SUPREME COURT REPORTS ANNOTATED temperate, liquidated, or compensatory damages.

They are recoverable in

criminal cases as part of the civil liability when the crime was committed
BPI Investment Corporation vs. D.G. Carreon Commercial Corp.
with one or more aggravating circumstances; in quasi-delicts, if the
G.R. No. 126524. November 29, 2001.* defendant acted with gross negligence; and in contracts and quasi-
BPI INVESTMENT CORPORATION, petitioner, vs. D.G. CARREON contracts, if the defendant acted in a wanton, fraudulent, reckless,
COMMERCIAL CORPORATION, DANIEL G. CARREON, AURORA J. CARREON, oppressive, or malevolent manner.
AND JOSEFA M. JECEIL, respondents. Same; Same; Moral damages may be awarded in a breach of contract
when the defendant acted in bad faith, or was guilty of gross negligence
Remedial Law; Certiorari; Instances when the findings of fact of the
amounting to bad faith or in wanton disregard of his contractual
trial court and/or Court of Appeals may be reviewed by the supreme Court.
obligation.The award of moral damages and attorneys fees is also not in
There are instances when the findings of fact of the trial court and/or Court
keeping with existing jurisprudence. Moral damages may be awarded in a
of Appeals may be reviewed by the Supreme Court, such as (1) when the
breach of contract when the defendant acted in bad faith, or was guilty of
conclusion is a finding grounded entirely on speculation, surmises and
gross negligence amounting to bad faith, or in wanton disregard of his
conjectures; (2) when the inference made is manifestly mistaken, absurd or
contractual obligation. Finally, with the elimination of award of moral
impossible; (3) where there is a grave abuse of discretion; (4) when the
damages, so must the award of attorneys fees be deleted.
judgment is based on a misapprehension of facts; (5) when the findings of
Same; Same; Temperate or moderate damages may be recovered
fact are conflicting; (6) when the Court of Appeals, in making its findings,
when the court finds that some pecuniary loss has been suffered but its
went beyond the issues of the case and the same is contrary to the
amount cannot form the nature of the case be proved with certainty.There
admissions of both appellant and appellee; (7) when the findings are
is no doubt, however, that the damages sustained by respondents were due
contrary to those of the trial court; (8) when the findings of fact are
to petitioners fault or negligence, short of gross negligence. Temperate or
conclusions without citation of specific evidence on which they are based;
moderate damages may be recovered when the court finds that some
(9) when the facts set forth in the petition as well as in the petitioners main
pecuniary loss has been suffered but its amount cannot, from the nature of
and reply briefs are not disputed by the respondents; and (10) the findings
the case, be proved with certainty. The Court deems it prudent to award
of fact of the Court of Appeals are premised on the supposed absence of
reasonable temperate damages to respondents under the circumstances.
evidence and contradicted by the evidence on record.
Civil Law; Damages; Negligence; Gross negligence evinces a
PETITION for review of a decision of the Court of Appeals.
thoughtless disregard of consequences without exerting any effort to avoid
them. We find petitioner not guilty of gross negligence in the handling of
The facts are stated in the opinion of the Court.
the money market placement of respondents. Gross negligence implies a
Bargas, Benedicto, Tale & Verzosa for petitioner.
want or absence of or failure to exercise slight care or diligence, or the entire
Belo, Gozon, Parel, Asuncion & Lucila for private respondents.
absence of care. It evinces a thoughtless disregard of consequences without
exerting any effort to avoid them.
PARDO, J.:
Same; Same; Same; Exemplary damages are recoverable in
quasidelicts if the defendant acted with gross negligence and in contracts
Before the Court is a petition for review on certiorari of the decision 1 of the
and quasi-delicts if he acted in a wanton, fraudulent, reckless, oppressive or
Court of Appeals reversing the ruling of the Regional Trial Court, Makati,
malevolent manner.The law on exemplary damages is found in Section 5,
dismissing petitioners complaint for recovery of a sum of money alleged as
Chapter 3, Title XVIII, Book IV of the Civil Code. These are imposed by way
overpayment of money market placements.
of example or correction for the public good, in addition to moral,
The Facts
Petitioner BPI Investment Corporation (BPI Investments), formerly known as
Ayala Investment and Development Corporation, was engaged in money
market operations. Respondent D.G. Commercial Corporation was a client
of petitioner and started its money market placements in September, 1978.
The individual respondents, spouses Daniel and Aurora Carreon and Josefa
M. Jeceil also placed with BPI Investments their personal money in money
market placements.
On November 15, 1979, D.G. Carreon Commercial Corporation (D.G.
Carreon, for brevity) placed with BPI Investments P318,981.59 in money
market placement with a maturity term of thirty two days, or up to
December 17, 1979, at a maturity value of P323,518.22. BPI Investments
issued the corresponding sales order slip for straight sale and confirmation
slip.
On December 12, 1979, there appeared in BPI Investments ledger due
D.G. Carreon an amount of P323,518.22, which is the exact amount to
mature on December 17, 1979. D.G. Carreon did not make any money
placement maturing on December 12, 1979. As a result of this, Mr. Celso
Abrantes, an officer of BPI Investments called up Aurora Carreon about the
money market placement supposedly maturing on December 12, 1979.
Aurora Carreon instructed Abrantes to roll over the amount of P323,518.22,
for another thirty days at 19% interest to mature on January 11, 1980. A
sales order slip and a confirmation slip were executed dated December 12,
1979.
On December 17, 1979, BPI Investments credited D.G. Carreon with
another P323,518.22 via roll over of P300,000.00, for a term of one hundred
twenty days at 19% interest maturing on April 15, 1980, and P23,518.22,
paid out in cash. A sales order slip for straight sale and a confirmation slip
were executed. BPI Investments paid the money placement on April 16,
1980. The money placement in the amount of P319,000.00 that matured on
April 16, 1980 was again rolled over for a term of sixty one days at 19%
interest maturing on June 16, 1980, with a maturity value of P329,443.81.
The amount was again rolled over for a term of thirty days at 18% interest
maturing on July 16, 1980, and again rolled over for another thirty days at
18% interest.
BPI Investments paid D.G. Carreon twice in interest of the amount of
P323,518.22, representing a single money market placement, the first on
December 12, 1979, and the second on December 17, 1979. According to
petitioner, their bookkeeper made an error in posting 12-17 on the sales
order slip for 12-12. BPI Investments claimed that the same placement
was also booked as maturing on December 12, 1979. Aurora Carreon
instructed BPI Investments to roll over the whole amount ofP323,518.22 for
another thirty days, or up to January 11, 1980, at 19% interest. BPI
Investments claimed that roll overs were subsequently made from maturing
payments on which BPI Investments had made over payments at a total
amount of P410,937.09, as follows:
April 14, 1980 P 14,371.74
June 18, 1980 P 9,648.38
August 12, 1980 P100,000.00
March 19, 1981 P 66,259.88
October 19, 1981 P220,657.64
TOTAL P410,937.09
All the above payments were evidenced by checks issued by BPI Investments
to respondents.
On April 21, 1982, BPI Investments wrote respondents Daniel Carreon
and Aurora Carreon, demanding the return of the overpayment of
P410,937.09.2 They discussed the matter with BPI Investments. The
respondents asserted that there was no overpayment and asked for time to
look for the papers. Upon the request of BPI Investments, the spouses
Daniel and Aurora Carreon sent to BPI Investments a proposed
memorandum of agreement, dated May 7, 1982, stating that:
NOW, THEREFORE, and for (sic) in consideration of the foregoing, the
parties herein agree as follows:
1. Because of the age and retrieval difficulty of the transactions on this
placement, the Company has a five-year option to determine if the said
placement referred to as funded, and if so, to submit to AIDC (Now BPI
Investments) documents to this effect. And if such documents support the
funding of side placement, AIDC (BPI Investments) shall pay the company
the stated amount being temporarily reimbursed by the Company with a
12% p.a. interest. In the spirit of goodwill the company hereby agrees to
temporarily reimburse AIDC the amount of FOUR HUNDRED TEN
THOUSAND NINE HUNDRED THIRTY SEVEN and 9/100 PESOS (P410,937.09)
representing the full amount of the claim of AIDC as mentioned above. 3
On May 10, 1982, BPI Investments, without responding to the memorandum
and proposal of D.G. Carreon filed with the Court of First Instance of Rizal,
Branch 36, Makati, a complaint4 for recovery of a sum of money against D.G.
