1

G.R. No. 157314 July 29, 2005

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

DECISION

CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari filed by Far East Bank and Trust
Company (now Bank of the Philippines Islands) seeking the reversal of the Decision1 dated
August 30, 2002 of the Court of Appeals (CA) in CA-G.R. CV No. 36627 which ordered it,
together with its branch accountant, Roger Villadelgado, to pay respondent Themistocles
Pacilan, Jr.2 the total sum of ₱100,000.00 as moral and exemplary damages. The assailed
decision affirmed with modification that of the Regional Trial Court (RTC) of Negros
Occidental, Bacolod City, Branch 54, in Civil Case No. 4908. Likewise sought to be reversed
and set aside is the Resolution dated January 17, 2003 of the appellate court, denying
petitioner bank’s motion for reconsideration.

The case stemmed from the following undisputed facts:

Respondent Pacilan opened a current account with petitioner bank’s Bacolod Branch on
May 23, 1980. His account was denominated as Current Account No. 53208 (0052-00407-
4). The respondent had since then issued several postdated checks to different payees
drawn against the said account. Sometime in March 1988, the respondent issued Check No.
2434886 in the amount of ₱680.00 and the same was presented for payment to petitioner
bank on April 4, 1988.

Upon its presentment on the said date, Check No. 2434886 was dishonored by petitioner
bank. The next day, or on April 5, 1988, the respondent deposited to his current account
the amount of ₱800.00. The said amount was accepted by petitioner bank; hence,
increasing the balance of the respondent’s deposit to ₱1,051.43.

Subsequently, when the respondent verified with petitioner bank about the dishonor of
Check No. 2434866, he discovered that his current account was closed on the ground that it
was "improperly handled." The records of petitioner bank disclosed that between the
period of March 30,
1988 and April 5, 1988, the respondent issued four checks, to wit: Check No. 2480416 for
₱6,000.00; Check No. 2480419 for ₱50.00; Check No. 2434880 for ₱680.00 and; Check No.
2434886 for ₱680.00, or a total amount of ₱7,410.00. At the time, however, the
respondent’s current account with petitioner bank only had a deposit of ₱6,981.43. Thus,
the total amount of the checks presented for payment on April 4, 1988 exceeded the
balance of the respondent’s deposit in his account. For this reason, petitioner bank, through
its branch accountant, Villadelgado, closed the respondent’s current account effective the
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evening of April 4, 1988 as it then had an overdraft of ₱428.57. As a consequence of the

overdraft, Check No. 2434886 was dishonored.

On April 18, 1988, the respondent wrote to petitioner bank complaining that the closure of
his account was unjustified. When he did not receive a reply from petitioner bank, the
respondent filed with the RTC of Negros Occidental, Bacolod City, Branch 54, a complaint
for damages against petitioner bank and Villadelgado. The case was docketed as Civil Case
No. 4908. The respondent, as complainant therein, alleged that the closure of his current
account by petitioner bank was unjustified because on the first banking hour of April 5,
1988, he already deposited an amount sufficient to fund his checks. The respondent
pointed out that Check No. 2434886, in particular, was delivered to petitioner bank at the
close of banking hours on April 4, 1988 and, following normal banking procedure, it
(petitioner bank) had until the last clearing hour of the following day, or on April 5, 1988,
to honor the check or return it, if not funded. In disregard of this banking procedure and
practice, however, petitioner bank hastily closed the respondent’s current account and
dishonored his Check No. 2434886.

The respondent further alleged that prior to the closure of his current account, he had
issued several other postdated checks. The petitioner bank’s act of closing his current
account allegedly preempted the deposits that he intended to make to fund those checks.
Further, the petitioner bank’s act exposed him to criminal prosecution for violation
of Batas Pambansa Blg. 22.

According to the respondent, the indecent haste that attended the closure of his account
was patently malicious and intended to embarrass him. He claimed that he is a Cashier of
Prudential Bank and Trust Company, whose branch office is located just across that of
petitioner bank, and a prominent and respected leader both in the civic and banking
communities. The alleged malicious acts of petitioner bank besmirched the respondent’s
reputation and caused him "social humiliation, wounded feelings, insurmountable worries
and sleepless nights" entitling him to an award of damages.

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

They showed that the respondent had improperly and irregularly handled his current
account. For example, in 1986, the respondent’s account was overdrawn 156 times, in
1987, 117 times and in 1988, 26 times. In all these instances, the account was overdrawn
due to the issuance of checks against insufficient funds. The respondent had also signed
several checks with a different signature from the specimen on file for dubious reasons.
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When the respondent made the deposit on April 5, 1988, it was obviously to cover for
issuances made the previous day against an insufficiently funded account. When his Check
No. 2434886 was presented for payment on April 4, 1988, he had already incurred an
overdraft; hence, petitioner bank rightfully dishonored the same for insufficiency of funds.

After due proceedings, the court a quo rendered judgment in favor of the respondent as it
ordered the petitioner bank and Villadelgado, jointly and severally, to pay the respondent
the amounts of ₱100,000.00 as moral damages and ₱50,000.00 as exemplary damages and
costs of suit. In so ruling, the court a quo also cited petitioner bank’s rules and regulations
which state that "a charge of ₱10.00 shall be levied against the depositor for any check that
is taken up as a returned item due to ‘insufficiency of funds’ on the date of receipt from the
clearing office even if said check is honored and/or covered by sufficient deposit the
following banking day." The same rules and regulations also provide that "a check returned
for insufficiency of funds for any reason of similar import may be subsequently recleared
for one more time only, subject to the same charges."

According to the court a quo, following these rules and regulations, the respondent, as
depositor, had the right to put up sufficient funds for a check that was taken as a returned
item for insufficient funds the day following the receipt of said check from the clearing
office. In fact, the said check could still be recleared for one more time. In previous
instances, petitioner bank notified the respondent when he incurred an overdraft and he
would then deposit sufficient funds the following day to cover the overdraft. Petitioner
bank thus acted unjustifiably when it immediately closed the respondent’s account on April
4, 1988 and deprived him of the opportunity to reclear his check or deposit sufficient funds
therefor the following day.

As a result of the closure of his current account, several of the respondent’s checks were
subsequently dishonored and because of this, the respondent was humiliated, embarrassed
and lost his credit standing in the business community. The court a quo further ratiocinated
that even granting arguendo that petitioner bank had the right to close the respondent’s
account, the manner which attended the closure constituted an abuse of the
said right. Citing Article 19 of the Civil Code of the Philippines which states that "[e]very
person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith" and Article 20 thereof
which states that "[e]very person who, contrary to law, wilfully or negligently causes
damage to another, shall indemnify the latter for the same," the court a quo adjudged
petitioner bank of acting in bad faith. It held that, under the foregoing circumstances, the
respondent is entitled to an award of moral and exemplary damages.

The decretal portion of the court a quo’s decision reads:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:

1. Ordering the defendants [petitioner bank and Villadelgado], jointly and severally, to pay
plaintiff [the respondent] the sum of ₱100,000.00 as moral damages;
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2. Ordering the defendants, jointly and severally, to pay plaintiff the sum of ₱50,000.00 as
exemplary damages plus costs and expenses of the suit; and

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

SO ORDERED.4

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

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

allow that a check returned for insufficiency of funds or any reason of similar import, may
be subsequently recleared for one more time, subject to standard charges. Like the court a
quo, the appellate court observed that in several instances in previous years, petitioner
bank would inform the respondent when he incurred an overdraft and allowed him to
make a timely deposit to fund the checks that were initially dishonored for insufficiency of
funds. However, on April 4, 1988, petitioner bank immediately closed the respondent’s
account without even notifying him that he had incurred an overdraft. Even when they had
already closed his account on April 4, 1988, petitioner bank still accepted the deposit that
the respondent made on April 5, 1988, supposedly to cover his checks.

Echoing the reasoning of the court a quo, the CA declared that even as it may be conceded
that petitioner bank had reserved the right to close an account for repeated overdrafts by
the respondent, the exercise of that right must never be despotic or arbitrary. That
petitioner bank chose to close the account outright and return the check, even after
accepting a deposit sufficient to cover the said check, is contrary to its duty to handle the
respondent’s account with utmost fidelity. The exercise of the right is not absolute and
good faith, at least, is required. The manner by which petitioner bank closed the account of
the respondent runs afoul of Article 19 of the Civil Code which enjoins every person, in the
exercise of his rights, "to give every one his due, and observe honesty and good faith."

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

We, however, find excessive the amount of damages awarded by the RTC. In our view the
reduced amount of ₱75,000.00 as moral damages and ₱25,000.00 as exemplary damages
are in order. Awards for damages are not meant to enrich the plaintiff-appellee [the
respondent] at the expense of defendants-appellants [the petitioners], but to obviate the
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moral suffering he has undergone. The award is aimed at the restoration, within limits
possible, of the status quo ante, and should be proportionate to the suffering inflicted.5

The dispositive portion of the assailed CA decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the

MODIFICATION that the award of moral damages is reduced to ₱75,000.00 and the award
of exemplary damages reduced to ₱25,000.00.

SO ORDERED.6SDZ

Petitioner bank sought the reconsideration of the said decision but in the assailed
Resolution dated January 17, 2003, the appellate court denied its motion. Hence, the
recourse to this Court.

Petitioner bank maintains that, in closing the account of the respondent in the evening of
April 4, 1988, it acted in good faith and in accordance with the rules and regulations
governing the operation of a

regular demand deposit which reserves to the bank "the right to close an account if the
depositor frequently draws checks against insufficient funds and/or uncollected deposits."
The same rules and regulations also provide that "the depositor is not entitled, as a matter
of right, to overdraw on this deposit and the bank reserves the right at any time to return
checks of the depositor which are drawn against insufficient funds or for any reason."

It cites the numerous instances that the respondent had overdrawn his account and those
instances where he deliberately signed checks using a signature different from the
specimen on file. Based on these facts, petitioner bank was constrained to close the
respondent’s account for improper and irregular handling and returned his Check No.
2434886 which was presented to the bank for payment on April 4, 1988.

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

The petition is impressed with merit.

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

Art. 19. Every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith.
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The elements of abuse of rights are the following: (a) the existence of a legal right or duty;
(b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring
another.7 Malice or bad faith is at the core of the said provision.8 The law always presumes
good faith and any person who seeks to be awarded damages due to acts of another has the
burden of proving that the latter acted in bad faith or with ill-motive.9 Good faith refers to
the state of the mind which is manifested by the acts of the individual concerned. It consists
of the intention to abstain from taking an unconscionable and unscrupulous advantage of
another.10 Bad faith does not simply connote bad judgment or simple negligence, dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty
due to some motives or interest or ill-will that partakes of the nature of fraud. 11 Malice
connotes ill-will or spite and speaks not in response to duty. It implies an intention to do
ulterior and unjustifiable harm. Malice is bad faith or bad motive.12

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

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

12) …

However, it is clearly understood that the depositor is not entitled, as a matter of right, to
overdraw on this deposit and the bank reserves the right at any time to return checks of
the depositor which are drawn against insufficient funds or for any other reason.

The facts, as found by the court a quo and the appellate court, do not establish that, in the
exercise of this right, petitioner bank committed an abuse thereof. Specifically, the second
and third elements for abuse of rights are not attendant in the present case. The evidence
presented by petitioner bank negates the existence of bad faith or malice on its part in
closing the respondent’s account on April 4, 1988 because on the said date the same was
already overdrawn. The respondent issued four checks, all due on April 4, 1988, amounting
to ₱7,410.00 when the balance of his current account deposit was only ₱6,981.43. Thus, he
incurred an overdraft of ₱428.57 which resulted in the dishonor of his Check No. 2434886.
Further, petitioner bank showed that in 1986, the current account of the respondent was
overdrawn 156 times due to his issuance of checks against insufficient funds.13 In 1987, the
said account was overdrawn 117 times for the same

reason.14 Again, in 1988, 26 times.15 There were also several instances when the

respondent issued checks deliberately using a signature different from his specimen
signature on file with petitioner bank.16 All these circumstances taken together justified the
petitioner bank’s closure of the respondent’s account on April 4, 1988 for "improper
handling."
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It is observed that nowhere under its rules and regulations is petitioner bank required to
notify the respondent, or any depositor for that matter, of the closure of the account for
frequently drawing checks against insufficient funds. No malice or bad faith could be
imputed on petitioner bank for so acting since the records bear out that the respondent had
indeed been improperly and irregularly handling his account not just a few times but
hundreds of times. Under the circumstances, petitioner bank could not be faulted for
exercising its right in accordance with the express rules and regulations governing the
current accounts of its depositors. Upon the opening of his account, the respondent had
agreed to be bound by these terms and conditions.

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

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

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

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

In other words, in order that a plaintiff may maintain an action for the injuries of which he
complains, he must establish that such injuries resulted from a breach of duty which the
defendant owed to the plaintiff – a concurrence of injury to the plaintiff and legal
responsibility by the person causing it. The underlying basis for the award of tort damages
is the premise that the individual was injured in contemplation of law. Thus, there must
first be a breach of some duty and the imposition of liability for that breach before damages
may be awarded; and the breach of such duty should be the proximate cause of the injury.17

Whatever damages the respondent may have suffered as a consequence, e.g., dishonor of

his other insufficiently funded checks, would have to be borne by him alone. It was the
respondent’s repeated improper
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and irregular handling of his account which constrained petitioner bank to close the same
in accordance with the rules and regulations governing its depositors’ current accounts.
The respondent’s case is clearly one of damnum absque injuria.

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

G.R. No. 146322             December 6, 2006

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

vs.
ERNESTO QUIAMCO, respondent.

DECISION

CORONA, J.:

Honeste vivere, non alterum laedere et jus suum cuique tribuere. To live virtuously, not to
injure others and to give everyone his due. These supreme norms of justice are the
underlying principles of law and order in society. We reaffirm them in this petition for
review on certiorari assailing the July 26, 2000 decision1 and October 18, 2000 resolution
of the Court of Appeals (CA) in CA-G.R. CV No. 47571.

In 1982, respondent Ernesto C. Quiamco was approached by Juan Davalan, 2 Josefino

Gabutero and Raul Generoso to amicably settle the civil aspect of a criminal case for
robbery3 filed by Quiamco against them. They surrendered to him a red Honda XL-100
motorcycle and a photocopy of its certificate of registration. Respondent asked for the
original certificate of registration but the three accused never came to see him again.
Meanwhile, the motorcycle was parked in an open space inside respondent’s business
establishment, Avesco-AVNE Enterprises, where it was visible and accessible to the public.

It turned out that, in October 1981, the motorcycle had been sold on installment basis to
Gabutero by petitioner Ramas Uypitching Sons, Inc., a family-owned corporation managed
by petitioner Atty. Ernesto Ramas Uypitching. To secure its payment, the motorcycle was
mortgaged to petitioner corporation.4

When Gabutero could no longer pay the installments, Davalan assumed the obligation and
continued the payments. In September 1982, however, Davalan stopped paying the
remaining installments and told petitioner corporation’s collector, Wilfredo Verañ o, that
the motorcycle had allegedly been "taken by respondent’s men."
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Nine years later, on January 26, 1991, petitioner Uypitching, accompanied by

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

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

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

Respondent filed an action for damages against petitioners in the RTC of Dumaguete City,
Negros Oriental, Branch 37.9 He sought to hold the petitioners liable for the following: (1)
unlawful taking of the motorcycle; (2) utterance of a defamatory remark (that respondent
was a thief) and (3) precipitate filing of a baseless and malicious complaint. These acts
humiliated and embarrassed the respondent and injured his reputation and integrity.

On July 30, 1994, the trial court rendered a decision10 finding that petitioner Uypitching
was motivated with malice and ill will when he called respondent a thief, took the
motorcycle in an abusive manner and filed a baseless complaint for qualified theft and/or
violation of the Anti-Fencing Law. Petitioners’ acts were found to be contrary to Articles
1911 and 2012 of the Civil Code. Hence, the trial court held petitioners liable to respondent
for P500,000 moral damages, P200,000 exemplary damages and P50,000 attorney’s fees
plus costs.

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

In their petition and memorandum, petitioners submit that the sole (allegedly) issue to be
resolved here is whether the filing of a complaint for qualified theft and/or violation of the
Anti-Fencing Law in the Office of the City Prosecutor warranted the award of moral
damages, exemplary damages, attorney’s fees and costs in favor of respondent.

Petitioners’ suggestion is misleading. They were held liable for damages not only for
instituting a groundless complaint against respondent but also for making a slanderous
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remark and for taking the motorcycle from respondent’s establishment in an abusive
manner.

Correctness of the Findings of the RTC and CA

As they never questioned the findings of the RTC and CA that malice and ill will attended
not only the public imputation of a crime to respondent 14 but also the taking of the
motorcycle, petitioners were deemed to have accepted the correctness of such findings.
This alone was sufficient to hold petitioners liable for damages to respondent.

Nevertheless, to address petitioners’ concern, we also find that the trial and appellate
courts correctly ruled that the filing of the complaint was tainted with malice and bad faith.
Petitioners themselves in fact described their action as a "precipitate act." 15 Petitioners
were bent on portraying respondent as a thief. In this connection, we quote with approval
the following findings of the RTC, as adopted by the CA:

x x x There was malice or ill-will [in filing the complaint before the City Prosecutor’s
Office] because Atty. Ernesto Ramas Uypitching knew or ought to have known as he
is a lawyer, that there was no probable cause at all for filing a criminal complaint for
qualified theft and fencing activity against [respondent]. Atty. Uypitching had no
personal knowledge that [respondent] stole the motorcycle in question. He was
merely told by his bill collector ([i.e.] the bill collector of Ramas Uypitching Sons,
Inc.)[,] Wilfredo Verañ o[,] that Juan Dabalan will [no longer] pay the remaining
installment(s) for the motorcycle because the motorcycle was taken by the men of
[respondent]. It must be noted that the term used by Wilfredo Verañ o in informing
Atty. Ernesto Ramas Uypitching of the refusal of Juan Dabalan to pay for the
remaining installment was [‘]taken[’], not [‘]unlawfully taken[’] or ‘stolen.’ Yet,
despite the double hearsay, Atty. Ernesto Ramas Uypitching not only executed the
[complaint-affidavit] wherein he named [respondent] as ‘the suspect’ of the stolen
motorcycle but also charged [respondent] of ‘qualified theft and fencing activity’
before the City [Prosecutor’s] Office of Dumaguete. The absence of probable cause
necessarily signifies the presence of malice. What is deplorable in all these is that
Juan Dabalan, the owner of the motorcycle, did not accuse [respondent] or the
latter’s men of stealing the motorcycle[,] much less bother[ed] to file a case for
qualified theft before the authorities. That Atty. Uypitching’s act in charging
[respondent] with qualified theft and fencing activity is tainted with malice is also
shown by his answer to the question of Cupid Gonzaga 16 [during one of their
conversations] - "why should you still file a complaint? You have already recovered
the motorcycle…"[:] "Aron motagam ang kawatan ug motor." ("To teach a lesson to
the thief of motorcycle.")17

Moreover, the existence of malice, ill will or bad faith is a factual matter. As a rule, findings
of fact of the trial court, when affirmed by the appellate court, are conclusive on this Court.
We see no compelling reason to reverse the findings of the RTC and the CA.

Petitioners Abused Their Right of Recovery as Mortgagee(s)

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Petitioners claim that they should not be held liable for petitioner corporation’s exercise of
its right as seller-mortgagee to recover the mortgaged vehicle preliminary to the
enforcement of its right to foreclose on the mortgage in case of default. They are clearly
mistaken.

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

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

No doubt, petitioner corporation, acting through its co-petitioner Uypitching, blatantly

disregarded the lawful procedure for the enforcement of its right, to the prejudice of
respondent. Petitioners’ acts violated the law as well as public morals, and transgressed the
proper norms of human relations.

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

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

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

There is an abuse of right when it is exercised solely to prejudice or injure another.20 The

exercise of a right must be in accordance with the purpose for which it was established and
must not be excessive or unduly harsh; there must be no intention to harm
another.21 Otherwise, liability for damages to the injured party will attach.

In this case, the manner by which the motorcycle was taken at petitioners’ instance was not
only attended by bad faith but also contrary to the procedure laid down by law. Considered
in conjunction with the defamatory statement, petitioners’ exercise of the right to recover
the mortgaged vehicle was utterly prejudicial and injurious to respondent. On the other
hand, the precipitate act of filing an unfounded complaint could not in any way be
considered to be in accordance with the purpose for which the right to prosecute a crime
was established. Thus, the totality of petitioners’ actions showed a calculated design to
embarrass, humiliate and publicly ridicule respondent. Petitioners acted in an excessively
 12

harsh fashion to the prejudice of respondent. Contrary to law, petitioners willfully caused
damage to respondent. Hence, they should indemnify him.22

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

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

G.R. No. 160273             January 18, 2008

CEBU COUNTRY CLUB, INC., SABINO R. DAPAT, RUBEN D. ALMENDRAS, JULIUS Z. NERI,
DOUGLAS L. LUYM, CESAR T. LIBI, RAMONTITO* E. GARCIA and JOSE B.
SALA, petitioners,
vs.
RICARDO F. ELIZAGAQUE, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

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

The facts are:

Cebu Country Club, Inc. (CCCI), petitioner, is a domestic corporation operating as a non-
profit and non-stock private membership club, having its principal place of business in
Banilad, Cebu City. Petitioners herein are members of its Board of Directors.

Sometime in 1987, San Miguel Corporation, a special company proprietary member of

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

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

As the price of a proprietary share was around the P5 million range, Benito Unchuan, then
president of CCCI, offered to sell respondent a share for only P3.5 million. Respondent,
however, purchased the share of a certain Dr. Butalid for only P3 million. Consequently, on
September 6, 1996, CCCI issued Proprietary Ownership Certificate No. 1446 to respondent.
 13

During the meetings dated April 4, 1997 and May 30, 1997 of the CCCI Board of Directors,
action on respondent’s application for proprietary membership was deferred. In another
Board meeting held on July 30, 1997, respondent’s application was voted upon.
Subsequently, or on August 1, 1997, respondent received a letter from Julius Z. Neri, CCCI’s
corporate secretary, informing him that the Board disapproved his application for
proprietary membership.

On August 6, 1997, Edmundo T. Misa, on behalf of respondent, wrote CCCI a letter of

reconsideration. As CCCI did not answer, respondent, on October 7, 1997, wrote another
letter of reconsideration. Still, CCCI kept silent. On November 5, 1997, respondent again
sent CCCI a letter inquiring whether any member of the Board objected to his application.
Again, CCCI did not reply.

Consequently, on December 23, 1998, respondent filed with the Regional Trial Court (RTC),
Branch 71, Pasig City a complaint for damages against petitioners, docketed as Civil Case
No. 67190.

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

WHEREFORE, judgment is hereby rendered in favor of plaintiff:

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

of P2,340,000.00 as actual or compensatory damages.

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

of P5,000,000.00 as moral damages.

3. Ordering defendants to pay, jointly and severally, plaintiff the amount

of P1,000,000.00 as exemplary damages.

4. Ordering defendants to pay, jointly and severally, plaintiff the amount

of P1,000,000.00 as and by way of attorney’s fees and P80,000.00 as litigation
expenses.

5. Costs of suit.

Counterclaims are hereby DISMISSED for lack of merit.

SO ORDERED.2

On appeal by petitioners, the Court of Appeals, in its Decision dated January 31, 2003,
affirmed the trial court’s Decision with modification, thus:
 14

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

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

amount of P2,000,000.00 as moral damages;

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

amount of P1,000,000.00 as exemplary damages;

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

mount of P500,000.00 as attorney’s fees and P50,000.00 as litigation expenses; and

4. Costs of the suit.

The counterclaims are DISMISSED for lack of merit.

SO ORDERED.3

On March 3, 2003, petitioners filed a motion for reconsideration and motion for leave to set
the motion for oral arguments. In its Resolution 4 dated October 2, 2003, the appellate court
denied the motions for lack of merit.

Hence, the present petition.

The issue for our resolution is whether in disapproving respondent’s application for
proprietary membership with CCCI, petitioners are liable to respondent for damages, and if
so, whether their liability is joint and several.

Petitioners contend, inter alia, that the Court of Appeals erred in awarding exorbitant
damages to respondent despite the lack of evidence that they acted in bad faith in
disapproving the latter’s application; and in disregarding their defense of damnum absque
injuria.

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

CCCI’s Articles of Incorporation provide in part:

SEVENTH: That this is a non-stock corporation and membership therein as well as

the right of participation in its assets shall be limited to qualified persons who are
duly accredited owners of Proprietary Ownership Certificates issued by the
corporation in accordance with its By-Laws.

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

 15

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

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

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

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

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

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

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

As shown by the records, the Board adopted a secret balloting known as the "black ball
system" of voting wherein each member will drop a ball in the ballot box. A white ball
represents conformity to the admission of an applicant, while a black ball means
disapproval. Pursuant to Section 3(c), as amended, cited above, a unanimous vote of the
directors is required. When respondent’s application for proprietary membership was
voted upon during the Board meeting on July 30, 1997, the ballot box contained one (1)
black ball. Thus, for lack of unanimity, his application was disapproved.

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

Article 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good
faith.
 16

Article 21. Any person who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the latter
for the damage.

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

This article, known to contain what is commonly referred to as the principle of

abuse of rights, sets certain standards which must be observed not only in the
exercise of one's rights but also in the performance of one's duties. These standards
are the following: to act with justice; to give everyone his due; and to observe
honesty and good faith. The law, therefore, recognizes a primordial limitation on all
rights; that in their exercise, the norms of human conduct set forth in Article 19
must be observed. A right, though by itself legal because recognized or granted
by law as such, may nevertheless become the source of some illegality. When a
right is exercised in a manner which does not conform with the norms
enshrined in Article 19 and results in damage to another, a legal wrong is
thereby committed for which the wrongdoer must be held responsible. But
while Article 19 lays down a rule of conduct for the government of human relations
and for the maintenance of social order, it does not provide a remedy for its
violation. Generally, an action for damages under either Article 20 or Article 21
would be proper. (Emphasis in the original)

In rejecting respondent’s application for proprietary membership, we find that petitioners

violated the rules governing human relations, the basic principles to be observed for the
rightful relationship between human beings and for the stability of social order. The trial
court and the Court of Appeals aptly held that petitioners committed fraud and evident bad
faith in disapproving respondent’s applications. This is contrary to morals, good custom or
public policy. Hence, petitioners are liable for damages pursuant to Article 19 in relation to
Article 21 of the same Code.

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

Petitioners explained that the amendment was not printed on the application form due to
economic reasons. We find this excuse flimsy and unconvincing. Such amendment, aside
from being extremely significant, was introduced way back in 1978 or almost twenty (20)
years before respondent filed his application. We cannot fathom why such a prestigious
and exclusive golf country club, like the CCCI, whose members are all affluent, did not have
enough money to cause the printing of an updated application form.

It is thus clear that respondent was left groping in the dark wondering why his application
was disapproved. He was not even informed that a unanimous vote of the Board members
 17

was required. When he sent a letter for reconsideration and an inquiry whether there was
an objection to his application, petitioners apparently ignored him. Certainly, respondent
did not deserve this kind of treatment. Having been designated by San Miguel Corporation
as a special non-proprietary member of CCCI, he should have been treated by petitioners
with courtesy and civility. At the very least, they should have informed him why his
application was disapproved.

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

As to petitioners’ reliance on the principle of damnum absque injuria or damage without

injury, suffice it to state that the same is misplaced. In Amonoy v. Gutierrez,7 we held that
this principle does not apply when there is an abuse of a person’s right, as in this case.

As to the appellate court’s award to respondent of moral damages, we find the same in
order. Under Article 2219 of the New Civil Code, moral damages may be recovered, among
others, in acts and actions referred to in Article 21. We believe respondent’s testimony that
he suffered mental anguish, social humiliation and wounded feelings as a result of the
arbitrary denial of his application. However, the amount of P2,000,000.00 is excessive.
While there is no hard-and-fast rule in determining what would be a fair and reasonable
amount of moral damages, the same should not be palpably and scandalously excessive.
Moral damages are not intended to impose a penalty to the wrongdoer, neither to enrich
the claimant at the expense of the defendant.8 Taking into consideration the attending
circumstances here, we hold that an award to respondent of P50,000.00, instead
of P2,000,000.00, as moral damages is reasonable.

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

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

Lastly, petitioners’ argument that they could not be held jointly and severally liable for
damages because only one (1) voted for the disapproval of respondent’s application lacks
merit.
 18

Section 31 of the Corporation Code provides:

SEC. 31. Liability of directors, trustees or officers. — Directors or trustees who

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

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

G.R. No. 165443               April 16, 2009

CALATAGAN GOLF CLUB, INC. Petitioner,

vs.
SIXTO CLEMENTE, JR., Respondent.

DECISION

TINGA, J.:

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

The key facts are undisputed.

Clemente applied to purchase one share of stock of Calatagan, indicating in his application
for membership his mailing address at "Phimco Industries, Inc. – P.O. Box 240, MCC,"
complete residential address, office and residence telephone numbers, as well as the
 19

company (Phimco) with which he was connected, Calatagan issued to him Certificate of
Stock No. A-01295 on 2 May 1990 after paying ₱120,000.00 for the share.2

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

5. The owners of shares of stock shall be subject to the payment of monthly dues in an
amount as may be prescribed in the by-laws or by the Board of Directors which shall in no
case be less that [sic] ₱50.00 to meet the expenses for the general operations of the club,
and the maintenance and improvement of its premises and facilities, in addition to such
fees as may be charged for the actual use of the facilities x x x

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

Ten (10) months later, Calatagan made the initial step to collect Clemente’s back accounts
by sending a demand letter dated 21 September 1992. It was followed by a second letter
dated 22 October 1992. Both letters were sent to Clemente’s mailing address as indicated
in his membership application but were sent back to sender with the postal note that the
address had been closed.5

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

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

On 5 January 1993, a notice of auction sale was posted on the Club’s bulletin board, as well
as on the club’s premises. The auction sale took place as scheduled on 15 January 1993, and
Clemente’s share sold for ₱64,000.7 According to the Certificate of Sale issued by Calatagan
after the sale, Clemente’s share was purchased by a Nestor A. Virata. 8 At the time of the
sale, Clemente’s accrued monthly dues amounted to ₱5,200.00.9 A notice of foreclosure of
Clemente’s share was published in the 26 May 1993 issue of the Business World.10
 20

Clemente learned of the sale of his share only in November of 1997.11 He filed a claim with
the Securities and Exchange Commission (SEC) seeking the restoration of his shareholding
in Calatagan with damages.

On 15 November 2000, the SEC rendered a decision dismissing Clemente’s complaint.

Citing Section 69 of the Corporation Code which provides that the sale of shares at an
auction sale can only be questioned within six (6) months from the date of sale, the SEC
concluded that Clemente’s claim, filed four (4) years after the sale, had already prescribed.
The SEC further held that Calatagan had complied with all the requirements for a valid sale
of the subject share, Clemente having failed to inform Calatagan that the address he had
earlier supplied was no longer his address. Clemente, the SEC ruled, had acted in bad faith
in assuming as he claimed that his non-payment of monthly dues would merely render his
share "inactive."

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

In rejecting the SEC’s finding that the action had prescribed, the Court of Appeals cited the
SEC’s own ruling in SEC Case No. 4160, Caram v. Valley Golf Country Club, Inc., that Section
69 of the Corporation Code specifically refers to unpaid subscriptions to capital stock, and
not to any other debt of stockholders. With the insinuation that Section 69 does not apply
to unpaid membership dues in non-stock corporations, the appellate court employed
Article 1140 of the Civil Code as the proper rule of prescription. The provision sets the
prescription period of actions to recover movables at eight (8) years.

The Court of Appeals also pointed out that since that Calatagan’s first two demand letters
had been returned to it as sender with the notation about the closure of the mailing
address, it very well knew that its third and final demand letter also sent to the same
mailing address would not be received by Clemente. It noted the by-law requirement that
within ten (10) days after the Board has ordered the sale at auction of a member’s share of
stock for indebtedness, the Corporate Secretary shall notify the owner thereof and advise
the Membership Committee of such fact. Finally, the Court of Appeals ratiocinated that "a
person who is in danger of the imminent loss of his property has the right to be notified
and be given the chance to prevent the loss."12

Hence, the present appeal.

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

Section 69 of the Code provides that an action to recover delinquent stock sold must be
commenced by the filing of a complaint within six (6) months from the date of sale. As
correctly pointed out by the Court of Appeals, Section 69 is part of Title VIII of the Code
 21

entitled "Stocks and Stockholders" and refers specifically to unpaid subscriptions to capital
stock, the sale of which is governed by the immediately preceding Section 68.

The Court of Appeals debunked both Calatagan’s and the SEC’s reliance on Section 69 by
citing another SEC ruling in the case of Caram v. Valley Golf. In connection with Section 69,
Calatagan raises a peripheral point made in the SEC’s Caram ruling. In Caram, the SEC,
using as take-off Section 6 of the Corporation Code which refers to "such rights, privileges
or restrictions as may be stated in the articles of incorporation," pointed out that the
Articles of Incorporation of Valley Golf does not "impose any lien, liability or restriction on
the Golf Share [of Caram]," but only its (Valley Golf’s) By-Laws does. Here, Calatagan
stresses that its own Articles of Incorporation does provide that the monthly dues assessed
on owners of shares of the corporation, along with all other obligations of the shareholders
to the club, "shall constitute a first lien on the shares… and in the event of delinquency such
shares may be ordered sold by the Board of Directors in the manner provided in the By-
Laws to satisfy said dues or other obligations of the shareholders." 13 With its illative but
incomprehensible logic, Calatagan concludes that the prescriptive period under Section 69
should also apply to the sale of Clemente’s share as the lien that Calatagan perceives to be a
restriction is stated in the articles of incorporation and not only in the by-laws.

We remain unconvinced.

There are fundamental differences that defy equivalence or even analogy between the sale
of delinquent stock under Section 68 and the sale that occurred in this case. At the root of
the sale of delinquent stock is the non-payment of the subscription price for the share of
stock itself. The stockholder or subscriber has yet to fully pay for the value of the share or
shares subscribed. In this case, Clemente had already fully paid for the share in Calatagan
and no longer had any outstanding obligation to deprive him of full title to his share.
Perhaps the analogy could have been made if Clemente had not yet fully paid for his share
and the non-stock corporation, pursuant to an article or by-law provision designed to
address that situation, decided to sell such share as a consequence. But that is not the case
here, and there is no purpose for us to apply Section 69 to the case at bar.

Calatagan argues in the alternative that Clemente’s suit is barred by Article 1146 of the
Civil Code which establishes four (4) years as the prescriptive period for actions based
upon injury to the rights of the plaintiff on the hypothesis that the suit is purely for
damages. As a second alternative still, Calatagan posits that Clemente’s action is governed
by Article 1149 of the Civil Code which sets five (5) years as the period of prescription for
all other actions whose prescriptive periods are not fixed in the Civil Code or in any other
law. Neither article is applicable but Article 1140 of the Civil Code which provides that an
action to recover movables shall prescribe in eight (8) years. Calatagan’s action is for the
recovery of a share of stock, plus damages.

Calatagan’s advertence to the fact that the constitution of a lien on the member’s share by
virtue of the explicit provisions in its Articles of Incorporation and By-Laws is relevant but
ultimately of no help to its cause. Calatagan’s Articles of Incorporation states that the "dues,
together with all other obligations of members to the club, shall constitute a first lien on the
 22

shares, second only to any lien in favor of the national or local government, and in the event
of delinquency such shares may be ordered sold by the Board of Directors in the manner
provided in the By-Laws to satisfy said dues or other obligations of the stockholders."14 In
turn, there are several provisions in the By-laws that govern the payment of dues, the lapse
into delinquency of the member, and the constitution and execution on the lien. We quote
these provisions:

ARTICLE XII – MEMBER’S ACCOUNT

SEC. 31. (a) Billing Members, Posting of Delinquent Members – The Treasurer shall bill al
members monthly. As soon as possible after the end of every month, a statement showing
the account of bill of a member for said month will be prepared and sent to him. If the bill
of any member remains unpaid by the 20th of the month following that in which the bill
was incurred, the Treasurer shall notify him that if his bill is not paid in full by the end of
the succeeding month his name will be posted as delinquent the following day at the
Clubhouse bulletin board. While posted, a member, the immediate members of his family,
and his guests, may not avail of the facilities of the Club.

