed and Defendant-Appellee, Shell Company of the Philippine Islands Ltd., is hereby sentenced to pay Plaintiff-Appellant, as Assignee of the insolvent CALI, compensatory damages in a sum equal to the value of the insolvents airplane C -54 at the time Defendants credit against CALI was assigned to its sister corporation in the United States - which shall be determined in the corresponding incident in the lower Court after this decision becomes final - and exemplary damages in the sum of P25,000. Costs are taxed against Defendant-Appellee. It is SO ORDERED. Pars, C.J., Padilla, Concepcion and Endencia, JJ., concur.

It maybe seen from the foregoing that the above mentioned grounds on which the motion for reconsideration of the Defendant Shell stand, are not well taken. However, and despite this finding, We insist to delve in the question of whether the exemplary damages imposed in this Court upon Defendant Appellee, which the latters counsel contends to be inequitable and unfair, may be modified. It will be remembered that this case was looked into from the point of view of the provisions of Section 37 of the Insolvency Law, which reads as follows:chanroblesvirtuallawlibrary SEC. 37. IF ANY PERSON, before the assignment is made, having notice of the commencement of the proceedings in insolvency, or having reason to believe that insolvency proceedings are about to be commenced, embezzles or disposses of any of the money, goods, chattels, or effects of the insolvent, he is chargeable therewith, and liable to an action

Separate Opinions

MONTEMAYOR, J., concurring:chanroblesvirtuallawlibrary We concur, but we feel that the ends of justice would be sufficiently served if the exemplary damages were reduced to P10,000. Reyes, Bengzon, Bautista Angelo and Labrador, JJ., concur.

both Saudi nationals. Because it was almost morning when they returned to their hotels, they agreed to have breakfast together at the room of Thamer. When they were in te (sic) room, Allah left on some pretext. Shortly after he did, Thamer attempted to rape plaintiff. Fortunately, a roomboy and several security personnel heard her cries for help and rescued her. Later, the Indonesian police came and arrested Thamer and Allah Al-Gazzawi, the latter as an accomplice. When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her about the Jakarta incident. They then requested her to go back to Jakarta to help arrange the release of Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad and base manager Baharini negotiated with the police for the immediate release of the detained crew members but did not succeed because plaintiff refused to cooperate. She was afraid that she might be tricked into something she did not want because of her inability to understand the local dialect. She also declined to sign a blank paper and a document written in the local dialect. Eventually, SAUDIA allowed plaintiff to return to Jeddah but barred her from the Jakarta flights. Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to deport Thamer and Allah after two weeks of detention. Eventually, they were again put in service by defendant SAUDI (sic). In September 1990, defendant SAUDIA transferred plaintiff to Manila. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors requested her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where the police took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the police put pressure on her to make a statement dropping the case against Thamer and Allah. Not until she agreed to do so did the police return her passport and allowed her to catch the afternoon flight out of Jeddah. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to Manila, plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was asked to sign a document written in Arabic. They told her that this was necessary to close the case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance from SAUDIAs Manila manager, Aslam Saleemi, that the investigation was routinary and that it posed no danger to her. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her that the airline had forbidden her

Endnotes:chanroblesvirtuallawlibrary 1. SYMBIOSIS Biol. The living together in more or less intimate association or even close union of two dissimilar organisms. In a broad sense the term includes parasitism or antagonistic or antipathetic symbiosis in which the association is disadvantageous or destructive to one of the organism, but ordinarily it is used of cases where the association is advantageous, or often necessary, to one or both, and not harmful to either. (Websters New International Dictionary, 2nd Ed., p. 2555).

FIRST DIVISION [G.R. No. 122191. October 8, 1998] SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF APPEALS, MILAGROS P. MORADA and HON. RODOLFO A. ORTIZ, in his capacity as Presiding Judge of Branch 89, Regional Trial Court of Quezon City, respondents. DECISION QUISUMBING, J.: This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set aside the Resolutioni[1] dated September 27, 1995 and the Decisionii[2] dated April 10, 1996 of the Court of Appealsiii[3] in CA-G.R. SP No. 36533,iv[4] and the Ordersv[5] dated August 29, 1994vi[6] and February 2, 1995vii[7] that were issued by the trial court in Civil Case No. Q-93-18394.viii[8] The pertinent antecedent facts which gave rise to the instant petition, as stated in the questioned Decisionix[9], are as follows: On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines based in Jeddah, Saudi Arabia. x x x On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance with fellow crew members Thamer Al-Gazzawi and Allah Al-Gazzawi,

to take flight. At the Inflight Service Office where she was told to go, the secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at the crew quarters, until further orders. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment and shock, rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing and listening to the music in violation of Islamic laws; and (3) socializing with the male crew, in contravention of Islamic tradition.x[10] Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA. Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in Jeddah to help her while her case is on appeal. Meanwhile, to pay for her upkeep, she worked on the domestic flight of SAUDIA, while Thamer and Allah continued to serve in the international flights.xi[11] Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her and allowed her to leave Saudi Arabia. Shortly before her return to Manila,xii[12] she was terminated from the service by SAUDIA, without her being informed of the cause. On November 23, 1993, Morada filed a Complaintxiii[13] for damages against SAUDIA, and Khaled Al-Balawi (Al- Balawi), its country manager. On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismissxiv[14] which raised the following grounds, to wit: (1) that the Complaint states no cause of action against Saudia; (2) that defendant Al-Balawi is not a real party in interest; (3) that the claim or demand set forth in the Complaint has been waived, abandoned or otherwise extinguished; and (4) that the trial court has no jurisdiction to try the case. On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss)xv[15] Saudia filed a replyxvi[16] thereto on March 3, 1994. On June 23, 1994, Morada filed an Amended Complaintxvii[17] wherein Al-Balawi was dropped as party defendant. On August 11, 1994, Saudia filed its Manifestation and Motion to Dismiss Amended Complaintxviii[18]. The trial court issued an Orderxix[19] dated August 29, 1994 denying the Motion to Dismiss Amended Complaint filed by Saudia. From the Order of respondent Judgexx[20] denying the Motion to Dismiss, SAUDIA filed on September 20, 1994, its Motion for Reconsiderationxxi[21] of the Order dated August 29, 1994. It alleged that the trial court has no jurisdiction to hear and try the case on the basis of Article 21 of the Civil Code, since the proper law applicable is the law of the Kingdom of Saudi

Arabia. On October 14, 1994, Morada filed her Oppositionxxii[22] (To Defendants Motion for Reconsideration). In the Replyxxiii[23] filed with the trial court on October 24, 1994, SAUDIA alleged that since its Motion for Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus Motion Rule does not apply, even if that ground is raised for the first time on appeal. Additionally, SAUDIA alleged that the Philippines does not have any substantial interest in the prosecution of the instant case, and hence, without jurisdiction to adjudicate the same. Respondent Judge subsequently issued another Orderxxiv[24] dated February 2, 1995, denying SAUDIAs Motion for Reconsideration. The pertinent portion of the assailed Order reads as follows: Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru counsel, on September 20, 1994, and the Opposition thereto of the plaintiff filed, thru counsel, on October 14, 1994, as well as the Reply therewith of defendant Saudi Arabian Airlines filed, thru counsel, on October 24, 1994, considering that a perusal of the plaintiffs Amended Complaint, which is one for the recovery of actual, moral and exemplary damages plus attorneys fees, upon the basis of the applicable Philippine law, Article 21 of the New Civil Code of the Philippines, is, clearly, within the jurisdiction of this Court as regards the subject matter, and there being nothing new of substance which might cause the reversal or modification of the order sought to be reconsidered, the motion for reconsideration of the defendant, is DENIED. SO ORDERED.xxv[25] Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition with Prayer for Issuance of Writ of Preliminary Injunction and/or Temporary Restraining Orderxxvi[26] with the Court of Appeals. Respondent Court of Appeals promulgated a Resolution with Temporary Restraining Orderxxvii[27] dated February 23, 1995, prohibiting the respondent Judge from further conducting any proceeding, unless otherwise directed, in the interim. In another Resolutionxxviii[28] promulgated on September 27, 1995, now assailed, the appellate court denied SAUDIAs Petition for the Issuance of a Writ of Preliminary Injunction dated February 18, 1995, to wit: The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED, after considering the Answer, with Prayer to Deny Writ of Preliminary Injunction (Rollo, p. 135) the Reply and Rejoinder, it appearing that herein petitioner is not clearly entitled thereto (Unciano Paramedical College, et. Al., v. Court of Appeals, et. Al., 100335, April 7, 1993, Second Division). SO ORDERED.

On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petitionxxix[29] for Review with Prayer for Temporary Restraining Order dated October 13, 1995. However, during the pendency of the instant Petition, respondent Court of Appeals rendered the Decisionxxx[30] dated April 10, 1996, now also assailed. It ruled that the Philippines is an appropriate forum considering that the Amended Complaints basis for recovery of damages is Article 21 of the Civil Code, and thus, clearly within the jurisdiction of respondent Court. It further held that certiorari is not the proper remedy in a denial of a Motion to Dismiss, inasmuch as the petitioner should have proceeded to trial, and in case of an adverse ruling, find recourse in an appeal. On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary Restraining Orderxxxi[31] dated April 30, 1996, given due course by this Court. After both parties submitted their Memoranda,xxxii[32] the instant case is now deemed submitted for decision. Petitioner SAUDIA raised the following issues: I The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394 based on Article 21 of the New Civil Code since the proper law applicable is the law of the Kingdom of Saudi Arabia inasmuch as this case involves what is known in private international law as a conflicts problem. Otherwise, the Republic of the Philippines will sit in judgment of the acts done by another sovereign state which is abhorred. II. Leave of court before filing a supplemental pleading is not a jurisdictional requirement. Besides, the matter as to absence of leave of court is now moot and academic when this Honorable Court required the respondents to comment on petitioners April 30, 1996 Supplemental Petition For Review With Prayer For A Temporary Restraining Order Within Ten (10) Days From Notice Thereof. Further, the Revised Rules of Court should be construed with liberality pursuant to Section 2, Rule 1 thereof. III. Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533 entitled Saudi Arabian Airlines v. Hon. Rodolfo A. Ortiz, et al. and filed its April 30, 1996 Supplemental Petition For Review With Prayer For A Temporary Restraining Order on May 7, 1996 at 10:29 a.m. or within the 15-day reglementary period as provided for under Section 1, Rule 45 of the Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO. 36533 has not yet become final and executory and this Honorable Court can take cognizance of this case.xxxiii[33] From the foregoing factual and procedural antecedents, the following issues emerge for our resolution:

I. WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE REGIONAL TRIAL COURT OF QUEZON CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE NO. Q-93-18394 ENTITLED MILAGROS P. MORADA V. SAUDI ARABIAN AIRLINES. II. WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THE CASE PHILIPPINE LAW SHOULD GOVERN. Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It maintains that private respondents claim for alleged abuse of rights occurred in the Kingdom of Saudi Arabia. It alleges that the existence of a foreign element qualifies the instant case for the application of the law of the Kingdom of Saudi Arabia, by virtue of the lex loci delicti commissi rule.xxxiv[34] On the other hand, private respondent contends that since her Amended Complaint is based on Articles 19xxxv[35] and 21xxxvi[36] of the Civil Code, then the instant case is properly a matter of domestic law.xxxvii[37] Under the factual antecedents obtaining in this case, there is no dispute that the interplay of events occurred in two states, the Philippines and Saudi Arabia. As stated by private respondent in her Amended Complaintxxxviii[38] dated June 23, 1994: 2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation doing business in the Philippines. It may be served with summons rd and other court processes at Travel Wide Associated Sales (Phils.), Inc., 3 Floor, Cougar Building, 114 Valero St., Salcedo Village, Makati, Metro Manila. xxx xxx xxx

6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to deport Thamer and Allah after two weeks of detention. Eventually, they were again put in service by defendant SAUDIA. In September 1990, defendant SAUDIA transferred plaintiff to Manila. 7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors requested her to see MR. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where the police took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the police put pressure on her to make a statement dropping the case against Thamer and Allah. Not until she agreed to do so did the police return her passport and allowed her to catch the afternoon flight out of Jeddah.

8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to Manila, plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was asked to sign a document written in Arabic. They told her that this was necessary to close the case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila. 9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance from SAUDIAs Manila manager, Aslam Saleemi, that the investigation was routinary and that it posed no danger to her. 10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her that the airline had forbidden her to take that flight. At the Inflight Service Office where she was told to go, the secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at the crew quarters, until further orders. 11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment and shock, rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing, and listening to the music in violation of Islamic laws; (3) socializing with the male crew, in contravention of Islamic tradition. 12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the Philippine Embassy in Jeddah. The latter helped her pursue an appeal from the decision of the court. To pay for her upkeep, she worked on the domestic flights of defendant SAUDIA while, ironically, Thamer and Allah freely served the international flights.xxxix[39] Where the factual antecedents satisfactorily establish the existence of a foreign element, we agree with petitioner that the problem herein could present a conflicts case. A factual situation that cuts across territorial lines and is affected by the diverse laws of two or more states is said to contain a foreign element. The presence of a foreign element is inevitable since social and economic affairs of individuals and associations are rarely confined to the geographic limits of their birth or conception.xl[40] The forms in which this foreign element may appear are many.xli[41] The foreign element may simply consist in the fact that one of the parties to a contract is an alien or has a foreign

domicile, or that a contract between nationals of one State involves properties situated in another State. In other cases, the foreign element may assume a complex form.xlii[42] In the instant case, the foreign element consisted in the fact that private respondent Morada is a resident Philippine national, and that petitioner SAUDIA is a resident foreign corporation. Also, by virtue of the employment of Morada with the petitioner Saudia as a flight stewardess, events did transpire during her many occasions of travel across national borders, particularly from Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a conflicts situation to arise. We thus find private respondents assertion that the case is purely domestic, imprecise. A conflicts problem presents itself here, and the question of jurisdictionxliii[43] confronts the court a quo. After a careful study of the private respondents Amended Complaint,xliv[44] and the Comment thereon, we note that she aptly predicated her cause of action on Articles 19 and 21 of the New Civil Code. On one hand, Article 19 of the New 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 everyone his due and observe honesty and good faith. On the other hand, Article 21 of the New Civil Code provides: 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 damages. Thus, in Philippine National Bank (PNB) vs. Court of Appeals,xlv[45] this Court held that: The aforecited provisions on human relations were intended to expand the concept of torts in this jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to specifically provide in the statutes. Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions. Thus, we agree with private respondents assertion that violations of Articles 19 and 21 are actionable, with judicially enforceable remedies in the municipal forum. Based on the allegationsxlvi[46] in the Amended Complaint, read in the light of the Rules of Court on jurisdictionxlvii[47] we find that the Regional Trial Court (RTC) of Quezon City possesses jurisdiction over the subject matter of the suit.xlviii[48] Its authority to try and hear the case is provided for under Section 1 of Republic Act No. 7691, to wit:

Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act of 1980, is hereby amended to read as follows: SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive jurisdiction: xxx xxx xxx

Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By filing her Complaint and Amended Complaint with the trial court, private respondent has voluntary submitted herself to the jurisdiction of the court. The records show that petitioner SAUDIA has filed several motionsl[50] praying for the dismissal of Moradas Amended Complaint. SAUDIA also filed an Answer In Ex Abundante Cautelam dated February 20, 1995. What is very patent and explicit from the motions filed, is that SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA has effectively submitted to the trial courts jurisdiction by praying for the dismissal of the Amended Complaint on grounds other than lack of jurisdiction. As held by this Court in Republic vs. Ker and Company, Ltd.:li[51] We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the lower courts jurisdiction over defendants person, prayed for dismissal of the complaint on the ground that plaintiffs cause of action has prescribed. By interposing such second ground in its motion to dismiss, Ker and Co., Ltd. availed of an affirmative defense on the basis of which it prayed the court to resolve controversy in its favor. For the court to validly decide the said plea of defendant Ker & Co., Ltd., it necessarily had to acquire jurisdiction upon the latters person, who, being the proponent of the affirmative defense, should be deemed to have abandoned its special appearance and voluntarily submitted itself to the jurisdiction of the court. Similarly, the case of De Midgely vs. Ferandos, held that: When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the person, it must be for the sole and separate purpose of objecting to the jurisdiction of the court. If his motion is for any other purpose than to object to the jurisdiction of the court over his person, he thereby submits himself to the jurisdiction of the court. A special appearance by motion made for the purpose of objecting to the jurisdiction of the court over the person will be held to be a general appearance, if the party in said motion should, for example, ask for a dismissal of the action upon the further ground that the court had no jurisdiction over the subject matter.lii[52] Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City. Thus, we find that the trial court has jurisdiction over the case and that its exercise thereof, justified. As to the choice of applicable law, we note that choice-of-law problems seek to answer two important questions: (1) What legal system should control a given situation where some of the significant facts occurred in two or more states; and (2) to what extent should the chosen legal system regulate the situation.liii[53]

(8) In all other cases in which demand, exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the above-mentioned items exceeds Two hundred Thousand pesos (P200,000.00). (Emphasis ours) xxx xxx xxx

And following Section 2 (b), Rule 4 of the Revised Rules of Courtthe venue, Quezon City, is appropriate: SEC. 2 Venue in Courts of First Instance. [Now Regional Trial Court] (a) x x x xxx xxx

(b) Personal actions. All other actions may be commenced and tried where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiff resides, at the election of the plaintiff. Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor of the RTC Quezon City assuming jurisdiction. Paramount is the private interest of the litigant. Enforceability of a judgment if one is obtained is quite obvious. Relative advantages and obstacles to a fair trial are equally important. Plaintiff may not, by choice of an inconvenient forum, vex, harass, or oppress the defendant, e.g. by inflicting upon him needless expense or disturbance. But unless the balance is strongly in favor of the defendant, the plaintiffs choice of forum should rarely be disturbed. xlix[49] Weighing the relative claims of the parties, the court a quo found it best to hear the case in the Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff (private respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi Arabia where she no longer maintains substantial connections. That would have caused a fundamental unfairness to her. Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience have been shown by either of the parties. The choice of forum of the plaintiff (now private respondent) should be upheld.

Several theories have been propounded in order to identify the legal system that should ultimately control. Although ideally, all choice-of-law theories should intrinsically advance both notions of justice and predictability, they do not always do so. The forum is then faced with the problem of deciding which of these two important values should be stressed.liv[54] Before a choice can be made, it is necessary for us to determine under what category a certain set of facts or rules fall. This process is known as characterization, or the doctrine of qualification. It is the process of deciding whether or not the facts relate to the kind of question specified in a conflicts rule.lv[55] The purpose of characterization is to enable the forum to select the proper law.lvi[56] Our starting point of analysis here is not a legal relation, but a factual situation, event, or operative fact.lvii[57] An essential element of conflict rules is the indication of a test or connecting factor or point of contact. Choice-of-law rules invariably consist of a factual relationship (such as property right, contract claim) and a connecting factor or point of contact, such as the situs of the res, the place of celebration, the place of performance, or the place of wrongdoing.lviii[58] Note that one or more circumstances may be present to serve as the possible test for the determination of the applicable law.lix[59] These test factors or points of contact or connecting factors could be any of the following: (1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin; (2) the seat of a legal or juridical person, such as a corporation; (3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In particular, the lex situs is decisive when real rights are involved; (4) the place where an act has been done, the locus actus, such as the place where a contract has been made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is particularly important in contracts and torts; (5) the place where an act is intended to come into effect, e.g., the place of performance of contractual duties, or the place where a power of attorney is to be exercised; (6) the intention of the contracting parties as to the law that should govern their agreement, the lex loci intentionis; (7) the place where judicial or administrative proceedings are instituted or done. The lex forithe law of the forumis particularly important because, as we have seen earlier, matters of procedure not going to the substance of the claim involved are governed by it; and because the lex fori applies whenever the content of the otherwise applicable foreign law is excluded from application in a given case for the reason that it falls under one of the exceptions to the applications of foreign law; and

(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the ship and of its master or owner as such. It also covers contractual relationships particularly contracts of affreightment.lx[60] (Underscoring ours.) After a careful study of the pleadings on record, including allegations in the Amended Complaint deemed submitted for purposes of the motion to dismiss, we are convinced that there is reasonable basis for private respondents assertion that although she was already working in Manila, petitioner brought her to Jeddah on the pretense that she would merely testify in an investigation of the charges she made against the two SAUDIA crew members for the attack on her person while they were in Jakarta. As it turned out, she was the one made to face trial for very serious charges, including adultery and violation of Islamic laws and tradition. There is likewise logical basis on record for the claim that the handing over or turning over of the person of private respondent to Jeddah officials, petitioner may have acted beyond its duties as employer. Petitioners purported act contributed to and amplified or even proximately caused additional humiliation, misery and suffering of private respondent. Petitioner thereby allegedly facilitated the arrest, detention and prosecution of private respondent under the guise of petitioners authority as employer, taking advantage of the trust, confidence and faith she reposed upon it. As purportedly found by the Prince of Makkah, the alleged conviction and imprisonment of private respondent was wrongful. But these capped the injury or harm allegedly inflicted upon her person and reputation, for which petitioner could be liable as claimed, to provide compensation or redress for the wrongs done, once duly proven. Considering that the complaint in the court a quo is one involving torts, the connecting factor or point of contact could be the place or places where the tortious conduct or lex loci actus occurred. And applying the torts principle in a conflicts case, we find that the Philippines could be said as a situs of the tort (the place where the alleged tortious conduct took place). This is because it is in the Philippines where petitioner allegedly deceived private respondent, a Filipina residing and working here. According to her, she had honestly believed that petitioner would, in the exercise of its rights and in the performance of its duties, act with justice, give her her due and observe honesty and good faith. Instead, petitioner failed to protect her, she claimed. That certain acts or parts of the injury allegedly occurred in another country is of no moment. For in our view what is important here is the place where the over-all harm or the fatality of the alleged injury to the person, reputation, social standing and human rights of complainant, had lodged, according to the plaintiff below (herein private respondent). All told, it is not without basis to identify the Philippines as the situs of the alleged tort. Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi, modern theories and rules on tort liabilitylxi[61] have been advanced to offer fresh judicial approaches to arrive at just results. In keeping abreast with the modern theories on tort liability, we find here an occasion to apply the State of the most significant relationship rule, which in our view should be appropriate to apply now, given the factual context of this case.