Carreon with preliminary attachment. On May 14, 1982, the trial court
issued an order5 for preliminary attachment after submission of affidavit of
merit to support the petition, and the posting of a bond in the amount of
P200,000.00. However, on October 8, 1982, the trial court lifted the writ of
attachment.6 On October 28, 1982, BPI Investments moved for
reconsideration, but the trial court denied the motion after finding the
absence of double payment to the defendants.
On July 30, 1982, respondents D.G. Carreon filed with the trial court an
answer7 to the complaint, with counterclaim. D.G. Carreon asked for
compensatory damages in an amount to be proven during the trial; spouses
Daniel and Aurora Carreon asked for moral damages of P1,000,000.00
because of the humiliation, great mental anguish, sleepless nights and
deterioration of health due to the filing of the complaint and indiscriminate
and wrongful attachment of their property, especially their residential
house and payment of their money market placement of P109,283.75.
Josefa Jeceil asked for moral damages of P500,000.00, because of sleepless
nights and mental anguish, and payment of her money market placement of
P73,857.57; all defendants claimed for exemplary damages and attorneys
fees of P100,000.00.
On May 25, 1993, the trial court rendered a decision, the pertinent
portions of which read as follows:
Plaintiff s case is unmeritorious.
The court agrees with defendants counsels observation that plaintiff
did not prove by clear and convincing evidence that defendants indeed
received money in excess of what is due them as it utterly failed to show
and present any proof what was actually due defendants. As pointed out by
the same counsel, the summary of the money market placement submitted
as evidence by plaintiff (Exh. A) is at best self-serving as it was admittedly
prepared by plaintiff s own accounting department without any
participation of defendants. (TSN of October 15, 1985, p. 4)
Moreover, the alleged payments in the complaint were admitted by
plaintiff itself to be withdrawals from validly issued commercial papers (TSN
of August 12, 1986, pp. 3-5) for value received (Exhs. 1-B, 2-B up to 11-B)
duly verified and signed by at least two (2) authorized high ranking officers
of plaintiff s corporation. Again, as correctly stated by defendants, Art. 1431
of the New Civil Code provides that through estoppel an admission or
representation is rendered conclusive upon the person making it, and
cannot be denied or disapproved as against the person relying thereon.
Accordingly, plaintiff having thus clearly stated in several documents duly
signed by its responsible officers cannot now vary their contents and claim
that they were received without value having been received for the same.
Lastly, it is incumbent upon plaintiff corporation to provide for
competent employees possessed with adequate skills in implementing
effective safeguards and measures that ensure the non-occurrence of errors
of this nature, it would be gross negligence on the part of plaintiff if it fails
to provide for the same considering that it is primarily engaged in the
solicitation of money market placements.
In view of the foregoing, the case is hereby DISMISSED with cost against
plaintiff. The attachment previously issued is likewise lifted.
It appearing that plaintiff was not motivated by malice in filing this case,
the counterclaim is likewise DISMISSED.
SO ORDERED.8
Both parties appealed the above decision to the Court of Appeals. 9
After due proceedings, on July 19, 1996, the Court of Appeals
promulgated a decision, the dispositive portion of which reads as follows:
WHEREFORE, the appealed judgment of the trial court dismissing the
plaintiff s complaint is hereby AFFIRMED while its dismissal of the
counterclaim of defendants is REVERSED and SET ASIDE and judgment is
hereby rendered as follows:
1. Ordering plaintiff BPI to pay the following amounts of damages:
Moral Damages
a) P1,000,000.00 to the late Daniel G. Carreon or his estate represented
by Aurora J. Carreon;
b) P1,000,000.00 to Aurora J. Carreon; P500,000.00 to the late Josefa
M. Jeceil or her estate represented by Aurora J. Carreon;
Compensatory Damages
P1,500,000.00 to D.G. Carreon Commercial Corporation;
Exemplary Damages
P1,000,000.00 to all defendants;
Attorneys Fees
P500,000.00 to all defendants
 2. Ordering plaintiff BPI to pay to the estate of Daniel G. Carreon,
represented by Aurora J. Carreon, the money market placement of
P109,238.75 with 12% interest per annum from June 3, 1982 until fully paid;
3. Ordering plaintiff BPI to pay to the estate of Josefa M. Jeceil,
represented by Aurora J. Carreon, the money market placement in the
amount of P73,857.57 at 12% interest per annum from maturity on July 12,
1982 until fully paid;
4. Ordering plaintiff BPI to pay for the costs of the suit.
SO ORDERED.10
Hence, this appeal.11
Petitioner BPI Investments raises the following issues:
1. 1.Whether there was an over payment of respondents money
market placements.
2. 2.Whether petitioner abused its right in implementing the writ of
preliminary attachment;
3. 3.Whether the Court of Appeals awarded excessive moral and
exemplary damages as well as attorneys fees to respondents;
and
4. 4.Whether petitioner was obliged to pay the estate of Josefa Jeceil
the amount of her money market placement.12
Petitioners Submissions
First, BPI Investments submits that the summary of the money market
placements and the checks issued to D.G. Carreon are sufficient to show that
one renewal or roll over of the money market placement dated November
15, 1979, for a period of thirty-two days gave rise to two placements
maturing on two dates, that is, December 12, 1979 and December 17,
1979.13
After several roll overs and withdrawals by D.G. Carreon, BPI
Investments discovered that respondent corporation has overpaid
P410,937.09 since the December 12, 1979 placement was not funded. BPI
Investments stressed that in a money market transaction an official receipt
must support maturing placements. The December 12, 1979 placement was
unsupported by any fund.14
Second, a mistake caused the overpayment in the posting of the
maturity date of 12-12 instead of 12-17. The mistake in the posting of reviewable in this case.
the maturity date benefited D.G. Carreon. And as soon as petitioner
discovered the wrong posting, it immediately wrote D.G. Carreon to inform
the latter of the error in the posting of the maturity dates on its money
market placements.15
Third, the manner of execution of the writ of attachment is not the fault
of BPI Investments. The sheriff of the trial court implemented the writ. The
only participation BPI Investments had in the process was the application
for a writ of preliminary attachment. BPI Investments did not have a hand in
its implementation.16
Fourth, the Court of Appeals blamed BPI Investments for the
deterioration of the health of two respondents who died pendente lite. The
award of moral and exemplary damages and attorneys fees in favor of
respondents is bereft of factual and legal bases. 17
Petitioner filed the case below to recover the overpayment arising from
an unfunded placement. The respondents failed to show proof that the
December 12, 1979 placement was different from the December 17, 1979
placement.
The Court of Appeals ruling that the filing of the case aggravated and
caused the death of respondents Daniel Carreon and Josefa Jeceil is
completely unfounded and farfetched. Daniel Carreon, prior to the filing of
the case, was suffering from nasopharyngeal cancer from which he died in
1984. Whereas Josefa Jeceil died from various heart ailments in 1987,
almost five years since the case was filed. No causal relation whatsoever was
established between the health of the respondents and the filing of the
case.18 The award of damages in favor of the respondent corporation was
also without basis. There was no proof adduced that the credit standing of
the respondent corporation was affected by the filing of the case. There was
no proof of bad faith or malice on the part of BPI Investments. What
happened was an honest mistake.19
Fifth, the order of the Court of Appeals for BPI Investments to pay the
money market placement of Josefa Jeceil was also without basis. The
amount of P73,857.57 was placed and deposited by BPI Investments with
the sheriff of the Court of First Instance of Rizal in compliance with the order
of the court. Respondent Jeceil knew of this fact but she failed to withdraw
the amount in the custody of the trial court.20
Respondents Position
Respondents submit that the issues raised are factual, hence, not
 Only questions of law, distinctly set forth, may be raised in a petition for
review on certiorari, subject to clearly settled exceptions in case law. The
case at bar does not fall within any of the exceptions.21
BPI Investments was guilty of bad faith, malice and gross negligence in
the management of respondents money market placements. According to
respondents, this is not a mere case of misreading 12-17 as 12-12. The
sloppy accounting and recording of the ledger was a clear case of gross
negligence in the exercise of petitioners primary business of accepting
money market placements. BPI Investments was remiss in its duty to treat
respondents money market placements with the highest degree of care,
considering the fiduciary nature of their relationship.22
The Court of Appeals correctly ruled that petitioner abused its right in
executing the writ of attachment against respondents. Notwithstanding the
fact that petitioners claim amounted only up to P410,937.09, petitioner
caused the levy on property of respondents valued at more than
P40,000,000.00, in a harsh, unjust, inhuman and oppressive manner. This
constitutes an abuse that justifies the award of damages to the respondents.