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

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

(a) Within ten (10) days after the Board has ordered the sale at auction of a
member’s share of stock for indebtedness under Section 31(b) hereof, the Secretary
shall notify the owner thereof, and shall advise the Membership Committee of such
fact.

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

(c) On the date and hour fixed, the Membership Committee shall proceed with the
auction by viva voce bidding and award the sale of the share of stock to the highest
bidder.

(d) The purchase price shall be paid by the winning bidder to the Club within
twenty-four (24) hours after the bidding. The winning bidder or the representative
in the case of a juridical entity shall become a Regular Member upon payment of the
purchase price and issuance of a new stock certificate in his name or in the name of
 23

the juridical entity he represents. The proceeds of the sale shall be paid by the Club
to the selling stockholder after deducting his obligations to the Club.

(e) If no bids be received or if the winning bidder fails to pay the amount of this bid
within twenty-four (24) hours after the bidding, the auction procedures may be
repeated from time to time at the discretion of the Membership Committee until the
share of stock be sold.

(f) If the proceeds from the sale of the share of stock are not sufficient to pay in full
the indebtedness of the member, the member shall continue to be obligated to the
Club for the unpaid balance. If the member whose share of stock is sold fails or
refuse to surrender the stock certificate for cancellation, cancellation shall be
effected in the books of the Club based on a record of the proceedings. Such
cancellation shall render the unsurrendered stock certificate null and void and
notice to this effect shall be duly published.

It is plain that Calatagan had endeavored to install a clear and comprehensive procedure to
govern the payment of monthly dues, the declaration of a member as delinquent, and the
constitution of a lien on the shares and its eventual public sale to answer for the member’s
debts. Under Section 91 of the Corporation Code, membership in a non-stock corporation
"shall be terminated in the manner and for the causes provided in the articles of
incorporation or the by-laws." The By-law provisions are elaborate in explaining the
manner and the causes for the termination of membership in Calatagan, through the
execution on the lien of the share. The Court is satisfied that the By-Laws, as written,
affords due protection to the member by assuring that the member should be notified by
the Secretary of the looming execution sale that would terminate membership in the club.
In addition, the By-Laws guarantees that after the execution sale, the proceeds of the sale
would be returned to the former member after deducting the outstanding obligations. If
followed to the letter, the termination of membership under this procedure outlined in the
By-Laws would accord with substantial justice.

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

In accordance with this provision, Calatagan sent the third and final demand letter to
Clemente on December 7, 1992. The letter states that if the amount of delinquency is not
paid, the share will be included among the delinquent shares to be sold at public auction.
This letter was signed by Atty. Benjamin Tanedo, Jr., Calatagan Golf’s Corporate
Secretary. It was again sent to Clemente’s mailing address – Phimco Industries Inc.,
P.O. Box 240, MCC Makati. As expected, it was returned because the post office box had
been closed.

Under the By-Laws, the Corporate Secretary is tasked to "give or cause to be given, all
notices required by law or by these By-Laws. .. and … keep a record of the addresses of all
stockholders. As quoted above, Sec. 32 (a) of the By-Laws further provides that "within ten
(10) days after the Board has ordered the sale at auction of a member’s share of stock for
 24

indebtedness under Section 31 (b) hereof, the Secretary shall notify the owner thereof and
shall advise the Membership Committee of such fact.," The records do not disclose what
report the Corporate Secretary transmitted to the Membership Committee to comply with
Section 32(a). Obviously, the reason for this mandatory requirement is to give the
Membership Committee the opportunity to find out, before the share is sold, if proper
notice has been made to the shareholder member.

We presume that the Corporate Secretary, as a lawyer is knowledgeable on the law and on
the standards of good faith and fairness that the law requires. As custodian of corporate
records, he should also have known that the first two letters sent to Clemente were
returned because the P.O. Box had been closed. Thus, we are surprised – given his
knowledge of the law and of corporate records – that he would send the third and final
letter – Clemente’s last chance before his share is sold and his membership lost – to the
same P.O. Box that had been closed.

Calatagan argues that it "exercised due diligence before the foreclosure sale" and "sent
several notices to Clemente’s specified mailing address." We do not agree; we cannot label
as due diligence Calatagan’s act of sending the December 7, 1992 letter to Clemente’s
mailing address knowing fully well that the P.O. Box had been closed. Due diligence or good
faith imposes upon the Corporate Secretary – the chief repository of all corporate records –
the obligation to check Clemente’s other address which, under the By-Laws, have to be kept
on file and are in fact on file. One obvious purpose of giving the Corporate Secretary the
duty to keep the addresses of members on file is specifically for matters of this kind, when
the member cannot be reached through his or her mailing address. Significantly, the
Corporate Secretary does not have to do the actual verification of other addressees on
record; a mere clerk can do the very simple task of checking the files as in fact clerks
actually undertake these tasks. In fact, one telephone call to Clemente’s phone numbers on
file would have alerted him of his impending loss.

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

It is noteworthy that Clemente in his membership application had provided his residential
address along with his residence and office telephone numbers. Nothing in Section 32 of
Calatagan’s By-Laws requires that the final notice prior to the sale be made solely through
the member’s mailing address. Clemente cites our aphorism-like pronouncement in Rizal
Commercial Banking Corporation v. Court of Appeals15 that "[a] simple telephone call and
an ounce of good faith x x x could have prevented this present controversy." That
memorable observation is quite apt in this case.
 25

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

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

We turn to the matter of damages. The award of actual damages is of course warranted
since Clemente has sustained pecuniary injury by reason of Calatagan’s wrongful violation
of its own By-Laws. It would not be feasible to deliver Clemente’s original Certificate of
Stock because it had already been cancelled and a new one issued in its place in the name of
the purchases at the auction who was not impleaded in this case. However, the Court of
Appeals instead directed that Calatagan to issue to Clemente a new certificate of stock. That
sufficiently redresses the actual damages sustained by Clemente. After all, the certificate of
stock is simply the evidence of the share.

The Court of Appeals also awarded Clemente ₱200,000.00 as moral damages, ₱100,000.00
as exemplary damages, and ₱100,000.00 as attorney’s fees. We agree that the award of
such damages is warranted.

The Court of Appeals cited Calatagan for violation of Article 32 of the Civil Code, which
allows recovery of damages from any private individual "who directly or indirectly
obstructs, defeats, violates or in any manner impedes or impairs" the right "against
deprivation of property without due process of laws." The plain letter of the provision
squarely entitles Clemente to damages from Calatagan. Even without Article 32 itself,
Calatagan will still be bound to pay moral and exemplary damages to Clemente. The latter
was able to duly prove that he had sustained mental anguish, serious anxiety and wounded
feelings by reason of Calatagan’s acts, thereby entitling him to moral damages under Article
2217 of the Civil Code. Moreover, it is evident that Calatagan’s bad faith as exhibited in the
 26

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

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

G.R. No. 165443               April 16, 2009

CALATAGAN GOLF CLUB, INC. Petitioner,

vs.
SIXTO CLEMENTE, JR., Respondent.

DECISION

TINGA, J.:

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

The key facts are undisputed.

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

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

5. The owners of shares of stock shall be subject to the payment of monthly dues in an
amount as may be prescribed in the by-laws or by the Board of Directors which shall in no
case be less that [sic] ₱50.00 to meet the expenses for the general operations of the club,
and the maintenance and improvement of its premises and facilities, in addition to such
fees as may be charged for the actual use of the facilities x x x
 27

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

Ten (10) months later, Calatagan made the initial step to collect Clemente’s back accounts
by sending a demand letter dated 21 September 1992. It was followed by a second letter
dated 22 October 1992. Both letters were sent to Clemente’s mailing address as indicated
in his membership application but were sent back to sender with the postal note that the
address had been closed.5

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

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

On 5 January 1993, a notice of auction sale was posted on the Club’s bulletin board, as well
as on the club’s premises. The auction sale took place as scheduled on 15 January 1993, and
Clemente’s share sold for ₱64,000.7 According to the Certificate of Sale issued by Calatagan
after the sale, Clemente’s share was purchased by a Nestor A. Virata. 8 At the time of the
sale, Clemente’s accrued monthly dues amounted to ₱5,200.00.9 A notice of foreclosure of
Clemente’s share was published in the 26 May 1993 issue of the Business World.10

Clemente learned of the sale of his share only in November of 1997.11 He filed a claim with
the Securities and Exchange Commission (SEC) seeking the restoration of his shareholding
in Calatagan with damages.

On 15 November 2000, the SEC rendered a decision dismissing Clemente’s complaint.

Citing Section 69 of the Corporation Code which provides that the sale of shares at an
auction sale can only be questioned within six (6) months from the date of sale, the SEC
concluded that Clemente’s claim, filed four (4) years after the sale, had already prescribed.
The SEC further held that Calatagan had complied with all the requirements for a valid sale
of the subject share, Clemente having failed to inform Calatagan that the address he had
earlier supplied was no longer his address. Clemente, the SEC ruled, had acted in bad faith
in assuming as he claimed that his non-payment of monthly dues would merely render his
share "inactive."

Clemente filed a petition for review with the Court of Appeals. On 1 June 2004, the Court of
Appeals promulgated a decision reversing the SEC. The appellate court restored Clemente’s
 28

one share with a directive to Calatagan to issue in his a new share, and awarded to
Clemente a total of ₱400,000.00 in damages, less the unpaid monthly dues of ₱5,200.00.

In rejecting the SEC’s finding that the action had prescribed, the Court of Appeals cited the
SEC’s own ruling in SEC Case No. 4160, Caram v. Valley Golf Country Club, Inc., that Section
69 of the Corporation Code specifically refers to unpaid subscriptions to capital stock, and
not to any other debt of stockholders. With the insinuation that Section 69 does not apply
to unpaid membership dues in non-stock corporations, the appellate court employed
Article 1140 of the Civil Code as the proper rule of prescription. The provision sets the
prescription period of actions to recover movables at eight (8) years.

The Court of Appeals also pointed out that since that Calatagan’s first two demand letters
had been returned to it as sender with the notation about the closure of the mailing
address, it very well knew that its third and final demand letter also sent to the same
mailing address would not be received by Clemente. It noted the by-law requirement that
within ten (10) days after the Board has ordered the sale at auction of a member’s share of
stock for indebtedness, the Corporate Secretary shall notify the owner thereof and advise
the Membership Committee of such fact. Finally, the Court of Appeals ratiocinated that "a
person who is in danger of the imminent loss of his property has the right to be notified
and be given the chance to prevent the loss."12

Hence, the present appeal.

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

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

The Court of Appeals debunked both Calatagan’s and the SEC’s reliance on Section 69 by
citing another SEC ruling in the case of Caram v. Valley Golf. In connection with Section 69,
Calatagan raises a peripheral point made in the SEC’s Caram ruling. In Caram, the SEC,
using as take-off Section 6 of the Corporation Code which refers to "such rights, privileges
or restrictions as may be stated in the articles of incorporation," pointed out that the
Articles of Incorporation of Valley Golf does not "impose any lien, liability or restriction on
the Golf Share [of Caram]," but only its (Valley Golf’s) By-Laws does. Here, Calatagan
stresses that its own Articles of Incorporation does provide that the monthly dues assessed
on owners of shares of the corporation, along with all other obligations of the shareholders
to the club, "shall constitute a first lien on the shares… and in the event of delinquency such
shares may be ordered sold by the Board of Directors in the manner provided in the By-
Laws to satisfy said dues or other obligations of the shareholders." 13 With its illative but
incomprehensible logic, Calatagan concludes that the prescriptive period under Section 69
 29

should also apply to the sale of Clemente’s share as the lien that Calatagan perceives to be a
restriction is stated in the articles of incorporation and not only in the by-laws.

We remain unconvinced.

There are fundamental differences that defy equivalence or even analogy between the sale
of delinquent stock under Section 68 and the sale that occurred in this case. At the root of
the sale of delinquent stock is the non-payment of the subscription price for the share of
stock itself. The stockholder or subscriber has yet to fully pay for the value of the share or
shares subscribed. In this case, Clemente had already fully paid for the share in Calatagan
and no longer had any outstanding obligation to deprive him of full title to his share.
Perhaps the analogy could have been made if Clemente had not yet fully paid for his share
and the non-stock corporation, pursuant to an article or by-law provision designed to
address that situation, decided to sell such share as a consequence. But that is not the case
here, and there is no purpose for us to apply Section 69 to the case at bar.

Calatagan argues in the alternative that Clemente’s suit is barred by Article 1146 of the
Civil Code which establishes four (4) years as the prescriptive period for actions based
upon injury to the rights of the plaintiff on the hypothesis that the suit is purely for
damages. As a second alternative still, Calatagan posits that Clemente’s action is governed
by Article 1149 of the Civil Code which sets five (5) years as the period of prescription for
all other actions whose prescriptive periods are not fixed in the Civil Code or in any other
law. Neither article is applicable but Article 1140 of the Civil Code which provides that an
action to recover movables shall prescribe in eight (8) years. Calatagan’s action is for the
recovery of a share of stock, plus damages.

Calatagan’s advertence to the fact that the constitution of a lien on the member’s share by
virtue of the explicit provisions in its Articles of Incorporation and By-Laws is relevant but
ultimately of no help to its cause. Calatagan’s Articles of Incorporation states that the "dues,
together with all other obligations of members to the club, shall constitute a first lien on the
shares, second only to any lien in favor of the national or local government, and in the event
of delinquency such shares may be ordered sold by the Board of Directors in the manner
provided in the By-Laws to satisfy said dues or other obligations of the stockholders."14 In
turn, there are several provisions in the By-laws that govern the payment of dues, the lapse
into delinquency of the member, and the constitution and execution on the lien. We quote
these provisions:

ARTICLE XII – MEMBER’S ACCOUNT

SEC. 31. (a) Billing Members, Posting of Delinquent Members – The Treasurer shall bill al
members monthly. As soon as possible after the end of every month, a statement showing
the account of bill of a member for said month will be prepared and sent to him. If the bill
of any member remains unpaid by the 20th of the month following that in which the bill
was incurred, the Treasurer shall notify him that if his bill is not paid in full by the end of
the succeeding month his name will be posted as delinquent the following day at the
 30

Clubhouse bulletin board. While posted, a member, the immediate members of his family,
and his guests, may not avail of the facilities of the Club.

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

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

(a) Within ten (10) days after the Board has ordered the sale at auction of a
member’s share of stock for indebtedness under Section 31(b) hereof, the Secretary
shall notify the owner thereof, and shall advise the Membership Committee of such
fact.

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

(c) On the date and hour fixed, the Membership Committee shall proceed with the
auction by viva voce bidding and award the sale of the share of stock to the highest
bidder.

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

(e) If no bids be received or if the winning bidder fails to pay the amount of this bid
within twenty-four (24) hours after the bidding, the auction procedures may be
repeated from time to time at the discretion of the Membership Committee until the
share of stock be sold.

(f) If the proceeds from the sale of the share of stock are not sufficient to pay in full
the indebtedness of the member, the member shall continue to be obligated to the
Club for the unpaid balance. If the member whose share of stock is sold fails or
refuse to surrender the stock certificate for cancellation, cancellation shall be
effected in the books of the Club based on a record of the proceedings. Such
cancellation shall render the unsurrendered stock certificate null and void and
notice to this effect shall be duly published.
 31

It is plain that Calatagan had endeavored to install a clear and comprehensive procedure to
govern the payment of monthly dues, the declaration of a member as delinquent, and the
constitution of a lien on the shares and its eventual public sale to answer for the member’s
debts. Under Section 91 of the Corporation Code, membership in a non-stock corporation
"shall be terminated in the manner and for the causes provided in the articles of
incorporation or the by-laws." The By-law provisions are elaborate in explaining the
manner and the causes for the termination of membership in Calatagan, through the
execution on the lien of the share. The Court is satisfied that the By-Laws, as written,
affords due protection to the member by assuring that the member should be notified by
the Secretary of the looming execution sale that would terminate membership in the club.
In addition, the By-Laws guarantees that after the execution sale, the proceeds of the sale
would be returned to the former member after deducting the outstanding obligations. If
followed to the letter, the termination of membership under this procedure outlined in the
By-Laws would accord with substantial justice.

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

In accordance with this provision, Calatagan sent the third and final demand letter to
Clemente on December 7, 1992. The letter states that if the amount of delinquency is not
paid, the share will be included among the delinquent shares to be sold at public auction.
This letter was signed by Atty. Benjamin Tanedo, Jr., Calatagan Golf’s Corporate
Secretary. It was again sent to Clemente’s mailing address – Phimco Industries Inc.,
P.O. Box 240, MCC Makati. As expected, it was returned because the post office box had
been closed.

Under the By-Laws, the Corporate Secretary is tasked to "give or cause to be given, all
notices required by law or by these By-Laws. .. and … keep a record of the addresses of all
stockholders. As quoted above, Sec. 32 (a) of the By-Laws further provides that "within ten
(10) days after the Board has ordered the sale at auction of a member’s share of stock for
indebtedness under Section 31 (b) hereof, the Secretary shall notify the owner thereof and
shall advise the Membership Committee of such fact.," The records do not disclose what
report the Corporate Secretary transmitted to the Membership Committee to comply with
Section 32(a). Obviously, the reason for this mandatory requirement is to give the
Membership Committee the opportunity to find out, before the share is sold, if proper
notice has been made to the shareholder member.

We presume that the Corporate Secretary, as a lawyer is knowledgeable on the law and on
the standards of good faith and fairness that the law requires. As custodian of corporate
records, he should also have known that the first two letters sent to Clemente were
returned because the P.O. Box had been closed. Thus, we are surprised – given his
knowledge of the law and of corporate records – that he would send the third and final
letter – Clemente’s last chance before his share is sold and his membership lost – to the
same P.O. Box that had been closed.
 32

Calatagan argues that it "exercised due diligence before the foreclosure sale" and "sent
several notices to Clemente’s specified mailing address." We do not agree; we cannot label
as due diligence Calatagan’s act of sending the December 7, 1992 letter to Clemente’s
mailing address knowing fully well that the P.O. Box had been closed. Due diligence or good
faith imposes upon the Corporate Secretary – the chief repository of all corporate records –
the obligation to check Clemente’s other address which, under the By-Laws, have to be kept
on file and are in fact on file. One obvious purpose of giving the Corporate Secretary the
duty to keep the addresses of members on file is specifically for matters of this kind, when
the member cannot be reached through his or her mailing address. Significantly, the
Corporate Secretary does not have to do the actual verification of other addressees on
record; a mere clerk can do the very simple task of checking the files as in fact clerks
actually undertake these tasks. In fact, one telephone call to Clemente’s phone numbers on
file would have alerted him of his impending loss.

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

It is noteworthy that Clemente in his membership application had provided his residential
address along with his residence and office telephone numbers. Nothing in Section 32 of
Calatagan’s By-Laws requires that the final notice prior to the sale be made solely through
the member’s mailing address. Clemente cites our aphorism-like pronouncement in Rizal
Commercial Banking Corporation v. Court of Appeals15 that "[a] simple telephone call and
an ounce of good faith x x x could have prevented this present controversy." That
memorable observation is quite apt in this case.

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

The utter bad faith exhibited by Calatagan brings into operation Articles 19, 20 and 21 of
the Civil Code,16 under the Chapter on Human Relations. These provisions, which the Court
 33

of Appeals did apply, enunciate a general obligation under law for every person to act fairly
and in good faith towards one another. A non-stock corporation like Calatagan is not
exempt from that obligation in its treatment of its members. The obligation of a
corporation to treat every person honestly and in good faith extends even to its
shareholders or members, even if the latter find themselves contractually bound to
perform certain obligations to the corporation. A certificate of stock cannot be a charter of
dehumanization.

We turn to the matter of damages. The award of actual damages is of course warranted
since Clemente has sustained pecuniary injury by reason of Calatagan’s wrongful violation
of its own By-Laws. It would not be feasible to deliver Clemente’s original Certificate of
Stock because it had already been cancelled and a new one issued in its place in the name of
the purchases at the auction who was not impleaded in this case. However, the Court of
Appeals instead directed that Calatagan to issue to Clemente a new certificate of stock. That
sufficiently redresses the actual damages sustained by Clemente. After all, the certificate of
stock is simply the evidence of the share.

The Court of Appeals also awarded Clemente ₱200,000.00 as moral damages, ₱100,000.00
as exemplary damages, and ₱100,000.00 as attorney’s fees. We agree that the award of
such damages is warranted.

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

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

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

G.R. No. 160689               March 26, 2014

RAUL H. SESBREÑO, Petitioner,
vs.
HONORABLE COURT OF APPEALS, JUAN I. COROMINA (SUBSTITUTED BY ANITA
COROMINA, ELIZABETH COROMINA and ROSIEMARIE COROMINA), VICENTE E.
GARCIA (SUBSTITUTED BY EDGAR JOHN GARCIA), FELIPE CONSTANTINO, RONALD
ARCILLA, NORBETO ABELLANA, DEMETRIO BALICHA, ANGELITA LHUILLIER, JOSE E.
GARCIA, AND VISA YAN ELECTRIC COMPANY (VECO), Respondents.
 34

DECISION

BERSAMIN, J.:

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

Hence, this appeal by Sesbreñ o.

Antecedents

At the time material to the petition, VECO was a public utility corporation organized and
existing under the laws of the Philippines. VECO engaged in the sale and distribution of
electricity within Metropolitan Cebu. Sesbreñ o was one of VECO’s customers under the
metered service contract they had entered into on March 2, 1982. 3 Respondent Vicente E.
Garcia was VECO’s President, General Manager and Chairman of its Board of Directors.
Respondent Jose E. Garcia was VECO’s Vice-President, Treasurer and a Member of its Board
of Directors. Respondent Angelita Lhuillier was another Member of VECO’s Board of
Directors. Respondent Juan Coromina was VECO’s Assistant Treasurer, while respondent
Norberto Abellana was the Head of VECO’s Billing Section whose main function was to
compute back billings of customers found to have violated their contracts.

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

The CA summarized the antecedent facts as follows:

x x x. Reduced to its essentials, however, the facts of this case are actually simple enough,
although the voluminous records might indicate otherwise. It all has to do with an incident
that occurred at around 4:00 o’clock in the afternoon of May 11, 1989. On that day, the
Violation of Contracts (VOC) Team of defendants-appellees Constantino and Arcilla and
their PC escort, Balicha, conducted a routine inspection of the houses at La Paloma Village,
Labangon, Cebu City, including that of plaintiff-appellant Sesbreñ o, for illegal connections,
meter tampering, seals, conduit pipes, jumpers, wiring connections, and meter
installations. After Bebe Baledio, plaintiff-appellant Sesbreñ o’s maid, unlocked the gate,
they inspected the electric meter and found that it had been turned upside down.
Defendant-appellant Arcilla took photographs of the upturned electric meter. With Chuchie
 35

Garcia, Peter Sesbreñ o and one of the maids present, they removed said meter and
replaced it with a new one. At that time, plaintiff-appellant Sesbreñ o was in his office and
no one called to inform him of the inspection. The VOC Team then asked for and received
Chuchie Garcia’s permission to enter the house itself to examine the kind and number of
appliances and light fixtures in the household and determine its electrical load. Afterwards,
Chuchie Garcia signed the Inspection Division Report, which showed the condition of the
electric meter on May 11, 1989 when the VOC Team inspected it, with notice that it would
be subjected to a laboratory test. She also signed a Load Survey Sheet that showed the
electrical load of plaintiff-appellant Sesbreñ o.

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

Judgment of the RTC

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

In contrast, the RTC believed the evidence of the respondents showing that the VOC
inspection team had found the electric meter in Sesbreñ o’s residence turned upside down
to prevent the accurate registering of the electricity consumption of the household, causing
them to detach and replace the meter. It held as unbelievable that the team forcibly entered
the house through threats and intimidation; that they themselves turned the electric meter
upside down in order to incriminate him for theft of electricity, because the fact that the
team and Sesbreñ o had not known each other before then rendered it unlikely for the team
 36

to fabricate charges against him; and that Sesbreñ o’s non-presentation of Chuchie Garcia
left her allegation of her being forced to sign the two documents by the team
unsubstantiated.

Decision of the CA

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

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

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

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

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

xxxx

Neither is this Court swayed by the testimonies of Baledio and Lopez.1âwphi1 The lower
court rightly described their testimonies as fraught by discrepancies and inconsistencies on
 37

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

Upon denial of his motion for reconsideration,10 Sesbreñ o appealed.

Issue

Was Sesbreñ o entitled to recover damages for abuse of rights?

Ruling

The appeal has no merit.

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

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

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

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

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

Sesbreñ o contends, however, that paragraph 9 did not give Constantino, Arcilla and Balicha
the blanket authority to enter at will because the only property VECO owned in his
premises was the meter; hence, Constantino and Arcilla should enter only the garage. He
 38

denies that they had the right to enter the main portion of the house and inspect the
various rooms and the appliances therein because those were not the properties of VECO.
He posits that Balicha, who was not an employee of VECO, had no authority whatsoever to
enter his house and conduct a search. He concludes that their search was unreasonable,
and entitled him to damages in light of their admission that they had entered and inspected
his premises without a search warrant.12

We do not accept Sesbreñ o’s conclusion.1avvphi1 Paragraph 9 clothed the entire VOC team
with unquestioned authority to enter the garage to inspect the meter. The members of the
team obviously met the conditions imposed by paragraph 9 for an authorized entry. Firstly,
their entry had the objective of conducting the routine inspection of the meter. 13 Secondly,
the entry and inspection were confined to the garage where the meter was
installed.14 Thirdly, the entry was effected at around 4 o’clock p.m., a reasonable
hour.15 And, fourthly, the persons who inspected the meter were duly authorized for the
purpose by VECO.

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

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

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

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

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

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

xxxx
 39

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

x x x x.

Sesbreñ o’s insistence has no legal and factual basis.

The constitutional guaranty against unlawful searches and seizures is intended as a

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

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

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

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

Our holding could be different had Sesbreñ o persuasively demonstrated the intervention of
malice or bad faith on the part of Constantino and Arcilla during their inspection of the
main premises, or any excessiveness committed by them in the course of the inspection.
But Sesbreñ o did not. On the other hand, the CA correctly observed that the inspection did
not zero in on Sesbreñ o’s residence because the other houses within the area were
similarly subjected to the routine inspection.20 This, we think, eliminated any notion of
malice or bad faith.
 40

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

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

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

The assertion of Sesbreñ o is improper for consideration in this appeal.1âwphi1 The RTC

and the CA unanimously found the testimonies of Sesbreñ o’s witnesses implausible
because of inconsistencies on material points; and even declared that the non-presentation
of Garcia as a witness was odd if not suspect. Considering that such findings related to the
credibility of the witnesses and their testimonies, the Court cannot review and undo them
now because it is not a trier of facts, and is not also tasked to analyze or weigh evidence all
over again.26 Verily, a review that may tend to supplant the findings of the trial court that
had the first-hand opportunity to observe the demeanor of the witnesses themselves
should be undertaken by the Court with prudent hesitation. Only when Sesbreñ o could
make a clear showing of abuse in their appreciation of the evidence and records by the trial
and the appellate courts should the Court do the unusual review of the factual findings of
the trial and appellate courts.27 Alas, that showing was not made here.

Nor should the Court hold that Sesbreñ o was denied due process by the refusal of the trial
judge to inhibit from the case. Although the trial judge had issued an order for his voluntary
inhibition, he still rendered the judgment in the end in compliance with the instruction of
the Executive Judge, whose exercise of her administrative authority on the matter of the
inhibition should be respected.28 In this connection, we find to be apt the following
observation of the CA, to wit:
 41

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

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

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

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

A.C. No. 4697               November 25, 2014

FLORENCIO A. SALADAGA, Complainant,
vs.
ATTY. ARTURO B. ASTORGA, Respondent.

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

A.C. No. 4728

FLORENCIO A. SALADAGA, Complainant,
vs.
ATTY. ARTURO B. ASTORGA, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

Membership in the legal profession is a high personal privilege burdened with

conditions,1 including continuing fidelity to the law and constant possession of moral
fitness. Lawyers, as guardians of the law, play a vital role in the preservation of society, and
a consequent obligation of lawyers is to maintain the highest standards of ethical
conduct.2 Failure to live by the standards of the legal profession and to discharge the
 42

burden of the privilege conferred on one as a member of the bar warrant the suspension or
revocation of that privilege.

The Factual Antecedents

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

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

Complainant was alarmed and made aninvestigation. He learned the following:

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

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

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

Aggrieved, complainant instituted a criminal complaint for estafa against respondent with
the Office of the Provincial Prosecutor of Leyte, docketed as I.S. No. 95-144. The Provincial
Prosecutor of Leyte approved the Resolution8 dated April 21, 1995 in I.S. No. 95-144
finding that "[t]he facts of [the] case are sufficient to engender a well-founded belief that
Estafa x x x has been committed and that respondent herein is probably guilty
thereof."9 Accordingly, an Information10 dated January 8,1996 was filed before the
Municipal Trial Court (MTC) of Baybay, Leyte, formally charging respondent with the crime
of estafa under Article 316, paragraphs 1 and 2 of the Revised Penal Code, 11 committed as
follows:
 43

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

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

Complainant likewise instituted the instant administrative cases against respondent by

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

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

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

Report and Recommendation of the Investigating Commissioner and Resolution of the IBP
Board of Governors

In a Report and Recommendation16 dated April 29, 2005, the Investigating Commissioner of

the IBP’s Commission on Bar Discipline found that respondent was in bad faith when he
dealt with complainant and executed the "Deed of Sale with Right to Repurchase" but later
on claimed that the agreement was one of equitable mortgage. Respondent was also guilty
of deceit or fraud when he represented in the "Deed of Sale with Right to Repurchase"
dated December 2, 1981 that the property was covered by TCT No. T-662, even giving
complainant the owner’s copy of the said certificate of title, when the said TCT had already
been cancelled on November 17, 1972 by TCT No. T-3211 in the name of Philippine
National Bank (PNB). Respondent made matters even worse, when he had TCT No. T-3211
cancelled with the issuance of TCT No. T-7235 under his and his wife’s name on January
4,1982 without informing complainant. This was compounded by respondent’s subsequent
mortgage of the property to RBAI, which led to the acquisition of the property by RBAI and
the dispossession thereof of complainant. Thus, the Investigating Commissioner
recommended that respondent be (1) suspended from the practice of law for one year, with
warning that a similar misdeed in the future shall be dealt with more severity, and (2)
 44

ordered to return the sum of ₱15,000.00, the amount he received as consideration for the
pacto de retrosale, with interest at the legal rate.

Considering respondent’s "commission of unlawful acts, especially crimes involving moral

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

The Court’s Ruling

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

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

There is no merit in respondent’s defense.

Regardless of whether the written contract between respondent and complainant is

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

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

The Investigating Commissioner correctly found, and the IBP Board of Governors rightly
agreed, that respondent caused the ambiguity or vagueness in the "Deed of Sale with Right
to Repurchase" as he was the one who prepared or drafted the said instrument.
Respondent could have simply denominated the instrument as a deed of mortgage and
referred to himself and complainant as "mortgagor" and "mortgagee," respectively, rather
than as "vendor a retro" and "vendee a retro." If only respondent had been more
circumspect and careful in the drafting and preparation of the deed, then the controversy
between him and complainant could havebeen avoided or, at the very least, easily resolved.
 45

His imprecise and misleading wording of the said deed on its face betrayed lack oflegal
competence on his part. He thereby fell short of his oath to "conduct [him]self as a lawyer
according to the best of [his] knowledge and discretion."

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

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

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

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

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

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

CANON 1 – A lawyer shall uphold the constitution, obey the laws of the land and promote
respect for law and legal processes.
 46

Rule 1.01 – A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.
Under Canon 1, a lawyer is not only mandated to personally obey the laws and the legal
processes, he is moreover expected to inspire respect and obedience thereto. On the other
hand, Rule 1.01 states the norm of conduct that is expected of all lawyers.22

Any act or omission that is contrary to, prohibited or unauthorized by, in defiance of,
disobedient to, or disregards the law is "unlawful." "Unlawful" conduct does not necessarily
imply the element of criminality although the concept is broad enough to include such
element.23

To be "dishonest" means the disposition to lie, cheat, deceive, defraud or betray; be

untrustworthy; lacking inintegrity, honesty, probity, integrity in principle, fairness and
straightforwardness. On the other hand, conduct that is "deceitful" means as follows:

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

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

In particular, the Court required respondent to comment on complainant’s Affidavit-

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

When these cases were referred to the IBP and during the proceedings before the IBP’s
Investigating Commissioner, respondent was again required several times to submit his
consolidated answer. He only complied on August 28, 2003, or more than six years after
this Court originally required him to do so. The Investigating Commissioner also directed
 47

the parties to submit their respective position papers. Despite having been given several
opportunities to submit the same, respondent did not file any position paper.27

Respondent’s disregard of the directives of this Court and of the Investigating

Commissioner, which caused undue delay in these administrative cases, contravenes the
following provisions of the Code of Professional Responsibility:

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

xxxx

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

xxxx

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

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

Respondent’s infractions are aggravated by the fact that he has already been imposed a
disciplinary sanction before.1âwphi1 In Nuñ ez v. Atty. Astorga,28 respondent was held
liable for conduct unbecoming an attorney for which he was fined ₱2,000.00.

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

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

In Roa v. Moreno,29 the Court pronounced that "[i]n disciplinary proceedings against

lawyers, the only issue is whether the officer of the court is still fit to be allowed to continue
as a member of the Bar. Our only concern is the determination of respondent’s
administrative liability. Our findings have no material bearing on other judicial action
which the parties may choose to file against each other."While the respondent lawyer’s
wrongful actuations may give rise at the same time to criminal, civil, and administrative
liabilities, each must be determined in the appropriate case; and every case must be
resolved in accordance with the facts and the law applicable and the quantum of proof
required in each. Section 5,30 in relation to Sections 131 and 2,32 Rule 133 of the Rules of
Court states that in administrative cases, such as the ones atbar, only substantial evidence
 48

is required, not proof beyond reasonable doubt as in criminal cases, or preponderance of

evidence asin civil cases. Substantial evidence is that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.33

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

WHEREFORE, respondent is hereby found GUILTY of the following: breach of the Lawyer’s
Oath; unlawful, dishonest, and deceitful conduct; and disrespect for the Court and causing
undue delay of these cases, for which he is SUSPENDED from the practice of law for a
period of two (2) years, reckoned from receipt of this Decision, with WARNING that a
similar misconduct in the future shall be dealt with more severely.

Let a copy of this Decision be furnished the Office of the Bar Confidant and the Integrated
Bar of the Philippines for their information and guidance. The Court Administrator is
directed to circulate this Decision to all courts in the country.

G.R. No. 190667, November 07, 2016

COCA-COLA BOTTLERS PHILIPPINES, INC., Petitioner, v. SPOUSES JOSE R. BERNARDO

AND LILIBETH R. BERNARDO, DOING BUSINESS UNDER THE NAME AND STYLE "JOLLY
BEVERAGE ENTERPRISES," Respondents.

DECISION

SERENO, C.J.:

This is a Petition for Review1 filed by Coca-Cola Bottlers Philippines, Inc. (petitioner), from
the Court of Appeals (CA) Decision2 and Resolution3 in CA-GR. CV No. 91096. The CA
affirmed in toto the Decision4 of Regional Trial Court (RTC) Branch 88 in Quezon City in
Civil Case No. Q-00-42320.

This case originated from the claim for damages filed by respondent spouses Jose and
Lilibeth Bernardo (respondents) against petitioner for violation of Articles 19, 20, 21, and
28 of the Civil Code. The RTC found petitioner liable to pay respondents temperate
 49

damages in the amount of P500,000 for loss of goodwill, to be offset against the latter's
outstanding balance for deliveries in the amount of P449,154. The trial court ordered
petitioner to pay P50,000 as moral damages, P20,000 as exemplary damages, and P100,000
as attorney's fees.