In applying said principle to determine the State which has the most significant relationship, the following contacts are to be taken into account and evaluated according to their relative importance with respect to the particular issue: (a) the place where the injury occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered.lxii[62] As already discussed, there is basis for the claim that over-all injury occurred and lodged in the Philippines. There is likewise no question that private respondent is a resident Filipina national, working with petitioner, a resident foreign corporation engaged here in the business of international air carriage. Thus, the relationship between the parties was centered here, although it should be stressed that this suit is not based on mere labor law violations. From the record, the claim that the Philippines has the most significant contact with the matter in this dispute,lxiii[63] raised by private respondent as plaintiff below against defendant (herein petitioner), in our view, has been properly established. Prescinding from this premise that the Philippines is the situs of the tort complaint of and the place having the most interest in the problem, we find, by way of recapitulation, that the Philippine law on tort liability should have paramount application to and control in the resolution of the legal issues arising out of this case. Further, we hold that the respondent Regional Trial Court has jurisdiction over the parties and the subject matter of the complaint; the appropriate venue is in Quezon City, which could properly apply Philippine law. Moreover, we find untenable petitioners insistence that *s+ince private respondent instituted this suit, she has the burden of pleading and proving the applicable Saudi law on the matter.lxiv[64] As aptly said by private respondent, she has no obligation to plead and prove the law of the Kingdom of Saudi Arabia since her cause of action is based on Articles 19 and 21 of the Civil Code of the Philippines. In her Amended Complaint and subsequent pleadings she never alleged that Saudi law should govern this case.lxv[65] And as correctly held by the respondent appellate court, considering that it was the petitioner who was invoking the applicability of the law of Saudi Arabia, thus the burden was on it [petitioner] to plead and to establish what the law of Saudi Arabia is.lxvi[66] Lastly, no error could be imputed to the respondent appellate court in upholding the trial courts denial of defendants (herein petitioners) motion to dismiss the case. Not only was jurisdiction in order and venue properly laid, but appeal after trial was obviously available, and the expeditious trial itself indicated by the nature of the case at hand. Indubitably, the Philippines is the state intimately concerned with the ultimate outcome of the case below not just for the benefit of all the litigants, but also for the vindication of the countrys system of law and justice in a transnational setting. With these guidelines in mind, the trial court must proceed to try and adjudge the case in the light of relevant Philippine law, with due consideration of the foreign element or elements involved. Nothing said herein, of course, should be construed as prejudging the results of the case in any manner whatsoever. WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-9318394 entitled Milagros P. Morada vs. Saudi Arabia Airlines is hereby REMANDED to Regional Trial Court of Quezon City, Branch 89 for further proceedings.

SO ORDERED. Davide, Jr., (Chairman), Bellosillo, Vitug, and Panganiban, JJ., concur.

i[1] Annex A, PETITION, October 13, 1995, rollo, p. 36. ii[2] Annex A, SUPPLEMENTAL PETITION, April 30, 1996, rollo, pp. 88-102. iii[3] Penned by Associate Justice Bernardo Ll. Salas, and concurred in by Associate Justice Jorge S. Imperial and Associate Justice Pacita Caizares-Nye. iv[4] Entitled Saudi Arabian Airlines vs. Hon. Judge Rodolfo A. Ortiz, in his capacity as Presiding Judge of Branch 89 of the Regional Trial Court of Quezon City and Milagros P. Morada. v[5] Issued by respondent Judge Hon. Rodolfo A. Ortiz of Branch 89, Regional Trial Court of Quezon City. vi[6] Annex B, PETITION, October 13, 1995, rollo, pp. 37-39. vii[7] Annex B, PETITION, October 13, 1995, rollo, p. 40. viii[8] Entitled Milagros P. Morada vs. Saudi Arabian Airlines. ix[9] Supra, note 2. x[10] Decision, pp. 2-4; See Rollo, pp. 89-91. xi[11] Private respondent's Comment; rollo, p. 50. xii[12] Ibid., at pp. 50-51. xiii[13] Dated November 19, 1993 and docketed as Civil Case No. Q-93-18394, Branch 89, Regional Trial Court of Quezon City. xiv[14] Dated January 14, 1994. xv[15] Dated February 4, 1994.

xvi[16] Reply dated March 1, 1994. xvii[17] Records, pp. 65-84. xviii[18] Rollo, p. 65. xix[19] Supra, note 6. xx[20] Hon. Rodolfo A. Ortiz. xxi[21] Dated September 19, 1994. xxii[22] Records, pp. 108-116. xxiii[23] Records, pp. 117-128. xxiv[24] Supra, note 7. xxv[25] Ibid. xxvi[26] Dated February 18, 1995; see supra note 4. xxvii[27] Supra, note 7. xxviii[28] Records, p. 180. xxix[29] Rollo, pp. 1-44. xxx[30] Supra, note 2. xxxi[31] Rollo, pp. 80-86. xxxii[32] Memorandum for Petitioner dated October 9, 1996; rollo, pp. 149-180; and Memorandum for Private Respondent, 30 October 1996, rollo, pp. 182-210. xxxiii[33] Rollo, pp. 157-159. All caps in the original. xxxiv[34] Memorandum for Petitioner, p. 14, rollo, p. 162;. xxxv[35] 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.

xxxvi[36] Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damages. xxxvii[37] Memorandum for Private Respondent, p. 9, rollo, p. 190. xxxviii[38] Records, pp. 65-71. xxxix[39] Supra, note 17, at pp. 65-68. xl[40] Salonga, Private International Law, 1995 edition, p. 3. xli[41] Ibid., citing Cheshire and North, Private International Law, p. 5 by P.M. North and J.J. Faucett (Butterworths; London, 1992). xlii[42] Ibid. xliii[43] Paras, Philippine Conflict of Laws, sixth edition (1984), p. 24, citing Leflar, The Law of Conflict of Laws, pp. 5-6. xliv[44] Supra, note 17. xlv[45] 83 SCRA 237, 247. xlvi[46] Supra, note at 17, at p. 6. Morada prays that judgment be rendered against Saudia, ordering it to pay: (1) not less than P250,000.00 as actual damages; (2) P4 million in moral damages; (3) P500,000.00 in exemplary damages; and (4) P500,000.00 in attorneys fees. xlvii[47] Baguioro v. Barrios, 77 Phil. 120. xlviii[48] Jurisdiction over the subject matter is conferred by law and is defined as the authority of a court to hear and decide cases of the general class to which the proceedings in question belong. (Reyes v. Diaz, 73 Phil. 484,487) xlix[49] Supra, note 37, p. 58, citing Gulf Oil Corporation v. Gilbert, 350 U.S. 501, 67 Sup. Ct. 839 (1947). l[50] Omnibus Motion to Dismiss dated January 14, 1994; Reply (to Plaintiffs Opposition) dated February 19, 1994; Comment (to Plaintiffs Motion to Admit Amended Complaint dated June 23, 1994) dated July 20, 1994; Manifestation and Motion to Dismiss Amended Complaint dated June 23, 1994 under date August 11, 1994; and Motion for Reconsideration dated September 19, 1994.

li[51] 18 SCRA 207, 213-214. lii[52] 64 SCRA 23, 31.

SERGIO AMONOY, petitioner, vs. Spouses JOSE GUTIERREZ and ANGELA FORNILDA, respondents. DECISION

liii[53] Coquia and Pangalangan, Conflict of Laws, 1995 edition, p. 65, citing Von Mehren, Recent Trends in Choice-of-Law Methodology, 60 Cornell L. Rev. 927 (1975). liv[54] Ibid. lv[55] Supra, note 40 at p. 94, citing Falconbridge, Essays on the Conflict of Laws, p. 50. lvi[56] Ibid. lvii[57] Supra, note 37, at p. 136; cf. Mussbaum, Principle of Private International Law, p. 173; and Rabel, The Conflict of Laws: A Comparative Study, pp. 51-52. lviii[58] Supra, note 37, at p. 137. lix[59] Ibid. lx[60] Supra, note 37, at pp. 138-139. lxi[61] Includes the (1) German rule of elective concurrence; (2) State of the most significant relationship rule (the Second Restatement of 1969); (3) State interest analysis; and (4) Cavers Principle of Preference. lxii[62] Supra, note 37, p. 396. lxiii[63] Supra, note 59, at p. 79, citing Ruben v. Irving Trust Co., 305 N.Y. 288, 305, 113 N.E. 2d 424, 431. lxiv[64] Memorandum for Petitioner, p. 22; Rollo, p. 170. lxv[65] Memorandum for Private Respondent, pp. 21-22; rollo, pp. 202-203. lxvi[66] CA Decision, p. 10; rollo, p. 97. THIRD DIVISION [G.R. No. 140420. February 15 , 2001]

PANGANIBAN, J.: Damnum absque injuria. Under this principle, the legitimate exercise of a persons rights, even if it causes loss to another, does not automatically result in an actionable injury. The law does not prescribe a remedy for the loss. This principle does not, however, apply when there is an abuse of a persons right, or when the exercise of this right is suspended or extinguished pursuant to a court order. Indeed, in the availment of ones rights, one must act with justice, give others their due, and observe honesty and good faith.
The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the April 21, 1999 Decisionlxvi[1] of the Court of Appeals (CA) in CA-GR CV No. 41451, which set aside the judgmentlxvi[2] of the Regional Trial Court (RTC) of Tanay, Rizal. The RTC had earlier dismissed the Complaint for damages filed by herein respondents against petitioner. The dispositive portion of the challenged CA Decision reads as follows: WHEREFORE, the appealed Decision is SET ASIDE, and in its stead judgment is rendered ordering the defendant-appellee Sergio Amonoy to pay the plaintiffs-appellants Bruno and Bernardina Gutierrez as actual damages the sum of [t]wo [h]undred [f]ifty [t]housand [p]esos (P250,000.00).lxvi[3] Likewise assailed is the October 19, 1999 CA Resolution,lxvi[4] which denied the Motion for Reconsideration.
The Facts

The appellate court narrated the factual antecedents of this case as follows: This case had its roots in Special Proceedings No. 3103 of Branch I of the CFI of Pasig, Rizal, for the settlement of the estate of the deceased Julio Cantolos, involving six (6) parcels of land situated in Tanay, Rizal. Amonoy was the counsel of therein Francisca Catolos, Agnes Catolos, Asuncion Pasamba and Alfonso Formilda. On 12 January 1965, the Project of Partition submitted was approved and x x x two (2) of the said lots were adjudicated to Asuncion Pasamba and Alfonso Formilda. The attorneys fees charged by Amonoy was P27,600.00 and on 20 January 1965 Asuncion Pasamba and Alfonso Formilda executed a deed of real estate mortgage on the said two (2) lots adjudicated to them, in favor of Amonoy to secure the payment of his attorneys fees. But it was only on 6 August 1969 after the taxes had been paid, the claims settled and the properties adjudicated, that the estate was declared closed and terminated.

Asuncion Pasamba died on 24 February 1969 while Alfonso Fornilda passed away on 2 July 1969. Among the heirs of the latter was his daughter, plaintiff-appellant Angela Gutierrez. Because his attorneys fees thus secured by the two lots were not paid, on 21 January 1970 Amonoy filed for their foreclosure in Civil Case No. 12726 entitled Sergio Amonoy vs. Heirs of Asuncion Pasamba and Heirs of Alfonso Fornilda before the CFI of Pasig, Rizal, and this was assigned to Branch VIII. The heirs opposed, contending that the attorneys fees charged [were] unconscionable and that the agreed sum was only P11,695.92. But on 28 September 1972 judgment was rendered in favor of Amonoy requiring the heirs to pay within 90 days the P27,600.00 secured by the mortgage, P11,880.00 as value of the harvests, and P9,645.00 as another round of attorneys fees. Failing in that, the two (2) lots would be sold at public auction. They failed to pay. On 6 February 1973, the said lots were foreclosed and on 23 March 1973 the auction sale was held where Amonoy was the highest bidder at P23,760.00. On 2 May 1973 his bid was judicially confirmed. A deficiency was claimed and to satisfy it another execution sale was conducted, and again the highest bidder was Amonoy at P12,137.50. Included in those sold was the lot on which the Gutierrez spouses had their house. More than a year after the Decision in Civil Case No. 12726 was rendered, the said decedents heirs filed on 19 December 1973 before the CFI of Pasig, Rizal*,+ Civil Case No. 18731 entitled Maria Penano, et al vs. Sergio Amonoy, et al, a suit for the annulment thereof. The case was dismissed by the CFI on 7 November 1977, and this was affirmed by the Court of Appeals on 22 July 1981. Thereafter, the CFI on 25 July 1985 issued a Writ of Possession and pursuant to which a notice to vacate was made on 26 August 1985. On Amonoys motion of 24 April 1986, the Orders of 25 April 1986 and 6 May 1986 were issued for the demolition of structures in the said lots, including the house of the Gutierrez spouses. On 27 September 1985 the petition entitled David Fornilda, et al vs Branch 164 RTC IVth Pasig, Deputy Sheriff Joaquin Antonil and Atty. Sergio Amonoy, G.R. No. L-72306, was filed before the Supreme Court. Among the petitioners was the plaintiff-appellant Angela Gutierrez. On a twin Musiyun (Mahigpit na Musiyon Para Papanagutin Kaugnay ng Paglalapastangan, and Musiyung Makahingi ng Utos sa Pagpapapigil ng Pagpapagiba at Pananagutin sa Paglalapastangan) with full titles as fanciful and elongated as their Petisyung (Petisyung Makapagsuri Taglay and Pagpigil ng Utos), a temporary restraining order was granted on 2 June 1986 enjoining the demolition of the petitioners houses. Then on 5 October 1988 a Decision was rendered in the said G.R. No. L-72306 disposing that: WHEREFORE, Certiorari is granted; the Order of respondent Trial Court, dated 25 July 1985, granting a Writ of Possession, as well as its Orders, dated 25 April 1986 and 16 May 1986,

directing and authorizing respondent Sheriff to demolish the houses of petitioners Angela and Leocadia Fornilda are hereby set aside, and the Temporary Restraining Order heretofore issued, is made permanent. The six (6) parcels of land herein controverted are hereby ordered returned to petitioners unless some of them have been conveyed to innocent third persons.lxvi[5] But by the time the Supreme Court promulgated the above-mentioned Decision, respondents house had already been destroyed, supposedly in accordance with a Writ of Demolition ordered by the lower court. Thus, a Complaint for damages in connection with the destruction of their house was filed by respondents against petitioner before the RTC on December 15, 1989. In its January 27, 1993 Decision, the RTC dismissed respondents suit. On appeal, the CA set aside the lower courts ruling and ordered petitioner to pay respondents P250,000 as actual damages. Petitioner then filed a Motion for Reconsideration, which was also denied. Hence, this recourse.lxvi[6]
The Issue

In his Memorandum,lxvi[7] petitioner submits this lone issue for our consideration: Whether or not the Court of Appeals was correct in deciding that the petitioner [was] liable to the respondents for damageslxvi[8]
The Courts Ruling

The Petition has no merit.


Main Issue: Petitioners Liability

Well-settled is the maxim that damage resulting from the legitimate exercise of a persons rights is a loss without injury -- damnum absque injuria -- for which the law gives no remedy.lxvi*9+ In other words, one who merely exercises ones rights does no actionable injury and cannot be held liable for damages. Petitioner invokes this legal precept in arguing that he is not liable for the demolition of respondents house. He maintains that he was merely acting in accordance with the Writ of Demolition ordered by the RTC. We reject this submission. Damnum absque injuria finds no application to this case.

True, petitioner commenced the demolition of respondents house on May 30, 1986 under the authority of a Writ of Demolition issued by the RTC. But the records show that a Temporary Restraining Order (TRO), enjoining the demolition of respondents house, was issued by the Supreme Court on June 2, 1986. The CA also found, based on the Certificate of Service of the Supreme Court process server, that a copy of the TRO was served on petitioner himself on June 4, 1986. Petitioner, however, did not heed the TRO of this Court. We agree with the CA that he unlawfully pursued the demolition of respondents house well until the middle of 1987. This is clear from Respondent Angela Gutierrezs testimony. The appellate court quoted the following pertinent portion thereof:lxvi[10] Q. A. xxx Q. A. Q. A. xxx Q. A. Q. A. Q. A. On May 30, 1986, were they able to destroy your house? Not all, a certain portion only xxx Was your house completely demolished? No, sir. How about the following day? It was completely demolished xxx Until when[,] Mrs. Witness? Until 1987. About what month of 1987? Middle of the year. Can you tell the Honorable Court who completed the demolition? The men of Fiscal Amonoy.lxvi[11] xxx xxx

Although the acts of petitioner may have been legally justified at the outset, their continuation after the issuance of the TRO amounted to an insidious abuse of his right. Indubitably, his actions were tainted with bad faith. Had he not insisted on completing the demolition, respondents would not have suffered the loss that engendered the suit before the RTC. Verily, his acts constituted not only an abuse of a right, but an invalid exercise of a right that had been suspended when he received the TRO from this Court on June 4, 1986. By then, he was no longer entitled to proceed with the demolition. A commentator on this topic explains: The exercise of a right ends when the right disappears, and it disappears when it is abused, especially to the prejudice of others. The mask of a right without the spirit of justice which gives it life, is repugnant to the modern concept of social law. It cannot be said that a person exercises a right when he unnecessarily prejudices another x x x. Over and above the specific precepts of positive law are the supreme norms of justice x x x; and he who violates them violates the law. For this reason, it is not permissible to abuse our rights to prejudice others.lxvi[12] Likewise, in Albenson Enterprises Corp. v. CA,lxvi[13] the Court discussed the concept of abuse of rights as follows: Article 19, known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards which may be observed not only in the exercise of ones rights but also in the performance of ones 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 the 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 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 x x x. Clearly then, the demolition of respondents house by petitioner, despite his receipt of the TRO, was not only an abuse but also an unlawful exercise of such right. In insisting on his alleged right, he wantonly violated this Courts Order and wittingly caused the destruction of respondents house. Obviously, petitioner cannot invoke damnum absque injuria, a principle premised on the valid exercise of a right.lxvi[14] Anything less or beyond such exercise will not give rise to the legal protection that the principle accords. And when damage or prejudice to another is occasioned thereby, liability cannot be obscured, much less abated. In the ultimate analysis, petitioners liability is premised on the obligation to repair or to make whole the damage caused to another by reason of ones act or omission, whether done intentionally or negligently and whether or not punishable by law.lxvi[15]

The foregoing disproves the claim of petitioner that the demolition, which allegedly commenced only on May 30, 1986, was completed the following day. It likewise belies his allegation that the demolitions had already ceased when he received notice of the TRO.

WHEREFORE, the Petition is DENIED and the appealed Decision AFFIRMED. Costs against petitioner. SO ORDERED.

The plaintiff's name appeared in the Tentative List of Candidates for graduation for the Degree of Bachelor of Laws (LL.B) as of Second Semester (1987-1988) with the following annotation: JADER ROMEO A.

Melo, (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur. Def. Conflict of Laws x-1-87-88, Practice Court I Inc., 1-87-88 C-1 to submit transcript with S.O. (Exhibits "3", "3-C-1", "3-C-2"). The 35th Investitures & Commencement Ceremonies for the candidates of Bachelor of Laws was scheduled on the 16th of April 1988 at 3:00 o'clock in the afternoon, and in the invitation for that occasion the name of the plaintiff appeared as one of the candidates. (Exhibits "B", "B-6", "B-6-A"). At the foot of the list of the names of the candidates there appeared however the following annotation: This is a tentative list Degrees will be conferred upon these candidates who satisfactorily complete requirements as stated in the University Bulletin and as approved of the Department of Education, Culture and Sports (Exhibit "B-7-A"). The plaintiff attended the investiture ceremonies at F. dela Cruz Quadrangle, U.E., Recto Campus, during the program of which he went up the stage when his name was called, escorted by her (sic) mother and his eldest brother who assisted in placing the Hood, and his Tassel was turned from left to right, and he was thereafter handed by Dean Celedonio a rolled white sheet of paper symbolical of the Law Diploma. His relatives took pictures of the occasion (Exhibits "C" to "C-6", "D-3" to "D-11"). He tendered a blow-out that evening which was attended by neighbors, friends and relatives who wished him good luck in the forthcoming bar examination. There were pictures taken too during the blow-out (Exhibits "D" to "D-1"). He thereafter prepared himself for the bar examination. He took a leave of absence without pay from his job from April 20, 1988 to September 30, 1988 (Exhibit "G") and enrolled at the pre-bar review class in Far Eastern University. (Exhibits "F" to "F-2"). Having learned of the deficiency he dropped his review class and was not 2 able to take the bar examination. Consequently, respondent sued petitioner for damages alleging that he suffered moral shock, mental anguish, serious anxiety, besmirched reputation, wounded feelings and sleepless nights when he was not able to take the 1988 bar examinations arising from the latter's negligence. He prayed for an award of moral and exemplary damages, unrealized income, attorney's fees, and costs of suit.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 132344 February 17, 2000

UNIVERSITY OF THE EAST, petitioner, vs. ROMEO A. JADER, respondent. YNARES-SANTIAGO, J.: May an educational institution be held liable for damages for misleading a student into believing that the latter had satisfied all the requirements for graduation when such is not the case? This is the issue in the instant petition for review premised on the following 1 undisputed facts as summarized by the trial court and adopted by the Court of Appeals (CA), to wit: Plaintiff was enrolled in the defendants' College of Law from 1984 up to 1988. In the first semester of his last year (School year 1987-1988), he failed to take the regular final examination in Practice Court I for which he was given an incomplete grade (Exhibits "2", also Exhibit "H"). He enrolled for the second semester as fourth year law student (Exhibit "A") and on February 1, 1988 he filed an application for the removal of the incomplete grade given him by Professor Carlos Ortega (Exhibits "H-2", also Exhibit "2") which was approved by Dean Celedonio Tiongson after payment of the required fee. He took the examination on March 28, 1988. On May 30, 1988, Professor Carlos Ortega submitted his grade. It was a grade of five (5). (Exhibits "H-4", also Exhibits "2-L", "2-N").1wphi1.nt In the meantime, the Dean and the Faculty Members of the College of Law met to deliberate on who among the fourth year students should be allowed to graduate.