Articles 19, 20 and 21 of the Civil Code constitute the legal basis for the
award of damages to respondents.23
As to the alleged excessive award of moral and exemplary damages as
well as attorneys fees, respondents submit that the same is supported by
proofs. As to the moral damages awarded to Daniel G. Carreon and Aurora
J. Carreon, both in the amount of P1,000,000.00, and to Josefa M. Jeceil in
the amount of P500,000.00, the awards are reasonable and supported by
evidence.
All the respondents are persons of high reputation in the community.
Each of them suffered mental anguish, embarrassment and humiliation due
to the case filed by petitioner and two of them deteriorated in their health
and died during the pendency of the case. As to the compensatory damages
awarded to the corporation, the same is proper. It was proved that D.G.
Carreon is a reputable corporation with good credit standing in the business
community and this reputation was damaged due to the malicious charges
filed by petitioner.24
As to the award of exemplary damages, the same is not excessive. It
must be stressed that the amount of P1,000,000.00 was awarded to four
respondents. The attorneys fees in the amount of P500,000.00 is not
excessive considering that the case dragged on from 1981 up to the present,
over fifteen years.25
As to the order to pay the long overdue money market placement of the
late Josefa Jeceil, petitioners contention that respondent failed to withdraw
the amount deposited with the sheriff is not correct. First, the deposit does
not amount to payment; indeed, consignation was not proper. Josefa Jeceil
had no right to withdraw such deposit because of the pending litigation. As
a consequence, the Court of Appeals directed the petitioner to pay the
matured money market placement of the late Josefa Jeceil. 26
The Courts Ruling
After a careful consideration of the facts and the evidence presented by
both parties, we consider the petition partly meritorious.
There are instances when the findings of fact of the trial court and/or
Court of Appeals may be reviewed by the Supreme Court, such as (1) when
the conclusion is a finding grounded entirely on speculation, surmises and
conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) where there is a grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of
fact are conflicting; (6) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (7) when the findings are
contrary to those of the trial court; (8) when the findings of fact are
conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioners main
and reply briefs are not disputed by the respondents; and (10) the findings
of fact of the Court of Appeals are premised on the supposed absence of
evidence and contradicted by the evidence on record.27
In the case at bar, the Court of Appeals committed errors in the
apprehension of the facts of the case, hence, we review its findings of facts.
We find petitioner not guilty of gross negligence in the handling of the
money market placement of respondents. Gross negligence implies a want
or absence of or failure to exercise slight care or diligence, or the entire
absence of care. It evinces a thoughtless disregard of consequences without
exerting any effort to avoid them.28
However, while petitioner BPI Investments may not be guilty of gross
negligence, it failed to prove by clear and convincing evidence that D.G.
Carreon indeed received money in excess of what was due them. The
alleged payments in the complaint were admitted by plaintiff itself to be
withdrawals from validly issued commercial papers, duly verified and signed
by at least two authorized high-ranking officers of BPI Investments. 29
 The law on exemplary damages is found in Section 5, Chapter 3, Title placement of P109,238.75, with legal interest of twelve (12%) percent per
XVIII, Book IV of the Civil Code. These are imposed by way of example or annum from June 3, 1982, until fully paid; to pay the estate of Josefa M.
correction for the public good, in addition to moral, temperate, liquidated, Jeceil, the money market placement in the amount of P73,857.57, with legal
or compensatory damages. They are recoverable in criminal cases as part of interest at twelve (12%) percent per annum from maturity on July 12, 1982,
the civil liability when the crime was committed with one or more until fully paid. The petitioner may withdraw its deposit from the lower court
aggravating circumstances; in quasi-delicts, if the defendant acted with at its peril. BPI Investments is likewise ordered to pay temperate damages
gross negligence; and in contracts and quasi-contracts, if the defendant to the estate of the late Daniel G. Carreon in the amount of P300,000.00,
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. 30 and to the estate of Aurora J. Carreon in the amount of P300,000.00, and to
BPI Investments did not act in a wanton, fraudulent, reckless, the estate of Josefa M. Jeceil in the amount of P150,000.00.
oppressive, or malevolent manner, when it asked for preliminary No costs.
attachment. It was just exercising a legal option. The sheriff of the issuing SO ORDERED.
court did the execution and the attachment. Hence, BPI Investments is not Davide, Jr. (C.J., Chairman), Puno, Kapunan and Ynares-Santiago,
to be blamed for the excessive and wrongful attachment. JJ., concur.
As to the finding of the appellate court that the filing of the case
aggravated and eventually caused the death of two of the respondents, we Judgment affirmed with modification.
agree with the petitioner that such correlation is bereft of basis and is far Note.The Supreme Court has the full discretionary power to take
fetched. cognizance of the petition filed directly to it if compelling reasons, or the
The award of moral damages and attorneys fees is also not in keeping nature and importance of the issues raised warrant. (Malonzo vs.
with existing jurisprudence. Moral damages may be awarded in a breach of Zamora, 311 SCRA 224 [1999])
contract when the defendant acted in bad faith, or was guilty of gross
negligence amounting to bad faith, or in wanton disregard of his contractual
obligation. Finally, with the elimination of award of moral damages, so must
the award of attorneys fees be deleted.31
There is no doubt, however, that the damages sustained by respondents
were due to petitioners fault or negligence, short of gross negligence.
Temperate or moderate damages may be recovered when the court finds
that some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be proved with certainty.32 The Court deems it prudent
to award reasonable temperate damages to respondents under the
circumstances.33
As to the claim for payment of the money market placement of Josefa
Jeceil, the trial court may release the deposited amount of P73,857.57 to
petitioner as the consignation was not proper or warranted.
The Fallo
IN VIEW WHEREOF, the decision of the Court of Appeals is hereby AFFIRMED
with MODIFICATION. The award of moral, compensatory and exemplary
damages and attorneys fees are deleted. BPI Investments is ordered to pay
to the estate of Daniel G. Carreon and Aurora J. Carreon the money market
 VOL. 429, MAY 25, 2004
Philippine Communications Satellite Corporation vs. Globe Telecom, Inc.
G.R. No. 147324. May 25, 2004.*
PHILIPPINE COMMUNICATIONS SATELLITE
CORPORATION, petitioner, vs. GLOBE TELECOM, INC.
(formerly and Globe Mckay Cable and Radio Corporation),
respondents.
G.R. No. 147334. May 25, 2004.*
GLOBE TELECOM, INC., petitioner, vs. PHILIPPINE
COMMUNICATION SATELLITE CORPORATION, respondent.
Civil Law; Contracts; Force Majeure; Article 1174 exempts an
obligor from liability not only to events that are unforeseeable, but
also to those which are foreseeable, but inevitable.Article 1174,
which exempts an obligor from liability on account of fortuitous
events or force majeure, refers not only to events that are
unforeseeable, but also to those which are foreseeable, but
inevitable: Art. 1174. Except in cases specified by the law, or when
it is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be
responsible for those events which, could not be foreseen, or which,
though foreseen were inevitable. A fortuitous event under Article
1174 may either be an act of God, or natural occurrences such as
floods or typhoons, or an act of man, such as riots, strikes or wars.
Same; Same; Same; Terms and Conditions; Parties may
stipulate on terms and conditions as they may see fit, and these have
the force of law between them.Under Article 1306 of the Civil
Code, parties to a contract may establish such stipulations, clauses,
terms and conditions as they may deem fit, as long as the same do
not run counter to the law, morals, good customs, public order or
public policy. Article 1159 of the Civil Code also provides that
[o]bligations arising from contracts have the force of law between
the contracting parties and should be complied with in good faith.