Petitioner asserts that the Complaint had no basis, and that the trial court had no
jurisdiction to award temperate damages in an amount equivalent to the outstanding
obligation of respondents. It prays not only for the reversal of the assailed judgments, but
also for an award of moral and exemplary damages, as well as attorney's fees and litigation
expenses. It also asks that respondents be ordered to pay P449,154 plus legal interest from
the date of demand until full payment.5

We deny the Petition.chanroblesvirtuallawlibrary

FACTS

Petitioner is a domestic corporation engaged in the large-scale manufacture, sale, and

distribution of beverages around the country.6 On the other hand, respondents, doing
business under the name "Jolly Beverage Enterprises," are wholesalers of softdrinks in
Quezon City, particularly in the vicinities of Bulacan Street, V. Luna Road, Katipunan
Avenue, and Timog Avenue.7

The business relationship between the parties commenced in 1987 when petitioner
designated respondents as its distributor.8 On 22 March 1994, the parties formally entered
into an exclusive dealership contract for three years.9 Under the Agreement,10 petitioner
would extend developmental assistance to respondents in the form of cash assistance and
trade discount incentives. For their part, respondents undertook to sell petitioner's
products exclusively, meet the sales quota of 7,000 cases per month, and assist petitioner in
its marketing efforts.11

On 1 March 1997, the parties executed a similar agreement tor another two years, or until
28 February 1999.12 This time, petitioner gave respondents complimentary cases of its
products instead of cash assistance, and increased the latter's sales quota to 8,000 cases
per month.

For 13 years, the parties enjoyed a good and harmonious business partnership. 13 While the
contracts contained a clause for breach, it was never enforced.14

Sometime in late 1998 or early 1999, before the contract expired, petitioner required
respondents to submit a list of their customers on the pretext that it would formulate a
policy defining its territorial dealership in Quezon City.15 It assured respondents that their
contract would be renewed for a longer period, provided that they would submit the
list.16 However, despite their compliance, the promise did not materialize.17
 50

Respondents discovered that in February 1999, petitioner started to reach out to the
persons whose names were on the list.18 Respondents also received reports that their
delivery trucks were being trailed by petitioner's agents; and that as soon as the trucks left,
the latter would approach the former's customers.19 Further, respondents found out that
petitioner had employed a different pricing scheme, such that the price given to
distributors was significantly higher than that given to supermarkets. 20 It also enticed
direct buyers and sari-sari store owners in the area with its "Coke Alok" promo, in which it
gave away one free bottle for every case purchased.21 It further engaged a store adjacent to
respondents' warehouse to sell the former's products at a substantially lower price.22

Respondents claimed that because of these schemes, they lost not only their major
customers - such as Peach Blossoms, May Flower Restaurant, Saisaki Restaurant, and Kim
Hong Restaurant  but also small stores, such as the canteen in the hospital where
respondent Jose Bernardo worked.23 They admitted that they were unable to pay deliveries
worth P449,154.24

Respondents filed a Complaint25 for damages, alleging that the acts of petitioner constituted
dishonesty, bad faith, gross negligence, fraud, and unfair competition in commercial
enterprise.26 The Complaint was later amended27 to implead petitioner's officers and
personnel, include additional factual allegations, and increase the amount of damages
prayed for.

Petitioner denied the allegations.28 It maintained that it had obtained a list of clients
through surveys, and that promotional activities or developmental strategies were
implemented only after the expiration of the Agreements.29 It opined that the filing of the
complaint was a mere ploy resorted to by respondents to evade the payment of the
deliveries.30

The RTC held petitioner liable for damages for abuse of rights in violation of Articles 19, 20,
and 21 of the Civil Code and for unfair competition under Article 28. It found that
petitioner's agents solicited the list of clients in order to penetrate the market and directly
supply customers with its products.31 Moreover, the trial court found that petitioner had
recklessly ignored the rights of respondents to have a fair chance to engage in business or
earn a living when it deliberately used oppressive methods to deprive them of their
business.32 Its officers were, however, absolved of liability, as there was no showing that
they had acted in their individual and personal capacities.33

In the body of its Decision, the RTC stated that petitioner should pay respondents P500,000
as temperate damages, and that it was only just and fair that the latter offset this amount
against their outstanding obligation to petitioner in the amount of P449,154. 34 In the fallo,
the trial court awarded P50,000 as moral damages, P20,000 as exemplary damages, and
P100,000 as attorney's fees.35 It denied petitioner's counterclaim for damages for lack of
factual and legal basis.36 Petitioner moved for reconsideration, but the motion was denied.37
 51

Petitioner then elevated the case to the CA, which affirmed the RTC Decision in toto.
According to the appellate court's ruling, petitioner had used its sizable resources to
railroad the business of respondents:38chanroblesvirtuallawlibrary
[Petitioner] infiltrated certain areas in Quezon City at the expense of and later, in
derogation of its wholesalers, particularly [respondents]. As admitted by Allan Mercado,
the Integrated Selling and Marketing Manager of appellant, it was previously dependent on
wholesalers to circulate its products around the country. x x x.

x x x x

[T]owards the end of the partnership, appellant employed a different marketing scheme
purportedly to obviate the poor dealership management from wholesalers in major areas.
But as may be shown by the incidents leading to the filing of this case, this method was
designed strategically to overrun [respondents'] business and take over the customers of
its wholesalers.

x x x x

One such method was "different pricing schemes" wherein the prices given to
supermarkets and grocery stores were considerably lower than those imposed on
wholesalers. No prior advice thereof was given to [respondents] or any of the wholesalers.
In fact, they only knew of it when their customers began complaining about the variation in
prices of softdrinks sold in supermarkets and those that were sold by them. When in fact
[respondent] Bernardo personally inspected the products in grocery stores, he discovered
that a box of Coke-in-can is sold at P40.00, lower than those offered by them as
wholesalers.

About the same time, [petitioner] also implemented the "Area Market Cooperatives" (AMC)
and the "Coke-Alok" promo. Under the AMC, customers of wholesalers can purchase
[petitioner's] products from prominent stores in heavily crowded areas for P76.00 per
case, as opposed to [respondent's] offering of P112.00. In "Coke-Alok," [petitioner] directly
sold Coke products to wholesale customers with incentives as free bottle of Coke for every
case of softdrinks purchased. Being of limited resources, [respondents had no] means to
equal the lucrative incentives given by [petitioner] to their customers.

x x x x

Apart from direct selling and other promotions, [petitioner] also employed high-handed
means that further shrunk [respondents'] market coverage. In one instance, [petitioner's
sales representative] advised [respondents] and other wholesalers to keep away from
major thoroughfares. Apparently, [petitioner] was going to supply their products to these
stores themselves. x x x.

x x x x

x x x Furthermore, one of [petitioner's] representatives, Nelson Pabulayan, admitted that

 52

he sold products at the canteen in V. Luna Hospital [which was then being serviced by
respondents].

As if that was not enough, petitioner engaged other stores, such as Freezel's Bakeshop that
was located adjacent to [respondent's] warehouse, to sell Coke products at a price
substantially lower than [that offered by respondents].
ISSUES

Petitioner argues that the trial court had no jurisdiction to award temperate damages that
were not prayed for in the Complaint. It further asserts that it did not violate Articles 19,
20, 21 or 28; hence, the award of damages and attorney's fees was
improper.chanroblesvirtuallawlibrary

OUR RULING

The CA did not err in affirming the finding that petitioner was liable for temperate, moral
and exemplary damages, as well as attorney's fees, tor abuse of rights and unfair
competition.

The Petition raises questions of fact.

Petitioner ignores the nature of a petition for review as a remedy against errors of law.
Instead, it raises factual matters that have already been passed upon by the RTC and the
CA.

It insists on the following facts: 1) the "promotional activities" were implemented after the
dealership agreements expired;39 2) the "developmental strategies" were implemented
nationwide and were not meant to destroy the business of respondents;40 3) its agents did
not follow the trucks of Jolly Beverages;41 4) the price difference resulted because
respondents could no longer avail of trade discounts and incentives under the expired
Agreement;42 and 5) there is no causal connection between the promotional activities and
the claimed losses of respondents.43

Petitioner contends that since it did not assign any exclusive territory to respondents, the
latter had no exclusive right to any customer.44 It supposedly decided to rely on its own
sales personnel to push the sale of its products, because the distributors had violated the
terms of their agreements by selling competing products, failing to meet the required sales
volume, or failing to pay on time.45 Petitioner, however, did not allege that respondents
committed any of these actions during the existence of the agreement.

We have repeatedly held that factual findings of the trial court, especially when affirmed by
the appellate court, are given great weight, even finality, by this Court.46 Petitioner fails to
make a convincing argument that this case falls under any of the exceptions to the rule. On
the contrary, the Decisions of the RTC and theCA appear to be supported by the records.
 53

Petitioner bewails the fact that the RTC and the CA, in establishing the facts, relied heavily
on the testimony of respondent Jose Bernardo.47

Petitioner, however, forgets that trial courts are in an ideal position to observe the
demeanor of the witnesses and can therefore discern if the latter are telling the truth or
not.48 In this case, both the trial and the appellate courts found the testimonies of
respondent Jose Bernardo and his witnesses more credible than those of the witnesses
presented by petitioners. We shall not substitute our judgment for that of the trial court,
absent any compelling reason.

Petitioner is liable for damages for abuse of rights and unfair competition under the
Civil Code.

Both the RTC and the CA found that petitioner had employed oppressive and high-handed
schemes to unjustly limit the market coverage and diminish the investment returns of
respondents.49 The CA summarized its findings as follows:50chanroblesvirtuallawlibrary
This [cut-throat competition] is precisely what appellant did in order to take over the
market: directly sell its products to or deal them off to competing stores at a price
substantially lower than those imposed on its wholesalers. As a result, the wholesalers
suffered losses, and in [respondents'] case, laid ofT a number of employees and alienated
the patronage of its major customers including small-scale stores.
It must be emphasized that petitioner is not only a beverage giant, but also the
manufacturer of the products; hence, it sets the price. In addition, it took advantage of the
infonnation provided by respondents to facilitate its takeover of the latter's usual business
area. Distributors like respondents, who had assisted petitioner in its marketing efforts,
suddenly found themselves with fewer customers. Other distributors were left with no
choice but to fold.51

Articles 19, 20, and 21 of the Civil Code provide the legal bedrock for the award of damages
to a party who suffers damage whenever another person commits an act in violation of
some legal provision; or an act which, though not con'itituting a transgression of positive
law, nevertheless violates certain rudimentary rights of the party aggrieved.52 The
provisions read:chanRoblesvirtualLawlibrary
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. 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.
 54

In Albenson Enterprises Corp. v. CA,53 this Court held that under any of the above provisions
of law, an act that causes injury to another may be made the basis for an award of damages.
As explained by this Court in GF Equity, Inc. v. Valenzona:54chanroblesvirtuallawlibrary
The exercise of a right ends when the right disappears; and it disappears when it is abused,
especially to the prejudice of others. The mask of a right without the spirit of justice which
gives it life is repugnant to the modern concept of social law. It cannot be said that a person
exercises a right when he unnecessarily prejudices another or offends morals or good
customs. Over and above the specific precepts of positive law are the supreme norms of
justice which the law develops and which are expressed in three principles: honeste vivere,
alterum non laedere and jus suum quique tribuere; and he who violates them violates the
law. For this reason, it is not permissible to abuse our rights to prejudice others.
Meanwhile, the use of unjust, oppressive, or high-handed business methods resulting in
unfair competition also gives a right of action to the injured party. Article 28 of the Civil
Code provides:chanRoblesvirtualLawlibrary
Art. 28. 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 highhanded method shall give rise to a right of action by the person who thereby sutlers
damage.
Petitioner cites Tolentino, who in turn cited Colin and Capitant. According to the latter, the
act of "a merchant [who] puts up a store near the store of another and in this way attracts
some of the latter's patrons" is not an abuse of a right.55 The scenario in the present case is
vastly different: the merchant was also the producer who, with the use of a list provided by
its distributor, knocked on the doors of the latter's customers and offered the products at a
substantially lower price. Unsatisfied, the merchant even sold its products at a preferential
rate to another store within the vicinity. Jurisprudence holds that when a person starts an
opposing place of business, not for the sake of profit, but regardless of Joss and for the sole
purpose of driving a competitor out of business, in order to take advantage of the effects of
a malevolent purpose, that person is guilty of a wanton wrong. 56

Temperate, moral, and exemplary damages, as well as attorney's fees, were properly
awarded.

Petitioner argues that the trial court did not have jurisdiction to grant an award of
temperate damages, because respondents did not specifically pray for it in their Amended
Complaint:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, it is most respectfully prayed that the Honorable Court
render a judgment directing defendants to:

1. Pay plaintiffs the amount of P1,000,000.00 representing loss of goodwill

nurtured over the past 13 years as actual damages.

2. Pay plaintiffs the amount of P200,000 representing moral damages.

3. Pay plaintiffs the amount of P100,000 representing exemplary damages.

 55

4. Pay plaintiffs the amount of P100,000 representing attorney's fees.

Other reliefs which are just and equitable under the premises are also prayed for.
Petitioner's argument is flimsy and unsupported even by the cases it has cited. 57 The CA
correctly ruled that the award of temperate damages was justified, even if it was not
specifically prayed for, because 1) respondents did pray for the grant of "other reliefs," and
2) the award was clearly warranted under the circumstances. Indeed, the law permits
judges to award a different kind of damages as an alternative to actual
damages:chanRoblesvirtualLawlibrary
Civil Code, Art. 2224. Temperate or moderate damages, which are more than nominal but
less than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount can not, from the nature of the case, be
provided with certainty. (Emphasis supplied)
Compensatory damages may be awarded in the concept of temperate damages for injury to
business reputation or business standing, loss of goodwill, and loss of customers who
shifted their patronage to competitors.58

It is not extraordinary for courts to award temperate damages in lieu of actual damages.
In Canada v. All Commodities Marketing Corporation,59 this Court awarded temperate
damages in recognition of the pecuniary loss suffered, after finding that actual damages
could not be awarded for lack of proof. In Public Estates Authority v. Chu,60 this Court held
that temperate damages should have been awarded by the trial court considering that the
plaintiff therein had suffered some pecuniary loss.

In this case, both the RTC and the CA found that respondents had similarly suffered
pecuniary loss by reason of petitioner's high-handed machinations to eliminate
competition in the market.61

We see no grave error on the part of the RTC when it ruled that the unpaid obligation of
respondents shall be offset against the temperate damages due them from
petitioner.62 However, the trial court was not accurate in considering the P500,000
temperate damages as adequate to completely extinguish the obligation of respondents to
petitioner.63 We note that while the principal was P449,154, this amount earned legal
interest from the time of demand. Nonetheless, in view of the established fact that
respondents incurred the losses after their business was systematically crippled by
petitioner, it is only proper and just that the obligation, as well as the legal interest that has
accrued, be deemed totally compensated by the temperate damages. Therefore,
respondents do not need to tender the amount of P449,154 plus legal interest to petitioner,
while the latter does not have to tender any amount as temperate damages to the former.

With regard to moral damages, petitioner argues that respondents failed to provide
satisfactory proof that the latter had undergone any suffering or injury.64 This is a factual
question that has been resolved by the trial court in a Decision affirmed by the CA. The
award finds legal basis under Article 2219(10) of the Civil Code, which states that moral
damages may be recovered in acts and actions referred to in Articles 21 and 28.65
 56

Petitioner likewise questions the award of exemplary damages without "competent

proof."66 It cites Spouses Villafuerte v. CA67 as basis for arguing that the CA should have
based its Decision regarding the fact and the amount of exemplary damages upon
competent proof that respondents have suffered injury and upon evidence of the actual
amount thereof. We enjoin petitioner's counsel to fully and carefully read the text of our
decisions before citing them as authority.68 The excerpt lifted pertains to compensatory
damages, not exemplary damages. We remind counsel that exemplary damages are
awarded under Article 2229 of the Civil Code by way of example or correction for the
public good. The determination of the amount is left to the discretion of the judge; its proof
is not incumbent upon the claimant.

There being no meritorious argument raised by petitioner, the award of exemplary

damages must be sustained to caution powerful business owners against the use of
oppressive and high-handed commercial strategies to target and trample on the rights of
small business owners, who are striving to make a decent living.

Exemplary damages having been awarded, the grant of attorney's fees was therefore
warranted.69

Petitioner's counterclaims for moral and exemplary damages, as well as attorney's

fees and litigation expenses, were properly denied.

The counterclaim for the payment of P449,154 plus legal interet was effectively granted
when the trial court offset the temperate damages awarded to respondents against the
outstanding obligation of the latter to petitioner.

The counterclaims for moral and exemplary damages, as well as attorney's fees and
litigation expenses, had no basis and were properly denied. The fact that petitioner was
compelled to engage the services of counsel in order to defend itself against the suit of
respondents did not entitle it to attorney's fees.

According to petitioner, it is entitled to moral damages, because "respondents clearly acted

in a vexatious manner when they instituted this suit."70 We see nothing in the record to
sustain this argument.

With respect to the prayer for exemplary damages, neither do we find any act of
respondents that has to be deterred.

WHEREFORE, the Petition is DENIED. The Decision dated 23 July 2009 and Resolution
dated 19 November 2009 rendered by the Court of Appeals in CA-G.R. CV No. 91096, which
affirmed in toto the Decision dated 28 September 2007 issued by Regional Trial Court
Branch 88 Quezon City in Civil Case No. Q-00-42320, are
hereby AFFIRMED with MODIFICATION in that the damages awarded shall earn legal
interest of 6% per annum from the date of finality of this Decision until its full satisfaction.
 57

The total compensation of respondents' unpaid obligation, including legal interest that has
accrued, and the temperate damages awarded to them, is hereby upheld.

G.R. No. 217426, December 04, 2017

ST. MARTIN POLYCLINIC, INC., Petitioner, v. LWV CONSTRUCTION

CORPORATION, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated July 11, 2014 and
the Resolution3 dated February 27, 2015 of the Court of Appeals (CA) in CA-G.R. SP No.
125451, which affirmed with modification the Decision4 dated December 15, 2011 and the
Order dated May 25, 2012 of the Regional Trial Court of Mandaluyong City, Branch 211
(RTC) in SCA Case No. MC11-879 (Civil Case No. 21881), and thereby ordered herein
petitioner St. Martin Polyclinic, Inc. (petitioner) to pay respondent LWV Construction
Corporation (respondent) temperate damages in the amount of P50,000.00.

The Facts

Respondent is engaged in the business of recruiting Filipino workers for deployment to

Saudi Arabia.5 On the other hand, petitioner is an accredited member of the Gulf
Cooperative Council Approved Medical Centers Association (GAMCA) and as such,
authorized to conduct medical examinations of prospective applicants for overseas
employment.6

On January 10, 2008, respondent referred prospective applicant Jonathan V. Raguindin

(Raguindin) to petitioner for a pre-deployment medical examination in accordance with
the instructions from GAMCA.7 After undergoing the required examinations, petitioner
cleared Raguindin and found him "fit for employment," as evidenced by a Medical
Report8 dated January 11, 2008 (Medical Report).9
 58

Based on the foregoing, respondent deployed Raguindin to Saudi Arabia, allegedly

incurring expenses in the amount of P84,373.41. 10 Unfortunately, when Raguindin
underwent another medical examination with the General Care Dispensary of Saudi Arabia
(General Care Dispensary) on March 24, 2008, he purportedly tested positive for HCV or
the hepatitis C virus. The Ministry of Health of the Kingdom of Saudi Arabia (Ministry of
Health) required a re-examination of Raguindin, which the General Care Dispensary
conducted on April 28, 2008.11 However, the results of the re-examination remained the
same, i.e., Raguindin was positive for HCV, which results were reflected in a
Certification12 dated April 28, 2008 (Certification). An undated HCV Confirmatory Test
Report13 likewise conducted by the Ministry of Health affirmed such finding, thereby
leading to Raguindin's repatriation to the Philippines.14

Claiming that petitioner was reckless in issuing its Medical Report stating that Raguindin is
"fit for employment" when a subsequent finding in Saudi Arabia revealed that he was
positive for HCV, respondent filed a Complaint15 for sum of money and damages against
petitioner before the Metropolitan Trial Court of Mandaluyong City, Branch 60 (MeTC).
Respondent essentially averred that it relied on petitioner's declaration and incurred
expenses as a consequence. Thus, respondent prayed for the award of damages in the
amount of P84,373.41 representing the expenses it incurred in deploying Raguindin
abroad.16

In its Answer with compulsory counterclaim,17 petitioner denied liability and claimed

that: first, respondent was not a proper party in interest for lack of privity of contract
between them; second, the MeTC had no jurisdiction over the case as it involves the
interpretation and implementation of a contract of employment; third, the action is
premature as Raguindin has yet to undergo a post-employment medical examination
following his repatriation; and fourth, the complaint failed to state a cause of action as the
Medical Report issued by petitioner had already expired on April 11, 2008, or three (3)
months after its issuance on January 11, 2008.18

The MeTC Ruling

In a Decision19 dated December 17, 2010, the MeTC rendered judgment in favor of

respondent and ordered petitioner to pay the amount of P84,373.41 as actual damages,
P20,000.00 as attorney's fees, and the costs of suit.20

At the onset, the MeTC held that it had jurisdiction over the case, since respondent was
claiming actual damages incurred in the deployment of Raguindin in the amount of
P84,373.41.21 It further ruled that respondent was a real party in interest, as it would not
have incurred expenses had petitioner not issued the Medical Report certifying that
Raguindin was fit to work.

On the merits, the MeTC found that respondent was entitled to be informed accurately of
the precise condition of Raguindin before deploying the latter abroad and consequently,
had sustained damage as a result of the erroneous certification.22 In this relation, it rejected
petitioner's contention that Raguindin may have contracted the disease after his medical
 59

examination in the Philippines up to the time of his deployment, there being no evidence
offered to corroborate the same.23

Aggrieved, petitioner appealed to the RTC, contending,24 among others, that respondent

failed to comply with the requirements on the authentication and proof of documents
under Section 24,25 Rule 132 of the Rules of Court, considering that respondent's evidence,
particularly the April 28, 2008 Certification issued by the General Care Dispensary and the
HCV Confirmatory Test Report issued by the Ministry of Health, are foreign documents
issued in Saudi Arabia.

The RTC Ruling

In a Decision26 dated December 15, 2011, the RTC dismissed petitioner's appeal and
affirmed the MeTC Decision in its entirety.27 Additionally, the RTC pointed out that
petitioner can no longer change the theory of the case or raise new issues on appeal,
referring to the latter's argument on the authentication of respondent's documentary
evidence.28

Petitioner's motion for reconsideration29 was denied in an Order30 dated May 25, 2012.

Dissatisfied, petitioner elevated the case to the CA.31

The CA Ruling

In a Decision32 dated July 11, 2014, the CA affirmed the RTC Decision, with the modification
deleting the award of actual damages and instead, awarding temperate damages in the
amount of P50,000.00.33

The CA held that petitioner failed to perform its duty to accurately diagnose Raguindin
when it issued its Medical Report declaring the latter "fit for employment", considering that
he was subsequently found positive for HCV in Saudi Arabia. 34 Further, the CA opined that
the Certification issued by the General Care Dispensary is not a public document and in
such regard, rejected petitioner's argument that the same is inadmissible in evidence for
not having been authenticated. Moreover, it remarked that petitioner's own Medical Report
does not enjoy the presumption of regularity as petitioner is merely an accredited
clinic.35 Finally, the CA ruled that petitioner could not disclaim liability on the ground that
Raguindin tested positive for HCV in Saudi Arabia after the expiration of the Medical Report
on April 11, 2008, noting that the General Care Dispensary issued its Certification on April
28, 2008, or a mere seventeen (17) days from the expiration of petitioner's Medical
Report.36 Hence, the CA concluded that "it is contrary to human experience that a newly-
deployed overseas worker, such as Raguindin, would immediately contract a serious virus
at the very beginning of a deployment."37

However, as the records are bereft of evidence to show that respondent actually incurred
the amount of P84,373.41 as expenses for Raguindin's deployment, the CA deleted the
award of actual damages and instead, awarded temperate damages in the amount of
P50,000.00.38
 60

Aggrieved, petitioner filed a motion for partial reconsideration,39 which the CA denied in a

Resolution40 dated February 27, 2015; hence, this petition.

The Issue Before the Court

The essential issue advanced for the Court's resolution is whether or not petitioner was
negligent in issuing the Medical Report declaring Raguindin "fit for employment" and
hence, should be held liable for damages.

The Court's Ruling

The petition is granted.

I.

At the outset, it should be pointed out that a re-examination of factual findings cannot be
done acting on a petition for review on certiorari because the Court is not a trier of facts but
reviews only questions of law.41 Thus, in petitions for review on certiorari, only questions
of law may generally be put into issue. This rule, however, admits of certain exceptions,
such as "when the inference made is manifestly mistaken, absurd or impossible"; or "when
the findings are conclusions without citation of specific evidence on which they are
based."42 Finding a confluence of certain exceptions in this case, the general rule that only
legal issues may be raised in a petition for review on certiorari under Rule 45 of the Rules
of Court would not apply, and the Court retains the authority to pass upon the evidence
presented and draw conclusions therefrom.43

II.

An action for damages due to the negligence of another may be instituted on the basis of
Article 2176 of the Civil Code, which defines a quasi-delict:

Article 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.

The elements of a quasi-delict are: (1) an act or omission; (2) the presence of fault
or negligence in the performance or non-performance of the act; (3) injury; (4) a
causal connection between the negligent act and the injury; and (5) no pre-existing
contractual relation.44

As a general rule, any act or omission coming under the purview of Article 2176 gives rise
to a cause of action under quasi-delict. This, in turn, gives the basis for a claim of
damages.45 Notably, quasi-delict is one among several sources of obligation. Article 1157 of
the Civil Code states:
 61

Article 1157. Obligations arise from:

(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.

However, as explained by Associate Justice Marvic M.V.F. Leonen (Justice Leonen) in his
opinion in Alano v. Magud-Logmao46 (Alano), "Article 2176 is not an all-encompassing
enumeration of all actionable wrongs which can give rise to the liability for damages.
Under the Civil Code, acts done in violation of Articles 19, 20, and 21 will also give
rise to damages."47 These provisions - which were cited as bases by the MTC, RTC and CA
in their respective rulings in this case - read as follows:

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

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

Article 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs, or public policy shall compensate the latter for the
damage.

"[Article 19], 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."48 Case law states that "[w]hen 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 [then] be proper."49 Between these two provisions as worded, it is Article
20 which applies to both willful and negligent acts that are done contrary to law. On the
other hand, Article 21 applies only to willful acts done contra bonos mores.50

In the Alano case, Justice Leonen aptly elaborated on the distinctive applications of Articles

19, 20 and 21, which are general provisions on human relations, vis-a-vis Article 2176,
which particularly governs quasi-delicts:

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.
 62

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.

Article 2176 covers situations where an injury happens through an act or omission of the
defendant. When it involves a positive act, the intention to commit the outcome is
irrelevant. The act itself must not be a breach of an existing law or a pre-existing
contractual obligation. What will be considered is whether there is "fault or negligence”
attending the commission of the act which necessarily leads to the outcome considered as
injurious by the plaintiff. The required degree of diligence will then be assessed in relation
to the circumstances of each and every case.51 (Emphases and underscoring supplied)

Thus, with respect to negligent acts or omissions, it should therefore be discerned

that Article 20 of the Civil Code concerns "violations of existing law as basis for an
injury", whereas Article 2176 applies when the negligent act causing damage to
another does not constitute "a breach of an existing law or a pre-existing contractual
obligation."

In this case, the courts a quo erroneously anchored their respective rulings on the
provisions of Articles 19, 20, and 21 of the Civil Code. This is because respondent did not
proffer (nor have these courts mentioned) any law as basis for which damages may be
recovered due to petitioner's alleged negligent act. In its amended complaint, respondent
mainly avers that had petitioner not issue a "fit for employment" Medical Report to
Raguindin, respondent would not have processed his documents, deployed him to Saudi
Arabia, and later on - in view of the subsequent findings that Raguindin was positive for
HCV and hence, unfit to work - suffered actual damages in the amount of
P84,373.41.52 Thus, as the claimed negligent act of petitioner was not premised on the
breach of any law, and not to mention the incontestable fact that no pre-existing
contractual relation was averred to exist between the parties, Article 2176 - instead of
Articles 19, 20 and 21 - of the Civil Code should govern.

III.

Negligence is defined as the failure to observe for the protection of the interests of another
person, that degree of care, precaution and vigilance which the circumstances justly
demand, whereby such other person suffers injury.53
 63

As early as the case of Picart v. Smith,54 the Court elucidated that "the test by which to
determine the existence of negligence in a particular case is: Did the defendant in doing
the alleged negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is guilty of
negligence."55 Corollary thereto, the Court stated that "[t]he question as to what would
constitute the conduct of a prudent man in a given situation must of course be always
determined in the light of human experience and in view of the facts involved in the
particular case. Abstract speculation cannot here be of much value x x x: Reasonable
men govern their conduct by the circumstances which are before them or known to
them. They are not, and are not supposed to be, omniscient of the future. Hence[,]
they can be expected to take care only when there is something before them to
suggest or warn of danger."56

Under our Rules of Evidence, it is disputably presumed that a person takes ordinary care of
his concerns and that private transactions have been fair and regular. 57 In effect,
negligence cannot be presumed, and thus, must be proven by him who alleges
it.58 In Huang v. Philippine Hoteliers, Inc.:59

[T]he negligence or fault should be clearly established as it is the basis of her action. The
burden of proof is upon [the plaintiff]. Section 1, Rule 131 of the Rules of Court provides
that "burden of proof is the duty of a party to present evidence on the facts in issue
necessary to establish his claim or defense by the amount of evidence required by law." It is
then up for the plaintiff to establish his cause of action or the defendant to establish his
defense. Therefore, if the plaintiff alleged in his complaint that he was damaged
because of the negligent acts of the defendant, he has the burden of proving such
negligence. It is even presumed that a person takes ordinary care of his concerns.
The quantum of proof required is preponderance of evidence.60 (Emphasis and
underscoring supplied)

The records of this case show that the pieces of evidence mainly relied upon by respondent
to establish petitioner's negligence are: (a) the Certification61 dated April 28, 2008; and (b)
the HCV Confirmatory Test Report.62 However, these issuances only indicate the results of
the General Care Dispensary and Ministry of Health's own medical examination of
Raguindin finding him to be positive for HCV. Notably, the examination conducted by the
General Care Dispensary, which was later affirmed by the Ministry of Health, was
conducted only on March 24, 2008, or at least two (2) months after petitioner issued
its Medical Report on January 11, 2008. Hence, even assuming that Raguindin's
diagnosis for HCV was correct, the fact that he later tested positive for the same does not
convincingly prove that he was already under the same medical state at the time petitioner
issued the Medical Report on January 11, 2008. In this regard, it was therefore incumbent
upon respondent to show that there was already negligence at the time the Medical
Report was issued, may it be through evidence that show that standard medical
procedures were not carefully observed or that there were already palpable signs that
exhibited Raguindin's unfitness for deployment at that time. This is hardly the case when
respondent only proffered evidence which demonstrate that months after petitioner's
 64

Medical Report was issued, Raguindin, who had already been deployed to Saudi Arabia,
tested positive for HCV and as such, was no longer "fit for employment".

In fact, there is a reasonable possibility that Raguindin became exposed to the HCV
only after his medical examination with petitioner on January 11, 2008. Based on
published reports from the World Health Organization, HCV or the hepatitis C virus causes
both acute and chronic infection. Acute HCV infection is usually asymptomatic,63 and is
only very rarely associated with life-threatening diseases. The incubation period64 for
HCV is two (2) weeks to six (6) months, and following initial infection, approximately
80% of people do not exhibit any symptoms.65 Indisputably, Raguindin was not deployed to
Saudi Arabia immediately after petitioner's medical examination and hence, could have
possibly contracted the same only when he arrived thereat. In light of the foregoing, the CA
therefore erred in holding that "[h]ad petitioner more thoroughly and diligently examined
Raguindin, it would likely have discovered the existence of the HCV because it was contrary
to human experience that a newly-deployed overseas worker, such as Raguindin, would
immediately have contracted the disease at the beginning of his deployment"66

While petitioner's Medical Report indicates an expiration of April 11, 2008, the Court finds
it fitting to clarify that the same could not be construed as a certified guarantee coming
from petitioner that Raguindin's medical status at the time the report was issued on
January 11, 2008 (i.e., that he was fit for employment) would remain the same up until that
date (i.e., April 11, 2008). As earlier intimated, the intervening period could very well
account for a number of variables that could have led to a change in Raguindin's condition,
such as his deployment to a different environment in Saudi Arabia. If at all, the expiration
date only means that the Medical Report is valid - and as such, could be submitted - as a
formal requirement for overseas employment up until April 11, 2008; it does not, by any
means, create legal basis to hold the issuer accountable for any intervening change of
condition from the time of issuance up until expiration. Truly, petitioner could not be
reasonably expected to predict, much less assure, that Raguindin's medical status of being
fit for employment would remain unchanged. Thus, the fact that the Medical Report's
expiration date of April 11, 2008 was only seventeen (17) days away from the issuance of
the General Care Dispensary's April 28, 2008 Certification finding Raguindin positive for
HCV should not - as it does not - establish petitioner's negligence.

IV.

At any rate, the fact that Raguindin tested positive for HCV could not have been properly
established since the courts a quo, in the first place, erred in admitting and giving probative
weight to the Certification of the General Care Dispensary, which was written in an
unofficial language. Section 33, Rule 132 ofthe Rules of Court states that:

Section 33. Documentary evidence in an unofficial language. - Documents written in an

unofficial language shall not be admitted as evidence, unless accompanied with a
translation into English or Filipino. To avoid interruption of proceedings, parties or their
attorneys are directed to have such translation prepared before trial.67
 65

A cursory examination of the subject document would reveal that while it contains English
words, the majority of it is in an unofficial language. Sans any translation in English or
Filipino provided by respondent, the same should not have been admitted in evidence; thus
their contents could not be given probative value, and deemed to constitute proof of the
facts stated therein.

Moreover, the due execution and authenticity of the said certification were not proven in
accordance with Section 20, Rule 132 of the Rules of Court:

Section 20. Proof of private document. - Before any private document offered as authentic is
received in evidence, its due execution and authenticity must be proved either:

(a) By anyone who saw the document executed or written; or

(b) By evidence of the genuineness of the signature or handwriting of the maker.
(c) Any other private document need only be identified as that which it is claimed to be.

Notably, the foregoing provision applies since the Certification does not fall within the
classes of public documents under Section 19, Rule 132 of the Rules of Court 68 - and hence,
must be considered as private. It has been settled that an unverified and unidentified
private document cannot be accorded probative value.69 In addition, case law states
that "since a medical certificate involves an opinion of one who must first be
established as an expert witness, it cannot be given weight or credit unless the
doctor who issued it is presented in court to show his qualifications. It is precluded
because the party against whom it is presented is deprived of the right and opportunity to
cross-examine the person to whom the statements or writings are attributed. Its executor
or author should be presented as a witness to provide the other party to the litigation the
opportunity to question its contents. Being mere hearsay evidence, failure to present the
author of the medical certificate renders its contents suspect and of no probative
value,"70 as in this case.

Similarly, the HCV Confirmatory Test Report issued by the Ministry of Health of Saudi
Arabia should have also been excluded as evidence. Although the same may be considered
a public document, being an alleged written official act of an official body of a foreign
country,71 the same was not duly authenticated in accordance with Section 24,72 Rule 132 of
the Rules of Court. While respondent provided a translation73 thereof from the National
Commission on Muslim Filipinos, Bureau of External Relations, Office of the President, the
same was not accompanied by a certificate of the secretary of the embassy or legation,
consul-general, consul, vice-consul, or consular agent or any officer in the foreign service of
the Philippines stationed in Saudi Arabia, where the record is kept, and authenticated by
the seal of his office.74

To be sure, petitioner - contrary to respondent's contention75 - has not changed its theory
of the case by questioning the foregoing documents. As petitioner correctly argued, it
merely amplified its defense76 that it is not liable for negligence when it further questioned
 66

the validity of the issuances of the General Care Dispensary and Ministry of Health.
In Limpangco Sons v. Yangco77, the Court explained that "[t]here is a difference x x x
between a change in the theory of the case and a shifting of the incidence of the emphasis
placed during the trial or in the briefs." "Where x x x the theory of the case as set out in the
pleadings remains the theory throughout the progress of the cause, the change of emphasis
from one phase of the case as presented by one set of facts to another phase made
prominent by another set of facts x x x does not result in a change of theory x x x". 78 In any
case, petitioner had already questioned the validity of these documents in its Position
Paper79 before the MeTC.80 Hence, there is no change of theory that would preclude
petitioner's arguments on this score.