In its answer with counterclaim, petitioner denied liability arguing mainly that it never led respondent to believe that he completed the requirements for a Bachelor of Laws degree when his name was included in the tentative list of graduating students. After trial, the lower court rendered judgment as follows: WHEREFORE, in view of the foregoing judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the latter to pay plaintiff the sum of THIRTY FIVE THOUSAND FOUR HUNDRED SEVENTY PESOS (P35,470.00) with legal rate of interest from the filing of the complaint until fully paid, the amount of FIVE THOUSAND PESOS (P5,000.00) as attorney's fees and the cost of suit. Defendant's counterclaim is, for lack of merit, hereby dismissed. SO ORDERED.
3

degree or whether they would be included among those who will graduate. Although commencement exercises are but a formal ceremony, it nonetheless is not an ordinary occasion, since such ceremony is the educational institution's way of announcing to the whole world that the students included in the list of those who will be conferred a degree during the baccalaureate ceremony have satisfied all the requirements for such degree. Prior or subsequent to the ceremony, the school has the obligation to promptly inform the student of any problem involving the latter's grades and performance and also most importantly, of the procedures for remedying the same. Petitioner, in belatedly informing respondent of the result of the removal examination, particularly at a time when he had already commenced preparing for the bar exams, cannot be said to have acted in good faith. Absence of good faith must be sufficiently established for a successful prosecution by the aggrieved party in a suit for abuse of right under Article 19 of the Civil Code. Good faith connotes an honest intention to abstain from taking undue advantage of another, even though the forms and technicalities of the law, together with the 5 absence of all information or belief of facts, would render the transaction unconscientious. It is the school that has access to those information and it is only the school that can compel its professors to act and comply with its rules, regulations and policies with respect to the computation and the prompt submission of grades. Students do not exercise control, much less influence, over the way an educational institution should run its affairs, particularly in disciplining its professors and teachers and ensuring their compliance with the school's rules and orders. Being the party that hired them, it is the school that exercises general supervision and exclusive control over the professors with respect to the submission of reports involving the students' standing. Exclusive control means that no other person or 6 entity had any control over the instrumentality which caused the damage or injury. The college dean is the senior officer responsible for the operation of an academic program, 7 enforcement of rules and regulations, and the supervision of faculty and student services. He must see to it that his own professors and teachers, regardless of their status or position outside of the university, must comply with the rules set by the latter. The negligent act of a professor who fails to observe the rules of the school, for instance by not promptly submitting a student's grade, is not only imputable to the professor but is an act of the school, being his employer. Considering further, that the institution of learning involved herein is a university which is engaged in legal education, it should have practiced what it inculcates in its students, more specifically the principle of good dealings enshrined in Articles 19 and 20 of the Civil Code which states: Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.

which on appeal by both parties was affirmed by the Court of Appeals (CA) with modification. The dispositive portion of the CA decision reads: WHEREFORE, in the light of the foregoing, the lower Court's Decision is hereby AFFIRMED with the MODIFICATION that defendant-appellee, in addition to the sum adjudged by the lower court in favor of plaintiff-appellant, is also ORDERED to pay plaintiff-appellant the amount of FIFTY THOUSAND (P50,000.00) PESOS for moral damages. Costs against defendant-appellee. SO ORDERED.
4

Upon the denial of its motion for reconsideration, petitioner UE elevated the case to this Court on a petition for review under Rule 45 of the Rules of Court, arguing that it has no liability to respondent Romeo A. Jader, considering that the proximate and immediate cause of the alleged damages incurred by the latter arose out of his own negligence in not verifying from the professor concerned the result of his removal exam. The petition lacks merit. When a student is enrolled in any educational or learning institution, a contract of education is entered into between said institution and the student. The professors, teachers or instructors hired by the school are considered merely as agents and administrators tasked to perform the school's commitment under the contract. Since the contracting parties are the school and the student, the latter is not duty-bound to deal with the former's agents, such as the professors with respect to the status or result of his grades, although nothing prevents either professors or students from sharing with each other such information. The Court takes judicial notice of the traditional practice in educational institutions wherein the professor directly furnishes his/her students their grades. It is the contractual obligation of the school to timely inform and furnish sufficient notice and information to each and every student as to whether he or she had already complied with all the requirements for the conferment of a

Art. 19 was intended to expand the concept of torts by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to provide 8 specifically in statutory law. In civilized society, men must be able to assume that others will do them no intended injury that others will commit no internal aggressions upon them; that their fellowmen, when they act affirmatively will do so with due care which the ordinary understanding and moral sense of the community exacts and that those with whom they deal in the general course of society will act in good faith. The ultimate thing in the theory of 9 liability is justifiable reliance under conditions of civilized society. Schools and professors cannot just take students for granted and be indifferent to them, for without the latter, the former are useless. Educational institutions are duty-bound to inform the students of their academic status and not wait for the latter to inquire from the former. The conscious indifference of a person to the rights or welfare of the person/persons who may be affected by his act or omission can 10 support a claim for damages. Want of care to the conscious disregard of civil obligations coupled with a conscious knowledge of the cause naturally calculated to produce them 11 would make the erring party liable. Petitioner ought to have known that time was of the essence in the performance of its obligation to inform respondent of his grade. It cannot feign ignorance that respondent will not prepare himself for the bar exams since that is precisely the immediate concern after graduation of an LL.B. graduate. It failed to act seasonably. Petitioner cannot just give out its student's grades at any time because a student has to comply with certain deadlines set by the Supreme Court on the submission of requirements for taking the bar. Petitioner's liability arose from its failure to promptly inform respondent of the result of an examination and in misleading the latter into believing that he had satisfied all requirements for the course. Worth quoting is the following disquisition of the respondent court: It is apparent from the testimony of Dean Tiongson that defendant-appellee University had been informed during the deliberation that the professor in Practice Court I gave plaintiff-appellant a failing grade. Yet, defendant-appellee still did not inform plaintiff-appellant of his failure to complete the requirements for the degree nor did they remove his name from the tentative list of candidates for graduation. Worse, defendant-appellee university, despite the knowledge that plaintiff-appellant failed in Practice Court I, again included plaintiff-appellant's name in the "tentative list of candidates for graduation which was prepared after the deliberation and which became the basis for the commencement rites program. Dean Tiongson reasons out that plaintiff-appellant's name was allowed to remain in the tentative list of candidates for graduation in the hope that the latter would still be able to remedy the situation in the remaining few days before graduation day. Dean Tiongson, however, did not explain how plaintiff appellant Jader could have done something to complete his deficiency if defendant-appellee university did not exert any effort to inform plaintiff-appellant of his failing grade in 12 Practice Court I. Petitioner cannot pass on its blame to the professors to justify its own negligence that led to the delayed relay of information to respondent. When one of two innocent parties must 13 suffer, he through whose agency the loss occurred must bear it. The modern tendency is to

grant indemnity for damages in cases where there is abuse of right, even when the act is not 14 illicit. If mere fault or negligence in one's acts can make him liable for damages for injury caused thereby, with more reason should abuse or bad faith make him liable. A person should be protected only when he acts in the legitimate exercise of his right, that is, when he 15 acts with prudence and in good faith, but not when he acts with negligence or abuse. However, while petitioner was guilty of negligence and thus liable to respondent for the latter's actual damages, we hold that respondent should not have been awarded moral damages. We do not agree with the Court of Appeals' findings that respondent suffered shock, trauma and pain when he was informed that he could not graduate and will not be allowed to take the bar examinations. At the very least, it behooved on respondent to verify for himself whether he has completed all necessary requirements to be eligible for the bar examinations. As a senior law student, respondent should have been responsible enough to ensure that all his affairs, specifically those pertaining to his academic achievement, are in order. Given these considerations, we fail to see how respondent could have suffered untold embarrassment in attending the graduation rites, enrolling in the bar review classes and not being able to take the bar exams. If respondent was indeed humiliated by his failure to take the bar, he brought this upon himself by not verifying if he has satisfied all the requirements including his school records, before preparing himself for the bar examination. Certainly, taking the bar examinations does not only entail a mental preparation on the subjects thereof; there are also prerequisites of documentation and submission of requirements which the prospective examinee must meet. WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner is ORDERED to PAY respondent the sum of Thirty-five Thousand Four Hundred Seventy Pesos (P35,470.00), with legal interest of 6% per annum computed from the date of filing of the complaint until fully paid; the amount of Five Thousand Pesos (P5,000.00) as attorney's fees; and the costs of the suit. The award of moral damages is DELEIED.1wphi1.nt SO ORDERED.

THIRD DIVISION [G.R. No. 47013. February 17, 2000] ANDRES LAO, petitioner, vs. COURT OF APPEALS, THE ASSOCIATED ANGLO-AMERICAN TOBACCO CORPORATION and ESTEBAN CO, respondents. [G.R. No. 60647. February 17, 2000]

ESTEBAN CO, petitioner, vs. COURT OF APPEALS and ANDRES LAO, respondents. Esmsc [G.R. No. 60958-59. February 17, 2000] THE ASSOCIATED ANGLO-AMERICAN TOBACCO CORPORATION, petitioner, vs. COURT OF APPEALS, ANDRES LAO, JOSE LAO, and TOMAS LAO, respondents. DECISION PURISIMA, J.: PURISIMA These consolidated petitions for review on certiorari under Rule 45 of the Rules of Court revolve around discrepant statements of accountability between a principal and its agent in the sale of cigarettes. The common factual background at bar follows: On April 6, 1965, The Associated Anglo-American Tobacco Corporation (Corporation for brevity) entered into a "Contract of Sales Agent" with Andres Lao. Under the contract, Lao agreed to sell cigarettes manufactured and shipped by the Corporation to his business address in Tacloban City. Lao would in turn remit the sales proceeds to the Corporation. For his services, Lao would receive commission depending on the kind of cigarettes sold, fixed monthly salary, and operational allowance. As a guarantee to Laos compliance with his contractual obligations, his brother Jose and his father Tomas executed a deed of mortgagelxvi[1] in favor of the Corporation in the amount of P200,000.00 In compliance with the contract, Lao regularly remitted the proceeds of his sales to the Corporation, generating, in the process, a great deal of business. Thus, the Corporation awarded him trophies and plaques in recognition of his outstanding performance from 1966 to 1968. However, in February 1968 and until about seven (7) months later, Lao failed to accomplish his monthly sales report. In a conference in Cebu, Ching Kiat Kam, the President of the Corporation, reminded Lao of his enormous accounts and the difficulty of obtaining a tally thereon despite Laos avowal of regular remittances of his collections. Sometime in August and September 1969, Esteban Co, the vice-president and general manager of the Corporation, summoned Lao to Pasay City for an accounting. It was then and there established that Laos liability amounted to P525,053.47. And so, Lao and his brother Lao Y Ka, enlisted the services of the Sycip Gorres and Velayo Accounting Firm (SGV) to check and reconcile the accounts. Esmmis Ching Kiat Kam allowed Lao to continue with the sales agency provided Lao would reduce his accountability to P200,000.00, the amount secured by the mortgage. The Corporation thereafter credited in favor of Lao the amount of P325,053.47 representing partial payments he had made but without prejudice to the result of the audit of accounts. However, the SGV personnel Lao had employed failed to conclude their services because the Corporation did

not honor its commitment to assign two of its accountants to assist them. Neither did the Corporation allow the SGV men access to its records. Subsequently, the Corporation discovered that Lao was engaging in the construction business so much so that it suspected that Lao was diverting the proceeds of his sales to finance his business. In the demand letter of April 15, 1979,lxvi[2] counsel for the Corporation sought payment of the obligations of Lao, warning him of the intention of the Corporation to foreclose the mortgage. Attached to said letter was a statement of account indicating that Laos total obligations duly supported by receipts amounted to P248,990.82. Since Lao appeared to encounter difficulties in complying with his obligations under the contract of agency, the Corporation sent Ngo Kheng to supervise Laos sales operations in Leyte and Samar. Ngo Kheng discovered that, contrary to Laos allegation that he still had huge collectibles from his customers, nothing was due the Corporation from L aos clients. From then on, Lao no longer received shipments from the Corporation which transferred its vehicles to another compound controlled by Ngo Kheng. Shipments of cigarettes and the corresponding invoices were also placed in the name of Ngo Kheng. On May 21, 1970, Andres, Jose and Tomas Lao brought a complaint for accounting and damages with writ of preliminary injunctionlxvi[3] against the Corporation, docketed as Civil Case No. 4452 before the then Court of First Instance of Leyte, Branch I in Tacloban City, which courtlxvi[4] came out with its decisionlxvi[5] on March 26, 1975, disposing as follows: "IN VIEW OF ALL THE FOREGOING PREMISES, and upon a clear preponderance of evidence in favor of the plaintiffs, the court hereby renders judgment as follows: Esmso 1........Ordering both the plaintiffs and defendant corporation to undergo a Court supervised accounting of their respective account with the view of establishing once and for all, by a reconciliation of their respective books of accounts, the true and correct accountability of Andres Lao to the defendant corporation. Pursuant thereto, both plaintiff Andres Lao and the defendant The Associated Anglo-American Tobacco Corporation are directed to make available all their records pertainting [sic] to their business transactions with each other under the contract of sales agent, from 1965 up to the time Andres Lao ceased being the agent of the defendant. A Committee on Audit is hereby formed to be composed of three (3) members, one member to be nominated by the plaintiffs, another to be nominated by the defendant corporation and the third member who shall act as the Committee Chairman to be appointed by this Court. As Committee Chairman, the Court hereby appoints the Branch Clerk of Court of this Court, Atty. Victorio Galapon, who shall immediately convene the Committee upon appointment of the other two members, and undertake to finish their assigned task under his decision within two (2) months.

2........Ordering the defendant corporation to pay Plaintiffs the amount of P180,000 representing actual loss of earnings. 3........Ordering the defendant to pay plaintiffs moral damages in the amount of P130,000.00. 4........Ordering the defendant to pay to the plaintiffs, exemplary damages in the amount of P50,000.00. 5........Ordering the defendant to pay to the plaintiffs, attorneys fees in the amount of P40,000.00. 6........Ordering the plaintiffs and the defendant to pay the compensation of the commissioners pro-rata. 7........Finally ordering the defendant to pay the cost of this suit. SO ORDERED." The Committee of Audit that was eventually constituted was composed of Atty. Victorio L. Galapon, Jr., as chairman, Wilfredo Madarang, Jr. and Cesar F.P. Corcuera, as representatives of the Corporation, and Lao himself. On September 16, 1976, said committee submitted a reportlxvi[6] with the following findings: Msesm "Total remittances made by Mr. Andres Lao in favor of Associated from April 10, 1965 to November 1969 which are substantially supported by official receipt ..................................................... Shipments by Associated to Mr. Andres Lao duly supported by bills of lading, factory consignment invoices and delivery receipts.................................. Shipments by Associated to Mr. Andres Lao, covered by bills of lading and factory consignment invoices but with no supporting delivery receipts purported to have been delivered to Mr. Lao on the basis of sales made by him as reported in his monthly sales reports (except for sales in December, 1968 and November and December 1968 where the sales reports were not available to the Audit Committee)............................................... Shipments covered by bills of lading and factory consignment invoices but with no supporting delivery receipts ......................................................

Shipments with covering factory consignment invoices but not covered by bills of lading and delivery receipts ...................................................... On February 28, 1977, the trial courtlxvi[7] promulgated a supplemental decision wherein it dismissed Laos claim that he had made an overpayment of P556,444.20. The alleged overpayment was arrived at after deducting the total payment made by Lao in the amount of P13,686,148.80 from the total volume of shipments made by the Corporation in the amount of P13,129,704.60, without including the amount of P597,239.40, representing alleged shipments covered by bills of lading and factory consignment invoices but with no supporting delivery receipts, and the amount of P126,950.00, representing shipments with factory consignment invoices but not covered by bills of lading and delivery receipts. The trial court, in rejecting the claim of overpayment, held that "when he (referring to Lao) made partial payments amounting to P325,053.47 subsequent to the demand in September, 1969, he is deemed to have admitted his liability and his claim of overpayment is not only preposterous but devoid of logic." Therefore, with the sums of P597,239.40 and P126,950.00 included in the total volume of shipments made by the Corporation in the amount of P13,129,704.60, Laos total remittances of P13,686,248.80 were short of P167,745.20. Thus, the trial court held: "WHEREFORE, judgment is hereby rendered declaring plaintiff Andres Laos accountability to defendant Corporation in the amount of P167,745.20 and ordering him to pay said amount of P167,745.20 to defendant The Associated Anglo-American Tobacco Corporation." Exsm The Corporation appealed the decision, dated March 26, 1975, just as Lao appealed the supplemental decision, dated February 28, 1977, to the Court of Appeals. Docketed as CAG.R. No. 62532-R, the appeal was resolved in the Decision of the Court of Appeals dated P13,686,148.80 October 26, 1981,lxvi[8] disposing thus: "WHEREFORE, in connection with the decision of March 26, 1975, defendant corporation is hereby ordered to pay plaintiffs P150,000.00 actual damages for loss of earnings, P30,000.00 by way of moral damages and P10,000.00 for exemplary damages. As modified, the decision is AFFIRMED in all other respects. As for the supplemental decision of February 28, 1977, the same is hereby reversed and set aside, and defendant-appellant corporation sentenced to reimburse Andres Laos overpayment in the amount of P556,444.20. Costs against defendant-appellant corporation."

9,110,777.00

4,018,927.60

The Corporation presented a motion for reconsiderationlxvi[9] of the said Decision but the same was denied in a Resolution dated May 18, 1982.lxvi[10] A motion for leave to file a 597,239.40 second motion for reconsideration was likewise denied.lxvi[11] Kylex

Meanwhile, on June 24, 1974 and during the pendency of Civil Case No. 4452, Esteban Co, representing the Corporation as its new vice-president, filed an affidavit of complaintlxvi[12] with the Pasay City Fiscals Office under I.S. No. 90994; alleging that Lao failed to remit the amount of P224,585.82 which he allegedly misappropriated and converted to his personal use. Although the amount supposedly defalcated was put up as a counterclaim in Civil Case No. 4452 for accounting, the Corporation averred that it reserved the right to institute a criminal case against Lao. On July 31, 1974, after finding a prima facie case against Lao, the Pasay City Fiscal filed an informationlxvi[13] for estafa against Lao, docketed as Criminal Case No. 2650-P before the then Court of First Instance of Rizal, Branch XXVII. Lao sought a reinvestigationlxvi[14] of the case, contending that he was never served a subpoena or notice of preliminary investigation that was considered mandatory in cases cognizable by Court of First Instance, now Regional Trial Court. Apparently, the preliminary investigation proceeded ex-parte because Esteban Co made it appear that Lao could not be located. Kycalr On December 17, 1974, without awaiting the termination of the criminal case, Lao lodged a complaintlxvi[15] for malicious prosecution against the Corporation and Esteban Co, praying for an award of damages for violation of Articles 20 and 21 of the Civil Code. The case was docketed as Civil Case No. 5528 before Branch I of the then Court of First Instance in Cotabato City. In his resolution dated January 3, 1975,lxvi[16] then Pasay City Fiscal Jose Flaminiano found merit in the petition for reinvestigation of the estafa case. He opined that Lao had not committed estafa as his liability was essentially civil in nature. The Fiscal entertained doubts about the motive of the Corporation in instituting the criminal case against Lao because of the undue delay in its filing, aside from the fact that the estafa case involved the same subject matter the Corporation sued upon by way of counterclaim in Civil Case No. 4452. Eventually, on May 13, 1976, the Court of First Instance of Rizal, Branch XXVII, in Pasay City, promulgated a decisionlxvi[17] acquitting Lao of the crime charged and adopting in toto the said Resolution of Fiscal Flaminiano. On March 18, 1977, the Court of First Instance of Samarlxvi[18] handed down a decision in Civil Case No. 5528, the action for damages arising from malicious prosecution, disposing thus: "WHEREFORE, the Court declares that the defendants filed Criminal Case No. 2650-P against the plaintiff for estafa before the Court of First Instance of Rizal, Branch XXVII, Pasay City, without probable cause and with malice and therefore orders the defendants Associated AngloAmerican Tobacco Corporation and Esteban Co to jointly and severally pay the plaintiff: a........P30,000 as actual damages; Calrky b........P150,000.00 as moral damages;

c........P100,000.00 as exemplary damages; d........P50,000.00 as attorneys fees and costs. SO ORDERED." The Corporation and Esteban Co both appealed the aforesaid decision to the Court of Appeals under CA-G.R. No. 61925-R. On April 18, 1977, Lao presented a motion for execution pending appeallxvi[19] before the trial court. The opposition of the Corporation notwithstanding, on June 8, 1977 the trial court issued a special order granting the motion for execution pending appeal,lxvi[20] and on the following day, the corresponding writ of execution issued.lxvi[21] On June 10, 1977, the Court of Appeals issued a Restraining Order enjoining the execution of subject judgment.lxvi[22] The said order was issued on account of a petition for certiorari, prohibition and mandamus with preliminary injunctionlxvi[23] filed by the Corporation and Esteban Co with the said appellate court. Docketed as CA-G.R. No. 06761, the petition was received by the Court of Appeals on June 9, 1977. A supplemental to the petition and a "compliance" were also received on the same time and date.lxvi[24] On June 21, 1977, Lao moved to lift the restraining order. On September 14, 1977, the Court of Appeals resolved in CA-G.R. No. 06761 thus: "WHEREFORE, the petition for certiorari is hereby granted, the special order granting execution pending appeal is annulled and the restraining order heretofore issued is made permanent. No pronouncement as to costs." On October 21, 1981, the Court of Appeals likewise rendered a Decisionlxvi[25] in CA-G.R. No. 62532-R, affirming the trial courts finding that Criminal Case No. 2650-P was filed without probable cause and with malice; and held the Corporation and Esteban Co solidarily liable for damages, attorneys fees and costs. The Corporation and Esteban Co moved to reconsiderlxvi[26] the said decision in CA-G.R. No. 61925-R but to no avail. The motion for reconsideration was denied in a Resolution promulgated on May 18, 1992. A motion for leave of court to file a second motion for reconsiderationlxvi[27] met the same fate. It was likewise denied in a Resolutionlxvi[28] dated June 23, 1982. From the said cases sprung the present petitions which were ordered consolidated in the Resolutions of December 15, 1982 and November 11, 1985.lxvi[29] Subject petitions are to be passed upon in the order they were filed. Mesm

G.R. No. 47013 A petition for review on certiorari of the Decision of the Court of Appeals in CA-G.R. No. 06761 that Lao filed, contending that: 1........The Court of Appeals cannot validly give due course to an original action for certiorari, prohibition and mandamus where the petition is fatally defective for not being accompanied by a copy of the trial courts questioned process/order. 2........The Court of Appeals, cannot, in a petition for certiorari, prohibition and mandamus, disregard, disturb and substitute its own judgment for the findings of facts of the trial court, particularly as in the present case, where the trial court did not exceed nor abuse its discretion. 3........The Court of Appeals did not act in accordance with established jurisprudence when it overruled the trial courts holding that the posting of a good and solvent bond is a good or special reason for execution pending appeal. For clarity, the petition for review on certiorari questioning the Decision of the Court of Appeals that nullified the special order granting execution pending appeal is anchored on the antecedent facts as follows: Slx After the Court of First Instance of Samar had decided in favor of Lao in the action for damages by reason of malicious prosecution, Lao filed a motion for execution pending appeallxvi[30] even as the Corporation and Co had interposed an appeal from the said decision. In that motion, Lao theorized that the appeal had no merit and the judgment in his favor would be rendered ineffectual on account of losses incurred by the Corporation in the 1972 floods in Luzon and in a fire that cost the Corporation P5 million, as well as the fact that the properties of the Corporation were heavily encumbered as it had even incurred an overdraft with a bank; for which reasons, Lao evinced his willingness to post a bond although Section 2, Rule 39 of the Rules of Court does not require such bond. Lao thereafter sent in a supplemental motionlxvi*31+ asserting that the Corporations properties were mortgaged in the total amount of Seven Million (P7,000,000.00) Pesos. The Corporation and Co opposed both motions. On June 8, 1977, after hearing and presentation of evidence by both parties, the Court of First Instance of Samar issued a special order granting the motion for execution pending appeal.lxvi[32] The following day, June 9, 1977, the corresponding writ of execution pending appeal issued.lxvi[33] At 8:00 a.m. on the same day, the Corporation and Co filed a petition for certiorari, prohibition and mandamus with preliminary injunction with the Court of Appeals, the filling of which petition was followed by the filing of a supplement to the petition and a "compliance" with each pleading bearing the docket stamp showing that the Court of Appeals also received the same at 8:00 a.m.lxvi[34] Scslx

