G.R. No.
206806 June 25, 2014 its answer15 but failed to have its representatives attend the pre-trial hearing. Hence, the trial
ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS, Petitioners,
vs.
DAN T. LIM, doing business under the name and style of QUALITY PAPERS & PLASTIC
PRODUCTS ENTERPRISES, Respondent.
DECISION
LEONEN, J.:
Novation must be stated in clear and unequivocal terms to extinguish an obligation. It cannot be
presumed and may be implied only if the old and new contracts are incompatible on every point.
Before us is a petition for review on certiorari1 assailing the Court of Appeals decision2 in CA-
G.R. CV No. 95709, which stemmed from a complaint3 filed in the Regional Trial Court of
Valenzuela City, Branch 171, for collection of sum of money.
The facts are as follows:
Dan T. Lim works in the business of supplying scrap papers, cartons, and other raw materials,
under the name Quality Paper and Plastic Products, Enterprises, to factories engaged in the
paper mill business.4 From February 2007 to March 2007, he delivered scrap papers worth
7,220,968.31 to Arco Pulp and Paper Company, Inc. (Arco Pulp and Paper) through its Chief
Executive Officer and President, Candida A. Santos.5 The parties allegedly agreed that Arco
Pulp and Paper would either pay Dan T. Lim the value of the raw materials or deliver to him their
finished products of equivalent value.6
Dan T. Lim alleged that when he delivered the raw materials, Arco Pulp and Paper issued a
post-dated check dated April 18, 20077 in the amount of 1,487,766.68 as partial payment, with
the assurance that the check would not bounce.8 When he deposited the check on April 18,
2007, it was dishonored for being drawn against a closed account.9
On the same day, Arco Pulp and Paper and a certain Eric Sy executed a memorandum of
agreement10 where Arco Pulp and Paper bound themselves to deliver their finished products to
Megapack Container Corporation, owned by Eric Sy, for his account. According to the
memorandum, the raw materials would be supplied by Dan T. Lim, through his company, Quality
Paper and Plastic Products. The memorandum of agreement reads as follows:
Per meeting held at ARCO, April 18, 2007, it has been mutually agreed between Mrs. Candida
A. Santos and Mr. Eric Sy that ARCO will deliver 600 tons Test Liner 150/175 GSM, full width 76
inches at the price of 18.50 per kg. to Megapack Container for Mr. Eric Sys account. Schedule
of deliveries are as follows:
....
It has been agreed further that the Local OCC materials to be used for the production of the
above Test Liners will be supplied by Quality Paper & Plastic Products Ent., total of 600 Metric
Tons at 6.50 per kg. (price subject to change per advance notice). Quantity of Local OCC
delivery will be based on the quantity of Test Liner delivered to Megapack Container Corp.
based on the above production schedule.11
On May 5, 2007, Dan T.Lim sent a letter12 to Arco Pulp and Paper demanding payment of the
amount of 7,220,968.31, but no payment was made to him.13
Dan T. Lim filed a complaint14 for collection of sum of money with prayer for attachment with the
Regional Trial Court, Branch 171, Valenzuela City, on May 28, 2007. Arco Pulp and Paper filed
court allowed Dan T. Lim to present his evidence ex parte.16
On September 19, 2008, the trial court rendered a judgment in favor of Arco Pulp and Paper and
dismissed the complaint, holding that when Arco Pulp and Paper and Eric Sy entered into the
memorandum of agreement, novation took place, which extinguished Arco Pulp and Papers
obligation to Dan T. Lim.17
Dan T. Lim appealed18 the judgment with the Court of Appeals. According to him, novation did
not take place since the memorandum of agreement between Arco Pulp and Paper and Eric Sy
was an exclusive and private agreement between them. He argued that if his name was
mentioned in the contract, it was only for supplying the parties their required scrap papers,
where his conformity through a separate contract was indispensable.19
On January 11, 2013, the Court of Appeals20 rendered a decision21 reversing and setting aside
the judgment dated September 19, 2008 and ordering Arco Pulp and Paper to jointly and
severally pay Dan T. Lim the amount of 7,220,968.31 with interest at 12% per annum from the
time of demand; 50,000.00 moral damages; 50,000.00 exemplary damages; and 50,000.00
attorneys fees.22
The appellate court ruled that the facts and circumstances in this case clearly showed the
existence of an alternative obligation.23 It also ruled that Dan T. Lim was entitled to damages
and attorneys fees due to the bad faith exhibited by Arco Pulp and Paper in not honoring its
undertaking.24
Its motion for reconsideration25 having been denied,26 Arco Pulp and Paper and its President
and Chief Executive Officer, Candida A. Santos, bring this petition for review on certiorari.
On one hand, petitioners argue that the execution of the memorandum of agreement constituted
a novation of the original obligation since Eric Sy became the new debtor of respondent. They
also argue that there is no legal basis to hold petitioner Candida A. Santos personally liable for
the transaction that petitioner corporation entered into with respondent. The Court of Appeals,
they allege, also erred in awarding moral and exemplary damages and attorneys fees to
respondent who did not show proof that he was entitled to damages.27
Respondent, on the other hand, argues that the Court of Appeals was correct in ruling that there
was no proper novation in this case. He argues that the Court of Appeals was correct in ordering
the payment of 7,220,968.31 with damages since the debt of petitioners remains unpaid.28 He
also argues that the Court of Appeals was correct in holding petitioners solidarily liable since
petitioner Candida A. Santos was "the prime mover for such outstanding corporate liability."29 In
their reply, petitioners reiterate that novation took place since there was nothing in the
memorandum of agreement showing that the obligation was alternative. They also argue that
when respondent allowed them to deliver the finished products to Eric Sy, the original obligation
was novated.30
A rejoinder was submitted by respondent, but it was noted without action in view of A.M. No. 99-
2-04-SC dated November 21, 2000.31
The issues to be resolved by this court are as follows:
1. Whether the obligation between the parties was extinguished by novation
2. Whether Candida A. Santos was solidarily liable with Arco Pulp and Paper Co., Inc.
3. Whether moral damages, exemplary damages, and attorneys fees can be awarded
The petition is denied.
The obligation between the
parties was an alternative
obligation
The rule on alternative obligations is governed by Article 1199 of the Civil Code, which states:
Article 1199. A person alternatively bound by different prestations shall completely perform one
of them.
The creditor cannot be compelled to receive part of one and part of the other undertaking.
"In an alternative obligation, there is more than one object, and the fulfillment of one is sufficient,
determined by the choice of the debtor who generally has the right of election."32 The right of
election is extinguished when the party who may exercise that option categorically and
unequivocally makes his or her choice known.33
The choice of the debtor must also be communicated to the creditor who must receive notice of
it since: The object of this notice is to give the creditor . . . opportunity to express his consent, or
to impugn the election made by the debtor, and only after said notice shall the election take legal
effect when consented by the creditor, or if impugned by the latter, when declared proper by a
competent court.34
According to the factual findings of the trial court and the appellate court, the original contract
between the parties was for respondent to deliver scrap papers worth 7,220,968.31 to
petitioner Arco Pulp and Paper. The payment for this delivery became petitioner Arco Pulp and
Papers obligation. By agreement, petitioner Arco Pulp and Paper, as the debtor, had the option
to either (1) pay the price or(2) deliver the finished products of equivalent value to respondent.35
The appellate court, therefore, correctly identified the obligation between the parties as an
alternative obligation, whereby petitioner Arco Pulp and Paper, after receiving the raw materials
from respondent, would either pay him the price of the raw materials or, in the alternative, deliver
to him the finished products of equivalent value.
When petitioner Arco Pulp and Paper tendered a check to respondent in partial payment for the
scrap papers, they exercised their option to pay the price. Respondents receipt of the check and
his subsequent act of depositing it constituted his notice of petitioner Arco Pulp and Papers
option to pay.
This choice was also shown by the terms of the memorandum of agreement, which was
executed on the same day. The memorandum declared in clear terms that the delivery of
petitioner Arco Pulp and Papers finished products would be to a third person, thereby
extinguishing the option to deliver the finished products of equivalent value to respondent.
The memorandum of
agreement did not constitute
a novation of the original
contract
The trial court erroneously ruled that the execution of the memorandum of agreement
constituted a novation of the contract between the parties. When petitioner Arco Pulp and Paper
opted instead to deliver the finished products to a third person, it did not novate the original
obligation between the parties.
The rules on novation are outlined in the Civil Code, thus:
Article 1291. Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor. (1203)
Article 1292. In order that an obligation may be extinguished by another which substitute the
same, it is imperative that it be so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other. (1204)
Article 1293. Novation which consists in substituting a new debtor in the place of the original
one, may be made even without the knowledge or against the will of the latter, but not without
the consent of the creditor. Payment by the new debtor gives him the rights mentioned in Articles
1236 and 1237. (1205a)
Novation extinguishes an obligation between two parties when there is a substitution of objects
or debtors or when there is subrogation of the creditor. It occurs only when the new contract
declares so "in unequivocal terms" or that "the old and the new obligations be on every point
incompatible with each other."36
Novation was extensively discussed by this court in Garcia v. Llamas:37
Novation is a mode of extinguishing an obligation by changing its objects or principal obligations,
by substituting a new debtor in place of the old one, or by subrogating a third person to the rights
of the creditor. Article 1293 of the Civil Code defines novation as follows:
"Art. 1293. Novation which consists in substituting a new debtor in the place of the original one,
may be made even without the knowledge or against the will of the latter, but not without the
consent of the creditor. Payment by the new debtor gives him rights mentioned in articles 1236
and 1237."
In general, there are two modes of substituting the person of the debtor: (1) expromision and (2)
delegacion. In expromision, the initiative for the change does not come from and may even be
made without the knowledge of the debtor, since it consists of a third persons assumption of
the obligation. As such, it logically requires the consent of the third person and the creditor. In
delegacion, the debtor offers, and the creditor accepts, a third person who consents to the
substitution and assumes the obligation; thus, the consent of these three persons are necessary.
Both modes of substitution by the debtor require the consent of the creditor.
Novation may also be extinctive or modificatory. It is extinctive when an old obligation is
terminated by the creation of a new one that takes the place of the former. It is merely
modificatory when the old obligation subsists to the extent that it remains compatible with the
amendatory agreement. Whether extinctive or modificatory, novation is made either by changing
the object or the principal conditions, referred to as objective or real novation; or by substituting
the person of the debtor or subrogating a third person to the rights of the creditor, an act known
as subjective or personal novation. For novation to take place, the following requisites must
concur:
1) There must be a previous valid obligation.
2) The parties concerned must agree to a new contract.
3) The old contract must be extinguished.
4) There must be a valid new contract.
Novation may also be express or implied. It is express when the new obligation declares in
unequivocal terms that the old obligation is extinguished. It is implied when the new obligation is
incompatible with the old one on every point. The test of incompatibility is whether the two
obligations can stand together, each one with its own independent existence.38 (Emphasis
supplied)
Because novation requires that it be clear and unequivocal, it is never presumed, thus:
In the civil law setting, novatio is literally construed as to make new. So it is deeply rooted in the
Roman Law jurisprudence, the principle novatio non praesumitur that novation is never
presumed.At bottom, for novation tobe a jural reality, its animus must be ever present, debitum
pro debito basically extinguishing the old obligation for the new one.39 (Emphasis supplied)
There is nothing in the memorandum of agreement that states that with its execution, the
obligation of petitioner Arco Pulp and Paper to respondent would be extinguished. It also does
not state that Eric Sy somehow substituted petitioner Arco Pulp and Paper as respondents
debtor. It merely shows that petitioner Arco Pulp and Paper opted to deliver the finished
products to a third person instead.
The consent of the creditor must also be secured for the novation to be valid:
Novation must be expressly consented to. Moreover, the conflicting intention and acts of the
parties underscore the absence of any express disclosure or circumstances with which to
deduce a clear and unequivocal intent by the parties to novate the old agreement.40 (Emphasis
supplied)
In this case, respondent was not privy to the memorandum of agreement, thus, his conformity to
the contract need not be secured. This is clear from the first line of the memorandum, which
states:
Per meeting held at ARCO, April 18, 2007, it has been mutually agreed between Mrs. Candida
A. Santos and Mr. Eric Sy. . . .41
If the memorandum of agreement was intended to novate the original agreement between the
parties, respondent must have first agreed to the substitution of Eric Sy as his new debtor. The
memorandum of agreement must also state in clear and unequivocal terms that it has replaced
the original obligation of petitioner Arco Pulp and Paper to respondent. Neither of these
circumstances is present in this case.
Petitioner Arco Pulp and Papers act of tendering partial payment to respondent also conflicts
with their alleged intent to pass on their obligation to Eric Sy. When respondent sent his letter of
demand to petitioner Arco Pulp and Paper, and not to Eric Sy, it showed that the former neither
acknowledged nor consented to the latter as his new debtor. These acts, when taken together,
clearly show that novation did not take place. Since there was no novation, petitioner Arco Pulp
and Papers obligation to respondent remains valid and existing. Petitioner Arco Pulp and Paper,
therefore, must still pay respondent the full amount of 7,220,968.31.
Petitioners are liable for
damages
Under Article 2220 of the Civil Code, moral damages may be awarded in case of breach of
contract where the breach is due to fraud or bad faith:
Art. 2220. Willfull injury to property may be a legal ground for awarding moral damages if the
court should find that, under the circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted fraudulently or in bad faith.
(Emphasis supplied)
Moral damages are not awarded as a matter of right but only after the party claiming it proved
that the breach was due to fraud or bad faith. As this court stated:
Moral damages are not recoverable simply because a contract has been breached. They are
recoverable only if the party from whom it is claimed acted fraudulently or in bad faith or in
wanton disregard of his contractual obligations. The breach must be wanton, reckless, malicious
or in bad faith, and oppressive or abusive.42
Further, the following requisites must be proven for the recovery of moral damages:
An award of moral damages would require certain conditions to be met, to wit: (1)first, there
must be an injury, whether physical, mental or psychological, clearly sustained by the claimant;
(2) second, there must be culpable act or omission factually established; (3) third, the wrongful
act or omission of the defendant is the proximate cause of the injury sustained by the claimant;
and (4) fourth, the award of damages is predicated on any of the cases stated in Article 2219 of
the Civil Code.43
Here, the injury suffered by respondent is the loss of 7,220,968.31 from his business. This has
remained unpaid since 2007. This injury undoubtedly was caused by petitioner Arco Pulp and
Papers act of refusing to pay its obligations.
When the obligation became due and demandable, petitioner Arco Pulp and Paper not only
issued an unfunded check but also entered into a contract with a third person in an effort to
evade its liability. This proves the third requirement.
As to the fourth requisite, Article 2219 of the Civil Code provides that moral damages may be
awarded in the following instances:
Article 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
Breaches of contract done in bad faith, however, are not specified within this enumeration. When
a party breaches a contract, he or she goes against Article 19 of the Civil Code, which states:
Article 19. Every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith.
Persons who have the right to enter into contractual relations must exercise that right with
honesty and good faith. Failure to do so results in an abuse of that right, which may become the
basis of an action for damages. Article 19, however, cannot be its sole basis:
Article 19 is the general rule which governs the conduct of human relations. By itself, it is not the
basis of an actionable tort. Article 19 describes the degree of care required so that an actionable
tort may arise when it is alleged together with Article 20 or Article 21.44
Article 20 and 21 of the Civil Code are as follows:
Article 20. Every person who, contrary to law, wilfully or negligently causes damage to another,
shall indemnify the latter for the same.
Article 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.
To be actionable, Article 20 requires a violation of law, while Article 21 only concerns with lawful
acts that are contrary to morals, good customs, and public policy:
Article 20 concerns violations of existing law as basis for an injury. It allows recovery should the
act have been willful or negligent. Willful may refer to the intention to do the act and the desire to
achieve the outcome which is considered by the plaintiff in tort action as injurious. Negligence
may refer to a situation where the act was consciously done but without intending the result
which the plaintiff considers as injurious.
Article 21, on the other hand, concerns injuries that may be caused by acts which are not
necessarily proscribed by law. This article requires that the act be willful, that is, that there was
an intention to do the act and a desire to achieve the outcome. In cases under Article 21, the
legal issues revolve around whether such outcome should be considered a legal injury on the
part of the plaintiff or whether the commission of the act was done in violation of the standards of
care required in Article 19.45
When parties act in bad faith and do not faithfully comply with their obligations under contract,
they run the risk of violating Article 1159 of the Civil Code:
Article 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.
Article 2219, therefore, is not an exhaustive list of the instances where moral damages may be
recovered since it only specifies, among others, Article 21. When a party reneges on his or her
obligations arising from contracts in bad faith, the act is not only contrary to morals, good
customs, and public policy; it is also a violation of Article 1159. Breaches of contract become the
basis of moral damages, not only under Article 2220, but also under Articles 19 and 20 in
relation to Article 1159.
Moral damages, however, are not recoverable on the mere breach of the contract. Article 2220
requires that the breach be done fraudulently or in bad faith. In Adriano v. Lasala:46
To recover moral damages in an action for breach of contract, the breach must be palpably
wanton, reckless and malicious, in bad faith, oppressive, or abusive. Hence, the person claiming
bad faith must prove its existence by clear and convincing evidence for the law always presumes
good faith.
Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or
some moral obliquity and conscious doing of a wrong, a breach of known duty through some
motive or interest or ill will that partakes of the nature of fraud. It is, therefore, a question of
intention, which can be inferred from ones conduct and/or contemporaneous statements.47
(Emphasis supplied)
Since a finding of bad faith is generally premised on the intent of the doer, it requires an
examination of the circumstances in each case.
When petitioner Arco Pulp and Paper issued a check in partial payment of its obligation to
respondent, it was presumably with the knowledge that it was being drawn against a closed
account. Worse, it attempted to shift their obligations to a third person without the consent of
respondent.
Petitioner Arco Pulp and Papers actions clearly show "a dishonest purpose or some moral
obliquity and conscious doing of a wrong, a breach of known duty through some motive or
interest or ill will that partakes of the nature of fraud."48 Moral damages may, therefore, be
awarded.
Exemplary damages may also be awarded. Under the Civil Code, exemplary damages are due
in the following circumstances:
Article 2232. In contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
Article 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide
whether or not they should be adjudicated.
Article 2234. While the amount of the exemplary damages need not be proven, 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 Tankeh v. Development Bank of the Philippines,49 we stated that:
The purpose of exemplary damages is to serve as a deterrent to future and subsequent parties
from the commission of a similar offense. The case of People v. Ranteciting People v. Dalisay
held that:
Also known as punitive or vindictive damages, exemplary or corrective damages are intended
to serve as a deterrent to serious wrong doings, and as a vindication of undue sufferings and
wanton invasion of the rights of an injured or a punishment for those guilty of outrageous
conduct. These terms are generally, but not always, used interchangeably. In common law,
there is preference in the use of exemplary damages when the award is to account for injury to
feelings and for the sense of indignity and humiliation suffered by a person as a result of an
injury that has been maliciously and wantonly inflicted, the theory being that there should be
compensation for the hurt caused by the highly reprehensible conduct of the defendant
associated with such circumstances as willfulness, wantonness, malice, gross negligence or
recklessness, oppression, insult or fraud or gross fraudthat intensifies the injury. The terms
punitive or vindictive damages are often used to refer to those species of damages that may be
awarded against a person to punish him for his outrageous conduct. In either case, these
damages are intended in good measure to deter the wrongdoer and others like him from similar
conduct in the future.50 (Emphasis supplied; citations omitted)
The requisites for the award of exemplary damages are as follows:
(1) they may be imposed by way of example in addition to compensatory damages, and only
after the claimant's right to them has been established;
(2) that they cannot be recovered as a matter of right, their determination depending upon the
amount of compensatory damages that may be awarded to the claimant; and
(3) the act must be accompanied by bad faith or done in a wanton, fraudulent, oppressive or
malevolent manner.51
Business owners must always be forthright in their dealings. They cannot be allowed to renege
on their obligations, considering that these obligations were freely entered into by them.
Exemplary damages may also be awarded in this case to serve as a deterrent to those who use
fraudulent means to evade their liabilities.
Since the award of exemplary damages is proper, attorneys fees and cost of the suit may also
be recovered.
Article 2208 of the Civil Code states:
Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded[.]
Petitioner Candida A. Santos
is solidarily liable with
petitioner corporation
Petitioners argue that the finding of solidary liability was erroneous since no evidence was
adduced to prove that the transaction was also a personal undertaking of petitioner Santos. We
disagree.
In Heirs of Fe Tan Uy v. International Exchange Bank,52 we stated that:
Basic is the rule in corporation law that a corporation is a juridical entity which is vested with a
legal personality separate and distinct from those acting for and in its behalf and, in general,
from the people comprising it. Following this principle, obligations incurred by the corporation,
acting through its directors, officers and employees, are its sole liabilities. A director, officer or
employee of a corporation is generally not held personally liable for obligations incurred by the
corporation. Nevertheless, this legal fiction may be disregarded if it is used as a means to
perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, or to confuse legitimate issues.
....
Before a director or officer of a corporation can be held personally liable for corporate
obligations, however, the following requisites must concur: (1) the complainant must allege in the
complaint that the director or officer assented to patently unlawful acts of the corporation, or that
the officer was guilty of gross negligence or bad faith; and (2) the complainant must clearly and
convincingly prove such unlawful acts, negligence or bad faith.
While it is true that the determination of the existence of any of the circumstances that would
warrant the piercing of the veil of corporate fiction is a question of fact which cannot be the
subject of a petition for review on certiorari under Rule 45, this Court can take cognizance of
factual issues if the findings of the lower court are not supported by the evidence on record or
are based on a misapprehension of facts.53 (Emphasis supplied)
As a general rule, directors, officers, or employees of a corporation cannot be held personally
liable for obligations incurred by the corporation. However, this veil of corporate fiction may be
pierced if complainant is able to prove, as in this case, that (1) the officer is guilty of negligence
or bad faith, and (2) such negligence or bad faith was clearly and convincingly proven.
Here, petitioner Santos entered into a contract with respondent in her capacity as the President
and Chief Executive Officer of Arco Pulp and Paper. She also issued the check in partial
payment of petitioner corporations obligations to respondent on behalf of petitioner Arco Pulp
and Paper. This is clear on the face of the check bearing the account name, "Arco Pulp & Paper,
Co., Inc."54 Any obligation arising from these acts would not, ordinarily, be petitioner Santos
personal undertaking for which she would be solidarily liable with petitioner Arco Pulp and
Paper.
We find, however, that the corporate veil must be pierced. In Livesey v. Binswanger
Philippines:55
Piercing the veil of corporate fiction is an equitable doctrine developed to address situations
where the separate corporate personality of a corporation is abused or used for wrongful
purposes. Under the doctrine, the corporate existence may be disregarded where the entity is
formed or used for non-legitimate purposes, such as to evade a just and due obligation, or to
justify a wrong, to shield or perpetrate fraud or to carry out similar or inequitable considerations,
other unjustifiable aims or intentions, in which case, the fiction will be disregarded and the
individuals composing it and the two corporations will be treated as identical.56 (Emphasis
supplied)
According to the Court of Appeals, petitioner Santos was solidarily liable with petitioner Arco
Pulp and Paper, stating that:
In the present case, We find bad faith on the part of the [petitioners] when they unjustifiably
refused to honor their undertaking in favor of the [respondent]. After the check in the amount of
1,487,766.68 issued by [petitioner] Santos was dishonored for being drawn against a closed
account, [petitioner] corporation denied any privity with [respondent]. These acts prompted the
[respondent] to avail of the remedies provided by law in order to protect his rights.57
We agree with the Court of Appeals. Petitioner Santos cannot be allowed to hide behind the
corporate veil.1wphi1 When petitioner Arco Pulp and Papers obligation to respondent became
due and demandable, she not only issued an unfunded check but also contracted with a third
party in an effort to shift petitioner Arco Pulp and Papers liability. She unjustifiably refused to
honor petitioner corporations obligations to respondent. These acts clearly amount to bad faith.
In this instance, the corporate veil may be pierced, and petitioner Santos may be held solidarily
liable with petitioner Arco Pulp and Paper.
The rate of interest due on
the obligation must be
reduced in view of Nacar v.
Gallery Frames58
In view, however, of the promulgation by this court of the decision dated August 13, 2013 in
Nacar v. Gallery Frames,59 the rate of interest due on the obligation must be modified from 12%
per annum to 6% per annum from the time of demand.
Nacar effectively amended the guidelines stated in Eastern Shipping v. Court of Appeals,60 and
we have laid down the following guidelines with regard to the rate of legal interest:
To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping
Linesare accordingly modified to embody BSP-MB Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under
Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable
damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages,
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
6% per annum from such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1,
2013, shall not be disturbed and shall continue to be implemented applying the rate of interest
fixed therein.61 (Emphasis supplied; citations omitted.)

According to these guidelines, the interest due on the obligation of 7,220,968.31 should now
be at 6% per annum, computed from May 5, 2007, when respondent sent his letter of demand to
petitioners. This interest shall continue to be due from the finality of this decision until its full
satisfaction.

WHEREFORE, the petition is DENIED in part. The decision in CA-G.R. CV No. 95709 is
AFFIRMED.

Petitioners Arco Pulp & Paper Co., Inc. and Candida A. Santos are hereby ordered solidarily to
pay respondent Dan T. Lim the amount of 7,220,968.31 with interest of 6% per annum at the
time of demand until finality of judgment and its full satisfaction, with moral damages in the
amount of 50,000.00, exemplary damages in the amount of 50,000.00, and attorney's fees in
the amount of 50,000.00.

SO ORDERED.
G.R. No. 81262 August 25, 1989
GLOBE MACKAY CABLE AND RADIO CORP., and HERBERT C. HENDRY, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and RESTITUTO M. TOBIAS, respondents.
Atencia & Arias Law Offices for petitioners.
Romulo C. Felizmena for private respondent.
CORTES, J.:
Private respondent Restituto M. Tobias was employed by petitioner Globe Mackay Cable and
Radio Corporation (GLOBE MACKAY) in a dual capacity as a purchasing agent and
administrative assistant to the engineering operations manager. In 1972, GLOBE MACKAY
discovered fictitious purchases and other fraudulent transactions for which it lost several
thousands of pesos.
According to private respondent it was he who actually discovered the anomalies and reported
them on November 10, 1972 to his immediate superior Eduardo T. Ferraren and to petitioner
Herbert C. Hendry who was then the Executive Vice-President and General Manager of GLOBE
MACKAY.
On November 11, 1972, one day after private respondent Tobias made the report, petitioner
Hendry confronted him by stating that he was the number one suspect, and ordered him to take
a one week forced leave, not to communicate with the office, to leave his table drawers open,
and to leave the office keys.
On November 20, 1972, when private respondent Tobias returned to work after the forced leave,
petitioner Hendry went up to him and called him a "crook" and a "swindler." Tobias was then
ordered to take a lie detector test. He was also instructed to submit specimen of his handwriting,
signature, and initials for examination by the police investigators to determine his complicity in
the anomalies.
On December 6,1972, the Manila police investigators submitted a laboratory crime report (Exh.
"A") clearing private respondent of participation in the anomalies.
Not satisfied with the police report, petitioners hired a private investigator, retired Col. Jose G.
Fernandez, who on December 10, 1972, submitted a report (Exh. "2") finding Tobias guilty. This
report however expressly stated that further investigation was still to be conducted.
Nevertheless, on December 12, 1972, petitioner Hendry issued a memorandum suspending
Tobias from work preparatory to the filing of criminal charges against him.
On December 19,1972, Lt. Dioscoro V. Tagle, Metro Manila Police Chief Document Examiner,
after investigating other documents pertaining to the alleged anomalous transactions, submitted
a second laboratory crime report (Exh. "B") reiterating his previous finding that the handwritings,
signatures, and initials appearing in the checks and other documents involved in the fraudulent
transactions were not those of Tobias. The lie detector tests conducted on Tobias also yielded
negative results.
Notwithstanding the two police reports exculpating Tobias from the anomalies and the fact that
the report of the private investigator, was, by its own terms, not yet complete, petitioners filed
with the City Fiscal of Manila a complaint for estafa through falsification of commercial
documents, later amended to just estafa. Subsequently five other criminal complaints were filed
against Tobias, four of which were for estafa through Falsification of commercial document while
the fifth was for of Article 290 of' the Revised Penal Code (Discovering Secrets Through Seizure
of Correspondence).lwph1.t Two of these complaints were refiled with the Judge Advocate
General's Office, which however, remanded them to the fiscal's office. All of the six criminal
complaints were dismissed by the fiscal. Petitioners appealed four of the fiscal's resolutions
dismissing the criminal complaints with the Secretary of Justice, who, however, affirmed their
dismissal.
In the meantime, on January 17, 1973, Tobias received a notice (Exh. "F") from petitioners that
his employment has been terminated effective December 13, 1972. Whereupon, Tobias filed a
complaint for illegal dismissal. The labor arbiter dismissed the complaint. On appeal, the
National Labor Relations Commission (NLRC) reversed the labor arbiter's decision. However,
the Secretary of Labor, acting on petitioners' appeal from the NLRC ruling, reinstated the labor
arbiter's decision. Tobias appealed the Secretary of Labor's order with the Office of the
President. During the pendency of the appeal with said office, petitioners and private respondent
Tobias entered into a compromise agreement regarding the latter's complaint for illegal
dismissal.
Unemployed, Tobias sought employment with the Republic Telephone Company (RETELCO).
However, petitioner Hendry, without being asked by RETELCO, wrote a letter to the latter stating
that Tobias was dismissed by GLOBE MACKAY due to dishonesty.
Private respondent Tobias filed a civil case for damages anchored on alleged unlawful,
malicious, oppressive, and abusive acts of petitioners. Petitioner Hendry, claiming illness, did not
testify during the hearings. The Regional Trial Court (RTC) of Manila, Branch IX, through Judge
Manuel T. Reyes rendered judgment in favor of private respondent by ordering petitioners to pay
him eighty thousand pesos (P80,000.00) as actual damages, two hundred thousand pesos
(P200,000.00) as moral damages, twenty thousand pesos (P20,000.00) as exemplary damages,
thirty thousand pesos (P30,000.00) as attorney's fees, and costs. Petitioners appealed the RTC
decision to the Court of Appeals. On the other hand, Tobias appealed as to the amount of
damages. However, the Court of Appeals, an a decision dated August 31, 1987 affirmed the
RTC decision in toto. Petitioners' motion for reconsideration having been denied, the instant
petition for review on certiorari was filed.
The main issue in this case is whether or not petitioners are liable for damages to private
respondent.
Petitioners contend that they could not be made liable for damages in the lawful exercise of their
right to dismiss private respondent.
On the other hand, private respondent contends that because of petitioners' abusive manner in
dismissing him as well as for the inhuman treatment he got from them, the Petitioners must
indemnify him for the damage that he had suffered.
One of the more notable innovations of the New Civil Code is the codification of "some basic
principles that are to be observed for the rightful relationship between human beings and for the
stability of the social order." [REPORT ON THE CODE COMMISSION ON THE PROPOSED
CIVIL CODE OF THE PHILIPPINES, p. 39]. The framers of the Code, seeking to remedy the
defect of the old Code which merely stated the effects of the law, but failed to draw out its spirit,
incorporated certain fundamental precepts which were "designed to indicate certain norms that
spring from the fountain of good conscience" and which were also meant to serve as "guides for
human conduct [that] should run as golden threads through society, to the end that law may
approach its supreme ideal, which is the sway and dominance of justice" (Id.) Foremost among
these principles is that pronounced in Article 19 which 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.
This article, known to contain what is commonly referred to as the principle of abuse of rights,
sets certain standards which must be observed not only in the exercise of one's rights but also in
the performance of one's duties. These standards are the following: to act with justice; to give
everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a
primordial limitation on all rights; that in their exercise, the norms of human conduct set forth in
Article 19 must be observed. A right, though by itself legal because recognized or granted by law
as such, may nevertheless become the source of some illegality. When a right is exercised in a
manner which does not conform with the norms enshrined in Article 19 and results in damage to
another, a legal wrong is thereby committed for which the wrongdoer must be held responsible.
But while Article 19 lays down a rule of conduct for the government of human relations and for
the maintenance of social order, it does not provide a remedy for its violation. Generally, an
action for damages under either Article 20 or Article 21 would be proper.
Article 20, which pertains to damage arising from a violation of law, provides that:
Art. 20. Every person who contrary to law, wilfully or negligently causes damage to another, shall
indemnify the latter for the same.
However, in the case at bar, petitioners claim that they did not violate any provision of law since
they were merely exercising their legal right to dismiss private respondent. This does not,
however, leave private respondent with no relief because Article 21 of the Civil Code provides
that:
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.
This article, adopted to remedy the "countless gaps in the statutes, which leave so many victims
of moral wrongs helpless, even though they have actually suffered material and moral injury"
[Id.] should "vouchsafe adequate legal remedy for that untold number of moral wrongs which it is
impossible for human foresight to provide for specifically in the statutes" [Id. it p. 40; See also
PNB v. CA, G.R. No. L-27155, May 18,1978, 83 SCRA 237, 247].
In determining whether or not the principle of abuse of rights may be invoked, there is no rigid
test which can be applied. While the Court has not hesitated to apply Article 19 whether the legal
and factual circumstances called for its application [See for e.g., Velayo v. Shell Co. of the Phil.,
Ltd., 100 Phil. 186 (1956); PNB v. CA, supra; Grand Union Supermarket, Inc. v. Espino, Jr., G.R.
No. L-48250, December 28, 1979, 94 SCRA 953; PAL v. CA, G.R. No. L-46558, July
31,1981,106 SCRA 391; United General Industries, Inc, v. Paler G.R. No. L-30205, March
15,1982,112 SCRA 404; Rubio v. CA, G.R. No. 50911, August 21, 1987, 153 SCRA 183] the
question of whether or not the principle of abuse of rights has been violated resulting in
damages under Article 20 or Article 21 or other applicable provision of law, depends on the
circumstances of each case. And in the instant case, the Court, after examining the record and
considering certain significant circumstances, finds that all petitioners have indeed abused the
right that they invoke, causing damage to private respondent and for which the latter must now
be indemnified.
The trial court made a finding that notwithstanding the fact that it was private respondent Tobias
who reported the possible existence of anomalous transactions, petitioner Hendry "showed
belligerence and told plaintiff (private respondent herein) that he was the number one suspect
and to take a one week vacation leave, not to communicate with the office, to leave his table
drawers open, and to leave his keys to said defendant (petitioner Hendry)" [RTC Decision, p. 2;
Rollo, p. 232]. This, petitioners do not dispute. But regardless of whether or not it was private
respondent Tobias who reported the anomalies to petitioners, the latter's reaction towards the
former upon uncovering the anomalies was less than civil. An employer who harbors suspicions
that an employee has committed dishonesty might be justified in taking the appropriate action
such as ordering an investigation and directing the employee to go on a leave. Firmness and the
resolve to uncover the truth would also be expected from such employer. But the high-handed
treatment accorded Tobias by petitioners was certainly uncalled for. And this reprehensible
attitude of petitioners was to continue when private respondent returned to work on November
20, 1972 after his one week forced leave. Upon reporting for work, Tobias was confronted by
Hendry who said. "Tobby, you are the crook and swindler in this company." Considering that the
first report made by the police investigators was submitted only on December 10, 1972 [See
Exh. A] the statement made by petitioner Hendry was baseless. The imputation of guilt without
basis and the pattern of harassment during the investigations of Tobias transgress the standards
of human conduct set forth in Article 19 of the Civil Code. The Court has already ruled that the
right of the employer to dismiss an employee should not be confused with the manner in which
the right is exercised and the effects flowing therefrom. If the dismissal is done abusively, then
the employer is liable for damages to the employee [Quisaba v. Sta. Ines-Melale Veneer and
Plywood Inc., G.R. No. L-38088, August 30, 1974, 58 SCRA 771; See also Philippine Refining
Co., Inc. v. Garcia, G.R. No. L-21871, September 27,1966, 18 SCRA 107] Under the
circumstances of the instant case, the petitioners clearly failed to exercise in a legitimate manner
their right to dismiss Tobias, giving the latter the right to recover damages under Article 19 in
relation to Article 21 of the Civil Code.
But petitioners were not content with just dismissing Tobias. Several other tortious acts were
committed by petitioners against Tobias after the latter's termination from work. Towards the
latter part of January, 1973, after the filing of the first of six criminal complaints against Tobias,
the latter talked to Hendry to protest the actions taken against him. In response, Hendry cut
short Tobias' protestations by telling him to just confess or else the company would file a
hundred more cases against him until he landed in jail. Hendry added that, "You Filipinos cannot
be trusted." The threat unmasked petitioner's bad faith in the various actions taken against
Tobias. On the other hand, the scornful remark about Filipinos as well as Hendry's earlier
statements about Tobias being a "crook" and "swindler" are clear violations of 'Tobias' personal
dignity [See Article 26, Civil Code].
The next tortious act committed by petitioners was the writing of a letter to RETELCO sometime
in October 1974, stating that Tobias had been dismissed by GLOBE MACKAY due to
dishonesty. Because of the letter, Tobias failed to gain employment with RETELCO and as a
result of which, Tobias remained unemployed for a longer period of time. For this further damage
suffered by Tobias, petitioners must likewise be held liable for damages consistent with Article
2176 of the Civil Code. Petitioners, however, contend that they have a "moral, if not legal, duty
to forewarn other employers of the kind of employee the plaintiff (private respondent herein)
was." [Petition, p. 14; Rollo, p. 15]. Petitioners further claim that "it is the accepted moral and
societal obligation of every man to advise or warn his fellowmen of any threat or danger to the
latter's life, honor or property. And this includes warning one's brethren of the possible dangers
involved in dealing with, or accepting into confidence, a man whose honesty and integrity is
suspect" [Id.]. These arguments, rather than justify petitioners' act, reveal a seeming obsession
to prevent Tobias from getting a job, even after almost two years from the time Tobias was
dismissed.
Finally, there is the matter of the filing by petitioners of six criminal complaints against Tobias.
Petitioners contend that there is no case against them for malicious prosecution and that they
cannot be "penalized for exercising their right and prerogative of seeking justice by filing criminal
complaints against an employee who was their principal suspect in the commission of forgeries
and in the perpetration of anomalous transactions which defrauded them of substantial sums of
money" [Petition, p. 10, Rollo, p. 11].
While sound principles of justice and public policy dictate that persons shall have free resort to
the courts for redress of wrongs and vindication of their rights [Buenaventura v. Sto. Domingo,
103 Phil. 239 (1958)], the right to institute criminal prosecutions can not be exercised maliciously
and in bad faith [Ventura v. Bernabe, G.R. No. L-26760, April 30, 1971, 38 SCRA 5871.] Hence,
in Yutuk V. Manila Electric Co., G.R. No. L-13016, May 31, 1961, 2 SCRA 337, the Court held
that the right to file criminal complaints should not be used as a weapon to force an alleged
debtor to pay an indebtedness. To do so would be a clear perversion of the function of the
criminal processes and of the courts of justice. And in Hawpia CA, G.R. No. L-20047, June 30,
1967. 20 SCRA 536 the Court upheld the judgment against the petitioner for actual and moral
damages and attorney's fees after making a finding that petitioner, with persistence, filed at least
six criminal complaints against respondent, all of which were dismissed.