All told, there being no negligence proven by respondent through credible and admissible
evidence, petitioner cannot be held liable for damages under Article 2176 of the Civil Code
as above-discussed.

WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated July 11, 2014 and
the Resolution dated February 27, 2015 of the Court of Appeals in CA-G.R. SP No. 125451
are REVERSED and SET ASIDE, and a NEW ONE is entered, DISMISSING the complaint of
respondent LWV Construction Corporation for lack of merit.

G.R. No. 127358             March 31, 2005

NOEL BUENAVENTURA, Petitioner,
vs.
COURT OF APPEALS and ISABEL LUCIA SINGH BUENAVENTURA, respondents.

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

G.R. No. 127449             March 31, 2005

NOEL BUENAVENTURA, Petitioner,
vs.
COURT OF APPEALS and ISABEL LUCIA SINGH BUENAVENTURA, Respondents.

DECISION

AZCUNA, J.:

These cases involve a petition for the declaration of nullity of marriage, which was filed by
petitioner Noel Buenaventura on July 12, 1992, on the ground of the alleged psychological
incapacity of his wife, Isabel Singh Buenaventura, herein respondent. After respondent filed
her answer, petitioner, with leave of court, amended his petition by stating that both he and
his wife were psychologically incapacitated to comply with the essential obligations of
 67

marriage. In response, respondent filed an amended answer denying the allegation that she
was psychologically incapacitated.1

On July 31, 1995, the Regional Trial Court promulgated a Decision, the dispositive portion
of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1) Declaring and decreeing the marriage entered into between plaintiff Noel A.
Buenaventura and defendant Isabel Lucia Singh Buenaventura on July 4, 1979, null
and void ab initio;

2) Ordering the plaintiff to pay defendant moral damages in the amount of 2.5
million pesos and exemplary damages of 1 million pesos with 6% interest from the
date of this decision plus attorney’s fees of P100,000.00;

3) Ordering the plaintiff to pay the defendant expenses of litigation of P50,000.00,

plus costs;

4) Ordering the liquidation of the assets of the conjugal partnership property[,]

particularly the plaintiff’s separation/retirement benefits received from the Far East
Bank [and] Trust Company[,] by ceding, giving and paying to her fifty percent (50%)
of the net amount of P3,675,335.79 or P1,837,667.89 together with 12% interest
per annum from the date of this decision and one-half (1/2) of his outstanding
shares of stock with Manila Memorial Park and Provident Group of Companies;

5) Ordering him to give a regular support in favor of his son Javy Singh
Buenaventura in the amount of P15,000.00 monthly, subject to modification as the
necessity arises;

6) Awarding the care and custody of the minor Javy Singh Buenaventura to his
mother, the herein defendant; and

7) Hereby authorizing the defendant to revert back to the use of her maiden family
name Singh.

Let copies of this decision be furnished the appropriate civil registry and registries
of properties.

SO ORDERED.2

Petitioner appealed the above decision to the Court of Appeals. While the case was pending
in the appellate court, respondent filed a motion to increase the P15,000 monthly
support pendente lite of their son Javy Singh Buenaventura. Petitioner filed an opposition
thereto, praying that it be denied or that such incident be set for oral argument.3
 68

On September 2, 1996, the Court of Appeals issued a Resolution increasing the

support pendente lite to P20,000.4 Petitioner filed a motion for reconsideration questioning
the said Resolution.5

On October 8, 1996, the appellate court promulgated a Decision dismissing petitioner’s

appeal for lack of merit and affirming in toto the trial court’s decision. 6 Petitioner filed a
motion for reconsideration which was denied. From the abovementioned Decision,
petitioner filed the instant Petition for Review on Certiorari.

On November 13, 1996, through another Resolution, the Court of Appeals denied
petitioner’s motion for reconsideration of the September 2, 1996 Resolution, which
increased the monthly support for the son.7 Petitioner filed a Petition for Certiorari to
question these two Resolutions.

On July 9, 1997, the Petition for Review on Certiorari8 and the Petition for Certiorari9 were
ordered consolidated by this Court.10

In the Petition for Review on Certiorari petitioner claims that the Court of Appeals decided
the case not in accord with law and jurisprudence, thus:

1. WHEN IT AWARDED DEFENDANT-APPELLEE MORAL DAMAGES IN THE

AMOUNT OF P2.5 MILLION AND EXEMPLARY DAMAGES OF P1 MILLION, WITH 6%
INTEREST FROM THE DATE OF ITS DECISION, WITHOUT ANY LEGAL AND MORAL
BASIS;

2. WHEN IT AWARDED P100,000.00 ATTORNEY’S FEES AND P50,000.00 EXPENSES

OF LITIGATION, PLUS COSTS, TO DEFENDANT-APPELLEE, WITHOUT FACTUAL
AND LEGAL BASIS;

3. WHEN IT ORDERED PLAINTIFF-APPELLANT NOEL TO PAY DEFENDANT-

APPELLEE ONE-HALF OR P1,837,667.89 OUT OF HIS RETIREMENT BENEFITS
RECEIVED FROM THE FAR EAST BANK AND TRUST CO., WITH 12% INTEREST
THEREON FROM THE DATE OF ITS DECISION, NOTWITHSTANDING THAT SAID
RETIREMENT BENEFITS ARE GRATUITOUS AND EXCLUSIVE PROPERTY OF NOEL,
AND ALSO TO DELIVER TO DEFENDANT-APPELLEE ONE-HALF OF HIS SHARES OF
STOCK WITH THE MANILA MEMORIAL PARK AND THE PROVIDENT GROUP OF
COMPANIES, ALTHOUGH SAID SHARES OF STOCK WERE ACQUIRED BY NOEL
BEFORE HIS MARRIAGE TO RESPONDENT ISABEL AND ARE, THEREFORE, AGAIN
HIS EXCLUSIVE PROPERTIES; AND

4. WHEN IT AWARDED EXCLUSIVE CARE AND CUSTODY OVER THE PARTIES’

MINOR CHILD TO DEFENDANT-APPELLEE WITHOUT ASKING THE CHILD (WHO
WAS ALREADY 13 YEARS OLD AT THAT TIME) HIS CHOICE AS TO WHOM,
BETWEEN HIS TWO PARENTS, HE WOULD LIKE TO HAVE CUSTODY OVER HIS
PERSON.11
 69

In the Petition for Certiorari, petitioner advances the following contentions:

THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT REFUSED

TO SET RESPONDENT’S MOTION FOR INCREASED SUPPORT FOR THE PARTIES’
SON FOR HEARING.12

THERE WAS NO NEED FOR THE COURT OF APPEALS TO INCREASE JAVY’S

MONTHLY SUPPORT OF P15,000.00 BEING GIVEN BY PETITIONER EVEN AT
PRESENT PRICES.13

IN RESOLVING RESPONDENT’S MOTION FOR THE INCREASE OF JAVY’S SUPPORT,

THE COURT OF APPEALS SHOULD HAVE EXAMINED THE LIST OF EXPENSES
SUBMITTED BY RESPONDENT IN THE LIGHT OF PETITIONER’S OBJECTIONS
THERETO, INSTEAD OF MERELY ASSUMING THAT JAVY IS ENTITLED TO A P5,000
INCREASE IN SUPPORT AS SAID AMOUNT IS "TOO MINIMAL."14

LIKEWISE, THE COURT OF APPEALS SHOULD HAVE GIVEN PETITIONER AN

OPPORTUNITY TO PROVE HIS PRESENT INCOME TO SHOW THAT HE CANNOT
AFFORD TO INCREASE JAVY’S SUPPORT.15

With regard to the first issue in the main case, the Court of Appeals articulated:

On Assignment of Error C, the trial court, after findings of fact ascertained from the
testimonies not only of the parties particularly the defendant-appellee but likewise,
those of the two psychologists, awarded damages on the basis of Articles 21, 2217
and 2229 of the Civil Code of the Philippines.

Thus, the lower court found that plaintiff-appellant deceived the defendant-appellee
into marrying him by professing true love instead of revealing to her that he was
under heavy parental pressure to marry and that because of pride he married
defendant-appellee; that he was not ready to enter into marriage as in fact his
career was and always would be his first priority; that he was unable to relate not
only to defendant-appellee as a husband but also to his son, Javy, as a father; that he
had no inclination to make the marriage work such that in times of trouble, he chose
the easiest way out, that of leaving defendant–appellee and their son; that he had no
desire to keep defendant-appellee and their son as proved by his reluctance and
later, refusal to reconcile after their separation; that the aforementioned caused
defendant-appellee to suffer mental anguish, anxiety, besmirched reputation,
sleepless nights not only in those years the parties were together but also after and
throughout their separation.

Plaintiff-appellant assails the trial court’s decision on the ground that unlike those
arising from a breach in ordinary contracts, damages arising as a consequence of
marriage may not be awarded. While it is correct that there is, as yet, no decided
case by the Supreme Court where damages by reason of the performance or non-
 70

performance of marital obligations were awarded, it does not follow that no such
award for damages may be made.

Defendant-appellee, in her amended answer, specifically prayed for moral and

exemplary damages in the total amount of 7 million pesos. The lower court, in the
exercise of its discretion, found full justification of awarding at least half of what was
originally prayed for. We find no reason to disturb the ruling of the trial court.16

The award by the trial court of moral damages is based on Articles 2217 and 21 of the Civil
Code, which read as follows:

ART. 2217. Moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,
and similar injury. Though incapable of pecuniary computation, moral damages may
be recovered if they are the proximate result of the defendant’s wrongful act or
omission.

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage.

The trial court referred to Article 21 because Article 221917 of the Civil Code enumerates
the cases in which moral damages may be recovered and it mentions Article 21 as one of
the instances. It must be noted that Article 21 states that the individual must willfully cause
loss or injury to another. There is a need that the act is willful and hence done in complete
freedom. In granting moral damages, therefore, the trial court and the Court of Appeals
could not but have assumed that the acts on which the moral damages were based were
done willfully and freely, otherwise the grant of moral damages would have no leg to stand
on.

On the other hand, the trial court declared the marriage of the parties null and void based
on Article 36 of the Family Code, due to psychological incapacity of the petitioner, Noel
Buenaventura. Article 36 of the Family Code states:

A marriage contracted by any party who, at the time of the celebration, was
psychologically incapacitated to comply with the essential marital obligations of
marriage, shall likewise be void even if such incapacity becomes manifest only after
its solemnization.

Psychological incapacity has been defined, thus:

. . . no less than a mental (not physical) incapacity that causes a party to be truly
incognitive of the basic marital covenants that concomitantly must be
assumed and discharged by the parties to the marriage which, as so expressed
by Article 68 of the Family Code, include their mutual obligations to live together,
observe love, respect and fidelity and render help and support. There is hardly any
 71

doubt that the intendment of the law has been to confine the meaning of
"psychological incapacity" to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and
significance to the marriage. . . .18

The Court of Appeals and the trial court considered the acts of the petitioner after the
marriage as proof of his psychological incapacity, and therefore a product of his incapacity
or inability to comply with the essential obligations of marriage. Nevertheless, said courts
considered these acts as willful and hence as grounds for granting moral damages. It is
contradictory to characterize acts as a product of psychological incapacity, and hence
beyond the control of the party because of an innate inability, while at the same time
considering the same set of acts as willful. By declaring the petitioner as psychologically
incapacitated, the possibility of awarding moral damages on the same set of facts was
negated. The award of moral damages should be predicated, not on the mere act of entering
into the marriage, but on specific evidence that it was done deliberately and with malice by
a party who had knowledge of his or her disability and yet willfully concealed the same. No
such evidence appears to have been adduced in this case.

For the same reason, since psychological incapacity means that one is truly incognitive of
the basic marital covenants that one must assume and discharge as a consequence of
marriage, it removes the basis for the contention that the petitioner purposely deceived the
private respondent. If the private respondent was deceived, it was not due to a willful act
on the part of the petitioner. Therefore, the award of moral damages was without basis in
law and in fact.

Since the grant of moral damages was not proper, it follows that the grant of exemplary
damages cannot stand since the Civil Code provides that exemplary damages are
imposed in addition to moral, temperate, liquidated or compensatory damages.19

With respect to the grant of attorney’s fees and expenses of litigation the trial court
explained, thus:

Regarding Attorney’s fees, Art. 2208 of the Civil Code authorizes an award of
attorney’s fees and expenses of litigation, other than judicial costs, when as in this
case the plaintiff’s act or omission has compelled the defendant to litigate and to
incur expenses of litigation to protect her interest (par. 2), and where the Court
deems it just and equitable that attorney’s fees and expenses of litigation should be
recovered. (par. 11)20

The Court of Appeals reasoned as follows:

On Assignment of Error D, as the award of moral and exemplary damages is fully

justified, the award of attorney’s fees and costs of litigation by the trial court is
likewise fully justified.21
 72

The acts or omissions of petitioner which led the lower court to deduce his psychological
incapacity, and his act in filing the complaint for the annulment of his marriage cannot be
considered as unduly compelling the private respondent to litigate, since both are
grounded on petitioner’s psychological incapacity, which as explained above is a mental
incapacity causing an utter inability to comply with the obligations of marriage. Hence,
neither can be a ground for attorney’s fees and litigation expenses. Furthermore, since the
award of moral and exemplary damages is no longer justified, the award of attorney’s fees
and expenses of litigation is left without basis.

Anent the retirement benefits received from the Far East Bank and Trust Co. and the shares
of stock in the Manila Memorial Park and the Provident Group of Companies, the trial court
said:

The third issue that must be resolved by the Court is what to do with the assets of
the conjugal partnership in the event of declaration of annulment of the marriage.
The Honorable Supreme Court has held that the declaration of nullity of marriage
carries ipso facto a judgment for the liquidation of property (Domingo v. Court of
Appeals, et al., G.R. No. 104818, Sept. 17, 1993, 226 SCRA, pp. 572 – 573, 586). Thus,
speaking through Justice Flerida Ruth P. Romero, it was ruled in this case:

When a marriage is declared void ab initio, the law states that the final
judgment therein shall provide for the liquidation, partition and distribution
of the properties of the spouses, the custody and support of the common
children and the delivery of their presumptive legitimes, unless such matters
had been adjudicated in the previous proceedings.

The parties here were legally married on July 4, 1979, and therefore, all property
acquired during the marriage, whether the acquisition appears to have been made,
contracted or registered in the name of one or both spouses, is presumed to be
conjugal unless the contrary is proved (Art. 116, New Family Code; Art. 160, Civil
Code). Art. 117 of the Family Code enumerates what are conjugal partnership
properties. Among others they are the following:

1) Those acquired by onerous title during the marriage at the expense of the
common fund, whether the acquisition be for the partnership, or for only one
of the spouses;

2) Those obtained from the labor, industry, work or profession of either or

both of the spouses;

3) The fruits, natural, industrial, or civil, due or received during the marriage
from the common property, as well as the net fruits from the exclusive
property of each spouse. . . .

Applying the foregoing legal provisions, and without prejudice to requiring an

inventory of what are the parties’ conjugal properties and what are the exclusive
 73

properties of each spouse, it was disclosed during the proceedings in this case that
the plaintiff who worked first as Branch Manager and later as Vice-President of Far
East Bank & Trust Co. received separation/retirement package from the said bank in
the amount of P3,701,500.00 which after certain deductions amounting
to P26,164.21 gave him a net amount of P3,675,335.79 and actually paid to him on
January 9, 1995 (Exhs. 6, 7, 8, 9, 10, 11). Not having shown debts or obligations
other than those deducted from the said retirement/separation pay, under Art. 129
of the Family Code "The net remainder of the conjugal partnership properties shall
constitute the profits, which shall be divided equally between husband and wife,
unless a different proportion or division was agreed upon in the marriage
settlement or unless there has been a voluntary waiver or forfeiture of such share as
provided in this Code." In this particular case, however, there had been no marriage
settlement between the parties, nor had there been any voluntary waiver or valid
forfeiture of the defendant wife’s share in the conjugal partnership properties. The
previous cession and transfer by the plaintiff of his one-half (1/2) share in their
residential house and lot covered by T.C.T. No. S-35680 of the Registry of Deeds of
Parañ aque, Metro Manila, in favor of the defendant as stipulated in their
Compromise Agreement dated July 12, 1993, and approved by the Court in its
Partial Decision dated August 6, 1993, was actually intended to be in full settlement
of any and all demands for past support. In reality, the defendant wife had allowed
some concession in favor of the plaintiff husband, for were the law strictly to be
followed, in the process of liquidation of the conjugal assets, the conjugal dwelling
and the lot on which it is situated shall, unless otherwise agreed upon by the parties,
be adjudicated to the spouse with whom their only child has chosen to remain (Art.
129, par. 9). Here, what was done was one-half (1/2) portion of the house was ceded
to defendant so that she will not claim anymore for past unpaid support, while the
other half was transferred to their only child as his presumptive legitime.

Consequently, nothing yet has been given to the defendant wife by way of her share
in the conjugal properties, and it is but just, lawful and fair, that she be given one-
half (1/2) share of the separation/retirement benefits received by the plaintiff the
same being part of their conjugal partnership properties having been obtained or
derived from the labor, industry, work or profession of said defendant husband in
accordance with Art. 117, par. 2 of the Family Code. For the same reason, she is
entitled to one-half (1/2) of the outstanding shares of stock of the plaintiff husband
with the Manila Memorial Park and the Provident Group of Companies.22

The Court of Appeals articulated on this matter as follows:

On Assignment of Error E, plaintiff-appellant assails the order of the trial court for
him to give one-half of his separation/retirement benefits from Far East Bank &
Trust Company and half of his outstanding shares in Manila Memorial Park and
Provident Group of Companies to the defendant-appellee as the latter’s share in the
conjugal partnership.
 74

On August 6, 1993, the trial court rendered a Partial Decision approving the
Compromise Agreement entered into by the parties. In the same Compromise
Agreement, the parties had agreed that henceforth, their conjugal partnership is
dissolved. Thereafter, no steps were taken for the liquidation of the conjugal
partnership.

Finding that defendant-appellee is entitled to at least half of the

separation/retirement benefits which plaintiff-appellant received from Far East
Bank & Trust Company upon his retirement as Vice-President of said company for
the reason that the benefits accrued from plaintiff–appellant’s service for the bank
for a number of years, most of which while he was married to defendant-appellee,
the trial court adjudicated the same. The same is true with the outstanding shares of
plaintiff-appellant in Manila Memorial Park and Provident Group of Companies. As
these were acquired by the plaintiff-appellant at the time he was married to
defendant-appellee, the latter is entitled to one-half thereof as her share in the
conjugal partnership. We find no reason to disturb the ruling of the trial court.23

Since the present case does not involve the annulment of a bigamous marriage, the
provisions of Article 50 in relation to Articles 41, 42 and 43 of the Family Code, providing
for the dissolution of the absolute community or conjugal partnership of gains, as the case
may be, do not apply. Rather, the general rule applies, which is that in case a marriage is
declared void ab initio, the property regime applicable and to be liquidated, partitioned and
distributed is that of equal co-ownership.

In Valdes v. Regional Trial Court, Branch 102, Quezon City,24 this Court expounded on the
consequences of a void marriage on the property relations of the spouses and specified the
applicable provisions of law:

The trial court correctly applied the law. In a void marriage, regardless of the cause
thereof, the property relations of the parties during the period of cohabitation is
governed by the provisions of Article 147 or Article 148, such as the case may be, of
the Family Code. Article 147 is a remake of Article 144 of the Civil Code as
interpreted and so applied in previous cases; it provides:

ART. 147. When a man and a woman who are capacitated to marry each
other, live exclusively with each other as husband and wife without the
benefit of marriage or under a void marriage, their wages and salaries shall
be owned by them in equal shares and the property acquired by both of them
through their work or industry shall be governed by the rules on co-
ownership.

In the absence of proof to the contrary, properties acquired while they lived
together shall be presumed to have been obtained by their joint efforts, work
or industry, and shall be owned by them in equal shares. For purposes of this
Article, a party who did not participate in the acquisition by the other party
of any property shall be deemed to have contributed jointly in the acquisition
 75

thereof if the former's efforts consisted in the care and maintenance of the
family and of the household.

Neither party can encumber or dispose by acts inter vivos of his or her share
in the property acquired during cohabitation and owned in common, without
the consent of the other, until after the termination of their cohabitation.

When only one of the parties to a void marriage is in good faith, the share of
the party in bad faith in the co-ownership shall be forfeited in favor of their
common children. In case of default of or waiver by any or all of the common
children or their descendants, each vacant share shall belong to the
respective surviving descendants. In the absence of descendants, such share
shall belong to the innocent party. In all cases, the forfeiture shall take place
upon termination of the cohabitation.

This peculiar kind of co-ownership applies when a man and a woman, suffering no
legal impediment to marry each other, so exclusively live together as husband and
wife under a void marriage or without the benefit of marriage. The term
"capacitated" in the provision (in the first paragraph of the law) refers to the legal
capacity of a party to contract marriage, i.e., any "male or female of the age of
eighteen years or upwards not under any of the impediments mentioned in Articles
37 and 38" of the Code.

Under this property regime, property acquired by both spouses through

their work and industry shall be governed by the rules on equal co-ownership. Any
property acquired during the union is prima facie presumed to have been obtained
through their joint efforts. A party who did not participate in the acquisition of the
property shall still be considered as having contributed thereto jointly if said party's
"efforts consisted in the care and maintenance of the family household." Unlike the
conjugal partnership of gains, the fruits of the couple's separate property are not
included in the co-ownership.

Article 147 of the Family Code, in substance and to the above extent, has clarified
Article 144 of the Civil Code; in addition, the law now expressly provides that —

(a) Neither party can dispose or encumber by act[s] inter vivos [of] his or her share
in co-ownership property, without the consent of the other, during the period of
cohabitation; and

(b) In the case of a void marriage, any party in bad faith shall forfeit his or her share
in the co-ownership in favor of their common children; in default thereof or waiver
by any or all of the common children, each vacant share shall belong to the
respective surviving descendants, or still in default thereof, to the innocent party.
The forfeiture shall take place upon the termination of the cohabitation or
declaration of nullity of the marriage.
 76

In deciding to take further cognizance of the issue on the settlement of the parties'
common property, the trial court acted neither imprudently nor precipitately; a
court which had jurisdiction to declare the marriage a nullity must be deemed
likewise clothed with authority to resolve incidental and consequential matters. Nor
did it commit a reversible error in ruling that petitioner and private respondent
own the "family home" and all their common property in equal shares, as well as in
concluding that, in the liquidation and partition of the property owned in common
by them, the provisions on co-ownership under the Civil Code, not Articles 50, 51
and 52, in relation to Articles 102 and 129, of the Family Code, should aptly prevail.
The rules set up to govern the liquidation of either the absolute community or the
conjugal partnership of gains, the property regimes recognized for valid and
voidable marriages (in the latter case until the contract is annulled), are irrelevant
to the liquidation of the co-ownership that exists between common-law spouses.
The first paragraph of Article 50 of the Family Code, applying paragraphs (2), (3),
(4) and (5) of Article 43, relates only, by its explicit terms, to voidable marriages and,
exceptionally, to void marriages under Article 40 of the Code, i.e., the declaration of
nullity of a subsequent marriage contracted by a spouse of a prior void marriage
before the latter is judicially declared void. The latter is a special rule that somehow
recognizes the philosophy and an old doctrine that void marriages are inexistent
from the very beginning and no judicial decree is necessary to establish their nullity.
In now requiring for purposes of remarriage, the declaration of nullity by final
judgment of the previously contracted void marriage, the present law aims to do
away with any continuing uncertainty on the status of the second marriage. It is not
then illogical for the provisions of Article 43, in relation to Articles 41 and 42, of the
Family Code, on the effects of the termination of a subsequent marriage contracted
during the subsistence of a previous marriage to be made applicable pro hac vice. In
all other cases, it is not to be assumed that the law has also meant to have coincident
property relations, on the one hand, between spouses in valid and voidable
marriages (before annulment) and, on the other, between common-law spouses or
spouses of void marriages, leaving to ordain, in the latter case, the ordinary rules on
co-ownership subject to the provision of Article 147 and Article 148 of the Family
Code. It must be stressed, nevertheless, even as it may merely state the obvious, that
the provisions of the Family Code on the "family home," i.e., the provisions found in
Title V, Chapter 2, of the Family Code, remain in force and effect regardless of the
property regime of the spouses.25

Since the properties ordered to be distributed by the court a quo were found, both by the
trial court and the Court of Appeals, to have been acquired during the union of the parties,
the same would be covered by the co-ownership. No fruits of a separate property of one of
the parties appear to have been included or involved in said distribution. The liquidation,
partition and distribution of the properties owned in common by the parties herein as
ordered by the court a quo should, therefore, be sustained, but on the basis of co-
ownership and not of the regime of conjugal partnership of gains.
 77

As to the issue on custody of the parties over their only child, Javy Singh Buenaventura, it is
now moot since he is about to turn twenty-five years of age on May 27, 2005 26 and has,
therefore, attained the age of majority.

With regard to the issues on support raised in the Petition for Certiorari, these would also
now be moot, owing to the fact that the son, Javy Singh Buenaventura, as previously stated,
has attained the age of majority.

WHEREFORE, the Decision of the Court of Appeals dated October 8, 1996 and its
Resolution dated December 10, 1996 which are contested in the Petition for Review (G.R.
No. 127449), are hereby MODIFIED, in that the award of moral and exemplary damages,
attorney’s fees, expenses of litigation and costs are deleted. The order giving respondent
one-half of the retirement benefits of petitioner from Far East Bank and Trust Co. and one-
half of petitioner’s shares of stock in Manila Memorial Park and in the Provident Group of
Companies is sustained but on the basis of the liquidation, partition and distribution
of the co-ownership and not of the regime of conjugal partnership of gains. The rest of
said Decision and Resolution are AFFIRMED.

The Petition for Review on Certiorari (G.R. No. 127358) contesting the Court of Appeals’
Resolutions of September 2, 1996 and November 13, 1996 which increased the
support pendente lite in favor of the parties’ son, Javy Singh Buenaventura, is now MOOT
and ACADEMIC and is, accordingly, DISMISSED.

G.R. No. 174715 : October 11, 2012

FILINVEST LAND, INC., EFREN C. GUTIERRE and LINA DE GUZMAN-

FERRER, Petitioners, v. ABDUL BACKY, ABEHERA, BAIYA, EDRIS, HADJI GULAM,
JAMELLA, KIRAM, LUCAYA, MONER, OMAR, RAMIR, ROBAYCA, SATAR, TAYBA ALL
SURNAMED NGILAY, EDMER ANDONG, UNOS BANTANGAN and NADJER
ESQUIVEL, Respondents.

DECISION

PERALTA, J.:

For this Court's consideration is the Petition for Review on Certiorari under Rule 45, dated
November 9, 2006, of petitioner Filinvest Land, Inc., which seeks to set aside the
Decision1Ï‚rνll dated March 30, 2006 and Resolution2Ï‚rνll dated September 18, 2006 of
the Court of Appeals (CA) partially reversing the Decision3Ï‚rνll dated October 1, 2003 of
the Regional Trial Court, Las Pis, Branch 253 (RTC).

The factual antecedents, as found in the records follow.

 78

Respondents were grantees of agricultural public lands located in Tambler, General Santos
City through Homestead and Fee patents sometime in 1986 and 1991 which are covered by
and specifically described in the following Original Certificates of Title issued by the
Register of Deeds of General Santos City:

OCT No. Area (sq. m.) Grantee Date Granted

P-5204 38,328 Abdul Backy Ngilay November 11, 1986
P-5205 49,996 Hadji Gulam Ngilay November 11, 1986
P-5206 49,875 Edris A. Ngilay November 11, 1986
P-5207 44,797 Robayca A. Ngilay November 11, 1986
P-5209 20,000 Omar Ngilay November 11, 1986
P-5211 29,990 Tayba Ngilay November 11, 1986
P-5212 48,055 Kiram Ngilay November 11, 1986
P-5578 20,408 Nadjer Esquevel November 24, 1991
P-5579 35,093 Unos Bantangan November 24, 1991
P-5580 39,507 Moner Ngilay November 24, 1991
P-5582 44,809 Baiya Ngilay November 24, 1991
P-5583 10,050 Jamela Ngilay November 24, 1991
P-5584 49,993 Ramir Ngilay November 24, 1991
P-5586 40,703 Satar Ngilay November 24, 1991
P-5590 20,000 Abehara Ngilay November 24, 1991
P-5592 41,645 Lucaya Ngilay November 24, 1991
P-5595 13,168 Edmer Andong November 24, 1991

Negotiations were made by petitioner, represented by Lina de Guzman-Ferrer with the

patriarch of the Ngilays, Hadji Gulam Ngilay sometime in 1995. Eventually, a Deed of
Conditional Sale of the above- enumerated properties in favor of petitioner Filinvest Land,
Inc. was executed. Upon its execution, respondents were asked to deliver to petitioner the
original owner's duplicate copy of the certificates of title of their respective properties.
Respondents received the downpayment for the properties on October 28, 1995.

A few days after the execution of the aforestated deeds and the delivery of the
corresponding documents to petitioner, respondents came to know that the sale of their
properties was null and void, because it was done within the period that they were not
allowed to do so and that the sale did not have the approval of the Secretary of the
Department of Environment and Natural Resources (DENR) prompting them to file a case
 79

for the declaration of nullity of the deeds of conditional and absolute sale of the questioned
properties and the grant of right of way with the RTC, Las Pis, Branch 253.

On the other hand, petitioner claims that sometime in 1995, the representative of Hadji
Ngilay approached petitioner to propose the sale of a portion of his properties. Thereafter,
representatives of petitioner flew to General Santos City from Manila to conduct an ocular
inspection of the subject properties. Petitioner was willing to purchase the properties but
seeing that some of the properties were registered as land grants through homestead
patents, representatives of petitioner informed Ngilay that they would return to General
Santos City in a few months to finalize the sale as ten (10) certificates of title were issued
on November 24, 1991.

According to petitioner, Ngilay and his children prevailed upon the representatives of
petitioner to make an advance payment. To accommodate the Ngilays, petitioner acceded
to making an advance with the understanding that petitioner could demand anytime the
return of the advance payment should Ngilay not be able to comply with the conditions of
the sale. The Ngilays likewise undertook to secure the necessary approvals of the DENR
before the consummation of the sale.

The RTC ruled in favor of Filinvest Land, Inc. and upheld the sale of all the properties in
litigation. It found that the sale of those properties whose original certificates of title were
issued by virtue of the 1986 Patents was valid, considering that the prohibitory period
ended in 1991, or way before the transaction took place. As to those patents awarded in
1991, the same court opined that since those properties were the subject of a deed of
conditional sale, compliance with those conditions is necessary for there to be a perfected
contract between the parties. The RTC also upheld the grant of right of way as it adjudged
that the right of way agreement showed that the right of way was granted to provide access
from the highway to the properties to be purchased. The dispositive portion of the Decision
dated October 1, 2003 reads:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the Court upholds the sale of all the properties in
litigation. It likewise upholds the grant of right of way in favor of the respondent.
Consequently, the petition is DISMISSED.

No pronouncement as to damages for failure to prove the same.

Costs against the petitioners.

SO ORDERED.4ςrνll

Respondents elevated the case to the CA in which the latter modified the judgment of the
RTC. While the CA upheld the validity of the sale of the properties the patents of which
were awarded in 1986, including the corresponding grant of right of way for the same lots,
it nullified the disposition of those properties granted through patents in 1991 and the
right of way on the same properties. As to the "1991 Patents," the CA ruled that the
contract of sale between the parties was a perfected contract, hence, the parties entered
 80

into a prohibited conveyance of a homestead within the prohibitive period of five years
from the issuance of the patent. The CA Decision dated March 30, 2006 disposed the case as
follows:

WHEREFORE, the assailed Decision dated October 1, 2003 is MODIFIED:

a) The Deed of Conditional Sale and Deed of Absolute Sale for the properties covered by the
"1991 Patents", as well as the Right of Way Agreement thereto, are declared null and void.
The Register of Deeds of General Santos City is consequently directed to cancel the
certificates of title covered by the "1991 Patents" issued in favor of appellee Filinvest and
to issue new titles in favor of herein appellants.

b) The sale of the properties covered by the "1986 Patents", including the corresponding
grant of way for said lots, are declared valid.

SO ORDERED.5ςrνll

Petitioners filed a Motion for Partial Reconsideration, but it was denied by the CA.

Hence, the present petition.

The grounds relied upon are:

1.

A CONDITIONAL SALE INVOLVING THE 1991 PATENTS DID NOT VIOLATE THE
PROHIBITION AGAINST ALIENATION OF HOMESTEADS UNDER THE PUBLIC LAND ACT
SINCE NO ACTUAL TRANSFER OR DISPOSITION WAS PERFECTED UNTIL ALL THE
CONDITIONS OF THE DEED ARE FULFILLED.

2.

REGISTRATION IS THE OPERATIVE ACT THAT CONVEYS OR DISPOSES RIGHTS IN REAL

PROPERTY. BEING UNREGISTERED, THE DEED OF CONDITIONAL SALE DID NOT CONVEY
OR DISPOSE OF THE 1991 HOMESTEADS OR ANY RIGHTS THEREIN IN VIOLATION OF THE
PUBLIC LAND ACT.

3.

ASSUMING THE NULLITY OF THE SALE OF THE 1991 PATENTS, THE HONORABLE COURT
OF APPEALS SHOULD HAVE ORDERED RESPONDENTS AS A MATTER OF LAW TO RETURN
TO PETITIONERS WHAT THEY HAVE RECEIVED.6ςrνll

In their Comment7Ï‚rνll dated March 5, 2007, respondents stated the following counter-

arguments:
 81

(1) The Honorable Court of Appeals did not err in holding that the Deed of Conditional Sale
and Deed of Absolute Sale for the properties covered by the 1991 Patents, as well as the
Right of Way Agreement thereto is null and void for the simplest reason that the said
transactions were volatile of the Public Land Act.

(2) The questions raised by the Petitioner, Filinvest Land Inc. (FLI) are unsubstantial to
require consideration.8ςrνll

In its Reply9Ï‚rνll dated July 30, 2007, petitioner insists that the prohibition against
alienation and disposition of land covered by Homestead Patents is a prohibition against
the actual loss of the homestead within the five-year prohibitory period, not against all
contracts including those that do not result in such an actual loss of ownership or
possession. It also points out that respondents themselves admit that the transfer
certificates of title covering the ten parcels of land are all dated 1998, which confirms its
declaration that the lands covered by 1991 Homestead Patents were not conveyed to
Filinvest until after the five-year prohibitory period.

The petition is unmeritorious.

The five-year prohibitory period following the issuance of the homestead patent is
provided under Section 118 of Commonwealth Act No. 141, as amended by Commonwealth
Act No. 456, otherwise known as the Public Land Act. 10Ï‚rνll It bears stressing that the law
was enacted to give the homesteader or patentee every chance to preserve for himself and
his family the land that the State had gratuitously given to him as a reward for his labour in
cleaning and cultivating it.11Ï‚rνll Its basic objective, as the Court had occasion to stress, is
to promote public policy that is to provide home and decent living for destitute, aimed at
providing a class of independent small landholders which is the bulwark of peace and
order.12Ï‚rνll Hence, any act which would have the effect of removing the property subject
of the patent from the hands of a grantee will be struck down for being violative of the
law.13ςrνll

In the present case, the negotiations for the purchase of the properties covered by the
patents issued in 1991 were made in 1995 and, eventually, an undated Deed of Conditional
Sale was executed. On October 28, 1995, respondents received the downpayment of
P14,000.000.00 for the properties covered by the patents issued in 1991. Applying the five-
year prohibition, the properties covered by the patent issued on November 24, 1991 could
only be alienated after November 24, 1996. Therefore, the sale, having been consummated
on October 28, 1995, or within the five-year prohibition, is as ruled by the CA, void.