Courts cannot stipulate for the parties nor amend their agreement
where the same does not contravene law, morals, good customs,
public order or public policy, for to do so would be to alter the real
intent of the parties, and would run contrary to the function of the
courts
153 to give force and effect thereto. Not being contrary to law,
morals, good customs, public order, or public policy, Section 8 of the
Agreement which Philcomsat and Globe freely agreed upon has the
force of law between them.
Same; Same; Same; Requisites; The concurrence of the
following elements must be established.In order that Globe may
be exempt from non compliance with its obligation to pay rentals
under Section 8, the concurrence of the following elements must be
established: (1) the event must be independent of the human will;
(2) the occurrence must render it impossible for the debtor to fulfill
the obligation in a normal manner; and (3) the obligor must be free
of participation in, or aggravation of, the injury to the creditor.
Same; Same; Damages; Attorneys Fees; In cases where both
parties have legitimate claims against each other, an award of
attorneys fees would not be warranted.The award of attorneys
fees is the exception rather than the rule, and must be supported
by factual, legal and equitable justifications. In previously decided
cases, the Court awarded attorneys fees where a party acted in
gross and evident bad faith in refusing to satisfy the other partys
claims and compelled the former to litigate to protect his rights;
when the action filed is clearly unfounded, or where moral or
exemplary damages are awarded. However, in cases where both
parties have legitimate claims against each other and no party
actually prevailed, such as in the present case where the claims of
both parties were sustained in part, an award of attorneys fees
would not be warranted.
PETITION for review on certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
Rillorga, Africa, De Ocampo and Africa for Phil.
Communications Satellite Corp.
Salalima and Castelo for Globe Telecom, Inc.
TINGA, J.:
Before the Court are two Petitions for Review assailing
the Decision of the Court of Appeals, dated 27 February 2001,
in CA-G.R. CV No. 63619.1
The facts of the case are undisputed.
For several years prior to 1991, Globe Mackay Cable and Radio
Corporation, now Globe Telecom, Inc. (Globe), had been engaged in
the coordination of the provision of various communication
facilities for the military bases of the United States of America (US)
in Clark Air Base, Angeles, Pampanga and Subic Naval Base in
Cubi Point, Zambales. The said communication facilities were
installed and configured for the exclusive use of the US Defense
Communications Agency (USDCA), and for security reasons, were
operated only by its personnel or those of American companies
contracted by it to operate said facilities. The USDCA contracted
with said American companies, and the latter, in turn, contracted
with Globe for the use of the communication facilities. Globe, on
the other hand, contracted with local service providers such as the
Philippine Communications Satellite Corporation (Philcomsat) for
the provision of the communication facilities.
On 07 May 1991, Philcomsat and Globe entered into an
Agreement whereby Philcomsat obligated itself to establish,
operate and provide an IBS Standard B earth station (earth
station) within Cubi Point for the exclusive use of the
USDCA.2 The term of the contract was for 60 months, or five (5)
years.3 In turn, Globe promised to pay Philcomsat monthly rentals
for each leased circuit involved.4
At the time of the execution of the Agreement, both parties
knew that the Military Bases Agreement between the Republic of
the Philippines and the US (RP-US Military Bases Agreement),
which was the basis for the occupancy of the Clark Air Base and
Subic Naval Base in Cubi Point, was to expire in 1991. Under
Section 25, Article XVIII of the 1987 Constitution, foreign military
bases, troops or facilities, which include those located at the US
Naval Facility in Cubi Point, shall not be allowed in the Philippines
unless a new treaty is duly concurred in by the Senate and ratified
by a majority of the votes cast by the people in a national
referendum when the Congress so requires, and such new treaty is
recognized as such by the US Government.
Subsequently, Philcomsat installed and established the earth
station at Cubi Point and the USDCA made use of the same.
On 16 September 1991, the Senate passed and adopted Senate
Resolution No. 141, expressing its decision not to concur in the
ratification of the Treaty of Friendship, Cooperation and Security
and its Supplementary Agreements that was supposed to extend
the term of the use by the US of Subic Naval Base, among
others.5 The last two paragraphs of the Resolution state:
FINDING that the Treaty constitutes a defective framework for
the continuing relationship between the two countries in the spirit
of friendship, cooperation and sovereign equality: Now, therefore,
be it
Resolved by the Senate, as it is hereby resolved, To express its
decision not to concur in the ratification of the Treaty of
Friendship, Cooperation and Security and its Supplementary
Agreements, at the same time reaffirming its desire to continue
friendly relations with the government and people of the United
States of America.6
On 31 December 1991, the Philippine Government sent a Note
Verbale to the US Government through the US Embassy, notifying
it of the Philippines termination of the RP-US Military Bases
Agreement. The Note Verbale stated that since the RP-US Military
Bases Agreement, as amended, shall terminate on 31 December
1992, the withdrawal of all US military forces from Subic Naval
Base should be completed by said date.
In a letter dated 06 August 1992, Globe notified Philcomsat of
its intention to discontinue the use of the earth station effective 08
November 1992 in view of the withdrawal of US military personnel
from Subic Naval Base after the termination of the RP-US Military
Bases Agreement. Globe invoked as basis for the letter of
termination Section 8 (Default) of the Agreement, which provides:
Neither party shall be held liable or deemed to be in default for any
failure to perform its obligation under this Agreement if such
failure results directly or indirectly from force majeure or
fortuitous event. Either party is thus precluded from performing
its obligation until such force majeure or fortuitous event shall
terminate. For the purpose of this paragraph, force majeure shall
mean circumstances beyond the control of the party involved
including, but not limited to, any law, order, regulation, direction
or request of the Government of the Philippines, strikes or other
labor difficulties, insurrection riots, national emergencies, war,
acts of public enemies, fire, floods, typhoons or other catastrophies
or acts of God. Philcomsat sent a reply letter dated 10 August 1992
to Globe, stating that we expect [Globe] to know its commitment
to pay the stipulated rentals for the remaining terms of the
Agreement even after [Globe] shall have discontinue[d] the use of
the earth station after November 08, 1992.7 Philcomsat referred
to Section 7 of the Agreement, stating as follows:
7. DISCONTINUANCE OF SERVICE
Should [Globe] decide to discontinue with the use of the earth
station after it has been put into operation, a written notice shall
be served to PHILCOMSAT at least sixty (60) days prior to the
expected date of termination. Notwithstanding the non-use of the
earth station, [Globe] shall continue to pay PHILCOMSAT for the
rental of the actual number of T1 circuits in use, but in no case
shall be less than the first two (2) Tl circuits, for the remaining life
of the agreement. However, should PHILCOMSAT make use or sell
the earth station subject to this agreement, the obligation of
[Globe] to pay the rental for the remaining life of the agreement
shall be at such monthly rate as may be agreed upon by the
parties.8
After the US military forces left Subic Naval Base, Philcomsat sent
Globe a letter dated 24 November 1993 demanding payment of its
outstanding obligations under the Agreement amounting to
US$4,910,136.00 plus interest and attorneys fees. However, Globe
refused to heed Philcomsats demand.
On 27 January 1995, Philcomsat filed with the Regional Trial
Court of Makati a Complaint against Globe, praying that the latter
be ordered to pay liquidated damages under the Agreement, with
legal interest, exemplary damages, attorneys fees and costs of suit.
The case was raffled to Branch 59 of said court.
Globe filed an Answer to the Complaint, insisting that it was
constrained to end the Agreement due to the termination of the RP-
US Military Bases Agreement and the non-ratification by the
Senate of the Treaty of Friendship and Cooperation, which events
constituted force majeure under the Agreement. Globe explained
that the occurrence of said events exempted it from paying rentals
for the remaining period of the Agreement.
On 05 January 1999, the trial court rendered its Decision,the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered as follows:
1. 1.Ordering the defendant to pay the plaintiff the amount
of Ninety Two Thousand Two Hundred Thirty Eight US
Dollars (US$92,238.00) or its equivalent in Philippine
Currency (computed at the exchange rate prevailing at
the time of compliance or payment) representing rentals
for the month of December 1992 with interest thereon at
the legal rate of twelve percent (12%) per annum starting
December 1992 until the amount is fully paid;
2. 2.Ordering the defendant to pay the plaintiff the amount
of Three Hundred Thousand (P300,000.00) Pesos as and
for attorneys fees;
3. 3.Ordering the DISMISSAL of defendants counterclaim
for lack of merit; and
4. 4.With costs against the defendant.