In the petition under consideration, petitioner Lao contends that the supplemental petition and "compliance" could not have been filed with the Court of Appeals at the same time as the original petition; pointing out that the supplemental petition contains an allegation to the effect that the special order granting execution pending appeal was then still "being flown to Manila" and would be attached to the petition "as soon as it arrives in Manila which is expected tomorrow, June 10, 1977 or Saturday."lxvi[35] Petitioner Lao thus expressed incredulity on the fact that both the supplemental petition and the "compliance" submitted to the appellate court a copy of the special order bearing the same time of receipt. He theorized that the writ of execution could have been issued by the Court of First Instance of Samar at the earliest, at 8:30 a.m. on July 9, 1977. Petitioner Lao then noted that, the restraining order enjoining execution pending appeal did not mention the date of issuance of the writ subsequently issued and the names of the special sheriffs tasked to execute it simply because when the restraining order was issued the copy of the writ of execution was not yet filed with the Court of Appeals. Petitioner Lao also averred that because his counsel was furnished a copy of the restraining order through the mail, he was deprived of the opportunity to take immediate "remedial steps in connection with the improvident issuance of the restraining order."lxvi[36] In their comment on the petition, respondent Corporation and Co assail petitioner Laos insinuation of irregularity in the filing of their pleadings. They aver that in view of petitioner Laos allegation, they, made inquiries in the Docket Section of the Court of Appeals, and th ey were informed that the receiving machine of said section was out of order when the pleadings were received "as the time of receipt appearing therein is always 8:00 a.m."lxvi[37] This Court cannot gloss over, as it has never glossed over allegations of irregularity in the handling of pleadings filed in the Court. However, in the absence of concrete proof that there was malicious intent to derail the propriety of procedure, this Court has no basis on which to arrive at a conclusion thereon. The documentary evidence of simultaneous receipt of pleadings that should ordinarily be received one after another is simply insufficient to warrant any conclusion on irregularity of procedure. All court personnel are enjoined to do their jobs properly and according to law. Should they notice anything in the performance of their duties that may generate even a mere suspicion of irregularity, they are duty-bound to correct the same. In this case, more diligence on the part of the personnel handling the receiving machine could have prevented the stamping on the pleadings with erroneous date and time of receipt and would have averted suspicion of an anomaly in the filing of pleadings. Persons responsible for the negligence should be taken to task. However, since this is not the proper forum for whatever administrative measures may be taken under the premises, the Court opts to discuss the merits of the petition for review on certiorari at bar rather than tarry more on an administrative matter that is fundamentally extraneous to the petition. Slxsc Petitioner Lao maintains that the Court of Appeals should not have been given due course to the petition for certiorari, prohibition and mandamus considering that it was fatally defective for failure of the petitioners to attach thereto a copy of the questioned writ of execution. On their part, private respondents concede the mandatory character of the requirement of

Section 1, Rule 65 of the Rules of Court - that the petition "shall be accompanied by a certified true copy of the judgment or order subject thereof, together with copies of all pleadings and documents relevant and pertinent thereto." However, private respondents asked that their submission of a certified true copy of the special order granting execution pending appeal attached to their "compliance" dated June 9, 1977lxvi[38] be taken as substantial compliance with the rule. The Court gives due consideration to private respondents stance. Strict adherence to procedural rules must at all times be observed. However, it is not the end-all and be-all of litigation. As this Court said: "xxx adjective law is not to be taken lightly for, without it, the enforcement of substantive law may not remain assured. The Court must add, nevertheless, that technical rules of procedure are not ends in themselves but primarily devised and designed to help in the proper and expedient dispensation of justice. In appropriate cases, therefore, the rules may have to be so construed liberally as to meet and advance the cause of substantial justice."lxvi[39] Thus, in holding that the Court of Appeals may entertain a second motion for reconsideration of its decision although the filing of such motion violates a prohibition thereof, the Court said: "xxx (I)t is within the power of this Court to temper rigid rules in favor of substantial justice. While it is desirable that the Rules of Court be faithfully and even meticulously observed, courts should not be so strict about procedural lapses that do not really impair the proper administration of justice. If the rules are intended to ensure the orderly conduct of litigation, it is because of the higher objective they seek which is the protection of substantive rights of the parties."lxvi[40] Slxmis In the case under consideration, private respondents substantially complied with the Rules of Court when they submitted a copy of the writ of execution sought to be enjoined on the same day they filed the petition for certiorari, prohibition and mandamus. Petitioner Cos allegation of irregularity as to the time of receipt of the "compliance" to which copy of the writ was attached being unsubstantiated, the presumption of regularity of its receipt on the day the original petition was filed should prevail. Petitioner Co argues that the Court of Appeals cannot disturb the factual findings of the trial court and substitute its own in a petition for certiorari, prohibition and mandamus where the basic issue is one of jurisdiction or grave abuse of discretion. It is well-settled, however, that in a petition for certiorari and mandamus, the Court of Appeals, when inevitable, may examine the factual merits of the case.lxvi[41] In the present case, it was necessary and inevitable for the Court of Appeals to look into the diverse factual allegations of the parties. It is worthy to note that petitioners motion for execution pending appeal was premised on his contention that the award of damages in his favor would be meaningless on account of

respondent Corporations precarious financial status. On the other hand, respondent Corporation countered that it was operating at a profit, an assurance that at the time, it was a stable business entity that could answer for its obligations. In the face of these contradictory allegations, the appellate court correctly opted to make its own finding of facts on the issue of the propriety of the issuance of the writ of execution pending appeal. It should be stressed that what was at issue was not the award of damages itself but the issuance of said writ. Petitioner Laos position that the posting of a good and solvent bond is a special reason for the issuance of the writ of execution pending appeal is utterly barren of merit. Mere posting of a bond to answer for damages does not suffice as a good reason for the granting of execution pending appeal, within the context of "good reasons" under Section 2, Rule 39 of the Rules of Court.lxvi[42] In Roxas v. Court of Appeals,lxvi[43] the Court held: Missdaa "It is not intended obviously that execution pending appeal shall issue as a matter of course. Good reasons, special, important, pressing reasons must exist to justify it; otherwise, instead of an instrument of solicitude and justice, it may well become a tool of oppression and inequity. But to consider the mere posting of a bond a good reason would precisely make immediate execution of a judgment pending appeal routinary, the rule rather than the exception. Judgments would be executed immediately, as a matter of course, once rendered, if all that the prevailing party needed to do was to post a bond to answer for damages that might result therefrom. This is a situation, to repeat, neither contemplated nor intended by law."lxvi[44] G.R. No. 60647 From the decision of the Court of First Instance of Samar in Civil Case No. 5528, finding that they are liable for malicious prosecution and therefore, they must pay Lao damages, the Corporation and Co appealed to the Court of Appeals. In affirming the lower courts decision, the Court of Appeals deduced from the facts established that the Corporation knew all along that Laos liability was civil in nature. However, after around four (4) years had elapsed and sensing that Civil Case No. 4452 would result in a decision against them, they instituted the criminal case for estafa. In awarding damages in the total amount of P330,000, the Court of Appeals took into account Laos social and business standing. lxvi[45] Sdaadsc From the Decision of the Court of Appeals in CA-G.R. No. 61925-R, Co filed the instant petition for review on certiorari; contending that the Court of Appeals erred in affirming the decision of the Samar Court of First Instance because when the case for malicious prosecution was commenced there was as yet no cause of action as the criminal case was still pending decision. Co also asserted that he should not be held jointly and severally liable with the Corporation because in filing the affidavit-complaint against respondent Lao, he was acting as the executive vice-president of the Corporation and his action was within the scope of his authority as such corporate officer.

The issue of whether the Court of Appeals correctly ruled that the Corporation and petitioner Co should be held liable for damages on account of malicious prosecution shall be ratiocinated upon and resolved with the issues submitted for resolution in G.R. Nos. 6095859. What should concern the Court here is whether petitioner Co should be held solidarily liable with the Corporation for whatever damages would be imposed upon them for filing the complaint for malicious prosecution. Petitioner Co argues that following the dictum in agency, the suit should be against his principal unless he acted on his own or exceeded the limits of his agency. A perusal of his affidavit-complaint reveals that at the time he filed the same on June 24, 1974, petitioner Co was the vice-president of the Corporation. As a corporate officer, his power to bind the Corporation as its agent must be sought from statute, charter, by-laws, a delegation of authority to a corporate officer, or from the acts of the board of directors formally expressed or implied from a habit or custom of doing business.lxvi[46] In this case, no such sources of petitioners authority from which to deduce whether or not he was acting beyond the scope of his responsibilities as corporate vice-president are mentioned, much less proven. It is thus logical to conclude that the board of directors or by laws- of the corporation vested petitioner Co with certain executive dutieslxvi[47]one of which is a case for the Corporation. That petitioner Co was authorized to institute the estafa case is buttressed by the fact that the Corporation failed to make an issue out of his authority to file said case. Upon wellestablished principles of pleading, lack of authority of an officer of a corporation to bind it by contract executed by him in its name, is a defense which should have been specially pleaded by the Corporation.lxvi*48+ The Corporations failure to interpose suc h a defense could only mean that the filing of the affidavit-complaint by petitioner Co was with the consent and authority of the Corporation. In the same vein, petitioner Co may not be held personally liable for acts performed in pursuance of an authority and therefore, holding him solidarily liable with the Corporation for the damages awarded to respondent Lao does accord with law and jurisprudence. Rtcspped G.R. No. 606958-59 In this petition for review on certiorari of the Decisions of the Court of Appeals in CA-G.R. No. 61925-R, regarding Laos claim for damages on account of malicious prosecution, and in CAG.R. No. 62532-R that arose from Laos complaint for accounting and damages, petitioner Corporation assigns as errors, that: 1........The respondent Court of Appeals erred and/or committed a grave abuse of discretion in affirming the erroneous decision of the lower court. The civil case for malicious prosecution was filed during the pendency of the criminal case upon which the civil suit was based. There is as yet no cause of action. xxx.

2........The respondent Court of Appeals erred and/or committed a grave abuse of discretion when it reversed or set aside the supplemental decision of the lower court in Civil Case No. 4452, which reversal was merely based on surmises and conjectures. xxx. 3........The respondent Court of Appeals erred and/or committed grave abuse of discretion when it awarded moral damages in Civil Case No. 4452 which was not prayed for because Andres Lao prayed for moral damages and was already awarded in Civil Case No. 5528. Moral damages must be specifically prayed for. xxx.lxvi[49] Petitioner Corporation contends that the complaint for malicious prosecution brought by Lao during the pendency of subject criminal case for estafa, states no cause of action as it was prematurely filed when the criminal case that resulted in the acquittal of Lao was not yet terminated. On the other hand, respondent Lao countered that the elements supportive of an action for malicious prosecution are evidentiary in nature and their existence or nonexistence cannot be the subject of evaluation and conclusion upon the filing of the complaint. For Lao, those elements must be determined at the time the plaintiff has offered all his evidence and rested his case. Kortex Malicious prosecution has been defined as an action for damages brought by one against whom a criminal prosecution, civil suit or other legal proceeding has been instituted maliciously and without probable cause, after the termination of such prosecution, suit or other proceeding in favor of the defendant therein.lxvi[50] As thus defined, the fact of termination of the criminal prosecution, civil suit or legal proceeding maliciously filed and without probable cause, should precede the complaint for malicious prosecution. Such a complaint states a cause of action if it alleges: (a) that the defendant was himself the prosecutor or at least instigated the prosecution; (b) that the prosecution finally terminated in the acquittal of the plaintiff; (c) that in bringing the action the prosecutor acted without probable cause, and (d) that the prosecutor was actuated by malice, i.e., by improper and sinister motives.lxvi[51] Ocamp v. Buenaventuralxvi[52] demonstrates the importance of the requirement that the case maliciously commenced should be terminated before a claim for damages arising from the filing of such case should be presented. In that case, a complaint for damages arising from the alleged malicious filing of an administrative case for serious misconduct, grave abuse of authority and commission of a felony, was held to be premature during the pendency of said administrative case before the then Police Commission (POLCOM). Observing that the complaint for damages was based on the claim that the administrative case brought before the POLCOM was malicious, unfounded and aimed to harass the respondents, the Court there held: "xxx. The veracity of this allegation is not for us to determine, for if We rule and allow the civil case for damages to proceed on that ground, there is the possibility that the court a quo in deciding said case might declare the respondents victims of harassment and thereby indirectly

interfere with the proceedings before the POLCOM. The respondents case for damages before the lower court is, therefore, premature as it was filed during the pendency of the administrative case against the respondents before the POLCOM. The possibility cannot be overlooked that the POLCOM may hand down a decision adverse to the respondents, in which case the damage suit will become unfounded and baseless for wanting in cause of action. Of persuasive force is the ruling in William H. Brown vs. Bank of the Philippine Islands and Santiago Freixas, 101 Phil. 309, 312, where this Court said: Sclaw "xxx. In effect, plaintiff herein seeks to recover damages upon the ground that the detainer case has been filed, and is being maintained, maliciously and without justification; but this pretense affects the merits of said detainer case. Should final judgment be eventually rendered in that case in favor of the plaintiffs therein, such as the one rendered in the municipal court, the validity of the cause of action of said lessors against Brown, would thereby be conclusively established, and necessarily, his contention in the present case would have to be rejected. Similarly, we cannot sustain the theory of Brown in the case at bar, without prejudging the issue in the detainer case, which is still pending. Until final determination of said case, plaintiff herein cannot, and does not, have, therefore, a cause of action - if any, on which we do not express our opinion - against the herein defendants. In short, the lower court has correctly held that the present action is premature, and, that, consequently, the complain herein does not set forth a cause of action against the defendants."lxvi[53] A similar ruling was laid down in Cabacungan v. Corraleslxvi[54] where the Court sustained the dismissal of an action for damages on the ground of prematurity. The records disclosed that the alleged false and malicious complaint charging plaintiffs with malicious mischief was still pending trial when the action for damages based on the subject complaint was brought. Premises studiedly viewed in proper perspective, the contention of Lao that the elements of an action for malicious prosecution are evidentiary in nature and should be determined at the time the plaintiff offers evidence and rests his case, is untenable. To rule otherwise would, in effect, sanction the filing of actions without a cause of action. The existence of a cause of action is determined solely by the facts alleged in the complaint. Consideration of other facts is proscribed and any attempt to prove extraneous circumstances is not allowed.lxvi[55] As this Court said in Surigao Mine Exploration Co., Inc. v. Harris,lxvi[56] "unless the plaintiff has a valid and subsisting cause of action at the time his action is commenced, the defect cannot be cured or remedied by the acquisition or accrual of one

while the action is pending, and a supplemental complaint or an amendment setting up such after-accrued cause of action is not permissible."lxvi[57] Thus, the circumstance that the estafa case concluded in respondent Laos acquittal during the pendency of the complaint for malicious prosecution did not cure the defect of lack of cause of action at the time of filing of the complaint. Sclex Neither does the Court find merit in respondent Laos submission that the complaint for malicious prosecution is viable inasmuch as it is also anchored on Articles 20 and 21 of the Civil Code. This may appear to be a persuasive argument since there is no hard and fast rule which can be applied in the determination of whether or not the principle of abuse of rights has been violated, resulting in damages under the said articles of the Civil Code on Human Relations. Indeed, a party injured by the filing of a court case against him, even if he is later on absolved, may file a case for damages grounded either on the principle of abuse of rights or on malicious prosecution.lxvi[58] However, whether based on the principle of abuse of rights or malicious prosecution, a reading of the complaint here reveals that it is founded on the mere filing of the estafa charge against respondent Lao. As such, it was prematurely filed and it failed to allege a cause of action. Should the action for malicious prosecution be entertained and the estafa charge would result in respondent Laos conviction during the pendency of the damage suit, even if it is based on Articles 20 and 21, such suit would nonetheless become groundless and unfounded. To repeat; that the estafa case, in fact, resulted in respondent Laos acquittal would not infuse a cause of action on the malicious prosecution case already commenced and pending resolution. The complaint for damages based on malicious prosecution and/or on Articles 20 and 21 should have been dismissed for lack of cause of action and therefore, the Court of Appeals erred in affirming the decision of the trial court of origin. It should be stressed, however, that the dismissal of subject complaint should not be taken as an adjudication on the merits, the same being merely grounded on the failure of the complaint to state a cause of action.lxvi[59] As regards the Decision in CA-G.R. No. 62532-R which was spawned by respondent Laos complaint for accounting, petitioner contends that the appellate court erred when it reversed and set aside the supplemental decision in Civil Case No. 4452 and directed the corporation to reimburse the amount of P556,444.20, representing Laos overpayment to the Corporation. The Court would normally have restricted itself to questions of law and shunned away from questions of fact were it not for the conflicting findings of fact by the trial court and appellate court on the matter. The Court is therefore constrained to relax the rule on conclusiveness of factual findings of the Court of Appeals and, on the basis of the facts on record, make its own findings.lxvi[60] It is significant to note that as per decision of the trial court dated March 26, 1975, a courtsupervised accounting was directed so as to ascertain the true and correct accountability of Andres Lao to the defendant corporation. Thus, a three-man audit committee was formed with the branch of clerk of court, Atty. Victorio Galapon, as chairman, and two other certified public accountants respectively nominated by the parties, as members.

On September 16, 1976, the said Audit Committee submitted its reportlxvi[61] and in the hearing of November 25, 1976, the parties interposed no objection thereto and unanimously accepted the Audit Committee Report. The Committee found that Andres Lao has made a total overpayment to defendant corporation in the amount of P556,444.20. Xlaw Trial by commissioners is allowed by the Rules of Court when a) the trial of an issue of fact requires the examination of a long account on either side, in which case the commissioner may be directed to hear and report upon the whole issue or any specific question involved therein; b) when the taking of an account is necessary for the information of the court before judgment, or for carrying a judgment or order into effect; and c) when a question of fact, other than upon the pleadings, arises upon motion or otherwise, at any stage of a case, or for carrying a judgment or order into effect.lxvi[62] Ultimately, the trial court, in the exercise of its sound discretion, may either adopt, modify, or reject in whole or in part, the commissioners report or it may recommit the same with instructions, or require the parties to present additional evidence before the commissioners or before the court.lxvi[63] In the case under consideration, it is thus within the power of the trial court to refer the accounting to court-appointed commissioners because a true and correct accounting is necessary for the information of the court before it can render judgment. Moreover, the technical nature of the audit procedure necessitates the assistance of a certified public accountant. And since both parties offered no objection to the commissioners report, they are deemed to have accepted and admitted the findings therein contained. There is no discernible cause for veering from the findings of the Audit Committee. In arriving at its conclusion, the Audit Committee subtracted the total remittances of Lao in the amount of P13,686,148.80 from the entire volume of shipments made by the corporation. In determining the total volume of shipments made by the corporation, the Audit Committee did not include the shipments covered by bills of lading and factory consignment invoices but without the corresponding delivery receipts. These included shipments in the amount of P597, 239.40 covered by bills of lading and factory consignment invoices but with no supporting delivery receipts, and shipments worth P126, 950.00 with factory consignment invoices but not covered by bills of lading and delivery receipts. However, the Audit Committee considered shipments made by the corporation to Lao in the amount of P9,110,777.00 covered by bills of lading and factory invoices but without the corresponding delivery receipts because subject shipments were duly reported in Laos monthly sales report. Xsc The Audit Committee correctly excluded the shipments not supported by delivery receipts, albeit covered by bills of lading and factory consignment invoices. Under Article 1497 of the Civil Code, a thing sold shall be understood as delivered when it is placed in the control or possession of the vendee. Unless possession or control has been transferred to the vendee, the thing or goods sold cannot be considered as delivered. Thus, in the present case, the Audit Committee was correct when it adopted as guideline that accountability over the goods shipped was transferred from the corporation to Andres Lao only upon actual delivery of the goods to him. For it is only when the goods were actually delivered to and received by

Lao, did Lao have control and possession over subject goods, and only when he had control and possession over said goods could he sell the same. Delivery is generally evidenced by a written acknowledgement of a person that he or she has actually received the thing or the goods, as in delivery receipts. A bill of lading cannot substitute for a delivery receipt. This is because it is a written acknowledgement of the receipt of the goods by the carrier and an agreement to transport and deliver them at a specific place to a person named or upon his order.lxvi[64] It does not evidence receipt of the goods by the consignee or the person named in the bill of lading; rather, it is evidence of receipt by the carrier of the goods from the shipper for transportation and delivery. Likewise, a factory consignment invoice is not evidence of actual delivery of the goods. An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold.lxvi[65] It is not proof that the thing or goods were actually delivered to the vendee or the consignee. As admitted by the witness for the corporation: A: Factory consignment invoices represents what the company billed the plaintiff Mr. Lao and the bill of lading represents the goods which were supposed to have been shipped. xxx.......xxx.......xxx A: Shipments covered by factory consignment invoices simply meant these are billings made again by the Associated Anglo-American Tobacco Corporation to plaintiff Andres Lao. (t.s.n., November 25, 1976, pp. 45-47 as cited in Respondent Laos Comment, Rollo, p. 259) Thus, in the absence of proof that the goods were actually received by Lao as evidenced by delivery receipts, the shipments allegedly made by the corporation in the amount of P597,239.40 and P126,950.00 covered only by bills of lading and factory consignment invoices cannot be included in Laos accountability. Sc However, as to the shipments worth P4,018,927.60 likewise covered only by bills of lading and factory consignment invoices, the Audit Committee correctly considered them in Laos account because such shipments were reported in the latters sales reports. The fact that Lao included them in his sales reports is an implied admission that subject goods were actually delivered to him, and that he received the said goods for resale. As regards the award of moral damages, petitioner Corporation faults the Court of Appeals for awarding such damages not specifically prayed for in the complaint for accounting and damages in Civil Case No. 4452. Petitioner Corporation argues that moral damages were prayed for and duly awarded in Civil Case No. 5528 and therefore, it would be unfair and unjust to allow once again, recovery of moral damages on similar grounds.