Petitioner argues that the correct formulation of the issue is not whether there was a
perfected contract between the parties during the period of prohibition, but whether by
such deed of conditional sale there was "alienation or encumbrance" within the
contemplation of the law. This is wrong. The prohibition does not distinguish between
consummated and executory sale. The conditional sale entered into by the parties is still a
conveyance of the homestead patent. As correctly ruled by the CA, citing Ortega v.
Tan:14ςrνll
 82

And, even assuming that the disputed sale was not yet perfected or consummated, still, the
transaction cannot be validated. The prohibition of the law on the sale or encumbrance of
the homestead within five years after the grant is MANDATORY. The purpose of the law is
to promote a definite policy, i.e., "to preserve and keep in the family of the homesteader
that portion of the public land which the State has gratuitously given to him." Thus, the law
does not distinguish between executory and consummated sales. Where the sale of a
homestead was perfected within the prohibitory period of five years, the fact that the
formal deed of sale was executed after the expiration of the staid period DID NOT and
COULD NOT legalize a contract that was void from its inception. To hold valid such
arrangement would be to throw the door open to all possible fraudulent subterfuges and
schemes which persons interested in the land given to a homesteader may devise in
circumventing and defeating the legal provisions prohibiting their alienation within five
years from the issuance of the patent.15ςrνll

To repeat, the conveyance of a homestead before the expiration of the five-year prohibitory
period following the issuance of the homestead patent is null and void and cannot be
enforced, for it is not within the competence of any citizen to barter away what public
policy by law seeks to preserve.16ςrνll

Nevertheless, petitioner does not err in seeking the return of the down payment as a
consequence of the sale having been declared void. The rule is settled that the declaration
of nullity of a contract which is void ab initio operates to restore things to the state and
condition in which they were found before the execution thereof.17Ï‚rνll Petitioner is
correct in its argument that allowing respondents to keep the amount received from
petitioner is tantamount to judicial acquiescence to unjust enrichment. Unjust enrichment
exists "when a person unjustly retains a benefit to the loss of another, or when a person
retains money or property of another against the fundamental principles of justice, equity
and good conscience."18Ï‚rνll There is unjust enrichment under Article 22 of the Civil Code
when (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or
with damages to another.19Ï‚rνll Thus, the sale which created the obligation of petitioner
to pay the agreed amount having been declared void, respondents have the duty to return
the down payment as they no longer have the right to keep it. The principle of unjust
enrichment essentially contemplates payment when there is no duty to pay, and the person
who receives the payment has no right to receive it.20Ï‚rνll As found by the CA and
undisputed by the parties, the amount or the down payment made is P14,000,000.00 which
shall also be the amount to be returned by respondents.ςηαοblενιrυαllαωlιbrαr

WHEREFORE, the Petition for Review on Certiorari dated November 9, 2006 or petitioner
Filinvest Land, Inc. is hereby DENIED. Consequently, the Decision dated March 30, 2006
and Resolution dated September 18, 2006 or the Court of Appeals are hereby AFFIRMED
with the MODIFICATION that respondents return the amount of P14,000,000.00 given by
petitioner as down payment for the sale which is ruled to be void ab initio.Ï‚rαlαÏ
‰lιbrαr
 83

G.R. No. 160600               January 15, 2014

DOMINGO GONZALO, Petitioner,
vs.
JOHN TARNATE, JR., Respondent.

DECISION

BERSAMIN, J.:

The doctrine of in pari delicto which stipulates that the guilty parties to an illegal contract
are not entitled to any relief, cannot prevent a recovery if doing so violates the public policy
against unjust enrichment.

Antecedents

After the Department of Public Works and Highways (DPWH) had awarded on July 22,
1997 the contract for the improvement of the Sadsadan-Maba-ay Section of the Mountain
Province-Benguet Road in the total amount of 7 014 963 33 to his company, Gonzalo
Construction,1 petitioner Domingo Gonzalo (Gonzalo) subcontracted to respondent John
Tarnate, Jr. (Tarnate) on October 15, 1997, the supply of materials and labor for the project
under the latter s business known as JNT Aggregates. Their agreement stipulated, among
others, that Tarnate would pay to Gonzalo eight percent and four percent of the contract
price, respectively, upon Tarnate s first and second billing in the project.2

In furtherance of their agreement, Gonzalo executed on April 6, 1999 a deed of assignment

whereby he, as the contractor, was assigning to Tarnate an amount equivalent to 10% of
the total collection from the DPWH for the project. This 10% retention fee (equivalent to
₱233,526.13) was the rent for Tarnate’s equipment that had been utilized in the project. In
the deed of assignment, Gonzalo further authorized Tarnate to use the official receipt of
Gonzalo Construction in the processing of the documents relative to the collection of the
10% retention fee and in encashing the check to be issued by the DPWH for that
purpose.3 The deed of assignment was submitted to the DPWH on April 15, 1999. During
the processing of the documents for the retention fee, however, Tarnate learned that
Gonzalo had unilaterally rescinded the deed of assignment by means of an affidavit of
cancellation of deed of assignment dated April 19, 1999 filed in the DPWH on April 22,
 84

1999;4 and that the disbursement voucher for the 10% retention fee had then been issued
in the name of Gonzalo, and the retention fee released to him.5

Tarnate demanded the payment of the retention fee from Gonzalo, but to no avail. Thus, he
brought this suit against Gonzalo on September 13, 1999 in the Regional Trial Court (RTC)
in Mountain Province to recover the retention fee of ₱233,526.13, moral and exemplary
damages for breach of contract, and attorney’s fees.6

In his answer, Gonzalo admitted the deed of assignment and the authority given therein to
Tarnate, but averred that the project had not been fully implemented because of its
cancellation by the DPWH, and that he had then revoked the deed of assignment. He
insisted that the assignment could not stand independently due to its being a mere product
of the subcontract that had been based on his contract with the DPWH; and that Tarnate,
having been fully aware of the illegality and ineffectuality of the deed of assignment from
the time of its execution, could not go to court with unclean hands to invoke any right
based on the invalid deed of assignment or on the product of such deed of assignment.7

Ruling of the RTC

On January 26, 2001, the RTC, opining that the deed of assignment was a valid and binding
contract, and that Gonzalo must comply with his obligations under the deed of assignment,
rendered judgment in favor of Tarnate as follows:

WHEREFORE, premises considered and as prayed for by the plaintiff, John Tarnate, Jr. in
his Complaint for Sum of Money, Breach of Contract With Damages is hereby RENDERED in
his favor and against the above-named defendant Domingo Gonzalo, the Court now hereby
orders as follows:

1. Defendant Domingo Gonzalo to pay the Plaintiff, John Tarnate, Jr., the amount of
TWO HUNDRED THIRTY THREE THOUSAND FIVE HUNDRED TWENTY SIX and
13/100 PESOS (₱233,526.13) representing the rental of equipment;

2. Defendant to pay Plaintiff the sum of THIRTY THOUSAND (₱30,000.00) PESOS by

way of reasonable Attorney’s Fees for having forced/compelled the plaintiff to
litigate and engage the services of a lawyer in order to protect his interest and to
enforce his right. The claim of the plaintiff for attorney’s fees in the amount of FIFTY
THOUSAND PESOS (₱50,000.00) plus THREE THOUSAND PESOS (₱3,000.00) clearly
appears to be unconscionable and therefore reduced to Thirty Thousand Pesos
(₱30,000.00) as aforestated making the same to be reasonable;

3. Defendant to pay Plaintiff the sum of FIFTEEN THOUSAND PESOS (₱15,000.00) by

way of litigation expenses;

4. Defendant to pay Plaintiff the sum of TWENTY THOUSAND PESOS (₱20,000.00)

for moral damages and for the breach of contract; and
 85

5. To pay the cost of this suit.

Award of exemplary damages in the instant case is not warranted for there is no showing
that the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner analogous to the case of Xentrex Automotive, Inc. vs. Court of Appeals, 291 SCRA
66.8

Gonzalo appealed to the Court of Appeals (CA).

Decision of the CA

On February 18, 2003, the CA affirmed the RTC.9

Although holding that the subcontract was an illegal agreement due to its object being
specifically prohibited by Section 6 of Presidential Decree No. 1594; that Gonzalo and
Tarnate were guilty of entering into the illegal contract in violation of Section 6 of
Presidential Decree No. 1594; and that the deed of assignment, being a product of and
dependent on the subcontract, was also illegal and unenforceable, the CA did not apply the
doctrine of in pari delicto, explaining that the doctrine applied only if the fault of one party
was more or less equivalent to the fault of the other party. It found Gonzalo to be more
guilty than Tarnate, whose guilt had been limited to the execution of the two illegal
contracts while Gonzalo had gone to the extent of violating the deed of assignment. It
declared that the crediting of the 10% retention fee equivalent to ₱233,256.13 to his
account had unjustly enriched Gonzalo; and ruled, accordingly, that Gonzalo should
reimburse Tarnate in that amount because the latter’s equipment had been utilized in the
project.

Upon denial of his motion for reconsideration,10 Gonzalo has now come to the Court to seek
the review and reversal of the decision of the CA.

Issues

Gonzalo contends that the CA erred in affirming the RTC because: (1) both parties were in
pari delicto; (2) the deed of assignment was void; and (3) there was no compliance with the
arbitration clause in the subcontract.

Gonzalo submits in support of his contentions that the subcontract and the deed of
assignment, being specifically prohibited by law, had no force and effect; that upon finding
both him and Tarnate guilty of violating the law for executing the subcontract, the RTC and
the CA should have applied the rule of in pari delicto, to the effect that the law should not
aid either party to enforce the illegal contract but should leave them where it found them;
and that it was erroneous to accord to the parties relief from their predicament.11

Ruling
 86

We deny the petition for review, but we delete the grant of moral damages, attorney’s fees
and litigation expenses.

There is no question that every contractor is prohibited from subcontracting with or

assigning to another person any contract or project that he has with the DPWH unless the
DPWH Secretary has approved the subcontracting or assignment. This is pursuant to
Section 6 of Presidential Decree No. 1594, which provides:

Section 6. Assignment and Subcontract. – The contractor shall not assign, transfer, pledge,
subcontract or make any other disposition of the contract or any part or interest therein
except with the approval of the Minister of Public Works, Transportation and
Communications, the Minister of Public Highways, or the Minister of Energy, as the case
may be. Approval of the subcontract shall not relieve the main contractor from any liability
or obligation under his contract with the Government nor shall it create any contractual
relation between the subcontractor and the Government.

Gonzalo, who was the sole contractor of the project in question, subcontracted the
implementation of the project to Tarnate in violation of the statutory prohibition. Their
subcontract was illegal, therefore, because it did not bear the approval of the DPWH
Secretary. Necessarily, the deed of assignment was also illegal, because it sprung from the
subcontract. As aptly observed by the CA:

x x x. The intention of the parties in executing the Deed of Assignment was merely to cover
up the illegality of the sub-contract agreement. They knew for a fact that the DPWH will not
allow plaintiff-appellee to claim in his own name under the Sub-Contract Agreement.

Obviously, without the Sub-Contract Agreement there will be no Deed of Assignment to

speak of. The illegality of the Sub-Contract Agreement necessarily affects the Deed of
Assignment because the rule is that an illegal agreement cannot give birth to a valid
contract. To rule otherwise is to sanction the act of entering into transaction the object of
which is expressly prohibited by law and thereafter execute an apparently valid contract to
subterfuge the illegality. The legal proscription in such an instance will be easily rendered
nugatory and meaningless to the prejudice of the general public.12

Under Article 1409 (1) of the Civil Code, a contract whose cause, object or purpose is
contrary to law is a void or inexistent contract. As such, a void contract cannot produce a
valid one.13 To the same effect is Article 1422 of the Civil Code, which declares that "a
contract, which is the direct result of a previous illegal contract, is also void and inexistent."

We do not concur with the CA’s finding that the guilt of Tarnate for violation of Section 6 of
Presidential Decree No. 1594 was lesser than that of Gonzalo, for, as the CA itself observed,
Tarnate had voluntarily entered into the agreements with Gonzalo. 14 Tarnate also admitted
that he did not participate in the bidding for the project because he knew that he was not
authorized to contract with the DPWH.15 Given that Tarnate was a businessman who had
represented himself in the subcontract as "being financially and organizationally sound and
established, with the necessary personnel and equipment for the performance of the
 87

project,"16 he justifiably presumed to be aware of the illegality of his agreements with

Gonzalo. For these reasons, Tarnate was not less guilty than Gonzalo.

According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal contract
cannot recover from one another and are not entitled to an affirmative relief because they
are in pari delicto or in equal fault. The doctrine of in pari delicto is a universal doctrine
that holds that no action arises, in equity or at law, from an illegal contract; no suit can be
maintained for its specific performance, or to recover the property agreed to be sold or
delivered, or the money agreed to be paid, or damages for its violation; and where the
parties are in pari delicto, no affirmative relief of any kind will be given to one against the
other.17

Nonetheless, the application of the doctrine of in pari delicto is not always rigid.1âwphi1 An
accepted exception arises when its application contravenes well-established public
policy.18 In this jurisdiction, public policy has been defined as "that principle of the law
which holds that no subject or citizen can lawfully do that which has a tendency to be
injurious to the public or against the public good."19

Unjust enrichment exists, according to Hulst v. PR Builders, Inc.,20 "when a person unjustly

retains a benefit at the loss of another, or when a person retains money or property of
another against the fundamental principles of justice, equity and good conscience." The
prevention of unjust enrichment is a recognized public policy of the State, for Article 22 of
the Civil Code explicitly provides that "[e]very person who through an act of performance
by another, or any other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same to him." It is well to
note that Article 22 "is part of the chapter of the Civil Code on Human Relations, the
provisions of which were formulated as basic principles to be observed for the rightful
relationship between human beings and for the stability of the social order; designed to
indicate certain norms that spring from the fountain of good conscience; 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."21

There is no question that Tarnate provided the equipment, labor and materials for the
project in compliance with his obligations under the subcontract and the deed of
assignment; and that it was Gonzalo as the contractor who received the payment for his
contract with the DPWH as well as the 10% retention fee that should have been paid to
Tarnate pursuant to the deed of assignment.22 Considering that Gonzalo refused despite
demands to deliver to Tarnate the stipulated 10% retention fee that would have
compensated the latter for the use of his equipment in the project, Gonzalo would be
unjustly enriched at the expense of Tarnate if the latter was to be barred from recovering
because of the rigid application of the doctrine of in pari delicto. The prevention of unjust
enrichment called for the exception to apply in Tarnate’s favor. Consequently, the RTC and
the CA properly adjudged Gonzalo liable to pay Tarnate the equivalent amount of the 10%
retention fee (i.e., ₱233,526.13).
 88

Gonzalo sought to justify his refusal to turn over the ₱233,526.13 to Tarnate by insisting
that he (Gonzalo) had a debt of ₱200,000.00 to Congressman Victor Dominguez; that his
payment of the 10% retention fee to Tarnate was conditioned on Tarnate paying that debt
to Congressman Dominguez; and that he refused to give the 10% retention fee to Tarnate
because Tarnate did not pay to Congressman Dominguez.23 His justification was
unpersuasive, however, because, firstly, Gonzalo presented no proof of the debt to
Congressman Dominguez; secondly, he did not competently establish the agreement on the
condition that supposedly bound Tarnate to pay to Congressman Dominguez;24 and, thirdly,
burdening Tarnate with Gonzalo’s personal debt to Congressman Dominguez to be paid
first by Tarnate would constitute another case of unjust enrichment.

The Court regards the grant of moral damages, attorney’s fees and litigation expenses to
Tarnate to be inappropriate. We have ruled that no damages may be recovered under a
void contract, which, being nonexistent, produces no juridical tie between the parties
involved.25 It is notable, too, that the RTC and the CA did not spell out the sufficient factual
and legal justifications for such damages to be granted.

Lastly, the letter and spirit of Article 22 of the Civil Code command Gonzalo to make a full
reparation or compensation to Tarnate. The illegality of their contract should not be
allowed to deprive Tarnate from being fully compensated through the imposition of legal
interest. Towards that end, interest of 6% per annum reckoned from September 13, 1999,
the time of the judicial demand by Tarnate, is imposed on the amount of ₱233,526.13. Not
to afford this relief will make a travesty of the justice to which Tarnate was entitled for
having suffered too long from Gonzalo’s unjust enrichment.

WHEREFORE, we AFFIRM the decision promulgated on February 18, 2003, but DELETE the
awards of moral damages, attorney’s fees and litigation expenses; IMPOSE legal interest of
6% per annum on the principal oL₱233,526.13 reckoned from September 13, 1999; and
DIRECT the petitioner to pay the costs of suit.

G.R. No. 213233, August 05, 2015

BLISS DEVELOPMENT CORP./HOME GUARANTY

CORPORATION, Petitioner, v. MONTANO DIAZ, DOMINGO TAPAY, AND EDGAR H.
ARREZA, Respondents.

DECISION

VELASCO JR., J.:

The Case

This is a Petition for Review on Certiorari assailing the Decision1 of the Court of Appeals
(CA), promulgated on January 21, 2014, and its subsequent Resolution dated June 27, 2014,
 89

both in CA-G.R. CV No. 99179. The assailed Decision reversed and set aside the Decision of
the Regional Trial Court (RTC), Makati City, Branch 59, dated November 21, 2011, in Civil
Case No. 96-1372. The assailed Resolution, meanwhile, denied petitioner’s Motion for
Reconsideration.

The Facts

Petitioner Bliss Development Corporation (BDC) (subsequently reorganized as Home

Guaranty Corporation) is the registered owner of Lot No. 27, Block 30, New Capitol Estates
I, Brgy. Matandang Balara, Diliman, Quezon City, and covered by Transfer Certificate of
Title (TCT) No. 331582. On October 19, 1984, it entered into and executed a Deed of Sale
over the said property in favor of Spouses Emiliano and Leonila Melgazo (Sps. Melgazo),
both of whom are now deceased.2redarclaw

On May 7, 1991, a certain Rodolfo Nacua (Nacua) sent a letter to BDC, saying that Sps.
Melgazo transferred to him their rights over the property. He further expressed willingness
to pay the outstanding obligations of Sps. Melgazo to BDC. Before the property was fully
paid, however, Nacua sold his rights to Olivia Garcia (Garcia), through a Deed of Transfer of
Rights. Later, Garcia transferred her rights to Elizabeth Reyes (Reyes). Reyes then
transferred her rights to Domingo Tapay (Tapay), who then later sold his rights to herein
respondent Montano Diaz (Diaz) for Six Hundred Thousand Pesos (P600,000.00). Diaz then
paid BDC the amortizations due on the property, amounting to P406,915.15, and BDC
issued a permit to occupy the property in favor of Diaz. Diaz then introduced
improvements on the property, amounting to P700,000.00.

On April 14, 1992, BDC executed a Contract to Sell in favor of Diaz.3 On April 15, 1994,
however, BDC informed Diaz that respondent Edgar Arreza (Arreza) was claiming that the
heirs of Sps. Melgazo sold to him the rights over the property.4 BDC then placed Diaz’s
account in “inactive status.” To resolve the conflicting claims of Arreza and Diaz, BDC filed a
complaint for Interpleader against them, before the RTC, Makati City, Branch 146. On
March 27, 1996, the Makati City RTC Branch 146 ruled that the signatures of Sps. Melgazo
transferring their rights to Nacua were mere forgeries. Thus, it ruled that Arreza had a
better right over the property. This decision became final and executory.5redarclaw

On August 27, 1996, Diaz filed the present complaint for sum of money against BDC before
the RTC, Makati City, Branch 59.6 This was later amended to include Arreza and Tapay as
defendants. Diaz argued that BDC and Tapay’s representations led him to believe that he
had a good title over the property, but due to the court’s ruling in the interpleader case, he
was constrained to transfer the property to Arreza. Thus, he prayed for the
following:LawlibraryofCRAlaw

(1) For BDC and Arreza to pay him P1,106,915.58, plus interest, representing the amount
he paid for the assumption of Tapay’s rights;

(2) For Tapay to pay him P600,000.00, plus interests, representing the amount he paid
 90

Tapay;

(3) For BDC and Tapay to pay him P500,000.00 as moral damages;

(4) For BDC to pay him P500,000 as exemplary damages; and

(5) For BDC, Tapay, and Arreza to pay him P100,000 as attorney’s fees and costs of suit.7

Both BDC and Tapay argued that their respective acts were lawful and done in good
faith.Arreza filed a Motion to Dismiss, citing res judicata, arguing that the claim of Diaz is a
compulsory counterclaim that should have been pleaded in the Interpleader case. The RTC
denied the Motion to Dismiss, which the CA, on certiorari, affirmed. When the issue reached
this Court in G.R. No. 133113,8 this Court ruled that the claim as against Arreza is barred
by res judicata. The Court upheld the argument that the claim is in the nature of a
compulsory counterclaim. Thus, the case against Arreza was dismissed.

The Decision of the RTC

After trial, the RTC rendered its Decision on November 21, 2011, finding that Diaz failed to
prove that he is an assignee in good faith, and thus dismissed the complaint for lack of
merit in this wise:LawlibraryofCRAlaw

Plaintiff must show that he inquired not only into the title of the assignor but also into the
assignor’s capacity to convey. The failure of plaintiff to diligently inquire as such, indicated
that he is not an assignee in good faith. Plaintiff Diaz downplays the need to extend his
examination to intervening transferor farther than Domingo Tapay from whom he acquired
the subject property. Such attitude, however, is not in accord with what a reasonably
prudent person would do under the circumstances.

x x x x

WHEREFORE, premises considered, plaintiff’s Complaint is hereby DISMISSED for lack of

merit. Defendant Domingo Tapay’s [counterclaim] is likewise dismissed. No costs.9

Aggrieved, Diaz appealed to the CA.

The Decision of the CA

In its presently assailed Decision promulgated on January 21, 2014, the CA reversed the
ruling of the RTC and, instead,ruled that Diaz is entitled to be paid reimbursement and
damages. The CA anchored its ruling on its finding that Diaz is both a buyer in good faith
and a builder in good faith, thus:LawlibraryofCRAlaw

A careful examination of the records convinces Us that Diaz is both a buyer and builder in
good faith. We note that while Bliss executed a Deed of Sale with Mortgage in favor of the
 91

spouses Emiliano and Leonila Melgazo, title over the property was in Bliss’ name. The title
remained in Bliss’ name when Tapay offered to transfer his rights over the property to
Diaz. Considering that the property involved is registered land, Diaz need not go beyond
the title to be considered a buyer in good faith. Indeed, after Diaz accepted Tapay’s offer, he
dealt directly with Bliss which received the monthly amortizations due on the property. For
almost three years, from 1991 to 1994, Bliss accepted Diaz’s payment without informing
Diaz of Arreza’s conflicting claim over the property. Bliss even issued Diaz a permit to
occupy the property in 1992; thus, allowing Diaz to introduce improvements on the
property. In other words, at the time when Diaz purchased the property from Tapay and
when he introduced the improvements, he had no notice that some other person has a right
over the property. He also had a well-founded belief that the property he was building on
was his. Accordingly, Diaz is a buyer and builder in good faith.10

In ruling that Diaz is a buyer in good faith, the CA noted that Diaz need not go beyond the
title to be considered a buyer in good faith, because what is involved is a registered land.

With regard to the liability of BDC, the CA ruled that the provision in the Contract to Sell
excusing it from reimbursing the monthly amortizations to Diaz cannot exempt it from
liability, because it acted in bad faith. The CA said:LawlibraryofCRAlaw

Next, Bliss’ argument that the Additional Provision in the Contract to Sell excuses it from
reimbursing the monthly amortizations paid by Diaz cannot be given credence. Any
stipulation exempting the vendor from the obligation to answer for eviction shall be void, if
he acted in bad faith. The vendor’s bad faith consists in his knowledge beforehand at the
time of the sale, of the presence of the fact giving rise to eviction, and its possible
consequence. It is undisputed that Bliss knew about Arreza’s claim in 1991. It even
received amortization payments from Arreza. Yet, Bliss is aware that should Arreza pursue
his claim in court, Diaz may be evicted from the property. Yet, Bliss only informed Diaz
about Arreza’s claim in 1994 when Arreza followed up his claim. Indubitably, Bliss acted in
bad faith in dealing with Diaz and should not be absolved from liability by the Additional
Provision in the Contract to Sell.11

Thus, the CA dispositively held:LawlibraryofCRAlaw

FOR THESE REASONS, the November 21, 2011 Decision of the Regional Trial Court of
Makati City, Branch 59, is SET ASIDE. The Court hereby DIRECTS: (1) Defendant-appellee
Bliss Development Corporation/Home Guaranty Corporation to PAY plaintiff-apellant
Montano Diaz P1,106,915.58 for the amortizations paid and amount spent on
improvements on the property, P100,000.00 as moral damages, P50,000.00 as exemplary
damages, and P25,000.00 as attorney’s fee; and (2) defendant-appellee Domingo Tapay to
PAY plaintiff-appellant Montano M. Diaz P600,000.00, the amount he paid for the transfer
of rights.

Petitioner BDC moved for reconsideration, insisting that Diaz cannot be declared a buyer in
good faith, in light of the March 27, 1996 Decision of the Makati City RTC, Branch 146 in the
 92

Interpleader case, which had long been final and executory. Tapay also moved for
reconsideration, arguing that he was not aware of the defect in the title sold to Diaz, and,
hence, he should not be made liable for the P600,000.00 that Diaz paid to him. In the CA’s
assailed Resolution dated June 27, 2014,12 the CA denied both motions for reconsideration.

Hence, the present Petition for Review on Certiorari filed by BDC, raising the following
issues:LawlibraryofCRAlaw

I.

WHETHER THE CA ERREDIN NOT DISMISSING THE APPEAL, IN VIEW OF THE

APPLICATION OF THE DOCTRINE OF IMMUTABILITY OF JUDGMENT IN THE DECISION OF
THE COURT IN G.R. NO. 133113

II.

WHETHER THE CA ERRED IN DECLARING BDC IN BAD FAITH

III.

WHETHER THE CA ERRED IN DECLARING THAT THERE WAS UNJUST ENRICHMENT ON

THE PART OF BDC

IV.

WHETHER DIAZ CAN STILL CLAIM REIMBURSEMENT EVEN IF UNDER THE CONTRACT,
HIS POSSESSION IS IN THE NATURE OF A LESSOR

V.

WHETHER BDC IS LIABLE TO REIMBURSE DIAZ OF THE AMOUNT OF P1,106,915.58

In fine, petitioner argues that it is not liable to respondent Diaz, both for the amortizations
that Diaz paid to it, and the value of the improvements that Diaz introduced to the property.

Meanwhile, Tapay failed to elevate before this Court the CA’s ruling against him.

The Court’s Ruling

The petition is partially granted. The CA committed reversible error in ruling that Diaz was
a buyer in good faith and for value. Nevertheless, BDC is liable to Diaz because it acted in
bad faith, as discussed below.

The claim is not barred by the

doctrine of immutability of judgment
 93

First, We dispose of the issue of the applicability of the doctrine of immutability of

judgment, in view of the ruling of this Court in G.R. No. 133113. We find that the present
claim is not barred by the court’s ruling in G.R. No. 133113––to the effect that Diaz can no
longer claim reimbursement from Arrezabecause of res judicata––for his failure to allege
the claim in the interpleader case between them.

In G.R. No. 133113, We ruled that the claim against Arreza is barred by res
judicata, because of a prior Interpleader case between Arreza and Diaz. We ruled that the
claim for reimbursement should have been alleged and proved in the prior case, and failure
to do so bars any future action on such claims. We reiterated the rule on res judicata,
thus:LawlibraryofCRAlaw

In cases involving res adjudicata, the parties and the causes of action are identical or
substantially the same in the prior as well as the subsequent action. The judgment in the
first action is conclusive as to every matter offered and received therein and as to any other
matter admissible therein and which might have been offered for that purpose, hence said
judgment is an absolute bar to a subsequent action for the same cause.The bar extends to
questions necessarily involved in an issue, and necessarily adjudicated, or necessarily
implied in the final judgment, although no specific finding may have been made in
reference thereto, and although such matters were directly referred to in the pleadings and
were not actually or formally presented. Said prior judgment is conclusive in a
subsequent suit between the same parties on the same subject matter, and on the
same cause of action, not only as to matters which were decided in the first action, but
also as to every other matter which the parties could have properly set up in the prior
suit.13 (emphasis added)

In the case at bar, We find that the essential elements of res judicata are not present. First,
the interpleader case was between Arreza and Diaz. While it was BDC that initiated the
interpleader case, the opposing parties in that prior case is, in fact, Arreza and
Diaz. Second, the issues resolved in the interpleader case revolved around the conflicting
claims of Arreza and Diaz, and not whatever claim either of them may have against BDC.
Thus, there is no identity of parties, nor identity of subject matter, between the
interpleader case and the one at bar.

Petitioner BDC acted in bad faith

in dealing with respondent Diaz

On the second issue, We find that the CA committed no reversible error in finding that BDC
acted in bad faith, when it allowed Diaz to take over the payment of the amortizations over
the subject property. As the CA correctly noted, “It is undisputed that Bliss knew about
Arreza’s claim in 1991. It even received amortization payments from Arreza. Yet, Bliss
acknowledged the transfer to Diaz and received the monthly amortizations paid by Diaz.
Also, Bliss is aware that should Arreza pursue his claim in court, Diaz may be evicted from
the property.”14redarclaw
 94

BDC anchors its claim of good faith on the fact that it did not act as seller to Diaz. Rather,
BDC claims, it was Diaz who came forward and presented himself to BDC as the lawful
successor-in-interest of Emiliano and Leonila Melgazo, by virtue of the several deeds of
transfer of rights, all of which he presented to BDC. It was on the basis of this claim that
BDC allowed Diaz to occupy the property and pay amortizations accruing over the
property.15redarclaw

Nevertheless, BDC does not dispute that as early as 1991, even before respondent came
forward presenting the deeds of transfer to BDC, BDC was already aware of the claim of
Arreza. In fact, it even received amortizations from Arreza. Despite this, BDC also later
acknowledged the transfer to Diaz, and also accepted amortizations from him.16 This
uncontroverted sequence of events led the CA to correctly rule that BDC, indeed, acted in
bad faith.

When Diaz came forward and presented the deeds of transfer, including the deed of
transfer executed by Tapay in his favor, BDC was already well aware of a conflicting claim
by Arreza. Instead of waiting for the resolution on the matter, BDC immediately accepted
the deed of transfer presented by Diaz, as well as the amortizations he paid over the
property. It was only in 1994 that BDC filed the Interpleader case to resolve the conflicting
case. This is nothing short of evident bad faith.

Respondent Diaz is not a purchaser

for value and in good faith

We,however, fail to find sufficient basis for the CA’s ruling that Diaz is a purchaser for value
and in good faith. In a long line of cases, this Court had ruled that a purchaser in good faith
and for value is one who buys property of another without notice that some other person
has a right to, or interest in, such property and pays full and fair price for the same at the
time of such purchase or before he or she has notice of the claim or interest of some other
person in the property.17For one to be considered a purchaser in good faith, the following
requisites must concur: (1) that the purchaser buys the property of another without notice
that some other person has a right to or interest in such property; and (2) that the
purchaser pays a full and fair price for the property at the time of such purchase or before
he or she has notice of the claim of another.18 We find that in the case at bar, the first
element is lacking.

The CA, in disposing the issue of Diaz’s good faith, merely said that “considering that the
property involved is registered land, Diaz need not go beyond the title to be considered a
buyer in good faith.”19We find this to be a serious and reversible error on the part of the CA.
In the first place, while it is true that the subject lot is registered lot, the doctrine of not
going beyond the face of the title does not apply in the case here, because what was
subjected to a series of sales was not the lot itself but the right to purchase the lot from
BDC. The CA itself observed: “while [BDC] executed a Deed of Sale with Mortgage in favor of
the spouses Emiliano and Leonila Melgazo, title over the property was in [BDC’s] name. The
title remained in [BDC’s] name when Tapay offered to transfer his rights over the property
to Diaz.”20Notably, the several transfers themselves did not purport to be Deeds of Absolute
 95

Sale, but merely deeds of assignment of rights. The subject of those deeds of assignment
was never the real right over the subject property, but merely the personal right to
purchase it. Therefore, the mirror doctrine finds no application in the case at bar.

A careful review of the records of this case reveals that Diaz, in fact, failed to diligently
inquire into the title of his predecessor before entering into the contract of sale. As such, he
cannot be considered a buyer in good faith. There is no issue that despite the several
transfers of rights from Nacua to Garcia to Reyes to Tapay to Diaz, title over the property
remained in BDC’s name.When Diaz transacted with Tapay, it was also clear that what was
being transferred was merely rights to purchase the property, and not title over the lot
itself; if it were, the sale would have been void because Tapay never had ownership over
the subject property. As the buyer in such a transaction, it was incumbent upon Diaz not
only to inquire as to the right of Tapay to transfer his rights, but also to trace the source of
that right to purchase the property. Had he discharged this duty diligently, he would have
found out that Nacua’s right was without basis, because it was founded on a forged deed.
For his failure to inquire diligently and trace the source of the right to purchase the
property, Diaz cannot claim to be a purchaser in good faith and for value.

Petitioner BDC is liable to return the

amortizations paid by respondent Diaz,
under the doctrine of unjust enrichment

Notwithstanding the fact that Diaz is not an innocent purchaser in good faith and for value,
BDC is nevertheless liable to return to him the amortizations which he already paid on the
property, applying the rule on unjust enrichment.

Unjust enrichment exists when a person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against the fundamental principles of
justice, equity and good conscience. Under Article 22 of the Civil Code, 21 there is unjust
enrichment when (1) a person is unjustly benefited and (2) such benefit is derived at the
expense of or with damages to another.22redarclaw

Allowing BDC to keep the amortizations paid by Diaz is tantamount to unjust enrichment. It
would result in BDC receiving amortizations twice the amount it should have received, that
is, the amortizations paid by Diaz and Arreza. While BDC claims that it did not receive
amortizations from both Diaz and Arreza covering the same period, such a claim is self-
serving, and is not amply supported by any documentary evidence.

Even if BDC can prove that there was no overlap between the payments made by Diaz and
those made by Arreza, allowing it to keep the amortizations paid by Diaz still amounts to
unjust enrichment. As a direct result of the final and executory ruling that Arreza is the
rightful buyer of the subject property, the buyer-seller relationship between Diaz and BDC
is rendered null and void. Consequently, there remains no valid consideration whatsoever
for the payments made by Diaz to BDC. There being no indication of intent to donate,
because such payments were made under the impression that Diaz is the rightful buyer of
the property, it is only but just that Diaz be allowed to claim back what he has paid. This is
 96

only a natural consequence of the final and executory ruling that Diaz is not the rightful
buyer of the subject property. Allowing BDC to keep such payments, at the expense of and
to the damage of Diaz, still amounts to unjust enrichment.

Both parties being in bad faith,

BDC is liable to Diaz for the value
of the improvements he introduced
on the subject property

Next, We resolve the issue of whether BDC is liable to Diaz for the value of the
improvements that Diaz introduced to the property. Arts. 448, 453, 546, and 548 of the
Civil Code are material in resolving the issue:LawlibraryofCRAlaw

Art. 448. The owner of the land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who
built or planted to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.

Art. 453. If there was bad faith, not only on the part of the person who built, planted or
sowed on the land of another, but also on the part of the owner of such land, the rights of
one and the other shall be the same as though both had acted in good faith.

It is understood that there is bad faith on the part of the landowner whenever the act was
done with his knowledge and without opposition on his part.

Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor
in good faith may retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right of
retention, the person who has defeated him in the possession having the option of
refunding the amount of the expenses or of paying the increase in value which the thing
may have acquired by reason thereof.

Art. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor
in good faith; but he may remove the ornaments with which he has embellished the
principal thing if it suffers no injury thereby, and if his successor in the possession does not
prefer to refund the amount expended.

The CA may have made the erroneous conclusion that Diaz acted in good faith, but because
BDC equally acted in bad faith, Art. 453 of the Civil Code commands that the rights of one
 97

and the other shall be the same as though both had acted in good faith. The CA made the
correct observation then, when it said:LawlibraryofCRAlaw

Under Article 448, the landowner is given the option, either to appropriate the
improvement as his own upon payment of the proper amount of indemnity or to sell the
land to the possessor in good faith. Relatedly Article 546 provides that a builder in good
faith is entitled to full reimbursement for all the necessary and useful expenses incurred. In
this case, however, the option of selling the land to the builder in good faith is no longer
viable in light of the ruling in the interpleader case. Hence, there is only one thing left for
[BDC] to do: indemnify Diaz for the improvements introduced on the property.23

Nevertheless, because the law treats both parties as if they acted in good faith, the CA
committed reversible error in awarding moral and exemplary damages, there being no
basis therefor. We find it proper to delete the award of P100,000.00 as moral damages,
P50,000.00 as exemplary damages, and P25,000.00 as attorney’s fees.