SO ORDERED.9
Both parties appealed the trial courts Decision to the Court of
Appeals.
Philcomsat claimed that the trial court erred in ruling that: (1)
the non-ratification by the Senate of the Treaty of Friendship,
Cooperation and Security and its Supplementary Agreements
constitutes force majeure which exempts Globe from complying
with its obligations under the Agreement; (2) Globe is not liable to
pay the rentals for the remainder of the term of the Agreement;
and (3) Globe is not liable to Philcomsat for exemplary damages.
Globe, on the other hand, contended that the RTC erred in
holding it liable for payment of rent of the earth station for
December 1992 and of attorneys fees. It explained that it
terminated Philcomsats services on 08 November 1992; hence, it
had no reason to pay for rentals beyond that date.
On 27 February 2001, the Court of Appeals promulgated
its Decision dismissing Philcomsats appeal for lack of merit and
affirming the trial courts finding that certain events
constituting force majeure under Section 8 the Agreement occurred
and justified the non-payment by Globe of rentals for the
remainder of the term of the Agreement. The appellate court ruled
that the non-ratification by the Senate of the Treaty of Friendship,
Cooperation and Security, and its Supplementary Agreements, and
the termination by the Philippine Government of the RP-US
Military Bases Agreement effective 31 December 1991 as stated in
the Philippine Governments Note Verbale to the US Government,
are acts, directions, or requests of the Government of the
Philippines which constitute force majeure. In addition, there were
circumstances beyond the control of the parties, such as the
issuance of a formal order by Cdr. Walter Corliss of the US Navy,
the issuance of the letter notification from ATT and the complete
withdrawal of all US military forces and personnel from Cubi
Point, which prevented further use of the earth station under the
Agreement.
However, the Court of Appeals ruled that although Globe
sought to terminate Philcomsats services by 08 November 1992, it
is still liable to pay rentals for the December 1992, amounting to
US$92,238.00 plus interest, considering that the US military
forces and personnel completely withdrew from Cubi Point only on
31 December 1992.10
Both parties filed their respective Petitions for Review assailing
the Decision of the Court of Appeals.
In G.R. No. 147324,11 petitioner Philcomsat raises the following
assignments of error:
1. A.THE HONORABLE COURT OF APPEALS ERRED IN
ADOPTING A DEFINITION OF FORCE
MAJEURE DIFFERENT FROM WHAT ITS LEGAL
DEFINITION FOUND IN ARTICLE 1174 OF THE
CIVIL CODE, PROVIDES, SO AS TO EXEMPT GLOBE
TELECOM FROM COMPLYING WITH ITS
OBLIGATIONS UNDER THE SUBJECT AGREEMENT.
2. B.THE HONORABLE COURT OF APPEALS ERRED IN
RULING THAT GLOBE TELECOM IS NOT LIABLE TO
PHILCOMSAT FOR RENTALS FOR THE REMAINING
TERM OF THE AGREEMENT, DESPITE THE CLEAR
TENOR OF SECTION 7 OF THE AGREEMENT.
1. C.THE HONORABLE COURT OF APPEALS ERRED IN
DELETING THE TRIAL COURTS AWARD OF
ATTORNEYS FEES IN FAVOR OF PHILCOMSAT.
2. D.THE HONORABLE COURT OF APPEALS ERRED IN
RULING THAT GLOBE TELECOM IS NOT LIABLE TO
PHILCOMSAT FOR EXEMPLARY DAMAGES.12
Philcomsat argues that the termination of the RP-US Military
Bases Agreement cannot be considered a fortuitous event because
the happening thereof was foreseeable. Although the Agreement
was freely entered into by both parties, Section 8 should be deemed
ineffective because it is contrary to Article 1174 of the Civil Code.
Philcomsat posits the view that the validity of the parties
definition of force majeure in Section 8 of the Agreement as
circumstances beyond the control of the party involved including,
but not limited to, any law, order, regulation, direction or request
of the Government of the Philippines, strikes or other labor
difficulties, insurrection riots, national emergencies, war, acts of
public enemies, fire, floods, typhoons or other catastrophies or acts
of God, should be deemed subject to Article 1174 which defines
fortuitous events as events which could not be foreseen, or which,
though foreseen, were inevitable.13
Philcomsat further claims that the Court of Appeals erred in
holding that Globe is not liable to pay for the rental of the earth
station for the entire term of the Agreement because it runs
counter to what was plainly stipulated by the parties in Section 7
thereof. Moreover, said ruling is inconsistent with the appellate
courts pronouncement that Globe is liable to pay rentals for
December 1992 even though it terminated Philcomsats services
effective 08 November 1992, because the US military and
personnel completely withdrew from Cubi Point only in December
1992. Philcomsat points out that it was Globe which proposed the
five-year term of the Agreement, and that the other provisions of
the Agreement, such as Section 4.114 thereof, evince the intent of
Globe to be bound to pay rentals for the entire five-year term.15
Philcomsat also maintains that contrary to the appellate courts
findings, it is entitled to attorneys fees and exemplary damages. 16
In its Comment to Philcomsats Petition, Globe asserts that
Section 8 of the Agreement is not contrary to Article 1174 of the
Civil Code because said provision does not prohibit parties to a
contract from providing for other instances when they would be
exempt from fulfilling their contractual obligations. Globe also
claims that the termination of the RP-US Military Bases
Agreement constitutes force majeure and exempts it from
complying with its obligations under the Agreement.17 On the issue
of the propriety of awarding attorneys fees and exemplary
damages to Philcomsat, Globe maintains that Philcomsat is not
entitled thereto because in refusing to pay rentals for the
remainder of the term of the Agreement, Globe only acted in
accordance with its rights.18
In G.R. No. 147334,19 Globe, the petitioner therein, contends
that the Court of Appeals erred in finding it liable for the amount
of US$92,238.00, representing rentals for December 1992, since
tary Base Agreement, GMCR [now Globe] shall pay PHILCOMSAT
the following rates exclusive of space segment charges:
1. a)First two (2) T-1 circuits at US$ 46,119 per circuit per
month;
2. b)Third and fourth T-1 circuits at US$ 30,333.00 per circuit
per month;
3. c)Extension of the first two (2) T-1 circuits in (a) above,
starting on the 61st month, at US$ 40,406.00 per circuit
per month;
4. d)Extension of the third and fourth circuits in (b) above,
starting on the 61st month, at US$ 22,200.00 per circuit
per month;
The above-mentioned monthly lease of circuits become due and
payable within fifteen (15) days from service establishment date or
availment of the service whichever comes earlier and within the
fifteenth day of each month thereafter. Philcomsats services were
actually terminated on 08 November 1992.20
In its Comment, Philcomsat claims that Globes petition should
be dismissed as it raises a factual issue which is not cognizable by
the Court in a petition for review on certiorari.21
On 15 August 2001, the Court issued a Resolution giving due
course to Philcomsats Petition in G.R. No. 147324 and required
the parties to submit their respective memoranda.22
Similarly, on 20 August 2001, the Court issued
a Resolution giving due course to the Petition filed by Globe in G.R.
No. 147334 and required both parties to submit their
memoranda.23
Philcomsat and Globe thereafter filed their
respective Consolidated Memoranda in the two cases, reiterating
their arguments in their respective petitions.
The Court is tasked to resolve the following issues: (1) whether
the termination of the RP-US Military Bases Agreement, the
nonratification of the Treaty of Friendship, Cooperation and
Security, and the consequent withdrawal of US military forces and
personnel from Cubi Point constitute force majeure which would
exempt Globe from complying with its obligation to pay rentals
under its Agreement with Philcomsat; (2) whether Globe is liable
to pay rentals under the Agreement for the month of December
1992; and (3) whether Philcomsat is entitled to attorneys fees and
exemplary damages.
No reversible error was committed by the Court of Appeals in
issuing the assailed Decision; hence the petitions are denied.
There is no merit in Philcomsats argument that Section 8 of
the Agreement cannot be given effect because the enumeration of
events constituting force majeure therein unduly expands the
concept of a fortuitous event under Article 1174 of the Civil Code
and is therefore invalid.