To constitute malicious prosecution, there must be proof that the prosecution was prompted by a
design to vex and humiliate a person and that it was initiated deliberately by the defendant
knowing that the charges were false and groundless [Manila Gas Corporation v. CA, G.R. No. L-
44190, October 30,1980, 100 SCRA 602]. Concededly, the filing of a suit by itself, does not
render a person liable for malicious prosecution [Inhelder Corporation v. CA, G.R. No. 52358,
May 301983122 SCRA 576]. The mere dismissal by the fiscal of the criminal complaint is not a
ground for an award of damages for malicious prosecution if there is no competent evidence to
show that the complainant had acted in bad faith [Sison v. David, G.R. No. L-11268, January
28,1961, 1 SCRA 60].
In the instant case, however, the trial court made a finding that petitioners acted in bad faith in
filing the criminal complaints against Tobias, observing that:
x x x petitioners have been guilty of committing several actionable tortious acts, i.e., the abusive
Defendants (petitioners herein) filed with the Fiscal's Office of Manila a total of six (6) criminal
cases, five (5) of which were for estafa thru falsification of commercial document and one for
violation of Art. 290 of the Revised Penal Code "discovering secrets thru seizure of
correspondence," and all were dismissed for insufficiency or lack of evidence." The dismissal of
four (4) of the cases was appealed to the Ministry of Justice, but said Ministry invariably
sustained the dismissal of the cases. As above adverted to, two of these cases were refiled with
the Judge Advocate General's Office of the Armed Forces of the Philippines to railroad plaintiffs
arrest and detention in the military stockade, but this was frustrated by a presidential decree
transferring criminal cases involving civilians to the civil courts.
x x x herein).lwph1.t " [Petition, p. 17; Rollo, p. 18].
To be sure, when despite the two (2) police reports embodying the findings of Lt. Dioscoro
Tagle, Chief Document Examiner of the Manila Police Department, clearing plaintiff of
participation or involvement in the fraudulent transactions complained of, despite the negative
results of the lie detector tests which defendants compelled plaintiff to undergo, and although the
police investigation was "still under follow-up and a supplementary report will be submitted after
all the evidence has been gathered," defendants hastily filed six (6) criminal cases with the city
Fiscal's Office of Manila, five (5) for estafa thru falsification of commercial document and one (1)
for violation of Art. 290 of the Revised Penal Code, so much so that as was to be expected, all
six (6) cases were dismissed, with one of the investigating fiscals, Asst. Fiscal de Guia,
commenting in one case that, "Indeed, the haphazard way this case was investigated is evident.
Evident likewise is the flurry and haste in the filing of this case against respondent Tobias," there
can be no mistaking that defendants would not but be motivated by malicious and unlawful intent
to harass, oppress, and cause damage to plaintiff.
x x x the cases mentioned in Article 21 of said Code." Hence, the Court of Appeals committed no
[RTC Decision, pp. 5-6; Rollo, pp. 235-236].
In addition to the observations made by the trial court, the Court finds it significant that the
criminal complaints were filed during the pendency of the illegal dismissal case filed by Tobias
against petitioners. This explains the haste in which the complaints were filed, which the trial
court earlier noted. But petitioners, to prove their good faith, point to the fact that only six
complaints were filed against Tobias when they could have allegedly filed one hundred cases,
considering the number of anomalous transactions committed against GLOBE MACKAY.
However, petitioners' good faith is belied by the threat made by Hendry after the filing of the first
complaint that one hundred more cases would be filed against Tobias. In effect, the possible
filing of one hundred more cases was made to hang like the sword of Damocles over the head of
Tobias. In fine, considering the haste in which the criminal complaints were filed, the fact that
they were filed during the pendency of the illegal dismissal case against petitioners, the threat
made by Hendry, the fact that the cases were filed notwithstanding the two police reports
exculpating Tobias from involvement in the anomalies committed against GLOBE MACKAY,
coupled by the eventual dismissal of all the cases, the Court is led into no other conclusion than
that petitioners were motivated by malicious intent in filing the six criminal complaints against
Tobias.
Petitioners next contend that the award of damages was excessive. In the complaint filed
against petitioners, Tobias prayed for the following: one hundred thousand pesos (P100,000.00)
as actual damages; fifty thousand pesos (P50,000.00) as exemplary damages; eight hundred
thousand pesos (P800,000.00) as moral damages; fifty thousand pesos (P50,000.00) as
attorney's fees; and costs. The trial court, after making a computation of the damages incurred
by Tobias [See RTC Decision, pp. 7-8; Rollo, pp. 154-1551, awarded him the following: eighty
thousand pesos (P80,000.00) as actual damages; two hundred thousand pesos (P200,000.00)
as moral damages; twenty thousand pesos (P20,000.00) as exemplary damages; thirty
thousand pesos (P30,000.00) as attorney's fees; and, costs. It must be underscored that
manner in which they dismissed Tobias from work including the baseless imputation of guilt and
the harassment during the investigations; the defamatory language heaped on Tobias as well as
the scornful remark on Filipinos; the poison letter sent to RETELCO which resulted in Tobias'
loss of possible employment; and, the malicious filing of the criminal complaints. Considering the
extent of the damage wrought on Tobias, the Court finds that, contrary to petitioners' contention,
the amount of damages awarded to Tobias was reasonable under the circumstances.
Yet, petitioners still insist that the award of damages was improper, invoking the principle of
damnum absque injuria. It is argued that "[t]he only probable actual damage that plaintiff (private
respondent herein) could have suffered was a direct result of his having been dismissed from his
employment, which was a valid and legal act of the defendants-appellants (petitioners
According to the principle of damnum absque injuria, damage or loss which does not constitute a
violation of a legal right or amount to a legal wrong is not actionable [Escano v. CA, G.R. No. L-
47207, September 25, 1980, 100 SCRA 197; See also Gilchrist v. Cuddy 29 Phil, 542 (1915);
The Board of Liquidators v. Kalaw, G.R. No. L-18805, August 14, 1967, 20 SCRA 987]. This
principle finds no application in this case. It bears repeating that even granting that petitioners
might have had the right to dismiss Tobias from work, the abusive manner in which that right
was exercised amounted to a legal wrong for which petitioners must now be held liable.
Moreover, the damage incurred by Tobias was not only in connection with the abusive manner in
which he was dismissed but was also the result of several other quasi-delictual acts committed
by petitioners.
Petitioners next question the award of moral damages. However, the Court has already ruled in
Wassmer v. Velez, G.R. No. L-20089, December 26, 1964, 12 SCRA 648, 653, that [p]er
express provision of Article 2219 (10) of the New Civil Code, moral damages are recoverable in
error in awarding moral damages to Tobias.
Lastly, the award of exemplary damages is impugned by petitioners. Although Article 2231 of the
Civil Code provides that "[i]n quasi-delicts, exemplary damages may be granted if the defendant
acted with gross negligence," the Court, in Zulueta v. Pan American World Airways, Inc., G.R.
No. L- 28589, January 8, 1973, 49 SCRA 1, ruled that if gross negligence warrants the award of
exemplary damages, with more reason is its imposition justified when the act performed is
deliberate, malicious and tainted with bad faith. As in the Zulueta case, the nature of the
wrongful acts shown to have been committed by petitioners against Tobias is sufficient basis for
the award of exemplary damages to the latter.
WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals in CA-
G.R. CV No. 09055 is AFFIRMED.
SO ORDERED.

G.R. No. 88694 January 11, 1993
ALBENSON ENTERPRISES CORP., JESSE YAP, AND BENJAMIN MENDIONA, petitioners,
vs.
THE COURT OF APPEALS AND EUGENIO S. BALTAO, respondents.
Puruganan, Chato, Chato & Tan for petitioners.
Lino M. Patajo, Francisco Ma. Chanco, Ananiano Desierto and Segundo Mangohig for private
respondent.
BIDIN, J.:
This petition assails the decision of respondent Court of Appeals in
CA-GR CV No. 14948 entitled "Eugenio S. Baltao, plaintiff-appellee vs. Albenson Enterprises
Corporation, et al, defendants-appellants", which modified the judgment of the Regional Trial
Court of Quezon City, Branch XCVIII in Civil Case No. Q-40920 and ordered petitioner to pay
private respondent, among others, the sum of P500,000.00 as moral damages and attorney's
fees in the amount of P50,000.00.
The facts are not disputed.
In September, October, and November 1980, petitioner Albenson Enterprises Corporation
(Albenson for short) delivered to Guaranteed Industries, Inc. (Guaranteed for short) located at
3267 V. Mapa Street, Sta. Mesa, Manila, the mild steel plates which the latter ordered. As part
payment thereof, Albenson was given Pacific Banking Corporation Check No. 136361 in the
amount of P2,575.00 and drawn against the account of E.L. Woodworks (Rollo, p. 148).
When presented for payment, the check was dishonored for the reason "Account Closed."
Thereafter, petitioner Albenson, through counsel, traced the origin of the dishonored check.
From the records of the Securities and Exchange Commission (SEC), Albenson discovered that
the president of Guaranteed, the recipient of the unpaid mild steel plates, was one "Eugenio S.
Baltao." Upon further inquiry, Albenson was informed by the Ministry of Trade and Industry that
E.L. Woodworks, a single proprietorship business, was registered in the name of one "Eugenio
Baltao". In addition, upon verification with the drawee bank, Pacific Banking Corporation,
Albenson was advised that the signature appearing on the subject check belonged to one
"Eugenio Baltao."
After obtaining the foregoing information, Albenson, through counsel, made an extrajudicial
demand upon private respondent Eugenio S. Baltao, president of Guaranteed, to replace and/or
make good the dishonored check.
Respondent Baltao, through counsel, denied that he issued the check, or that the signature
appearing thereon is his. He further alleged that Guaranteed was a defunct entity and hence,
could not have transacted business with Albenson.
On February 14, 1983, Albenson filed with the Office of the Provincial Fiscal of Rizal a complaint
against Eugenio S. Baltao for violation of Batas Pambansa Bilang 22. Submitted to support said
charges was an affidavit of petitioner Benjamin Mendiona, an employee of Albenson. In said
affidavit, the above-mentioned circumstances were stated.
It appears, however, that private respondent has a namesake, his son Eugenio Baltao III, who
manages a business establishment, E.L. Woodworks, on the ground floor of the Baltao Building,
3267 V. Mapa Street, Sta. Mesa, Manila, the very same business address of Guaranteed.
On September 5, 1983, Assistant Fiscal Ricardo Sumaway filed an information against Eugenio
S. Baltao for Violation of Batas Pambansa Bilang 22. In filing said information, Fiscal Sumaway
claimed that he had given Eugenio S. Baltao opportunity to submit controverting evidence, but
the latter failed to do so and therefore, was deemed to have waived his right.
Respondent Baltao, claiming ignorance of the complaint against him, immediately filed with the
Provincial Fiscal of Rizal a motion for reinvestigation, alleging that it was not true that he had
been given an opportunity to be heard in the preliminary investigation conducted by Fiscal
Sumaway, and that he never had any dealings with Albenson or Benjamin Mendiona,
consequently, the check for which he has been accused of having issued without funds was not
issued by him and the signature in said check was not his.
On January 30, 1984, Provincial Fiscal Mauro M. Castro of Rizal reversed the finding of Fiscal
Sumaway and exonerated respondent Baltao. He also instructed the Trial Fiscal to move for
dismissal of the information filed against Eugenio S. Baltao. Fiscal Castro found that the
signature in PBC Check No. 136361 is not the signature of Eugenio S. Baltao. He also found
that there is no showing in the records of the preliminary investigation that Eugenio S. Baltao
actually received notice of the said investigation. Fiscal Castro then castigated Fiscal Sumaway
for failing to exercise care and prudence in the performance of his duties, thereby causing
injustice to respondent who was not properly notified of the complaint against him and of the
requirement to submit his counter evidence.
Because of the alleged unjust filing of a criminal case against him for allegedly issuing a check
which bounced in violation of Batas Pambansa Bilang 22 for a measly amount of P2,575.00,
respondent Baltao filed before the Regional Trial Court of Quezon City a complaint for damages
against herein petitioners Albenson Enterprises, Jesse Yap, its owner, and Benjamin Mendiona,
its employee.
In its decision, the lower court observed that "the check is drawn against the account of "E.L.
Woodworks," not of Guaranteed Industries of which plaintiff used to be President. Guaranteed
Industries had been inactive and had ceased to exist as a corporation since 1975. . . . . The
possibility is that it was with Gene Baltao or Eugenio Baltao III, a son of plaintiff who had a
business on the ground floor of Baltao Building located on V. Mapa Street, that the defendants
may have been dealing with . . . ." (Rollo, pp. 41-42).
The dispositive portion of the trial court 's decision reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants ordering
the latter to pay plaintiff jointly and severally:
1. actual or compensatory damages of P133,350.00;
2. moral damages of P1,000,000.00 (1 million pesos);
3. exemplary damages of P200,000.00;
4. attorney's fees of P100,000.00;
5 costs.
Defendants' counterclaim against plaintiff and claim for damages against Mercantile Insurance
Co. on the bond for the issuance of the writ of attachment at the instance of plaintiff are hereby
dismissed for lack of merit. (Rollo, pp. 38-39).
On appeal, respondent court modified the trial court's decision as follows:
WHEREFORE, the decision appealed from is MODIFIED by reducing the moral damages
awarded therein from P1,000,000.00 to P500,000.00 and the attorney's fees from P100,000.00
to P50,000.00, said decision being hereby affirmed in all its other aspects. With costs against
appellants. (Rollo, pp. 50-51)
Dissatisfied with the above ruling, petitioners Albenson Enterprises Corp., Jesse Yap, and
Benjamin Mendiona filed the instant Petition, alleging that the appellate court erred in:
1. Concluding that private respondent's cause of action is not one based on malicious
prosecution but one for abuse of rights under Article 21 of the Civil Code notwithstanding the fact
that the basis of a civil action for malicious prosecution is Article 2219 in relation to Article 21 or
Article 2176 of the Civil Code . . . .
2. Concluding that "hitting at and in effect maligning (private respondent) with an unjust
criminal case was, without more, a plain case of abuse of rights by misdirection" and "was
therefore, actionable by itself," and which "became inordinately blatant and grossly aggravated
when . . . (private respondent) was deprived of his basic right to notice and a fair hearing in the
so-called preliminary investigation . . . . "
3. Concluding that petitioner's "actuations in this case were coldly deliberate and
calculated", no evidence having been adduced to support such a sweeping statement.
4. Holding the petitioner corporation, petitioner Yap and petitioner Mendiona jointly and
severally liable without sufficient basis in law and in fact.
5. Awarding respondents
5.1. P133,350.00 as actual or compensatory damages, even in the absence of sufficient
evidence to show that such was actually suffered.
5.2. P500,000.00 as moral damages considering that the evidence in this connection
merely involved private respondent's alleged celebrated status as a businessman, there being
no showing that the act complained of adversely affected private respondent's reputation or that
it resulted to material loss.
5.3. P200,000.00 as exemplary damages despite the fact that petitioners were duly
advised by counsel of their legal recourse.
5.4. P50,000.00 as attorney's fees, no evidence having been adduced to justify such an
award (Rollo, pp. 4-6).
Petitioners contend that the civil case filed in the lower court was one for malicious prosecution.
Citing the case of Madera vs. Lopez (102 SCRA 700 [1981]), they assert that the absence of
malice on their part absolves them from any liability for malicious prosecution. Private
respondent, on the other hand, anchored his complaint for Damages on Articles 19, 20, and 21
** of the Civil Code.
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 one's rights but also in the
performance of one's duties. These standards are the following: to act with justice; to give
everyone his due; and to observe honesty and good faith. The law, therefore, recognizes 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 the norms enshrined in Article 19 and results in damage to
another, a legal wrong is thereby committed for which the wrongdoer must be held responsible.
Although the requirements of each provision is different, these three (3) articles are all related to
each other. As the eminent Civilist Senator Arturo Tolentino puts it: "With this article (Article 21),
combined with articles 19 and 20, the scope of our law on civil wrongs has been very greatly
broadened; it has become much more supple and adaptable than the Anglo-American law on
torts. It is now difficult to conceive of any malevolent exercise of a right which could not be
checked by the application of these articles" (Tolentino, 1 Civil Code of the Philippines 72).
There is however, no hard and fast rule which can be applied to determine whether or not the
principle of abuse of rights may be invoked. The question of whether or not the principle of
abuse of rights has been violated, resulting in damages under Articles 20 and 21 or other
applicable provision of law, depends on the circumstances of each case. (Globe Mackay Cable
and Radio Corporation vs. Court of Appeals, 176 SCRA 778 [1989]).
The elements of an abuse of right under Article 19 are the following: (1) There is a legal right or
duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.
Article 20 speaks of the general sanction for all other provisions of law which do not especially
provide for their own sanction (Tolentino, supra, p. 71). Thus, anyone who, whether willfully or
negligently, in the exercise of his legal right or duty, causes damage to another, shall indemnify
his victim for injuries suffered thereby. Article 21 deals with acts contra bonus mores, and has
the following elements: 1) There is an act which is legal; 2) but which is contrary to morals, good
custom, public order, or public policy; 3) and it is done with intent to injure.
Thus, under any of these three (3) provisions of law, an act which causes injury to another may
be made the basis for an award of damages.
There is a common element under Articles 19 and 21, and that is, the act must be intentional.
However, Article 20 does not distinguish: the act may be done either "willfully", or "negligently".
The trial court as well as the respondent appellate court mistakenly lumped these three (3)
articles together, and cited the same as the bases for the award of damages in the civil
complaint filed against petitioners, thus:
With the foregoing legal provisions (Articles 19, 20, and 21) in focus, there is not much difficulty
in ascertaining the means by which appellants' first assigned error should be resolved, given the
admitted fact that when there was an attempt to collect the amount of P2,575.00, the defendants
were explicitly warned that plaintiff Eugenio S. Baltao is not the Eugenio Baltao defendants had
been dealing with (supra, p. 5). When the defendants nevertheless insisted and persisted in
filing a case a criminal case no less against plaintiff, said defendants ran afoul of the legal
provisions (Articles 19, 20, and 21 of the Civil Code) cited by the lower court and heretofore
quoted (supra).
Defendants, not having been paid the amount of P2,575.00, certainly had the right to complain.
But that right is limited by certain constraints. Beyond that limit is the area of excess, of abuse of
rights. (Rollo, pp.
44-45).
Assuming, arguendo, that all the three (3) articles, together and not independently of each one,
could be validly made the bases for an award of damages based on the principle of "abuse of
right", under the circumstances, We see no cogent reason for such an award of damages to be
made in favor of private respondent.
Certainly, petitioners could not be said to have violated the aforestated principle of abuse of
right. What prompted petitioners to file the case for violation of Batas Pambansa Bilang 22
against private respondent was their failure to collect the amount of P2,575.00 due on a
bounced check which they honestly believed was issued to them by private respondent.
Petitioners had conducted inquiries regarding the origin of the check, and yielded the following
results: from the records of the Securities and Exchange Commission, it was discovered that the
President of Guaranteed (the recipient of the unpaid mild steel plates), was one "Eugenio S.
Baltao"; an inquiry with the Ministry of Trade and Industry revealed that E.L. Woodworks, against
whose account the check was drawn, was registered in the name of one "Eugenio Baltao";
verification with the drawee bank, the Pacific Banking Corporation, revealed that the signature
appearing on the check belonged to one "Eugenio Baltao".
In a letter dated December 16, 1983, counsel for petitioners wrote private respondent
demanding that he make good the amount of the check. Counsel for private respondent wrote
back and denied, among others, that private respondent ever transacted business with Albenson
Enterprises Corporation; that he ever issued the check in question. Private respondent's counsel
even went further: he made a warning to defendants to check the veracity of their claim. It is
pivotal to note at this juncture that in this same letter, if indeed private respondent wanted to
clear himself from the baseless accusation made against his person, he should have made
mention of the fact that there are three (3) persons with the same name, i.e.: Eugenio Baltao,
Sr., Eugenio S. Baltao, Jr. (private respondent), and Eugenio Baltao III (private respondent's
son, who as it turned out later, was the issuer of the check). He, however, failed to do this. The
last two Baltaos were doing business in the same building Baltao Building located at 3267
V. Mapa Street, Sta. Mesa, Manila. The mild steel plates were ordered in the name of
Guaranteed of which respondent Eugenio S. Baltao is the president and delivered to
Guaranteed at Baltao building. Thus, petitioners had every reason to believe that the Eugenio
Baltao who issued the bouncing check is respondent Eugenio S. Baltao when their counsel
wrote respondent to make good the amount of the check and upon refusal, filed the complaint
for violation of BP Blg. 22.
Private respondent, however, did nothing to clarify the case of mistaken identity at first hand.
Instead, private respondent waited in ambush and thereafter pounced on the hapless petitioners
at a time he thought was propitious by filing an action for damages. The Court will not
countenance this devious scheme.
The criminal complaint filed against private respondent after the latter refused to make good the
amount of the bouncing check despite demand was a sincere attempt on the part of petitioners
to find the best possible means by which they could collect the sum of money due them. A
person who has not been paid an obligation owed to him will naturally seek ways to compel the
debtor to pay him. It was normal for petitioners to find means to make the issuer of the check
pay the amount thereof. In the absence of a wrongful act or omission or of fraud or bad faith,
moral damages cannot be awarded and that the adverse result of an action does not per se
make the action wrongful and subject the actor to the payment of damages, for the law could not
have meant to impose a penalty on the right to litigate (Rubio vs. Court of Appeals, 141 SCRA
488 [1986]).
In the case at bar, private respondent does not deny that the mild steel plates were ordered by
and delivered to Guaranteed at Baltao building and as part payment thereof, the bouncing check
was issued by one Eugenio Baltao. Neither had private respondent conveyed to petitioner that
there are two Eugenio Baltaos conducting business in the same building he and his son
Eugenio Baltao III. Considering that Guaranteed, which received the goods in payment of which
the bouncing check was issued is owned by respondent, petitioner acted in good faith and
probable cause in filing the complaint before the provincial fiscal.
To constitute malicious prosecution, 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. (Manila Gas Corporation vs. Court of Appeals, 100 SCRA 602 [1980]). Still, private
respondent argues that liability under Articles 19, 20, and 21 of the Civil Code is so
encompassing that it likewise includes liability for damages for malicious prosecution under
Article 2219 (8). True, a civil action for damages for malicious prosecution is allowed under the
New Civil Code, more specifically Articles 19, 20, 26, 29, 32, 33, 35, and 2219 (8) thereof. In
order that such a case can prosper, however, the following three (3) elements must be present,
to wit: (1) The fact of the prosecution and the further fact that the defendant was himself the
prosecutor, and that the action was finally terminated with an acquittal; (2) That in bringing the
action, the prosecutor acted without probable cause; (3) The prosecutor was actuated or
impelled by legal malice (Lao vs. Court of Appeals, 199 SCRA 58, [1991]).
Thus, 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. As earlier stated, a complaint for damages based on malicious prosecution will
prosper only if the three (3) elements aforecited are shown to exist. In the case at bar, the
second and third elements were not shown to exist. It is well-settled that one cannot be held
liable for maliciously instituting a prosecution where one has acted with probable cause.
"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. In other words, a suit 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"
(Que vs. Intermediate Appellate Court, 169 SCRA 137 [1989]).
The presence of probable cause signifies, as a legal consequence, the absence of malice. In the
instant case, it is evident that petitioners were not motivated by malicious intent or by sinister
design to unduly harass private respondent, but only by a well-founded anxiety to protect their
rights when they filed the criminal complaint against private respondent.
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 liable for malicious prosecution. Proof
and motive that the institution of the action was prompted by a sinister design to vex and
humiliate a person must be clearly and preponderantly established to entitle the victims to
damages (Ibid.).
In the case at bar, there is no proof of a sinister design on the part of petitioners to vex or
humiliate private respondent by instituting the criminal case against him. While petitioners may
have been negligent to some extent in determining the liability of private respondent for the
dishonored check, the same is not so gross or reckless as to amount to bad faith warranting an
award of damages.
The root of the controversy in this case is founded on a case of mistaken identity. It is possible
that with a more assiduous investigation, petitioners would have eventually discovered that
private respondent Eugenio S. Baltao is not the "Eugenio Baltao" responsible for the dishonored
check. However, the record shows that petitioners did exert considerable effort in order to
determine the liability of private respondent. Their investigation pointed to private respondent as
the "Eugenio Baltao" who issued and signed the dishonored check as the president of the
debtor-corporation Guaranteed Enterprises. Their error in proceeding against the wrong
individual was obviously in the nature of an innocent mistake, and cannot be characterized as
having been committed in bad faith. This error could have been discovered if respondent had
submitted his counter-affidavit before investigating fiscal Sumaway and was immediately
rectified by Provincial Fiscal Mauro Castro upon discovery thereof, i.e., during the reinvestigation
resulting in the dismissal of the complaint.
Furthermore, the adverse result of an action does not per se make the act 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 even exercise it erroneously. And an adverse decision does not ipso facto justify
the award of attorney's fees to the winning party (Garcia vs. Gonzales, 183 SCRA 72 [1990]).
Thus, an award of damages and attorney's fees is unwarranted where the action was filed in
good faith. If damage results from a person's exercising his legal rights, it is damnum absque
injuria (Ilocos Norte Electric Company vs. Court of Appeals, 179 SCRA 5 [1989]).
Coming now to the claim of private respondent for actual or compensatory damages, the records
show that the same was based solely on his allegations without proof to substantiate the same.
He did not present proof of the cost of the medical treatment which he claimed to have
undergone as a result of the nervous breakdown he suffered, nor did he present proof of the
actual loss to his business caused by the unjust litigation against him. In determining actual
damages, the court cannot rely on speculation, conjectures or guesswork as to the amount.
Without the actual proof of loss, the award of actual damages becomes erroneous (Guilatco vs.
City of Dagupan, 171 SCRA 382 [1989]).

Actual and compensatory damages are those recoverable because of pecuniary loss in
business, trade, property, profession, job or occupation and the same must be proved,
otherwise, if the proof is flimsy and unsubstantiated, no damages will be given (Rubio vs. Court
of Appeals, 141 SCRA 488 [1986]). For these reasons, it was gravely erroneous for respondent
court to have affirmed the award of actual damages in favor of private respondent in the
absence of proof thereof.

Where there is no evidence of the other party having acted in wanton, fraudulent or reckless, or
oppressive manner, neither may exemplary damages be awarded (Dee Hua Liong Electrical
Equipment Corporation vs. Reyes, 145 SCRA 488 [1986]).

As to the award of attorney's fees, it is well-settled that the same is the exception rather than the
general rule. Needless to say, the award of attorney's fees must be disallowed where the award
of exemplary damages is eliminated (Article 2208, Civil Code; Agustin vs. Court of Appeals, 186
SCRA 375 [1990]). Moreover, in view of the fact that there was no malicious prosecution against
private respondent, attorney's fees cannot be awarded him on that ground.

In the final analysis, there is no proof or showing that petitioners acted maliciously or in bad faith
in the filing of the case against private respondent. Consequently, in the absence of proof of
fraud and bad faith committed by petitioners, they cannot be held liable for damages (Escritor,
Jr. vs. Intermediate Appellate Court, 155 SCRA 577 [1987]). No damages can be awarded in the
instant case, whether based on the principle of abuse of rights, or for malicious prosecution. The
questioned judgment in the instant case attests to the propensity of trial judges to award
damages without basis. Lower courts are hereby cautioned anew against awarding
unconscionable sums as damages without bases therefor.

WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals in C.A. G.R.
C.V. No. 14948 dated May 13, 1989, is hereby REVERSED and SET ASIDE. Costs against
respondent Baltao.