Contrary to the allegation of the petitioner Corporation, the award of moral damages was specifically prayed for in the complaint albeit it left the amount of the same to the discretion of the court.lxvi[66] Moreover, Civil Case Nos. 4452 and 5528 were on varied causes of action. While the award for moral damages in Civil Case No. 4452 was based on the evident bad faith of the petitioner Corporation in unilaterally rescinding respondent Laos sales agency through his immediate replacement by Ngo Kheng, the claim for moral damages in Civil Case No. 5528 was anchored on the supposed malice that attended the filing of the criminal case for estafa. Petitioner Corporation also opposes for being conjectural, the award of P150,000.00 in Civil Case No. 4452, representing actual damages for loss of earnings. True, damages cannot be presumed or premised on conjecture or even logic. A party is entitled to adequate compensation only for duly substantiated pecuniary loss actually suffered by him or her.lxvi[67] In this case, however, the trial court correctly found that an award for actual damages was justified because several months before their contract of agency was due to expire in 1969, the petitioner Corporation replaced Lao with Ngo Kheng as sales agent for the areas of Leyte and Samar. This, despite the fact that they had already agreed that Lao would continue to act as the corporations sales agent provided that he would reduce his accountability to P200,000.00, the amount covered by his bond, and engaged the services of an independent accounting firm to do an audit to establish Laos true liability. Due to his ouster as sales agent, Lao failed to realize a net income from his sales agency in the amount of P30,000.00 a year. Scmis However, the amount of actual damages should be reduced to P30,000.00 only instead of the P150,000.00 awarded by the appellate court. Since the contract of sales agency was on a yearly basis, the actual damages Lao suffered should be limited to the annual net income he failed to realize due to his unjust termination as sales agent prior to the expiration of his contract in 1969. Unrealized income for the succeeding years cannot be awarded to Lao because the corporation is deemed to have opted not to renew the contract with Lao for the succeeding years. As to the award of exemplary damages, suffice it to state that in contracts and quasicontracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.lxvi[68] In the case under scrutiny, the Court finds the award of exemplary damages unjustified or unwarranted in the absence of any proof that the petitioner Corporation acted in a wanton, fraudulent, reckless, oppressive, and malevolent manner. For the same reasons, the award for attorneys fees should be deleted. WHEREFORE, In G.R. No. L-47013, the petition for review on certiorari is DENIED for lack of merit; In G.R. No. 60647, the petition is GRANTED and the assailed decision is SET ASIDE; and the Decision of the Court of Appeals in CA-G.R. No. 61925-R, finding Esteban Co solidarily liable with the respondent Associated Anglo-American Tobacco Corporation for damages, is

REVERSED AND SET ASIDE. As above ratiocinated, the respondent corporation cannot be held liable for damages. In G.R. Nos. 60958-59, the Decision in CA-G.R. No. 61925-R is REVERSED AND SET ASIDE; the respondent corporation is adjudged not liable for malicious prosecution due to the prematurity of the action; while the Decision in CA-G.R. No. 62532-R is AFFIRMED, insofar as it ordered respondent corporation to reimburse Andres Laos overpayment in the amount of P556,444.20, but MODIFIED, in that only an award of P30,000.00 for actual damages is GRANTED, and all the other monetary awards are deleted. No pronouncement as to costs. SO ORDERED. Melo, (Chairman), Vitug, and Panganiban, JJ., concur. Gonzaga-Reyes, J., no part. Spouse is with counsel for respondents.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. L-66865 January 13, 1989 MAGTANGGOL QUE, petitioner, vs. THE HON. INTERMEDIATE APPELLATE COURT and NICOLAS, respondents. Manuel O. Chan Law Offices for petitioner. Jose M. Castillo for respondents.

CRUZ, J.:

Both procedural and substantive issues are involved in this petition for review by certiorari of a decision of the respondent court reinstating the original decision of the trial court in favor of the appellant, the private respondent herein. The petitioner claims that the respondent court committed reversible error in holding that his second motion for reconsideration was pro forma and therefore null and void. It is also his contention that the revived original decision of the trial court, which had been reversed on his motion for reconsideration, was not in accordance with law and jurisprudence and should itself be annulled. The case arose when Magtanggol Que, the herein petitioner, filed a complaint for estafa against private respondent Antonio Nicolas in the office of the city fiscal of Caloocan City for issuance of several checks which were subsequently dishonored when presented for 1 encashment. The charge was dismissed for lack of merit, the investigating fiscal holding that the controversy was an accounting matter that did not necessarily involve deceit on the part 2 of Nicolas. Subsequently, Nicolas filed his own complaint for damages against Que, this time in the Court of First Instance of Bulacan, for what he claimed was his malicious prosecution 3 by the latter. It was now Que's turn to claim harassment. In his counterclaim, he averred that Nicolas had maliciously filed the complaint in Bulacan although he was a resident of 4 Caloocan City; that the private respondent was really indebted to him in any case; and that it was he who had suffered damages as a result of the unwarranted suit. The dispute goes back to several previous business transactions between the protagonists when they were still on amicable terms. In July and August of 1975, the private respondent ordered from the petitioner certain amounts of canvass strollers which were delivered to and accepted by Nicolas, who issued five checks therefore to Que. The total face value of the cheeks was P7,600.00. Payment thereof was subsequently stopped by Nicolas and Que was unable to encash them. Nicolas explained later that he had ordered the "stop payment" because of defects in the articles sold which despite his requests Que had not corrected. Que for his part argued that the allegedly defective articles were never returned to him until after he had filed the charge for estafa and that Nicolas had earlier merely ignored his complaints about the dishonored checks. The original decision written by the late Judge Benigno M. Puno held in favor of the plaintiff and awarded him the total amount of P80,500.00 in moral, exemplary, and nominal damages 5 plus a P4,000.00 attorney's fee and the costs of the suit. The finding was that the defendant had acted maliciously in filing the estafa charge and in alleging that the plaintiff had issued the dishonored checks with deceit aforethought. The decision was served on the petitioner on November 8, 1977. He filed a motion for reconsideration, which was denied on November 3, 1978, by Judge Oscar C. Fernandez, who 7 had succeeded Judge Puno. On November 15, 1978, the petitioner filed his notice of appeal and appeal bond, followed two days later by his record on appeal, which was opposed by the 8 private respondent. On November 29, 1978, Nicolas filed a motion for execution pending 9 appeal. On December 29, 1978, Que filed a motion to stay the running of the period for appeal and leave to file a second motion for reconsideration within a period of thirty days.
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The trial court granted an extension up to January 29, 1978. The second motion for reconsideration was filed on that date and on the basis thereof the trial court rendered its 11 amended decision dated February 21, 1978, which reversed the original decision penned by Judge Puno. It also awarded P10,000.00 moral damages to Que on his counterclaim. Thus it was that Nicolas, the would-be-appellee, became himself the appellant in the respondent court. In his appeal, the private respondent contended that the amended decision rendered by Judge Fernandez was null and void because the trial court lost jurisdiction over the case when the petitioner filed his notice of appeal, appeal bond and record on appeal. Assuming the appeal had not yet been perfected, the trial judge nevertheless could not have acted on the second motion for reconsideration because it did not contain any notice of hearing and was also filed beyond the thirty-day extension prayed for by the petitioner himself. There was the further contention that the second motion for reconsideration was pro forma and as "a mere scrap of paper" did not suspend the running of the reglementary period for appeal .
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10

The first objection is clearly without merit as it is not disputed that the record on appeal had not yet been approved by the trial court and in fact had been opposed by the private respondent himself. The trial court had not yet lost jurisdiction over the case because Rule 41, Section 9, of the Rules of Court provides: Sec. 9. When appeal deemed perfected, effect thereof If the notice of appeal bond and the record on appeal, the appeal bond and the record on appeal have been filed in due time, the appeal is deemed perfected upon the approval of the record on appeal and of the appeal bond other than a cash bond, and thereafter the trial court loses its jurisdiction over the case... While it is conceded that the motion for reconsideration did not contain any notice of hearing, it is also true that the private respondent was notified of such hearing by the trial 13 court and that his counsel appeared thereat, to reiterate his position that the second motion was null and void. It seems to us that in opting not to oppose the same on the merits, the private respondent was relying too much on a technicality. As for the claimed tardiness, the respondent court correctly ruled that although the petitioner had asked for an extension of thirty days, which would have ended on January 28, 1979, the recorded fact was that the extension granted was up to January 29, 1979. The motion was filed on this date and so it could not be faulted for tardiness. On the last ground, however, the respondent court sustained the private respondent. It held that the second motion for reconsideration should have been denied for being pro forma as it was a mere reiteration of the issues previously raised and already decided by the trial court. Accordingly, it annulled the amended decision based on the second motion for reconsideration and reinstated the original decision of Judge Puno.
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The Court has carefully gone over the first and the second motions for reconsideration and cannot agree with the respondent court that the latter simply reproduces the issues already raised and resolved in the first motion. We find that the second motion not only restates and reargues the first motion but also amplifies the same; and more than that, it also invokes and supports other substantial grounds not earlier raised in the first motion. In the first motion, the petitioner argued that there was probable cause to justify his filing of the complaint for estafa and that he had not been motivated by malice; that the filing of the complaint for malicious prosecution in Bulacan was intended to harass him because the plaintiff was a resident of Caloocan City; and that there was no basis for the award of 16 damages. In the second motion, the petitioner augmented his claim that he had not filed the estafa charge with malice; that he had probable cause because the defendant had not gone beyond his own self-serving statements to prove that he had stopped payment of the checks because the goods delivered to him were defective; that the mere dismissal of the charge in the fiscal's office was not a ground for damages nor did it constitute an actionable wrong; and that the award of damages was not justified. While some of the grounds raised in the first motion were admittedly also invoked in the second motion, the purpose was evidently to reinforce the arguments thereon; and, no less significantly, the additional issues raised were seriously argued and supported with authorities. It is therefore incorrect to say that the second motion for reconsideration was a mere repetition of the first motion and so should not have been accepted by the trial court. Coming now to the substantive issues, we observe that the declared nullity of the second motion for reconsideration was the sole basis of the respondent court in setting aside the amended decision of Judge Fernandez and reinstating the original decision of Judge Puno. The more important question of whether or not the petitioner had instituted a malicious prosecution of the private respondent was not resolved as it was felt no longer necessary to do so. But as we have here ruled that the second motion for reconsideration was not merely pro forma it should follow that that important substantive question raised by the appellant must still be addressed and decided. Normally, the resolution of this question should be undertaken by the respondent court, to which this case ought to be remanded for further proceedings on the matter. However, considering the time this case has been pending since it was commenced in 1976 with the filing of the complaint for damages, and the pertinent records being available for direct examination and study by the Court, we deem it necessary and expedient to resolve the question ourselves, that this case may be decided once and for all without further delay. In the amended decision that reversed the original decision awarding damages to the private respondent, Judge Fernandez declared: 'In awarding plaintiff damages and attorney's fees in the total amount of P80,900.00, by way of moral, nominal and exemplary damages and attorney's fees, the Court overlooked the ruling that failure in suit is not per se an actionable wrong, that adverse result of an action does not per
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se make the act wrongful and subject the actor to payment of moral damages, for the law could not have meant to impose a penalty of a right to litigate, the right so precious that moral damages may be charged to those who exercise it erroneously; that reliance in good faith to counsel's advice given after a full and fair statement of all the facts to the attorney, does not render the party liable for damages and that it is immaterial that the attorney's advice is unsound or erroneous; and that where there is no clear showing of malice on the part of petitioner in filing the action, the worries and anxiety suffered by respondent are usually caused to the party haled into a court as a defendant, and there is no sufficient justification for awarding of damages. The resolution of dismissal by the Fiscal's office of Caloocan City is not tantamount to a decision in the sense that the proceedings had therein were merely summary in nature as the title of the proceeding 'preliminary investigation' so connotes. As a preliminary proceeding, it lacks the thoroughness and rigidity of an ordinary trial. The investigating fiscal was merely called upon to determine at first instance whether or not there exists a prima facie case to justify the filing of an infromation in court. 'Viewed in the light of the foregoing, the Court so believes that the lone self-serving testimony of plaintiff is insufficient to justify the award of the fabulous sum of P80,900.00 by way of moral, nominal and exemplary damages and attorney's fees. On the other hand, the Court is convinced that defendant had proven that of the sum of P7,600.00 covered by the five bouncing checks issued to him by plaintiff, at least P4,600.00 remains unpaid up to now. The defense of plaintiff that 198 pieces of canvass strollers which he received from defendant were defective, is in reality a lame and shallow excuse for plaintiff's non payment of his truly, just, valid, legal and moral obligation to defendant.** We take note at this point of the jurisprudence cited by the private respondent regarding the inhibitions that ought to be observed by a judge in reviewing the decision of his predecessor who conducted the trial and had the opportunity to observe the demeanor of the witnesses and to test their credibility firsthand. We affirm the rule announced in Miranda v. Court of 17 Appeals that the original decision should not be lightly revised. Nevertheless, the rule is not inflexible and ought not to be applied where an objective re- examination of the facts and the applicable laws dictates a reversal of the former judgment in the interest of justice. Decisions are after all not infallible, and much less are they immutable, more so if, as in the present case, they have not yet become final and executory.

The question is not really whether or not Judge Fernandez had the authority to reverse the decision of Judge Puno but whether or not the reversal was correct. A study of the appealed amended decision shows that it was not arbitrarily reached by Judge Fernandez. On the contrary, the detailed assessment of the facts in light of the pertinent laws shows that the conclusions of the trial court were the result of a careful study of the record, as befitted a judge who was in effect reviewing the verdict of a colleague. In our view, the private respondent has not shown that Judge Fernandez committed any reversible error when on the basis of his own appraisal of the case he found for the petitioner and reversed the original decision of Judge Puno. As early as in 1932, in Buchanan v. Esteban, this Court had already stressed that "one cannot be held liable in damages for maliciously instituting a prosecution where he acted with probable cause." As Justice Moreland explained in that case: Probable cause is the existence of such facts and circumstances as would excite the belief, in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which be was prosecuted. The general rule is well settled that one cannot be held liable in damages for maliciously instituting a prosecution where he acted with probable cause. In other words, a suit will lie only in cases where a legal prosecution has been carried on without probable cause. And the reason for the rule as stated by Blackstone, is that it would be a very great discouragement to public justice if prosecutors, who had a tolerable ground of suspicion, were liable to be sued at law when their indictments miscarried. xxx xxx xxx 'Under the Spanish Law, the element of probable cause was not treated separately from that of malice, as under the American Law. When a complaint was laid and there was probable cause to believe that the person charged had committed the acts complained of, although, as a matter of fact, he had not, the complainant was fully protected, but not so much on the theory of probable cause as on the ground that, under such circumstances, there was no intent to accuse falsely. If the charge, although false, was made with an honest belief in its truth and justice, and there were reasonable grounds on which such a belief could be founded, the accusation could not be held to have been false in the legal sense.' (Italics supplied.) In the case at bar, it is indisputable that the five checks issued by the private respondent had been dishonored and that the drawer had failed to make them good despite the protests of the petitioner. Nicolas had merely ignored him. It is also a matter of record that the checks were post-dated, which made the petitioner assume that at the time they were issued the private respondent did not really have sufficient funds for their encashment. It could be, as
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the original decision assumed, that the checks were in the nature of promissory notes, to be made good when the articles delivered met with the drawer's approval. However, considering that the checks could not be encashed and the supposedly defective goods had not been returned by the drawer, the petitioner had reason to believe when he filed his complaint that the buyer had at the outset intended to deceive him. The record shows the the criminal charge for estafa was filed by the petitioner with the 19 fiscal's office on October 8, 1975, and that the supposedly defective articles were returned 20 by the private respondent to the former's driver only on October 13, 1975. The only evidence that the articles were defective was the testimony of the private respondent himself, who claimed that the buttons on the canvass strollers were misplaced. Considering that Nicolas and Que had apparently been cordial until then and that they were businessmen involved in a symbiotic relationship, the Court feels that what Nicolas would or should have done was request the petitioner to correct the claimed defects instead of arbitrarily stopping payment on the checks in question. Strangely, what the private respondent did instead was simply cut short a mutually profitable association with this hostile act. The petitioner had to find out for himself that the checks had been dishonored on orders of the drawer. Except for his own allegations, there is no evidence that Nicolas asked or, if necessary, demanded the repair of the strollers. Neither is there any evidence that he had warned Que that payment on the checks would be stopped unless the repairs were undertaken. The 21 private respondent says that he did all this by telephone. but this self-serving statement is 22 denied by the petitioner. As the Court itself sees it, Nicolas, while retaining the strollers which had been delivered to him on the strength of his post-dated checks, simply issued the stop payment order without even previous notice to the petitioner. The petitioner alleged that he complained about the dishonored checks-also verbally, over the telephone but the 23 private respondent simply ignored him. It is noteworthy that, by contrast, this averment of the petitioner was not denied by the private respondent. The presence of probable cause signifies as a legal consequence the absence of malice. It is evident that the petitioner was not motivated by ill feeling but only by an anxiety to protect his his rights when he filed the criminal complaint for estafa with the fiscal's office. If he averred that the private respondent had no funds in the bank when he issued the postdated checks and intended to cheat the payee, it was because the circumstances of the case as Que saw them led him to this conclusion. Even if the fiscal found that no deceit was involved and that the petitioner's claim was unfounded, the mistaken charge was nonetheless, in the legal sense, not malicious. As the Court has held: To constitute malicious prosecution, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person that it was initiated deliberately by the defendant knowing that his charges were false and groundless. Concededly, the mere act of submitting a case to the authorities for prosecution does not make one 24 liable for malicious prosecution (Italics supplied.)

We agree with the petitioner that the mere dismissal of the criminal complaint by the fiscal's office did not create a cause of action because the proceedings therein did not involve an exhaustive examination of the elements of malicious prosecution. What was inquired into in that preliminary investigation was whether or not there was a prima facie showing of estafa that would justify the filing of the corresponding information. Nowhere in the fiscal's investigation report is there any statement imputing malice to the complainant nor could it have as this was not the matter in issue. The Court is not unaware of the common tactic of filing complaints for estafa in the fiscal's office in hopes that fear of criminal prosecution will compel the debtor to settle his civil obligation. Fortunately, the fiscal has often seen through this maneuver and resisted this none-too-clever effort to make his office a collection agency for the complainant. In view of the antecedents of the case at bar, however, we are satisfied that the criminal complaint filed by the petitioner was not a mere ploy to enforce the payment of his account by Nicolas. There was here a genuine protest over the abrupt and suspicious order to stop the encashment of the checks issued to him by the private respondent. In a free society, controversies are heard and settled under the rule of law in the forum of the courts of justice. It is one of the virtues of our system of government that if a person feels he has been aggrieved, he does not have to take the law into his hands or resort to the use of force for the vindication of his injury. The courts are there to hear and act on his complaint. The right to litigate is an escape valve to relieve the pressures of personal disagreements that might otherwise explode in physical confrontation, It is necessary not only for upholding one's claims when they are unjustly denied but also for the maintenance of peace if not goodwill among incipient antagonists. Without the right to litigate, conflicting claims cannot be examined and resolved in accordance with one of the primary purposes of government, which is to provide for a just and orderly society. As the Court has held: While we must look upon the plight of hapless victims of unfounded and malicious prosecutions with tolerance and sympathy, sound principles of justice and public policy dictate that persons shall have free resort to the courts for redress of wrongs and vindications of their rights without fear of later on standing trial for damages whereby lack of sufficient evidence, legal technicalities or a different interpretation of the laws on the matter the case would lose ground and therein defendants acquitted. Proof and motive that the prosecution or institution of the action was prompted by a sinister design to vex and humiliate a person and to cast dishonor and disgrace must be clearly and preponderantly established to entitle the victims to damages and other rights granted by law; otherwise, there would always be a civil action for damages after every prosecution's failure to prove its 25 cause resulting in the consequent acquittal of the accused therein. Furthermore: The adverse result of an action does not per se make the wrongful and subject the actor to the payment of moral damages. The law could not

have meant to impose a penalty on the right to litigate, such right is so precious that moral damages may not be charged on those who may 26 exercise it erroneously. There is in fact a stronger suggestion of malice in the circumstance that the private respondent filed his complaint for damages in Valenzuela, Bulacan, as his alleged residence, notwithstanding that his place of business, in which he had dealings with the petitioner, was Caloocan City. The Court finds the petitioner's claim of harassment more plausible. However, inasmuch as good faith is presumed, and applying this presumption both to the petitioner and the private respondent, we hereby rule that, absent sufficient rebuttable evidence, neither of them is guilty of malice in their mutual relations. There remains the issue of the actual damages, which the amended decision awarded in the sum of P4,600.00, representing the cost of the strollers not yet paid for by the private respondent. The evidence shows that these items were returned, albeit belatedly, for which the petitioner's driver had issued a receipt to Nicolas. The private respondent questioned this award in his appeal and argued his challenge in his appellant's brief, but the petitioner for his 27 part offered no rebuttal and did not even file the appellee's brief. In view of this, we hold that the said award should for lack of basis be, as it is hereby, disallowed. The acts of the petitioner and the private respondent have in the view of the Court been far from exemplary. The petitioner could have exercised a little more diligence in ascertaining the facts before filing the criminal complaint in the fiscal's office and provoking all this legal conflict. The private respondent, on the other hand, exhibited an undue belligerence that naturally excited the suspicions of the petitioner and later exacerbated their relations when he filed bis own complaint in Bulacan instead of Caloocan City. In the exercise of its discretion, the Court denies both parties their respective claims for damages and holds that each of them must bear the financial consequences of bis own acts, including the litigation expenses. The damages awarded in the original and amended decisions are all disallowed. WHEREFORE, the decision of the respondent court dated March 12, 1984, is SET ASIDE and the amended decision of the trial court dated February 21, 1979, is REINSTATED as above modified. This decision is immediately executory. FIRST DIVISION [G.R. No. 107019. March 20, 1997] FRANKLIN M. DRILON, AURELIO C. TRAMPE, GREGORIO A. ARIZALA, CESAR M. SOLIS and FERDINAND R. ABESAMIS, petitioners, vs. COURT OF APPEALS, HON. GEORGE C. MACLI-ING, in his capacity as Presiding Judge of Branch 100 of the Regional Trial Court of Quezon City, and HOMOBONO ADAZA, respondents.