In support of its position, Philcomsat contends that under
Article 1174 of the Civil Code, an event must be unforeseen in order
to exempt a party to a contract from complying with its obligations
therein. It insists that since the expiration of the RP-US Military
Bases Agreement, the non-ratification of the Treaty of Friendship,
Cooperation and Security and the withdrawal of US military forces
and personnel from Cubi Point were not unforeseeable, but were
possibilities known to it and Globe at the time they entered into
the Agreement, such events cannot exempt Globe from performing
its obligation of paying rentals for the entire five-year term thereof.
However, Article 1174, which exempts an obligor from liability
on account of fortuitous events or force majeure, refers not only to
events that are unforeseeable, but also to those which are
foreseeable, but inevitable:
Art. 1174. Except in cases specified by the law, or when it is
otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be
responsible for those events which, could not be foreseen, or which,
though foreseen were inevitable.
A fortuitous event under Article 1174 may either be an act of God,
or natural occurrences such as floods or typhoons, 24 or an act of
man, such as riots, strikes or wars.25
Philcomsat and Globe agreed in Section 8 of the Agreement that
the following events shall be deemed events constituting force
majeure:
1. 1.Any law, order, regulation, direction or request of the
Philippine Government;
2. 2.Strikes or other labor difficulties;
3. 3.Insurrection;
4. 4.Riots;
5. 5.National emergencies;
6. 6.War;
7. 7.Acts of public enemies;
8. 8.Fire, floods, typhoons or other catastrophies or acts of
God;
9. 9.Other circumstances beyond the control of the parties.
Clearly, the foregoing are either unforeseeable, or foreseeable but
beyond the control of the parties. There is nothing in the
enumeration that runs contrary to, or expands, the concept of a
fortuitous event under Article 1174.
Furthermore, under Article 130626 of the Civil Code, parties to
a contract may establish such stipulations, clauses, terms and
conditions as they may deem fit, as long as the same do not run
counter to the law, morals, good customs, public order or public
policy.27
Article 1159 of the Civil Code also provides that [o]bligations
arising from contracts have the force of law between the
contracting parties and should be complied with in good
faith.28 Courts cannot stipulate for the parties nor amend their
agreement where the same does not contravene law, morals, good
customs, public order or public policy, for to do so would be to alter
the real intent of the parties, and would run contrary to the
function of the courts to give force and effect thereto.29
Not being contrary to law, morals, good customs, public order,
or public policy, Section 8 of the Agreement which Philcomsat and
Globe freely agreed upon has the force of law between them. 30
In order that Globe may be exempt from non-compliance with
its obligation to pay rentals under Section 8, the concurrence of the
following elements must be established: (1) the event must be
independent of the human will; (2) the occurrence must render it
impossible for the debtor to fulfill the obligation in a normal
manner; and (3) the obligor must be free of participation in, or
aggravation of, the injury to the creditor.31
The Court agrees with the Court of Appeals and the trial court
that the abovementioned requisites are present in the instant case.
Philcomsat and Globe had no control over the non-renewal of the
term of the RP-US Military Bases Agreement when the same
expired in 1991, because the prerogative to ratify the treaty
extending the life thereof belonged to the Senate. Neither did the
parties have control over the subsequent withdrawal of the US
military forces and personnel from Cubi Point in December 1992:
Obviously the non-ratification by the Senate of the RP-US Military
Bases Agreement (and its Supplemental Agreements) under its
Resolution No. 141. (Exhibit 2) on September 16, 1991 is beyond
the control of the parties. This resolution was followed by the
sending on December 31, 1991 o[f] a Note Verbale(Exhibit 3) by
the Philippine Government to the US Government notifying the
latter of the formers termination of the RP-US Military Bases
Agreement (as amended) on 31 December 1992 and that
accordingly, the withdrawal of all U.S. military forces from Subic
Naval Base should be completed by said date. Subsequently,
defendant [Globe] received a formal order from Cdr. Walter F.
Corliss II Commander USN dated July 31, 1992 and a notification
from ATT dated July 29, 1992 to terminate the provision of T1s
services (via an IBS Standard B Earth Station) effective November
08, 1992. Plaintiff [Philcomsat] was furnished with copies of the
said order and letter by the defendant on August 06, 1992.
Resolution No. 141 of the Philippine Senate and the Note
Verbale of the Philippine Government to the US Government are
acts, direction or request of the Government of the Philippines and
circumstances beyond the control of the defendant. The formal
order from Cdr. Walter Corliss of the USN, the letter notification
from ATT and the complete withdrawal of all the military forces
and personnel from Cubi Point in the year-end 1992 are also acts
and circumstances beyond the control of the defendant.
Considering the foregoing, the Court finds and so holds that the
afore-narrated circumstances constitute force majeure or
fortuitous event(s) as defined under paragraph 8 of the Agreement.
...
From the foregoing, the Court finds that the defendant is
exempted from paying the rentals for the facility for the remaining
term of the contract.
As a consequence of the termination of the RP-US Military
Bases Agreement (as amended) the continued stay of all US
Military forces and personnel from Subic Naval Base would no
longer be allowed, hence, plaintiff would no longer be in any
position to render the service it was obligated under the
Agreement. To put it blantly (sic), since the US military forces and
personnel left or withdrew from Cubi Point in the year end
December 1992, there was no longer any necessity for the plaintiff
to continue maintaining the IBS facility. . . .32(Emphasis in the
original.)
The aforementioned events made impossible the continuation of
the Agreement until the end of its five-year term without fault on
the part of either party. The Court of Appeals was thus correct in
ruling that the happening of such fortuitous events rendered Globe
exempt from payment of rentals for the remainder of the term of
the Agreement.
Moreover, it would be unjust to require Globe to continue
paying rentals even though Philcomsat cannot be compelled to
perform its corresponding obligation under the Agreement. As
noted by the appellate court:
We also point out the sheer inequity of PHILCOMSATs position.
PHILCOMSAT would like to charge GLOBE rentals for the
balance of the lease term without there being any corresponding
telecommunications service subject of the lease. It will be grossly
unfair and iniquitous to hold GLOBE liable for lease charges for a
service that was not and could not have been rendered due to an
act of the government which was clearly beyond GLOBEs control.
The binding effect of a contract on both parties is based on the
principle that the obligations arising from contracts have the force
of law between the contracting parties, and there must be
mutuality between them based essentially on their equality under
which it is repugnant to have one party bound by the contract while
leaving the other party free therefrom (Allied Banking Corporation
v. Court of Appeals, 284 SCRA 357). . . .33
With respect to the issue of whether Globe is liable for payment of
rentals for the month of December 1992, the Court likewise affirms
the appellate courts ruling that Globe should pay the same.
Although Globe alleged that it terminated the Agreement with
Philcomsat effective 08 November 1992 pursuant to the formal
order issued by Cdr. Corliss of the US Navy, the date when they
actually ceased using the earth station subject of the Agreement
was not established during the trial.34 However, the trial court
found that the US military forces and personnel completely
withdrew from Cubi Point only on 31 December 1992.35 Thus, until
that date, the USDCA had control over the earth station and had
the option of using the same. Furthermore, Philcomsat could not
have removed or rendered ineffective said communication facility
until after 31 December 1992 because Cubi Point was accessible
only to US naval personnel up to that time. Hence, the Court of
Appeals did not err when it affirmed the trial courts ruling that
Globe is liable for payment of rentals until December 1992.
Neither did the appellate court commit any error in holding
that Philcomsat is not entitled to attorneys fees and exemplary
damages.
The award of attorneys fees is the exception rather than the
rule, and must be supported by factual, legal and equitable
justifications.36 In previously decided cases, the Court awarded
attorneys fees where a party acted in gross and evident bad faith
in refusing to satisfy the other partys claims and compelled the
former to litigate to protect his rights;37 when the action filed is
clearly unfounded,38 or where moral or exemplary damages are
awarded.39 However, in cases where both parties have legitimate
claims against each other and no party actually prevailed, such as
in the present case where the claims of both parties were sustained
in part, an award of attorneys fees would not be warranted. 40
Exemplary damages may be awarded in cases involving
contracts or quasi-contracts, if the erring party acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. 41 In the
present case, it was not shown that Globe acted wantonly or
oppressively in not heeding Philcomsats demands for payment of
rentals. It was established during the trial of the case before the VOL. 262, SEPTEMBER 20, 1996 245
trial court that Globe had valid grounds for refusing to comply with
Development Bank of the Philippines vs. Court of Appeals
its contractual obligations after 1992.