SO ORDERED.
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 undisputed facts as
summarized by the trial court and adopted by the Court of Appeals (CA),1 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. 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.
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 able to take the bar examination.2
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.
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
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 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 absence of all information
or belief of facts, would render the transaction unconscientious.5 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 entity had any control over the instrumentality which
caused the damage or injury.6
The college dean is the senior officer responsible for the operation of an academic program,
enforcement of rules and regulations, and the supervision of faculty and student services.7 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.
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 specifically in
statutory law.8 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 liability is justifiable
reliance under conditions of civilized society.9 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 support a claim
for damages.10 Want of care to the conscious disregard of civil obligations coupled with a
conscious knowledge of the cause naturally calculated to produce them would make the erring
party liable.11 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 Practice Court I.12
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 suffer, he
through whose agency the loss occurred must bear it.13 The modern tendency is to grant
indemnity for damages in cases where there is abuse of right, even when the act is not illicit.14 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 acts with
prudence and in good faith, but not when he acts with negligence or abuse.15
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.
G.R. No. L-20089 December 26, 1964
BEATRIZ P. WASSMER, plaintiff-appellee,
vs.
FRANCISCO X. VELEZ, defendant-appellant.
BENGZON, J.P., J.:
The facts that culminated in this case started with dreams and hopes, followed by appropriate
planning and serious endeavors, but terminated in frustration and, what is worse, complete
public humiliation.
Francisco X. Velez and Beatriz P. Wassmer, following their mutual promise of love, decided to
get married and set September 4, 1954 as the big day. On September 2, 1954 Velez left this
note for his bride-to-be:
Dear Bet
Will have to postpone wedding My mother opposes it. Am leaving on the Convair today.
Please do not ask too many people about the reason why That would only create a scandal.
Paquing
But the next day, September 3, he sent her the following telegram:
NOTHING CHANGED REST ASSURED RETURNING VERY SOON APOLOGIZE MAMA PAPA
LOVE .
PAKING
Thereafter Velez did not appear nor was he heard from again.
Sued by Beatriz for damages, Velez filed no answer and was declared in default. Plaintiff
adduced evidence before the clerk of court as commissioner, and on April 29, 1955, judgment
was rendered ordering defendant to pay plaintiff P2,000.00 as actual damages; P25,000.00 as
moral and exemplary damages; P2,500.00 as attorney's fees; and the costs.
On June 21, 1955 defendant filed a "petition for relief from orders, judgment and proceedings
and motion for new trial and reconsideration." Plaintiff moved to strike it cut. But the court, on
August 2, 1955, ordered the parties and their attorneys to appear before it on August 23, 1955
"to explore at this stage of the proceedings the possibility of arriving at an amicable settlement."
It added that should any of them fail to appear "the petition for relief and the opposition thereto
will be deemed submitted for resolution."
On August 23, 1955 defendant failed to appear before court. Instead, on the following day his
counsel filed a motion to defer for two weeks the resolution on defendants petition for relief. The
counsel stated that he would confer with defendant in Cagayan de Oro City the latter's
residence on the possibility of an amicable element. The court granted two weeks counted
from August 25, 1955.
Plaintiff manifested on June 15, 1956 that the two weeks given by the court had expired on
September 8, 1955 but that defendant and his counsel had failed to appear.
Another chance for amicable settlement was given by the court in its order of July 6, 1956 calling
the parties and their attorneys to appear on July 13, 1956. This time. however, defendant's
counsel informed the court that chances of settling the case amicably were nil.
On July 20, 1956 the court issued an order denying defendant's aforesaid petition. Defendant
has appealed to this Court. In his petition of June 21, 1955 in the court a quo defendant alleged
excusable negligence as ground to set aside the judgment by default. Specifically, it was stated
that defendant filed no answer in the belief that an amicable settlement was being negotiated.
A petition for relief from judgment on grounds of fraud, accident, mistake or excusable
negligence, must be duly supported by an affidavit of merits stating facts constituting a valid
defense. (Sec. 3, Rule 38, Rules of Court.) Defendant's affidavit of merits attached to his petition
of June 21, 1955 stated: "That he has a good and valid defense against plaintiff's cause of
action, his failure to marry the plaintiff as scheduled having been due to fortuitous event and/or
circumstances beyond his control." An affidavit of merits like this stating mere conclusions or
opinions instead of facts is not valid. (Cortes vs. Co Bun Kim, L-3926, Oct. 10, 1951; Vaswani
vs. P. Tarrachand Bros., L-15800, December 29, 1960.)
Defendant, however, would contend that the affidavit of merits was in fact unnecessary, or a
mere surplusage, because the judgment sought to be set aside was null and void, it having been
based on evidence adduced before the clerk of court. In Province of Pangasinan vs. Palisoc, L-
16519, October 30, 1962, this Court pointed out that the procedure of designating the clerk of
court as commissioner to receive evidence is sanctioned by Rule 34 (now Rule 33) of the Rules
of Court. Now as to defendant's consent to said procedure, the same did not have to be
obtained for he was declared in default and thus had no standing in court (Velez vs. Ramas, 40
Phil. 787; Alano vs. Court of First Instance, L-14557, October 30, 1959).
In support of his "motion for new trial and reconsideration," defendant asserts that the judgment
is contrary to law. The reason given is that "there is no provision of the Civil Code authorizing"
an action for breach of promise to marry. Indeed, our ruling in Hermosisima vs. Court of Appeals
(L-14628, Sept. 30, 1960), as reiterated in Estopa vs. Biansay (L-14733, Sept. 30, 1960), is that
"mere breach of a promise to marry" is not an actionable wrong. We pointed out that Congress
deliberately eliminated from the draft of the new Civil Code the provisions that would have it so.
It must not be overlooked, however, that the extent to which acts not contrary to law may be
perpetrated with impunity, is not limitless for Article 21 of said Code provides that "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 record reveals that on August 23, 1954 plaintiff and defendant applied for a license to
contract marriage, which was subsequently issued (Exhs. A, A-1). Their wedding was set for
September 4, 1954. Invitations were printed and distributed to relatives, friends and
acquaintances (Tsn., 5; Exh. C). The bride-to-be's trousseau, party drsrses and other apparel for
the important occasion were purchased (Tsn., 7-8). Dresses for the maid of honor and the flower
girl were prepared. A matrimonial bed, with accessories, was bought. Bridal showers were given
and gifts received (Tsn., 6; Exh. E). And then, with but two days before the wedding, defendant,
who was then 28 years old,: simply left a note for plaintiff stating: "Will have to postpone
wedding My mother opposes it ... " He enplaned to his home city in Mindanao, and the next
day, the day before the wedding, he wired plaintiff: "Nothing changed rest assured returning
soon." But he never returned and was never heard from again.
Surely this is not a case of mere breach of promise to marry. As stated, mere breach of promise
to marry is not an actionable wrong. But to formally set a wedding and go through all the above-
described preparation and publicity, only to walk out of it when the matrimony is about to be
solemnized, is quite different. This is palpably and unjustifiably contrary to good customs for
which defendant must be held answerable in damages in accordance with Article 21 aforesaid.
Defendant urges in his afore-stated petition that the damages awarded were excessive. No
question is raised as to the award of actual damages. What defendant would really assert
hereunder is that the award of moral and exemplary damages, in the amount of P25,000.00,
should be totally eliminated.
Per express provision of Article 2219 (10) of the New Civil Code, moral damages are
recoverable in the cases mentioned in Article 21 of said Code. As to exemplary damages,
defendant contends that the same could not be adjudged against him because under Article
2232 of the New Civil Code the condition precedent is that "the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner." The argument is devoid of merit as
under the above-narrated circumstances of this case defendant clearly acted in a "wanton ... ,
reckless [and] oppressive manner." This Court's opinion, however, is that considering the
particular circumstances of this case, P15,000.00 as moral and exemplary damages is deemed
to be a reasonable award.

PREMISES CONSIDERED, with the above-indicated modification, the lower court's judgment is
hereby affirmed, with costs.
[G.R. No. L-17396. May 30, 1962.]
CECILIO PE, ET AL., Plaintiffs-Appellants, v. ALFONSO PE, Defendant-Appellee.
Cecilio L. Pe for and in his own behalf as plaintiff-appellant.
Leodegario L. Mogol, for Defendant-Appellee.
SYLLABUS
1. DAMAGES; ACTS CONTRARY TO MORALS. Defendant won Lolitas affection thru an
ingenious scheme or trickery and seduced her to the extent of making her fall in love with him.
This is shown by the fact that defendant frequented the house of Lolita on the pretext that he
wanted her to teach him how to pray the rosary. Because of the frequency of his visits to the
latters family who was allowed free access because he was a collateral relative and was
considered as a member of her family, the two eventually fell in love with each other and
conducted clandestine love affairs not only in Gasan but in Boac where Lolita used to teach in a
barrio school. When the rumors about their illicit affair reached the knowledge of her parents,
defendant was forbidden from going to their house and even from seeing Lolita. Plaintiff even
filed deportation proceedings against defendant who is a Chinese national. Nevertheless,
defendant continued his love affairs with Lolita until she disappeared from the parental home,
Held; The wrong defendant has caused Lolita and her family is indeed immeasurable
considering the fact that he is a married man. Verily, he has committed an injury to Lolitas family
in a manner contrary to morals, good customs and public policy as contemplated in Article 21 of
the New Civil Code.
DECISION
BAUTISTA ANGELO, J.:
Plaintiffs brought this action before the Court of First Instance of Manila to recover moral,
compensatory, exemplary and corrective damages in the amount of P94,000.00, exclusive of
attorneys fees and expenses of litigation.
Defendant, after denying some allegations contained in the complaint, set up as a defense that
the facts alleged therein, even if true, do not constitute a valid cause of action.
After trial, the lower court, after finding that defendant had carried on a love affair with one Lolita
Pe, an unmarried woman, being a married man himself, declared that defendant cannot be held
liable for moral damages it appearing that plaintiffs failed to prove that defendant, being aware of
his marital status, deliberately and in bad faith tried to win Lolitas affection. So it rendered
decision dismissing the complaint.
Plaintiffs brought this case on appeal before this Court on the ground that the issues involved
are purely of law.
The facts as found by the trial court are: Plaintiffs are the parents, brothers and sisters of one
Lolita Pe. At the time of her disappearance on April 14, 1957, Lolita was 24 years old and
unmarried. Defendant is a married man and works as agent of the La Perla Cigar and Cigarette
Factory. He used to stay in the town of Gasan, Marinduque, in connection with his aforesaid
occupation. Lolita was staying with her parents in the same town. Defendant was an adopted
son of a Chinaman named Pe Beco, a collateral relative of Lolitas father. Because of such fact
and the similarity in their family name, defendant became close to the plaintiffs who regarded
him as a member of their family. Sometime in 1952, defendant frequented the house of Lolita on
the pretext that he wanted her to teach him how to pray the rosary. The two eventually fell in
love with each other and conducted clandestine trysts not only in the town of Gasan but also in
Boac where Lolita used to teach in a barrio school. They exchanged love notes with each other
the contents of which reveal not only their infatuation for each other but also the extent to which
they had carried their relationship. The rumors about their love affair reached the ears of Lolitas
parents sometime in 1955, and since then defendant was forbidden from going to their house
and from further seeing Lolita. The plaintiffs even filed deportation proceedings against
defendant who is a Chinese national. The affair between defendant and Lolita continued
nonetheless.
Sometime in April, 1957, Lolita was staying with her brothers and sisters at their residence at 54-
B Espaa Extension, Quezon City. On April 14, 1957, Lolita disappeared from said house. After
she left, her brothers and sisters checked up her things and found that Lolitas clothes were
gone. However, plaintiffs found a note on a crumpled piece of paper inside Lolitas aparador.
Said note, written on a small slip of paper approximately 4" by 3" in size, was in a handwriting
recognized to be that of defendant. In English it reads:jgc:chanrobles.com.ph
"Honey, suppose I leave here on Sunday night, and thats 13th of this month and we will have a
date on the 14th, thats Monday morning at 10 a.m.
Reply
Love"
The disappearance of Lolita was reported to the police authorities and the NBI but up to the
present there is no news or trace of her whereabouts.
The present action is based on Article 21 of the new Civil Code which
provides:jgc:chanrobles.com.ph
"Any person who wilfully causes loss or injury to another in a manner which is contrary to
morals, good customs or public policy shall compensate the latter for the damage."cralaw
virtua1aw library
There is no doubt that the claim of plaintiffs for damages is based on the fact that defendant,
being a married man, carried on a love affair with Lolita Pe thereby causing plaintiffs injury in a
manner contrary to morals, good customs and public policy. But in spite of the fact that plaintiffs
have clearly established that an illicit affair was carried on between defendant and Lolita which
caused great damage to the name and reputation of plaintiffs who are her parents, brothers and
sisters, the trial court considered their complaint not actionable for the reason that they failed to
prove that defendant deliberately and in bad faith tried to win Lolitas affection. Thus, the trial
court said: "In the absence of proof on this point, the court may not presume that it was the
defendant who deliberately induced such relationship. We cannot be unmindful of the
uncertainties and sometimes inexplicable mysteries of the human emotions. It is a possibility that
the defendant and Lolita simply fell in love with each other, not only without any desire on their
part, but also against their better judgment and in full consciousness of the disastrous
consequences that such an affair would naturally bring on both of them. This is specially so with
respect to Lolita, being an unmarried woman, falling in love with defendant who is a married
man."cralaw virtua1aw library
We disagree with this view. The circumstances under which defendant tried to win Lolitas
affection cannot lead to any other conclusion than that it was he who, thru an ingenious scheme
or trickery, seduced the latter to the extent of making her fall in love with him. This is shown by
the fact that defendant frequented the house of Lolita on the pretext that he wanted her to teach
him how to pray the rosary. Because of the frequency of his visits to the latters family who was
allowed free access because he was a collateral relative and was considered as a member of
her family, the two eventually fell in love with each other and conducted clandestine love affairs
not only in Gasan but in Boac where Lolita used to teach in a barrio school. When the rumors
about their illicit affair reached the knowledge of her parents, defendant was forbidden from
going to their house and even from seeing Lolita. Plaintiffs even filed deportation proceedings
against defendant who is a Chinese national. Nevertheless, defendant continued his love affairs
with Lolita until she disappeared from the parental home. Indeed, no other conclusion can be
drawn from this chain of events than that defendant not only deliberately, but through a clever
strategy, succeeded in winning the affection and love of Lolita to the extent of having illicit
relations with her. The wrong he has caused her and her family is indeed immeasurable
considering the fact that he is a married man. Verily, he has committed an injury to Lolitas family
in a manner contrary to morals, good customs and public policy as contemplated in Article 21 of
the new Civil Code.

WHEREFORE, the decision appealed from is reversed. Defendant is hereby sentenced to pay
the plaintiffs the sum of P5,000.00 as damages and P2,500.00 as attorneys fees and expenses
of litigation. Costs against appellee.
SECOND DIVISION
[G.R. No. 151866. September 9, 2004]
SOLEDAD CARPIO, petitioner, vs. LEONORA A. VALMONTE, respondent.
DECISION
TINGA, J.:
Assailed in the instant petition for review is the Decision of the Court of Appeals in C.A.-G.R. CV
No. 69537,[1] promulgated on 17 January 2002.[2] The appellate court reversed the trial courts
decision denying respondents claim for damages against petitioner and ordered the latter to pay
moral damages to the former in the amount of P100,000.00.
Respondent Leonora Valmonte is a wedding coordinator. Michelle del Rosario and Jon Sierra
engaged her services for their church wedding on 10 October 1996. At about 4:30 p.m. on that
day, Valmonte went to the Manila Hotel where the bride and her family were billeted. When she
arrived at Suite 326-A, several persons were already there including the bride, the brides
parents and relatives, the make-up artist and his assistant, the official photographers, and the
fashion designer. Among those present was petitioner Soledad Carpio, an aunt of the bride who
was preparing to dress up for the occasion.
After reporting to the bride, Valmonte went out of the suite carrying the items needed for the
wedding rites and the gifts from the principal sponsors. She proceeded to the Maynila
Restaurant where the reception was to be held. She paid the suppliers, gave the meal allowance
to the band, and went back to the suite. Upon entering the suite, Valmonte noticed the people
staring at her. It was at this juncture that petitioner allegedly uttered the following words to
Valmonte: Ikaw lang ang lumabas ng kwarto, nasaan ang dala mong bag? Saan ka pumunta?
Ikaw lang and lumabas ng kwarto, ikaw ang kumuha. Petitioner then ordered one of the ladies to
search Valmontes bag. It turned out that after Valmonte left the room to attend to her duties,
petitioner discovered that the pieces of jewelry which she placed inside the comfort room in a
paper bag were lost. The jewelry pieces consist of two (2) diamond rings, one (1) set of diamond
earrings, bracelet and necklace with a total value of about one million pesos. The hotel security
was called in to help in the search. The bags and personal belongings of all the people inside
the room were searched. Valmonte was allegedly bodily searched, interrogated and trailed by a
security guard throughout the evening. Later, police officers arrived and interviewed all persons
who had access to the suite and fingerprinted them including Valmonte. During all the time
Valmonte was being interrogated by the police officers, petitioner kept on saying the words Siya
lang ang lumabas ng kwarto. Valmontes car which was parked at the hotel premises was also
searched but the search yielded nothing.
A few days after the incident, petitioner received a letter from Valmonte demanding a formal
letter of apology which she wanted to be circulated to the newlyweds relatives and guests to
redeem her smeared reputation as a result of petitioners imputations against her. Petitioner did
not respond to the letter. Thus, on 20 February 1997, Valmonte filed a suit for damages against
her before the Regional Trial Court (RTC) of Pasig City, Branch 268. In her complaint, Valmonte
prayed that petitioner be ordered to pay actual, moral and exemplary damages, as well as
attorneys fees.
Responding to the complaint, petitioner denied having uttered words or done any act to confront
or single out Valmonte during the investigation and claimed that everything that transpired after
the theft incident was purely a police matter in which she had no participation. Petitioner prayed
for the dismissal of the complaint and for the court to adjudge Valmonte liable on her
counterclaim.
The trial court rendered its Decision on 21 August 2000, dismissing Valmontes complaint for
damages. It ruled that when petitioner sought investigation for the loss of her jewelry, she was
merely exercising her right and if damage results from a person exercising his legal right, it is
damnum absque injuria. It added that no proof was presented by Valmonte to show that
petitioner acted maliciously and in bad faith in pointing to her as the culprit. The court said that
Valmonte failed to show that she suffered serious anxiety, moral shock, social humiliation, or
that her reputation was besmirched due to petitioners wrongful act.
Respondent appealed to the Court of Appeals alleging that the trial court erred in finding that
petitioner did not slander her good name and reputation and in disregarding the evidence she
presented.
The Court of Appeals ruled differently. It opined that Valmonte has clearly established that she
was singled out by petitioner as the one responsible for the loss of her jewelry. It cited the
testimony of Serena Manding, corroborating Valmontes claim that petitioner confronted her and
uttered words to the effect that she was the only one who went out of the room and that she was
the one who took the jewelry. The appellate court held that Valmontes claim for damages is not
predicated on the fact that she was subjected to body search and interrogation by the police but
rather petitioners act of publicly accusing her of taking the missing jewelry. It categorized
petitioners utterance defamatory considering that it imputed upon Valmonte the crime of theft.
The court concluded that petitioners verbal assault upon Valmonte was done with malice and in
bad faith since it was made in the presence of many people without any solid proof except
petitioners suspicion. Such unfounded accusation entitles Valmonte to an award of moral
damages in the amount of P100,000.00 for she was publicly humiliated, deeply insulted, and
embarrassed. However, the court found no sufficient evidence to justify the award of actual
damages.
Hence, this petition.
Petitioner contends that the appellate courts conclusion that she publicly humiliated respondent
does not conform to the evidence presented. She adds that even on the assumption that she
uttered the words complained of, it was not shown that she did so with malice and in bad faith.
In essence, petitioner would want this Court to review the factual conclusions reached by the
appellate court. The cardinal rule adhered to in this jurisdiction is that a petition for review must
raise only questions of law,[3] and judicial review under Rule 45 does not extend to an
evaluation of the sufficiency of evidence unless there is a showing that the findings complained
of are totally devoid of support in the record or that they are so glaringly erroneous as to
constitute serious abuse of discretion.[4] This Court, while not a trier of facts, may review the
evidence in order to arrive at the correct factual conclusion based on the record especially so
when the findings of fact of the Court of Appeals are at variance with those of the trial court, or
when the inference drawn by the Court of Appeals from the facts is manifestly mistaken.[5]
Contrary to the trial courts finding, we find sufficient evidence on record tending to prove that
petitioners imputations against respondent was made with malice and in bad faith.
Petitioners testimony was shorn of substance and consists mainly of denials. She claimed not to
have uttered the words imputing the crime of theft to respondent or to have mentioned the latters
name to the authorities as the one responsible for the loss of her jewelry. Well-settled is the rule
that denials, if unsubstantiated by clear and convincing evidence, are negative and self-serving
which merit no weight in law and cannot be given greater evidentiary value over the testimony of
credible witnesses who testify on affirmative matters.[6]
Respondent, however, has successfully refuted petitioners testimony. Quite credibly, she has
narrated in great detail her distressing experience on that fateful day. She testified as to how
rudely she was treated by petitioner right after she returned to the room. Petitioner immediately
confronted her and uttered the words Ikaw lang ang lumabas ng kwarto. Nasaan ang dala mong
bag? Saan ka pumunta? Ikaw ang kumuha. Thereafter, her body was searched including her
bag and her car. Worse, during the reception, she was once more asked by the hotel security to
go to the ladies room and she was again bodily searched.[7]
Serea Manding, a make-up artist, corroborated respondents testimony. She testified that
petitioner confronted respondent in the presence of all the people inside the suite accusing her
of being the only one who went out of the comfort room before the loss of the jewelry. Manding
added that respondent was embarrassed because everybody else in the room thought she was
a thief.[8] If only to debunk petitioners assertion that she did not utter the accusatory remarks in
question publicly and with malice, Mandings testimony on the point deserves to be reproduced.
Thus,
Q After that what did she do?
A Then Leo came out from the other room she said, she is (sic) the one I only saw from the
comfort room.
Q Now, what exact word (sic) were said by Mrs. Carpio on that matter?
A She said siya lang yung nakita kong galing sa C.R.
Q And who was Mrs. Carpio or the defendant referring to?
A Leo Valmonte.
Q Did she say anything else, the defendant?
A Her jewelry were lost and Leo was the only one she saw in the C.R. After that she get (sic) the
paper bag then the jewelry were already gone.
Q Did she confront the plaintiff Mrs. Valmonte regarding that fact?
A Yes.
Q What did the defendant Mrs. Carpio tell the plaintiff, Mrs. Valmonte?
A Ikaw yung nakita ko sa C.R. nawawala yung alahas ko.
Q When the defendant Mrs. Carpio said that to plaintiff Mrs. Valmonte were there other people
inside the room?
A Yes, sir.
Q Were they able to hear what Mrs. Carpio said to Mrs. Valmonte?
A Yes, sir.
Q What was your thinking at that time that Mrs. Carpio said that to Mrs. Valmonte?
A Nakakahiya kasi akala ng iba doon na talagang magnanakaw siya. Kasi marami na kaming
nandodoon, dumating na yung couturier pati yung video man and we sir.
Q Who was the person you [were] alleging na nakakahiya whose (sic) being accused or being
somebody who stole those item of jewelry?
A Nakakahiya para kay Leo kasi pinagbibintangan siya. Sa dami namin doon siya yung
napagbintangan.
Q And who is Leo, what is her full name?
A Leo Valmonte.
Q Did the defendant tell this matter to other people inside the room?
A Yes, the mother of the bride.
Q And who else did she talk to?
A The father of the bride also.
Q And what did the defendant tell the mother regarding this matter?
A Nawawala yung alahas ko. Sabi naman nung mother baka naman hindi mo dala tignan mo
munang mabuti.
Q Who was that other person that she talked to?
A Father of the bride.[9]
Significantly, petitioners counsel elected not to pursue her cross-examination of the witness on
this point following her terse and firm declaration that she remembered petitioners exact
defamatory words in answer to the counsels question.[10]
Jaime Papio, Security Supervisor at Manila Hotel, likewise contradicted petitioners allegation
that she did not suspect or mention the name of respondent as her suspect in the loss of the
jewelry.[11]
To warrant recovery of damages, there must be both a right of action, for a wrong inflicted by the
defendant, and the damage resulting therefrom to the plaintiff. Wrong without damage, or
damage without wrong, does not constitute a cause of action.[12]
In the sphere of our law on human relations, the victim of a wrongful act or omission, whether
done willfully or negligently, is not left without any remedy or recourse to obtain relief for the
damage or injury he sustained. Incorporated into our civil law are not only principles of equity but
also universal moral precepts which are designed to indicate certain norms that spring from the
fountain of good conscience and which are meant to serve as guides for human conduct.[13]
First of these fundamental precepts is the principle commonly known as abuse of rights under
Article 19 of the Civil Code. It provides that Every person must, in the exercise of his rights and
in the performance of his duties, act with justice, give everyone his due and observe honesty
and good faith. To find the existence of an abuse of right, the following elements must be
present: (1) there is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent
or prejudicing or injuring another.[14] When a right is exercised in a manner which discards
these norms resulting in damage to another, a legal wrong is committed for which the actor can
be held accountable.[15] One is not allowed to exercise his right in a manner which would cause
unnecessary prejudice to another or if he would thereby offend morals or good customs. Thus, a
person should be protected only when he acts in the legitimate exercise of his right, that is when
he acts with prudence and good faith; but not when he acts with negligence or abuse.[16]
Complementing the principle of abuse of rights are the provisions of Articles 20 and 21 of the
Civil Code which read, thus:
Art. 20. Every person who, contrary to law, willfully or negligently causes damage to another,
shall indemnify the latter for the same.
Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to
morals or good customs or public policy shall compensate the latter for the damage.
The foregoing rules provide the legal bedrock for the award of damages to a party who suffers
damage whenever one commits an act in violation of some legal provision, or an act which
though not constituting a transgression of positive law, nevertheless violates certain rudimentary
rights of the party aggrieved.
In the case at bar, petitioners verbal reproach against respondent was certainly uncalled for
considering that by her own account nobody knew that she brought such kind and amount of
jewelry inside the paper bag.[17] This being the case, she had no right to attack respondent with
her innuendos which were not merely inquisitive but outrightly accusatory. By openly accusing
respondent as the only person who went out of the room before the loss of the jewelry in the
presence of all the guests therein, and ordering that she be immediately bodily searched,
petitioner virtually branded respondent as the thief. True, petitioner had the right to ascertain the
identity of the malefactor, but to malign respondent without an iota of proof that she was the one
who actually stole the jewelry is an act which, by any standard or principle of law is
impermissible. Petitioner had willfully caused injury to respondent in a manner which is contrary
to morals and good customs. Her firmness and resolve to find her missing jewelry cannot justify
her acts toward respondent. She did not act with justice and good faith for apparently, she had
no other purpose in mind but to prejudice respondent. Certainly, petitioner transgressed the
provisions of Article 19 in relation to Article 21 for which she should be held accountable.

Owing to the rule that great weight and even finality is given to factual conclusions of the Court
of Appeals which affirm those of the trial court,[18] we sustain the findings of the trial court and
the appellate court that respondents claim for actual damages has not been substantiated with
satisfactory evidence during the trial and must therefore be denied. To be recoverable, actual
damages must be duly proved with reasonable degree of certainty and the courts cannot rely on
speculation, conjecture or guesswork.[19]

Respondent, however, is clearly entitled to an award of moral damages. Moral damages may be
awarded whenever the defendants wrongful act or omission is the proximate cause of the
plaintiffs physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury[20] in the cases specified or
analogous to those provided in Article 2219 of the Civil Code.[21] Though no proof of pecuniary
loss is necessary in order that moral damages may be adjudicated, courts are mandated to take
into account all the circumstances obtaining in the case and assess damages according to their
discretion.[22] Worthy of note is that moral damages are not awarded to penalize the
defendant,[23] or to enrich a complainant, but to enable the latter to obtain means, diversions or
amusements that will serve to alleviate the moral suffering he has undergone, by reason of
defendants culpable action. In any case, award of moral damages must be proportionate to the
sufferings inflicted.[24]

Based on the foregoing jurisprudential pronouncements, we rule that the appellate court did not
err in awarding moral damages. Considering respondents social standing, and the fact that her
profession is based primarily on trust reposed in her by her clients, the seriousness of the
imputations made by petitioner has greatly tarnished her reputation and will in one way or the
other, affect her future dealings with her clients, the award of P100,000.00 as moral damages
appears to be a fair and reasonable assessment of respondents damages.

WHEREFORE, the instant Petition is DENIED. Costs against petitioner.

SO ORDERED.
[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 Drilon[1] dated March 20, 1990,
General Renato de Villa,[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,[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.[4]
The above Resolution became the basis for the filing of an Information,[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.[6]
Feeling aggrieved by the institution of these proceedings against him, private respondent Adaza
filed a complaint for damages,[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 non-existence 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 Order[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.[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. Q-90-
6073.[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.[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.[12]
On March 8, 1993,[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,[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.[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).[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).[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).[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.[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.[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. Q-90-11855 is concerned,
what appears clear from the records only is that respondent has been discharged on a writ of
habeas corpus and granted bail.[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.[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.[23] While it is true that the petitioners were
fully aware of the prevailing jurisprudence enunciated in People v. Hernandez,[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.[25]
While the Supreme Court in the case of Enrile v. Salazar,[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 justices[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 duly-constituted
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.[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 --[29] and thereupon ordered the remand of the case to the trial
court for the prosecution of the named accused[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.[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.[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.[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:

xxxxxxxxx

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.[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.[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.[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.
CONRADO MAGBANUA and ROSEMARIE MAGBANUA-TABORADA, the latter assisted by her
husband ARTEMIO TABORADA,
Petitioners,
- versus -
PILAR S. JUNSAY, asssisted by her husband VICENTE JUNSAY, IBARRA LOPEZ, and
JUANITO JACELA,
Respondents.
G.R. No. 132659
Present:
YNARES-SANTIAGO, J.
Chairperson,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
CHICO-NAZARIO, and
NACHURA,* JJ.
Promulgated:
February 12, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
This is an Appeal by Certiorari from the Decision,[1] dated 26 January 1998, of the Court of
Appeals in CA-G.R. CV No. 51750, which affirmed in toto the Decision,[2] dated 25 July 1995, of
the Regional Trial Court (RTC), Branch 51, Bacolod City, in Civil Case No. 4361, dismissing the
Complaint for Damages for malicious prosecution, filed by petitioners against respondents. The
RTC rendered judgment declaring that the prosecution was not prompted by sinister design to
vex and humiliate petitioner Rosemarie Magbanua. The Court of Appeals similarly found the
appeal without merit.
The following are the antecedent facts:
Petitioner Rosemarie Magbanua, who worked as a housemaid in the residence of complainant
and herein respondent Pilar S. Junsay was charged as a co-accused with the crime of Robbery
before the RTC, Branch XLI of Bacolod City in Criminal Case No. 28 entitled, People of the
Philippines v. Rosemarie Magbanua, et al., by virtue of an Information, which recites, thus:
That on or about the 18th day of July, 1982, in the City of Bacolod, Philippines, and within the
jurisdiction of this Honorable Court, the herein accused, conspiring, confederating and mutually
helping one another, with intent to gain and with the use of force upon things by then and there
making a hole on the lower portion of the kitchens door of the house of the herein offended
party, Dra. Pilar S. Junsay, situated at Bata Subdivision, Bacolod City, through which opening
made (sic) them, said accused gained entrance thereto and once inside the said house, did,
then and there willfully, unlawfully and feloniously take, rob and carry away with them, assorted
jewelries and cash, valued all in all in the amount of P29,624.00, Pesos, Philippine Currency, to
the damage and prejudice of the herein offended party in the aforementioned amount.[3]
The records show that only petitioner Rosemarie was tried in Criminal Case No. 28. Her co-
accused, Ernesto Fernandez and a certain Gudo, remain at large.
The case for the prosecution relied on an alleged confession made by petitioner Rosemarie,
admitting her participation in the crime of Robbery. The defense contested the admissibility of
the confession, and averred that the same was made under duress.
On 20 December 1985, the RTC, Branch XLI of Bacolod City, rendered a Decision,[4] acquitting
petitioner Rosemarie of the crime of Robbery. The RTC held:
The evidence for accused [herein petitioner Rosemarie] more particularly the Medical Certificate
and the testimony of the attending physician as well as the Decision of the NAPOLCOM finding
the investigating officers guilty has clearly establish (sic) the fact that accused was physically
maltreated by the investigating officers in an attempt to force her to confess her participation in
the robbery. Whatever declaration of accused therefore against her interest is inadmissible in
evidence against her, hence, the alleged admission of the accused that she participated in the
commission of the Robbery made to the police investigator and complainant [complainant
respondent Pilar] even if it is true cannot be used against her. Notwithstanding however,
accused could still be found guilty if the evidence for the prosecution is sufficient to establish her
participation in the crime without said alleged admission by the accused. Record, however,
shows that other than the alleged admission of the accused made to the police investigator and
the complainant, the only evidence to establish the participation of the accused in the robbery is
the testimony of the complaining witness that after accused informed her that part of the jewelry
stolen was inside her bag at her room, the complaining witness searched the room of accused
and found one (1) piece of gold necklace. On this point, the evidence adduced shows that the
police authorities went at (sic) the scene of the robbery and thoroughly investigated the incident
including dusting for fingerprints, tending to show that the investigation of the police authorities
was extensive, hence, it was quite improbable and difficult to believe that the police investigator
would fail to search the bag nor the room of accused. This Court[,] therefore[,] find said
testimony of the complaining witness on this point discredited.[5]
The decretal portion of the 20 December 1985 RTC Decision pronounced:
IN VIEW OF THE FOREGOING THEREFORE, this Court finds the evidence for the prosecution
not only insufficient to prove the guilt of the accused beyond reasonable doubt but even
insufficient to establish a prima facie case against her for having participated in the robbery
subject of the above entitled case and therefore ACQUITS accused on the ground of
insufficiency of evidence. The bailbond of the accused for her provisional liberty is hereby
ordered cancelled.[6]
On 9 March 1987, petitioner Rosemarie, assisted by Artemio Taborada, and together with co-
petitioner Conrado Magbanua (Rosemaries father) filed with the RTC, Branch 51, Bacolod City,
a Complaint for Damages[7] against respondent Pilar, assisted by her husband Vicente Junsay,
Ibarra Lopez, and Juanito Jacela. Respondent Pilar was the employer of petitioner Rosemarie,
while respondents Ibarra and Juanito were members of the police force of Bacolod City, and
assigned at the Police Station in Taculing, Bacolod City.
The Complaint, alleged, inter alia, that by reason of respondents false, malicious, and illegal
actuations in filing Criminal Case No. 28 for Robbery against petitioner Rosemarie, the latter
suffered untold pain, shame, humiliation, worry, and mental anguish, which if assessed in
monetary terms will not be less than P200,000.00.[8] It was further alleged therein that Conrado,
Rosemaries father, lost his job and his entire family suffered.[9] Petitioners maintained that
Rosemarie suffered physical pain and mental torture due to the filing of the false criminal charge
against her.[10] They sought moral and exemplary damages, including attorneys fees and
litigation expenses, as well as loss of earnings and expenses incurred in connection with
Rosemaries defense in Criminal Case No. 28 for Robbery.[11] They similarly prayed for payment
of the expenses incurred in the prosecution of the instant case.
Subsequently, petitioners filed a Petition to litigate as pauper which the RTC granted in its Order
dated 9 March 1987, it appearing that they had no means to prosecute their action.[12]
Respondent Pilar filed a Motion to Dismiss,[13] on the ground that the cause of action is barred
by the Statute of Limitations, as crystallized in Article 1146[14] of the Civil Code. From the time
the cause of action arose to the filing of the Complaint, four years and eight months had already
lapsed.
Petitioners filed an Opposition to the Motion to Dismiss,[15] contending that their cause of action
is not for damages based on the physical injuries suffered by Rosemarie during the investigation
of the criminal case nor the violation of her rights for the indignities foisted upon her by the
respondents from 18 July 1982, and several days thereafter.[16] They posited that the damages
sought are for the malicious prosecution of Rosemarie. They reasoned that the baseless filing of
the criminal case for Robbery against Rosemarie, despite her protestations of innocence and the
lack of evidence against her, caused her family to incur expenses and subjected her to untold
shame and humiliation.[17] Petitioners clarified that the allegations about the violation of
Rosemaries rights as a person were included only to demonstrate respondents palpable malice
in the filing of the said criminal case against her. Petitioners postulated that as the Complaint for
Damages is for malicious prosecution, the prescriptive period should be counted from the date of
Rosemaries acquittal in Criminal Case No. 28, or on 20 December 1985, and not from 18 July
1982, the date when respondents injured the rights of Rosemarie. From the time judgment in
Criminal Case No. 28 was rendered to the filing of the Complaint in the instant case, not more
than one year and three months had passed.[18]
On 24 March 1988, the RTC issued an Order[19] denying respondents Motion to Dismiss for
lack of merit. It found that the cause of action of petitioners Complaint was based on malicious
prosecution; hence, the prescriptive period shall be counted from the date of petitioner
Rosemaries acquittal. According to the RTC, the allegations about the wanton violation of the
rights of Rosemarie as a person were to show the pattern of respondents malice.
Respondent Pilar filed before the RTC an Answer,[20] dated 18 May 1988, disclaiming
petitioners allegation that she maltreated petitioner Rosemarie while the latter was being
investigated by the police authorities. She posited, inter alia: that she was not present during the
investigation, and was subsequently informed of petitioner Rosemaries participation in the
robbery by the investigators, the same being reflected in the Joint Affidavit of the police
investigators; that she never laid a hand on petitioner Rosemarie before, during, or after the
investigation, as, in fact, she had no inkling of her participation in the crime; that she had no
hand in the filing of the case except to execute an affidavit regarding her ownership of the lost
jewelry; and that she has no liability whatsoever to petitioner Rosemarie, much less, to her
father, petitioner Conrado, who does not appear to have any involvement in the matter.[21] By
way of counterclaim, she sought damages, including attorneys fees, and costs of suit from the
petitioners.
Petitioners filed a Reply and Answer to Counterclaim,[22] reiterating the allegation in the
Complaint, that respondent Pilar actually participated in the maltreatment of petitioner
Rosemarie, and she cannot deny her participation as she was always present in the police
station during the investigation. Petitioners alleged that respondent Pilar cannot claim lack of
knowledge of the maltreatment and indignities suffered by petitioner Rosemarie because she
herself participated in such maltreatment. Petitioners further contended, inter alia, that they have
a proper and valid cause of action against the respondents, including petitioner Conrado who
suffered and incurred expenses to defend his daughter, Rosemarie, who was then a minor
against unjust accusation, maltreatment and torture.
On 9 September 1988, at the pre-trial, the parties entered into a stipulation of facts. Counsel for
the petitioners manifested that they were claiming damages not for physical injuries which
petitioner Rosemarie allegedly suffered in the hands of respondents during her investigation, but
for her malicious prosecution.[23] In concurrence thereto, counsel for respondents declared that
the main issue was whether Rosemarie was maliciously prosecuted with the filing of the criminal
case for Robbery.[24] Following the stipulations and counter-stipulation of facts, pre-trial was
terminated.
Meanwhile, respondents Ibarra and Juanito, members of the police force of Bacolod City, filed
an Answer and Manifestation,[25] adopting the Answer filed by their co-respondent Pilar, dated
18 May 1988, insofar as the allegations therein were applicable to them, and further adopting the
counterclaim interposed in the aforesaid action.
Trial, thereafter, ensued.
Seeking to fortify their case, petitioners offered the following exhibits, to wit:
Exhibit A The medical certificate issued by Dr. Teodoro S. Lavasa, Medico-legal officer and
Chief, Crime Laboratory, Bacolod Metro Police District, dated July 27, 1982.
This exhibit is offered to show the many injuries sustained by [herein petitioner] Rosemarie
Magbanua at the hands of the [herein respondents] in their joint effort to make her admit the
crime in the absence of proof that she participated therein and despite her protestations of
innocence.
Exhibit B The note of Dr. Teodoro S. Lavada to the jail warden.
This exhibit is offered to show the result of the maltreatment and/or physical injuries inflicted by
the [respondents] on the person of [petitioner] Rosemarie Magbanua hemoptysis, fever, and
body pains - which made the medico-legal officer recommend hospitalization for her.
Exhibit C The information filed by Fiscal Ricardo F. Tornilla, 2nd Asst. City Fiscal, Bacolod City,
dated July 20, 1982.
This exhibit is offered to show the result of the [respondents] confederated efforts for Rosemarie
Magbanua to be prosecuted for the crime she did not commit, including untrue affidavits, a
biased and false investigation report mentioning Rosemarie Magbanuas alleged confession of
her participation in the robbery when she never did, despite the injuries and indignities to which
she was subjected, all of which made the Asst. City Fiscal Ricardo F. Tornilla file the information
against said plaintiff Rosemarie Magbanua.
Exhibit D The Decision rendered by Hon. Quirino D. Abad Santos, Jr., Judge, Regional Trial
Court of Negros Occidental, Branch XLI Bacolod City, in Criminal Case No. 28 entitled, People
of the Philippines vs. Rosemarie Magbanua, et al. dated December 20, 1985.
Exhibit D-1 The portion appearing on page 4 of said decision stating that, IN VIEW OF THE
FOREGOING THEREFORE, this Court finds the evidence for the prosecution not only
insufficient to prove the guilt of the accused beyond reasonable doubt but even insufficient to
establish a prima facie case against her for having participated in the robbery subject of the
above entitled case and therefore ACQUITS accused on the ground of insufficiency of evidence.
The bailbond of the accused for her provisional liberty is hereby ordered cancelled.
This exhibit with its sub-marking is offered to show that the [petitioner] Rosemarie Magbanua
was acquitted of the crime charged because the evidence for the prosecution was not only
insufficient to prove the guilt of the accused beyond reasonable doubt but even insufficient to
establish a prima facie evidence against her for having participated in the robbery, thus glaringly
exposing the utter lack of basis for charging and/or prosecuting Rosemarie Magbanua for the
crime of robbery which was nevertheless filed at the behest of the [respondents] who knowing
fully the bereftness of their stand even tried to concoct additional evidence of having found still
more jewelry in [petitioner] Rosemarie Magbanuas handbag, a maneuver which was debunked
by the honorable Court in its decision.
Exhibit E The decision of the National Police Commission Adjudication Board No. 11 in Adm.
Case No. 83-0888 finding the respondent PFC Ibarra Lopez and respondent Patrolman Juanito
Jacela, two of the defendants, guilty of grave misconduct and ordering their suspension for two
(2) months without pay.
Exhibit E-1 The bracketed dispositive portion of the decision appearing on page 3 thereof which
is as follows:
IN VIEW OF THE FOREGOING, this Board finds respondents PFC IBARRA LOPEZ AND PAT
JUANITO JACELA guilty of Misconduct and they are hereby ordered SUSPENDED FOR TWO
(2) MONTHS WITHOUT PAY WITH WARNING THAT A REPETITION OF THE SAME
OFFENSE SHALL BE PENALIZED MORE SEVERELY.
This exhibit with its submarking is offered to show that the two (2) [respondents], PFC Ibarra
Lopez and Patrolman Juanito Jacela, employed unnecessary force on the person of the
[petitioner] Rosemarie Magbanua just to make her admit and/or confess to a crime she did not
commit, thus contributing to and even making possible the unnecessary, baseless, and
malicious prosecution of the [petitioner].[26]
On 25 January 1991, the RTC issued an Order,[27] admitting Exhibits A to E, including the sub-
markings thereon for the purposes for which they had been offered and for such purpose as may
serve the court a quo in the resolution of the case.[28]
On 25 July 1995, the RTC rendered a Decision dismissing the Complaint. The RTC applied the
established rule that for a malicious prosecution suit to succeed, two indispensable elements
must be shown to exist, to wit: (a) malice and (b) absence of probable cause. It found that the
elements were not successfully shown by petitioners. It held that the mere filing of a suit does
not render a person liable for malicious prosecution should he be unsuccessful for the law could
not have meant to impose a penalty on the right to litigate.[29]
In sustaining the respondents, the RTC said that the filing of the criminal complaint against
petitioner Rosemarie was not prompted with a sinister design to vex, or humiliate her. It
reasoned that respondent Pilar reported the robbery which occurred on 17 July 1982 to the
Bacolod Police Station; consequently, police investigators, including respondents Ibarra and
Juanito, proceeded to the residence of respondent Pilar. It ratiocinated that there was no legal
malice on the part of the latter as victim of the crime of robbery for bringing the same to the
attention of the police authorities. The RTC similarly did not find legal malice on the part of her
co-respondents, Ibarra and Juanito, as they were merely performing their duties when they
conducted the investigation; and subsequently filed the case against petitioner Rosemarie and
her co-accused pursuant thereto.
In denying petitioners prayer for damages arising from malicious prosecution, the RTC ruled
that:
In the course of the investigation, Rosemarie Magbanua admitted her participation in the robbery
together with a certain Ernesto Fernandez and a person named Gudo. The necklace given to
her as her share was recovered in her shoulder bag.
After the police authorities had completed their investigation, they filed a case for robbery with
the office of the City Fiscal of Bacolod City (now City Prosecutor) against Rosemarie Magbanua,
Ernesto Fernandez and a certain Gudo. The Office of the City Fiscal after conducting a
preliminary investigation filed a case for robbery against the three suspects. After trial, as
against then accused now [herein petitioner] Rosemarie Magbanua, the Court acquitted her.
[Herein respondent] Dra. Pilar Junsay, cannot be faulted for reporting to the police. She was
robbed of valuables worth P29,974.00. Besides, she did not tell the police that she was robbed
by herein [petitioner] Rosemarie Magbanua. And, there is no legal malice for a victim of a crime
to report the matter to the police. Furthermore, the mere filing of a suit does not render a person
liable for malicious prosecution should he be unsuccessful for the law could not have meant to
impose a penalty on the right to litigate (Albenson Enterprises Corp. vs. Court of Appeals, 217
SCRA 16).
Neither can [respondents] police investigator Ibarra Lopez and Juanito Jacela be faulted for filing
a complaint of robbery with the Office of the City Fiscal, against herein plaintiff Rosemarie
Magbanua, Ernesto Fernandez and a certain Gudo. It is part of their duties to conduct an
investigation of a case reported to their office. And Rosemarie Magbanua admitted to them her
participation to the commission of the crime together with her co-accused Ernesto Fernandez
and Gudo. Thus, there was probable cause of the crime of robbery against said accused. Their
finding of a probable cause against the accused was shared by the City Fiscals Office when an
Information for robbery against said accused was filed after conducting a preliminary
investigation.
[Respondents] police investigators Ibarra Lopez and Juanito Jacela do not know [respondent]
Dra.Pilar Junsay nor [petitioner] Rosemarie Magbanua, prior to July 18, 1982, when the crime
was reported by the former to their office. And, the criminal complaint filed by them was not only
against Rosemarie Magbanua, but also against Ernesto Fernandez and a certain Gudo. Hence,
it cannot be said that they were prompted by a sinister design to vex, and humiliate [petitioner]
Rosemarie Magbanua.[30]
Petitioners filed a Notice of Appeal on the 25 July 1995 Decision of the RTC. Thus, the records
of the case were subsequently forwarded to the Court of Appeals.
The Court of Appeals affirmed the RTC in toto.
The appellate court declared that the design to vex and humiliate petitioner Rosemarie in the
prosecution of Criminal Case No. 28 was wanting. It held that respondent Pilar as complaining
witness merely reported the matter to the police authorities; while respondents Ibarra and
Juanito were merely performing their duties as investigating police officers. Thus:
In the present case, there was no proof that the prosecution was prompted by a design to vex
and humiliate the [herein petitioner] Rosemarie Magbanua. The crime of robbery was actually
committed and [petitioner] Rosemarie Magbanua admitted her participation therein. There was
nothing illegal, sinister or malicious in prosecuting her on the part of [herein respondent] Dra.
Junsay who, as a victim of the crime of robbery, reported the incident to the police authorities. In
fact, the [respondent] did not suspect that the [petitioner] was one of those who committed the
crime.
On the part of the police investigators, they were only performing their duties in accordance with
the standard procedure of their office. They came to know the victim Dra. Junsay and [petitioner]
Rosemarie Magbanua only during the investigation. The fact was that Rosemarie Magbanua
admitted participation in the commission of the crime. Finding that there was a prima facie case,
the City Fiscal who investigated the case filed a case for robbery in the then Court of First
Instance of Bacolod (now RTC).[31]
The Court of Appeals was also convinced that there was probable cause to believe that the
robbery was committed by petitioner Rosemarie and her co-accused. The finding of probable
cause, according to the appellate court, was confirmed by the filing of the Information for
Robbery by the City Fiscals Office after the preliminary investigation.[32]
The Court of Appeals disposed:
WHEREFORE, the Decision of the trial court dated July 25, 1995 is hereby AFFIRMED IN
TOTO. Costs against the [herein petitioners].[33]
Hence, petitioners come to the succor of this Court via the instant Appeal by Certiorari to assail
the Decision of the Court of Appeals, which affirmed the Decision of the RTC, that there was no
malicious prosecution.
For our resolution is the issue of whether petitioners are entitled to damages for malicious
prosecution. However, before we could resolve said issue, we should first determine whether the
filing of a criminal case for Robbery against petitioner Rosemarie constituted malicious
prosecution.
It is petitioners submission that the prosecution of petitioner Rosemarie was founded upon
baseless accusations.[34] Petitioners posit that the charges were based on false affidavits and
false police reports, without which the criminal case against petitioner Rosemarie would not have
been filed.[35] Petitioners further decry the maltreatment which petitioner Rosemarie allegedly
suffered from the hands of respondents. According to petitioners, Rosemarie was maltreated to
extract a confession from her, and to make her admit to a crime she did not commit. They
reasoned that petitioner Rosemarie, who was then a minor, an uneducated farm girl, and a
stranger in Bacolod City, was subjected to torture and inhumane treatment.[36] Petitioners
contend further that respondent Pilar employed her privileged status in the society as a medical
doctor; and her co-respondents Ibarra and Juanito utilized their positions as members of the
Bacolod City Police to secure an admission from petitioner Rosemarie.[37]
In this jurisdiction, the term 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.[38] While generally
associated with unfounded criminal actions, the term has been expanded to include unfounded
civil suits instituted just to vex and humiliate the defendant despite the absence of a cause of
action or probable cause.[39]
This Court, in Drilon v. Court of Appeals,[40] elucidated, viz:
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).
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).
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). 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.
This Court has drawn the four elements that must be shown to concur to recover damages for
malicious prosecution. Therefore, for a malicious prosecution suit to prosper, the plaintiff must
prove the following: (1) the prosecution did occur, and the defendant was himself the prosecutor
or that he instigated its commencement; (2) the criminal action finally ended with an acquittal; (3)
in bringing the action, the prosecutor acted without probable cause; and (4) the prosecution was
impelled by legal malice -- an improper or a sinister motive.[41] The gravamen of malicious
prosecution is not the filing of a complaint based on the wrong provision of law, but the
deliberate initiation of an action with the knowledge that the charges were false and
groundless.[42]
We shall proceed to determine whether in the prosecution of petitioner Rosemarie for the crime
of Robbery, all four elements were in attendance.
It is not disputed that the first and second elements are present.
The prosecution of petitioner Rosemarie for the crime of robbery did occur, and respondents
Pilar, Ibarra and Juanito instigated its commencement. On 20 December 1985, the RTC, Branch
XLI, Bacolod City, rendered a Decision acquitting Rosemarie Magbanua on the ground of
insufficiency of evidence.
On the question of probable cause, this Court has ruled that for purposes of malicious
prosecution, probable cause means 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.[43] It is merely based on opinion
and reasonable belief.[44] Thus, a finding of probable cause does not require an inquiry into
whether there is sufficient evidence to procure a conviction.[45]
Anent the question of whether the prosecutor acted without probable cause in bringing the
action against petitioner Rosemarie, we find no reason to depart from the conclusions reached
by the RTC and the Court of Appeals. The filing of Criminal Case No. 28 for Robbery was not
without probable cause.
Indeed, during the investigation petitioner Rosemarie admitted her participation in the
commission of the incident complained of. The investigation report, which prompted the filing of
the Information for Robbery against petitioner Rosemarie showed that she admitted to receiving
instruction from her co-accused Ernesto Fernandez and a certain Gudo to leave the barrel belt
of the kitchen door unlocked,[46] so her co-accused can gain entry to the house of respondent
Pilar. Moreover, she admitted that after her co-accused had taken the pieces of jewelry owned
by respondent Pilar, they gave her a necklace which she kept in a shoulder bag. During the
investigation, she was shown the said necklace, and she positively identified the same to be the
necklace her co-accused had given her.[47] On the basis of the said admission, the Office of the
Prosecutor found basis and probable cause to file the appropriate Information with the RTC
against petitioner Rosemarie and her co-accused Ernesto Fernandez and a certain Gudo. The
inadmissibility of the aforesaid admission on the ground that the same was extracted under
duress was an evidentiary matter, which does not detract from the fact that based on petitioner
Rosemaries admission, there was reason for the respondents to believe that the suit was not
unfounded, and that the crime was committed.
Finally, in an action to recover damages based on malicious prosecution, it must be established
that the prosecution was impelled by legal malice. There is necessity of proof that the suit was
so patently malicious as to warrant the award of damages under Articles 19 to 21,[48] of the Civil
Code, or that the suit was grounded on malice or bad faith.[49] Moreover, it is a doctrine well-
entrenched in jurisprudence that the mere act of submitting a case to the authorities for
prosecution does not make one liable for malicious prosecution, for the law would not have
meant to impose a penalty on the right to litigate.[50]
Applying the rule to the case at bar, we affirm the findings of the RTC and the Court of Appeals
that there was no proof of a sinister design on the part of the respondents to vex or humiliate
petitioner Rosemarie by instituting the criminal case against her and her co-accused.
Respondent Pilar who was robbed of her valuable belongings can only be expected to bring the
matter to the authorities. There can be no evil motive that should be attributed to one, who, as
victim of a crime institutes the necessary legal proceedings. At the risk of redundancy, we stress
that the proscription against the imposition of penalty on the right to litigate must not be violated.
Mere filing of a suit does not render a person liable for malicious prosecution should he be
unsuccessful, for the law could not have meant to impose a penalty on the right to litigate.[51]
There was no other explanation or motive as to why respondents would institute baseless
prosecution of petitioner Rosemarie. No evidence was shown that there was bad blood between
respondent Pilar and petitioner Rosemarie prior to the supposed robbery.

We also do not find the actuations of respondents Ibarra and Juanito to be impelled by legal
malice. Their commencement of the action against petitioner Rosemarie and her co-accused
was pursuant to their duties as police officers. The same was made subsequent to the report of
respondent Pilar of the commission of the crime, and the investigation on the person of petitioner
Rosemarie. Even then, mistakes committed by a public officer are not actionable absent any
clear showing that they were motivated by malice or gross negligence amounting to bad
faith,[52] which was not established in the case at bar.

Moreover, as was clear from the outset, the instant case is a suit seeking damages for malicious
prosecution, and not for the violations and maltreatment that respondents allegedly committed
against petitioner Rosemarie in extracting the admission from her. At any rate, the RTC had
ruled that the instant case is not an action on the injuries allegedly suffered by petitioner
Rosemarie, but rather for malicious prosecution. Otherwise, an action seeking damages for her
injuries should have been deemed prescribed.[53]

WHEREFORE, the Appeal is DENIED. The Decision, dated 26 January 1998, of the Court of
Appeals in CA-G.R. CV No. 51750, which affirmed in toto the Decision, dated 25 July 1995, of
the RTC, Branch 51, Bacolod City, in Civil Case No. 4361, is AFFIRMED. Costs against
petitioners.

SO ORDERED.
SPOUSES LUIGI M. GUANIO and Petitioners claim that during the reception, respondents representatives, Catering Director Bea
ANNA HERNANDEZ-GUANIO, Marquez and Sales Manager Tessa Alvarez, did not show up despite their assurance that they
Petitioners, would; their guests complained of the delay in the service of the dinner; certain items listed in the
published menu were unavailable; the hotels waiters were rude and unapologetic when
confronted about the delay; and despite Alvarezs promise that there would be no charge for the
G.R. No. 190601 extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per hour for
the three-hour extension of the event up to 4:00 A.M. the next day.

Petitioners further claim that they brought wine and liquor in accordance with their open bar
- versus - arrangement, but these were not served to the guests who were forced to pay for their drinks.

Present: Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc.
(respondent) and received an apologetic reply from Krister Svensson, the hotels Executive
CARPIO MORALES, Assistant Manager in charge of Food and Beverage. They nevertheless filed a complaint for
Chairperson, J., breach of contract and damages before the Regional Trial Court (RTC) of Makati City.
BRION,
BERSAMIN, In its Answer, respondent claimed that petitioners requested a combination of king prawns and
VILLARAMA, JR., and salmon, hence, the price was increased to P1,200.00 per person, but discounted at P1,150.00;
that contrary to petitioners claim, Marquez and Alvarez were present during the event, albeit
SERENO, JJ. they were not permanently stationed thereat as there were three other hotel functions; that while
MAKATI SHANGRI-LA HOTEL and RESORT, INC., also doing there was a delay in the service of the meals, the same was occasioned by the sudden increase
of guests to 470 from the guaranteed expected minimum number of guests of 350 to a maximum
business under the name of of 380, as stated in the Banquet Event Order (BEO);[2] and that Isaac Albacea, Banquet Service
Promulgated: Director, in fact relayed the delay in the service of the meals to petitioner Luigis father, Gil
SHANGRI-LA HOTEL MANILA, Guanio.

Respondent. Respecting the belated service of meals to some guests, respondent attributed it to the
February 7, 2011 insistence of petitioners wedding coordinator that certain guests be served first.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
On Svenssons letter, respondent, denying it as an admission of liability, claimed that it was
meant to maintain goodwill to its customers.
DECISION

CARPIO MORALES, J. By Decision of August 17, 2006, Branch 148 of the Makati RTC rendered judgment in favor of
petitioners, disposing as follows:

For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna Hernandez- WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
Guanio (petitioners) booked at the Shangri-la Hotel Makati (the hotel). against the defendant ordering the defendants to pay the plaintiff the following:

Prior to the event, Makati Shangri-La Hotel & Resort, Inc. (respondent) scheduled an initial food 1) The amount of P350,000.00 by way of actual damages;
tasting. Petitioners claim that they requested the hotel to prepare for seven persons the two of 2) The amount of P250,000.00 for and as moral damages;
them, their respective parents, and the wedding coordinator. At the scheduled food tasting, 3) The amount of P100,000.00 as exemplary damages;
however, respondent prepared for only six. 4) The amount of P100,000.00 for and as attorneys fees.

Petitioners initially chose a set menu which included black cod, king prawns and angel hair pasta With costs against the defendant.
with wild mushroom sauce for the main course which cost P1,000.00 per person. They were,
however, given an option in which salmon, instead of king prawns, would be in the menu at SO ORDERED.[3]
P950.00 per person. They in fact partook of the salmon.

Three days before the event, a final food tasting took place. Petitioners aver that the salmon
served was half the size of what they were served during the initial food tasting; and when
queried about it, the hotel quoted a much higher price (P1,200.00) for the size that was initially
served to them. The parties eventually agreed on a final price P1,150 per person.
A day before the event or on July 27, 2001, the parties finalized and forged their contract.[1]
In finding for petitioners, the trial court relied heavily on the letter of Svensson which is partly
quoted below:
Upon receiving your comments on our service rendered during your reception here with us, we
are in fact, very distressed. Right from minor issues pappadums served in the soup instead of
the creutons, lack of valet parkers, hard rolls being too hard till a major one slow service, rude
and arrogant waiters, we have disappointed you in all means.
Indeed, we feel as strongly as you do that the services you received were unacceptable and
definitely not up to our standards. We understand that it is our job to provide excellent service
and in this instance, we have fallen short of your expectations. We ask you please to accept our
profound apologies for causing such discomfort and annoyance. [4] (underscoring supplied)
The trial court observed that from the tenor of the letter . . . the defendant[-herein respondent]
admits that the services the plaintiff[-herein petitioners] received were unacceptable and
definitely not up to their standards.[5]
On appeal, the Court of Appeals, by Decision of July 27, 2009,[6] reversed the trial courts
decision, it holding that the proximate cause of petitioners injury was an unexpected increase in
their guests:
x x x Hence, the alleged damage or injury brought about by the confusion, inconvenience and
disarray during the wedding reception may not be attributed to defendant-appellant Shangri-la.
We find that the said proximate cause, which is entirely attributable to plaintiffs-appellants, set
the chain of events which resulted in the alleged inconveniences, to the plaintiffs-appellants.
Given the circumstances that obtained, only the Sps. Guanio may bear whatever consequential
damages that they may have allegedly suffered.[7] (underscoring supplied)
Petitioners motion for reconsideration having been denied by Resolution of November 18, 2009,
the present petition for review was filed.
The Court finds that since petitioners complaint arose from a contract, the doctrine of proximate
cause finds no application to it:
The doctrine of proximate cause is applicable only in actions for quasi-delicts, not in actions
involving breach of contract. x x x The doctrine is a device for imputing liability to a person where
there is no relation between him and another party. In such a case, the obligation is created by
law itself. But, where there is a pre-existing contractual relation between the parties, it is the
parties themselves who create the obligation, and the function of the law is merely to regulate
the relation thus created.[8] (emphasis and underscoring supplied)
What applies in the present case is Article 1170 of the Civil Code which reads:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence or
delay, and those who in any manner contravene the tenor thereof, are liable for damages.
RCPI v. Verchez, et al. [9] enlightens:
In culpa contractual x x x the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief. The law, recognizing the
obligatory force of contracts, will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach
upon the contract confers upon the injured party a valid cause for recovering that which may
have been lost or suffered. The remedy serves to preserve the interests of the promissee that
may include his expectation interest, which is his interest in having the benefit of his bargain by
being put in as good a position as he would have been in had the contract been performed, or
his reliance interest, which is his interest in being reimbursed for loss caused by reliance on the
contract by being put in as good a position as he would have been in had the contract not been
made; or his restitution interest, which is his interest in having restored to him any benefit that he
has conferred on the other party. Indeed, agreements can accomplish little, either for their
makers or for society, unless they are made the basis for action. The effect of every infraction is
to create a new duty, that is, to make RECOMPENSE to the one who has been injured by the
failure of another to observe his contractual obligation unless he can show extenuating
circumstances, like proof of his exercise of due diligence x x x or of the attendance of fortuitous
event, to excuse him from his ensuing liability. (emphasis and underscoring in the original;
capitalization supplied)
The pertinent provisions of the Banquet and Meeting Services Contract between the parties
read:
4.3 The ENGAGER shall be billed in accordance with the prescribed rate for the minimum
guaranteed number of persons contracted for, regardless of under attendance or non-
appearance of the expected number of guests, except where the ENGAGER cancels the
Function in accordance with its Letter of Confirmation with the HOTEL. Should the attendance
exceed the minimum guaranteed attendance, the ENGAGER shall also be billed at the actual
rate per cover in excess of the minimum guaranteed attendance.
xxxx
4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours before the scheduled
date and time of the Function of any change in the minimum guaranteed covers. In the absence
of such notice, paragraph 4.3 shall apply in the event of under attendance. In case the actual
number of attendees exceed the minimum guaranteed number
by ten percent (10%), the HOTEL shall not in any way be held liable for any damage or
inconvenience which may be caused thereby. The ENGAGER shall also undertake to advise the
guests of the situation and take positive steps to remedy the same.[10] (emphasis, italics and
underscoring supplied)
Breach of contract is defined as the failure without legal reason to comply with the terms of a
contract. It is also defined as the [f]ailure, without legal excuse, to perform any promise which
forms the whole or part of the contract.[11]
The appellate court, and even the trial court, observed that petitioners were remiss in their
obligation to inform respondent of the change in the expected number of guests. The
observation is reflected in the records of the case. Petitioners failure to discharge such obligation
thus excused, as the above-quoted paragraph 4.5 of the parties contract provide, respondent
from liability for any damage or inconvenience occasioned thereby.
As for petitioners claim that respondent departed from its verbal agreement with petitioners, the
same fails, given that the written contract which the parties entered into the day before the
event, being the law between them.
Respecting the letter of Svensson on which the trial court heavily relied as admission of
respondents liability but which the appellate court brushed aside, the Court finds the appellate
courts stance in order. It is not uncommon in the hotel industry to receive comments, criticisms
or feedback on the service it delivers. It is also customary for hotel management to try to smooth
ruffled feathers to preserve goodwill among its clientele.
Kalalo v. Luz holds:[12]
Statements which are not estoppels nor judicial admissions have no quality of conclusiveness,
and an opponent whose admissions have been offered against him may offer any evidence
which serves as an explanation for his former assertion of what he now denies as a fact.
 WHEREFORE, the Court of Appeals Decision dated July 27, 2009 is PARTIALLY REVERSED.
Respondents Catering Director, Bea Marquez, explained the hotels procedure on receiving and Respondent is, in light of the foregoing discussion, ORDERED to pay the amount of P50,000.00
processing complaints, viz: to petitioners by way of nominal damages.

ATTY. CALMA: SO ORDERED.

Q You mentioned that the letter indicates an acknowledgement of the concern and that there
was-the first letter there was an acknowledgment of the concern and an apology, not necessarily
indicating that such or admitting fault?
A Yes.
Q Is this the letter that you are referring to?
If I may, Your Honor, that was the letter dated August 4, 2001, previously marked as plaintiffs
exhibits, Your Honor. What is the procedure of the hotel with respect to customer concern?
A Upon receipt of the concern from the guest or client, we acknowledge receipt of such concern,
and as part of procedure in service industry particularly Makati Shangri-la we apologize for
whatever inconvenience but at the same time saying, that of course, we would go through
certain investigation and get back to them for the feedback with whatever concern they may
have.
Q Your Honor, I just like at this point mark the exhibits, Your Honor, the letter dated August 4,
2001 identified by the witness, Your Honor, to be marked as Exhibit 14 and the signature of Mr.
Krister Svensson be marked as Exhibit 14-A.[13]
xxxx
Q In your opinion, you just mentioned that there is a procedure that the hotel follows with respect
to the complaint, in your opinion was this procedure followed in this particular concern?
A Yes, maam.
Q What makes you say that this procedure was followed?
A As I mentioned earlier, we proved that we did acknowledge the concern of the client in this
case and we did emphatize from the client and apologized, and at the same time got back to
them in whatever investigation we have.
Q You said that you apologized, what did you apologize for?
A Well, first of all it is a standard that we apologize, right? Being in the service industry, it is a
practice that we apologize if there is any inconvenience, so the purpose for apologizing is mainly
to show empathy and to ensure the client that we are hearing them out and that we will do a
better investigation and it is not in any way that we are admitting any fault.[14] (underscoring
supplied)

To the Court, the foregoing explanation of the hotels Banquet Director overcomes any
presumption of admission of breach which Svenssons letter might have conveyed.

The exculpatory clause notwithstanding, the Court notes that respondent could have managed
the situation better, it being held in high esteem in the hotel and service industry. Given
respondents vast experience, it is safe to presume that this is not its first encounter with booked
events exceeding the guaranteed cover. It is not audacious to expect that certain measures
have been placed in case this predicament crops up. That regardless of these measures,
respondent still received complaints as in the present case, does not amuse.

Respondent admitted that three hotel functions coincided with petitioners reception. To the
Court, the delay in service might have been avoided or minimized if respondent exercised
prescience in scheduling events. No less than quality service should be delivered especially in
events which possibility of repetition is close to nil. Petitioners are not expected to get married
twice in their lifetimes.