In sum, the CA correctly reversed the ruling of the RTC, and ordered BDC to pay Diaz the
amount he paid as amortizations, as well as the value of the improvements that he
introduced on the subject property. However, because both parties acted in bad faith, there
is no basis for the award of moral and exemplary damages, as well as attorney’s fees.

WHEREFORE, in view of the foregoing, the January 21, 2014 Decision of the Court of
Appeals in CA-G.R. CV No. 99179 is hereby MODIFIED to read as follows: (1) petitioner
Bliss Development Corporation/Home Guaranty Corporation is ordered topay respondent
Montano M. Diaz the amount of P1,106,915.58 for the amortizations paid and the amount
spent on improvements on the property; and (2) Domingo Tapay is ordered to pay
respondent Montano M. Diaz the amount of P600,000.00, the amount he paid for the
transfer of rights.

[G.R. NO. 180832 : July 23, 2008]

JEROME CASTRO, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

RESOLUTION

CORONA, J.:

This Petition for Review on Certiorari 1 emanated from the complaint for grave oral
defamation2 filed by Albert P. Tan against petitioner Jerome Castro.
 98

The facts follow.

On November 11, 2002, Reedley International School (RIS) dismissed Tan's son, Justin
Albert (then a Grade 12 student), for violating the terms of his disciplinary
probation.3 Upon Tan's request, RIS reconsidered its decision but imposed "non-
appealable" conditions such as excluding Justin Albert from participating in the graduation
ceremonies.

Aggrieved, Tan filed a complaint in the Department of Education (Dep-Ed) for violation of
the Manual of Regulation of Private Schools, Education Act of 1982 and Article 19 of the
Civil Code4 against RIS. He alleged that the dismissal of his son was undertaken with malice,
bad faith and evident premeditation. After investigation, the Dep-Ed found that RIS' code
violation point system allowed the summary imposition of unreasonable sanctions (which
had no basis in fact and in law). The system therefore violated due process. Hence, the Dep-
Ed nullified it.5

Meanwhile, on November 20, 2002, the Dep-Ed ordered RIS to readmit Justin Albert
without any condition.6 Thus, he was able to graduate from RIS and participate in the
commencement ceremonies held on March 30, 2003.

After the graduation ceremonies, Tan met Bernice C. Ching, a fellow parent at RIS. In the
course of their conversation, Tan intimated that he was contemplating a suit against the
officers of RIS in their personal capacities, including petitioner who was the assistant
headmaster.

Ching telephoned petitioner sometime the first week of April and told him that Tan was
planning to sue the officers of RIS in their personal capacities. Before they hung up,
petitioner told Ching:

Okay, you too, take care and be careful talking to [Tan], that's dangerous.

Ching then called Tan and informed him that petitioner said "talking to him was
dangerous."

Insulted, Tan filed a complaint for grave oral defamation in the Office of the City Prosecutor
of Mandaluyong City against petitioner on August 21, 2003.

On November 3, 2003, petitioner was charged with grave oral defamation in the
Metropolitan Trial Court (MeTC) of Mandaluyong City, Branch 60 7 under the following
Information:

That on or about the 13th day of March, 2003 in the City of Mandaluyong, Philippines, a
place within the jurisdiction of this Honorable Court, the above-named [petitioner], with
deliberate intent of bringing ATTY. ALBERT P. TAN, into discredit, dishonor, disrepute and
contempt, did then and there, willfully, unlawfully and feloniously speak and utter the
following words to Ms. Bernice C. Ching:
 99

"OK, YOU TOO, YOU TAKE CARE AND BE CAREFUL TALKING TO [TAN], THAT'S
DANGEROUS."

and other words of similar import of a serious and insulting nature.

CONTRARY TO LAW.

Petitioner pleaded not guilty during arraignment.

The prosecution essentially tried to establish that petitioner depicted Tan as a "dangerous
person." Ching testified that petitioner warned her that talking to Tan was dangerous. Tan,
on the other hand, testified that petitioner's statement shocked him as it portrayed him as
"someone capable of committing undesirable acts." He added that petitioner probably took
offense because of the complaint he filed against RIS in the Dep-Ed.

For his defense, petitioner denied harboring ill-feelings against Tan despite the latter's
complaint against RIS in the Dep-Ed. Although he admitted conversing with Ching (whom
he considered as a close acquaintance) on the telephone a few days after RIS' 2003
commencement exercises, petitioner asserted that he never said or insinuated that Tan or
talking to Tan was dangerous. On cross-examination, however, he did not categorically
deny the veracity of Ching's statement.

The MeTC found that Ching's statements in her affidavit and in open court were consistent
and that she did not have any motive to fabricate a false statement. Petitioner, on the other
hand, harbored personal resentment, aversion and ill-will against Tan since the Dep-Ed
compelled RIS to readmit his son. Thus, the MeTC was convinced that petitioner told Ching
talking to Tan was dangerous and that he uttered the statement with the intention to insult
Tan and tarnish his social and professional reputation.

In a decision dated December 27, 2005, the MeTC found petitioner guilty beyond
reasonable doubt of grave oral defamation:8

WHEREFORE, judgment is hereby rendered finding accused, Jerome

Castro GUILTY beyond reasonable doubt of the crime of Grave Oral Defamation, sentencing
him therefore, in accordance to Article 358(1) of the Revised Penal Code and applying the
Indeterminate Sentence Law to suffer the penalty of imprisonment of 1 month and 1 day
of arresto mayor as minimum to 4 months and 1 day of arresto mayor as maximum.

On appeal, the Regional Trial Court (RTC) affirmed the factual findings of the MeTC.
However, in view of the animosity between the parties, it found petitioner guilty only of
slight oral defamation. But because Tan filed his complaint in the Office of the City
Prosecutor of Mandaluyong City only on August 21, 2003 (or almost five months from
discovery), the RTC ruled that prescription had already set in; it therefore acquitted
petitioner on that ground.9
 100

On April 19, 2007, the Office of the Solicitor General (OSG) filed a petition for certiorari in
the Court of Appeals (CA) assailing the decision of the RTC. 10 It contended that the RTC
acted with grave abuse of discretion when it downgraded petitioner's offense to slight oral
defamation. The RTC allegedly misappreciated the antecedents which provoked petitioner
to utter the allegedly defamatory statement against Tan.

The CA found that the RTC committed grave abuse of discretion when it misapprehended
the totality of the circumstances and found petitioner guilty only of slight oral defamation.
Thus, the CA reinstated the MeTC decision.11

Petitioner moved for reconsideration but it was denied.12 Hence, this recourse.

Petitioner basically contends that the CA erred in taking cognizance of the petition
for certiorari inasmuch as the OSG raised errors of judgment (i.e., that the RTC
misappreciated the evidence presented by the parties) but failed to prove that the RTC
committed grave abuse of discretion. Thus, double jeopardy attached when the RTC
acquitted him.

We grant the petition.

No person shall be twice put in jeopardy of punishment for the same offense.13 This
constitutional mandate is echoed in Section 7 of Rule 117 of the Rules of Court which
provides:

Section 7. Former conviction or acquittal; double jeopardy. ' When an accused has been
convicted or acquitted or the case against him dismissed or otherwise terminated without
his express consent by a court of competent jurisdiction, upon a valid complaint or in
information or other formal charge sufficient in form and substance to sustain a conviction
and after the accused had pleaded to the charge, the conviction or acquittal of the accused
or the dismissal of the case shall be a bar to another prosecution for the offense charged or
for any attempt to commit the same or frustration thereof, or for any offense which
necessarily includes or is necessarily included in the offense charged in the former
complaint or information.

x x x           x x x          x x x

Under this provision, double jeopardy occurs upon (1) a valid indictment (2) before a
competent court (3) after arraignment (4) when a valid plea has been entered and (5)
when the accused was acquitted or convicted or the case was dismissed or otherwise
terminated without the express consent of the accused.14 Thus, an acquittal, whether
ordered by the trial or appellate court, is final and unappealable on the ground of double
jeopardy.15

The only exception is when the trial court acted with grave abuse of discretion or, as we
held in Galman v. Sandiganbayan,16 when there was mistrial. In such instances, the OSG can
 101

assail the said judgment in a petition for certiorari establishing that the State was deprived
of a fair opportunity to prosecute and prove its case.17

The rationale behind this exception is that a judgment rendered by the trial court with
grave abuse of discretion was issued without jurisdiction. It is, for this reason, void.
Consequently, there is no double jeopardy.

In this case, the OSG merely assailed the RTC's finding on the nature of petitioner's
statement, that is, whether it constituted grave or slight oral defamation. The OSG premised
its allegation of grave abuse of discretion on the RTC's "erroneous" evaluation and
assessment of the evidence presented by the parties.ςηαñ rοblεš νιr†υαl lαω lιbrαrÿ

What the OSG therefore questioned were errors of judgment (or those involving
misappreciation of evidence or errors of law). However, a court, in a petition for certiorari,
cannot review the public respondent's evaluation of the evidence and factual
findings.18 Errors of judgment cannot be raised in a Rule 65 petition as a writ
of certiorari can only correct errors of jurisdiction (or those involving the commission of
grave abuse of discretion).19

Because the OSG did not raise errors of jurisdiction, the CA erred in taking cognizance of its
petition and, worse, in reviewing the factual findings of the RTC. 20 We therefore reinstate
the RTC decision so as not to offend the constitutional prohibition against double jeopardy.

At most, petitioner could have been liable for damages under Article 26 of the Civil Code21 :

Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of
his neighbors and other persons. The following and similar acts, though they may not
constitute a criminal offense, shall produce a cause of action for damages, prevention and
other relief:

x x x           x x x          x x x

(3) Intriguing to cause another to be alienated from his friends;

x x x           x x x          x x x

Petitioner is reminded that, as an educator, he is supposed to be a role model for the youth.
As such, he should always act with justice, give everyone his due and observe honesty and
good faith.22

WHEREFORE, the petition is hereby GRANTED. The August 29, 2007 decision and
December 5, 2007 resolution of the Court of Appeals in CA-G.R. SP No. 98649
are REVERSED and SET ASIDE. The November 20, 2006 decision of the Regional Trial
Court of Mandaluyong City, Branch 212 is REINSTATED. Petitioner Jerome Castro
is ACQUITTED of slight oral defamation as defined and penalized in Article 358 of the
Revised Penal Code.
 102

G.R. No. L-54598 April 15, 1988

JOSE B. LEDESMA, petitioner,
vs.
HON. COURT OF APPEALS, Spouses PACIFICO DELMO and SANCHA DELMO (as private
respondents), respondents.

The Solicitor General for petitioner.

Luzel D. Demasu-ay for respondent.

GUTIERREZ, JR., J.:

This petition seeks to reverse the decision of the respondent Court of Appeals which
afirmed the decision of the Court of First Instance of Iloilo, adjudging the petitioner, who
was then the President of the West Visayas College liable for damages under Article 27 of
the Civil Code of the Philippines for failure to graduate a student with honors.

The facts are not disputed.

An organization named Student Leadership Club was formed by some students of the West
Visayas College. They elected the late Violets Delmo as the treasurer. In that capacity,
Delmo extended loans from the funds of the club to some of the students of the school. "the
petitioner claims that the said act of extending loans was against school rules and
regulations. Thus, the petitioner, as President of the School, sent a letter to Delmo
informing her that she was being dropped from the membership of the club and that she
would not be a candidate for any award or citation from the school.

Delmo asked for a reconsideration of the decision but the petitioner denied it. Delmo, thus,
appealed to the Office of the Director of the Bureau of Public Schools.

The Director after due investigation, rendered a decison on April 13, 1966 which provided:

Records of the preliminary investigation conducted by one of the legal

officers of this Office disclosed the following: That Violeta Delmo was the
treasurer of the Student Leadership Club, an exclusive student organization;
that pursuant to Article IX of the of the Constitution and By-Laws of the club,
it passed Resolution No. 2, authorizing the treasurer to disburse funds of the
Club to student for financial aid and other humanitarian purposes; that in
compliance with said resolution and as treasurer of the Club, Violeta Delmo
extended loans to some officers and members of the Club upon proper
application duly approved by the majority of the members of the Executive
Board; and that upon receiving the report from Mr. Jesse Dagoon, adviser of
the funds of the Club, that Office conducted an investigation on the matter
 103

and having been convinced of the guilt of Violets Delmo and the other officers
and members of the Club, that Office rendered the order or decision in
question. In justifying that Office's order or decision, it is contended that
approval by that Office of the Constitution and By-Laws of the Club is
necessary for its effectivity and validity and since it was never submitted to
that Office, the Club had no valid constitution and By-Laws and that as a
consequence, Resolution No. 2 which was passed based on the Constitution
and By-Laws- is without any force and effect and the treasurer, Violeta
Delmo, who extended loans to some officers and members of the Club
pursuant thereto are illegal (sic), hence, she and the other students involved
are deemed guilty of misappropriating the funds of the Club. On the other
hand, Raclito Castaneda, Nestor Golez and Violeta Delmo, President,
Secretary and Treasurer of the Club, respectively, testified that the Club had
adopted its Constitution and By-Laws in a meeting held last October 3, 1965,
and that pursuant to Article I of said Constitution and By-Laws, the majority
of the members of the Executive Board passed Resolution No. 2, which
resolution became the basis for the extension on of loans to some officers and
members of the Club, that the Club honestly believed that its Constitution and
By-Laws has been approved by the superintendent because the adviser of the
Club, Mr. Jesse Dagoon, assured the President of the Club that he will cause
the approval of the Constitution and By-Laws by the Superintendent; the
officers of the Club have been inducted to office on October 9,1965 by the
Superintendent and that the Club had been likewise allowed to cosponsor the
Education Week Celebration.

After a careful study of the records, this Office sustains the action taken by
the Superintendent in penalizing the adviser of the Club as well as the
officers and members thereof by dropping them from membership therein.
However, this Office is convinced that Violets M. Delmo had acted in good
faith, in her capacity as Club Treasurer, in extending loans to the officers and
members of the Student partnership Club. Resolution No. 2 authorizing the
Club treasurer to discharge finds to students in need of financial assistance
and other humanitarian purposes had been approved by the Club adviser,
Mr. Jesse Dagoon, with the notation that approval was given in his capacity as
adviser of the Club and extension of the Superintendent's personality. Aside
from misleading the officers and members of the Club, Mr. Dagoon, had
unsatisfactorily explained why he failed to give the Constitution and By-Laws
of the Club to the Superintendent for approval despite his assurance to the
Club president that he would do so. With this finding of negligence on the
part of the Club adviser, not to mention laxity in the performance of his
duties as such, this Office considers as too severe and unwarranted that
portion of the questioned order stating that Violeta Delmo "shall not be a
candidate for any award or citation from this school or any organization in
this school." Violeta Delmo, it is noted, has been a consistent full scholar of
the school and she alone has maintained her scholarship. The decision in
 104

question would, therefore, set at naught all her sacrifice and frustrate her
dreams of graduating with honors in this year's commencement exercises.

In view of all the foregoing, this Office believes and so holds and hereby
directs that appellant Violeta. M. Delmo, and for that matter all other Club
members or officers involved in this case, be not deprived of any award,
citation or honor from the school, if they are otherwise entitled thereto.
(Rollo, pp. 28-30)

On April 27, 1966, the petitioner received by mail the decision of the Director and all the
records of the case. On the same day, petitioner received a telegram stating the following:

"AIRMAIL RECORDS DELMO CASE MISSENT THAT OFFICE"

The Director asked for the return only of the records but the petitioner allegedly mistook
the telegram as ordering him to also send the decision back. On the same day, he returned
by mail all the records plus the decision of the Director to the Bureau of Public Schools.

The next day, the petitioner received another telegram from the Director order him to
furnish Delmo with a copy of the decision. The petitioner, in turn, sent a night letter to the
Director informing the latter that he had sent the decision back and that he had not
retained a copy thereof..

On May 3, 1966, the day of the graduation, the petitioner received another telegram from
the Director ordering him not to deprive Delmo of any honors due her. As it was impossible
by this time to include Delmo's name in the program as one of the honor students, the
petitioner let her graduate as a plain student instead of being awarded the Latin honor of
Magna Cum Laude.

To delay the matter further, the petitioner on May 5, 1966, wrote the Director for a
reconsideration of the latters" decision because he believed that Delmo should not be
allowed to graduate with honors. The Director denied the petitioner's request.

On July 12, 1966, the petitioner finally instructed the Registrar of the school to enter into
the scholastic records of Delmo the honor, "Magna Cum Laude."

On July 30, 1966, Delmo, then a minor, was joined by her parents in flag action for damages
against the petitioner. During the pendency of the action, however, Delmo passed away,
and thus, an Amended and Supplemental Complaint was filed by her parents as her sole
and only heirs.

The trial court after hearing rendered judgment against the petitioner and in favor of the
spouses Delmo. The court said:

Let us go to specific badges of the defendants (now petitioners) bad faith. Per
investigation of Violeta Delmo's appeal to Director Vitaliano Bernardino of
 105

the Bureau of Public Schools (Exhibit L it was the defendant who inducted
the officers of the Student Leadership Club on October 9, 1965. In fact the
Club was allowed to cosponsor the Education Week Celebration. (Exh. "L"). If
the defendant he not approve of the constitution and by-laws of the Club,
why did he induct the officers into office and allow the Club to sponsor the
Education Week Celebration"? It was through his own act that the students
were misled to do as they did. Coupled with the defendants tacit recognition
of the Club was the assurance of Mr. Jemm Dagoon, Club Adviser, who made
the students believe that he was acting as an extension of Mr. Ledesma's
personality. (Exhibit "L").

Another badge of the defendan'ts want of good faith is the fact that, although,
he kaew as early as April 27,1966 that per on of r Bernardino, Exhibit "L," he
was directed to give honors to Miss Delmo, he kept Id information to . He told
the Court that he knew that the letter of Director Bernardino directed him
not to deprive Miss Delmo the honors due her, but she (sic) says that he has
not finished reading the letter-decision, Exhibit "L," of Director Bernardino 0,
him to give honors to Miss Delmo. (Tsn, Feb. 5, 1974, testimony of Mr.
Ledesma, pp. .33-35). It could not be true that he has not finished reading the
letter-decision, Exh. "L," because said letter consisted of only three pages,
and the portion which directed that Miss Delmo "be not deprived of any
award, citation or honor from the school, if otherwise entitled thereto is
found at the last paragraph of the same. How did he know the last paragraph
if he did not read the letter.

Defendants actuations regarding Miss Delmo's cam had been one of bias and
prejudice. When his action would favor him, he was deliberate and aspect to
the utter prejudice and detriment of Miss Delmo. Thus, although, as early as
April 27, 1966, he knew of the exoneration of Miss Delino by Director
Bernardino, he withheld the information from Miss Delmo. This is eloquently
dramatized by Exh. "11" and Exh. "13" On April 29,1966, Director Bernardino
cabled him to furnish Violeta Delmo copy of the Decision, Exh. "L," but
instead of informing Miss Delmo about the decision, since he said he mailed
back the decision on April 28,1966, he sent a night letter on April 29,1966, to
Director Bernardino, informing the latter that he had returned the decision
(Exh. "l3"), together with the record. Why a night letter when the matter was
of utmost urgency to the parties in the case, because graduation day was only
four days ahead? An examination of the telegrams sent by the defendant
shows that he had been sending ordinary telegram and not night letters.
(Exh. "5", Exhibit "7"). At least, if the defendant could not furnish a copy of
the decision, (Exh. "L"), to Miss Delmo, he should have told her about it or
that Miss Delmo's honors and citation in the commencement be announced
or indicated. But Mr. Ledesma is one who cannot admit a mistake. Very
ungentlemanly this is home out by his own testimony despite his knowledge
that his decision to deprive Miss Delmo of honors due to her was overturned
by Director Bernardino, he on his wrong belief. To quote the defendant,1
 106

believed that she did not deserve those honors(Tsn Feb. 5, 1974, p.
43,Empasized supplied). Despite the telegram of Director Bernardino which
the defendant received hours before the commencement executory on May
3-4,1966, he did not obey Director Bernardino because he said in his
testimony that he would be embarrassment . Tan Feb 5,1974, P. 46).
Evidently, he knew only his embarrassment and not that of r Bernardino
whose order was being flagrantly and wantonly disregarded by bim And
certainly, not the least of Miss Delmo's embarrassment. His acts speak
eloquently of ho bad faith and unjust of mindwarped by his delicate
sensitivity for having been challenged by Miss Delmo, a mere student.

xxx xxx xxx

Finally the defendant's behaviour relative to Miss s case smacks of

contemptuous arrogance, oppression and abuse of power. Come to think of it.
He refused to obey the directive of Be o and instead, chose to feign ignorance
of it." (Reward on Appeal, p. 72-76).

The trial court awarded P20,000.00 to the estate of Violeta Delmo and P10,000.00 to her
parents for moral damages; P5,000.00 for nominal damages to Violeta's estate; exemplary
damages of P10,000.00 and P2,000.00 attorney's fees.

On appeal, the Court of Appeals affirmed the decision. Hence, this petition.

The issues raised in this petition can be reduced to the sole question of whether or not the
respondent Court of Appeals erred in affirming the trial court's finding that petitioner is
liable for damages under Article 27 of the New Civil Code.

We find no reason why the findings of the trial and appellate courts should be reversed. It
cannot be disputed that Violeta Delmo went through a painful ordeal which was brought
about by the petitioner's neglect of duty and callousness. Thus, moral damages are but
proper. As we have affirmed in the case of (Prudenciado v. Alliance Transport System, Inc.,
148 SCRA 440, 448):

There is no argument that moral damages include physical suffering, mental

anguish, fright, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if they are the
proximate result of defendant's wrongly act or omission." (People v. Baylon,
129 SCRA 62 (1984).

The Solicitor-General tries to cover-up the petitioner's deliberate omission to inform Miss
Delmo by stating that it was not the duty of the petitioner to furnish her a copy of the
Director's decision. Granting this to be true, it was nevertheless the petitioner's duty to
enforce the said decision. He could have done so considering that he received the decision
on April 27, 1966 and even though he sent it back with the records of the case, he
 107

undoubtedly read the whole of it which consisted of only three pages. Moreover, the
petitioner should have had the decency to meet with Mr. Delmo, the girl's father, and
inform the latter, at the very least of the decision. This, the petitioner likewise failed to do,
and not without the attendant bad faith which the appellate court correctly pointed out in
its decision, to wit:

Third, assuming that defendant could not furnish Miss Delmo of a copy of the
decision, he could have used his discretion and plain common sense by
informing her about it or he could have directed the inclusion of Miss
Delmo's honor in the printed commencement program or announced it
during the commencement exercises.

Fourth, defendant despite receipt of the telegram of Director Benardino

hours before the commencement exercises on May 3-4, 1966, disobeyed his
superior by refusing to give the honors due Miss Delmo with a lame excuse
that he would be embarrassed if he did so, to the prejudice of and in
complete disregard of Miss Delmo's rights.

Fifth, defendant did not even extend the courtesy of meeting Mr. Pacifico
Delmo, father of Miss Delmo, who tried several times to see defendant in his
office thus Mr. Delmo suffered extreme disappointment and humiliation.

xxx xxx xxx

Defendant, being a public officer should have acted with circumspection and
due regard to the rights of Miss Delmo. Inasmuch as he exceeded the scope of
his authority by defiantly disobeying the lawful directive of his superior,
Director Bernardino, defendant is liable for damages in his personal capacity.
. . . (Rollo, pp- 57-58)

Based on the undisputed facts, exemplary damages are also in order. In the same case
of Prudenciado v. Alliance Transport System, Inc., supra., at p. 450, we ruled:

The rationale behind exemplary or corrective damages is, as the name

implies, to provide an example or correction for the public good (Lopez, et al.
v. Pan American World Airways, 16 SCRA 431).

However, we do not deem it appropriate to award the spouses Delmo

damages in the amount of P10,000.00 in their individual capacity, separately
from and in addition to what they are already entitled to as sole heirs of the
deceased Violeta Delmo. Thus, the decision is modified insofar as moral
damages are awarded to the spouses in their own behalf.

WHEREFORE, the petition is DISMISSED for lack of merit. The decision of the Court of
Appeals is AFFIRMED with the slight modification as stated in the preceding paragraph.
This decision is immediately executory.
 108

A.C. No. 8261, March 11, 2015

JESSIE T. CAMPUGAN AND ROBERT C. TORRES, Complainants, v. ATTY. FEDERICO S.

TOLENTINO, JR., ATTY. RENATO G. CUNANAN, ATTY. DANIEL F. VICTORIO, JR., AND
ATTY. ELBERT T. QUILALA, Respondents.

A.C. No. 8725

JESSIE T. CAMPUGAN AND ROBERT C. TORRES, Complainants, v. ATTY. CONSTANTE P.

CALUYA, JR., AND ATTY. ELBERT T. QUILALA, Respondent.

DECISION

BERSAMIN, J.:

In this consolidated administrative case, complainants Jessie T. Campugan and Robert C.

Torres seek the disbarment of respondents Atty. Federico S. Tolentino, Jr., Atty. Daniel F.
Victorio, Jr., Atty. Renato G. Cunanan, Atty. Elbert T. Quilala and Atty. Constante P. Caluya, Jr.
for allegedly falsifying a court order that became the basis for the cancellation of their
annotation of the notice of adverse claim and the notice of lis pendens in the Registry of
Deeds in Quezon City.chanRoblesvirtualLawlibrary

Antecedents

Atty. Victorio, Jr. had replaced Atty. Edgardo Abad as counsel of the complainants in a civil
action they brought to seek the annulment of Transfer Certificate of Title (TCT) No. N-
290546 of the Registry of Deeds of Quezon City in the first week of January 2007 in the
Regional Trial Court (RTC) in Quezon City (Civil Case No. Q-07-59598). They impleaded as
defendants Ramon and Josefina Ricafort, Juliet Vargas and the Register of Deeds of Quezon
City. They caused to be annotated on TCT No. N-290546 their affidavit of adverse claim, as
well as the notice of lis pendens.1 Atty. Tolentino, Jr. was the counsel of defendant Ramon
and Josefina Ricafort.

In their sworn complaint for disbarment dated April 23, 2009 (later docketed as A.C. No.
8261),2 the complainants narrated that as the surviving children of the late Spouses
Antonio and Nemesia Torres, they inherited upon the deaths of their parents a residential
lot located at No. 251 Boni Serrano Street, Murphy, Cubao, Quezon City registered under
Transfer Certificate of Title (TCT) No. RT-64333(35652) of the Register of Deeds of Quezon
City;3 that on August 24, 2006, they discovered that TCT No. RT-64333(35652) had been
unlawfully cancelled and replaced by TCT No. N-290546 of the Register of Deeds of Quezon
City under the names of Ramon and Josefina Ricafort;4 and that, accordingly, they
immediately caused the annotation of their affidavit of adverse claim on TCT No. N-290546.
 109

It appears that the parties entered into an amicable settlement during the pendency of Civil
Case No. Q-07-59598 in order to end their dispute,5 whereby the complainants agreed to
sell the property and the proceeds thereof would be equally divided between the parties,
and the complaint and counterclaim would be withdrawn respectively by the complainants
(as the plaintiffs) and the defendants. Pursuant to the terms of the amicable settlement,
Atty. Victorio, Jr. filed a Motion to Withdraw Complaint dated February 26, 2008, 6 which
the RTC granted in its order dated May 16, 2008 upon noting the defendants' lack of
objection thereto and the defendants' willingness to similarly withdraw their
counterclaim.7

The complainants alleged that from the time of the issuance by the RTC of the order dated
May 16, 2008, they could no longer locate or contact Atty. Victorio, Jr. despite making
several phone calls and visits to his office; that they found out upon verification at the
Register of Deeds of Quezon City that new annotations were made on TCT No. N-290546,
specifically: (1) the annotation of the letter-request appearing to be filed by Atty. Tolentino,
Jr.8 seeking the cancellation of the affidavit of adverse claim and the notice of lis
pendens annotated on TCT No. N-290546; and (2) the arinotation of the decision dated May
16, 2008 rendered in Civil Case No. Q-07-59598 by the RTC, Branch 95, in Quezon City,
granting the complainants' Motion to Withdraw Complaint;9 and that a copy of the letter-
request dated June 30, 2008 addressed to Atty. Quilala, Registrar of Deeds of Quezon City,
disclosed that it was defendant Ramon Ricafort who had signed the letter.

Feeling aggrieved by their discovery, the complainants filed an appeal en consulta with the
Land Registration Authority (LRA), docketed as Consulta No. 4707, assailing the unlawful
cancellation of their notice of adverse claim and their notice of lis pendens under primary
entries PE-2742 and PE-3828-9, respectively. The LRA set Consulta No. 4707 for hearing on
March 30, 2009, and directed the parties to submit their respective memoranda and/or
supporting documents on or before such scheduled hearing.10 However, the records do not
disclose whether Consulta No. 4707 was already resolved, or remained pending at the LRA.

Unable to receive any response or assistance from Atty. Victorio, Jr. despite their having
paid him for his professional services, the complainants felt that said counsel had
abandoned their case. They submitted that the cancellation of their notice of adverse claim
and their notice of lis pendens without a court order specifically allowing such cancellation
resulted from the connivance and conspiracy between Atty. Victorio, Jr. and Atty. Tolentino,
Jr., and from the taking advantage of their positions as officials in the Registry of Deeds by
respondents Atty. Quilala, the Chief Registrar, and Atty. Cunanan, the acting Registrar and
signatory of the new annotations. Thus, they claimed to be thereby prejudiced.

On July 6, 2009, the Court required the respondents to comment on the verified
complaint.11

Atty. Victorio, Jr. asserted in his Comment dated August 17, 2009 12 that complainant Robert
Torres had been actively involved in the proceedings in Civil Case No. Q-07-59598, which
included the mediation process; that the complainants, after having aggressively
participated in the drafting of the amicable settlement, could not now claim that they had
 110

been deceived into entering the agreement in the same way that they could not feign
ignorance of the conditions contained therein; that he did not commit any abandonment as
alleged, but had performed in good faith his duties as the counsel for the complainants in
Civil Case No. Q-07-59598; that he should not be held responsible for their representation
in other proceedings, such as that before the LRA, which required a separate engagement;
and that the only payment he had received from the complainants were those for his
appearance fees of P1,000.00 for every hearing in the RTC.

In his Comment dated August 24, 2009,13 Atty. Tolentino, Jr. refuted the charge of
conspiracy, stressing that he was not acquainted with the other respondents, except Atty.
Victorio, Jr. whom he had met during the hearings in Civil Case No. Q-07-59598; that
although he had notarized the letter-request dated June 30, 2008 of Ramon Ricafort to the
Register of Deeds, he had no knowledge about how said letter-request had been disposed
of by the Register of Deeds; and that the present complaint was the second disbarment case
filed by the complainants against him with no other motive except to harass and intimidate
him.

Atty. Quilala stated in his Comment dated September 1, 200914 that it was Atty. Caluya, Jr.,
another Deputy Register of Deeds, who was the actual signing authority of the annotations
that resulted in the cancellation of the affidavit of adverse claim and the notice of lis
pendens on TCT No. N-290546; that the cancellation of the annotations was undertaken in
the regular course of official duty and in the exercise of the ministerial duty of the Register
of Deeds; that no irregularity occurred or was performed in the cancellation of the
annotations; and that the Register of Deeds was impleaded in Civil Case No. Q-07-59598
only as a nominal party, thereby discounting any involvement in the proceedings in the
case.

Atty. Cunanan did not file any comment.15

As the result of Atty. Quilala's allegation in his Comment in A.C. No. 8261 that it had been
Atty. Caluya, Jr.'s signature that appeared below the cancelled entries, the complainants
filed another sworn disbarment complaint dated August 26, 2010 alleging that Atty. Caluya,
Jr. had forged the signature of Atty. Cunanan.16 This disbarment complaint was docketed as
A.C. No. 8725, and was later on consolidated with A.C. No. 826117 because the complaints
involved the same parties and rested on similar allegations against the respondents.

Atty. Quilala filed his Comment in A.C. No. 8725 to belie the allegation of forgery and to
reiterate the arguments he had made in A.C. No. 8261. 18 On his part, Atty. Caluya, Jr.
manifested that he adopted Atty. Quilala's Comment.19

Ruling

We dismiss the complaints for disbarment for being bereft of merit.

Well entrenched in this jurisdiction is the rule that a lawyer may be disciplined for
misconduct committed either in his professional or private capacity. The test is whether his
 111

conduct shows him to be wanting in moral character, honesty, probity, and good demeanor,
or whether his conduct renders him unworthy to continue as an officer of the
Court.20 Verily, Canon 7 of the Code of Professional Responsibility mandates all lawyers to
uphold at all times the dignity and integrity of the Legal Profession. Lawyers are similarly
required under Rule 1.01, Canon 1 of the same Code not to engage in any unlawful,
dishonest and immoral or deceitful conduct. Failure to observe these tenets of the Code of
Professional Responsibility exposes the lawyer to disciplinary sanctions as provided in
Section 27, Rule 138 of the Rules of Court, as amended, viz.:chanroblesvirtuallawlibrary
Section 27. Disbarment or suspension of attorneys by Supreme Court, grounds therefor. — A
member of the bar may be disbarred or suspended from his office as attorney by the
Supreme Court for any deceit, malpractice, or other gross misconduct in such office, grossly
immoral conduct, or by reason of his conviction of a crime involving moral turpitude, or for
any violation of the oath which he is required to take before the admission to practice, or
for a wilful disobedience appearing as an attorney for a party to a case without authority so
to do. The practice of soliciting cases at law for the purpose of gain, either personally or
through paid agents or brokers, constitutes malpractice.
The complainants' allegations of the respondents' acts and omissions are insufficient to
establish any censurable conduct against them.

Section 10 of Presidential Decree No. 1529 (Property Registration Decree) enumerates the
general duties of the Register of Deeds, as follows:chanroblesvirtuallawlibrary
Section 10. General functions of Registers of Deeds. - x x x

It shall be the duty of the Register of Deeds to immediately register an instrument

presented for registration dealing with real or personal property which complies with all
the requisites for registration. He shall see to it that said instrument bears the proper
documentary science stamps and that the same are properly canceled. If the instrument is
not registrable, he shall forthwith deny registration thereof and inform the presenter of
such denial in writing, stating the ground or reason therefor, and advising him of his right
to appeal by consulta in accordance with Section 117 of this Decree. (Emphasis supplied)
The aforementioned duty of the Register of Deeds is ministerial in nature.21 A purely
ministerial act or duty is one that an officer or tribunal performs in a given state of facts, in
a prescribed manner, in obedience to the mandate of a legal authority, without regard to or
the exercise of his own judgment upon the propriety or impropriety of the act done. If the
law imposes a duty upon a public officer and gives him the right to decide how or when the
duty shall be performed, such duty is discretionary, not ministerial. The duty is ministerial
only when its discharge requires neither the exercise of official discretion nor the exercise
of judgment.22

In Gabriel v. Register of Deeds of Rizal,23 the Court underscores that registration is a merely

ministerial act of the Register of Deeds, explaining:chanroblesvirtuallawlibrary
xxx [W]hether the document is invalid, frivolous or intended to harass, is not the duty of a
Register of Deeds to decide, but a court of competent jurisdiction, and that it is his concern
to see whether the documents sought to be registered conform with the formal and legal
requirements for such documents.
 112

In view of the foregoing, we find no abuse of authority or irregularity committed by Atty.

Quilala, Atty. Cunanan, and Atty. Caluya, Jr. with respect to the cancellation of the notice of
adverse claim and the notice of lis pendens annotated on TCT No. N-290546. Whether or
not the RTC order dated May 16, 2008 or the letter-request dated June 30, 2008 had been
falsified, fraudulent or invalid was not for them to determine inasmuch as their duty to
examine documents presented for registration was limited only to what appears on the
face of the documents. If, upon their evaluation of the letter-request and the RTC order,
they found the same to be sufficient in law and t]o be in conformity with existing
requirements, it became obligatory for them to perform their ministerial duty without
unnecessary delay.24

Should they be aggrieved by said respondents' performance of duty, complainants were not
bereft of any remedy because they could challenge the performance of duty by bringing the
matter by way of consulta with the LRA, as provided by Section 11725 of Presidential Decree
No. 1529. But, as enunciated in Gabriel v. Register of Deeds of Rizal,26 it was ultimately
within the province of a court of competent jurisdiction to resolve issues concerning the
validity or invalidity of a document registered by the Register of Deeds.