WHEREFORE, the Petitions are DENIED for lack of merit. G.R. No. 118180. September 20, 1996.*
The assailed Decision of the Court of Appeals in CA-G.R. CV No. DEVELOPMENT BANK OF THE PHILIPPINES,
63619 is AFFIRMED. petitioner, vs. COURT OF APPEALS, Sps. NORMY D. CARPIO
SO ORDERED. and CARMEN ORQUISA; Sps. ROLANDO D. CARPIO and
Quisumbing (Actg. Chairman), Austria- RAFAELA VILLANUEVA; Sps. ELISEO D. CARPIO and
Martinez and Callejo, Sr., JJ., concur. ANUNCIACION del ROSARIO; LUZ C. REYES, MARIO C.
Puno (Chairman), J., On Official Leave. REYES, JULIET REYES-RUBIN, respondents.

Petition denied, assailed decision affirmed. Contracts; Obligations; In conditional obligations, the
acquisition of rights and the extinguishment or loss of those already
acquired depend upon the happening of the event which constitutes
the condition.In conditional obligations, the acquisition of
rights, as well as the extinguishment or loss of those already
acquired, shall depend upon the happening of the event which
constitutes the condition.
Same; Same; Agrarian Reform; Constitutional Law; Non-
Impairment Clause; Neither Sec. 6 of the Comprehensive Agrarian
Reform Law (R.A. 6657) nor Sec. 1 of E.O. 407 was intended to
impair the obligation of contracts earlier concluded.We reject
petitioners contention as we ruleas the trial court and CA have
correctly ruledthat neither Sec. 6 of Rep. Act 6657 nor Sec. 1 of
E.O. 407 was intended to impair the obligation of contract
petitioner had much earlier concluded with private respondents.
Same; Same; Same; Same; Same; Due Process; Statutory
Construction; The CARL and E.O. 407 were not intended to take
away property without due process of law nor were they intended to
impair the obligation of contracts; Laws cannot have retroactive
effect unless there is an express provision in them to that effect.
The CARL (Rep. Act 6657) was not intended to take away property
without due process of law. Nor is it intended to impair the
obligation of contracts. In the same manner must E.O. 407 be
regarded. It was enacted two (2) months after private respondents
had legally fulfilled the condition in the contract of conditional sale
by the payment of all installments on their due dates. These laws
cannot have retroactive effect unless there is an express provision
in them to that effect.
Attorneys Fees; While judicial discretion in the award of
attorneys fees is not entirely left out, the same, as a rule, must have
a factual, legal or equitable justificationthe matter cannot and
should not be left to speculation and conjecture.The award of
attorneys fees under Article 2208 of the Civil Code is more of an
exception to the general rule that it is not sound policy to place a
penalty on the right to litigate. While judicial discretion in the
award of attorneys fees is not entirely left out, the same, as a rule,
must have a factual, legal or equitable justification. The matter
cannot and should not be left to speculation and conjecture.
Same; The matter of attorneys fees cannot be touched once and
only in the dispositive portion of the decisionthe text itself must
expressly state the reason why attorneys fees are being awarded.
As aptly stated in the Mirasol case: x x x The matter of attorneys
fees cannot be touched once and only in the dispositive portion of
the decision. The text itself must expressly state the reason why
attorneys fees are being awarded. The court, after reading through
the text of the appealed decision, finds the same bereft of any
findings of fact and law to justify the award of attorneys fees. The
matter of such fees was touched but once and appears only in the
dispositive portion of the decision. Simply put, the text of the
decision did not state the reason why attorneys fees are being
awarded, and for this reason, the Court finds it necessary to
disallow the same for being conjectural.
Same; Egregious error in the interpretation of a provision of a
law is not equivalent to gross and evident bad faith.While DBP
committed egregious error in interpreting Sec. 6 of RA 6657, the
same is not equivalent to gross and evident bad faith when it
refused to execute the deed of sale in favor of private respondents.
PETITION for review on certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
Office of the Legal Counsel for petitioner.
Restituto G. Cudiamat for private respondent.
PADILLA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court which seeks to set aside the decision1 of the Court of
Appeals (CA) dated 28 February 1994 in CA-G.R. CV No. 37158, as
well as the resolution dated 11 August 1994 denying petitioners
motion for reconsideration.
The facts are undisputed:
Private respondents were the original owners of a parcel of
agricultural land covered by TCT No. T-1432, situated in Barrio
Capucao, Ozamis City, with an area of 113,695 square meters,
more or less.
1Entitled Spouses Normy D. Carpio and Carmen Orquisa vs.
Development Bank of the Philippines penned by Justice Antonio
M. Martinez concurred in by Justices Cancio C. Garcia and Ramon
Mabutas, Jr.
On 30 May 1977, private respondents mortgaged said land to
petitioner. When private respondents defaulted on their obligation,
petitioner foreclosed the mortgage on the land and emerged as sole
bidder in the ensuing auction sale. Consequently, Transfer
Certificate of Title No. T-10913 was eventually issued in
petitioners name.
On 6 April 1984, petitioner and private respondents entered
into a Deed of Conditional Sale wherein petitioner agreed to
reconvey the foreclosed property to private respondents.
The pertinent stipulations of the Deed provided that:
WHEREAS, the VENDOR acquired a parcel of land in an auction
sale by the City Sheriff of Ozamiz City, pursuant to Act 3135, as
amended, and subject to the redemption period pursuant to CA
141, described as follows:
xxx xxx xxx
WHEREAS, the VENDEES offered to repurchase and the
VENDOR agreed to sell the above-described property, subject to
the terms and stipulations as hereinafter stipulated, for the sum of
SEVENTY THREE THOUSAND SEVEN HUNDRED ONLY
(P73,700.00), with a down payment of P8,900.00 and the balance
of P64,800.00 shall be payable in six (6) years on equal quarterly
amortization plan at 18% interest per annum. The first quarterly
amortization of P4,470.36 shall be payable three months from the
date of the execution of the documents and all subsequent
amortization shall be due and payable every quarter thereafter.
xxx xxx xxx
That, upon completion of the payment herein stipulated and
agreed, the Vendor agrees to deliver to the Vendee/s(,) his heirs,
administrators and assigns(,) a good and sufficient deed of
conveyance covering the property, subject matter of this deed of
conditional sale, in accordance with the provisions of law. (Exh.
A, p. 5, Records)2
On 6 April 1990, upon completing the payment of the full
repurchase price, private respondents demanded from petitioner
the execution of a Deed of Conveyance in their favor.
Petitioner then informed private respondents that the
prestation to execute and deliver a deed of conveyance in their
favor had become legally impossible in view of Sec. 6 of Rep. Act
6657 (the Comprehensive Agrarian Reform Law or CARL)
approved 10 June 1988, and Sec. 1 of E.O. 407 issued 10 June 1990.
Aggrieved, private respondents filed a complaint for specific
performance with damages against petitioner before the Regional
Trial Court of Ozamis City, Branch XV. During the pre-trial, the
trial court narrowed down the issue to whether or not Sec. 6 of the
CARL (Rep. Act 6657) had rendered legally impossible compliance
by petitioner with its obligation to execute a deed of conveyance of
the subject land in favor of private respondents. The trial court
ordered both parties to file their separate memorandum and
deemed the case submitted for decision thereafter.
On 30 January 1992, the trial court rendered judgment, the
dispositive part of which reads:
WHEREFORE, judgment is rendered ordering defendant to
execute and deliver unto plaintiffs a deed of final sale of the land
subject of their deed of conditional saleLot 5259-A, to pay
plaintiffs P10,000.00 as nominal damages, P5,000.00 as attorneys
fees, P3,000.00 as litis expenses and costs.3
The trial court held that petitioner interpreted the fourth
paragraph of Sec. 6, Rep. Act 6657 literally in conjunction with Sec.
1 of E.O. 407.