In the present petition, under considerations of equity, the Court deems it just to award the
amount of P50,000.00 by way of nominal damages to petitioners, for the discomfiture that they
were subjected to during to the event.[15] The Court recognizes that every person is entitled to
respect of his dignity, personality, privacy and peace of mind.[16] Respondents lack of prudence
is an affront to this right.
G.R. No. 195549 September 3, 2014
WILLAWARE PRODUCTS CORPORATION, Petitioner,
vs.
JESICHRIS MANUFACTURING CORPORATION, Respondent.
DECISION
PERALTA, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeking to set aside the Decision1 dated November 24, 2010 and Resolution2 dated February
10, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 86744.
The facts, as found by the Regional Trial Court (RTC), are as follows:
[Respondent] Jesichris Manufacturing Company ([respondent] for short) filed this present
complaint for damages for unfair competition with prayer for permanent injunction to enjoin
[petitioner] Willaware Products Corporation ([petitioner] for short) from manufacturing and
distributing plastic-made automotive parts similar to those of [respondent].
[Respondent] alleged that it is a duly registeredpartnership engaged in the manufacture and
distribution of plastic and metal products, with principal office at No. 100 Mithi Street,
Sampalukan, Caloocan City. Since its registration in 1992, [respondent] has been manufacturing
in its Caloocan plant and distributing throughout the Philippines plastic-made automotive parts.
[Petitioner], on the other hand, which is engaged in the manufacture and distribution of
kitchenware items made of plastic and metal has its office near that of [respondent].
[Respondent] further alleged that in view of the physical proximity of [petitioners] office to
[respondents] office, and in view of the fact that some of the [respondents] employeeshad
transferred to [petitioner], [petitioner] had developed familiarity with [respondents] products,
especially its plastic-made automotive parts.
That sometime in November 2000, [respondent] discovered that [petitioner] had been
manufacturing and distributing the same automotive parts with exactly similar design, same
material and colors but was selling these products at a lower price as [respondents] plastic-
made automotive parts and to the same customers.
[Respondent] alleged that it had originated the use of plastic in place of rubber in the
manufacture ofautomotive underchassis parts such as spring eye bushing, stabilizer bushing,
shock absorberbushing, center bearing cushions, among others. [Petitioners] manufacture of
the same automotive parts with plastic materialwas taken from [respondents] idea of using
plastic for automotive parts. Also, [petitioner] deliberately copied [respondents] products all of
which acts constitute unfair competition, is and are contrary to law, morals, good customs and
public policy and have caused [respondent] damages in terms oflost and unrealizedprofits in the
amount of TWO MILLION PESOS as of the date of [respondents] complaint.
Furthermore, [petitioners] tortuous conduct compelled [respondent] to institute this action and
thereby to incur expenses in the way of attorneys fees and other litigation expenses in the
amount of FIVE HUNDRED THOUSAND PESOS (500,000.00).
In its Answer, [petitioner] denies all the allegations of the [respondent] except for the following
facts: that it is engaged in the manufacture and distribution of kitchenware items made of plastic
and metal and that theres physical proximity of [petitioners] office to [respondent]s office, and
that someof [respondents] employees had transferred to [petitioner] and that over the years
[petitioner] had developed familiarity with [respondents] products, especially its plastic made
automotive parts.
As its Affirmative Defenses, [petitioner] claims that there can be no unfair competition as the
plastic-made automotive parts are mere reproductions of original parts and their construction
and composition merely conforms to the specificationsof the original parts of motor vehicles they
intend to replace. Thus, [respondent] cannot claim that it "originated" the use of plastic for these
automotive parts. Even assuming for the sake of argument that [respondent] indeed originated
the use of these plastic automotive parts, it still has no exclusive right to use, manufacture and
sell these as it has no patent over these products. Furthermore, [respondent] is not the only
exclusive manufacturer of these plastic-made automotive parts as there are other
establishments which were already openly selling them to the public.3
After trial on the merits, the RTC ruled in favor of respondent. It ruled that petitioner clearly
invaded the rights or interest of respondent by deliberately copying and performing acts
amounting to unfair competition. The RTC further opined that under the circumstances, in order
for respondents property rights to be preserved, petitioners acts of manufacturing similar
plastic-made automotive parts such as those of respondents and the selling of the
sameproducts to respondents customers, which it cultivated over the years, will have to be
enjoined. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the court finds the defendant liable to plaintiff Two Million
(2,000,000.00) Pesos, as actual damages, One Hundred Thousand (100,000.00) Pesos as
attorneys fees and One Hundred Thousand (100,000.00) Pesos for exemplary damages. The
court hereby permanently [enjoins] defendant from manufacturing the plastic-made automotive
parts as those manufactured by plaintiffs.
SO ORDERED.4
Thus, petitioner appealed to the CA.
On appeal, petitioner asserts that ifthere is no intellectual property protecting a good belonging
to another,the copying thereof for production and selling does not add up to unfair competition
as competition is promoted by law to benefit consumers. Petitioner further contends that it did
not lure away respondents employees to get trade secrets. It points out that the plastic spare
parts sold by respondent are traded in the market and the copying of these can be done by
simplybuying a sample for a mold to be made.
Conversely, respondent averred that copyright and patent registrations are immaterial for an
unfair competition case to prosper under Article 28 of the Civil Code. It stresses that the
characteristics of unfair competition are present in the instant case as the parties are trade rivals
and petitioners acts are contrary to good conscience for deliberately copying its products and
employing its former employees.
In a Decision dated November 24,2010, the CA affirmed with modification the ruling of the RTC.
Relevant portions of said decision read:
Despite the evidence showing thatWillaware took dishonest steps in advancing its business
interest against Jesichris, however, the Court finds no basis for the award by the RTC of actual
damages. One is entitled to actual damages as one has duly proven. The testimony of Quejada,
who was engaged by Jesichris in 2001 to audit its business, only revealed that there was a
discrepancy between the sales of Jesichris from 2001 to 2002. No amount was mentioned. As
for Exhibit "Q," which is a copy of the comparative income statement of Jesichris for 1999-2002,
it shows the decline of the sales in 2002 in comparison with those made in 2001 but it does not
disclose if this pertains to the subject automotive parts or to the other products of Jesichris like
plates.
In any event, it was clearly shown that there was unfair competition on the part of Willaware that
prejudiced Jesichris. It is only proper that nominal damages be awarded in the amount of Two
Hundred Thousand Pesos (200,000.00) in order to recognize and vindicate Jesichris rights.
The RTCs award of attorneys fees and exemplary damages is also maintained.

xxxx
WHEREFORE, premises considered, the Decision dated April 15, 2003 of the Regional Trial
Court of Caloocan City, Branch 131, in Civil Case No. C-19771 is hereby MODIFIED. The award
of Two Million Pesos (2,000,000.00) actual damages is deleted and in its place, Two Hundred
Thousand Pesos nominal damages is awarded.
SO ORDERED.5
Dissatisfied, petitioner moved for reconsideration. However, the same was denied for lack of
merit by the CA in a Resolution dated February 10, 2011.
Hence, the present Petition for Review wherein petitioner raises the following issues for our
resolution:
(1) Whether or not there is unfair competition under human relations when the parties are not
competitors and there is actually no damage on the part of Jesichris?
(2) Consequently, if there is no unfair competition, should there be moral damages and
attorneys fees?
(3) Whether or not the addition of nominal damages is proper although no rights have been
established?
(4) If ever the right of Jesichris refersto its copyright on automotive parts, should it be considered
in the light of the said copyrights were considered to be void by no less than this Honorable
Court in SC GR No. 161295?
(5) If the right involved is "goodwill" then the issue is: whether or not Jesichris has established
"goodwill?"6
In essence, the issue for our resolution is: whether or not petitioner committed acts amounting to
unfair competition under Article 28 of the Civil Code.
Prefatorily, we would like to stress that the instant case falls under Article 28 of the Civil Code on
humanrelations, and not unfair competition under Republic Act No. 8293,7 as the present suit is
a damage suit and the products are not covered by patent registration. A fortiori, the existence of
patent registration is immaterial in the present case.
The concept of "unfair competition"under Article 28 is very much broader than that covered by
intellectual property laws. Under the present article, which follows the extended concept of
"unfair competition" in American jurisdictions, the term coverseven cases of discovery of trade
secrets of a competitor, bribery of his employees, misrepresentation of all kinds, interference
with the fulfillment of a competitors contracts, or any malicious interference with the latters
business.8
With that settled, we now come to the issue of whether or not petitioner committed acts
amounting tounfair competition under Article 28 of the Civil Code.
We find the petition bereft of merit.
Article 28 of the Civil Code provides that "unfair competition in agricultural, commercial or
industrial enterprises or in labor through the use of force, intimidation, deceit, machination or any
other unjust, oppressive or high-handed method shall give rise to a right of action by the person
who thereby suffers damage."
From the foregoing, it is clear thatwhat is being sought to be prevented is not competitionper
sebut the use of unjust, oppressive or high- handed methods which may deprive others of a fair
chance to engage in business or to earn a living. Plainly,what the law prohibits is unfair
competition and not competition where the means usedare fair and legitimate.
In order to qualify the competition as "unfair," it must have two characteristics: (1) it must involve
an injury to a competitor or trade rival, and (2) it must involve acts which are characterized as
"contrary to good conscience," or "shocking to judicial sensibilities," or otherwise unlawful; in the
language of our law, these include force, intimidation, deceit, machination or any other unjust,
oppressive or high-handed method. The public injury or interest is a minor factor; the essence of
the matter appears to be a private wrong perpetrated by unconscionable means.9
Here, both characteristics are present.
First, both parties are competitors or trade rivals, both being engaged in the manufacture of
plastic-made automotive parts. Second, the acts of the petitioner were clearly "contrary to good
conscience" as petitioner admitted having employed respondents formeremployees, deliberately
copied respondents products and even went to the extent of selling these products to
respondents customers.10
To bolster this point, the CA correctly pointed out that petitioners hiring of the former employees
of respondent and petitioners act of copying the subject plastic parts of respondent were
tantamount to unfair competition, viz.:
The testimonies of the witnesses indicate that [petitioner] was in bad faith in competing with the
business of [respondent].1wphi1 [Petitioners] acts can be characterized as executed with
mischievous subtle calculation. To illustrate, in addition to the findings of the RTC, the Court
observes that [petitioner] is engaged in the production of plastic kitchenware previous to its
manufacturing of plasticautomotive spare parts, it engaged the services of the then mold setter
and maintenance operator of [respondent], De Guzman, while he was employed by the latter. De
Guzman was hired by [petitioner] in order to adjust its machinery since quality plastic automotive
spare parts were not being made. It baffles the Court why [petitioner] cannot rely onits own mold
setter and maintenance operator to remedy its problem. [Petitioners] engagement of De
Guzman indicates that it is banking on his experience gained from working for [respondent].
Another point we observe is that Yabut, who used to be a warehouse and delivery man of
[respondent], was fired because he was blamed of spying in favor of [petitioner]. Despite this
accusation, he did not get angry. Later on, he applied for and was hired by [petitioner] for the
same position he occupied with [respondent]. These sequence of events relating to his
employment by [petitioner] is suspect too like the situation with De Guzman.11
Thus, it is evident that petitioner isengaged in unfair competition as shown by his act of suddenly
shifting his business from manufacturing kitchenware to plastic-made automotive parts; his luring
the employees of the respondent to transfer to his employ and trying to discover the trade
secrets of the respondent.12
Moreover, when a person starts an opposing place of business, not for the sake of profit to
himself, but regardless of loss and for the sole purpose of driving his competitor out of business
so that later on he can take advantage of the effects of his malevolent purpose, he is guilty of
wanton wrong.13 As aptly observed by the courta quo, the testimony of petitioners witnesses
indicate that it acted in bad faith in competing with the business of respondent, to wit:
[Petitioner], thru its General Manager, William Salinas, Jr., admitted that it was never engaged in
the business of plastic-made automotive parts until recently, year 2000:
Atty. Bautista: The business name of Willaware Product Corporation is kitchenware, it is (sic)
not? Manufacturer of kitchenware and distributor ofkitchenware, is it not? Mr. Salinas: Yes, sir.
Atty. Bautista: And you said you have known the [respondent] Jesichris Manufacturing Co., you
have known it to be manufacturing plastic automotive products, is it not? Mr. Salinas: Yes, sir.
Atty. Bautista: In fact, you have been (sic) physically become familiar with these products, plastic Q: And who else was there?
automotive products of Jesichris? Mr. Salinas: Yes, sir.
A: William Salinas, sir.
How [petitioner] was able to manufacture the same products, in terms of color, size, shape and
composition as those sold by Jesichris was due largely to the sudden transfer ofJesichris Q: And will you kindly inform us what happened when you spotted upon them drinking?
employees to Willaware.
A: Jun Molina called me, sir.
Atty. Bautista: Since when have you been familiar with Jesichris Manufacturing Company?
Q: And what happened after that?
Mr. Salinas: Since they transferred there (sic) our place.
A: At that time, he offered mea glass of wine and before I was able to drink the wine, Mr. Salinas
Atty. Bautista: And that was in what year? Mr. Salinas: Maybe four (4) years. I dont know the uttered something, sir.
exact date.
Q: And what were those words uttered by Mr. Salinas to you?
Atty. Bautista: And some of the employees of Jesichris Manufacturing Co. have transferred to
your company, is it not? A: "O, ano naapektuhan na kayo sa ginaya (sic) ko sa inyo?"

Mr. Salinas: Yes, sir. Q: And what did you do after that, after hearing those words?

Atty. Bautista: How many, more or less? A: And he added these words, sir. "sabihin mo sa amo mo, dalawang taon na lang
pababagsakin ko na siya."
Mr. Salinas: More or less, three (3).
Q: Alright, hearing those words, will you kindly tell this court whom did you gather to be referred
Atty. Bautista: And when, in what year or month did they transfer to you? to as your "amo"?

Mr. Salinas: First, November 1. A: Mr. Jessie Ching, sir.14

Atty. Bautista: Year 2000? In sum, petitioner is guilty of unfair competition under Article 28 of the Civil Code.

Mr. Salinas: Yes sir. And then the other maybe February, this year. And the other one, just one
month ago.
That [petitioner] was clearly outto take [respondent] out of business was buttressed by the
testimony of [petitioners] witness, Joel Torres:
Q: Are you familiar with the [petitioner], Willaware Product Corporation?
A: Yes, sir.
However, since the award of Two Million Pesos (2,000,000.00) in actual damages had been
deleted and in its place Two Hundred Thousand Pesos (200,000.00) in nominal damages is
awarded, the attorney's fees should concomitantly be modified and lowered to Fifty Thousand
Pesos (50,000.00).
WHEREFORE, the instant petition is DENIED. The Decision dated November 24, 2010 and
Resolution dated February 10, 2011 of the Court of Appeals in CA-G.R. CV No. 86744 are
hereby AFFIRMED with MODIFICATION that the award of attorney's fees be lowered to Fifty
Thousand Pesos (50,000.00).

Q: Will you kindly inform this court where is the office of this Willaware Product Corporation SO ORDERED.
(sic)?

A: At Mithi Street, Caloocan City, sir.

Q: And Mr. Witness, sometime second Saturday of January 2001, will you kindly inform this
court what unusual even (sic) transpired between you and Mr. Salinas on said date?

A: There was, sir.

Q: What is that?

A: Sir, I was walking at that time together with my wife going to the market and then I passed by
the place where they were having a drinking spree, sir.

Q: You mentioned they, who were they who were drinking at that time?

A: I know one Jun Molina, sir.

G.R. No. 86720 September 2, 1994
MHP GARMENTS, INC., and LARRY C. DE GUZMAN, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, AGNES VILLA CRUZ, MIRASOL LUGATIMAN, and
GERTRUDES GONZALES, respondents.
Benjamin M. Dacanay for petitioners.
Emmanuel O. Tansingco for private respondents.
PUNO, J.:
The constitutional protection of our people against unreasonable search and seizure is not
merely a pleasing platitude. It vouchsafes our right to privacy and dignity against undesirable
intrusions committed by any public officer or private individual. An infringement of this right
justifies an award for damages.
On February 22, 1983, petitioner MHP Garments, Inc., was awarded by the Boy Scouts of the
Philippines, the exclusive franchise to sell and distribute official Boy Scouts uniforms, supplies,
badges, and insignias. In their Memorandum Agreement, petitioner corporation was given the
authority to "undertake or cause to be undertaken the prosecution in court of all illegal sources of
scout uniforms and other scouting supplies." 1
Sometime in October 1983, petitioner corporation received information that private respondents
Agnes Villa Cruz, Mirasol Lugatiman, and Gertrudes Gonzales were selling Boy Scouts items
and paraphernalia without any authority. Petitioner de Guzman, an employee of petitioner
corporation, was tasked to undertake the necessary surveillance and to make a report to the
Philippine Constabulary (PC).
On October 25, 1983, at about 10:30 A.M., petitioner de Guzman, Captain Renato M. Peafiel,
and two (2) other constabulary men of the Reaction Force Battalion, Sikatuna Village, Diliman,
Quezon City went to the stores of respondents at the Marikina Public Market. Without any
warrant, they seized the boy and girl scouts pants, dresses, and suits on display at respondents'
stalls. The seizure caused a commotion and embarrassed private respondents. Receipts were
issued for the seized items. The items were then turned over by Captain Peafiel to petitioner
corporation for safekeeping.
A criminal complaint for unfair competition was then filed against private respondents. 2 During
its pendency, petitioner de Guzman exacted from private respondent Lugatiman the sum of
THREE THOUSAND ONE HUNDRED PESOS (P3,100.00) in order to be dropped from the
complaint. On December 6, 1983, after a preliminary investigation, the Provincial Fiscal of Rizal
dismissed the complaint against all the private respondents. On February 6, 1984, he also
ordered the return of the seized items. The seized items were not immediately returned despite
demands. 3 Private respondents had to go personally to petitioners' place of business to recover
their goods. Even then, not all the seized items were returned. The other items returned were of
inferior quality.
Private respondents then filed Civil Case No. 51144 against the petitioners for sums of money
and damages. 4 In its Decision dated January 9, 1987, the trial court ruled for the private
respondents, thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendants,
ordering the latter jointly and severally:
1. To return the amount of P3,100.00 to plaintiff Mirasol Lugatiman with interest at 12%
per annum from January 12, 1984, the date of the last receipt issued, until fully paid;
2. To pay plaintiff Agnes Villa Cruz the sum of P2,000.00 for the 26 pieces of girl scout
items not returned;
3. To pay plaintiffs the amount of P50,000.00 for and as moral damages and P15,000.00
for and as exemplary damages; and
4. P5,000.00 for and as attorney's fees and litigation expenses.
Costs against the defendants.
SO ORDERED.
The decision was appealed to the respondent court. On January 18, 1989, its Fifth Division, 5
affirmed the Decision with modification, thus:
WHEREFORE, the decision appealed from is AFFIRMED with MODIFICATION; and, as
modified, the dispositive portion thereof now reads as follows:
Judgment is hereby rendered in favor of plaintiffs (private respondents) and against defendants
(petitioners), ordering the latter jointly and severally;
1. To return the amount of P3,100.00 to plaintiff (respondent) Mirasol Lugatiman and
cancel her application for distributor's license;
2. To pay plaintiff (respondent) Agnes Villa Cruz the sum of P2,000.00 for the unreturned
26 pieces of girl scouts items with interest at 12% per annum from June 4, 1984 (date the
complaint was filed) until it is fully paid;
3. To pay plaintiffs (respondents) the amount of P10,000.00 each, or a total of
P30,000.00, for and as moral damages; and P5,000.00 each, or a total of P15,000.00, for and
as exemplary damages; and
4. To pay plaintiffs (respondents) P5,000.00 for and as attorney's fees and litigation
expenses.
Costs of the case a quo and the instant appeal are assessed jointly and severally against
defendants-appellants (petitioners) MHP Garments, Inc. and Larry de Guzman.
SO ORDERED.
In this petition for certiorari, petitioners contend:
FIRST ASSIGNMENT OF ERROR
THE COURT OF APPEALS ERRED IN IMPUTING LIABILITY FOR DAMAGES TO THE
PETITIONERS WHO DID NOT EFFECT THE SEIZURE OF THE SUBJECT MERCHANDISE.
SECOND ASSIGNMENT OF ERROR
THE COURT OF APPEALS ERRED WHEN IT MADE A FINDING THAT THE MANNER WITH
WHICH THE CONFISCATION OF PRIVATE RESPONDENTS WAS TORTIOUS BUT
PENALIZED INSTEAD THE PETITIONERS WHO DID NOT COMMIT THE ACT OF
CONFISCATION.
THIRD ASSIGNMENT OF ERROR
THE COURT OF APPEALS ERRED WHEN IT FOUND FOR THE PRIVATE RESPONDENTS
AND AGAINST THE PETITIONERS.
We affirm.
Article III, section 2, of the Constitution protects our people from unreasonable search and
seizure. It provides:
The right of the people to be secure in their persons, houses, papers, and effects against
unreasonable searches and seizures of whatever nature for any purpose shall be inviolable, and
no search warrant or warrant of arrest shall issue except upon probable cause to be determined
personally by the judge after examination under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the place to be searched and the persons
or things to be seized.
This provision protects not only those who appear to be innocent but also those who appear to
be guilty but are nevertheless to be presumed innocent until the contrary is proved. 6 In the case
at bench, the seizure was made without any warrant. Under the Rules of Court, 7 a warrantless
search can only be undertaken under the following circumstance:
Sec. 12. Search incident to a lawful arrest. - A person lawfully arrested may be searched for
dangerous weapons or anything which may be used as proof of the commission of an offense,
without a search warrant.
We hold that the evidence did not justify the warrantless search and seizure of private
respondents' goods. Petitioner corporation received information that private respondents were
illegally selling Boy Scouts items and paraphernalia in October 1983. The specific date and time
are not established in the evidence adduced by the parties. Petitioner de Guzman then made a
surveillance of the stores of private respondents. They reported to the Philippine Constabulary
and on October 25, 1983, the raid was made on the stores of private respondents and the
supposed illicit goods were seized. The progression of time between the receipt of the
information and the raid of the stores of private respondents shows there was sufficient time for
petitioners and the PC raiding party to apply for a judicial warrant. Despite the sufficiency of
time, they did not apply for a warrant and seized the goods of private respondents. In doing so,
they took the risk of a suit for damages in case the seizure would be proved to violate the right of
private respondents against unreasonable search and seizure. In the case at bench, the search
and seizure were clearly illegal. There was no probable cause for the seizure. Probable cause
for a search has been defined as "such facts and circumstances which would lead a reasonably
discreet and prudent man to believe that an offense has been committed and that the objects
sought in connection with the offense are in the place sought to be searched." 8 These facts and
circumstances were not in any way shown by the petitioners to justify their warrantless search
and seizure. Indeed, after a preliminary investigation, the Provincial Fiscal of Rizal dismissed
their complaint for unfair competition and later ordered the return of the seized goods.
Petitioners would deflect their liability with the argument that it was the Philippine Constabulary
that conducted the raid and their participation was only to report the alleged illegal activity of
private respondents.
While undoubtedly, the members of the PC raiding team should have been included in the
complaint for violation of the private respondents' constitutional rights, still, the omission will not
exculpate petitioners.
In the case of Lim vs. Ponce de Leon, 9 we ruled for the recovery of damages for violation of
constitutional rights and liberties from public officer or private individual, thus:
Art. 32. Any public officer or employee, or any private individual, who directly or indirectly
obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and
liberties of another person shall be liable to the latter for damages.
xxx xxx xxx
(9) The rights to be secure in one's person, house, papers, and effects against
unreasonable searches and seizures.
xxx xxx xxx
The indemnity shall include moral damages. Exemplary damages may also be adjudged.
Art. 2219. Moral damages may be recovered in the following and analogous cases:
xxx xxx xxx
(6) Illegal search;
(1) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
Pursuant to the foregoing provisions, a person whose constitutional rights have been violated or
impaired is entitled to actual and moral damages from the public officer or employee responsible
therefor. In addition, exemplary damages may also be awarded.
xxx xxx xxx
The very nature of Article 32 is that the wrong may be civil or criminal. It is not necessary
therefore that there should be malice or bad faith. To make such a requisite would defeat the
main purpose of Article 32 which is the effective protection of individual rights. Public officials in
the past have abused their powers on the pretext of justifiable motives or good faith in the
performance of their duties. Precisely, the object of the Article is to put an end to official abuse
by plea of the good faith. In the United States this remedy is in the nature of a tort. (emphasis
supplied)
In the subsequent case of Aberca vs. Ver, 10 the Court En Banc explained the liability of
persons indirectly responsible, viz:
[T]he decisive factor in this case, in our view, is the language of Article 32. The law speaks of an
officer or employee or person "directly or indirectly" responsible for the violation of the
constitutional rights and liberties of another. Thus, it is not the actor alone (i.e., the one directly
responsible) who must answer for damages under Article 32; the person indirectly responsible
has also to answer for the damages or injury caused to the aggrieved party.
xxx xxx xxx
While it would certainly be too naive to expect that violators of human rights would easily be
deterred by the prospect of facing damages suits, it should nonetheless be made clear in no
uncertain terms that Article 32 of the Civil Code makes the persons who are directly, as well as
indirectly, responsible for the transgression joint tortfeasors.
xxx xxx xxx
[N]either can it be said that only those shown to have participated "directly" should be held liable.
Article 32 of the Civil Code encompasses within the ambit of its provisions those directly, as well
as indirectly, responsible for its violations. (emphasis supplied)
Applying the aforecited provisions and leading cases, the respondent court correctly granted
damages to private respondents. Petitioners were indirectly involved in transgressing the right of
private respondents against unreasonable search and seizure. Firstly, they instigated the raid
pursuant to their covenant in the Memorandum Agreement to undertake the prosecution in court
of all illegal sources of scouting supplies. 11 As correctly observed by respondent court: Respondent Lugatiman testified:

Indeed, the acts committed by the PC soldiers of unlawfully seizing appellees' (respondents')
merchandise and of filing the criminal complaint for unfair competition against appellees
(respondents) were for the protection and benefit of appellant (petitioner) corporation. Such
being the case, it is, thus, reasonably fair to infer from those acts that it was upon appellant
(petitioner) corporation's instance that the PC soldiers conducted the raid and effected the illegal
seizure. These circumstances should answer the trial court's query posed in its decision now
under consideration as to why the PC soldiers immediately turned over the seized
merchandise to appellant (petitioner) corporation. 12
The raid was conducted with the active participation of their employee. Larry de Guzman did not
lift a finger to stop the seizure of the boy and girl scouts items. By standing by and apparently
assenting thereto, he was liable to the same extent as the officers themselves. 13 So with the
petitioner corporation which even received for safekeeping the goods unreasonably seized by
the PC raiding team and de Guzman, and refused to surrender them for quite a time despite the
dismissal of its complaint for unfair competition.
Secondly, Letter of Instruction No. 1299 was precisely crafted on March 9, 1983 to safeguard not
only the privilege of franchise holder of scouting items but also the citizen's constitutional rights,
to wit:
TITLE: APPREHENSION OF UNAUTHORIZED MANUFACTURERS AND DISTRIBUTORS
OF SCOUT PARAPHERNALIA AND IMPOUNDING OF SAID PARAPHERNALIA.
ABSTRACT:
Directs all law enforcement agencies of the Republic of the Philippines, to apprehend
immediately unauthorized manufacturers and distributors of Scout paraphernalia, upon proper
application by the Boy Scouts of the Philippines and/or Girl Scouts of the Philippines for warrant
of arrest and/or search warrant with a judge, or such other responsible officer as may be
authorized by law; and to impound the said paraphernalia to be used as evidence in court or
other appropriate administrative body. Orders the immediate and strict compliance with the
Instructions. 14
I felt very nervous. I was crying and I was very much ashamed because many people have been
watching the PC soldiers hauling my items, and many/I (sic) heard say "nakaw pala ang mga
iyan" for which I am claiming P25,000.00 for damages.19
While respondent Gonzalez stated thus:
I do not like the way the raid was conducted by the team sir because it looked like that what I
have been selling were stolen items that they should be confiscated by uniformed soldiers. Many
people were around and the more the confiscation was made in a scandalous manner; every
clothes, T-shirts, pants and dresses even those not wrapped dropped to the ground. I was
terribly shamed in the presence of market goers that morning.20
Needles to state, the wantonness of the wrongful seizure justifies the award of exemplary
damages. 21 It will also serve as a stern reminder to all and sundry that the constitutional
protection against unreasonable search and seizure is a virile reality and not a mere burst of
rhetoric. The all encompassing protection extends against intrusions directly done both by
government and indirectly by private entities.
IN VIEW WHEREOF, the appealed decision is AFFIRMED WITH MODIFICATION. We impose a
SIX PERCENT (6%) interest from January 9, 1987 on the TWO THOUSAND PESOS
(P2,000.00) for the unreturned twenty-six (26) pieces of girl scouts items and a TWELVE
PERCENT (12%) interest, in lieu of SIX PERCENT (6%), on the said amount upon finality of this
Decision until the payment thereof. 22 Costs against petitioners.
SO ORDERED.

Under the above provision and as aforediscussed, petitioners miserably failed to report the
unlawful peddling of scouting goods to the Boy Scouts of the Philippines for the proper
application of a warrant. Private respondents' rights are immutable and cannot be sacrificed to
transient needs. 15 Petitioners did not have the unbridled license to cause the seizure of
respondents' goods without any warrant.

And thirdly, if petitioners did not have a hand in the raid, they should have filed a third-party
complaint against the raiding team for contribution or any other relief, 16 in respect of
respondents' claim for Recovery of Sum of Money with Damages. Again, they did not.

We have consistently ruled that moral damages are not awarded to penalize the defendant but
to compensate the plaintiff for the injuries he may have suffered. 17 Conformably with our ruling
in Lim vs. Ponce de Leon, op. cit., moral damages can be awarded in the case at bench. There
can be no doubt that petitioners must have suffered sleepless nights, serious anxiety, and
wounded feelings due the tortious raid caused by petitioners. Private respondents' avowals of
embarrassment and humiliation during the seizure of their merchandise were supported by their
testimonies. Respondent Cruz declared:

I felt very nervous. I was crying to loss (sic) my goods and capital because I am doing business
with borrowed money only, there was commotion created by the raiding team and they even
stepped on some of the pants and dresses on display for sale. All passersby stopped to watch
and stared at me with accusing expressions. I was trembling and terribly ashamed, sir. 18
G.R. No. L-51183 December 21, 1983
CARMEN L. MADEJA, petitioner,
vs.
HON. FELIX T. CARO and EVA ARELLANO-JAPZON, respondents.
ABAD SANTOS, J.:
In Criminal Case No. 75-88 of the defunct Court of First Instance of Eastern Samar, DR. EVA A.
JAPZON is accused of homicide through reckless imprudence for the death of Cleto Madeja
after an appendectomy. The complaining witness is the widow of the deceased, Carmen L.
Madeja. The information states that: "The offended party Carmen L. Madeja reserving her right
to file a separate civil action for damages." (Rollo, p. 36.)
The criminal case still pending, Carmen L. Madeja sued Dr. Eva A. Japzon for damages in Civil
Case No. 141 of the same court. She alleged that her husband died because of the gross
negligence of Dr. Japzon. The respondent judge granted the defendant's motion to dismiss
which motion invoked Section 3(a) of Rule 111 of the Rules of Court which reads:t.hqw action is thus independent of the result of the civil action." (I Civil Code, p. 144 [1974.])
Sec. 3. Other civil actions arising from offenses. In all cases not included in the preceding
section the following rules shall be observed:
(a) Criminal and civil actions arising from the same offense may be instituted separately,
but after the criminal action has been commenced the civil action can not be instituted until final
judgment has been rendered in the criminal action. ...
According to the respondent judge, "under the foregoing Sec. 3 (a), Rule 111, New Rules of
Court, the instant civil action may be instituted only after final judgment has been rendered in the
criminal action." (Rollo, p. 33.)
The instant petition which seeks to set aside the order of the respondent judge granting the
defendant's motion to dismiss Civil Case No. 141 is highly impressed with merit.
Section 2, Rule 111 of the Rules of Court in relation to Article 33 of the Civil Code is the
applicable provision. The two enactments are quoted hereinbelow:t.hqw be similar to the civil action for assault and battery in American Law, and this recommendation
Sec. 2. Independent civil action. In the cases provided for in Articles 31,32, 33, 34 and
2177 of the Civil Code of the Philippines, an independent civil action entirely separate and
distinct from the criminal action, may be brought by the injured party during the pendency of the
criminal case, provided the right is reserved as required in the preceding section. Such civil
action shall proceed independently of the criminal prosecution, and shall require only a
preponderance of evidence." (Rule 111, Rules of Court.)
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely
separate and distinct from the criminal action, may be brought by the injured party. Such civil
action shall proceed independently of the criminal prosecution, and shall require only a
preponderance of evidence. (Civil Code,)
There are at least two things about Art. 33 of the Civil Code which are worth noting, namely:
1. The civil action for damages which it allows to be instituted is ex-delicto. This is
manifest from the provision which uses the expressions "criminal action" and "criminal
prosecution." This conclusion is supported by the comment of the Code Commission,
thus:t.hqw
The underlying purpose of the principle under consideration is to allow the citizen to enforce his
rights in a private action brought by him, regardless of the action of the State attorney. It is not
conducive to civic spirit and to individual self-reliance and initiative to habituate the citizens to
depend upon the government for the vindication of their own private rights. It is true that in many
of the cases referred to in the provision cited, a criminal prosecution is proper, but it should be
remembered that while the State is the complainant in the criminal case, the injured individual is
the one most concerned because it is he who has suffered directly. He should be permitted to
demand reparation for the wrong which peculiarly affects him. (Report, p. 46.)
And Tolentino says:t.hqw
The general rule is that when a criminal action is instituted, the civil action for recovery of civil
liability arising from the offense charged is impliedly instituted with the criminal action, unless the
offended party reserves his right to institute it separately; and after a criminal action has been
commenced, no civil action arising from the same offense can be prosecuted. The present
articles creates an exception to this rule when the offense is defamation, fraud, or physical
injuries, In these cases, a civil action may be filed independently of the criminal action, even if
there has been no reservation made by the injured party; the law itself in this article makes such
reservation; but the claimant is not given the right to determine whether the civil action should be
scheduled or suspended until the criminal action has been terminated. The result of the civil
2. The term "physical injuries" is used in a generic sense. It is not the crime of physical
injuries defined in the Revised Penal Code. It includes not only physical injuries but
consummated, frustrated and attempted homicide.t.hqw
The Article in question uses the words 'defamation', 'fraud' and 'physical injuries.' Defamation
and fraud are used in their ordinary sense because there are no specific provisions in the
Revised Penal Code using these terms as means of offenses defined therein, so that these two
terms defamation and fraud must have been used not to impart to them any technical meaning
in the laws of the Philippines, but in their generic sense. With this apparent circumstance in
mind, it is evident that the terms 'physical injuries' could not have been used in its specific sense
as a crime defined in the Revised Penal Code, for it is difficult to believe that the Code
Commission would have used terms in the same article-some in their general and another in its
technical sense. In other words, the term 'physical injuries' should be understood to mean bodily
injury, not the crime of physical injuries, bacause the terms used with the latter are general
terms. In any case the Code Commission recommended that the civil action for physical injuries
must hove been accepted by the Legislature when it approved the article intact as
recommended. If the intent has been to establish a civil action for the bodily harm received by
the complainant similar to the civil action for assault and battery, as the Code Commission
states, the civil action should lie whether the offense committed is that of physical injuries, or
frustrated homicide, or attempted homicide, or even death," (Carandang vs. Santiago, 97 Phil.
94, 96-97 [1955].)
Corpus vs. Paje, L-26737, July 31, 1969, 28 SCRA 1062, which states that reckless imprudence
or criminal negligence is not included in Article 33 of the Civil Code is not authoritative. Of eleven
justices only nine took part in the decision and four of them merely concurred in the result.
In the light of the foregoing, it is apparent that the civil action against Dr. Japzon may proceed
independently of the criminal action against her.
WHEREFORE, the petition is hereby granted; the order dismissing Civil Case No. 141 is hereby
set aside; no special pronouncement as to costs.
SO ORDERED.
ALFONSO T. YUCHENGCO,
Petitioner,
- versus -
THE MANILA CHRONICLE PUBLISHING CORPORATION, ROBERTO COYIUTO, JR., NOEL
CABRERA, GERRY ZARAGOZA, DONNA GATDULA, RODNEY P. DIOLA, RAUL VALINO and
THELMA SAN JUAN,
Respondents.
G.R. No. 184315
Present:
CORONA, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
Promulgated:
November 25, 2009
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
When malice in fact is proven, assertions and proofs that the libelous articles are qualifiedly
privileged communications are futile, since being qualifiedly privileged communications merely
prevents the presumption of malice from attaching in a defamatory imputation.
This is a Petition for Review on Certiorari assailing the Amended Decision[1] of the Court of
Appeals in CA-G.R. CV No. 76995 dated 28 August 2008. The Amended Decision reversed on
Motion for Reconsideration the 18 March 2008 Decision[2] of the same court, which in turn
affirmed in toto the Decision of the Regional Trial Court (RTC) of Makati City in Civil Case No.
94-1114 dated 8 November 2002 finding herein respondents liable for damages.
The facts of the case, as summarized by the RTC, are as follows:
In his Complaint, plaintiff Alfonso T. Yuchengco alleges that in the last quarter of 1994, Chronicle
Publishing Corporation (Chronicle Publishing for brevity) published in the Manila Chronicle a
series of defamatory articles against him. In two of the subject articles (November 10 and 12,
1993 issues), he was imputed to be a Marcos crony or a Marcos-Romualdez crony, which term
according to him is commonly used and understood in Philippine media to describe an individual
who was a recipient of special and underserving favors from former President Ferdinand E.
Marcos and/or his brother-in-law Benjamin Kokoy Romualdez due to special and extra-ordinary
closeness to either or both, and which favors allowed an individual to engage in illegal and
dishonorable business activities.
The plaintiff claims that the said articles further branded him as a mere front or dummy for the
Marcos and Romualdez clans in Benguet Corporation, which company sought to take-over the
management of Oriental Petroleum Mineral Corporation (Oriental for brevity). He contends that
such an imputation is untrue since his holdings in Benguet Corporation were legally acquired by
him.
Also, he was likewise accused of unsound and immoral business practices by insinuating that he
wanted to take control of Oriental in order to divert its resources to rescue the debt-ridden
Benguet Corporation. He claims that the accusation is untrue since he was merely interested in
being represented in the board thereof so as to protect his and his companies interest therein as
shareholders.
The subject articles insinuated that he personally and intentionally caused the failure of Benguet
Corporation and that if even if he ever assumed control of Oriental, it would suffer the same fate
as the former. According to him, at the time he assumed chairmanship of Benguet Corporation, it
was already experiencing financial downturns caused by plummeting world prices of gold and
unprofitable investments it ventured into.
Moreover, one of the articles portrayed him as being an unfair and uncaring employer when the
employees of Grepalife Corporation, of which he is the Chairman, staged a strike, when the truth
being that he had nothing to do with it. And that if his group takes over Oriental, it will experience
the same labor problems as in Grepalife.
Furthermore, the subject articles accused him of inducing Rizal Commercial Banking
Corporation (RCBC for brevity) to violate the provisions of the General Banking Act on DOSRI
loans. He denies the imputations believing that there is nothing irregular in the RCBC-Piedras
transaction for the acquisition of shares of Oriental.
Also, the plaintiff claims that the subject articles insinuated that he induced others to disobey
lawful orders of the Securities and Exchange Commission (SEC for brevity) when the truth is
that the officials of RCBC and Alcorn never defied any SEC order, and that if ever they did, he
never induced them to do so.
Finally, the plaintiff asserts that the subject articles imputed to him the derogatory tag of
corporate raider, implying that he was seeking to profit for something he did not work for. He
denies the imputation since he acquired his stake in Oriental for adequate and valuable
consideration at the time when no one was willing to bailout the government from its difficult and
losing position thereto.
In their Answer, the defendants deny liability claiming that the subject articles were not
defamatory since they were composed and published in good faith and only after having
ascertained their contents. In any event, they claim that these articles are privileged and/or
constitute reasonable and balance[d] comments on matters of legitimate public interest which
cannot serve as basis for the finding of libel against them. They likewise alleged that they were
acting within the bounds of constitutionally guaranteed freedom of speech and of the press.
Furthermore, they contend that since plaintiff is a public figure, and assuming that the articles
were indeed defamatory, they cannot be held liable for damages since they were not impelled by
actual malice in the composition thereof. They did not compose and/or publish said articles with
the knowledge that they contained falsehoods, or with reckless disregard on whether or not they
contained falsehood.
As to defendant Coyiuto, he claims that he had no participation in the publication of the subject
articles nor consented or approved their publication.
PLAINTIFFS EVIDENCE
During the trial, the plaintiff himself, ALFONSO T. YUCHENGCO, testified that prior to his
appointment as Ambassador to Japan, he was the chairman of various business organizations
notably: Benguet Corporation (Benguet), Philippine Long Distance Telephone Company, Rizal
Commercial Banking Corporation (RCBC), Bank of America Savings Bank, House of
Investments, Inc., Dole Philippines and Philippine Fuji Xerox Corporation. He was also the
President of the Philippine Ambassadors; chairman or vice president of Bantayog ng Bayan; and
chairman of AY Foundation, Inc. He was appointed Philippine Ambassador to Peoples Republic
of China after the EDSA Revolution.
As regards the article referring to the November 10, 1993 issue of the Manila Chronicle (Exh. A),
he stated that he had never been a Marcos crony nor had been a business partner of the
Romualdezes or had personal dealings with them; that during the shareholders meeting, the two
(2) sons of Benjamin Kokoy Romualdez were elected as directors of Benguet Corporation
pursuant to a Court order; that he had no personal dealings with them; that he had no intention
of taking over Oriental and that Benguet Corporation did not lose the amount as stated in the
article; that Benguet Corporation experienced liquidity problems, and that before he joined the
corporation, it had already diversified into many other financial ventures; that he denied having
any business partnership with the Romualdezes at that time.
Regarding the November 12, 1993 issue of the Manila Chronicle (Exh. B), he denied having any
partnership with the Marcos family; that he denied responsibility for the losses incurred by
Benguet Corporation, as the losses were due to the drop of the commodity market, and for
having diversified into other non-profitable ventures; that he had no intention whatsoever of
taking over Oriental; that although the Yuchengco family owns a substantial block of shares of
RCBC, Sanwa Bank actually owns twenty-five percent (25%) thereof; that RCBC did not finance
his fund but it extended a loan to Piedras Petroleum, a subsidiary of the Presidential
Commission of Good Government (PCGG for brevity); admitted that Traders Royal Bank also
granted a loan to PCGG but such was an independent transaction of RCBC.
About the November 15, 1993 issue of the Manila Chronicle (Exh. C), he denied any knowledge
of what transpired at the Trust Department of RCBC because as Chairman he was not involved
in many of the banks transactions.
Referring to November 16, 1993 issue of the Manila Chronicle (Exh. D), he considered the
attacks against him to be malicious considering that he does not see any connection between
the labor strike at Grepalife with the case of Alcorn and RCBC; that the article would like to show
that he was the reason for the huge losses incurred by Benguet Corporation.
As regards the November 22, 1993 issue of the Manila Chronicle (Exh. E), he denied giving any
interest free loan, the fact that they gave a loan to PCGG does not mean that they gave a loan to
Benedicto since the latter had already turned over the shares of Piedras to PCGG at that time.
Regarding the November 23, 1993 issue of the Manila Chronicle (Exh. F), he denied extending
an interest free loan considering that he is not the only owner of RCBC; that these series of
attacks against him and RCBC were intended to cause a bank run; that the article imputes that
he was responsible for giving an interest free loan.
About the December 5, 1993 issue of the Manila Chronicle (Exh. G), he said the article was
intended to humiliate and embarrass him since he really had no intention of taking over Oriental;
that the reason for the attack against his person was because he and defendant Coyiuto, Jr.
were both rivals in the insurance business and that the latter has always been envious of his
position for having owned Malayan Insurance Company.
On cross-examination, plaintiff Yuchengco testified that he does not consider himself a public
figure; and that he felt maligned by the references to him as a Marcos crony. [TSN, 07 February
1997; 10 February 1997; 12 February 1997]
ROSAURO ZARAGOZA testified that he is the Executive Vice-President of RCBC; that the
statement in Exhibits D, E and F with regard to the interest free loan allegedly granted to Piedras
Petroleum Company, Inc. (Piedras) are false because the Piedras deal was a trust transaction
which involved an advance in exchange for shares of stock; that plaintiff Yuchengco did not have
a personal interest in the Piedras deal; that Piedras or Oriental Petroleum Mineral Corporation
(Oriental Petroleum) shares were not transferred to plaintiff Yuchengcos name by virtue of the
transaction; and that the defendants did not approach him or RCBC to check the veracity of the
subject articles. The affidavit of Mr. Zaragoza (Exhibit H) was adopted as part of his testimony.
On cross-examination, Mr. Zaragoza testified that he volunteered to testify in the instant case
because he was the most knowledgeable about the Piedras deal; that plaintiff Yuchengco was
aggrieved upon reading the subject articles; that under the Memorandum of Agreement (MOA)
between RCBC and Piedras, should the latter fail to comply with its obligations under the MOA,
it will pay interest at the prevailing market interest rate from the date of advance until full
payment; and that there was a complaint filed with the Bangko Sentral ng Pilipinas against
RCBC by Mr. Felipe Remollo questioning the Piedras deal. [TSN 28 February 1997; 26 June
1997; 27 June 1997; 04 July 1997]
JOSE REVILLA testified that he and Amb. Yuchengco were long time friends, where he (Revilla)
worked for him (Yuchengco) for thirty-two (32) years in his (Yuchengco) credit card company
Industrial Finance Corporation Credit Cards; that knowing Amb. Yuchengco for a considerable
period of time, he does not believe the truth of the contents of the subject articles; that plaintiff
Yuchengco appeared distressed when he joked about the subject articles; that other people
approached him to ask whether the subject articles are true [TSN 25 August 1997].
xxxx
DEFENDANTS EVIDENCE
On the other hand, defendants Zaragoza, Gatdula, Cabrera and Valino substantially testified on
the following matters:
GERRY ZARAGOZA testified that he was the Managing Editor of Manila Chronicle in charge of
the national and political news; that defendant San Juan was the other Managing Editor in
charge of the lifestyle section; that a story conference is conducted everyday where the articles,
including the pages where they will appear, are discussed; that the editor-in-chief (defendant
Cruz), executive editor (defendant Tolentino) and deputy editor (defendant Cabrera) were the
ones responsible for the decisions of the story conference relative to the printing of the
newspaper; that he was not involved in the writing and editing of the subject articles; that
Exhibits A to D are classified as business news; that columns, specifically Exhibits E and F are
not discussed during story conferences; and that Exhibit G, which appeared in the Money
Section did not pass thru him.
On cross-examination, defendant Zaragoza testified that except for the columns, Exhibits A to D
and Exhibit G are considered hard news; that he handled the hard news, while defendant San
Juan handled the soft news; and that defendant Valino was the business editor in charge of the
business section (TSN 22 July 1998; 23 September 1998]
DONNABELLE GATDULA claimed that she was a correspondent for Manila Chronicle assigned
to the Securities and Exchange Commission (SEC) beat; that she had no participation in the
writing or publication of Exhibits A to C and G to E; that she attended the hearing conducted by
the SEC and interviewed the two lawyers of RCBC and SEC Chairman Rosario Lopez regarding
the Oriental Petroleum case; that her name appears as a tag line in Exhibit D, because she only
wrote part of the story; and that she did not write the entire article (Exhibit D) as some of the
statements therein were added by the editor/s; and that she did not discuss Exhibit D with any of
the editors.

On cross-examination, defendant Gatdula testified that she does not have a copy of the original
article which she wrote; that she read Exhibit D after it was published; that she did not compare
her original story with Exhibit D nor question the authority of the editor to edit her story; and that
she agreed to put her name on Exhibit D. (TSN 23 September 1998; 05 October 1998).
NOEL CABRERA contended that after having gone through the subject articles, he believes that
the news stories and commentaries were fair and that those who wrote the same followed the
proper standards; that as regard the contents of Exhibits E and F, the opinion of Mr. Raul Valino,
as written in the said articles, were valid and based on documentary facts; as to Exhibit D,
pertaining to the article of Ms. Donnabelle Gatdula, she based her article on documents
pertaining to the Oriental transaction, other documents, as well as interviews; that at the time the
subject articles were written, Amb. Yuchengco was a public figure, being a very prominent
businessman with vast interest in banks and other businesses; that during the year 1993, the
word crony was more or less accepted to mean as a big businessman or close associate of the
late President Marcos, and its use in the column was meant only to supply the perspective as to
the figure or subject involved in the news story, and there is thus no malice or derogatory intent
when the same was used.
On cross-examination, defendant Cabrera testified that defendant Coyiuto is one of the owners
of Manila Chronicle; and that he only saw the records of Exhibits 8 to 10 and 16 to 20 after the
publication of Exhibits A to G (TSN 21 April 1999; 28 April 1999 05 May 1999; 10 May 1999).
RAUL VALINO stated that he was the Acting Business Manager and later Managing Editor and
Business Editor-in-Chief of Manila Chronicle; that after having consulted several dictionaries as
to the meaning of the word crony, he did not come across a definition describing the word to
mean someone who is a recipient of any undeserving or special favor from anyone, that it
merely refers to someone who is a friend or a special friend; there was no mention whatsoever
in the subject article that Amb. Yuchengco was being accused of fronting for the late President
Marcos (referring to par. 2.3.2 of the complaint); that nowhere in the said paragraph was Amb.
Yuchengco accused of having acted as a front to facilitate the acquisition of a prohibited interest
in a private corporation by a public official while occupying a public office; that nowhere in the
article was Amb. Yuchengco accused of being directly or indirectly involved in unsound business
practices (referring to par. 2.4 of the complaint); that whatever imputation of ill-will in par. 2.4.1 of
the complaint was only in plaintiffs mind; and as regards par. 2.6 of the complaint, that he was
merely reporting on what transpired at the picket line and what the striking employees answered
to him; and that he did not state in his columns (Exhibits E and F) that plaintiff Yuchengco
violated banking laws. [TSN 23 February 2000][3]
On 8 November 2002, the RTC rendered its Decision in favor of herein petitioner Alfonso T.
Yuchengco, disposing of the case as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:
1. On the First Cause of Action, ordering defendants Chronicle Publishing, Neil H. Cruz, Ernesto
Tolentino, Noel Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino and
Rodney Diola to pay plaintiff Yuchengco, jointly and severally:
a. the amount of Ten Million Pesos (P10,000,000.00) as moral damages; and
b. the amount of Ten Million Pesos (P10,000,000.00) as exemplary damages;
2. On the Second Cause of Action, ordering defendants Roberto Coyiuto, Jr. and Chronicle
Publishing to pay plaintiff Yuchengco, jointly and severally:
a. the amount of Fifty Million Pesos (P50,000,000.00) as moral damages; and
b. the amount of Thirty Million Pesos (P30,000,000.00) as exemplary damages;
3. On the Third Cause of Action, ordering all defendants to pay plaintiff Yuchengco, jointly and
severally, the amount of One Million Pesos (P1,000,000.00) as attorneys fee and legal costs.[4]
The respondents, namely the Manila Chronicle Publishing Corporation, Neal H. Cruz, Ernesto
Tolentino, Noel Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino,
Rodney P. Diola, and Roberto Coyiuto, Jr. appealed to the Court of Appeals. The appeal was
docketed as CA-G.R. CV No. 76995 and was raffled to the Fifth Division.
On 18 March 2008, the Court of Appeals promulgated its Decision affirming the RTC Decision:
WHEREFORE, in consideration of the foregoing premises, judgment is hereby rendered
DISMISSING the appeals of defendants-appellants and AFFIRMING the decision dated
November 8, 2002 of the trial court IN TOTO.[5]
Respondents filed a Motion for Reconsideration. On 28 August 2008, the Court of Appeals
reversed itself in an Amended Decision:
WHEREFORE, the appeal is GRANTED. The Decision of this Court dated March 18, 2008 is
RECONSIDERED and SET ASIDE. The decision of the court a quo dated November 8, 2002 is
REVERSED and SET ASIDE. The Amended Complaint for Damages against the defendants-
appellants is DISMISSED. No pronouncement as to costs.
Hence, this Petition for Review on Certiorari, where petitioner puts forth the following
Assignments of Error:
A. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR IN RULING THAT THE CASE OF ARTURO BORJAL, ET AL. V. COURT OF
APPEALS, ET AL. CITED BY RESPONDENTS IN THEIR MOTION FOR RECONSIDERATION
WARRANTED THE REVERSAL OF THE CA DECISION DATED MARCH 18, 2008.
B. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR IN RULING THAT THE SUBJECT ARTICLES IN THE COMPLAINT FALL WITHIN THE
CONCEPT OF PRIVILEGED COMMUNICATION.
C. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR IN RULING THAT PETITIONER IS A PUBLIC OFFICIAL OR PUBLIC FIGURE.[6]
Libel is defined in Article 353 of the Revised Penal Code, which provides:
Art. 353. Definition of Libel. A libel is a public and malicious imputation of a crime, or of a vice or
defect, real or imaginary, or any act, omission, condition, status, or circumstance tending to
cause the dishonor, discredit, or contempt of a natural or juridical person, or to blacken the
memory of one who is dead.
Based on this definition, this Court has held that four elements constitute the crime of libel,
namely (a) defamatory imputation tending to cause dishonor, discredit or contempt; (b) malice,
either in law or in fact; (c) publication; and (d) identifiability of the person defamed.[7]
Despite being defined in the Revised Penal Code, libel can also be instituted, like in the case at
bar, as a purely civil action, the cause of action for which is provided by Article 33 of the Civil
Code, which provides:
 RCBC called to SEC; subtitled Yuchengco Bank defies government order
Article 33. In cases of defamation, fraud, and physical injuries, a civil action for damages, C, C-1 to C-3
entirely separate and distinct from the criminal action, may be brought by the injured party. Such 16 November 1993
civil action shall proceed independently of the criminal prosecution, and shall require only a (Donna Gatdula)
preponderance of evidence. Alcorn, RCBC execs own guilt
D, D-1 to D-4
22 November 1993
The above elements of libel were adopted as well in a purely civil action for damages. As held by (Raul Valino)
this Court in GMA Network, Inc. v. Bustos[8]: Bank runs and RCBC free loans
E, E-1 to E-2
An award of damages under the premises presupposes the commission of an act amounting to 23 November 1993
defamatory imputation or libel, which, in turn, presupposes malice. Libel is the public and (Raul Valino)
malicious imputation to another of a discreditable act or condition tending to cause the dishonor, RCBC case bugs Bangko Sentral
discredit, or contempt of a natural or juridical person. Liability for libel attaches present the F, F-1 to F-3
following elements: (a) an allegation or imputation of a discreditable act or condition concerning 5 December 1993
another; (b) publication of the imputation; (c) identity of the person defamed; and (d) existence of (Rodney P. Diola)
malice. The Battle for Oriental
G, G-1 to G-4

Of these four elements, the most apparent in the case at bar would be the publication of the
alleged imputation. Libel is published not only when it is widely circulated, but also when it is
made known or brought to the attention or notice of another person other than its author and the In two of the subject articles, respondents allegedly accused and labeled Yuchengco as a
offended party.[9] The circulation of an allegedly libelous matter in a newspaper is certainly Marcos crony, who took advantage of his relationship with the former President to gain
sufficient publication. We are thus left with the determination of the existence of the three unwarranted benefits:
remaining elements of libel, namely: (1) the defamatory imputation; (2) the identity of the person
defamed; and (3) the existence of malice. Yuchengco joins forces with Kokoy[12]

Defamatory Imputation
Defamation, which includes libel and slander, means the offense of injuring a person's character,
fame or reputation through false and malicious statements. It is that which tends to injure
reputation or to diminish esteem, respect, goodwill or confidence in the plaintiff, or to excite
derogatory feelings or opinions about the plaintiff. It is the publication of anything that is injurious
to the good name or reputation of another or tends to bring him into disrepute.[10] In determining
whether certain utterances are defamatory, the words used are to be construed in their entirety
and taken in their plain, natural and ordinary meaning, as they would naturally be understood by
persons hearing (or reading, as in libel) them, unless it appears that they were used and
understood in another sense.[11]
Alfonso Yuchengco, a Marcos crony who wants to takeover the ownership and management of
the highly profitable Oriental Petroleum Minerals Corp. (OMPC), has tied up with Marcos
brother-in-law Benjamin Kokoy Romualdez through two of his sons, records at the securities and
Exchange Commission (SEC) showed yesterday.
Kokoys two sons, Benjamin Philip Gomez Romualdez, 32, and Ferdinand Martin G. Romualdez,
29, are now members of the board of the debt-ridden and heavily losing Benguet Corp., a
company taken over by Marcos during his dictatorship, but which was sequestered at the start of
President Aquinos term.
xxxx

In order to fully appreciate whether the subject articles are, in fact, defamatory, an analysis Observers said they believed the elections of the Romualdez sons officially confirmed suspicions
thereof is in order. The following are what have been referred to as the subject articles: that the Marcos and Romualdez clans really owned Benguet.

Benguets former president, Jaime Ongpin, employed by the company for 10 years before he
was named finance secretary by then President Aquino, committed suicide after being accused
Manila Chronicle Issue Date (Author) of being a Marcos-Romualdez crony.
Title
Exhibit
10 November 1993 Yuchengco Bank under CB probe[13]
(no by-line)
Yuchengko joins forces with Kokoy xxxx
A, A-1 to A-5
12 November 1993 The official said the case was recently brought to Bangko Sentrals attention by an RCBC
(no by-line) creditor who felt he was being cheated by the bank through interest-free loans granted to related
RCBC probed for violating CB rules interests.
B, B-1 to B-2
15 November 1993
(no by-line)
Under the interest-free loan scheme, Yuchengco was able to own OMPC shares of Piedras
since they were the same shares RCBC financed and which were turned over to the bank as
payment for the loan.
The Central Bank official said that Bangko Sentral is now determining whether RCBC violated
the rule on loans to directors, officers, stockholders and related interests (DOSRI).
Yuchengco is both a director (chairman) officer, stockholder, and a related interest of RCBC.
xxxx
Violating the DOSRI rule is a criminal offense. The Bangko Sentral official stressed. I believe
that that is tantamount, not only to cheating the depositor, but also robbing the bank of its clients
money.
If Bangko Sentral does not act decisively on this matter, the official asked what will prevent the
other banks from resorting to this kind of transactions to enrich their owners and enable them to
acquire shares of stock from other companies?
The interest-free loan controversy also involves Traders Royal Bank (TRB), a sequestered bank,
owned by Roberto Benedicto, a Marcos crony.
xxxx
The deal could be from one crony to another since Yuchengco is very much associated with the
Marcoses and the Romualdezes, a source opined.
Yuchengco owns Benguet Corp., which is heavily losing since he joined the Company as
Chairman in 1989.
xxxx
Since Benguet is encountering all kinds of financial problems, losses and overdue debts,
observers say they fear that Oriental may also suffer the same fate when and should Yuchengco
and his partners assume management of OMPC.
Already, it was noted the Oriental shares sold on the stock market are weakening, and stock
observers say this could be attributed to the planned entry into the company of Yuchengco,
Leonardo Siguion-Reyna and their minority partners.
In another of the subject articles, respondents allegedly insinuated that Yuchengco induced
others to disobey the lawful orders of the Securities and Exchange Commission (SEC):
Alcorn, RCBC execs own guilt[14]
Two officials of Alcorn Petroleum and Minerals Corporation (AMPC) and Rizal Commercial
Banking Corporation (RCBC) admitted before the Securities and Exchange Commission (SEC)
yesterday that they ignored the SEC order commanding them to process all Alcorn shares in the
name of R. Coyiuto Securities Inc. and its investor clients such as Oriental Petroleum and
Minerals Corporation (OMPC).
xxxx
RCBC is owned by Alfonso Yuchengco, chairman of the debt-ridden and heavily-losing Benguet
Corp. He also owns Great Pacific Life Insurance Co., whose employees are on strike because of
the companys refusal to grant them better salaries and benefits.
xxxx
SEC insiders said that while Monreal and Ricalde should be punished for disobeying a lawful
order from the SEC, people who masterminded the APMC order should also be penalized once
proven guilty.
xxxx
Some observers said the APMC order to RCBC could be a ploy to prevent Robert Coyiuto, Jr.,
chairman and president of OPMC, from retaining his majority control of Oriental, and a scheme
to put on the board members of the Yuchengco company.
In fact, when Yuchengco created his own OPMC board of directors, he appointed Ricalde as
corporate secretary, OPMC officials pointed out.
In our opinion, observers following the OPMC developments stated, this is a clear and simple
case of criminal conspiracy whose perpetrators must be meted the harshest punishment to
prevent corporate thieves from making a mockery of the law and from illegally taking over
corporations which they do not own in the first place.
Yuchengco further presented the following articles which allegedly accused him of inducing Rizal
Commercial Banking Corporation (RCBC) to violate the provisions of the General Banking Act
on Directors, Officers, stockholders, and Related Interest (DOSRI) loans:
Bank runs and RCBC free loans[15]
The Bank runs that devastated the economy in the recent past were, first and foremost,
instigated by rumors that bank owners were, themselves, using the publics money to promote
their own businesses and interests in violation of Central Bank rules and regulations.
xxxx
Now here comes Rizal Commercial Banking Corporation (RCBC) being charged with engaging
in unsound banking by lending an interest-free loan of P101 million to one company, Piedras
Petroleum Corporation, which Marcos crony Roberto Benedicto had surrendered to the
Presidential Commission on Good Government (PCGG).
xxxx
What would happen if all the other banks resort to this kind of lending activity, giving away loans
without interest? The entire banking system would certainly be compromised.
The owners or RCBC, therefore, should not be too liberal with their depositors money. They
should also consider what fatal effects such a practice could inflict on the very system where
RCBC operates. The country, at this time, cannot afford another series of bank runs, nor a run at
RCBC.
RCBC case bugs Bangko Sentral[16]
xxxx
The P101 million interest-free loan to Piedras is of national interest for not just one reason alone.
First, the money involved came from the depositors, and not from the pockets of Yuchengco.
Second, banking rules dictate that a bank must be prudent in lending out its clients money, so
that its financial viability must never be put in question.
Third, the money lent to a borrower must never end up in the pocket of the owner of the bank.
Fourth, such a practice could lead to a bank run, which the economy cannot afford at this time,
even if the run is confined to just one bank.
Yuchengco further claims that the following article, in labeling him as a corporate raider, implies
that he is seeking to profit from something he did not work for:
The Battle for Oriental[17]
Ledesma says Coyiuto will not wilt from Yuchengcos fabled financial power. Robert has a lot of
friends that will help him fend off a raider like Yuchengco, says Ledesma.
xxxx
Ledesma of OPMC says that even if Coyiuto loses in the bid, hell still remain a very significant
player in OPMC given his substantial personal holdings and proxies in the company. Coyiutos
investment in OPMC is now valued at more than a billion pesos compared to the Yuchengco
block which, the Coyiuto group points out, has only minimal investments.
Thats our moral ascendancy over their group. Coyiuto virtually made Oriental what it is today
unlike Yuchengco who is just getting into the act now because Oriental has become an attractive
cash cow says Ledesma.
War of Families
The fight for control of Oriental Petroleum gains particular poignancy given the long history of
feuding between the families of Yuchengco and Coyiuto. Their families were bitter rivals in the
insurance business way back in the seventies. The Yuchengcos own the Malayan Group of
Insurance Companies while the Coyiutos used to control Pioneer Insurance. That rivalry seems
to have come full circle with their battle in Oriental Petroleum.
Pomento says the best arrangement would have been a modus vivendi between the two groups
to stop their quarrel and work instead for the interest of the company. But given the bad blood
that exists between the two families, that might be a difficult proposition, he says.
The trial court and the Court of Appeals are in agreement that the above articles contain
defamatory imputations. Even the Amended Decision of the Court of Appeals, wherein the
appellate court reversed itself and held that respondents were not liable for damages, did not
modify its earlier ruling affirming the defamatory character of the imputations in the above
articles. The Court of Appeals merely reversed itself on account of the allegedly privileged
nature of the articles, which goes into the element of malice. Malice, as an element of libel, and
the defenses affecting the existence of the same shall be discussed later.
In arguing that the subject articles are not really derogatory, respondent Cabrera explains that
the word crony was more or less accepted to describe a big businessman or close associate of
the late President Marcos, and its use in the column was meant only to supply the perspective
as to the figure or subject involved in the news story. Respondent Valino further claimed that
after consulting several dictionaries as to the meaning of the word crony, he did not come across
a definition describing the word to mean someone who is a recipient of any undeserving or
special favor from anyone.
We are not swayed by the explanations of respondents Cabrera and Valino. In determining the
defamatory character of words used, the explanation of the respondent should not prevail over
what the utterances (or writing) convey to an ordinary listener (or reader).[18] Furthermore, as
held by this Court in United States v. Sotto[19]:
[F]or the purpose of determining the meaning of any publication alleged to be libelous that
construction must be adopted which will give to the matter such a meaning as is natural and
obvious in the plain and ordinary sense in which the public would naturally understand what was
uttered. The published matter alleged to be libelous must be construed as a whole. In applying
these rules to the language of an alleged libel, the court will disregard any subtle or ingenious
explanation offered by the publisher on being called to account. The whole question being the
effect the publication had upon the minds of the readers, and they not having been assisted by
the offered explanation in reading the article, it comes too late to have the effect of removing the
sting, if any there be, from the word used in the publication. (Emphasis supplied.)
In finding that the phrase Marcos crony is derogatory, the trial court took judicial notice of the
fact that the said phrase, as understood in Philippine context, refers to an individual who was the
recipient of special and/or undeserved favors from the late President Marcos due to a special
closeness to the latter. This finding, which was upheld by the Court of Appeals in its original
Decision and was not tackled in the Amended Decision, is even supported by one of the subject
articles. In particular, the 10 November 1993 article marked as Exhibit A mentioned that
Benguets former president, Jaime Ongpin, committed suicide after being accused of being a
Marcos-Romualdez crony.[20] This statement highlights the disgrace respondents wanted to
associate with the term crony, which was used to describe Yuchengco in the very same article.
Even a cursory reading of the subject articles would show the intention of the writers to injure the
reputation, credit and virtue of Yuchengco and expose him to public hatred, discredit, contempt
and ridicule. The indirect manner in which the articles attributed the insults to Yuchengco (e.g.,
the money involved came from depositors, and not from Yuchengco) does not lessen the
culpability of the writers and publishers thereof, but instead makes the defamatory imputations
even more effective. Words calculated to induce suspicion are sometimes more effective to
destroy reputation than false charges directly made. Ironical and metaphorical language is a
favored vehicle for slander.[21]
In sum, this Court upholds the ruling of the trial court and the Court of Appeals that the subject
articles contain defamatory imputations. All of the following imputations: (1) the labeling of
Yuchengco as a Marcos crony, who took advantage of his relationship with the former President
to gain unwarranted benefits; (2) the insinuations that Yuchengco induced others to disobey the
lawful orders of SEC; (3) the portrayal of Yuchengco as an unfair and uncaring employer due to
the strike staged by the employees of Grepalife; (4) the accusation that he induced RCBC to
violate the provisions of the General Banking Act on DOSRI loans; and (5) the tagging of
Yuchengco as a corporate raider seeking to profit from something he did not work for, all
exposed Yuchengco to public contempt and ridicule, for they imputed to him a condition that was
dishonorable.
Identification
Defamatory words must refer to an ascertained or ascertainable person, and that person must
be the plaintiff. Statements are not libelous unless they refer to an ascertained or ascertainable
person.[22] However, the obnoxious writing need not mention the libeled party by name. It is
sufficient if it is shown that the offended party is the person meant or alluded to.[23]
In the case at bar, all but one of the subject articles explicitly mention the name of petitioner
Yuchengco. The lone article, which does not mention Yuchengco at all, Bank runs & RCBC free
loans,[24] nevertheless chided the owners of RCBC:
The owners or RCBC, therefore, should not be too liberal with their depositors money. They
should also consider what fatal effects such a practice could inflict on the very system where
RCBC operates. The country, at this time, cannot afford another series of bank runs, nor a run at
RCBC.[25]
Identifying Yuchengco in said article by name was, however, not necessary, since the other
subject articles, published a few days before and after this one, had already referred to
Yuchengco as the owner of RCBC, sometimes explicitly (Benguet started to bleed in 1989, the
year Yuchengco, who owns Rizal Commercial Banking Corp. [RCBC], took over as chairman of
the company[26]), and sometimes implicitly (the money involved came from depositors, and not
from Yuchengco). While the defamation of a large group does not give rise to a cause of action
on the part of an individual, this is subject to exception when it can be shown that he is the target
of the defamatory matter.[27] This Court therefore finds that Yuchengco was clearly identified as
the libeled party in the subject defamatory imputations.
Malice
Malice connotes ill will or spite and speaks not in response to duty but merely to injure the
reputation of the person defamed, and implies an intention to do ulterior and unjustifiable
harm.[28] It is present when it is shown that the author of the libelous remarks made such
remarks with knowledge that it was false or with reckless disregard as to the truth or falsity
thereof.[29]
Malice, however, does not necessarily have to be proven. There are two types of malice malice
in law and malice in fact.[30] Malice in law is a presumption of law. It dispenses with the proof of
malice when words that raise the presumption are shown to have been uttered. It is also known
as constructive malice, legal malice, or implied malice.[31] On the other hand, malice in fact is a
positive desire and intention to annoy and injure. It may denote that the defendant was actuated
by ill will or personal spite. It is also called express malice, actual malice, real malice, true
malice, or particular malice.[32]
In this jurisdiction, malice in law is provided in Article 354 of the Revised Penal Code, which also
enumerates exceptions thereto:
Art. 354. Requirement of publicity. - Every defamatory imputation is presumed to be malicious,
even if it be true, if no good intention and justifiable motive for making it is shown, except in the
following cases:
1. A private communication made by any person to another in the performance of any legal,
moral or social duty; and
2. A fair and true report, made in good faith, without any comments or remarks, of any judicial,
legislative or other official proceedings which are not of confidential nature, or of any statement,
report or speech delivered in said proceedings, or of any other act performed by public officers in
the exercise of their functions.
There is, thus, a presumption of malice in the case of every defamatory imputation, where there
is no showing of a good intention or justifiable motive for making such imputation.
The exceptions provided in Article 354 are also known as qualifiedly privileged communications.
The enumeration under said article is, however, not an exclusive list of qualifiedly privileged
communications since fair commentaries on matters of public interest are likewise privileged.[33]
They are known as qualifiedly privileged communications, since they are merely exceptions to
the general rule requiring proof of actual malice in order that a defamatory imputation may be
held actionable. In other words, defamatory imputations written or uttered during any of the three
classes of qualifiedly privileged communications enumerated above (1) a private communication
made by any person to another in the performance of any legal, moral or social duty; (2) a fair
and true report, made in good faith, without any comments or remarks, of any judicial, legislative
or other official proceedings which are not of confidential nature, or of any statement, report or
speech delivered in said proceedings, or of any other act performed by public officers in the
exercise of their functions; and (3) fair commentaries on matters of public interest may still be
considered actionable if actual malice is proven. This is in contrast with absolutely privileged
communications, wherein the imputations are not actionable, even if attended by actual malice:
A communication is said to be absolutely privileged when it is not actionable, even if its author
has acted in bad faith. This class includes statements made by members of Congress in the
discharge of their functions as such, official communications made by public officers in the
performance of their duties, and allegations or statements made by the parties or their counsel in
their pleadings or motions or during the hearing of judicial proceedings, as well as the answers
given by witnesses in reply to questions propounded to them, in the course of said proceedings,
provided that said allegations or statements are relevant to the issues, and the answers are
responsive or pertinent to the questions propounded to said witnesses. Upon the other hand,
conditionally or qualifiedly privileged communications are those which, although containing
defamatory imputations, would not be actionable unless made with malice or bad faith.[34]
In the case at bar, both the trial court and the Court of Appeals found that the publication of the
subject articles was attended by actual malice:
In the instant case, there is preponderance of evidence showing that there exists malice in fact
in the writing and publication of the subject libelous articles.
As correctly found by the trial court, [petitioner] was able to show that [respondents] were
animated by a desire to inflict unjustifiable harm on his reputation as shown by the timing and
frequency of the publication of the defamatory articles. Further, as previously stated,
[respondents] failed to show that they had any good intention and justifiable motive for
composing and publishing the vicious and malicious accusations against [petitioner].
Moreover, [respondents] published or caused the publication of the subject defamatory articles
with reckless disregard as to the truth or falsity thereof. As previously stated, there is no proof
that the contents of the subject articles are true or that the respondents exercised a reasonable
degree of care before publishing the same. [Respondents] failed to present evidence showing
that they verified the truth of any of the subject articles, especially in light of the categorical
denial by [petitioner] of the accusations made against him.
[Respondents] did not exercise reasonable degree of care or good faith efforts to arrive at the
truth before publishing the subject defamatory articles. [Respondents] did not present any
competent evidence to establish the truth of their allegations against [petitioner]. There was no
showing that [respondents] made any attempt to talk to [petitioner] to verify the statements
contained in the defamatory articles, especially considering the gravity of the accusations made
against [petitioner]. At the very least, [respondents] should have exercised efforts to talk to
[petitioner] to clarify the issues and get his side. [Respondents] failure to verify the truth of the
information from [petitioner] himself is in itself an evidence of their lack of bona fide efforts to
verify the accuracy of her information.
The incessant publication of the defamatory articles attacking the honor and reputation of
[petitioner] is also proof of [respondents] malicious scheme to malign and defame the name,
honor and reputation of [petitioner]. As earlier pointed out, in a span of one (1) month,
[respondents] wrote and published and/or caused the publication of seven (7) libelous articles
against [petitioner] attacking his honor and reputation as a distinguished businessman,
philanthropist, his political inclination, and as an employer in his insurance company. In fact, the
presence of malice is made more evident by [respondents] baseless and uncalled for attack on
the person of [petitioner] as an employer. As aptly noted by the trial court in the assailed
Decision:
Also in one of the articles, herein plaintiff was portrayed as an unfair and uncaring employer due
to the strike staged by the employees of Grepalife suggesting that it was the [petitioner] who was
the cause, and of insinuating that if [petitioners] group takes over control of Oriental, it would
experience the same labor problem as in Grepalife. The Court finds that [respondents] failed to
render an unbiased and fair report as to the real cause of the strike except to lay the blame to
[petitioner], without stating, much less describing, his participation thereon, knowing fully well
that Grepalife is an entity distinct from the plaintiff. In other words, the labor policies
implemented by Grepalife as regards its employees are obviously not that of Yuchengco.
Such baseless and malicious accusation of [respondents] on [petitioner] only proves the
intention of the [respondents] in publishing the defamatory articles was not to present an
unbiased report on current issues but to launch a personal attack on the very person of
[petitioner].
As earlier explained, as correctly found by the trial court, even the timing of the publication of
these subject articles is highly suspicious inasmuch as the subject libelous articles came out in
the Manila Chronicle, a newspaper owned and under the control of [respondent] Coyiuto, around
November to December of 1993, a couple of months prior to the January stockholders meeting
of Oriental Corporation. From this, it is logical to conclude that the publication of the subject
defamatory articles defaming the good name and reputation of [petitioner] is but a part of [a]
grand scheme to create a negative image of [petitioner] so as to negatively affect [petitioners]
credibility to the public, more particularly, to the then stockholders of Oriental Corporation. Worth
noting also is the fact that the subject articles did not only portray [petitioner] in a bad light.
Curiously, in these articles, [respondent] Coyiuto, a known rival of [petitioner], was portrayed as
the underdog, the David and [petitioner] as the Goliath in their battle for control over Oriental
Corporation. This does not escape the Courts attention.
These circumstances clearly indicate the presence of actual malice on the part of [respondents]
in the publication of the subject libelous articles.[35] (Emphases supplied.)
When the Court of Appeals granted the Motion for Reconsideration, it did not touch upon its
earlier finding of actual malice on the part of respondents in publishing the subject articles.
Instead, the Court of Appeals merely held that the subject articles were fair commentaries on
matters of public interest, and thus fell within the scope of the third type of qualifiedly privileged
communications.
This was a glaring error on the part of the Court of Appeals. As discussed above, whereas there
is an absolute bar to an action in the case of absolutely privileged communication, the same is
not true with respect to qualifiedly privileged communication, wherein the law merely raises a
prima facie presumption in favor of the occasion. In the former, the freedom from liability is
absolute, regardless of the existence of actual malice, as contrasted with the freedom in the
latter, where it is conditioned on the want or absence of actual malice. Conditionally or qualifiedly
privileged communications are actionable when made with actual malice.[36]
When malice in fact is proven, assertions and proofs that the libelous articles are qualifiedly
privileged communications are futile, since being qualifiedly privileged communications merely
prevents the presumption of malice from attaching to a defamatory imputation.
Neither is there any reason for this Court to reverse the findings of the trial court and the Court of
Appeals that there was actual malice on the part of the respondents. As held by the courts a
quo, Yuchengco was able to show by the attendant circumstances that respondents were
animated by a desire to inflict unjustifiable harm on his reputation, as shown by the timing and
frequency of the publication of the defamatory articles. The portrayal of then Chronicle
Publishing Chairman Coyiuto as an underdog and his rival Yuchengco as the greedy Goliath in
their battle for control over Oriental Corporation, taken with the timing of the publication of these
subject articles a couple of months prior to the January stockholders meeting of Oriental
Corporation, clearly indicate that the articles constituted an orchestrated attack to undermine the
reputation of Yuchengco. Furthermore, respondents were shown to have acted with reckless
disregard as to the truth or falsity of the articles they published, when they were unable to rebut
the categorical denial by Yuchengco of the accusations made against him, and his allegation
that he was not approached by respondents for his side of the stories before the publication
thereof. Respondents failure to present evidence showing that they verified the truth of any of
the subject articles is fatal to their cause. In In re: Emil P. Jurado,[37] this Court ruled that
categorical denials of the truth of allegations in a publication place the burden upon the party
publishing it, either of proving the truth of the imputations or of showing that the same was an
honest mistake or error committed despite good efforts to arrive at the truth. There is actual
malice when there is either (1) knowledge of the publications falsity; or (2) reckless disregard of
whether the contents of the publication were false or not.[38] Failure to even get the side of
Yuchengco in the published articles clearly constituted reckless disregard of the truth or falsity of
said articles.
Finally, even if we assume for the sake of argument that actual malice was not proven in the
case at bar, we nevertheless cannot adhere to the finding of the Court of Appeals in the
Amended Decision that the subject articles were fair commentaries on matters of public interest,
and thus fell within the scope of the third type of qualifiedly privileged communications.
In Philippine Journalists, Inc. (Peoples Journal) v. Theonen,[39] this Court adopted the
pronouncement in the United States Decision in Gertz v. Robert Welsch, Inc.[40] that, in order to
be considered as fair commentaries on matters of public interest, the individual to whom the
defamatory articles were imputed should either be a public officer or a public figure:
In Borjal v. Court of Appeals, we stated that the enumeration under Art. 354 is not an exclusive
list of qualifiedly privileged communications since fair commentaries on matters of public interest
are likewise privileged. We stated that the doctrine of fair commentaries means that while in
general every discreditable imputation publicly made is deemed false, because every man is
presumed innocent until his guilt is judicially proved, and every false imputation is deemed
malicious, nevertheless, when the discreditable imputation is directed against a public person in
his public capacity, it is not necessarily actionable. In order that such discreditable imputation to
a public official may be actionable, it must either be a false allegation of fact or a comment
based on a false supposition.
Again, this argument is unavailing to the petitioners. As we said, the respondent is a private
individual, and not a public official or public figure. We are persuaded by the reasoning of the
United States Supreme Court in Gertz v. Robert Welch, Inc., [418 U. S. 323 (1974)] that a
newspaper or broadcaster publishing defamatory falsehoods about an individual who is neither a
public official nor a public figure may not claim a constitutional privilege against liability, for injury
inflicted, even if the falsehood arose in a discussion of public interest. (Emphasis supplied.)
Thus, in trying to prove that the subject articles delved on matters concerning public interest, the
Court of Appeals insisted that Yuchengco was a public official or public figure, who must not be
too thin-skinned with reference to comment upon his official acts.[41] The Court of Appeals then
noted that Yuchengco was, at the time of the Amended Decision, appointed as a Presidential
Adviser on Foreign Affairs with Cabinet rank, and proceeded to enumerate[42] the public
positions held by Yuchengco through the years.
However, an examination of the subject articles reveals that the allegations therein pertain to
Yuchengcos private business endeavors and do not refer to his duties, functions and
responsibilities as a Philippine Ambassador to China and Japan, or to any of the other public
positions he occupied. A topic or story should not be considered a matter of public interest by
the mere fact that the person involved is a public officer, unless the said topic or story relates to
his functions as such. Assuming a public office is not tantamount to completely abdicating ones
right to privacy. Therefore, for the purpose of determining whether or not a topic is a matter of
public interest, Yuchengco cannot be considered a public officer.
Neither is Yuchengco a public figure. The above case Philippine Journalists continues to cite the
US case Gertz in describing who is a public figure:
ASIDE. The Decision of the Regional Trial Court of Makati City in Civil Case No. 94-1114 dated
8 November 2002 finding herein respondents liable for damages, is hereby REINSTATED, but
shall be MODIFIED to read as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:

More commonly, those classed as public figures have thrust themselves to the forefront of
particular public controversies in order to influence the resolution of the issues involved. In either
event, they invite attention and comment. Third, this would impose an additional difficulty on trial
court judges to decide which publications address issues of general interest and which do not.
Even if the foregoing generalities do not obtain in every instance, the communications media are
entitled to act on the assumption that public officials and public figures have voluntarily exposed
themselves to increased risk of injury from defamatory falsehood concerning them. No such
assumption is justified with respect to a private individual. He has not accepted public office or
assumed an influential role in ordering society. (Curtis Publishing Co. v. Butts, 388 U.S., at 164)
He has relinquished no part of his interest in the protection of his own good name, and
consequently he has a more compelling call on the courts for redress of injury inflicted by
defamatory falsehood. Thus, private individuals are not only more vulnerable to injury than public
officials and public figures; they are also more deserving of recovery.[43] (Emphasis supplied.)
1. On the First Cause of Action, ordering defendants Chronicle Publishing, Neil H. Cruz, Ernesto
Tolentino, Noel Cabrera, Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino and
Rodney Diola to pay plaintiff Yuchengco, jointly and severally:
a. the amount of Two Million Pesos (P2,000,000.00) as moral damages; and
b. the amount of Five Hundred Thousand Pesos (P500,000.00) as exemplary damages;
2. On the Second Cause of Action, ordering defendants Roberto Coyuito, Jr. and Chronicle
Publishing to pay plaintiff Yuchengco, jointly and severally:
a. the amount of Twenty-Five Million Pesos (P25,000,000.00) as moral damages; and
b. the amount of Ten Million Pesos (P10,000,000.00) as exemplary damages;

The records in the case at bar do not disclose any instance wherein Yuchengco had voluntarily
thrust himself to the forefront of particular public controversies in order to influence the resolution
of the issues involved. He cannot, therefore, be considered a public figure. Since Yuchengco,
the person defamed in the subject articles, is neither as public officer nor a public figure, said
articles cannot be considered as qualifiedly privileged communications even if they deal with
matters of public concern.
3. On the Third Cause of Action, ordering all defendants to pay plaintiff Yuchengco, jointly and
severally, the amount of One Million Pesos (P1,000,000.00) as attorneys fee and legal costs.
Costs against respondents.
SO ORDERED.

In view of the foregoing, this Court is constrained to grant the instant Petition and reinstate the
Decision of the trial court, as previously affirmed by the Court of Appeals in its original Decision.
This Court, however, finds the award of damages in the total amount of One Hundred Million
Pesos by the trial court to be rather excessive given the circumstances. This Court, thus, further
resolves to reduce the award of damages, as follows:

1. The damages for which Chronicle Publishing, Neil H. Cruz, Ernesto Tolentino, Noel Cabrera,
Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino and Rodney Diola shall be
jointly and severally liable under the first cause of action shall be reduced as follows:

a. The amount of moral damages shall be reduced from Ten Million Pesos (P10,000,000.00)
to Two Million Pesos (P2,000,000.00); and

b. The amount of exemplary damages shall be reduced from Ten Million Pesos
(P10,000,000.00) to Five Hundred Thousand Pesos (P500,000.00);

2. The damages for which Roberto Coyuito, Jr. and Chronicle Publishing shall be jointly and
severally liable under the second cause of action shall be reduced as follows:

a. The amount of moral damages shall be reduced from Fifty Million Pesos (P50,000,000.00)
to Twenty-Five Million Pesos (P25,000,000.00); and

b. The amount of exemplary damages shall be reduced from Thirty Million Pesos
(P30,000,000.00) Ten Million Pesos (P10,000,000.00).

WHEREFORE, the Petition is PARTIALLY GRANTED. The Amended Decision of the Court of
Appeals in CA-G.R. CV No. 76995 dated 28 August 2008, which reversed on Motion for
Reconsideration the 18 March 2008 Decision of the same Court is hereby REVERSED and SET
HEIRS OF EDUARDO coupled with an application for a writ of preliminary attachment (docketed as Civil Case No. 915-
SIMON, 00).[2] He alleged in his complaint the following:
Petitioners,
xxx
2. Sometime in December 1996 defendant employing fraud, deceit, and misrepresentation
encashed a check dated December 26, 1996 in the amount of P336,000.00 to the plaintiff
-versus - assuring the latter that the check is duly funded and that he had an existing account with the
Land Bank of the Philippines, xerox copy of the said check is hereto attached as Annex A;

3. However, when said check was presented for payment the same was dishonored on the
ground that the account of the defendant with the Land Bank of the Philippines has been closed
ELVIN* CHAN AND THE COURT OF APPEALS, contrary to his representation that he has an existing account with the said bank and that the
Respondent. said check was duly funded and will be honored when presented for payment;
G.R. No. 157547
4. Demands had been made to the defendant for him to make good the payment of the value of
Present: the check, xerox copy of the letter of demand is hereto attached as Annex B, but despite such
demand defendant refused and continues to refuse to comply with plaintiffs valid demand;
BRION, Acting Chairperson,**
BERSAMIN, 5. Due to the unlawful failure of the defendant to comply with the plaintiffs valid demands,
ABAD,*** plaintiff has been compelled to retain the services of counsel for which he agreed to pay as
VILLARAMA, JR., and reasonable attorneys fees the amount of P50,000.00 plus additional amount of P2,000.00 per
SERENO, JJ. appearance.

Promulgated: ALLEGATION IN SUPPORT OF PRAYER

FOR PRELIMINARY ATTACHMENT
February 23, 2011
x-----------------------------------------------------------------------------------------x 6. The defendant as previously alleged has been guilty of fraud in contracting the obligation
upon which this action is brought and that there is no sufficient security for the claims sought in
DECISION this action which fraud consist in the misrepresentation by the defendant that he has an existing
account and sufficient funds to cover the check when in fact his account was already closed at
BERSAMIN, J.: the time he issued a check;

There is no independent civil action to recover the civil liability arising from the issuance of an 7. That the plaintiff has a sufficient cause of action and this action is one which falls under
unfunded check prohibited and punished under Batas Pambansa Bilang 22 (BP 22). Section 1, sub-paragraph (d), Rule 57 of the Revised Rules of Court of the Philippines and the
amount due the plaintiff is as much as the sum for which the plaintiff seeks the writ of preliminary
Antecedents attachment;

On July 11, 1997, the Office of the City Prosecutor of Manila filed in the Metropolitan Trial Court 8. That the plaintiff is willing and able to post a bond conditioned upon the payment of damages
of Manila (MeTC) an information charging the late Eduardo Simon (Simon) with a violation of BP should it be finally found out that the plaintiff is not entitled to the issuance of a writ of preliminary
22, docketed as Criminal Case No. 275381 entitled People v. Eduardo Simon. The accusatory attachment.[3]
portion reads:

That sometime in December 1996 in the City of Manila, Philippines, the said accused, did then
and there willfully, unlawfully and feloniously make or draw and issue to Elvin Chan to apply on
account or for value Landbank Check No. 0007280 dated December 26, 1996 payable to cash
in the amount of P336,000.00 said accused well knowing that at the time of issue she/he/they
did not have sufficient funds in or credit with the drawee bank for payment of such check in full
upon its presentment, which check when presented for payment within ninety (90) days from the
date thereof was subsequently dishonored by the drawee bank for Account Closed and despite
receipt of notice of such dishonor, said accused failed to pay said Elvin Chan the amount of the
check or to make arrangement for full payment of the same within five (5) banking days after
receiving said notice.
CONTRARY TO LAW. [1]
More than three years later, or on August 3, 2000, respondent Elvin Chan commenced in the
MeTC in Pasay City a civil action for the collection of the principal amount of P336,000.00,
On August 9, 2000, the MeTC in Pasay City issued a writ of preliminary attachment, which was
implemented on August 17, 2000 through the sheriff attaching a Nissan vehicle of Simon.[4]
On August 17, 2000, Simon filed an urgent motion to dismiss with application to charge plaintiffs
attachment bond for damages,[5] pertinently averring:
xxx
On the ground of litis pendentia, that is, as a consequence of the pendency of another action
between the instant parties for the same cause before the Metropolitan Trial Court of Manila,
Branch X (10) entitled People of the Philippines vs. Eduardo Simon, docketed thereat as
Criminal Case No. 275381-CR, the instant action is dismissable under Section 1, (e), Rule 16,
1997 Rules of Civil Procedure, xxx
xxx
While the instant case is civil in nature and character as contradistinguished from the said
Criminal Case No. 915-00 in the Metropolitan Trial Court of Manila, Branch X (10), the basis of
the instant civil action is the herein plaintiffs criminal complaint against defendant arising from a
charge of violation of Batas Pambansa Blg. 22 as a consequence of the alleged dishonor in
plaintiffs hands upon presentment for payment with drawee bank a Land Bank Check No.
0007280 dated December 26, 1996 in the amount of P336,000- drawn allegedly issued to
plaintiff by defendant who is the accused in said case, a photocopy of the Criminal information
filed by the Assistant City Prosecutor of Manila on June 11, 1997 hereto attached and made
integral part hereof as Annex 1.
It is our understanding of the law and the rules, that, when a criminal action is instituted, the civil
action for recovery of civil liability arising from the offense charged is impliedly instituted with the
criminal action, unless the offended party expressly waives the civil action or reserves his right to
institute it separately xxx.
On August 29, 2000, Chan opposed Simons urgent motion to dismiss with application to charge
plaintiffs attachment bond for damages, stating:
1. The sole ground upon which defendant seeks to dismiss plaintiffs complaint is the alleged
pendency of another action between the same parties for the same cause, contending among
others that the pendency of Criminal Case No. 275381-CR entitled People of the Philippines vs.
Eduardo Simon renders this case dismissable;
2. The defendant further contends that under Section 1, Rule 111 of the Revised Rules of Court,
the filing of the criminal action, the civil action for recovery of civil liability arising from the offense
charged is impliedly instituted with the criminal action which the plaintiff does not contest;
however, it is the submission of the plaintiff that an implied reservation of the right to file a civil
action has already been made, first, by the fact that the information for violation of B.P. 22 in
Criminal Case No. 2753841 does not at all make any allegation of damages suffered by the
plaintiff nor is there any claim for recovery of damages; on top of this the plaintiff as private
complainant in the criminal case, during the presentation of the prosecution evidence was not
represented at all by a private prosecutor such that no evidence has been adduced by the
prosecution on the criminal case to prove damages; all of these we respectfully submit
demonstrate an effective implied reservation of the right of the plaintiff to file a separate civil
action for damages;
3. The defendant relies on Section 3 sub-paragraph (a) Rule 111 of the Revised Rules of Court
which mandates that after a criminal action has been commenced the civil action cannot be
instituted until final judgment has been rendered in the criminal action; however, the defendant
overlooks and conveniently failed to consider that under Section 2, Rule 111 which provides as
follows:
In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code of the Philippines,
an independent civil action entirely separate and distinct from the criminal action, may be
brought by the injured party during the pendency of criminal case provided the right is reserved
as required in the preceding section. Such civil action shall proceed independently of the
criminal prosecution, and shall require only a preponderance of evidence.
In as much as the case is one that falls under Art. 33 of the Civil Code of the Philippines as it is
based on fraud, this action therefore may be prosecuted independently of the criminal action;
4. In fact we would even venture to state that even without any reservation at all of the right to
file a separate civil action still the plaintiff is authorized to file this instant case because the
plaintiff seeks to enforce an obligation which the defendant owes to the plaintiff by virtue of the
negotiable instruments law. The plaintiff in this case sued the defendant to enforce his liability as
drawer in favor of the plaintiff as payee of the check. Assuming the allegation of the defendant of
the alleged circumstances relative to the issuance of the check, still when he delivered the check
payable to bearer to that certain Pedro Domingo, as it was payable to cash, the same may be
negotiated by delivery by who ever was the bearer of the check and such negotiation was valid
and effective against the drawer;
5. Indeed, assuming as true the allegations of the defendant regarding the circumstances
relative to the issuance of the check it would be entirely impossible for the plaintiff to have been
aware that such check was intended only for a definite person and was not negotiable
considering that the said check was payable to bearer and was not even crossed;
6. We contend that what cannot be prosecuted separate and apart from the criminal case
without a reservation is a civil action arising from the criminal offense charged. However, in this
instant case since the liability of the defendant are imposed and the rights of the plaintiff are
created by the negotiable instruments law, even without any reservation at all this instant action
may still be prosecuted;
7. Having this shown, the merits of plaintiffs complaint the application for damages against the
bond is totally without any legal support and perforce should be dismissed outright.[6]
On October 23, 2000, the MeTC in Pasay City granted Simons urgent motion to dismiss with
application to charge plaintiffs attachment bond for damages,[7] dismissing the complaint of
Chan because:
xxx
After study of the arguments of the parties, the court resolves to GRANT the Motion to Dismiss
and the application to charge plaintiffs bond for damages.
For litis pendentia to be a ground for the dismissal of an action, the following requisites must
concur: (a) identity of parties or at least such as to represent the same interest in both actions;
(b) identity of rights asserted and relief prayed for, the relief being founded on the same acts;
and (c) the identity in the two (2) cases should be such that the judgment, which may be
rendered in one would, regardless of which party is successful, amount to res judicata in the
other. xxx
A close perusal of the herein complaint denominated as Sum of Money and the criminal case for
violation of BP Blg. 22 would readily show that the parties are not only identical but also the
cause of action being asserted, which is the recovery of the value of Landbank Check No.
0007280 in the amount of P336,000.00. In both civil and criminal cases, the rights asserted and
relief prayed for, the reliefs being founded on the same facts, are identical.
Plaintiffs claim that there is an effective implied waiver of his right to pursue this civil case owing
to the fact that there was no allegation of damages in BP Blg. 22 case and that there was no
private prosecutor during the presentation of prosecution evidence is unmeritorious. It is basic
that when a complaint or criminal Information is filed, even without any allegation of damages
and the intention to prove and claim them, the offended party has the right to prove and claim for
them, unless a waiver or reservation is made or unless in the meantime, the offended party has
instituted a separate civil action. xxx The over-all import of the said provision conveys that the
waiver which includes indemnity under the Revised Penal Code, and damages arising under
Articles 32, 33, and 34 of the Civil Code must be both clear and express. And this must be
logically so as the primordial objective of the Rule is to prevent the offended party from
recovering damages twice for the same act or omission of the accused.
Indeed, the evidence discloses that the plaintiff did not waive or made a reservation as to his
right to pursue the civil branch of the criminal case for violation of BP Blg. 22 against the
defendant herein. To the considered view of this court, the filing of the instant complaint for sum
of money is indeed legally barred. The right to institute a separate civil action shall be made
before the prosecution starts to present its evidence and under circumstances affording the
offended party a reasonable opportunity to make such reservation. xxx
Even assuming the correctness of the plaintiffs submission that the herein case for sum of
money is one based on fraud and hence falling under Article 33 of the Civil Code, still prior
reservation is required by the Rules, to wit:
In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code of the Philippines,
an independent civil action entirely separate and distinct from the criminal action, may be
brought by the injured party during the pendency of criminal case provided the right is reserved
as required in the preceding section. Such civil action shall proceed independently of the
criminal prosecution, and shall require only a preponderance of evidence.
xxx
WHEREFORE, premises considered, the court resolves to:
1. Dismiss the instant complaint on the ground of litis pendentia;
2. Dissolve/Lift the Writ of Attachment issued by this court on August 14, 2000;
3. Charge the plaintiffs bond the amount of P336,000.00 in favor of the defendant for the
damages sustained by the latter by virtue of the implementation of the writ of attachment;
4. Direct the Branch Sheriff of this Court to RESTORE with utmost dispatch to the defendants
physical possession the vehicle seized from him on August 16, 2000; and
5. Direct the plaintiff to pay the defendant the sum of P5,000.00 by way of attorneys fees.
SO ORDERED.
Chans motion for reconsideration was denied on December 20, 2000,[8] viz:
Considering that the plaintiffs arguments appear to be a mere repetition of his previous
submissions, and which submissions this court have already passed upon; and taking into
account the inapplicability of the ratio decidendi in the Tactaquin vs. Palileo case which the
plaintiff cited as clearly in that case, the plaintiff therein expressly made a reservation to file a
separate civil action, the Motion for Reconsideration is DENIED for lack of merit.
SO ORDERED.
On July 31, 2001, the Regional Trial Court (RTC) in Pasay City upheld the dismissal of Chans
complaint, disposing:[9]
WHEREFORE, finding no error in the appealed decision, the same is hereby AFFIRMED in toto.
SO ORDERED.
On September 26, 2001, Chan appealed to the Court of Appeals (CA) by petition for review,[10]
challenging the propriety of the dismissal of his complaint on the ground of litis pendentia.
In his comment, [11] Simon countered that Chan was guilty of bad faith and malice in
prosecuting his alleged civil claim twice in a manner that caused him (Simon) utter
embarrassment and emotional sufferings; and that the dismissal of the civil case because of the
valid ground of litis pendentia based on Section 1 (e), Rule 16 of the 1997 Rules of Civil
Procedure was warranted.
On June 25, 2002, the CA promulgated its assailed decision,[12] overturning the RTC, viz:
xxx
As a general rule, an offense causes two (2) classes of injuries. The first is the social injury
produced by the criminal act which is sought to be repaired through the imposition of the
corresponding penalty, and the second is the personal injury caused to the victim of the crime
which injury is sought to be compensated through indemnity which is also civil in nature. Thus,
every person criminally liable for a felony is also civilly liable.
The offended party may prove the civil liability of an accused arising from the commission of the
offense in the criminal case since the civil action is either deemed instituted with the criminal
action or is separately instituted.
Rule 111, Section 1 of the Revised Rules of Criminal Procedure, which became effective on
December 1, 2000, provides that:
(a) When a criminal action is instituted, the civil action for the recovery of civil liability arising
from the offense charged shall be deemed instituted with the criminal action unless the offended
party waives the civil action, reserves the right to institute it separately or institute the civil action
prior to the criminal action.
Rule 111, Section 2 further states:
After the criminal action has been commenced, the separate civil action arising therefrom cannot
be instituted until final judgment has been entered in the criminal action.
However, with respect to civil actions for recovery of civil liability under Articles 32, 33, 34 and
2176 of the Civil Code arising from the same act or omission, the rule has been changed.
In DMPI Employees Credit Association vs. Velez, the Supreme Court pronounced that only the
civil liability arising from the offense charged is deemed instituted with the criminal action unless
the offended party waives the civil action, reserves his right to institute it separately, or institutes
the civil action prior to the criminal action. Speaking through Justice Pardo, the Supreme Court
held:
There is no more need for a reservation of the right to file the independent civil action under
Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines. The reservation and waiver
referred to refers only to the civil action for the recovery of the civil liability arising from the
offense charged. This does not include recovery of civil liability under Articles 32, 33, 34, and
2176 of the Civil Code of the Philippines arising from the same act or omission which may be
prosecuted separately without a reservation.
Rule 111, Section 3 reads:
Sec. 3. When civil action may proceed independently. In the cases provided in Articles 32, 33,
34, and 2176 of the Civil Code of the Philippines, the independent civil action may be brought by
the offended party. It shall proceed independently of the criminal action and shall require only a
preponderance of evidence. In no case, however, may the offended party recover damages
twice for the same act or omission charged in the criminal action.
The changes in the Revised Rules on Criminal Procedure pertaining to independent civil actions
which became effective on December 1, 2000 are applicable to this case.
Procedural laws may be given retroactive effect to actions pending and undetermined at the time
of their passage. There are no vested rights in the rules of procedure. xxx
Thus, Civil Case No. CV-94-124, an independent civil action for damages on account of the
fraud committed against respondent Villegas under Article 33 of the Civil Code, may proceed
independently even if there was no reservation as to its filing.
It must be pointed that the abovecited case is similar with the instant suit. The complaint was
also brought on allegation of fraud under Article 33 of the Civil Code and committed by the
respondent in the issuance of the check which later bounced. It was filed before the trial court,
despite the pendency of the criminal case for violation of BP 22 against the respondent. While it
may be true that the changes in the Revised Rules on Criminal Procedure pertaining to
independent civil action became effective on December 1, 2000, the same may be given
retroactive application and may be made to apply to the case at bench, since procedural rules
may be given retroactive application. There are no vested rights in the rules of procedure.
In view of the ruling on the first assigned error, it is therefore an error to adjudge damages in
favor of the petitioner.
WHEREFORE, the petition is hereby GRANTED. The Decision dated July 13, 2001 rendered by
the Regional Trial Court of Pasay City, Branch 108 affirming the dismissal of the complaint filed
by petitioner is hereby REVERSED and SET ASIDE. The case is hereby REMANDED to the trial
court for further proceedings.
SO ORDERED.
On March 14, 2003, the CA denied Simons motion for reconsideration.[13]
Hence, this appeal, in which the petitioners submit that the CA erroneously premised its decision
on the assessment that the civil case was an independent civil action under Articles 32, 33, 34,
and 2176 of the Civil Code; that the CAs reliance on the ruling in DMPI Employees Credit
Cooperative Inc. v. Velez[14] stretched the meaning and intent of the ruling, and was contrary to
Sections 1 and 2 of Rule 111 of the Rules of Criminal Procedure; that this case was a simple
collection suit for a sum of money, precluding the application of Section 3 of Rule 111 of the
Rules of Criminal Procedure.[15]
In his comment,[16] Chan counters that the petition for review should be denied because the
petitioners used the wrong mode of appeal; that his cause of action, being based on fraud, was
an independent civil action; and that the appearance of a private prosecutor in the criminal case
did not preclude the filing of his separate civil action.
Issue
The lone issue is whether or not Chans civil action to recover the amount of the unfunded check
(Civil Case No. 915-00) was an independent civil action.
Ruling
The petition is meritorious.
A No counterclaim, cross-claim or third-party complaint may be filed by the accused in the criminal
Applicable Law and Jurisprudence on the
Propriety of filing a separate civil action based on BP 22
The Supreme Court has settled the issue of whether or not a violation of BP 22 can give rise to
civil liability in Banal v. Judge Tadeo, Jr.,[17] holding:
xxx
Article 20 of the New Civil Code provides:
Every person who, contrary to law, wilfully or negligently causes damage to another, shall
indemnify the latter for the same.
Regardless, therefore, of whether or not a special law so provides, indemnification of the
offended party may be had on account of the damage, loss or injury directly suffered as a
consequence of the wrongful act of another. The indemnity which a person is sentenced to pay
forms an integral part of the penalty imposed by law for the commission of a crime (Quemel v.
Court of Appeals, 22 SCRA 44, citing Bagtas v. Director of Prisons, 84 Phil 692). Every crime
gives rise to a penal or criminal action for the punishment of the guilty party, and also to civil
action for the restitution of the thing, repair of the damage, and indemnification for the losses
(United States v. Bernardo, 19 Phil 265).
xxx
Civil liability to the offended party cannot thus be denied. The payee of the check is entitled to
receive the payment of money for which the worthless check was issued. Having been caused
the damage, she is entitled to recompense.
Surely, it could not have been the intendment of the framers of Batas Pambansa Blg. 22 to leave
the offended private party defrauded and empty-handed by excluding the civil liability of the
offender, giving her only the remedy, which in many cases results in a Pyrrhic victory, of having
to file a separate civil suit. To do so may leave the offended party unable to recover even the
face value of the check due her, thereby unjustly enriching the errant drawer at the expense of
the payee. The protection which the law seeks to provide would, therefore, be brought to naught.
xxx
However, there is no independent civil action to recover the value of a bouncing check issued in
contravention of BP 22. This is clear from Rule 111 of the Rules of Court, effective December 1,
2000, which relevantly provides:
Section 1. Institution of criminal and civil actions. - (a) When a criminal action is instituted, the
civil action for the recovery of civil liability arising from the offense charged shall be deemed
instituted with the criminal action unless the offended party waives the civil action, reserves the
right to institute it separately or institutes the civil action prior to the criminal action.
The reservation of the right to institute separately the civil action shall be made before the
prosecution starts presenting its evidence and under circumstances affording the offended party
a reasonable opportunity to make such reservation.
When the offended party seeks to enforce civil liability against the accused by way of moral,
nominal, temperate, or exemplary damages without specifying the amount thereof in the
complaint or information, the filing fees therefor shall constitute a first lien on the judgment
awarding such damages.
Where the amount of damages, other than actual, is specified in the complaint or information,
the corresponding filing fees shall be paid by the offended party upon the filing thereof in court.
Except as otherwise provided in these Rules, no filing fees shall be required for actual damages.
case, but any cause of action which could have been the subject thereof may be litigated in a
separate civil action. (1a)
(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include the
corresponding civil action. No reservation to file such civil action separately shall be allowed.[18]
Upon filing of the aforesaid joint criminal and civil actions, the offended party shall pay in full the
filing fees based on the amount of the check involved, which shall be considered as the actual
damages claimed. Where the complaint or information also seeks to recover liquidated, moral,
nominal, temperate or exemplary damages, the offended party shall pay the filing fees based on
the amounts alleged therein. If the amounts are not so alleged but any of these damages are
subsequently awarded by the court, the filing fees based on the amount awarded shall constitute
a first lien on the judgment.
Where the civil action has been filed separately and trial thereof has not yet commenced, it may
be consolidated with the criminal action upon application with the court trying the latter case. If
the application is granted, the trial of both actions shall proceed in accordance with section 2 of
the Rule governing consolidation of the civil and criminal actions.
Section 3. When civil action may proceed independently. In the cases provided in Articles 32,
33, 34 and 2176 of the Civil Code of the Philippines, the independent civil action may be brought
by the offended party. It shall proceed independently of the criminal action and shall require only
a preponderance of evidence. In no case, however, may the offended party recover damages
twice for the same act or omission charged in the criminal action.
The aforequoted provisions of the Rules of Court, even if not yet in effect when Chan
commenced Civil Case No. 915-00 on August 3, 2000, are nonetheless applicable. It is
axiomatic that the retroactive application of procedural laws does not violate any right of a
person who may feel adversely affected, nor is it constitutionally objectionable. The reason is
simply that, as a general rule, no vested right may attach to, or arise from, procedural laws.[19]
Any new rules may validly be made to apply to cases pending at the time of their promulgation,
considering that no party to an action has a vested right in the rules of procedure,[20] except that
in criminal cases, the changes do not retroactively apply if they permit or require a lesser
quantum of evidence to convict than what is required at the time of the commission of the
offenses, because such retroactivity would be unconstitutional for being ex post facto under the
Constitution.[21]
Moreover, the application of the rule would not be precluded by the violation of any assumed
vested right, because the new rule was adopted from Supreme Court Circular 57-97 that took
effect on November 1, 1997.
Supreme Court Circular 57-97 states:
Any provision of law or Rules of Court to the contrary notwithstanding, the following rules and
guidelines shall henceforth be observed in the filing and prosecution of all criminal cases under
Batas Pambansa Blg. 22 which penalizes the making or drawing and issuance of a check
without funds or credit:
1. The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to necessarily
include the corresponding civil action, and no reservation to file such civil action separately shall
be allowed or recognized.[22]
2. Upon the filing of the aforesaid joint criminal and civil actions, the offended party shall pay in
full the filing fees based upon the amount of the check involved which shall be considered as the
actual damages claimed, in accordance with the schedule of fees in Section 7 (a) and Section 8
(a), Rule 141 of the Rules of Court as last amended by Administrative Circular No. 11-94
effective August 1, 1994. Where the offended party further seeks to enforce against the accused
civil liability by way of liquidated, moral, nominal, temperate or exemplary damages, he shall pay
the corresponding filing fees therefor based on the amounts thereof as alleged either in the
complaint or information. If not so alleged but any of these damages are subsequently awarded
by the court, the amount of such fees shall constitute a first lien on the judgment.
3. Where the civil action has heretofore been filed separately and trial thereof has not yet
commenced, it may be consolidated with the criminal action upon application with the court
trying the latter case. If the application is granted, the trial of both actions shall proceed in
accordance with the pertinent procedure outlined in Section 2 (a) of Rule 111 governing the
proceedings in the actions as thus consolidated.
4. This Circular shall be published in two (2) newspapers of general circulation and shall take
effect on November 1, 1997.
The reasons for issuing Circular 57-97 were amply explained in Hyatt Industrial Manufacturing
Corporation v. Asia Dynamic Electrix Corporation,[23] thus:
xxx
We agree with the ruling of the Court of Appeals that upon filing of the criminal cases for
violation of B.P. 22, the civil action for the recovery of the amount of the checks was also
impliedly instituted under Section 1(b) of Rule 111 of the 2000 Rules on Criminal Procedure.
Under the present revised Rules, the criminal action for violation of B.P. 22 shall be deemed to
include the corresponding civil action. The reservation to file a separate civil action is no longer
needed. The Rules provide:
Section 1. Institution of criminal and civil actions.
(a) xxx
(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include the
corresponding civil action. No reservation to file such civil action separately shall be allowed.
Upon filing of the aforesaid joint criminal and civil actions, the offended party shall pay in full the
filing fees based on the amount of the check involved, which shall be considered as the actual
damages claimed. Where the complaint or information also seeks to recover liquidated, moral,
nominal, temperate or exemplary damages, the offended party shall pay additional filing fees
based on the amounts alleged therein. If the amounts are not so alleged but any of these
damages are subsequently awarded by the court, the filing fees based on the amount awarded
shall constitute a first lien on the judgment.
Where the civil action has been filed separately and trial thereof has not yet commenced, it may
be consolidated with the criminal action upon application with the court trying the latter case. If
the application is granted, the trial of both actions shall proceed in accordance with section 2 of
this Rule governing consolidation of the civil and criminal actions.
The foregoing rule was adopted from Circular No. 57-97 of this Court. It specifically states that
the criminal action for violation of B.P. 22 shall be deemed to include the corresponding civil
action. It also requires the complainant to pay in full the filing fees based on the amount of the
check involved. Generally, no filing fees are required for criminal cases, but because of the
inclusion of the civil action in complaints for violation of B.P. 22, the Rules require the payment
of docket fees upon the filing of the complaint. This rule was enacted to help declog court
dockets which are filled with B.P. 22 cases as creditors actually use the courts as collectors.
Because ordinarily no filing fee is charged in criminal cases for actual damages, the payee uses
the intimidating effect of a criminal charge to collect his credit gratis and sometimes, upon being
paid, the trial court is not even informed thereof. The inclusion of the civil action in the criminal
case is expected to significantly lower the number of cases filed before the courts for collection
based on dishonored checks. It is also expected to expedite the disposition of these cases.
Instead of instituting two separate cases, one for criminal and another for civil, only a single suit
shall be filed and tried. It should be stressed that the policy laid down by the Rules is to
discourage the separate filing of the civil action. The Rules even prohibit the reservation of a
separate civil action, which means that one can no longer file a separate civil case after the
criminal complaint is filed in court. The only instance when separate proceedings are allowed is
when the civil action is filed ahead of the criminal case. Even then, the Rules encourage the
consolidation of the civil and criminal cases. We have previously observed that a separate civil
action for the purpose of recovering the amount of the dishonored checks would only prove to be
costly, burdensome and time-consuming for both parties and would further delay the final
disposition of the case. This multiplicity of suits must be avoided. Where petitioners rights may
be fully adjudicated in the proceedings before the trial court, resort to a separate action to
recover civil liability is clearly unwarranted. In view of this special rule governing actions for
violation of B.P. 22, Article 31 of the Civil Code cited by the trial court will not apply to the case at
bar.[24]
The CAs reliance on DMPI Employees Credit Association v. Velez[25] to give due course to the
civil action of Chan independently and separately of Criminal Case No. 275381 was
unwarranted. DMPI Employees, which involved a prosecution for estafa, is not on all fours with
this case, which is a prosecution for a violation of BP 22. Although the Court has ruled that the
issuance of a bouncing check may result in two separate and distinct crimes of estafa and
violation of BP 22,[26] the procedures for the recovery of the civil liabilities arising from these two
distinct crimes are different and non-interchangeable. In prosecutions of estafa, the offended
party may opt to reserve his right to file a separate civil action, or may institute an independent
action based on fraud pursuant to Article 33 of the Civil Code,[27] as DMPI Employees has
allowed. In prosecutions of violations of BP 22, however, the Court has adopted a policy to
prohibit the reservation or institution of a separate civil action to claim the civil liability arising
from the issuance of the bouncing check upon the reasons delineated in Hyatt Industrial
Manufacturing Corporation, supra.