DECISION HERMOSISIMA, JR., J.: Petitioners seek the reversal of the Resolutions of respondent Court of Appeals in CA-G.R. SP No. 25080 dated January 31, 1992 and September 2, 1992 affirming the Orders, dated February 8, 1991 and May 14, 1991, of respondent Judge George C. Macli-ing which denied herein petitioners Motion to Dismiss the complaint filed in Civil Case No. Q-90-6073 by respondent Homobono Adaza. The facts are not in dispute. In a letter-complaint to then Secretary of Justice Franklin Drilonlxvi[1] dated March 20, 1990, General Renato de Villa,lxvi[2] who was then the Chief of Staff of the Armed Forces of the Philippines, requested the Department of Justice to order the investigation of several individuals named therein, including herein private respondent Homobono Adaza, for their alleged participation in the failed December 1989 coup detat. The letter-complaint was based on the affidavit of Brigadier General Alejandro Galido, Captain Oscarlito Mapalo, Colonel Juan Mamorno, Colonel Hernani Figueroa and Major Eduardo Sebastian. Gen. de Villas letter-complaint with its annexes was referred for preliminary inquiry to the Special Composite Team of Prosecutors created pursuant to Department of Justice Order No. 5 dated January 10, 1990. Petitioner then Assistant Chief State Prosecutor Aurelio Trampe,lxvi[3] the Team Leader, finding sufficient basis to continue the inquiry, issued a subpoena to the individuals named in the letter-complaint, Adaza included, and assigned the case for preliminary investigation to a panel of investigators composed of prosecutors George Arizala, as Chairman, and Ferdinand Abesamis and Cesar Solis as members. The case was docketed as I.S. No. DOJ-SC-90-013. On April 17, 1990, the panel released its findings, thru a Resolution, which reads: PREMISES CONSIDERED, we find and so hold that there is probable cause to hold herein respondents for trial for the crime of REBELLION WITH MURDER AND FRUSTRATED MURDER. Hence we respectfully recommend the filing of the corresponding information against them in court.lxvi[4] The above Resolution became the basis for the filing of an Information,lxvi[5] dated April 18, 1990, charging private respondent with the crime of rebellion with murder and frustrated murder before the Regional Trial Court of Quezon City, with no recommendation as to bail.lxvi[6] Feeling aggrieved by the institution of these proceedings against him, private respondent Adaza filed a complaint for damages,lxvi[7] dated July 11, 1990, before Branch 100 of the Regional Trial Court of Quezon City. The complaint was docketed as Civil Case No. Q-90-6073 entitled, Homobono Adaza, plaintiff versus Franklin Drilon, et al., respondents. In his

complaint, Adaza charged petitioners with engaging in a deliberate, willful and malicious experimentation by filing against him a charge of rebellion complexed with murder and frustrated murder when petitioners, according to Adaza, were fully aware of the nonexistence of such crime in the statute books. On October 15, 1990, petitioners filed a Motion to Dismiss Adazas complaint on the ground that said complaint states no actionable wrong constituting a valid cause of action against petitioners. On February 8, 1991, public respondent judge issued an Orderlxvi[8] denying petitioners Motion to Dismiss. In the same Order, petitioners were required to file their answer to the complaint within fifteen (15) days from receipt of the Order. Petitioners moved for a reconsideration of the Order of denial, but the same was likewise denied by respondent Judge in another Order dated May 14, 1991.lxvi[9] The subsequent Order reiterated that petitioners file their responsive pleading within the prescribed reglementary period. Instead of filing their answer as ordered, petitioners filed on June 5, 1991 a petition for certiorari under Rule 65 before the Court of Appeals, docketed as CA-G.R. No. 25080, alleging grave abuse of discretion on the part of the respondent Judge in ruling that sufficient cause of action exists to warrant a full-blown hearing of the case filed by Adaza and thus denying petitioners Motion to Dismiss. In its Resolution promulgated on January 31, 1992, the appellate court dismissed the petition for lack of merit and ordered respondent Judge to proceed with the trial of Civil Case No. Q90-6073.lxvi[10] A Motion for Reconsideration having been subsequently filed on February 28, 1992, the court a quo denied the same in a Resolution dated September 2, 1992.lxvi[11] Hence, this petition, dated October 9, 1992, pleading this Court to exercise its power of review under Rule 45 of the Revised Rules of Court. On January 13, 1993, however, this Court, thru the Second Division, dismissed the petition for failure to comply with Revised Circular No. 1-88, particularly the requirement on the payment of the prescribed docketing fees.lxvi[12] On March 8, 1993,lxvi[13] we reinstated the petition and required the respondents to comment on the aforesaid petition. In the same Resolution, a temporary restraining order was issued by this Court enjoining respondent Judge from further proceeding with Civil Case No. Q-90-6073 until further orders from this Court. The petition has merit. In his Comment,lxvi[14] dated March 23, 1993, respondent Adaza maintains that his claim before the trial court was merely a suit for damages based on tort by reason of petitioners

various malfeasance, misfeasance and nonfeasance in office, as well as for violation by the petitioners of Section 3 (e) of Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act. It was not a suit for malicious prosecution. Private respondent is taking us for a ride. A cursory perusal of the complaint filed by Adaza before respondent Judge George Macli-ing reveals that it is one for malicious prosecution against the petitioners for the latters filing of the charge against him of rebellion with murder and frustrated murder. An examination of the records would show that this latest posture as to the nature of his cause of action is only being raised for the first time on appeal. Nowhere in his complaint filed with the trial court did respondent Adaza allege that his action is one based on tort or on Section 3 (e) of Republic Act No. 3019. Such a change of theory cannot be allowed. When a party adopts a certain theory in the court below, he will not be permitted to change his theory on appeal, for to permit him to do so would not only be unfair to the other party but it would also be offensive to the basic rules of fair play, justice and due process.lxvi[15] Any member of the Bar, even if not too schooled in the art of litigation, would easily discern that Adazas complaint is no doubt a suit for damages for malicious prosecution against the herein petitioners. Unfortunately, however, his complaint filed with the trial court suffers from a fatal infirmity -- that of failure to state a cause of action -- and should have been dismissed right from the start. We shall show why. The term malicious prosecution has been defined in various ways. In American jurisdiction, it is defined as: One begun in malice without probable cause to believe the charges can be sustained (Eustace v. Dechter, 28 Cal. App. 2d. 706,83 P. 2d. 525). Instituted with intention of injuring defendant and without probable cause, and which terminates in favor of the person prosecuted. For this injury an action on the case lies, called the action of malicious prosecution (Hicks v. Brantley, 29 S.E. 459, 102 Ga. 264; Eggett v. Allen, 96 N.W. 803, 119 Wis. 625).lxvi[16] In Philippine jurisdiction, it has been defined as: An action for damages brought by one against whom a criminal prosecution, civil suit, or other legal proceeding has been instituted maliciously and without probable cause, after the termination of such prosecution, suit, or other proceeding in favor of the defendant therein. The gist of the action is the putting of legal process in force, regularly, for the mere purpose of vexation or injury (Cabasaan v. Anota, 14169-R, November 19, 1956).lxvi[17] The statutory basis for a civil action for damages for malicious prosecution are found in the provisions of the New Civil Code on Human Relations and on damages particularly Articles 19, 20, 21, 26, 29, 32, 33, 35, 2217 and 2219 (8).lxvi[18] To constitute malicious prosecution, however, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person, and that it was initiated deliberately by the defendant knowing that his charges were false and groundless. Concededly, the mere act of submitting a case to the authorities for prosecution does not make one liable for malicious prosecution.lxvi[19] Thus, in order for a malicious prosecution suit to prosper, the plaintiff must prove three (3)

elements: (1) the fact of the prosecution and the further fact that the defendant was himself the prosecutor and that the action finally terminated with an acquittal; (2) that in bringing the action, the prosecutor acted without probable cause; and (3) that the prosecutor was actuated or impelled by legal malice, that is by improper or sinister motive.lxvi[20] All these requisites must concur. Judging from the face of the complaint itself filed by Adaza against the herein petitioners, none of the foregoing requisites have been alleged therein, thus rendering the complaint dismissible on the ground of failure to state a cause of action under Section 1 (g), Rule 16 of the Revised Rules of Court. There is nothing in the records which shows, and the complaint does not allege, that Criminal Case No. Q-90-11855, filed by the petitioners against respondent Adaza for Rebellion with Murder and Frustrated Murder, has been finally terminated and therein accused Adaza acquitted of the charge. Not even Adaza himself, thru counsel, makes any positive asseveration on this aspect that would establish his acquittal. Insofar as Criminal Case No. Q90-11855 is concerned, what appears clear from the records only is that respondent has been discharged on a writ of habeas corpus and granted bail.lxvi[21] This is not, however, considered the termination of the action contemplated under Philippine jurisdiction to warrant the institution of a malicious prosecution suit against those responsible for the filing of the informaion against him. The complaint likewise does not make any allegation that the prosecution acted without probable cause in filing the criminal information dated April 18, 1990 for rebellion with murder and frustrated murder. Elementarily defined, probable cause is the existence of such facts and circumstances as would excite the belief, in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted. It is well-settled that one cannot be held liable for maliciously instituting a prosecution where one has acted with probable cause. Elsewise stated, a suit for malicious prosecution will lie only in cases where a legal prosecution has been carried on without probable cause. The reason for this rule is that it would be a very great discouragement to public justice, if prosecutors, who had tolerable ground of suspicion, were liable to be sued at law when their indictment miscarried.lxvi[22] In the case under consideration, the decision of the Special Team of Prosecutors to file the information for rebellion with murder and frustrated murder against respondent Adaza, among others, cannot be dismissed as the mere product of whim or caprice on the part of the prosecutors who conducted the preliminary investigation. Said decision was fully justified in an eighteen (18)-page Resolution dated April 17, 1990.lxvi[23] While it is true that the petitioners were fully aware of the prevailing jurisprudence enunciated in People v. Hernandez,lxvi[24] which proscribes the complexing of murder and other common crimes with rebellion, petitioners were of the honest conviction that the Hernandez Case can be differentiated from the present case. The petitioners thus argued: Of course we are aware of the ruling in People vs. Hernandez, 99 Phil. 515, which held that common crimes like murder, arson, etc. are absorbed by rebellion. However, the Hernandez

case is different from the present case before us. In the Hernandez case, the common crimes of murder, arson, etc. were found by the fiscal to have been committed as a necessary means to commit rebellion, or in furtherance thereof. Thus, the fiscal filed an information for rebellion alleging those common crimes as a necessary means of committing the offense charged under the second part of Article 48, RPC. We, however, find no occasion to apply the Hernandez ruling since as intimated above, the crimes of murder and frustrated murder in this case were absolutely unnecessary to commit rebellion although they were the natural consequences of the unlawful bombing. Hence, the applicable provision is the first part of Article 48 of the RPC.lxvi[25] While the Supreme Court in the case of Enrile v. Salazar,lxvi[26] addressing the issue of whether or not the Hernandez doctrine is still good law, in a 10-3 vote, did not sustain the position espoused by the herein petitioners on the matter, three justiceslxvi[27] felt the need to re-study the Hernandez ruling in light of present-day developments, among whom was then Chief Justice Marcelo Fernan who wrote a dissenting opinion in this wise: I am constrained to write this separate opinion on what seems to be a rigid adherence to the 1956 ruling of the Court. The numerous challenges to the doctrine enunciated in the case of People vs. Hernandez, 99 Phil. 515 (1956), should at once demonstrate the need to redefine the applicability of said doctrine so as to make it conformable with accepted and well-settled principles of criminal law and jurisprudence. To my mind, the Hernandez doctrine should not be interpreted as an all-embracing authority for the rule that all common crimes committed on the occasion, or in furtherance of, or in connection with, rebellion are absorbed by the latter. To that extent, I cannot go along with the view of the majority in the instant case that Hernandez remains binding doctrine operating to prohibit the complexing of rebellion with any other offense committed on the occasion thereof, either as a means necessary to its commission or as an unintended effect of an activity that constitutes rebellion (p. 9, Decision). The Hernandez doctrine has served the purpose for which it was applied by the Court in 1956 during the communist-inspired rebellion of the Huks. The changes in our society in the span of 34 years since then have far-reaching effects on the all-embracing applicability of the doctrine considering the emergence of alternative modes of seizing the powers of the dulyconstituted Government not contemplated in Articles 134 and 135 of the Revised Penal Code and their consequent effects on the lives of our people. The doctrine was good law then, but I believe that there is a certain aspect of the Hernandez doctrine that needs clarification.lxvi[28] Apparently, not even the Supreme Court then was of one mind in debunking the theory being advanced by the petitioners in this case, some of whom were also the petitioners in the Enrile case. Nevertheless, we held in Enrile that the Information filed therein properly charged an offense -- that of simple rebellion --lxvi[29] and thereupon ordered the remand of the case to the trial court for the prosecution of the named accusedlxvi[30] in the Information therein. Following this lead, the Information against Adaza in Criminmal Case

No. Q-90-11855 was not quashed, but was instead treated likewise as charging the crime of simple rebellion. A doubtful or difficult question of law may become the basis of good faith and, in this regard, the law always accords to public officials the presumption of good faith and regularity in the performance of official duties.lxvi[31] Any person who seeks to establish otherwise has the burden of proving bad faith or ill-motive. Here, since the petitioners were of the honest conviction that there was probable cause to hold respondent Adaza for trial for the crime of rebellion with murder and frustrated murder, and since Adaza himself, through counsel, did not allege in his complaint lack of probable cause, we find that the petitioners cannot be held liable for malicious prosecution. Needless to say, probable cause was not wanting in the institution of Criminal Case No. Q-90-11855 against Adaza. As to the requirement that the prosecutor must be impelled by malice in bringing the unfounded action, suffice it to state that the presence of probable cause signifies, as a legal consequence, the absence of malice.lxvi[32] At the risk of being repetitious, it is evident in this case that petitioners were not motivated by malicious intent or by a sinister design to unduly harass private respondent, but only by a well-founded belief that respondent Adaza can be held for trial for the crime alleged in the information. All told, the complaint, dated July 11, 1990, filed by Adaza before Branch 100 of the Regional Trial Court against the petitioners does not allege facts sufficient to constitute a cause of action for malicious prosecution. Lack of cause of action, as a ground for a motion to dismiss under Section 1 (g), Rule 16 of the Revised Rules of Court, must appear on the face of the complaint itself, meaning that it must be determined from the allegations of the complaint and from none other.lxvi[33] The infirmity of the complaint in this regard is only too obvious to have escaped respondent judges attention. Paragraph 14 of the complaint which states: x x x xxx xxx

14. The malicious prosecution, nay persecution, of plaintiff for a non-existent crime had severely injured and besmirched plaintiffs name and reputation and forever stigmatized his stature as a public figure, thereby causing him extreme physical suffering, serious anxiety, mental anguish, moral shock and social humiliation.lxvi[34] is a mere conclusion of law and is not an averment or allegation of ultimate facts. It does not, therefore, aid in any wise the complaint in setting forth a valid cause of action against the petitioners. It is worthy to note that this case was elevated to the public respondent Court of Appeals and now to this Court because of respondent Judge Macli-ings denial of petitioners motion to dismiss the Adaza complaint. The ordinary procedure, as a general rule, is that petitioners should have filed an answer, go to trial, and if the decision is adverse, reiterate the issue on appeal.lxvi[35] This general rule, however, is subject to certain exceptions, among which are, if the court denying the motion to dismiss acts without or in excess of jurisdiction or with grave abuse of discretion, in which case certiorari under Rule 65 may be availed of. The

reason is that it would be unfair to require the defendants (petitioners in this case) to undergo the ordeal and expense of trial under such circumstances, because the remedy of appeal then would then not be plain and adequate.lxvi[36] Judge Macli-ing committed grave abuse of discretion in denying petitioners motion to dismiss the Adaza complaint, and thus public respondent Court of Appeals should have issued the writ of certiorari prayed for by the petitioners and annulled the February 8, 1991 and May 14, 1991 Orders of respondent Judge. It was grievous error on the part of the court a quo not to have done so. This has to be corrected. Respondent Adazas baseless action cannot be sustained for this would unjustly compel the petitioners to needlessly go through a protracted trial and thereby unduly burden the court with one more futile and inconsequential case. WHEREFORE, the petition is GRANTED. The Resolutions of respondent Court of Appeals dated January 31, 1992 and September 2, 1992 affirming the February 8, 1991 and May 14, 1991 Orders of respondent Judge George C. Macli-ing are all hereby NULLIFIED AND SET ASIDE. Respondent Judge is DIRECTED to take no further action on Civil Case No. Q-90-6073 except to DISMISS the same. SO ORDERED. Padilla, (Chairman), Bellosillo, and Vitug, JJ., concur. Kapunan, J., concurs in the result. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-47739 June 22, 1983 SINGAPORE AIRLINES LIMITED, petitioner, vs. HON. ERNANI CRUZ PAO as Presiding Judge of Branch XVIII, Court of First Instance of Rizal, CARLOS E. CRUZ and B. E. VILLANUEVA, respondents. Bengzon, Zarraga, Narciso, Cudala Pecson, Azucena & Bengzon Law Offices for petitioner. Celso P. Mariano Law Office for private respondent Carlos Cruz. Romeo Comia for private respondent B. E. Villanueva.

MELENCIO-HERRERA, J.: On the basic issue of lack of jurisdiction, petitioner company has elevated to us for review the two Orders of respondent Judge dated October 28, 1977 and January 24, 1978 dismissing petitioner's complaint for damages in the first Order, and denying its Motion for Reconsideration in the second. On August 21, 1974, private respondent Carlos E. Cruz was offered employment by petitioner as Engineer Officer with the opportunity to undergo a B-707 I conversion training course," which he accepted on August 30, 1974. An express stipulation in the letter-offer read: 3. BONDING. As you win be provided with conversion training you are required to enter into a bond with SIA for a period of 5 years. For this purpose, please inform me of the names and addresses of your sureties as soon as possible. Twenty six days thereafter, or on October 26, 1974, Cruz entered into an "Agreement for a Course of Conversion Training at the Expense of Singapore Airlines Limited" wherein it was stipulated among others: 4. The Engineer Officer shall agree to remain in the service of the Company for a period of five years from the date of commencement of such aforesaid conversion training if so required by the Company. 5. In the event of the Engineer Officer: 1. Leaving the service of the company during the period of five years referred to in Clause 4 above, or 2. Being dismissed or having his services terminated by the company for misconduct, the Engineer Officer and the Sureties hereby bind themselves jointly and severally to pay to the Company as liquidated damages such sums of money as are set out hereunder: (a) during the first year of the period of five years referred to in Clause 4 above ...................................................................................... $ 67,460/

(b) during the second year of the period of five years referred to in Clause 4 above ................................................................................. $ 53,968/ (c) during the third year of the period of five years referred to in Clause 4 above ...................................................................................... $ 40,476/ (d) during the fourth year of the period of five years referred to in Clause 4 above .................................................................................. $ 26,984/ (e) during the fifth year of the period of five years referred to in Clause 4 above ....................................................................................... $ 13,492/ 6. The provisions of Clause 5 above shall not apply in a case where an Engineer Officer has his training terminated by the Company for reasons other than misconduct or where, subsequent to the completion of training, he 1. loses his license to operate as a Flight Engineer due to medical reasons which can in no way be attributable to any act or omission on his part; 2. is unable to continue in employment with the Company because his employment pass or work permit, as the case may be, has been withdrawn or has not been renewed due to no act or omission on his part; 3. has his services terminated by the Company as a result of being replaced by a national Flight Engineer; 4. has to leave the service of the Company on valid compassionate grounds stated to and accepted by 1 the Company in writing. Cruz signed the Agreement with his co-respondent, B. E. Villanueva, as surety.

Claiming that Cruz had applied for "leave without pay" and had gone on leave without approval of the application during the second year of the Period of five years, petitioner filed suit for damages against Cruz and his surety, Villanueva, for violation of the terms and conditions of the aforesaid Agreement. Petitioner sought the payment of the following sums: liquidated damages of $53,968.00 or its equivalent of P161,904.00 (lst cause of action); $883.91 or about P2,651.73 as overpayment in salary (2nd clause of action); $61.00 or about P183.00 for cost of uniforms and accessories supplied by the company plus $230.00, or roughly P690.00, for the cost of a flight manual (3rd cause of action); and $1,533.71, or approximately P4,601.13 corresponding to the vacation leave he had availed of but to which he was no longer entitled (4th cause Of action); exemplary damages attorney's fees; and costs. In his Answer, Cruz denied any breach of contract contending that at no time had he been required by petitioner to agree to a straight service of five years under Clause 4 of the Agreement (supra) and that he left the service on "valid compassionate grounds stated to and accepted by the company so that no damages may be awarded against him. And because of petitioner-plaintiff's alleged ungrounded causes of action, Cruz counterclaimed for attorney's fees of P7,000.00. The surety, Villanueva, in his own Answer, contended that his undertaking was merely that of one of two guarantors not that of surety and claimed the benefit of excussion, if at an found liable. He then filed a cross-claim against Cruz for damages and for whatever amount he may be held liable to petitioner-plaintiff, and a counterclaim for actual, exemplary, moral and other damages plus attorney's fees and litigation expenses against petitioner-plaintiff. The issue of jurisdiction having been raised at the pre-trial conference, the parties were directed to submit their respective memoranda on that question, which they complied with in due time. On October 28, 1977, respondent Judge issued the assailed Order dismissing the complaint, counterclaim and cross-claim for lack of jurisdiction stating. 2. The present case therefore involves a money claim arising from an employer-employee relation or at the very least a case arising from employer-employee relations, which under Art. 216 of the Labor Code is vested exclusively with the Labor Arbiters of the National Labor Relations 2 Commission. Reconsideration thereof having been denied in the Order of January 24, 1978, petitioner availed of the present recourse. We gave due course. We are here confronted with the issue of whether or not this case is properly cognizable by Courts of justice or by the Labor Arbiters of the National Labor Relations Commission. Upon the facts and issues involved, jurisdiction over the present controversy must be held to belong to the civil Courts. While seemingly petitioner's claim for damages arises from employer-employee relations, and the latest amendment to Article 217 of the Labor Code under PD No. 1691 and BP Blg. 130 provides that all other claims arising from employer-

employee relationship are cognizable by Labor Arbiters, in essence, petitioner's claim for damages is grounded on the "wanton failure and refusal" without just cause of private respondent Cruz to report for duty despite repeated notices served upon him of the disapproval of his application for leave of absence without pay. This, coupled with the further averment that Cruz "maliciously and with bad faith" violated the terms and conditions of the conversion training course agreement to the damage of petitioner removes the present controversy from the coverage of the Labor Code and brings it within the purview of Civil Law. Clearly, the complaint was anchored not on the abandonment per se by private respondent Cruz of his job as the latter was not required in the Complaint to report back to work but on the manner and consequent effects of such abandonment of work translated in terms of the damages which petitioner had to suffer. Squarely in point is the ruling enunciated in the case of Quisaba vs. Sta. Ines Melale Veneer & Plywood, Inc.4 the pertinent portion of which reads: Although the acts complied of seemingly appear to constitute "matter involving employee employer" relations as Quisaba's dismiss was the severance of a pre-existing employee-employer relations, his complaint is grounded not on his dismissal per se, as in fact he does not ask for reinstatement or backwages, but on the manner of his dismiss and the consequent effects of such Civil law consists of that 'mass of precepts that determine or regulate the relations ... that exist between members of a society for the protection of private interest (1 Sanchez Roman 3). The "right" of the respondents to dismiss Quisaba should not be confused with the manner in which the right was exercised and the effects flowing therefrom. If the dismiss was done anti-socially or oppressively, as the complaint alleges, then the respondents violated article 1701 of the Civil Code which prohibits acts of oppression by either capital or labor against the other, and article 21, which makers a person liable for damages if he wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy, the sanction for which, by way of moral damages, is provided in article 2219, No. 10 (Cf, Philippine Refining Co. vs. Garcia, L-21962, Sept. 27, 1966, 18 SCRA 107). Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute.

Additionally, there is a secondary issue involved that is outside the pale of competence of Labor Arbiters. Is the liability of Villanueva one of suretyship or one of guaranty? Unquestionably, this question is beyond the field of specialization of Labor Arbiters. WHEREFORE, the assailed Orders of respondent Judge are hereby set aside. The records are hereby ordered remanded to the proper Branch of the Regional Trial Court of Quezon City, to which this case belongs, for further proceedings. No costs. SO ORDERED. Teehankee (Chairman), Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.