The fourth paragraph of Sec. 6, Rep. Act 6657 states that:
Upon the effectivity of this Act, any sale, disposition, lease,
management contract or transfer of possession of private lands
executed by the original landowner in violation of this act shall be
null and void; Provided, however, that those executed prior to this
act shall be valid only when registered with the Register of Deeds
after the effectivity of this Act. Thereafter, all Registers of Deeds
shall inform the DAR within 320 days of any transaction involving
agricultural lands in excess of five hectares.
while Sec. 1 of E.O. 407 states that:
Sec. 1. All government instrumentalities but not limited to x x x
financial institutions such as the DBP x x x shall immediately
execute deeds of transfer in favor of the Republic of the Philippines
as represented by the Department of Agrarian Reform and
surrender to the latter department all landholdings suitable for
agriculture.
The court a quo noted that Sec. 6 of Rep. Act 6657, taken in its
entirety, is a provision dealing primarily with retention limits in
agricultural land allowed the landowner and his family and that
the fourth paragraph, which nullifies any sale x x x by
the original landowner in violation of the Act, does not cover the
sale by petitioner (not the original land owner) to private
respondents.
On the other hand, according to the trial court, E.O. 407 took
effect on 10 June 1990. But private respondents completed
payment of the price for the property, object of the conditional sale,
as early as 6 April 1990. Hence, with the fulfillment of the condition
for the sale, the land covered thereby, was detached from the mass
of foreclosed properties held by DBP, and, therefore, fell beyond the
ambit or reach of E.O. 407.
Dissatisfied, petitioner appealed to the Court of Appeals (CA),
still insisting that its obligation to execute a Deed of Sale in favor
of private respondents had become a legal impossibility and that
the non-impairment clause of the Constitution must yield to the
demands of police power.
On 28 February 1994, the CA rendered judgment dismissing
petitioners appeal on the basis of the following disquisitions:
It is a rule that if the obligation depends upon a suspensive
condition, the demandability as well as the acquisition or
effectivity of the rights arising from the obligation is suspended
pending the happening or fulfillment of the fact or event which
constitutes the condition. Once the event which constitutes the
condition is fulfilled resulting in the effectivity of the obligation, its
effects retroact to the moment when the essential elements which
gave birth to the obligation have taken place (8 Manresa, 5th Ed.
Bk. 1, pa. 33). Applying this precept to the case, the full payment
by the appellee on April 6, 1990 retroacts to the time the contract
of conditional sale was executed on April 6, 1984. From that time,
all elements of the contract of sale were present. Consequently, the
contract of sale was perfected. As such, the said sale does not come
under the coverage of R.A. 6657.
It is likewise interesting to note that despite the mandate of
Sec. 1, R.A. 6657, appellant continued to accept the payments made
by the appellee until it was fully paid on April 6, 1990. All that the
appellant has to do now is to execute the final deed of sale in favor
of the appellee. To follow the line of argument of the appellant
would only result in an unconscionable injury to the appellee.
Obligations arising from contracts have the force of law between
the contracting parties and should be complied with in good faith
(Flavio Macasaet & Associate, Inc. vs. Commission on Audit, 173
SCRA 352).
Going now to E.O. 407, We hold that the same can neither affect
appellants obligation under the deed of conditional sale. Under the
said law, appellant is required to transfer to the Republic of the
Philippines all lands foreclosed effective June 10, 1990. Under the
facts obtaining, the subject property has ceased to belong to the
mass of foreclosed property falling within the reach of said law. As
earlier explained, the property has already been sold to herein
appellees even before the said E.O. has been enacted. On this same
reason, We therefore need not delve on the applicability of DBP
Circular No. 11.4
In the present petition for review on certiorari, petitioner still
insists on its position that Rep. Act 6657, E.O. 407 and DBP
Circular No. 11 rendered its obligation to execute a Deed of Sale to
private respondents a legal impossibility.5 Petitioner also
questions the award of attorneys fees, nominal damages, and costs
in favor of private respondents, as not in accord with law and the
evidence.6
We rule in favor of private respondents.
In conditional obligations, the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall depend
upon the happening of the event which constitutes the condition. 7
The deed of conditional sale between petitioner and private
respondents was executed on 6 April 1984. Private respondents
had religiously paid the agreed installments on the property until
they completed payment on 6 April 1990. Petitioner, in
fact, allowed private respondents to fulfill the condition of effecting
full payment, and invoked Section 6 of Rep. Act 6657
only after private respondents, having fully paid the repurchase
price, demanded the execution of a Deed of Sale in their favor.
It will be noted that Rep. Act 6657 was enacted on 10 June 1988.
Following petitioners argument in this case, its prestation to
execute the deed of sale was rendered legally impossible by Section
6 of said law. In other words, the deed of conditional sale was
extinguished by a supervening event, giving rise to an impossibility
of performance.
We reject petitioners contention as we ruleas the trial court
and CA have correctly ruledthat neither Sec. 6 of Rep. Act 6657
nor Sec. 1 of E.O. 407 was intended to impair the obligation of
contract petitioner had much earlier concluded with private
respondents.
More specifically, petitioner cannot invoke the last paragraph
of Sec. 6 of Rep. Act 6657 to set aside its obligations already
existing prior to its enactment. In the first place, said last
paragraph clearly deals with any sale, lease, management
contract or transfer or possession of private lands executed by
the original landowner. The original owner in this case is not the
petitioner but the private respondents. Petitioner acquired the
land through foreclosure proceedings but agreed thereafter to
reconvey it to private respondents, albeit conditionally.
As earlier stated, Sec. 6 of Rep. Act 6657 in its entirety deals
with retention limits allowed by law to small landowners. Since the
property here involved is more or less ten (10) hectares, it is then
within the jurisdiction of the Department of Agrarian Reform
(CAR) to determine whether or not the property can be subjected
to agrarian reform. But this necessitates an entirely different
proceeding.
The CARL (Rep. Act 6657) was not intended to take away
property without due process of law. Nor is it intended to impair
the obligation of contracts. In the same manner must E.O. 407 be
regarded. It was enacted two (2) months after private respondents
had legally fulfilled the condition in the contract of conditional sale
by the payment of all installments on their due dates. These laws
cannot have retroactive effect unless there is an express provision
in them to that effect.8
As to petitioners contention, however, that the CA erred in
affirming the trial courts decision awarding nominal damages, and
attorneys fees to private respondents, we rule in favor of
petitioner.
It appears that the core issue in this case, being a pure question
of law, did not reach the trial stage as the case was submitted for
decision after pre-trial.
The award of attorneys fees under Article 2208 of the Civil
Code is more of an exception to the general rule that it is not sound
policy to place a penalty on the right to litigate. While judicial
discretion in the award of attorneys fees is not entirely left out, the
same, as a rule, must have a factual, legal or equitable justification.
The matter cannot and should not be left to speculation and
conjecture.9 As aptly stated in the Mirasol case:
x x x The matter of attorneys fees cannot be touched once and only
in the dispositive portion of the decision. The text itself must
expressly state the reason why attorneys fees are being awarded.
The court, after reading through the text of the appealed decision,
finds the same bereft of any findings of fact and law to justify the
award of attorneys fees. The matter of such fees was touched but
once and appears only in the dispositive portion of the decision.
Simply put, the text of the decision did not state the reason why
attorneys fees are being awarded, and for this reason, the Court
finds it necessary to disallow the same for being conjectural.10
While DBP committed egregious error in interpreting Sec. 6 of RA
6657, the same is not equivalent to gross and evident bad faith
when it refused to execute the deed of sale in favor of private
respondents.
For the same reasons stated above, the award of nominal
damages in the amount of P10,000.00 should also be deleted. The
amount of P3,000.00 as litigation expenses and costs against
petitioner must remain.
WHEREFORE, premises considered, the petition is hereby
DENIED, and the decision of the CA is hereby AFFIRMED, for lack
of any reversible error, with the MODIFICATION that attorneys
fees and nominal damages awarded to private respondents are
hereby DELETED.
SO ORDERED.
 Bellosillo, Vitug, Kapunan and Hermosisima, Jr.,
JJ., concur.

Petition denied, judgment affirmed with modification.

Notes.There is no ambiguity in Section 16(e) of Republic Act
No. 6657 to warrant an expanded construction of the term
deposit. (Land Bank of the Philippines vs. Court of Appeals, 249
SCRA 149 [1995]) The matter of attorneys fees cannot be touched
upon only in the dispositive portion of the decisionthe text itself
must state the reasons why attorneys fees are being awarded.
(Valiant Machinery and Metal Corporation vs. National Labor
Relations Commission,252 SCRA 369 [1996])

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