To repeat, Chans separate civil action to recover the amount of the check involved in the
prosecution for the violation of BP 22 could not be independently maintained under both
Supreme Court Circular 57-97 and the aforequoted provisions of Rule 111 of the Rules of Court,
notwithstanding the allegations of fraud and deceit.

B
Aptness of the dismissal of the civil action
on the ground of litis pendentia

Did the pendency of the civil action in the MeTC in Manila (as the civil aspect in Criminal Case
No. 275381) bar the filing of Civil Case No. 915-00 in the MeTC in Pasay City on the ground of
litis pendentia?

For litis pendentia to be successfully invoked as a bar to an action, the concurrence of the
following requisites is necessary, namely: (a) there must be identity of parties or at least such as
represent the same interest in both actions; (b) there must be identity of rights asserted and
reliefs prayed for, the reliefs being founded on the same facts; and, (c) the identity in the two
cases should be such that the judgment that may be rendered in one would, regardless of which
party is successful, amount to res judicata in respect of the other. Absent the first two requisites,
the possibility of the existence of the third becomes nil.[28]

A perusal of Civil Case No. 01-0033 and Criminal Case No. 275381 ineluctably shows that all
the elements of litis pendentia are attendant. First of all, the parties in the civil action involved in
Criminal Case No. 275381 and in Civil Case No. 915-00, that is, Chan and Simon, are the same.
Secondly, the information in Criminal Case No. 275381 and the complaint in Civil Case No. 915-
00 both alleged that Simon had issued Landbank Check No. 0007280 worth P336,000.00
payable to cash, thereby indicating that the rights asserted and the reliefs prayed for, as well as
the facts upon which the reliefs sought were founded, were identical in all respects. And, thirdly,
any judgment rendered in one case would necessarily bar the other by res judicata; otherwise,
Chan would be recovering twice upon the same claim.

It is clear, therefore, that the MeTC in Pasay City properly dismissed Civil Case No. 915-00 on
the ground of litis pendentia through its decision dated October 23, 2000; and that the RTC in
Pasay City did not err in affirming the MeTC.

WHEREFORE, we grant the petition for review on certiorari, and, accordingly, we reverse and
set aside the decision promulgated by the Court of Appeals on June 25, 2002. We reinstate the
decision rendered on October 23, 2000 by the Metropolitan Trial Court, Branch 45, in Pasay
City.

Costs of suit to be paid by the respondent.

SO ORDERED.
[G.R. No. L-33772. June 20, 1988.]
FRANCISCO BONITE, CANDIDO BONITE, VENECIA BONITE, CONSTANCIO BONITE,
ERNESTO BONITE, ANGELINA BONITE, MARIA BONITE and JUANITA BONITE, for herself
and for her minor children namely: NADIJA BONITE, NERIO BONITE, FELIX BONITE and
MARIA FEDILA BONITE, Petitioners, v. HON. MARIANO A. ZOSA, Presiding Judge, Court of
First Instance of Misamis Occidental, 16th Judicial District, Branch III and ELIGIO ABAMONGA,
Respondents.
A.C . Dulalas & F .G. Zapatos Law Office, for Petitioners.
Rufino Abadies for respondent Eligio Abamonga.
DECISION
PADILLA, J.:
Petition for review on certiorari of the order of the Court of First Instance of Misamis Occidental,
Branch III, dated 25 February 1971, 1 in Civil Case No. 2806 filed by herein petitioners against
private respondent, dismissing the complaint for damages, and the order dated 27 March 1971 2
denying petitioners motion for reconsideration of aforesaid order. The factual background of the
case is as follows:chanrob1es virtual 1aw library
At about 2:00 P.M. of 24 September 1968, while Florencio Bonite was working as "caminero" of
the Bureau of Public Highways in Barrio Vicente Alto (Dagatan), Oroquieta City, he was hit by a
truck driven by private respondent, as a result of which, Bonite died on that same day.
Consequently, a criminal complaint for Homicide through Reckless Imprudence was filed by the
surviving heirs of the deceased (now petitioners) against the respondent Abamonga, with the
City Court of Oroquieta City, docketed as Criminal Case No. 9328. Petitioners through their
counsel Atty. Alberto Dulalas, as private prosecutor, actively participated in the prosecution of
the criminal case against the accused. 3
After trial on the merits, a decision was rendered by the court in the criminal case, acquitting the
accused Abamonga for failure of the prosecution to prove his guilt beyond reasonable doubt. 4
On 28 December 1970, petitioners filed an action for recovery of damages against the same
accused on account of the death of Florencio Bonite, with the Court of First Instance of Misamis
Occidental, 16th Judicial District, Branch III, docketed as Civil Case No. 2806. In an order dated
25 February 1971, the court a quo dismissed the complaint for damages. The pertinent portion
of the order 5 reads as follows:jgc:chanrobles.com.ph
". . ., the court believes and so holds that as the plaintiffs did not reserve the right to file an
independent civil action, and the further fact that the plaintiffs have been represented by a
private prosecutor in the prosecution of the criminal case, the action presently filed by the
plaintiffs is already res adjudicata and therefore, dismisses the complaint without
pronouncement as to costs.
SO ORDERED."cralaw virtua1aw library
Petitioners moved for reconsideration of the aforesaid order, but the same was denied: 6 hence,
this petition for review.chanrobles.com:cralaw:red
The main issue to be resolved in this petition is whether or not an independent civil action for
damages, under Article 29 of the Civil Code, is deemed barred by petitioners failure in the
criminal action to make a reservation to file a separate civil action and by their active
participation in the prosecution of such criminal action.
When the accused in a criminal case is acquitted on the ground that his guilt has not been
proved beyond reasonable doubt, a civil action for damages for the same act or omission may
still be instituted against him, and only a preponderance of evidence is required to hold the
accused liable. The civil liability is not extinguished by acquittal of the accused, where the
acquittal is based on reasonable doubt.
Article 29, Civil Code, provides thus
"When the accused in a criminal prosecution is acquitted on the ground that his guilt has not
been proved beyond reasonable doubt, a civil action for damages for the same act or omission
may be instituted. Such action requires only a preponderance of evidence. Upon motion of the
defendant, the court may require the plaintiff to file a bond to answer for damages in case the
complaint should be found to be malicious.
"If in a criminal case the judgment of acquittal is based upon reasonable doubt, the court shall so
declare. In the absence of any declaration to that effect, it may be inferred from the text of the
decision whether or not the acquittal is due to that ground."cralaw virtua1aw library
In the instant case, the criminal complaint for homicide through reckless imprudence was
dismissed on the ground that the guilt of the accused (herein private respondent) was not proved
beyond reasonable doubt. Clearly, herein petitioners have the right to file an independent civil
action for damages, the acquittal of the accused in the criminal case notwithstanding.
In addition to anchoring their right to bring a separate civil action for damages under the express
provisions of Article 29 of the Civil Code, petitioners may base such separate civil action for
damages on Article 2176 of the Civil Code. 7 Acquittal of the accused from a charge of criminal
negligence, whether on reasonable doubt or not, is not a bar to a subsequent civil action for
recovery of civil liability, arising not from criminal negligence, but from a quasi-delict or culpa
aquiliana. It has been held that Article 2176 of the Civil Code, in referring to "fault or negligence"
covers acts "not punishable by law" as well as acts that may be criminal in character, whether
intentional and voluntary or negligent. Consequently, a separate civil action lies against the
offender in a criminal act, whether or not he is criminally prosecuted and found guilty or
acquitted, provided that the offended party is not allowed to recover damages on both scores
(delict and quasi-delict). 8
In regard to private respondents claim that the specific provision applicable in the case at bar is
Article 33 of the Civil Code 9 (and not Article 29), because the latter is not applicable to criminal
offenses proceeding from a tortious act, we find the same to be devoid of merit. It is important to
note that Article 29 of the Civil Code does not state that the right to file an independent civil
action for damages (under said article) can be availed of only in offenses not arising from a
tortious act. The only requisite set forth therein for the exercise of the right to file a civil action for
damages is that the accused must have been acquitted in the criminal action based on
reasonable doubt. It is a well known main in statutory construction that where the law does not
distinguish, the courts should not distinguish. 10
Moreover, Article 33 of the Civil Code assumes a defamation, fraud, or physical injuries 11
intentionally committed. The death of the deceased in the case at bar was alleged to be the
result of criminal negligence, i.e., not inflicted with malice. Criminal negligence under Article 365
of the Revised Penal Code consists in the execution of an imprudent or negligent act that, if
intentionally done, would be punishable as a felony. Thus, the law penalizes the negligent or
reckless act, not the result thereof. The gravity of the consequence is only taken into account to
determine the penalty. 12 As reckless imprudence or criminal negligence is not mentioned in
Article 33, no independent civil action for damages arising from reckless imprudence or criminal
negligence may be instituted under said article. 13 It is, therefore, not applicable to the case at
bar.chanrobles.com:cralaw:red
Coming now to private respondents contention that the enforcement of the right to file an action
for damages under Article 29, should be subject to the procedure outlined in Rule 111 of the
former Rules on Criminal Procedure, i.e., that a reservation be made in the criminal case of the
right to institute an independent civil action, we find such contention to be without merit. Article
29 of the Civil Code does not include any such reservation requirement. It allows an action for
damages against the accused upon the latters acquittal in the criminal case based upon
reasonable doubt.

Besides, the requirement in Section 2 of Rule 111 of the former Rules on Criminal Procedure
that there be a reservation in the criminal case of the right to institute an independent civil action,
has been declared as not in accordance with law. It is regarded as an unauthorized amendment
to the substantive law, i.e. the Civil Code, which does not require such a reservation. 14 In fact,
the reservation of the right to file an independent civil action has been deleted from Section 2,
Rule 111 of the 1985 Rules on Criminal Procedure, in consonance with the decisions of this
Court declaring such requirement of a reservation as ineffective.

Lastly, that petitioners actively participated in the prosecution of the criminal case does not bar
them from filing an independent and separate civil action for damages under Article 29 of the
Civil Code. The civil action based on criminal liability and a civil action under Article 29 are two
separate and independent actions.

WHEREFORE, the Orders dated 25 February 1971 and 27 March 1971 of the respondent court
are hereby REVERSED and SET ASIDE, and a new one is entered reinstating the complaint in
Civil Case No. 2806 and directing said court to proceed with the trial of the case. Costs against
private Respondent.

SO ORDERED.
G.R. No. 108017 April 3, 1995
MARIA BENITA A. DULAY, in her own behalf and in behalf of the minor children KRIZTEEN
ELIZABETH, BEVERLY MARIE and NAPOLEON II, all surnamed DULAY, petitioners,
vs.
THE COURT OF APPEALS, Former Eighth Division, HON. TEODORO P. REGINO, in his
capacity as Presiding Judge of the Regional Trial Court National Capital Region, Quezon City,
Br. 84, SAFEGUARD INVESTIGATION AND SECURITY CO., INC., and SUPERGUARD
SECURITY CORPORATION, respondents.
BIDIN, J.:
This petition for certiorari prays for the reversal of the decision of the Court of Appeals dated
October 29, 1991 in CA-G.R. CV No. 24646 which affirmed the order of the Regional Trial Court
dismissing Civil Case No. Q-89-1751, and its resolution dated November 17, 1991 denying
herein, petitioner's motion for reconsideration.
The antecedent facts of the case are as follows:
On December 7, 1988, an altercation between Benigno Torzuela and Atty. Napoleon Dulay
occurred at the "Big Bang Sa Alabang," Alabang Village, Muntinlupa as a result of which
Benigno Torzuela, the security guard on duty at the said carnival, shot and killed Atty. Napoleon
Dulay.
Herein petitioner Maria Benita A. Dulay, widow of the deceased Napoleon Dulay, in her own
behalf and in behalf of her minor children, filed on February 8, 1989 an action for damages
against Benigno Torzuela and herein private respondents Safeguard Investigation and Security
Co., Inc., ("SAFEGUARD") and/or Superguard Security Corp. ("SUPERGUARD"), alleged
employers of defendant Torzuela. The complaint, docketed as Civil Case No. Q-89-1751 among
others alleges the following:
1. ...
Defendants SAFEGUARD INVESTIGATION AND SECURITY CO., INC., (Defendant Safeguard)
and SUPERGUARD SECURITY CORPORATION (Defendant Superguard) are corporations duly
organized and existing in accordance with Philippine laws, with offices at 10th Floor,
Manufacturers Building, Inc., Plaza Santa Cruz, Manila. They are impleaded as alternative
defendants for, while the former appears to be the employer of defendant BENIGNO
TORZUELA (defendant TORZUELA), the latter impliedly acknowledged responsibility for the
acts of defendant TORZUELA by extending its sympathies to plaintiffs.
Defendant BENIGNO TORZUELA is of legal age, an employee of defendant SAFEGUARD
and/or defendant SUPERGUARD and, at the time of the incident complained of, was under their
control and supervision. . . .
3. On December 7, 1988 at around 8:00 a.m., defendant TORZUELA, while he was on
duty as security guard at the "Big Bang sa Alabang," Alabang Village, Muntinlupa, Metro Manila
shot and killed NAPOLEON V. DULAY with a .38 caliber revolver belonging to defendant
SAFEGUARD, and/or SUPERGUARD (per Police Report dated January 7, 1989, copy attached
as Annex A);
4. The incident resulting in the death of NAPOLEON V. DULAY was due to the
concurring negligence of the defendants. Defendant TORZUELA'S wanton and reckless
discharge of the firearm issued to him by defendant SAFEGUARD and/or SUPERGUARD was
the immediate and proximate cause of the injury, while the negligence of defendant
SAFEGUARD and/or SUPERGUARD consists in its having failed to exercise the diligence of a
good father of a family in the supervision and control of its employee to avoid the injury.
xxx xxx xxx
(Rollo, pp. 117-118)
Petitioners prayed for actual, compensatory, moral and exemplary damages, and attorney's
fees. The said Civil Case No. Q-89-1751 was raffled to Branch 84 of the Regional Trial Court of
Quezon City, presided by respondent Judge Teodoro Regino.
On March 2, 1989, private respondent SUPERGUARD filed a Motion to Dismiss on the ground
that the complaint does not state a valid cause of action. SUPERGUARD claimed that
Torzuela's act of shooting Dulay was beyond the scope of his duties, and that since the alleged
act of shooting was committed with deliberate intent (dolo), the civil liability therefor is governed
by Article 100 of the Revised Penal Code, which states:
Art. 100. Civil liability of a person guilty of a felony. Every person criminally liable for a felony
is also civilly liable.
Respondent SUPERGUARD further alleged that a complaint for damages based on negligence
under Article 2176 of the New Civil Code, such as the one filed by petitioners, cannot lie, since
the civil liability under Article 2176 applies only to quasi-offenses under Article 365 of the
Revised Penal Code. In addition, the private respondent argued that petitioners' filing of the
complaint is premature considering that the conviction of Torzuela in a criminal case is a
condition sine qua non for the employer's subsidiary liability (Rollo, p. 55-59).
Respondent SAFEGUARD also filed a motion praying that it be excluded as defendant on the
ground that defendant Torzuela is not one of its employees (Rollo, p. 96).
Petitioners opposed both motions, stating that their cause of action against the private
respondents is based on their liability under Article 2180 of the New Civil Code, which provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or an industry.
xxx xxx xxx
(Emphasis supplied)
Petitioners contended that a suit against alternative defendants is allowed under Rule 3, Section
13 of the Rules of Court. Therefore, the inclusion of private respondents as alternative
defendants in the complaint is justified by the following: the Initial Investigation Report prepared
by Pat. Mario Tubon showing that Torzuela is an employee of SAFEGUARD; and through overt
acts, SUPERGUARD extended its sympathies to petitioners (Rollo, pp. 64 and 98).
Meanwhile, an Information dated March 21, 1989 charging Benigno Torzuela with homicide was
filed before the Regional Trial Court of Makati and was docketed as Criminal Case No. 89-1896.
On April 13, 1989, respondent Judge Regino issued an order granting SUPERGUARD'S motion
to dismiss and SAFEGUARD'S motion for exclusion as defendant. The respondent judge held
that the complaint did not state facts necessary or sufficient to constitute a quasi-delict since it
does not mention any negligence on the part of Torzuela in shooting Napoleon Dulay or that the
same was done in the performance of his duties. Respondent judge ruled that mere allegations
of the concurring negligence of the defendants (private respondents herein) without stating the
facts showing such negligence are mere conclusions of law (Rollo, p. 106). Respondent judge
also declared that the complaint was one for damages founded on crimes punishable under
Articles 100 and 103 of the Revised Penal Code as distinguished from those arising from, quasi-
delict. The dispositive portion of the order dated April 13, 1989 states:
WHEREFORE, this Court holds that in view of the material and ultimate facts alleged in the
verified complaint and in accordance with the applicable law on the matter as well as precedents
laid down by the Supreme Court, the complaint against the alternative defendants Superguard
Security Corporation and Safeguard Investigation and Security Co., Inc., must be and (sic) it is
hereby dismissed. (Rollo, p. 110)
The above order was affirmed by the respondent court and petitioners' motion for
reconsideration thereof was denied.
Petitioners take exception to the assailed decision and insist that quasi-delicts are not limited to
acts of negligence but also cover acts that are intentional and voluntary, citing Andamo v. IAC
(191 SCRA 195 [1990]). Thus, petitioners insist that Torzuela' s act of shooting Napoleon Dulay
constitutes a quasi-delict actionable under Article 2176 of the New Civil Code.
Petitioners further contend that under Article 2180 of the New Civil Code, private respondents
are primarily liable for their negligence either in the selection or supervision of their employees.
This liability is independent of the employee's own liability for fault or negligence and is distinct
from the subsidiary civil liability under Article 103 of the Revised Penal Code. The civil action
against the employer may therefore proceed independently of the criminal action pursuant to
Rule 111 Section 3 of the Rules of Court. Petitioners submit that the question of whether
Torzuela is an employee of respondent SUPERGUARD or SAFEGUARD would be better
resolved after trial.
Moreover, petitioners argue that Torzuela's act of shooting Dulay is also actionable under Article
33 of the New Civil Code, to wit:
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely
separate and distinct from the criminal action, may be brought by the injured party. Such civil
action shall proceed independently of the criminal prosecution, and shall require only a
preponderance of evidence. (Emphasis supplied)
In the same vein, petitioners cite Section 3, Rule 111 of the Rules of Court which provides:
Rule 111. . . . .
Sec. 3. When civil action may proceed independently In the cases provided for in Articles
32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civil action which has
been reserved may be brought by the offended party, shall proceed independently of the
criminal action, and shall require only a preponderance of evidence. (Emphasis supplied)
The term "physical injuries" under Article 33 has been held to include consummated, frustrated
and attempted homicide. Thus, petitioners maintain that Torzuela's prior conviction is
unnecessary since the civil action can proceed independently of the criminal action. On the other
hand, it is the private respondents' argument that since the act was not committed with
negligence, the petitioners have no cause of action under Articles 2116 and 2177 of the New
Civil Code. The civil action contemplated in Article 2177 is not applicable to acts committed with
deliberate intent, but only applies to quasi-offenses under Article 365 of the Revised Penal
Code. Torzuela's act of shooting Atty. Dulay to death, aside from being purely personal, was
done with deliberate intent and could not have been part of his duties as security guard. And
since Article 2180 of the New Civil Code covers only: acts done within the scope of the
employee's assigned tasks, the private respondents cannot be held liable for damages.
We find for petitioners.
It is undisputed that Benigno Torzuela is being prosecuted for homicide for the fatal shooting of
Napoleon Dulay. Rule 111 of the Rules on Criminal Procedure provides:
Sec. 1. Institution of criminal and civil actions. When a criminal action is instituted, the civil
action for the recovery of civil liability is impliedly instituted with the criminal action, unless the
offended party waives the civil action , reserves his right to institute it separately or institutes the
civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the Revised Penal Code, and damages
under Articles 32, 33, 34, and 2176 of the Civil Code of the Philippines arising from the same act
or omission of the accused. (Emphasis supplied)
It is well-settled that the filing of an independent civil action before the prosecution in the criminal
action presents evidence is even far better than a compliance with the requirement of express
reservation (Yakult Philippines v. Court of Appeals, 190 SCRA 357 [1990]). This is precisely
what the petitioners opted to do in this case. However, the private respondents opposed the civil
action on the ground that the same is founded on a delict and not on a quasi-delict as the
shooting was not attended by negligence. What is in dispute therefore is the nature of the
petitioner's cause of action.
The nature of a cause of action is determined by the facts alleged in the complaint as
constituting the cause of action (Republic v. Estenzo, 158 SCRA 282 [1988]). The purpose of an
action or suit and the law to govern it is to be determined not by the claim of the party filing the
action, made in his argument or brief, but rather by the complaint itself, its allegations and prayer
for relief. (De Tavera v. Philippine Tuberculosis Society, 112 SCRA 243 [1982]). An examination
of the complaint in the present case would show that the plaintiffs, petitioners herein, are
invoking their right to recover damages against the private respondents for their vicarious
responsibility for the injury caused by Benigno Torzuela's act of shooting and killing Napoleon
Dulay, as stated in paragraphs 1 and 2 of the complaint.
Article 2176 of the New Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties is called a quasi-delict and is governed by the
provisions of this Chapter.
Contrary to the theory of private respondents, there is no justification for limiting the scope of
Article 2176 of the Civil Code to acts or omissions resulting from negligence. Well-entrenched is
the doctrine that article 2176 covers not only acts committed with negligence, but also acts
which are voluntary and intentional. As far back as the definitive case of Elcano v. Hill (77 SCRA
98 [1977]), this Court already held that:
. . . Article 2176, where it refers to "fault or negligence," covers not only acts "not punishable by
law" but also acts criminal in character; whether intentional and voluntary or negligent.
Consequently, a separate civil action against the offender in a criminal act, whether or not he is
criminally prosecuted and found guilty or acquitted, provided that the offended party is not
allowed, if he is actually charged also criminally, to recover damages on both scores, and would
be entitled in such eventuality only to the bigger award of the two, assuming the awards made in
the two cases vary. In other words, the extinction of civil liability referred to in Par. (e) of Section
3, Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code,
whereas the civil liability for the same act considered as quasi-delict only and not as a crime is
not extinguished even by a declaration in the criminal case that the criminal act charged has not
happened or has not been committed by the accused. Briefly stated, We here hold, in reiteration
of Garcia, that culpa aquiliana includes voluntary and negligent acts which may be punishable by
law. (Emphasis supplied)

The same doctrine was echoed in the case of Andamo v. Intermediate Appellate Court (191
SCRA 195 [1990]), wherein the Court held:
Article 2176, whenever it refers to "fault or negligence," covers not only acts criminal in
character, whether intentional and voluntary or negligent. Consequently, a civil action lies
against the offender in a criminal act, whether or not he is prosecuted or found guilty or
acquitted, provided that the offended party is not allowed, (if the tortfeasor is actually also
charged criminally), to recover damages on both scores, and would be entitled in such
eventuality only to the bigger award of the two, assuming the awards made in the two cases
vary. [citing Virata v. Ochoa, 81 SCRA 472] (Emphasis supplied)
Private respondents submit that the word "intentional" in the Andamo case is inaccurate obiter,
and should be read as "voluntary" since intent cannot be coupled with negligence as defined by
Article 365 of the Revised Penal Code. In the absence of more substantial reasons, this Court
will not disturb the above doctrine on the coverage of Article 2176.
Private respondents further aver that Article 33 of the New Civil Code applies only to injuries
intentionally committed pursuant to the ruling in Marcia v. CA (120 SCRA 193 [1983]), and that
the actions for damages allowed thereunder are ex-delicto. However, the term "physical injuries"
in Article 33 has already been construed to include bodily injuries causing death (Capuno v.
Pepsi-Cola Bottling Co. of the Philippines, 121 Phil. 638 [1965); Carandang v. Santiago, 97 Phil.
94 [1955]). It is not the crime of physical injuries defined in the Revised Penal Code. It includes
not only physical injuries but also consummated, frustrated, and attempted homicide (Madeja v.
Caro, 126 SCRA 293 [1983]). Although in the Marcia case (supra), it was held that no
independent civil action may be filed under Article 33 where the crime is the result of criminal
negligence, it must be noted however, that Torzuela, the accused in the case at bar, is charged
with homicide, not with reckless imprudence, whereas the defendant in Marcia was charged with
reckless imprudence. Therefore, in this case, a civil action based on Article 33 lies.
Private respondents also contend that their liability is subsidiary under the Revised Penal Code;
and that they are not liable for Torzuela's act which is beyond the scope of his duties as a
security guard. It having been established that the instant action is not ex-delicto, petitioners
may proceed directly against Torzuela and the private respondents. Under Article 2180 of the
New Civil Code as aforequoted, when an injury is caused by the negligence of the employee,
there instantly arises a presumption of law that there was negligence on the part of the master or
employer either in the selection of the servant or employee, or in supervision over him after
selection or both (Layugan v. Intermediate Appellate Court, 167 SCRA 363 [1988]). The liability
of the employer under Article 2180 is direct and immediate; it is not conditioned upon prior
recourse against the negligent employee and a prior showing of the insolvency of such
employee (Kapalaran Bus Lines v. Coronado, 176 SCRA 792 [1989]). Therefore, it is incumbent
upon the private respondents to prove that they exercised the diligence of a good father of a
family in the selection and supervision of their employee.
CA, 210 SCRA 33 [1992]); Development Bank of the Philippines v. Pundogar, 218 SCRA 118
[1993])
This Court finds, under the foregoing premises, that the complaint sufficiently alleged an
actionable breach on the part of the defendant Torzuela and respondents SUPERGUARD
and/or SAFEGUARD. It is enough that the complaint alleged that Benigno Torzuela shot
Napoleon Dulay resulting in the latter's death; that the shooting occurred while Torzuela was on
duty; and that either SUPERGUARD and/or SAFEGUARD was Torzuela's employer and
responsible for his acts. This does not operate however, to establish that the defendants below
are liable. Whether or not the shooting was actually reckless and wanton or attended by
negligence and whether it was actually done within the scope of Torzuela's duties; whether the
private respondents SUPERGUARD and/or SAFEGUARD failed to exercise the diligence of a
good father of a family; and whether the defendants are actually liable, are questions which can
be better resolved after trial on the merits where each party can present evidence to prove their
respective allegations and defenses. In determining whether the allegations of a complaint are
sufficient to support a cause of action, it must be borne in mind that the complaint does not have
to establish or allege the facts proving the existence of a cause of action at the outset; this will
have to be done at the trial on the merits of the case (Del Bros Hotel Corporation v. CA, supra).
If the allegations in a complaint can furnish a sufficient basis by which the complaint can be
maintained, the same should not be dismissed regardless of the defenses that may be assessed
by the defendants (Rava Dev't. Corp. v. CA, 211 SCRA 152 [1992] citing Consolidated Bank &
Trust Corporation v. Court of Appeals, 197 SCRA 663 [1991]). To sustain a motion to dismiss for
lack of cause of action, the complaint must show that the claim for relief does not exist rather
than that a claim has been defectively stated, is ambiguous, indefinite or uncertain (Azur v.
Provincial Board, 27 SCRA 50 [1969]). Since the petitioners clearly sustained an injury to their
rights under the law, it would be more just to allow them to present evidence of such injury.
WHEREFORE, premises considered, the petition for review is hereby GRANTED. The decision
of the Court of Appeals as well as the Order of the Regional Trial Court dated April 13, 1989 are
hereby REVERSED and SET ASIDE. Civil Case No. Q-89-1751 is remanded to the Regional
Trial Court for trial on the merits. This decision is immediately executory.
SO ORDERED.

Since Article 2176 covers not only acts of negligence but also acts which are intentional and
voluntary, it was therefore erroneous on the part of the trial court to dismiss petitioner's
complaint simply because it failed to make allegations of attendant negligence attributable to
private respondents.

With respect to the issue of whether the complaint at hand states a sufficient cause of action, the
general rule is that the allegations in a complaint are sufficient to constitute a cause of action
against the defendants if, admitting the facts alleged, the court can render a valid judgment upon
the same in accordance with the prayer therein. A cause of action exist if the following elements
are present, namely: (1) a right in favor of the plaintiff by whatever means and under whatever
law it arises or is created; (2) an obligation on the part of the named defendant to respect or not
to violate such right; and (3) an act or omission on the part of such defendant violative of the
right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for
which the latter may maintain an action for recovery of damages (Del Bros Hotel Corporation v.