The complainants charge Atty. Victorio, Jr. and Atty. Tolentino, Jr. with having conspired
with each other to guarantee that the parties in Civil Case No. Q-59598 would enter into the
amicable settlement, and then to cause the cancellation of the affidavit of adverse claim and
notice of lis pendens annotated on TCT No. N-290546. The complainants further fault Atty.
Victorio, Jr. with having abandoned their cause since the issuance of the RTC of its order
dated May 16, 2008.

The complainants' charges are devoid of substance.

Although it is not necessary to prove a formal agreement in order to establish conspiracy

because conspiracy may be inferred from the circumstances attending the commission of
an act, it is nonetheless essential that conspiracy be established by clear and convincing
evidence.27 The complainants failed in this regard. Outside of their bare assertions that
Atty. Victorio, Jr. and Atty. Tolentino, Jr. had conspired with each other in order to cause the
dismissal of the complaint and then discharge of the annotations, they presented no
evidence to support their allegation of conspiracy. On the contrary, the records indicated
their own active pjarticipation in arriving at the amicable settlement with the defendants in
Civil Case No. Q-07-59598. Hence, they could not now turn their backs on the amicable
settlement that they had themselves entered into.

Even assuming that Atty. Victorio, Jr. and Atty. Tolentino, Jr. initiated ahd participated in
the settlement of the case, there was nothing wrong in their doing so. It was actually their
obligation as lawyers to do so, pursuant to Rule 1.04, Canon 1 of the Code of Professional
Responsibility, viz.:chanroblesvirtuallawlibrary
RULE 1.04 - A lawyer shall encourage his clients to avoid, end or settle a controversy if it
will admit of a fair settlement.
 113

In fine, the presumption of the validity of the amicable settlement of the complainants and
the defendants in Civil Case No. Q-07-59598 subsisted.28

Anent the complainants' charge of abandonment against Atty. Victorio, Jr., Rule 18.03 and
Rule 18.04, Canon 18 of the Code of Professional Responsibility are applicable, to
wit:chanroblesvirtuallawlibrary
CANON 18 - A lawyer shall serve his client with competence and diligence.

Rule 18.03 - A lawyer shall not neglect a legal matter entrusted to him, and his negligence
in connection therewith shall render him liable.

Rule 18.04 - A lawyer shall keep the client informed of the status of his case and shall
respond within a reasonable time to the client's request for information.
There is no issue that the complainants engaged the services of Atty. Victorio, Jr. as their
counsel in Civil Case No. Q-07-59598. Atty. Victorio, Jr. served as such counsel. With Atty.
Victorio, Jr. assistance, the complainants obtained a fair settlement consisting in receiving
half of the proceeds of the sale of the property in litis, without any portion of the proceeds
accruing to counsel as his legal fees. The complainants did not competently and
persuasively show any unfaithfulness on the part of Atty. Victorio, Jr. as far as their interest
in the litigation was concerned. Hence, Atty. Victorio, Jr. was not liable for abandonment.

Atty. Victorio, Jr. could not be faulted for the perceived inattention to any other matters
subsequent to the termination of Civil Case No. Q-07-59598. Unless otherwise expressly
stipulated between them at any time during the engagement, the complainants had no right
to assume that Atty. Victorio, Jr.'s legal representation was indefinite as to extend to his
representation of them in the LRA. The Law Profession did not burden its members with
the responsibility of indefinite service to the clients; hence, the rendition of professional
services depends on the agreement between the attorney and the client. Atty. Victorio, Jr.'s
alleged failure to respond to the complainants' calls or visits, or to provide them with his
whereabouts to enable them to have access to him despite the termination of his
engagement in Civil Case No. Q-07-59598 did not equate to abandonment without the
credible showing that he continued to come under the professional obligation towards
them after the termination of Civil Case No. Q-07-59598.cralawred

WHEREFORE, the Court DISMISSES the baseless disbarment complaints against Atty.

Federico S. Tolentino, Jr., Atty. Renato G. Cunanan, Atty. Daniel F. Victorio, Jr., Atty. Elbert T.
Quilala and Atty. Constante P. Caluya, Jr.
 114

G.R. No. 102007 September 2, 1994

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
ROGELIO BAYOTAS y CORDOVA, accused-appellant.

The Solicitor General for plaintiff-appellee.

Public Attorney's Office for accused-appellant.

ROMERO, J.:

In Criminal Case No. C-3217 filed before Branch 16, RTC Roxas City, Rogelio Bayotas y
Cordova was charged with Rape and eventually convicted thereof on June 19, 1991 in a
decision penned by Judge Manuel E. Autajay. Pending appeal of his conviction, Bayotas died
on February 4, 1992 at
the National Bilibid Hospital due to cardio respiratory arrest secondary to hepatic
encephalopathy secondary to hipato carcinoma gastric malingering. Consequently, the
Supreme Court in its Resolution of May 20, 1992 dismissed the criminal aspect of the
appeal. However, it required the Solicitor General to file its comment with regard to
Bayotas' civil liability arising from his commission of the offense charged.
 115

In his comment, the Solicitor General expressed his view that the death of accused-
appellant did not extinguish his civil liability as a result of his commission of the offense
charged. The Solicitor General, relying on the case of People v. Sendaydiego  1 insists that the
appeal should still be resolved for the purpose of reviewing his conviction by the lower
court on which the civil liability is based.

Counsel for the accused-appellant, on the other hand, opposed the view of the Solicitor
General arguing that the death of the accused while judgment of conviction is pending
appeal extinguishes both his criminal and civil penalties. In support of his position, said
counsel invoked the ruling of the Court of Appeals in People v. Castillo and Ocfemia  2 which
held that the civil obligation in a criminal case takes root in the criminal liability and,
therefore, civil liability is extinguished if accused should die before final judgment is
rendered.

We are thus confronted with a single issue: Does death of the accused pending appeal of his
conviction extinguish his civil liability?

In the aforementioned case of People v. Castillo, this issue was settled in the affirmative.
This same issue posed therein was phrased thus: Does the death of Alfredo Castillo affect
both his criminal responsibility and his civil liability as a consequence of the alleged crime?

It resolved this issue thru the following disquisition:

Article 89 of the Revised Penal Code is the controlling statute. It reads, in

part:

Art. 89. How criminal liability is totally extinguished. —

Criminal liability is totally extinguished:

1. By the death of the convict, as to the personal penalties; and

as to the pecuniary penalties liability therefor is extinguished
only when the death of the offender occurs before final
judgment;

With reference to Castillo's criminal liability, there is no question. The law is

plain. Statutory construction is unnecessary. Said liability is extinguished.

The civil liability, however, poses a problem. Such liability is extinguished

only when the death of the offender occurs before final judgment. Saddled
upon us is the task of ascertaining the legal import of the term "final
judgment." Is it final judgment as contradistinguished from an interlocutory
order? Or, is it a judgment which is final and executory?

We go to the genesis of the law. The legal precept contained in Article 89 of

the Revised Penal Code heretofore transcribed is lifted from Article 132 of
the Spanish El Codigo Penal de 1870 which, in part, recites:
 116

La responsabilidad penal se extingue.

1. Por la muerte del reo en cuanto a las penas personales

siempre, y respecto a las pecuniarias, solo cuando a su
fallecimiento no hubiere recaido sentencia firme.

xxx xxx xxx

The code of 1870 . . . it will be observed employs the term "sentencia firme."
What is "sentencia firme" under the old statute?

XXVIII Enciclopedia Juridica Españ ola, p. 473, furnishes the ready answer: It
says:

SENTENCIA FIRME. La sentencia que adquiere la fuerza de las

definitivas por no haberse utilizado por las partes litigantes
recurso alguno contra ella dentro de los terminos y plazos
legales concedidos al efecto.

"Sentencia firme" really should be understood as one which is definite.

Because, it is only when judgment is such that, as Medina y Maranon puts it,
the crime is confirmed — "en condena determinada;" or, in the words of
Groizard, the guilt of the accused becomes — "una verdad legal." Prior
thereto, should the accused die, according to Viada, "no hay legalmente, en tal
caso, ni reo, ni delito, ni responsabilidad criminal de ninguna clase." And, as
Judge Kapunan well explained, when a defendant dies before judgment
becomes executory, "there cannot be any determination by final judgment
whether or not the felony upon which the civil action might arise exists," for
the simple reason that "there is no party defendant." (I Kapunan, Revised
Penal Code, Annotated, p. 421. Senator Francisco holds the same view.
Francisco, Revised Penal Code, Book One, 2nd ed., pp. 859-860)

The legal import of the term "final judgment" is similarly reflected in the
Revised Penal Code. Articles 72 and 78 of that legal body mention the term
"final judgment" in the sense that it is already enforceable. This also brings to
mind Section 7, Rule 116 of the Rules of Court which states that a judgment
in a criminal case becomes final "after the lapse of the period for perfecting
an appeal or when the sentence has been partially or totally satisfied or
served, or the defendant has expressly waived in writing his right to appeal."

By fair intendment, the legal precepts and opinions here collected funnel
down to one positive conclusion: The term final judgment employed in the
Revised Penal Code means judgment beyond recall. Really, as long as a
judgment has not become executory, it cannot be truthfully said that
defendant is definitely guilty of the felony charged against him.
 117

Not that the meaning thus given to final judgment is without reason. For
where, as in this case, the right to institute a separate civil action is not
reserved, the decision to be rendered must, of necessity, cover "both the
criminal and the civil aspects of the case." People vs. Yusico (November 9,
1942), 2 O.G., No. 100, p. 964. See also: People vs. Moll, 68 Phil., 626,
634; Francisco, Criminal Procedure, 1958 ed., Vol. I, pp. 234, 236. Correctly,
Judge Kapunan observed that as "the civil action is based solely on the felony
committed and of which the offender might be found guilty, the death of the
offender extinguishes the civil liability." I Kapunan, Revised Penal Code,
Annotated, supra.

Here is the situation obtaining in the present case: Castillo's criminal liability
is out. His civil liability is sought to be enforced by reason of that criminal
liability. But then, if we dismiss, as we must, the criminal action and let the
civil aspect remain, we will be faced with the anomalous situation whereby
we will be called upon to clamp civil liability in a case where the source
thereof — criminal liability — does not exist. And, as was well stated
in Bautista, et al. vs. Estrella, et al., CA-G.R.
No. 19226-R, September 1, 1958, "no party can be found and held criminally
liable in a civil suit," which solely would remain if we are to divorce it from
the criminal proceeding."

This ruling of the Court of Appeals in the Castillo case 3 was adopted by the Supreme Court
in the cases of People of the Philippines v. Bonifacio Alison, et al., 4 People of the Philippines
v. Jaime Jose, et al. 5 and People of the Philippines v. Satorre  6 by dismissing the appeal in
view of the death of the accused pending appeal of said cases.

As held by then Supreme Court Justice Fernando in the Alison case:

The death of accused-appellant Bonifacio Alison having been established, and

considering that there is as yet no final judgment in view of the pendency of
the appeal, the criminal and civil liability of the said accused-appellant Alison
was extinguished by his death (Art. 89, Revised Penal Code; Reyes' Criminal
Law, 1971 Rev. Ed., p. 717, citing People v. Castillo and Ofemia C.A., 56 O.G.
4045); consequently, the case against him should be dismissed.

On the other hand, this Court in the subsequent cases of Buenaventura Belamala
v. Marcelino Polinar  7 and Lamberto Torrijos v. The Honorable Court of Appeals  8 ruled
differently. In the former, the issue decided by this court was: Whether the civil liability of
one accused of physical injuries who died before final judgment is extinguished by his
demise to the extent of barring any claim therefore against his estate. It was the contention
of the administrator-appellant therein that the death of the accused prior to final judgment
extinguished all criminal and civil liabilities resulting from the offense, in view of Article 89,
paragraph 1 of the Revised Penal Code. However, this court ruled therein:
 118

We see no merit in the plea that the civil liability has been extinguished, in
view of the provisions of the Civil Code of the Philippines of 1950 (Rep. Act
No. 386) that became operative eighteen years after the revised Penal Code.
As pointed out by the Court below, Article 33 of the Civil Code establishes a
civil action for damages on account of physical injuries, entirely separate and
distinct from the criminal action.

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.

Assuming that for lack of express reservation, Belamala's civil action for
damages was to be considered instituted together with the criminal action
still, since both proceedings were terminated without final adjudication, the
civil action of the offended party under Article 33 may yet be enforced
separately.

In Torrijos, the Supreme Court held that:

xxx xxx xxx

It should be stressed that the extinction of civil liability follows the extinction
of the criminal liability under Article 89, only when the civil liability arises
from the criminal act as its only basis. Stated differently, where the civil
liability does not exist independently of the criminal responsibility, the
extinction of the latter by death, ipso facto extinguishes the former, provided,
of course, that death supervenes before final judgment. The said principle
does not apply in instant case wherein the civil liability springs neither solely
nor originally from the crime itself but from a civil contract of purchase and
sale. (Emphasis ours)

x x x           x x x          x x x

In the above case, the court was convinced that the civil liability of the accused who
was charged with estafa could likewise trace its genesis to Articles 19, 20 and 21 of
the Civil Code since said accused had swindled the first and second vendees of the
property subject matter of the contract of sale. It therefore concluded:
"Consequently, while the death of the accused herein extinguished his criminal
liability including fine, his civil liability based on the laws of human relations
remains."

Thus it allowed the appeal to proceed with respect to the civil liability of the accused,
notwithstanding the extinction of his criminal liability due to his death pending appeal of
his conviction.
 119

To further justify its decision to allow the civil liability to survive, the court relied on the
following ratiocination: Since Section 21, Rule 3 of the Rules of Court 9 requires the
dismissal of all money claims against the defendant whose death occurred prior to the final
judgment of the Court of First Instance (CFI), then it can be inferred that actions for
recovery of money may continue to be heard on appeal, when the death of the defendant
supervenes after the CFI had rendered its judgment. In such case, explained this tribunal,
"the name of the offended party shall be included in the title of the case as plaintiff-appellee
and the legal representative or the heirs of the deceased-accused should be substituted as
defendants-appellants."

It is, thus, evident that as jurisprudence evolved from Castillo to Torrijos, the rule
established was that the survival of the civil liability depends on whether the same can be
predicated on sources of obligations other than delict. Stated differently, the claim for civil
liability is also extinguished together with the criminal action if it were solely based
thereon, i.e., civil liability ex delicto.

However, the Supreme Court in People v. Sendaydiego, et al. 10 departed from this long-
established principle of law. In this case, accused Sendaydiego was charged with and
convicted by the lower court of malversation thru falsification of public documents.
Sendaydiego's death supervened during the pendency of the appeal of his conviction.

This court in an unprecedented move resolved to dismiss Sendaydiego's appeal but only to
the extent of his criminal liability. His civil liability was allowed to survive although it was
clear that such claim thereon was exclusively dependent on the criminal action already
extinguished. The legal import of such decision was for the court to continue exercising
appellate jurisdiction over the entire appeal, passing upon the correctness of Sendaydiego's
conviction despite dismissal of the criminal action, for the purpose of determining if he is
civilly liable. In doing so, this Court issued a Resolution of July 8, 1977 stating thus:

The claim of complainant Province of Pangasinan for the civil liability

survived Sendaydiego because his death occurred after final judgment was
rendered by the Court of First Instance of Pangasinan, which convicted him
of three complex crimes of malversation through falsification and ordered
him to indemnify the Province in the total sum of P61,048.23 (should be
P57,048.23).

The civil action for the civil liability is deemed impliedly instituted with the
criminal action in the absence of express waiver or its reservation in a
separate action (Sec. 1, Rule 111 of the Rules of Court). The civil action for
the civil liability is separate and distinct from the criminal action (People and
Manuel vs. Coloma, 105 Phil. 1287; Roa vs. De la Cruz, 107 Phil. 8).

When the action is for the recovery of money and the defendant dies before
final judgment in the Court of First Instance, it shall be dismissed to be
prosecuted in the manner especially provided in Rule 87 of the Rules of Court
(Sec. 21, Rule 3 of the Rules of Court).
 120

The implication is that, if the defendant dies after a money judgment had
been rendered against him by the Court of First Instance, the action survives
him. It may be continued on appeal (Torrijos vs. Court of Appeals, L-40336,
October 24, 1975; 67 SCRA 394).

The accountable public officer may still be civilly liable for the funds
improperly disbursed although he has no criminal liability (U.S. vs. Elvina, 24
Phil. 230; Philippine National Bank vs. Tugab, 66 Phil. 583).

In view of the foregoing, notwithstanding the dismissal of the appeal of the

deceased Sendaydiego insofar as his criminal liability is concerned, the Court
Resolved to continue exercising appellate jurisdiction over his possible civil
liability for the money claims of the Province of Pangasinan arising from the
alleged criminal acts complained of, as if no criminal case had been instituted
against him, thus making applicable, in determining his civil liability, Article
30 of the Civil Code . . . and, for that purpose, his counsel is directed to inform
this Court within ten (10) days of the names and addresses of the decedent's
heirs or whether or not his estate is under administration and has a duly
appointed judicial administrator. Said heirs or administrator will be
substituted for the deceased insofar as the civil action for the civil liability is
concerned (Secs. 16 and 17, Rule 3, Rules of Court).

Succeeding cases 11 raising the identical issue have maintained adherence to our ruling
in Sendaydiego; in other words, they were a reaffirmance of our abandonment of the settled
rule that a civil liability solely anchored on the criminal (civil liability ex delicto) is
extinguished upon dismissal of the entire appeal due to the demise of the accused.

But was it judicious to have abandoned this old ruling? A re-examination of our decision
in Sendaydiego impels us to revert to the old ruling.

To restate our resolution of July 8, 1977 in Sendaydiego: The resolution of the civil action
impliedly instituted in the criminal action can proceed irrespective of the latter's extinction
due to death of the accused pending appeal of his conviction, pursuant to Article 30 of the
Civil Code and Section 21, Rule 3 of the Revised Rules of Court.

Article 30 of the Civil Code provides:

When a separate civil action is brought to demand civil liability arising from a
criminal offense, and no criminal proceedings are instituted during the
pendency of the civil case, a preponderance of evidence shall likewise be
sufficient to prove the act complained of.

Clearly, the text of Article 30 could not possibly lend support to the ruling in Sendaydiego.
Nowhere in its text is there a grant of authority to continue exercising appellate jurisdiction
over the accused's civil liability ex delicto when his death supervenes during appeal. What
Article 30 recognizes is an alternative and separate civil action which may be brought to
 121

demand civil liability arising from a criminal offense independently of any criminal action.
In the event that no criminal proceedings are instituted during the pendency of said civil
case, the quantum of evidence needed to prove the criminal act will have to be that which is
compatible with civil liability and that is, preponderance of evidence and not proof of guilt
beyond reasonable doubt. Citing or invoking Article 30 to justify the survival of the civil
action despite extinction of the criminal would in effect merely beg the question of whether
civil liability ex delicto survives upon extinction of the criminal action due to death of the
accused during appeal of his conviction. This is because whether asserted in
the criminal action or in a separate civil action, civil liability ex delicto is extinguished by
the death of the accused while his conviction is on appeal. Article 89 of the Revised Penal
Code is clear on this matter:

Art. 89. How criminal liability is totally extinguished. — Criminal liability is

totally extinguished:

1. By the death of the convict, as to the personal penalties; and as to

pecuniary penalties, liability therefor is extinguished only when the death of
the offender occurs before final judgment;

x x x           x x x          x x x

However, the ruling in Sendaydiego deviated from the expressed intent of Article 89. It
allowed claims for civil liability ex delicto to survive by ipso facto treating the civil action
impliedly instituted with the criminal, as one filed under Article 30, as though no criminal
proceedings had been filed but merely a separate civil action. This had the effect of
converting such claims from one which is dependent on the outcome of the criminal action
to an entirely new and separate one, the prosecution of which does not even necessitate the
filing of criminal proceedings. 12 One would be hard put to pinpoint the statutory authority
for such a transformation. It is to be borne in mind that in recovering civil liability ex
delicto, the same has perforce to be determined in the criminal action, rooted as it is in the
court's pronouncement of the guilt or innocence of the accused. This is but to render fealty
to the intendment of Article 100 of the Revised Penal Code which provides that "every
person criminally liable for a felony is also civilly liable." In such cases, extinction of the
criminal action due to death of the accused pending appeal inevitably signifies the
concomitant extinction of the civil liability. Mors Omnia Solvi. Death dissolves all things.

In sum, in pursuing recovery of civil liability arising from crime, the final determination of
the criminal liability is a condition precedent to the prosecution of the civil action, such that
when the criminal action is extinguished by the demise of accused-appellant pending
appeal thereof, said civil action cannot survive. The claim for civil liability springs out of
and is dependent upon facts which, if true, would constitute a crime. Such civil liability is an
inevitable consequence of the criminal liability and is to be declared and enforced in the
criminal proceeding. This is to be distinguished from that which is contemplated under
Article 30 of the Civil Code which refers to the institution of a separate civil action that does
not draw its life from a criminal proceeding. The Sendaydiego resolution of July 8, 1977,
however, failed to take note of this fundamental distinction when it allowed the survival of
 122

the civil action for the recovery of civil liability ex delicto by treating the same as a separate
civil action referred to under Article 30. Surely, it will take more than just a summary
judicial pronouncement to authorize the conversion of said civil action to an independent
one such as that contemplated under Article 30.

Ironically however, the main decision in Sendaydiego did not apply Article 30, the
resolution of July 8, 1977 notwithstanding. Thus, it was held in the main decision:

Sendaydiego's appeal will be resolved only for the purpose of showing his
criminal liability which is the basis of the civil liability for which his estate
would be liable. 13

In other words, the Court, in resolving the issue of his civil liability, concomitantly made a
determination on whether Sendaydiego, on the basis of evidenced adduced, was indeed
guilty beyond reasonable doubt of committing the offense charged. Thus, it upheld
Sendaydiego's conviction and pronounced the same as the source of his civil liability.
Consequently, although Article 30 was not applied in the final determination of
Sendaydiego's civil liability, there was a reopening of the criminal action already
extinguished which served as basis for Sendaydiego's civil liability. We reiterate: Upon
death of the accused pending appeal of his conviction, the criminal action is extinguished
inasmuch as there is no longer a defendant to stand as the accused; the civil action
instituted therein for recovery of civil liability ex delicto is ipso facto extinguished,
grounded as it is on the criminal.

Section 21, Rule 3 of the Rules of Court was also invoked to serve as another basis for
the Sendaydiego resolution of July 8, 1977. In citing Sec. 21, Rule 3 of the Rules of Court, the
Court made the inference that civil actions of the type involved in Sendaydiego consist of
money claims, the recovery of which may be continued on appeal if defendant dies pending
appeal of his conviction by holding his estate liable therefor. Hence, the Court's conclusion:

"When the action is for the recovery of money" "and the defendant dies
before final judgment in the court of First Instance, it shall be dismissed to be
prosecuted in the manner especially provided" in Rule 87 of the Rules of
Court (Sec. 21, Rule 3 of the Rules of Court).

The implication is that, if the defendant dies after a money judgment had
been rendered against him by the Court of First Instance, the action survives
him. It may be continued on appeal.

Sadly, reliance on this provision of law is misplaced. From the standpoint of procedural
law, this course taken in Sendaydiego cannot be sanctioned. As correctly observed by
Justice Regalado:

xxx xxx xxx

 123

I do not, however, agree with the justification advanced in

both Torrijos and Sendaydiego which, relying on the provisions of Section 21,
Rule 3 of the Rules of Court, drew the strained implication therefrom that
where the civil liability instituted together with the criminal liabilities had
already passed beyond the judgment of the then Court of First Instance (now
the Regional Trial Court), the Court of Appeals can continue to exercise
appellate jurisdiction thereover despite the extinguishment of the
component criminal liability of the deceased. This pronouncement, which has
been followed in the Court's judgments subsequent and consonant
to Torrijos and Sendaydiego, should be set aside and abandoned as being
clearly erroneous and unjustifiable.

Said Section 21 of Rule 3 is a rule of civil procedure in ordinary civil actions.

There is neither authority nor justification for its application in criminal
procedure to civil actions instituted together with and as part of criminal
actions. Nor is there any authority in law for the summary conversion from
the latter category of an ordinary civil action upon the death of the
offender. . . .

Moreover, the civil action impliedly instituted in a criminal proceeding for recovery of civil
liability ex delicto can hardly be categorized as an ordinary money claim such as that
referred to in Sec. 21, Rule 3 enforceable before the estate of the deceased accused.

Ordinary money claims referred to in Section 21, Rule 3 must be viewed in light of the
provisions of Section 5, Rule 86 involving claims against the estate, which
in Sendaydiego was held liable for Sendaydiego's civil liability. "What are contemplated in
Section 21 of Rule 3, in relation to Section 5 of Rule 86, 14 are contractual money claims
while the claims involved in civil liability ex delicto may include even the restitution of
personal or real property." 15 Section 5, Rule 86 provides an exclusive enumeration of what
claims may be filed against the estate. These are: funeral expenses, expenses for the last
illness, judgments for money and claim arising from contracts, expressed or implied. It is
clear that money claims arising from delict do not form part of this exclusive enumeration.
Hence, there could be no legal basis in (1) treating a civil action ex delicto as an ordinary
contractual money claim referred to in Section 21, Rule 3 of the Rules of Court and (2)
allowing it to survive by filing a claim therefor before the estate of the deceased accused.
Rather, it should be extinguished upon extinction of the criminal action engendered by the
death of the accused pending finality of his conviction.

Accordingly, we rule: if the private offended party, upon extinction of the civil liability ex
delicto desires to recover damages from the same act or omission complained of, he must
subject to Section 1, Rule 111 16 (1985 Rules on Criminal Procedure as amended) file a
separate civil action, this time predicated not on the felony previously charged but on other
sources of obligation. The source of obligation upon which the separate civil action is
premised determines against whom the same shall be enforced.
 124

If the same act or omission complained of also arises from quasi-delict or may, by provision
of law, result in an injury to person or property (real or personal), the separate civil action
must be filed against the executor or administrator 17 of the estate of the accused pursuant
to Sec. 1, Rule 87 of the Rules of Court:

Sec. 1. Actions which may and which may not be brought against executor or
administrator. — No action upon a claim for the recovery of money or debt or
interest thereon shall be commenced against the executor or administrator;
but actions to recover real or personal property, or an interest therein, from
the estate, or to enforce a lien thereon, and actions to recover damages for an
injury to person or property, real or personal, may be commenced against him.

This is in consonance with our ruling in Belamala 18 where we held that, in recovering

damages for injury to persons thru an independent civil action based on Article 33 of the
Civil Code, the same must be filed against the executor or administrator of the estate of
deceased accused and not against the estate under Sec. 5, Rule 86 because this rule
explicitly limits the claim to those for funeral expenses, expenses for the last sickness of the
decedent, judgment for money and claims arising from contract, express or implied.
Contractual money claims, we stressed, refers only to purely personal obligations other
than those which have their source in delict or tort.

Conversely, if the same act or omission complained of also arises from contract, the
separate civil action must be filed against the estate of the accused, pursuant to Sec. 5, Rule
86 of the Rules of Court.

From this lengthy disquisition, we summarize our ruling herein:

1. Death of the accused pending appeal of his conviction extinguishes his criminal liability
as well as the civil liability based solely thereon. As opined by Justice Regalado, in this
regard, "the death of the accused prior to final judgment terminates his criminal liability
and only the civil liability directly arising from and based solely on the offense
committed, i.e., civil liability ex delicto in senso strictiore."

2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if
the same may also be predicated on a source of obligation other than delict. 19 Article 1157
of the Civil Code enumerates these other sources of obligation from which the civil liability
may arise as a result of the same act or omission:

a) Law 20

b) Contracts

c) Quasi-contracts

d) . . .
 125

e) Quasi-delicts

3. Where the civil liability survives, as explained in Number 2 above, an action for recovery
therefor may be pursued but only by way of filing a separate civil action and subject to
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as amended. This separate
civil action may be enforced either against the executor/administrator or the estate of the
accused, depending on the source of obligation upon which the same is based as explained
above.

4. Finally, the private offended party need not fear a forfeiture of his right to file this
separate civil action by prescription, in cases where during the prosecution of the criminal
action and prior to its extinction, the private-offended party instituted together therewith
the civil action. In such case, the statute of limitations on the civil liability is deemed
interrupted during the pendency of the criminal case, conformably with provisions of
Article 1155 21 of the Civil Code, that should thereby avoid any apprehension on a possible
privation of right by prescription. 22

Applying this set of rules to the case at bench, we hold that the death of appellant Bayotas
extinguished his criminal liability and the civil liability based solely on the act complained
of, i.e., rape. Consequently, the appeal is hereby dismissed without qualification.

G.R. No. 210148               December 8, 2014

ANTONIO L. DALURAYA, Petitioner,
vs.
MARLA OLIVA, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated June 28, 2013 and
the Resolution3 dated November 22, 2013 rendered by the Court of Appeals (CA) in CA-G.R.
SP No. 125113 finding petitioner Antonio L. Daluraya (Daluraya) civilly liable for the death
of Marina Arabit Oliva (Marina Oliva) despite having been acquitted for Reckless
Imprudence Resulting in Homicide on the ground of insufficiency of evidence.

The Facts

On January 4, 2006, Daluraya was charged in an Information4 for Reckless Imprudence

Resulting in Homicide in connection with the death5 of Marina Oliva. Records reveal that
sometime in the afternoon of January 3, 2006, Marina Oliva was crossing the street when a
Nissan Vanette, bearing plate number UPN-172 and traversing EDSA near the Quezon
Avenue flyover in Quezon City, ran her over.6 While Marina Oliva was rushed to the hospital
 126

to receive medical attention,she eventually died, prompting her daughter, herein

respondent Marla Oliva (Marla), to file a criminal case for Reckless Imprudence Resulting
in Homicide against Daluraya, the purported driver of the vehicle.7

During the proceedings, the prosecution presented as witness Shem Serrano (Serrano), an
eye-witness to the incident, who testified that on said date, he saw a woman crossing EDSA
heading towards the island near the flyover and that the latter was bumped by a Nissan
Vanette bearing plate number UPN-172. The prosecution also offered the testimonies of (a)
Marla, who testified as to the civil damages sustained by her family as a result of her
mother’s death; (b) Dr. Paul Ortiz (Dr. Ortiz), who presented his findings on the autopsy
conducted upon the body of Marina Oliva; and (c) Police Senior Inspector Lauro Gomez
(PSI Gomez), who conducted the investigation following the incident and claimed that
Marina Oliva was hit by the vehicle being driven by Daluraya, albeit he did not witness the
incident.8

After the prosecution rested its case, Daluraya filed an Urgent Motion to Dismiss
(demurrer)9 asserting, inter alia, that he was not positively identified by any of the
prosecution witnesses as the driver of the vehicle that hit the victim, and that there was no
clear and competent evidence of how the incident transpired.10

The MeTC Ruling

In an Order11 dated May 24, 2010, the Metropolitan Trial Court of Quezon City, Branch 38
(MeTC) granted Daluraya’s demurrer and dismissed the case for insufficiency of evidence.
It found that the testimonies of the prosecution witnesses were wanting in material details
and that they failed to sufficiently establish that Daluraya committed the crime imputed
upon him.12 Deconstructing the testimonies of the prosecution witnesses individually, the
MeTC found that: (a) Marla merely testified on the damages sustained by her family but she
failed to identify Daluraya as the driver of the vehicle that hit her mother; (b) Serrano also
did not identify

Daluraya as the driver of the said vehicle; (c) Dr. Ortiz merely testified on the autopsy
results; and (d) PSI Gomez, while he did investigate the incident, likewise declared thathe
did not witness the same.13

Marla moved for reconsideration,14 which the MeTC denied in an Order15 dated November

4, 2010, clarifying that the grant of Daluraya’s demurrer had the effect of an acquittal and
that reconsideration of its Order granting Daluraya’s demurrer would violate the latter’s
right against double jeopardy.16 With respect to the civil aspect of the case, the MeTC
likewise denied the same, holding that no civil liability can be awarded absent any evidence
proving that Daluraya was the person responsible for Marina Oliva’s demise.17

Aggrieved, Marla appealed18 to the Regional Trial Court of Quezon City, Branch 76 (RTC),
insisting that the MeTC failed to make any finding as to the civil liability of
Daluraya,19 which finding was not precluded by the dismissal of the criminal aspect of the
case.
 127

The RTC Ruling

In a Decision20 dated September 8, 2011, the RTC dismissed the appeal and affirmed the
MeTC’s ruling,declaring that "the act from which the criminal responsibility may spring did
not at all exist."21

Marla filed a motion for reconsideration22 which, although filed beyond the reglementary
period, was nonetheless accepted. However, the RTC found the same without merit and
thus, sustained the factual findings and rulings of the MeTC in its Order23 dated May 10,
2012. Dissatisfied, Marla elevated the case to the CA via petition for review, maintaining
that Daluraya must be held civilly liable.

The CA Ruling

In a Decision24 dated June 28, 2013, the CA granted the petition and reversed the RTC
Decision, ordering Daluraya to pay Marla the amounts of ₱152,547.00 as actual damages,
₱50,000.00 as civil indemnity, and ₱50,000.00 as moral damages.25 In so ruling, the CA held
that the MeTC’s Order showed that Daluraya’s acquittal was based on the fact that the
prosecution failed to prove his guilt beyond reasonable doubt. As such, Daluraya was not
exonerated from civil liability.26

Moreover, the CA considered the following pieces of evidence to support its finding that
Daluraya must be held civilly liable: (a) the inadmissible sworn statement executed by
Daluraya where he admitted that he drove the subject vehicle which hit Marina Oliva; (b)
the conclusion derived from Serrano’s testimony that the woman he saw crossing the street
who was hit by a Nissan Vanette with plate number UPN-172, and the victim who
eventually died, are one and the same; (c) the Philippine National Police Referral Letter of
one Police Chief Inspector Virgilio Pereda identifying Daluraya as the suspectin the case of
Reckless Imprudence Resulting in Homicide involving the death of Marina Oliva, and
stating that he brought the victim to the Quezon City General Hospital for treatment but
was declared dead on arrival; and (d) the subject vehicle was registered in the name of
Daluraya’s aunt, Gloria Zilmar,27 who authorized him to claim the vehicle from the MeTC.28

Daluraya filed a motion for reconsideration,29 which the CA denied in a Resolution30 dated

November 22, 2013,hence, this petition.

The Issue Before the Court

The sole issue advanced for the Court’s resolution is whether or not the CA was correct in
finding Daluraya civilly liable for Marina Oliva’s death despite his acquittal in the criminal
case for Reckless Imprudence Resulting in Homicide on the ground of insufficiency of
evidence.

The Court’s Ruling

The petition is meritorious.

 128

Every person criminally liable for a felony is also civilly liable. The acquittal of an accused
of the crime charged, however, does not necessarily extinguish his civil liability. 31 In
Manantan v. CA,32 the Court expounded on the two kinds of acquittal recognized by our law
and their concomitant effects on the civil liability of the accused, as follows:

Our law recognizes two kinds of acquittal, with different effects on the civil liability of the
accused. First is an acquittal on the ground that the accused is not the author of the actor
omission complained of. This instance closes the door to civil liability, for a person who has
been found to be not the perpetrator of any act or omission cannot and can never be held
liable for such act or omission. There being no delict, civil liability ex delictois out of the
question, and the civil action, if any, which may be instituted must be based on grounds
other than the delict complained of. This is the situation contemplated inRule 111 of the
Rules of Court. The second instance is an acquittal based on reasonable doubt on the guilt
of the accused. In this case, even if the guilt of the accused has not been satisfactorily
established, he is not exempt from civil liability which may be proved by preponderance of
evidence only.33

In Dayap v. Sendiong,34 the Court explained further:

The acquittal of the accused does not automatically preclude a judgment against him on the
civil aspect of the case.1âwphi1 The extinction of the penal action does not carry with it the
extinction of the civil liability where: (a) the acquittal is based on reasonable doubt as only
preponderance of evidence is required; (b) the court declares that the liability of the
accused is only civil; and (c) the civil liability of the accused does not arise from or is not
based upon the crime of which the accused is acquitted. However, the civil action based on
delictmay be deemed extinguished if there is a finding on the final judgment in the criminal
action that the act or omission from which the civil liability may arise did not exist or
where the accused did not commit the acts or omission imputed to him.