Footnotes 1 Annex "B ", p. 12, CFI Records. 2 p. 112, Ibid. 3 Article 217. Jurisdiction of Labor Arbiters and the Commission. (a) The labor Arbiters shall have the original and exclusive jurisdiction to hear and decide the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Those that involve wages, hours of work and other terms and conditions of employment; 3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for employees compensation, social security, medicare and maternity benefits; 4. Cases involving household services and 5. All other claims arising from employer-employee relations, unless expressly excluded by this Code.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. 4 68 SCRA 771 (1974). Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-59825 September 11, 1982 ERNESTO MEDINA and JOSE G. ONG, petitioners, vs. HON. FLORELIANA CASTRO-BARTOLOME in her capacity as Presiding Judge of the Court of First Instance Cf Rizal, Branch XV, Makati, Metro Manila, COSME DE ABOITIZ and PEPSICOLA BOTTLING COMPANY OF THE PHILIPPINES, INC., respondents.

affidavits of two (2) witnesses: Isagani Hernandez and Jose Ganseco II, but after conducting a preliminary investigation, Hon. Jose B. Castillo, dismissed the complaint allegedly because the expression "Fuck you and "You are both shit to me" were uttered not to slander but to express anger and displeasure; 5. That on February 8, 1978, plaintiffs filed a Petition for Review with the office of the Secretary of Justice (now Ministry of Justice) and on June 13, 1978, the Deputy Minister of Justice, Catalino Macaraig, Jr., issued a resolution sustaining the plaintiff's complaint, reversing the resolution of the Provincial Fiscal and directing him to file against defendant Cosme de Aboitiz an information for Grave Slander. ... ; 6. That the employment records of plaintiffs show their track performance and impeccable qualifications, not to mention their long years of service to the Company which undoubtedly caused their promotion to the two highest positions in Muntinlupa Plant having about 700 employees under them with Ernesto Medina as the Plant General Manager receiving a monthly salary of P6,600.00 excluding other perquisites accorded only to top executives and having under his direct supervision other professionals like himself, including the plaintiff Jose G. Ong, who was the Plant Comptroller with a basic monthly salary of P4,855.00; 7. That far from taking these matters into consideration, the defendant corporation, acting through its President, Cosme de Aboitiz, dismissed and slandered the plaintiffs in the presence of their subordinate employees although this could have been done in private; 8. That the defendants have evidently enjoyed the act of dismissing the plaintiffs and such dismissal was planned to make it as humiliating as possible because instead of allowing a lesser official like the Regional Vice President to take whatever action was necessary under the circumstances, Cosme de Aboitiz himself went to the Muntinlupa Plant in order to publicly upbraid and dismiss the plaintiffs; 9. That the defendants dismissed the plaintiffs because of an alleged delay in the use of promotional crowns when such delay was true with respect to the other Plants, which is therefore demonstrative of the fact that Cosme de Aboitiz did not really have a strong reason for publicly humiliating the plaintiffs by dismissing them on the spot; 10. That the defendants were moved by evil motives and an anti-social attitude in dismissing the plaintiffs because the dismissal was effected on the very day that plaintiffs were awarded rings of loyalty to the Company, five days before Christmas and on the day when the employees'

ABAD SANTOS, J.: Civil Case No. 33150 of the Court of First Instance of Rizal Branch XV, was filed in May, 1979, by Ernesto Medina and Jose G. Ong against Cosme de Aboitiz and Pepsi-Cola Bottling Co. of the Philippines, Inc. Medina was the former Plant General Manager and Ong was the former Plant Comptroller of the company. Among the averments in the complaint are the following: 3. That on or about 1:00 o'clock in the afternoon of December 20, 1977, defendant Cosme de Aboitiz, acting in his capacity as President and Chief Executive Officer of the defendant Pepsi-Cola Bottling Company of the Philippines, Inc., went to the Pepsi-Cola Plant in Muntinlupa, Metro Manila, and without any provocation, shouted and maliciously humiliated the plaintiffs with the use of the following slanderous language and other words of similar import uttered in the presence of the plaintiffs' subordinate employees, thusGOD DAMN IT. YOU FUCKED ME UP ... YOU SHUT UP! FUCK YOU! YOU ARE BOTH SHIT TO ME! YOU ARE FIRED (referring to Ernesto Medina). YOU TOO ARE FIRED! '(referring to Jose Ong ) 4. That on January 9, 1978, the herein plaintiffs filed a joint criminal complaint for oral defamation against the defendant Cosme de Aboitiz duly supported with respective affidavits and corroborated by the

Christmas party was held in the Muntinlupa Plant, so that when plaintiffs went home that day and found their wives and children already dressed up for the party, they didn't know what to do and so they cried unashamedly; xxx xxx xxx 20. That because of the anti-social manner by which the plaintiffs were dismissed from their employment and the embarrassment and degradation they experience in the hands of the defendants, the plaintiffs have suffered and will continue to suffer wounded feelings, sleepless nights, mental torture, besmirched reputation and other similar injuries, for which the sum of P150,000.00 for each plaintiff, or the total amount. of P300,000.00 should be awarded as moral damages; 21. That the defendants have demonstrated their lack of concern for the rights and dignity of the Filipino worker and their callous disregard of Philippine labor and social legislation, and to prevent other persons from following the footsteps of defendants, the amount of P50,000.00 for each plaintiff, or the total sum of P100,000.00, should be awarded as exemplary damages; 22. That plaintiffs likewise expect to spend no less than P5,000.00 as litigation expenses and were constrained to secure the services of counsel for the protection and enforcement of their rights for which they agreed to pay the sum of P10,000.00 and P200.00 per appearance as and for attorney's fees. The complaint contains the following: PRAYER WHEREFORE, in view of all the foregoing. it is most respectfully that after proper notice and hearing, judgment be rendered for the plaintiffs and against the defendants ordering them, jointly and solidarily, to pay the plaintiffs the sums of: 1. Unrealized income in such sum as will be established during the trial; 2. P300,000.00 as moral damages; 3. P100,000.00 by way of exemplary damages: 4. P5,000.00 as litigation expenses;

5. P10,000.00 and P200.00 per appearance as and for attorney's fees; and 6. Costs of this suit. Plaintiffs also pray for such further reliefs and remedies as may be in keeping with justice and equity. On June 4, 1979, a motion to dismiss the complaint on the ground of lack of jurisdiction was filed by the defendants. The trial court denied the motion on September 6, 1979, in an order which reads as follows: Up for resolution by the Court is the defendants' Motion to Dismiss dated June 4, 1979, which is basically anchored on whether or not this Court has jurisdiction over the instant petition. The complaint alleges that the plaintiffs' dismissal was without any provocation and that defendant Aboitiz shouted and maliciously humiliated plaintiffs and used the words quoted in paragraph 3 thereof. The plaintiffs further allege that they were receiving salaries of P6,600.00 and P4,855.00 a month. So the complaint for civil damages is clearly not based on an employer-employee relationship but on the manner of plaintiffs' dismissal and the effects flowing therefrom. (Jovito N. Quisaba vs, Sta. Ines-Melale Veneer & Plywood Co., Inc., et al., No. L-38088, Aug. 30,1974.) This case was filed on May 10, 1979. The amendatory decree, P.D. 1367, which took effect on May 1, 1978 and which provides that Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of damages, now expressly confers jurisdiction on the courts in these cases, specifically under the plaintiff's causes of action. Because of the letter dated January 4, 1978 and the statement of plaintiff Medina that his receipt of the amount from defendant company was done "under strong protest," it cannot be said that the demands set forth in the complaint have been paid, waived or other extinguished. In fact, in defendants' Motion to Dismiss, it is stated that 'in the absence of a showing that there was fraud, duress or violence attending said transactions, such Release and Quitclaim Deeds are valid and binding contracts between them, which in effect admits that plaintiffs can prove fraud, violence, duress or violence. Hence a cause of action for plaintiffs exist. It is noticed that the defamatory remarks standing alone per se had been made the sole cause under the first cause of action, but it is alleged in

connection with the manner in which the plaintiffs had been dismissed, and whether the statute of limitations would apply or not would be a matter of evidence. IT has been alreadly settled by jurisprudence that mere asking for reinstatement does not remove from the CFI jurisdiction over the damages. The case must involve unfair labor practices to bring it within the jurisdiction of the CIR (now NLRC). WHEREFORE, the defendants' Motion to Dismiss dated June 4, 1979 is hereby denied. The defendants are hereby directed to interpose their answer within ten (10) days from receipt hereof. While the trial was underway, the defendants filed a second motion to dismiss the complaint dated January 23, 1981, because of amendments to the Labor Code immediately prior thereto. Acting on the motion, the trial court issued on May 23, 1981, the following order: Up for resolution by the Court is the defendants' Motion to Dismiss dated January 23, 1981, on grounds not existing when the first Motion to Dismiss dated June 4, 1979 was interposed. The ground relied upon is the promulgation of P.D. No. 1691 amending Art. 217 of the Labor Code of the Philippines and Batasan Pambansa Bldg. 70 which took effect on May 1, 1980, amending Art. 248 of the Labor Code. The Court agrees with defendants that the complaint alleges unfair labor practices which under Art. 217 of the Labor Code, as amended by P.D. 1691, has vested original and exclusive jurisdiction to Labor Arbiters, and Art. 248, thereof ... "which may include claims for damages and other affirmative reliefs." Under the amendment, therefore, jurisdiction over employee-employer relations and claims of workers have been removed from the Courts of First Instance. If it is argued that this case did not arise from employer-employee relation, but it cannot be denied that this case would not have arisen if the plaintiffs had not been employees of defendant Pepsi-Cola. Even the alleged defamatory remarks made by defendant Cosme de Aboitiz were said to plaintiffs in the course of their employment, and the latter were dismissed from such employment. Hence, the case arose from such employer-employee relationship which under the new Presidential Decree 1691 are under the exclusive, original jurisdiction of the labor arbiters. The ruling of this Court with respect to the defendants' first motion to dismiss, therefore, no longer holds as the positive law has been subsequently issued and being a curative law, can be applied retroactively (Garcia v. Martinez, et al., L-47629, May 28, 1979; 90 SCRA 331-333).

It will also logically follow that plaintiffs can reinterpose the same complaint with the Ministry of Labor. WHEREFORE, let this case be, as it is hereby ordered, dismissed, without pronouncement as to costs. A motion to reconsider the above order was filed on July 7, 1981, but it was only on February 8, 1982, or after a lapse of around seven (7) months when the motion was denied. Plaintiffs have filed the instant petition pursuant to R. A. No. 5440 alleging that the respondent court committed the following errors: IN DIVESTING ITSELF OF ITS JURISDICTION TO HEAR AND DECIDE CIVIL CASE NO. 33150 DESPITE THE FACT THAT JURISDICTION HAD ALREADY ATTACHED WHICH WAS NOT OUSTED BY THE SUBSEQUENT ENACTMENT OF PRESIDENTIAL DECREE 1691; IN HOLDING THAT PRESIDENTIAL DECREE 1691 SHOULD BE GIVEN A RETROSPECTIVE EFFECT WHEN PRESIDENTIAL DECREE 1367 WHICH WAS IN FORCE WHEN CIVIL CASE NO. 33150 WAS FILED AND TRIAL THEREOF HAD COMMENCED, WAS NEVER EXPRESSLY REPEALED BY PRESIDENTIAL DECREE 1691, AND IF EVER THERE WAS AN IMPLIED REPEAL, THE SAME IS NOT FAVORED UNDER PREVAILED JURISPRUDENCE; IN HOLDING THAT WITH THE REMOVAL BY PRESIDENTIAL DECREE 1691 OF THE PROVISO INSERTED IN ARTICLE 217 OF THE LABOR CODE BY PRESIDENTIAL DECREE 1367, THE LABOR ARBITERS HAVE ACQUIRED JURISDICTION OVER CLAIMS FOR DAMAGES ARISING FROM EMPLOYEREMPLOYEE RELATIONS TO THE EXCLUSION OF THE REGULAR COURTS, WHEN A READING OF ARTICLE 217 WITHOUT THE PROVISO IN QUESTION READILY REVEALS THAT JURISDICTION OVER DAMAGE CLAIMS IS STILL VESTED WITH THE REGULAR COURTS; IN DISMISSING FOR LACK OF JURISDICTION CIVIL CASE NO. 33150 THEREBY VIOLATING THE CONSTITUTIONAL RIGHTS OF THE PETITIONERS NOTABLY THEIR RIGHT TO DUE PROCESS. The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought by the plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending it and whether or not they have retroactive effect is unnecessary. It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a simple action for damages for tortious acts allegedly committed by the

defendants. Such being the case, the governing statute is the Civil Code and not the Labor Code. It results that the orders under review are based on a wrong premise. WHEREFORE, the petition is granted; the respondent judge is hereby ordered to reinstate Civil Case No. 33150 and render a decision on the merits. Costs against the private respondents. SO ORDERED. Barredo (Chairman), Concepcion, Jr. Guerrero, De Castro and Escolin, JJ., concur.

The director of Region IV of the Ministry of Labor dismissed that complaint because of their resignation and quitclaim. Medina and Ong appealed to the National Labor Relations Commission. Deputy Minister Amado C. Inciong affirmed the dismissal in his order of April 23, 1979 (p. 246, Rollo), He denied the motion for reconsideration of Medina and Ong in his Order of October 25, 1979 (p. 327, Rollo). Seventeen days after that order of dismissal, or on May 10, 1979, Medina and Ong filed, in the Court of First Instance of Rizal, Makati Branch XV an action for damages against Aboitiz and Pepsi-Cola by reason of the humiliating manner in which they were dismissed. They prayed for the payment of unrealized income and P415,000 as moral and exemplary damages, attorney's fees and litigation expenses (pp. 34-5, 246, Rollo). Aboitiz and Pepsi-Cola filed a motion to dismiss on the grounds of lack of jurisdiction, pendency of a labor case, lack of cause of action, payment and prescription (p. 37, Rollo). Ong and Medina opposed the motion.

Separate Opinions

Judge Floreliana Castro-Bartolome in her order of September 6, 1979 denied the motion to dismiss on the ground that under Presidential Decree No. 1367, which took effect on May 1, 1979, the NLRC and Labor Arbiters cannot entertain claims for moral or other damages, thus implying that such claims should be ventilated in court (p. 247, Rollo). After Medina had commenced his testimony, Aboitiz and Pepsi-Cola filed another motion to dismiss based on Presidential Decree No. 1691, which took effect on May 1, 1980 and which repealed Presidential Decree No. 1367 and restored to the NLRC and Labor Arbiters the jurisdiction to adjudicate money claims of workers, including moral damages, and other claims arising from employer- employee relationship. Judge Bartolome in her order of May 23, 1981 dismissed the case for lack of jurisdiction. That order of dismissal is assailed in this appeal by Medina and Ong under Republic Act No. 5440. In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and Ong were within the exclusive jurisdiction of the Labor Arbiter and the NLRC, as originally provided in article 217 of the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could not split their cause of action against Aboitiz and PepsiCola. (See Aguda vs. Judge Vallejos, G. R. No. 58133, March 26,1982; Ebon vs. Judge De Guzman, G. R. No. 58265, March 25, 1982; Cardinal Industries, Inc. vs. Vallejos, G. R. No. 57032, June 19, 1982; Pepsi-Cola Bottling Co. vs. Martinez, G. R. No. 58877, March 15,1982.) The decisions of the Regional Director and Deputy Minister Inciong are res judicata as to the claims of Medina and Ong.

AQUINO, J.,dissenting: I dissent with due deference to the opinion penned by Mr. Justice Abad Santos. This case is about the jurisdiction of the Court of First Instance to entertain an action for damages arising from the alleged disgraceful termination of petitioners' employment. Ernesto Medina, the manager of the Muntinlupa plant of Pepsi-Cola Bottling Company of the Philippines with a monthly salary of P6,600, and Jose G. Ong, Pepsi's controller in the same plant with a monthly salary of P4,855, were summarily dismissed by Cosme de Aboitiz, Pepsi's president and chief executive officer, on December 20, 1977 for having allegedly delayed the use of promotional crowns (pp. 29-31, Rollo), The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and P84,386 as separation pay, respectively. However, before receiving those amounts, Medina and Ong sent by registered mail to Aboitiz letters wherein they indicated that they objected to their illegal dismissal and that they would sign the quitclaim and resignation papers "under protest" (pp. 32, 270-275, Rollo). More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry of Labor, a complaint for illegal dismissal. They prayed for reinstatement with full backwages and, in the alternative, they prayed for additional separation pay of P72,904 for Medina and P35,927 for Ong (NLRC Case No. R4-STF-1-492-78, pp. 40, 288-299, Rollo).

Separate Opinions

AQUINO, J.,dissenting: I dissent with due deference to the opinion penned by Mr. Justice Abad Santos. This case is about the jurisdiction of the Court of First Instance to entertain an action for damages arising from the alleged disgraceful termination of petitioners' employment. Ernesto Medina, the manager of the Muntinlupa plant of Pepsi-Cola Bottling Company of the Philippines with a monthly salary of P6,600, and Jose G. Ong, Pepsi's controller in the same plant with a monthly salary of P4,855, were summarily dismissed by Cosme de Aboitiz, Pepsi's president and chief executive officer, on December 20, 1977 for having allegedly delayed the use of promotional crowns (pp. 29-31, Rollo), The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and P84,386 as separation pay, respectively. However, before receiving those amounts, Medina and Ong sent by registered mail to Aboitiz letters wherein they indicated that they objected to their illegal dismissal and that they would sign the quitclaim and resignation papers "under protest" (pp. 32, 270-275, Rollo). More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry of Labor, a complaint for illegal dismissal. They prayed for reinstatement with full backwages and, in the alternative, they prayed for additional separation pay of P72,904 for Medina and P35,927 for Ong (NLRC Case No. R4-STF-1-492-78, pp. 40, 288-299, Rollo). The director of Region IV of the Ministry of Labor dismissed that complaint because of their resignation and quitclaim. Medina and Ong appealed to the National Labor Relations Commission. Deputy Minister Amado C. Inciong affirmed the dismissal in his order of April 23, 1979 (p. 246, Rollo), He denied the motion for reconsideration of Medina and Ong in his Order of October 25, 1979 (p. 327, Rollo). Seventeen days after that order of dismissal, or on May 10, 1979, Medina and Ong filed, in the Court of First Instance of Rizal, Makati Branch XV an action for damages against Aboitiz and Pepsi-Cola by reason of the humiliating manner in which they were dismissed. They prayed for the payment of unrealized income and P415,000 as moral and exemplary damages, attorney's fees and litigation expenses (pp. 34-5, 246, Rollo). Aboitiz and Pepsi-Cola filed a motion to dismiss on the grounds of lack of jurisdiction, pendency of a labor case, lack of cause of action, payment and prescription (p. 37, Rollo). Ong and Medina opposed the motion. Judge Floreliana Castro-Bartolome in her order of September 6, 1979 denied the motion to dismiss on the ground that under Presidential Decree No. 1367, which took effect on May 1, 1979, the NLRC and Labor Arbiters cannot entertain claims for moral or other damages, thus implying that such claims should be ventilated in court (p. 247, Rollo).

After Medina had commenced his testimony, Aboitiz and Pepsi-Cola filed another motion to dismiss based on Presidential Decree No. 1691, which took effect on May 1, 1980 and which repealed Presidential Decree No. 1367 and restored to the NLRC and Labor Arbiters the jurisdiction to adjudicate money claims of workers, including moral damages, and other claims arising from employer- employee relationship. Judge Bartolome in her order of May 23, 1981 dismissed the case for lack of jurisdiction. That order of dismissal is assailed in this appeal by Medina and Ong under Republic Act No. 5440. In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and Ong were within the exclusive jurisdiction of the Labor Arbiter and the NLRC, as originally provided in article 217 of the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could not split their cause of action against Aboitiz and PepsiCola. (See Aguda vs. Judge Vallejos, G. R. No. 58133, March 26,1982; Ebon vs. Judge De Guzman, G. R. No. 58265, March 25, 1982; Cardinal Industries, Inc. vs. Vallejos, G. R. No. 57032, June 19, 1982; Pepsi-Cola Bottling Co. vs. Martinez, G. R. No. 58877, March Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-46061 November 14, 1984 ST. LOUIS REALTY CORPORATION, petitioner, vs. COURT OF APPEALS and CONRADO J. ARAMIL, respondents. Romeo Z. Comia for petitioner. Roman R. Bersamin for private respondent.

AQUINO, J.: This case is about the recovery of damages for a wrongful advertisement in the Sunday Times where Saint Louis Realty Corporation misrepresented that the house of Doctor Conrado J. Aramil belonged to Arcadio S. Arcadio. St. Louis Realty caused to be published with the permission of Arcadio S. Arcadio (but without permission of Doctor Aramil) in the issue of the Sunday Times of December 15, 1968 an advertisement with the heading "WHERE THE HEART IS". Below that heading was the

photograph of the residence of Doctor Aramil and the Arcadio family and then below the photograph was the following write-up: Home is where the heart is. And the hearts of MR. AND MRS. ARCADIO S. ARCADIO and their family have been captured by BROOKSIDE HILLS. They used to rent a small 2-bedroom house in a cramped neighborhood, sadly inadequate and unwholesome for the needs of a large family. They dream(ed) of a more pleasant place free from the din and dust of city life yet near all facilities. Plans took shape when they heard of BROOKSIDE HILLS. With thrift and determination, they bought a lot and built their dream house ... for P31,000. The Arcadios are now part of the friendly, thriving community of BROOKSIDE HILLS... a beautiful first-class subdivision planned for wholesome family living. The same advertisement appeared in the Sunday Times dated January 5, 1969. Doctor Aramil a neuropsychiatrist and a member of the faculty of the U. E. Ramon Magsaysay Memorial Hospital, noticed the mistake. On that same date, he wrote St. Louis Realty the following letter of protest: Dear Sirs: This is anent to your advertisements appearing in the December 15, 1968 and January 5, 1969 issues of the Sunday Times which boldly depicted my house at the above-mentioned address and implying that it belonged to another person. I am not aware of any permission or authority on my part for the use of my house for such publicity. This unauthorized use of my house for your promotional gain and much more the apparent distortions therein are I believe not only transgression to my private property but also damaging to my prestige in the medical profession I have had invited in several occasions numerous medical colleagues, medical students and friends to my house and after reading your December 15 advertisement some of them have uttered some remarks purporting doubts as to my professional and personal integrity. Such sly remarks although in light vein as "it looks like your house," "how much are you renting from the Arcadios?", " like your wife portrayed in the papers as belonging to another husband," etc., have resulted in no little mental anguish on my part. I have referred this matter to the Legal Panel of the Philippine Medical Association and their final advice is pending upon my submission of supporting ownership papers. I will therefore be constrained to pursue court action against your corporation unless you could satisfactorily explain this matter within a week upon receipt of this letter.

The letter was received by Ernesto Magtoto, an officer of St. Louis Realty in charge of advertising. He stopped publication of the advertisement. He contacted Doctor Aramil and offered his apologies. However, no rectification or apology was published. On February 20, 1969, Aramil's counsel demanded from St. Louis Realty actual, moral and exemplary damages of P110,000 (Exh. D). In its answer dated March 10, St. Louis Realty claimed that there was an honest mistake and that if Aramil so desired, rectification would be published in the Manila Times (Exh. 3). It published in the issue of the Manila Times of March 18, 1969 a new advertisement with the Arcadio family and their real house. But it did not publish any apology to Doctor Aramil and an explanation of the error. On March 29, Aramil filed his complaint for damages. St. Louis Realty published in the issue of the Manila Times of April 15, 1969 the following "NOTICE OF RECTIFICATION" in a space 4 by 3 inches: This will serve as a notice that our print ad 'Where the Heart is' which appeared in the Manila Times issue of March 18, 1969 is a rectification of the same ad that appeared in the Manila Times issues rectification of the same ad that appeal of December 15, 1968 and January 5, 1969 wherein a photo of the house of another Brookside Homeowner (Dr. Aramilprivate respondent) was mistakenly used as a background for the featured homeowner's the Arcadio family. The ad of March 18, 1969 shows the Arcadio family with their real house in the background, as was intended all along. Judge Jose M. Leuterio observed that St. Louis Realty should have immediately published a rectification and apology. He found that as a result of St. Louis Realty's mistake, magnified by its utter lack of sincerity, Doctor Aramil suffered mental anguish and his income was reduced by about P1,000 to P1,500 a month. Moreover, there was violation of Aramil's right to privacy (Art. 26, Civil Code). The trial court awarded Aramil P8,000 as actual damages, P20,000 as moral damages and P2,000 as attorney's fees. St. Louis Realty appealed to the Court of Appeals. The Appellate Court affirmed that judgment, with Acting Presiding Justice Magno S. Gatmaitan as ponente, and Justices Sixto A. Domondon and Samuel F. Reyes concurring. The Appellate Court reasoned out that St. Louis Realty committed an actionable quasi-delict under articles 21 and 26 of the Civil Code because the questioned advertisements pictured a beautiful house which did not belong to Arcadio but to Doctor Aramil who, naturally, was annoyed by that contretemps.

In this appeal, St. Louis Realty contends that the Appellate Court ignored certain facts and resorted to surmises and conjectures. This contention is unwarranted. The Appellate Court adopted the facts found by the trial court. Those factual findings are binding on this Court. St. Louis Realty also contends that the decision is contrary to law and that the case was decided in a way not in conformity with the rulings of this Court. It argues that the case is not covered by article 26 which provides that "every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons". "Prying into the privacy of another's residence" and "meddling with or disturbing the private life or family relations of another" and "similar acts", "though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief". The damages fixed by Judge Leuterio are sanctioned by Articles 2200, 2208 and 2219 of the Civil Code. Article 2219 allows moral damages for acts and actions mentioned in Article 26. As lengthily explained by Justice Gatmaitan, the acts and omissions of the firm fan under Article 26. St. Louis Realty's employee was grossly negligent in mixing up the Aramil and Arcadio residences in a widely circulated publication like the Sunday Times. To suit its purpose, it never made any written apology and explanation of the mix-up. It just contented itself with a cavalier "rectification ". Persons, who know the residence of Doctor Aramil, were confused by the distorted, lingering impression that he was renting his residence from Arcadio or that Arcadio had leased it from him. Either way, his private life was mistakenly and unnecessarily exposed. He suffered diminution of income and mental anguish. WHEREFORE, the judgment of the Appellate Court is affirmed. Costs against the petitioner. SO ORDERED. Makasiar, Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur. 15,1982.) The decisions of the Regional Director and Deputy Minister Inciong are res judicata as to the claims of Medina and Ong.

RODRIGO CONCEPCION, petitioner, vs. COURT OF APPEALS and SPS. NESTOR NICOLAS and ALLEM NICOLAS, respondents. DECISION BELLOSILLO, J.: Petitioner Rodrigo Concepcion assails in this petition for review on certiorari the Decision of the Court of Appeals dated 12 December 1994 which affirmed the decision of the Regional Trial Court of Pasig City ordering him to pay respondent spouses Nestor Nicolas and Allem Nicolas the sums of P50,000.00 for moral damages, P25,000.00 for exemplary damages and P10,000.00 for attorneys fees, plus the costs of suit.* Petitioner claims absence of factual

The courts a quo found that sometime in 1985 the spouses Nestor Nicolas and Allem Nicolas resided at No. 51 M. Concepcion St., San Joaquin, Pasig City, in an apartment leased to them by the owner thereof, Florence "Bing" Concepcion, who also resided in the same compound where the apartment was located. Nestor Nicolas was then engaged in the business of supplying government agencies and private entities with office equipment, appliances and other fixtures on a cash purchase or credit basis. Florence Concepcion joined this venture by contributing capital on condition that after her capital investment was returned to her, any profit earned would be divided equally between her and Nestor. Jksm Sometime in the second week of July 1985 Rodrigo Concepcion, brother of the deceased husband of Florence, angrily accosted Nestor at the latters apartment and accused him of conducting an adulterous relationship with Florence. He shouted, "Hoy Nestor, kabit ka ni Bing! x x x Binigyan ka pa pala ni Bing Concepcion ng P100,000.00 para umakyat ng Baguio. Pagkaakyat mo at ng asawa mo doon ay bababa ka uli para magkasarilinan kayo ni Bing."lxvi[1] To clarify matters, Nestor went with Rodrigo, upon the latters dare, to see some relatives of the Concepcion family who allegedly knew about the relationship. However, those whom they were able to see denied knowledge of the alleged affair. The same accusation was hurled by Rodrigo against Nestor when the two (2) confronted Florence at the terrace of her residence. Florence denied the imputations and Rodrigo backtracked saying that he just heard the rumor from a relative. Thereafter, however, Rodrigo called Florence over the telephone reiterating his accusation and threatening her that should something happen to his sick mother, in case the latter learned about the affair, he would kill Florence. Chief As a result of this incident, Nestor Nicolas felt extreme embarrassment and shame to the extent that he could no longer face his neighbors. Florence Concepcion also ceased to do business with him by not contributing capital anymore so much so that the business venture of the Nicolas spouses declined as they could no longer cope with their commitments to their clients and customers. To make matters worse, Allem Nicolas started to doubt Nestors fidelity resulting in frequent bickerings and quarrels during which Allem even expressed her desire to leave her husband. Consequently, Nestor was forced to write Rodrigo demanding

SECOND DIVISION [G.R. No. 120706. January 31, 2000]

public apology and payment of damages. Rodrigo pointedly ignored the demand, for which reason the Nicolas spouses filed a civil suit against him for damages. In his defense, Rodrigo denied that he maligned Nestor by accusing him publicly of being Florence's lover. He reasoned out that he only desired to protect the name and reputation of the Concepcion family which was why he sought an appointment with Nestor through Florence's son Roncali to ventilate his feelings about the matter. Initially, he discussed with Nestor certain aspects of the joint venture in a friendly and amiable manner, and then only casually asked the latter about his rumored affair with his sister-in-law. In contesting the decision of the appellate court, petitioner Rodrigo Concepcion raises the following issues: (a) whether there is basis in law for the award of damages to private respondents, the Nicolas spouses; and, (b) whether there is basis to review the facts which are of weight and influence but which were overlooked and misapplied by the respondent appellate court. Esm Petitioner argues that in awarding damages to private respondents, the Court of Appeals was without legal basis to justify its verdict. The alleged act imputed to him by respondent spouses does not fall under Arts. 26lxvi[2] and 2219lxvi[3] of the Civil Code since it does not constitute libel, slander, or any other form of defamation. Neither does it involve prying into the privacy of anothers residence or meddling with or disturbing the private life or family relation of another. Petitioner also insists that certain facts and circumstances of the case were manifestly overlooked, misunderstood or glossed over by respondent court which, if considered, would change the verdict. Impugning the credibility of the witnesses for private respondents and the manner by which the testimonial evidence was analyzed and evaluated by the trial court, petitioner criticized the appellate court for not taking into account the fact that the trial judge who penned the decision was in no position to observe first-hand the demeanor of the witnesses of respondent spouses as he was not the original judge who heard the case. Thus, his decision rendered was flawed. Esmsc The Court has ruled often enough that its jurisdiction in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence on record or the assailed judgment is based on misapprehension of facts.lxvi[4] The reason behind this is that the Supreme Court respects the findings of the trial court on the issue of credibility of witnesses, considering that it is in a better position to decide the question, having heard the witnesses themselves and observed their deportment and manner of testifying during the trial.lxvi[5] Thus it accords the highest respect, even finality, to the evaluation made by the lower court of the testimonies of the witnesses presented before it. Esmmis The Court is also aware of the long settled rule that when the issue is on the credibility of witnesses, appellate courts will not generally disturb the findings of the trial court; however, its factual findings may nonetheless be reversed if by the evidence on record or lack of it, it appears that the trial court erred.lxvi[6] In this respect, the Court is not generally inclined to review the findings of fact of the Court of Appeals unless its findings are erroneous, absurd,

speculative, conjectural, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the trial court of origin.lxvi[7] This rule of course cannot be unqualifiedly applied to a case where the judge who penned the decision was not the one who heard the case, because not having heard the testimonies himself, the judge would not be in a better position than the appellate courts to make such determination.lxvi[8] However, it is also axiomatic that the fact alone that the judge who heard the evidence was not the one who rendered the judgment but merely relied on the record of the case does not render his judgment erroneous or irregular. This is so even if the judge did not have the fullest opportunity to weigh the testimonies not having heard all the witnesses speak nor observed their deportment and manner of testifying. Thus the Court generally will not find any misapprehension of facts as it can be fairly assumed under the principle of regularity of performance of duties of public officers that the transcripts of stenographic notes were thoroughly scrutinized and evaluated by the judge himself. Has sufficient reason then been laid before us by petitioner to engender doubt as to the factual findings of the court a quo? We find none. A painstaking review of the evidence on record convinces us not to disturb the judgment appealed from. The fact that the case was handled by different judges brooks no consideration at all, for preponderant evidence consistent with their claim for damages has been adduced by private respondents as to foreclose a reversal. Otherwise, everytime a Judge who heard a case, wholly or partially, dies or lives the service, the case cannot be decided and a new trial will have to be conducted. That would be absurb; inconceivable. Esmso According to petitioner, private respondents evidence is inconsistent as to time, place and persons who heard the alleged defamatory statement. We find this to be a gratuitous observation, for the testimonies of all the witnesses for the respondents are unanimous that the defamatory incident happened in the afternoon at the front door of the apartment of the Nicolas spouses in the presence of some friends and neighbors, and later on, with the accusation being repeated in the presence of Florence, at the terrace of her house. That this finding appears to be in conflict with the allegation in the complaint as to the time of the incident bears no momentous significance since an allegation in a pleading is not evidence; it is a declaration that has to be proved by evidence. If evidence contrary to the allegation is presented, such evidence controls, not the allegation in the pleading itself, although admittedly it may dent the credibility of the witnesses. But not in the instant case. Msesm It is also argued by petitioner that private respondents failed to present as witnesses the persons they named as eyewitnesses to the incident and that they presented instead one Romeo Villaruel who was not named as a possible witness during the pre-trial proceedings. Charging that Villaruels testimony is not credible and should never have been accorded any weight at all, petitioner capitalizes on the fact that a great distance separates Villaruels residence and that of private respondents as reflected in their house numbers, the formers number being No. 223 M. Concepcion St., while that of the Nicolas spouses, No. 51 along the same street. This being so, petitioner concludes, Villaruel could not have witnessed the ugly confrontation between Rodrigo and Nestor. It appears however from Villaruels testimony that at the time of the incident complained of, he was staying in an apartment inside the

compound adjacent to that of the Nicolas spouses. Whether his apartment was then numbered 223 is not stated. What is definite and clear is his statement that he and Nestor Nicolas were neighbors on 14 July 1985. There are other inconsistencies pointed out by petitioner in the testimonial evidence of private respondents but these are not of such significance as to alter the finding of facts of the lower court. Minor inconsistencies even guarantee truthfulness and candor, for they erase any suspicion of a rehearsed testimony.lxvi[9] Inconsistencies in the testimonies of witnesses with on minor details and collateral matters do not affect the substance of their testimonies.lxvi[10] All told, these factual findings provide enough basis in law for the award of damages by the Court of Appeals in favor of respondents. We reject petitioners posture that no legal provision supports such award, the incident complained of neither falling under Art. 2219 nor Art. 26 of the Civil Code. It does not need further elucidation that the incident charged of petitioner was no less than an invasion on the right of respondent Nestor as a person. The philosophy behind Art. 26 underscores the necessity for its inclusion in our civil law. The Code Commission stressed in no uncertain terms that the human personality must be exalted. The sacredness of human personality is a concomitant consideration of every plan for human amelioration. The touchstone of every system of law, of the culture and civilization of every country, is how far it dignifies man. If the statutes insufficiently protect a person from being unjustly humiliated, in short, if human personality is not exalted - then the laws are indeed defective.lxvi[11] Thus, under this article, the rights of persons are amply protected, and damages are provided for violations of a persons dignity, personality, privacy and peace of mind. Exsm It is petitioners position that the act imputed to him does not constitute any of those enumerated in Arts 26 and 2219. In this respect, the law is clear. The violations mentioned in the codal provisions are not exclusive but are merely examples and do not preclude other similar or analogous acts. Damages therefore are allowable for actions against a persons dignity, such as profane, insulting, humiliating, scandalous or abusive language.lxvi[12] Under Art. 2217 of the Civil Code, moral damages which include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury, although incapable of pecuniary computation, may be recovered if they are the proximate result of the defendants wrongful act or omission. There is no question that private respondent Nestor Nicolas suffered mental anguish, besmirched reputation, wounded feelings and social humiliation as a proximate result of petitioners abusive, scandalous and insulting language. Petitioner attempted to exculpate himself by claiming that he made an appointment to see Nestor through a nephew, Roncali, the son of Florence, so he could talk with Nestor to find out the truth about his rumored illicit relationship with Florence. He said that he wanted to protect his nephews and nieces and the name of his late brother (Florences husband).lxvi[13] How he could be convinced by some way other than a denial by Nestor, and how he would protect his nephews and nieces and his familys name if the rumor were true, he did not say. Petitioner admitted that he had already talked with Florence herself over the telephone about the issue, with the latter vehemently

denying the alleged immoral relationship. Yet, he could not let the matter rest on the strength of the denial of his sister-in-law. He had to go and confront Nestor, even in public, to the latter's humiliation. Kyle Testifying that until that very afternoon of his meeting with Nestor he never knew respondent, had never seen him before, and was unaware of his business partnership with Florence, his subsequent declarations on the witness stand however belie this lack of knowledge about the business venture for in that alleged encounter he asked Nestor how the business was going, what were the collection problems, and how was the money being spent. He even knew that the name of the business, Floral Enterprises, was coined by combining the first syllables of the name Florence and Allem, the name of Nestors wife. He said that he casually asked Nestor about the rumor between him and Florence which Nestor denied. Not content with such denial, he dared Nestor to go with him to speak to his relatives who were the source of his information. Nestor went with him and those they were able to talk to denied the rumor. Kycalr We cannot help noting this inordinate interest of petitioner to know the truth about the rumor and why he was not satisfied with the separate denials made by Florence and Nestor. He had to confront Nestor face to face, invade the latters privacy and hurl defamatory words at him in the presence of his wife and children, neighbors and friends, accusing him - a married man - of having an adulterous relationship with Florence. This definitely caused private respondent much shame and embarrassment that he could no longer show himself in his neighborhood without feeling distraught and debased. This brought dissension and distrust in his family where before there was none. This is why a few days after the incident, he communicated with petitioner demanding public apology and payment of damages, which petitioner ignored. Calrky If indeed the confrontation as described by private respondents did not actually happen, then there would have been no cause or motive at all for them to consult with their lawyer, immediately demand an apology, and not obtaining a response from petitioner, file an action for damages against the latter. That they decided to go to court to seek redress bespeaks of the validity of their claim. On the other hand, it is interesting to note that while explaining at great length why Florence Concepcion testified against him, petitioner never advanced any reason why the Nicolas spouses, persons he never knew and with whom he had no dealings in the past, would sue him for damages. It also has not escaped our attention that, faced with a lawsuit by private respondents, petitioner sent his lawyer, a certain Atty. Causapin, to talk not to the Nicolas spouses but to Florence, asking her not to be involved in the case, otherwise her name would be messily dragged into it. Quite succinctly, Florence told the lawyer that it was not for her to decide and that she could not do anything about it as she was not a party to the court case. WHEREFORE, in light of the foregoing premises, the assailed Decision of the Court of Appeals affirming the judgment of the Regional Trial Court of Pasig City, Br. 167, holding Rodrigo Concepcion liable to the spouses Nestor Nicolas and Allem Nicolas for P50,000.00 as moral damages, P25,000.00 for exemplary damages, P10,000.00 for attorney's fees, plus costs of suit, is AFFIRMED. Mesm

SO ORDERED. Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-46061 November 14, 1984 ST. LOUIS REALTY CORPORATION, petitioner, vs. COURT OF APPEALS and CONRADO J. ARAMIL, respondents. Romeo Z. Comia for petitioner. Roman R. Bersamin for private respondent.

The same advertisement appeared in the Sunday Times dated January 5, 1969. Doctor Aramil a neuropsychiatrist and a member of the faculty of the U. E. Ramon Magsaysay Memorial Hospital, noticed the mistake. On that same date, he wrote St. Louis Realty the following letter of protest: Dear Sirs: This is anent to your advertisements appearing in the December 15, 1968 and January 5, 1969 issues of the Sunday Times which boldly depicted my house at the above-mentioned address and implying that it belonged to another person. I am not aware of any permission or authority on my part for the use of my house for such publicity. This unauthorized use of my house for your promotional gain and much more the apparent distortions therein are I believe not only transgression to my private property but also damaging to my prestige in the medical profession I have had invited in several occasions numerous medical colleagues, medical students and friends to my house and after reading your December 15 advertisement some of them have uttered some remarks purporting doubts as to my professional and personal integrity. Such sly remarks although in light vein as "it looks like your house," "how much are you renting from the Arcadios?", " like your wife portrayed in the papers as belonging to another husband," etc., have resulted in no little mental anguish on my part. I have referred this matter to the Legal Panel of the Philippine Medical Association and their final advice is pending upon my submission of supporting ownership papers. I will therefore be constrained to pursue court action against your corporation unless you could satisfactorily explain this matter within a week upon receipt of this letter. The letter was received by Ernesto Magtoto, an officer of St. Louis Realty in charge of advertising. He stopped publication of the advertisement. He contacted Doctor Aramil and offered his apologies. However, no rectification or apology was published. On February 20, 1969, Aramil's counsel demanded from St. Louis Realty actual, moral and exemplary damages of P110,000 (Exh. D). In its answer dated March 10, St. Louis Realty claimed that there was an honest mistake and that if Aramil so desired, rectification would be published in the Manila Times (Exh. 3). It published in the issue of the Manila Times of March 18, 1969 a new advertisement with the Arcadio family and their real house. But it did not publish any apology to Doctor Aramil and an explanation of the error.

AQUINO, J.: This case is about the recovery of damages for a wrongful advertisement in the Sunday Times where Saint Louis Realty Corporation misrepresented that the house of Doctor Conrado J. Aramil belonged to Arcadio S. Arcadio. St. Louis Realty caused to be published with the permission of Arcadio S. Arcadio (but without permission of Doctor Aramil) in the issue of the Sunday Times of December 15, 1968 an advertisement with the heading "WHERE THE HEART IS". Below that heading was the photograph of the residence of Doctor Aramil and the Arcadio family and then below the photograph was the following write-up: Home is where the heart is. And the hearts of MR. AND MRS. ARCADIO S. ARCADIO and their family have been captured by BROOKSIDE HILLS. They used to rent a small 2-bedroom house in a cramped neighborhood, sadly inadequate and unwholesome for the needs of a large family. They dream(ed) of a more pleasant place free from the din and dust of city life yet near all facilities. Plans took shape when they heard of BROOKSIDE HILLS. With thrift and determination, they bought a lot and built their dream house ... for P31,000. The Arcadios are now part of the friendly, thriving community of BROOKSIDE HILLS... a beautiful first-class subdivision planned for wholesome family living.

On March 29, Aramil filed his complaint for damages. St. Louis Realty published in the issue of the Manila Times of April 15, 1969 the following "NOTICE OF RECTIFICATION" in a space 4 by 3 inches: This will serve as a notice that our print ad 'Where the Heart is' which appeared in the Manila Times issue of March 18, 1969 is a rectification of the same ad that appeared in the Manila Times issues rectification of the same ad that appeal of December 15, 1968 and January 5, 1969 wherein a photo of the house of another Brookside Homeowner (Dr. Aramilprivate respondent) was mistakenly used as a background for the featured homeowner's the Arcadio family. The ad of March 18, 1969 shows the Arcadio family with their real house in the background, as was intended all along. Judge Jose M. Leuterio observed that St. Louis Realty should have immediately published a rectification and apology. He found that as a result of St. Louis Realty's mistake, magnified by its utter lack of sincerity, Doctor Aramil suffered mental anguish and his income was reduced by about P1,000 to P1,500 a month. Moreover, there was violation of Aramil's right to privacy (Art. 26, Civil Code). The trial court awarded Aramil P8,000 as actual damages, P20,000 as moral damages and P2,000 as attorney's fees. St. Louis Realty appealed to the Court of Appeals. The Appellate Court affirmed that judgment, with Acting Presiding Justice Magno S. Gatmaitan as ponente, and Justices Sixto A. Domondon and Samuel F. Reyes concurring. The Appellate Court reasoned out that St. Louis Realty committed an actionable quasi-delict under articles 21 and 26 of the Civil Code because the questioned advertisements pictured a beautiful house which did not belong to Arcadio but to Doctor Aramil who, naturally, was annoyed by that contretemps. In this appeal, St. Louis Realty contends that the Appellate Court ignored certain facts and resorted to surmises and conjectures. This contention is unwarranted. The Appellate Court adopted the facts found by the trial court. Those factual findings are binding on this Court. St. Louis Realty also contends that the decision is contrary to law and that the case was decided in a way not in conformity with the rulings of this Court. It argues that the case is not covered by article 26 which provides that "every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons". "Prying into the privacy of another's residence" and "meddling with or disturbing the private life or family relations of another" and "similar acts", "though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief".

The damages fixed by Judge Leuterio are sanctioned by Articles 2200, 2208 and 2219 of the Civil Code. Article 2219 allows moral damages for acts and actions mentioned in Article 26. As lengthily explained by Justice Gatmaitan, the acts and omissions of the firm fan under Article 26. St. Louis Realty's employee was grossly negligent in mixing up the Aramil and Arcadio residences in a widely circulated publication like the Sunday Times. To suit its purpose, it never made any written apology and explanation of the mix-up. It just contented itself with a cavalier "rectification ". Persons, who know the residence of Doctor Aramil, were confused by the distorted, lingering impression that he was renting his residence from Arcadio or that Arcadio had leased it from him. Either way, his private life was mistakenly and unnecessarily exposed. He suffered diminution of income and mental anguish. WHEREFORE, the judgment of the Appellate Court is affirmed. Costs against the petitioner. SO ORDERED. Makasiar, Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.