Thus, if demurrer is granted and the accused is acquitted by the court, the accused has the
right to adduce evidence on the civil aspect of the case unless the court also declares that
the act or omission from which the civil liability may arise did not exist. This is because
when the accused files a demurrer to evidence, he has not yet adduced evidence both on
the criminal and civil aspects of the case. The only evidence on record is the evidence for
the prosecution. What the trial court should do is issue an order or partial judgment
granting the demurrer to evidence and acquitting the accused, and set the case for
continuation of trial for the accused to adduce evidence on the civil aspect of the case and
for the private complainant to adduce evidence by way of rebuttal. Thereafter, the court
shall render judgment on the civil aspect of the case.35

(Emphases supplied)

In case of an acquittal, the Rules of Court requires that the judgment state "whether the
evidence of the prosecution absolutely failed to prove the guilt of the accused or merely
failed to prove his guilt beyond reasonable doubt. In either case, the judgment shall
determine if the act or omission from which the civil liability might arise did not exist."36
 129

A punctilious examination of the MeTC’s Order, which the RTC sustained, will show that
Daluraya’s acquittal was based on the conclusion that the act or omission from which the
civil liability may arise did not exist, given that the prosecution was not able to establish
that he was the author of the crime imputed against him. Such conclusion is clear and
categorical when the MeTC declared that "the testimonies of the prosecution witnesses are
wanting in material details and they did not sufficiently establish that the accused precisely
committed the crime charged against him."37 Furthermore, when Marla sought
reconsideration of the MeTC’s Order acquitting Daluraya, said court reiterated and firmly
clarified that "the prosecution was not able to establish that the accused was the driver of
the Nissan Vanette which bumped Marina Oliva"38 and that "there is no competent evidence
on hand which proves that the accused was the person responsible for the death of Marina
Oliva."39

Clearly, therefore, the CA erred in construing the findings of the MeTC, as affirmed by the
RTC, that Daluraya’s acquittal was anchored on reasonable doubt, which would necessarily
call for a remand of the case to the court a quo for the reception of Daluraya’s evidence on
the civil aspect.1âwphi1 Records disclose that Daluraya’s acquittal was based on the fact
that "the act or omission from which the civil liability may arise did not exist" in view of the
failure of the prosecution to sufficiently establish that he was the author of the crime
ascribed against him. Consequently, his civil liability should be deemed as non-existent by
the nature of such acquittal.

WHEREFORE, the petition is GRANTED. The Decision dated June 28, 2013 and the
Resolution dated November 22, 2013 of the Court of Appeals in CA-G.R. SP No. 125113 are
hereby REVERSED and SET ASIDE. The Decision dated September 8,2011 and the Order
dated May 10, 2012 of the Regional Trial Court of Quezon City, Branch 76 are REINSTATED.

G.R. No. 207949               July 23, 2014

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
 130

ARMANDO DIONALDO y EBRON, RENATO DIONALDO y EBRON, MARIANO GARIGUEZ,

JR. y RAMOS, and RODOLFO LARIDO y EBRON, Accused-Appellants.

RESOLUTION

PERLAS-BERNABE, J.:

Before the Court is an appeal assailing the Decision1 dated February 15, 2013 of the Court
of Appeals (CA) in CA-G.R. CR-H.C. No. 02888 finding accused-appellants Armando
Dionaldo y Ebron (Armando), Renato Dionaldo y Ebron (Renato), Mariano Gariguez, Jr. y
Ramos (Mariano), and Rodolfo Larido y Ebron (Rodolfo) guilty beyond reasonable doubt of
the crime of Kidnapping and Serious Illegal Detention.

The Facts

At around 8 o'clock in the morning of May 16, 2003, Roderick Navarro (Roderick) dropped
his brother Edwin Navarro (Edwin) off at the Health Is Wealth Gym in Caloocan City. Thirty
minutes later, he received a text message from another brother who told him that Edwin
had been kidnapped.2 Records show that three (3) men, later identified as Armando,
Renato, and Mariano, forcibly dragged a bloodied Edwin down the stairway of the gym and
pushed him inside a dark green Toyota car with plate number UKF 194.3 Upon receiving
the message, Roderick immediately reported the incident to the police. At around 10
o’clock in the morning of the same day, he received a phone call from Edwin‟s kidnappers
who threatened to kill Edwin if he should report the matter to the police.4

The following day, Roderick received another call from the kidnappers, who demanded the
payment of ransom money in the amount of ₱15,000,000.00. Roderick told them he had no
such money, as he only had ₱50,000.00. On May 19, 2003, after negotiations over the
telephone, the kidnappers agreed to release Edwin in exchange for the amount of
₱110,000.00. Roderick was then instructed to bring the money to Batangas and wait for
their next call.5

At around 7:30 in the evening of the same day, as Roderick was on his way to Batangas to
deliver the ransom money, the kidnappers called and instructed him to open all the
windows of the car he was driving and to turn on the hazard light when he reaches the
designated place. After a while, Roderick received another call directing him to exit in
Bicutan instead and proceed to C-5 until he arrives at the Centennial Village. He was told to
park beside the Libingan ng mga Bayani. After several hours, an orange Mitsubishi car with
plate number DEH 498 pulled up in front of his vehicle where four (4) men alighted.
Roderick saw one of the men take a mobile phone and upon uttering the word "alat," the
men returned to their car and drove away.6

Meanwhile, a team had been organized to investigate the kidnapping of Edwin, headed by
SPO3 Romeo Caballero (SPO3 Caballero) and PO3 Nestor Acebuche (PO3 Acebuche) of the
Camp Crame Police Anti-Crime Emergency Response (PACER). During the course of the
investigation, Rodolfo, an employee at the Health Is Wealth Gym, confessed to PO3
 131

Acebuche that he was part of the plan to kidnap Edwin, as in fact he was the one who
tipped off Mariano, Renato, Armando and a certain Virgilio7 Varona8 (Virgilio) on the
condition that he will be given a share in the ransom money. Rodolfo gave information on
the whereabouts of his cohorts, leading to their arrest on June 12, 2003. In the early
morning of the following day or on June 13, 2003, the PACER team found the dead body of
Edwin at Sitio Pugpugan Laurel, Batangas, which Roderick identified.9

Thus, accused-appellants as well as Virgilio were charged in an Information10 which reads:

That on or about the 16th day of May, 2003 in Caloocan City, Metro Manila and within the
jurisdiction of this Honorable Court, the above-named accused, conspiring together and
mutually helping one another, being then private persons, did then and there by force and
intimidation willfully, unlawfully and feloniously with the use of motor vehicle and
superior strength take, carry and deprive EDWIN NAVARRO Y ONA, of his liberty against
his will, for the purpose of extorting ransom as in fact a demand of ₱15,000,000.00 was
made as a condition of the victim’s release and on the occasion thereof, the death of the
victim resulted.

Contrary to law.

During arraignment, accused-appellants pleaded not guilty11 and interposed the defenses of

denial and alibi. Except for Rodolfo, they individually claimed that on said date and time,
they were in their respective houses when they were taken by men in police uniforms, then
subsequently brought to Camp Crame, and there allegedly tortured and detained. On the
other hand, Rodolfo, for himself, averred that at around 8 o’clock in the evening of June 12,
2003, while walking on his way home, he noticed that a van had been following him.
Suddenly, four (4) persons alighted from the vehicle, boarded him inside, blindfolded him,
and eventually tortured him. He likewise claimed that he was made to sign an extrajudicial
confession, purporting too that while a certain Atty. Nepomuceno had been summoned to
assist him, the latter failed to do so.12

During trial, the death of the victim, Edwin, was established through a Certificate of
Death13 with Registry No. 2003-050 (subject certificate of death) showing that he died on
May 19, 2003 from a gunshot wound on the head.

The RTC Ruling

In a Decision14 dated June 13, 2007, the Regional Trial Court of Caloocan City, Branch 129
(RTC), in Crim. Case No. C-68329, convicted accused-appellants of the crime of Kidnapping
and Serious Illegal Detention, sentencing each of them to suffer the penalty of reclusion
perpetua.

It gave credence to the positive and straightforward testimonies of the prosecution

witnesses which clearly established that it was the accusedappellants who forcibly dragged
a bloodied Edwin into a car and, consequently, deprived him of his liberty. 15 In light thereof,
it rejected accused-appellants‟ respective alibis and claims of torture, which were not
 132

substantiated. It also held that the crime of Kidnapping had been committed for the
purpose of extorting ransom, which is punishable by death. However, in view of the
suspended imposition of the death penalty pursuant to Republic Act No. (RA) 9346,16 only
the penalty of reclusion perpetua was imposed.17 Further, the RTC found that conspiracy
attended the commission of the crime, as the accused-appellants’ individual participation
was geared toward a joint purpose and criminal design.18

Notably, while the RTC found that the testimonies of the prosecution witnesses prove that
the victim Edwin was abducted, deprived of liberty, and eventually killed,19 a fact which is
supported by the subject certificate of death, it did not consider said death in its judgment.
The CA Ruling

In a Decision20 dated February 15, 2013, the CA affirmed in toto the RTC’s conviction of
accused-appellants, finding that the prosecution was able to clearly establish all the
elements of the crime of Kidnapping and Serious Illegal Detention, namely: (a) the offender
is a private individual; (b) he kidnaps or detains another, or in any manner deprives the
latter of his liberty; (c) the act of detention or kidnapping must be illegal; and (d) in the
commission of the offense, any of the following circumstances is present: (1) the
kidnapping or detention lasts for more than three days; (2) it is committed simulating
public authority; (3) any serious physical injuries are inflicted upon the person kidnapped
or detained or threats to kill him are made; or (4) the person kidnapped or detained is a
minor, except when the accused is any of the parents, female or a public officer. 21 It likewise
sustained the finding that the kidnapping was committed for the purpose of extorting
ransom, as sufficiently proven by the testimony of the brother of the victim. 22 Moreover, the
CA affirmed that conspiracy attended the commission of the crime, as the acts of accused-
appellants emanated from the same purpose or common design, and they were united in its
execution.23

Separately, the CA found that accused-appellants’ claims of torture were never supported,
and that Rodolfo voluntarily signed the extrajudicial confession and was afforded
competent and independent counsel in its execution.24

Aggrieved by their conviction, accused-appellants filed the instant appeal.

The Issue Before the Court

The sole issue to be resolved by the Court is whether or not accusedappellants are guilty of
the crime of Kidnapping and Serious Illegal Detention.

The Court’s Ruling

The appeal is devoid of merit.

Well-settled is the rule that the question of credibility of witnesses is primarily for the trial
court to determine. Its assessment of the credibility of a witness is entitled to great weight,
and it is conclusive and binding unless shown to be tainted with arbitrariness or unless,
 133

through oversight, some fact or circumstance of weight and influence has not been
considered. Absent any showing that the trial judge overlooked, misunderstood, or
misapplied some facts or circumstances of weight which would affect the result of the case,
or that the judge acted arbitrarily, his assessment of the credibility of witnesses deserves
high respect by the appellate court.25

In this case, the RTC, as affirmed by the CA, gave weight and credence to the testimonies of
the prosecution witnesses, which they found to be straightforward and consistent. Through
these testimonies, it was clearly established that accused-appellants, who were all private
individuals, took the victim Edwin and deprived him of his liberty, which acts were illegal,
and for the purpose of extorting ransom.26 Thus, seeing no semblance of arbitrariness or
misapprehension on the part of the court a quo, the Court finds no compelling reason to
disturb its factual findings on this score.1âwphi1

Anent the finding that conspiracy attended the commission of the crime, the Court likewise
finds the conclusion of the RTC in this regard, as affirmed by the CA, to be well-taken.
Conspiracy exists when two or more persons come to an agreement concerning the
commission of a felony and decide to commit it, and when conspiracy is established, the
responsibility of the conspirators is collective, not individual, rendering all of them equally
liable regardless of the extent of their respective participations.27 In this relation, direct
proof is not essential to establish conspiracy, as it can be presumed from and proven by the
acts of the accused pointing to a joint purpose, design, concerted action, and community of
interests.28 Hence, as the factual circumstances in this case clearly show that accused-
appellants acted in concert at the time of the commission of the crime and that their acts
emanated from the same purpose or common design, showing unity in its execution, 29 the
CA, affirming the trial court, correctly ruled that there was conspiracy among them.

The foregoing notwithstanding, the Court is, however, constrained to modify the ruling of
the RTC and the CA, as the crime the accusedappellants have committed does not, as the
records obviously bear, merely constitute Kidnapping and Serious Illegal Detention, but
that of the special complex crime of Kidnapping for Ransom with Homicide. This is in view
of the victim’s (i.e., Edwin’s) death, which was (a) specifically charged in the
Information,30 and (b) clearly established during the trial of this case. Notably, while this
matter was not among the issues raised before the Court, the same should nonetheless be
considered in accordance with the settled rule that in a criminal case, an appeal, as in this
case, throws open the entire case wide open for review, and the appellate court can correct
errors, though unassigned, that may be found in the appealed judgment.31

After the amendment of the Revised Penal Code on December 31, 1993 by RA 7659, Article
267 of the same Code now provides:

Art. 267. Kidnapping and serious illegal detention. – Any private individual who shall
kidnap or detain another, or in any other manner deprive him of his liberty, shall suffer the
penalty of reclusion perpetua to death:

1. If the kidnapping or detention shall have lasted more than three days.
 134

2. If it shall have been committed simulating public authority.

3. If any serious physical injuries shall have been inflicted upon the person
kidnapped or detained; or if threats to kill him shall have been made.

4. If the person kidnapped or detained shall be a minor, except when the accused is
any of the parents, female or a public officer;

The penalty shall be death where the kidnapping or detention was committed for the
purpose of extorting ransom from the victim or any other person, even if none of the
circumstances above-mentioned were present in the commission of the offense.

When the victim is killed or dies as a consequence of the detention or is raped, or is

subjected to torture or dehumanizing acts, the maximum penalty shall be imposed.
(Emphases supplied)

The Court further elucidated in People v. Mercado:32

In People v. Ramos, the accused was found guilty of two separate heinous crimes of
kidnapping for ransom and murder committed on July 13, 1994 and sentenced to death. On
appeal, this Court modified the ruling and found the accused guilty of the "special complex
crime" of kidnapping for ransom with murder under the last paragraph of Article 267, as
amended by Republic Act No. 7659. This Court said:

x x x This amendment introduced in our criminal statutes the concept of „special complex
crime‟ of kidnapping with murder or homicide. It effectively eliminated the distinction
drawn by the courts between those cases where the killing of the kidnapped victim was
purposely sought by the accused, and those where the killing of the victim was not
deliberately resorted to but was merely an afterthought. Consequently, the rule now is:
Where the person kidnapped is killed in the course of the detention, regardless of whether
the killing was purposely sought or was merely an afterthought, the kidnapping and
murder or homicide can no longer be complexed under Art. 48, nor be treated as separate
crimes, but shall be punished as a special complex crime under the last paragraph of Art.
267, as amended by RA No. 7659.33 (Emphases supplied; citations omitted)

Thus, further taking into account the fact that the kidnapping was committed for the
purpose of extorting ransom, accused-appellants’ conviction must be modified from
Kidnapping and Serious Illegal Detention to the special complex crime of Kidnapping for
Ransom with Homicide, which carries the penalty of death. As earlier intimated, the
enactment of RA 9346 had suspended the imposition of the death penalty. This means that
the accused-appellants could, as the CA and trial court properly ruled, only be sentenced to
the penalty of reclusion perpetua. To this, the Court adds that the accused-appellants are
not eligible for parole.34

On a final note, the Court observes that the RTC and the CA failed to award civil indemnity
as well as damages to the family of the kidnap victim. In People v. Quiachon, 35 the Court
 135

explained that even if the death penalty was not to be imposed on accused-appellants in
view of the prohibition in RA 9346, the award of civil indemnity was nonetheless proper,
not being dependent on the actual imposition of the death penalty but on the fact that
qualifying circumstances warranting the imposition of the death penalty attended the
commission of the crime.36 In the present case, considering that both the qualifying
circumstances of ransom and the death of the victim during captivity were duly alleged in
the information and proven during trial, civil indemnity in the amount of ₱100,000.00 must
therefore be awarded to the family of the victim, to conform with prevailing
jurisprudence.37

Similarly, the Court finds that the award of moral damages is warranted in this case. Under
Article 2217 of the Civil Code, moral damages include physical suffering, mental anguish,
fright, serious anxiety, wounded feelings, moral shock and similar injury, while Article
2219 of the same Code provides that moral damages may be recovered in cases of illegal
detention. It cannot be denied, in this case, that the kidnap victim‟s family suffered mental
anguish, fright, and serious anxiety over the detention and eventually, the death of Edwin.
As such, and in accordance with prevailing jurisprudence, 38 moral damages in the amount
of ₱100,000.00 must perforce be awarded to the family of the victim.

Finally, exemplary damages must be awarded in this case, in view of the confluence of the
aforesaid qualifying circumstances and in order to deter others from committing the same
atrocious acts. In accordance with prevailing jurisprudence,39 therefore, the Court awards
exemplary damages in the amount of ₱100,000.00 to the family of the kidnap victim.

In addition, interest at the rate of six percent (6%) per annum shall be imposed on all
damages awarded from the date of finality of judgment until fully paid, pursuant to
prevailing jurisprudence.40

WHEREFORE, the appeal is DISMISSED. The Decision dated February 15, 2013 of the Court
of Appeals in CA-G.R. CR-H.C. No. 02888 is hereby AFFIRMED with the MODIFICATION that
all the accusedappellants herein are equally found GUILTY of the special complex crime of
Kidnapping for Ransom with Homicide, and are sentenced to each suffer the penalty of
reclusion perpetua, without eligibility for parole, and to pay, jointly and severally, the
family of the kidnap victim Edwin Navarro the following amounts: (1) ₱100,000.00 as civil
indemnity; (2) ₱100,000.00 as moral damages; and (3) ₱100,000.00 as exemplary
damages, all with interest at the rate of six percent (6%) per annum ·from the date of
finality of judgment until fully paid.

G.R. No. 189081, August 10, 2016

GLORIA S. DY, Petitioner, v. PEOPLE OF THE PHILIPPINES, MANDY COMMODITIES CO.,

INC., REPRESENTED BY ITS PRESIDENT, WILLIAM MANDY, Respondent.

DECISION

JARDELEZA, J.:
 136

Our law states that every person criminally liable for a felony is also civilly liable. This civil
liability ex delicto may be recovered through a civil action which, under our Rules of Court,
is deemed instituted with the criminal action. While they are actions mandatorily
fused,1 they are, in truth, separate actions whose existences are not dependent on each
other. Thus, civil liability ex delicto survives an acquittal in a criminal case for failure to
prove guilt beyond reasonable doubt. However, the Rules of Court limits this mandatory
fusion to a civil action for the recovery of civil liability ex delicto. It, by no means, includes a
civil liability arising from a different source of obligation, as in the case of a contract. Where
the civil liability is ex contractu, the court hearing the criminal case has no authority to
award damages.

The Case

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court. Petitioner
Gloria S. Dy (petitioner) seeks the reversal of the decision of the Court of Appeals (CA)
dated February 25, 2009 (Assailed Decision)2 ordering her to pay Mandy Commodities
Company, Inc. (MCCI) in the amount of P21,706,281.00.3chanrobleslaw

The Facts

Petitioner was the former General Manager of MCCL. In the course of her employment,
petitioner assisted MCCI in its business involving several properties. One such business
pertained to the construction of warehouses over a property (Numancia Property) that
MCCI leased from the Philippine National Bank (PNB). Sometime in May 1996, in pursuit of
MCCI's business, petitioner proposed to William Mandy (Mandy), President of MCCI, the
purchase of a property owned by Pantranco. As the transaction involved a large amount of
money, Mandy agreed to obtain a loan from the International China Bank of Commerce
(ICBC). Petitioner represented that she could facilitate the approval of the loan. True
enough, ICBC granted a loan to MCCI in the amount of P20,000,000.00, evidenced by a
promissory note. As security, MCCI also executed a chattel mortgage over the warehouses
in the Numancia Property. Mandy entrusted petitioner with the obligation to manage the
payment of the loan.4chanrobleslaw

In February 1999, MCCI received a notice of foreclosure over the mortgaged property due
to its default in paying the loan obligation.5 In order to prevent the foreclosure, Mandy
instructed petitioner to facilitate the payment of the loan. MCCI, through Mandy, issued 13
Allied Bank checks and 12 Asia Trust Bank checks in varying amounts and in different
dates covering the period from May 18, 1999 to April 4, 2000. 6 The total amount of the
checks, which were all payable to cash, was P21,706,281.00. Mandy delivered the checks to
petitioner. Mandy claims that he delivered the checks with the instruction that petitioner
use the checks to pay the loan.7 Petitioner, on the other hand, testified that she encashed
the checks and returned the money to Mandy.8 ICBC eventually foreclosed the mortgaged
property as MCCI continued to default in its obligation to pay. Mandy claims that it was
only at this point in time that he discovered that not a check was paid to
ICBC.9chanrobleslaw
 137

Thus, on October 7, 2002, MCCI, represented by Mandy, filed a Compiamt-Affidavit

for Estafa10 before the Office of the City Prosecutor of Manila. On March 3, 2004, an
Information11 was filed against petitioner before the Regional Trial Court (RTC) Manila.

After a full-blown trial, the RTC Manila rendered a decision12 dated November 11, 2005
(RTC Decision) acquitting petitioner. The RTC Manila found that while petitioner admitted
that she received the checks, the prosecution failed to establish that she was under any
obligation to deliver them to ICBC in payment of MCCFs loan. The trial court made this
finding on the strength of Mandy's admission that he gave the checks to petitioner with the
agreement that she would encash them. Petitioner would then pay ICBC using her own
checks. The trial court further made a finding that Mandy and petitioner entered into a
contract of loan.13 Thus, it held that the prosecution failed to establish an important
element of the crime of estafa—misappropriation or conversion. However, while the RTC
Manila acquitted petitioner, it ordered her to pay the amount of the checks. The dispositive
portion of the RTC Decision states —

WHEREFORE, the prosecution having failed to establish the guilt of the accused beyond
reasonable doubt, judgment is hereby rendered ACQUITTING the accused of the offense
charged. With costs de officio.

The accused is however civilly liable to the complainant for the amount of P21,706,281.00.

SO ORDERED.14chanroblesvirtuallawlibrary
Petitioner filed an appeal15 of the civil aspect of the RTC Decision with the CA. In the
Assailed Decision,16 the CA found the appeal without merit. It held that the acquittal of
petitioner does not necessarily absolve her of civil liability. The CA said that it is settled
that when an accused is acquitted on the basis of reasonable doubt, courts may still find
him or her civilly liable if the evidence so warrant. The CA explained that the evidence on
record adequately prove that petitioner received the checks as a loan from MCCI. Thus,
preventing the latter from recovering the amount of the checks would constitute unjust
enrichment. Hence, the Assailed Decision ruled

WHEREFORE, in view of the foregoing, the appeal is DENIED. The Decision dated
November 11, 2005 of the Regional Trial Court, Manila, Branch 33 in Criminal Case No. 04-
224294 which found Gloria Dy civilly liable to William Mandy is AFFIRMED.

SO ORDERED.17chanroblesvirtuallawlibrary
The CA also denied petitioner's motion for reconsideration in a resolution18 dated August 3,
2009.

Hence, this Petition for Review on Certiorari (Petition). Petitioner argues that since she was
acquitted for failure of the prosecution to prove all the elements of the crime charged, there
 138

was therefore no crime committed.19 As there was no crime, any civil liability ex
delicto cannot be awarded.

The Issues

The central issue is the propriety of making a finding of civil liability in a criminal case
for estafa when the accused is acquitted for failure of the prosecution to prove all the
elements of the crime charged.

The Ruling of the Court

We grant the petition.

Civil Liability Arising From Crime

Our laws recognize a bright line distinction between criminal and civil liabilities. A crime is
a liability against the state. It is prosecuted by and for the state. Acts considered criminal
are penalized by law as a means to protect the society from dangerous transgressions. As
criminal liability involves a penalty affecting a person's liberty, acts are only treated
criminal when the law clearly says so. On the other hand, civil liabilities take a less public
and more private nature. Civil liabilities are claimed through civil actions as a means to
enforce or protect a right or prevent or redress a wrong.20 They do not carry with them the
imposition of imprisonment as a penalty. Instead, civil liabilities are compensated in the
form of damages.

Nevertheless, our jurisdiction recognizes that a crime has a private civil component. Thus,
while an act considered criminal is a breach of law against the State, our legal system
allows for the recovery of civil damages where there is a private person injured by a
criminal act. It is in recognition of this dual nature of a criminal act that our Revised Penal
Code provides that every person criminally liable is also civilly liable. 21 This is the concept
of civil liability ex delicto.

This is echoed by the New Civil Code when it recognizes acts or omissions punished by law
as a separate source of obligation.22 This is reinforced by Article 30 of the same code which
refers to the filing of a separate civil action to demand civil liability arising from a criminal
offense.23chanrobleslaw

The Revised Penal Code fleshes out this civil liability in Article 10424 which states that it
includes restitution, reparation of damage caused and indemnification for consequential
damages.

Rules of procedure for criminal and civil actions involving the same act or omission

The law and the rules of procedure provide for a precise mechanism in instituting a civil
action pertaining to an act or omission which is also subject of a criminal case. Our Rules of
 139

Court prescribes a kind of fusion such that, subject to certain defined qualifications, when a
criminal action is instituted, the civil action for the recovery of the civil liability arising
from the offense is deemed instituted as well.25cralawredchanrobleslaw

However, there is an important difference between civil and criminal proceedings that
require a fine distinction as to how these twin actions shall proceed. These two
proceedings involve two different standards of proof. A criminal action requires proof of
guilt beyond reasonable doubt while a civil action requires a lesser quantum of proof, that
of preponderance of evidence. This distinction also agrees with the essential principle in
our legal system that while a criminal liability carries with it a corresponding civil liability,
they are nevertheless separate and distinct. In other words, these two liabilities may co-
exist but their existence is not dependent on each other.26chanrobleslaw

The Civil Code states that when an accused in a criminal prosecution is acquitted on the
ground that his guilt has not been proven beyond reasonable doubt, a civil action for
damages for the same act or omission may be filed. In the latter case, only preponderance
of evidence is required.27 This is supported by the Rules of Court which provides that the
extinction of the criminal action does not result in the extinction of the corresponding civil
action.28 The latter may only be extinguished when there is a "finding in a final judgment in
the criminal action that the act or omission from which the civil liability may arise did not
exist."29 Consistent with this, the Rules of Court requires that in judgments of acquittal the
court must state whether "the evidence of the prosecution absolutely failed to prove the
guilt of the accused or merely failed to prove his guilt beyond reasonable doubt. In either
case, the judgment shall determine if the act or omission from which the civil liability might
arise did not exist."30chanrobleslaw

Thus, whether an exoneration from the criminal action should affect the corresponding
civil action depends on the varying kinds of acquittal. In Manantan v. Court of Appeals,31 we
explained —
Our law recognizes two kinds of acquittal, with different effects on the civil liability of the
accused. First is an acquittal on the ground that the accused is not the author of the act or
omission complained of. This instance closes the door to civil liability, for a person who has
been found to be not the perpetrator of any act or omission cannot and can never be held
liable for such act or omission. There being no delict civil liability ex delicto is out of the
question, and the civil action, if any, which may be instituted must be based on grounds
other than the delict complained of. This is the situation contemplated in Rule 111 of the
Rules of Court. The second instance is an acquittal based on reasonable doubt on the guilt
of the accused. In this case, even if the guilt of the accused has not been satisfactorily
established, he is not exempt from civil liability which may be proved by preponderance of
evidence only. This is the situation contemplated in Article 29 of the Civil Code, where the
civil action for damages is "for the same act or omission." Although the two actions have
different purposes, the matters discussed in the civil case are similar to those discussed in
the criminal case. However, the judgment In the criminal proceeding cannot be read in
evidence In the civil action to establish any fact there determined, even though both actions
involve the same act or omission. The reason for this rule is that the parties are not the
 140

same and secondarily, different rules of evidence are applicable. Hence, notwithstanding
herein petitioner's acquittal, the Court of Appeals in determining whether Article 29
applied, was not precluded from looking into the question of petitioner's negligence or
reckless imprudence.32chanroblesvirtuallawlibrary
In Dayap v. Sendiong,33 we further said —
The acquittal of the accused does not automatically preclude a judgment against him on the
civil aspect of the case. The extinction of the penal action does not carry with it the
extinction of the civil liability where: (a) the acquittal is based on reasonable doubt as only
preponderance of evidence is required; (b) the court declares that the liability of the
accused is only civil; and (c) the civil liability of the accused does not arise from or is not
based upon the crime of which the accused is acquitted. However, the civil action based on
delict may be deemed extinguished if mere is a finding on the final judgment in the criminal
action that the act or omission from which the civil liability may arise did not exist or
where the accused did not commit the acts or omission imputed to
him.34chanroblesvirtuallawlibrary
Hence, a civil action filed for the purpose of enforcing civil liability ex delicto, even if
mandatorily instituted with the corresponding criminal action, survives an acquittal when
it is based on the presence of reasonable doubt. In these instances, while the evidence
presented does not establish the fact of the crime with moral certainty, the civil action still
prevails for as long as the greater weight of evidence tilts in favor of a finding of liability.
This means that while the mind of the court cannot rest easy in penalizing the accused for
the commission of a crime, it nevertheless finds that he or she committed or omitted to
perform acts which serve as a separate source of obligation. There is no sufficient proof
that the act or omission is criminal beyond reasonable doubt, but there is a preponderance
of evidence to show that the act or omission caused injury which demands compensation.

Civil Liability Ex Delicto in Estafa Cases

Our laws penalize criminal fraud which causes damage capable of pecuniary estimation
through estafa under Article 315 of the Revised Penal Code. In general, the elements
of estafa are:ChanRoblesVirtualawlibrary
(1) That the accused defrauded another (a) by abuse of confidence, or (b) by means of
deceit; and
(2) That damage or prejudice capable of pecuniary estimation is caused to the offended
party or third person.
The essence of the crime is the unlawful abuse of confidence or deceit in order to cause
damage. As this Court previously held, "the element of fraud or bad faith is
indispensable."35 Our law abhors the act of defrauding another person by abusing his trust
or deceiving him, such that, it criminalizes this kind of fraud.

Article 315 of the Revised Penal Code identifies the circumstances which constitute estafa.
Article 315, paragraph 1 (b) states that estafa is committed by abuse of confidence —
Art. 315. Swindling (estafa) - x x x (b) By misappropriating or converting, to the prejudice
of another, money, goods, or any other personal property received by the offender in trust
 141

or on commission, or for administration, or under any other obligation involving the duty
to make delivery of or to return the same, even though such obligation be totally or
partially guaranteed by a bond; or by denying having received such money, goods, or other
property.
In this kind of estafa, the fraud which the law considers as criminal is the act of
misappropriation or conversion. When the element of misappropriation or conversion is
missing, there can be no estafa. In such case, applying the foregoing discussions on civil
liability ex delicto, there can be no civil liability as there is no act or omission from which
any civil liability may be sourced. However, when an accused is acquitted because a
reasonable doubt exists as to the existence of misappropriation or conversion, then civil
liability may still be awarded. This means that, while there is evidence to prove fraud, such
evidence does not suffice to convince the court to the point of moral certainty that the act
of fraud amounts to estafa. As the act was nevertheless proven, albeit without sufficient
proof justifying the imposition of any criminal penalty, civil liability exists.

In this case, the RTC Manila acquitted petitioner because the prosecution failed to establish
by sufficient evidence the element of misappropriation or conversion. There was no
adequate evidence to prove that Mandy gave the checks to petitioner with the instruction
that she will use them to pay the ICBC loan. Citing Mandy's own testimony in open court,
the RTC Manila held that when Mandy delivered the checks to petitioner, their agreement
was that it was a "sort of loan."36 In the dispositive portion of the RTC Decision, the RTC
Manila ruled that the prosecution "failed to establish the guilt of the accused beyond
reasonable doubt."37 It then proceeded to order petitioner to pay the amount of the loan.

The ruling of the RTC Manila was affirmed by the CA. It said that "[t]he acquittal of Gloria
Dy is anchored on the ground that her guilt was not proved beyond reasonable doubt - not
because she is not the author of the act or omission complained of. x x x The trial court
found no trickery nor deceit in obtaining money from the private complainant; instead, it
concluded that the money obtained was undoubtedly a loan."38

Our jurisprudence on this matter diverges.

Earlier cases ordered the dismissal of the civil action for recovery of civil liability ex
delicto whenever there is a finding that there was no estafa but rather an obligation to pay
under a contract. In People v. Pantig,39 this Court affirmed the ruling of the lower court
acquitting Pantig, but revoked the portion sentencing him to pay the offended party the
amount of money alleged to have been obtained through false and fraudulent
representations, thus —
The trial court found as a fact that the sum of P1,200, ordered to be paid in the judgment of
acquittal, was received by the defendant-appellant as loan. This finding is inconsistent with
the existence of the criminal act charged in the information. The liability of the defendant
for the return of the amount so received arises from a civil contract, not from a
criminal act, and may not be enforced in the criminal case.
 142

The portion of the judgment appealed from, which orders the defendant-appellant to pay
the sum of Pi ,200 to the offended party, is hereby revoked, without prejudice to the filing
of a civil action for the recovery of the said amount.40chanroblesvirtuallawlibrary
This was also the import of the ruling in People v. Singson.41 In that case, this Court found
that "the evidence [was] not sufficient to establish the existence of fraud or deceit on the
part of the accused. x x x And when there is no proven deceit or fraud, there is no crime
of estafa."42 While we also said that the established facts may prove Singson's civil liability
(obligation to pay under a contract of sale), we nevertheless made no finding of civil
liability because "our mind cannot rest easy on the certainty of guilt"43 considering the
above finding. The dispositive portion stated that Singson is acquitted "without prejudice
to any civil liability which may be established in a civil case against her."44chanrobleslaw

However, our jurisprudence on the matter appears to have changed in later years.

In Eusebio-Calderon v. People,45 this Court affirmed the finding of the CA that Calderon "did
not employ trickery or deceit in obtaining money from the private complainants, instead, it
concluded that the money obtained was undoubtedly loans for which [Calderon] paid
interest."46 Thus, this Court upheld Calderon's acquittal of estafa, but found her civilly liable
for the principal amount borrowed from the private complainants. 47chanrobleslaw

The ruling was similar in People v. Cuyugan.48 In that case, we acquitted Cuyugan
of estafa for failure of the prosecution to prove fraud. We held that the transaction between
Cuyugan and private complainants was a loan to be used by Cuyugan in her business. Thus,
this Court ruled that Cuyugan has the obligation, which is civil in character, to pay the
amount borrowed.49chanrobleslaw

We hold that the better rule in ascertaining civil liability in estafa cases is that pronounced
in Pantig and Singson. The rulings in these cases are more in accord with the relevant
provisions of the Civil Code, and the Rules of Court. They are also logically consistent with
this Court's pronouncement in Manantan.

Under Pantig and Singson, whenever the elements of estafa are not established, and that

the delivery of any personal property was made pursuant to a contract, any civil liability
arising from the estafa cannot be awarded in the criminal case. This is because the civil
liability arising from the contract is not civil liability ex delicto, which arises from the same
act or omission constituting the crime. Civil liability ex delicto is the liability sought to be
recovered in a civil action deemed instituted with the criminal case.

The situation envisioned in the foregoing cases, as in this case, is civil liability ex
contractu where the civil liability arises from an entirely different source of obligation.
Therefore, it is not the type of civil action deemed instituted in the criminal case, and
consequently must be filed separately. This is necessarily so because whenever the court
makes a finding that the elements of estafa do not exist, it effectively says that there is no
crime. There is no act or omission that constitutes criminal fraud. Civil liability ex
delicto cannot be awarded as it cannot be sourced from something that does not exist.
 143

When the court finds that the source of obligation is in fact, a contract, as in a contract of
loan, it takes a position completely inconsistent with the presence of estafa. In estafa, a
person parts with his money because of abuse of confidence or deceit. In a contract, a
person willingly binds himself or herself to give something or to render some
service.50 In estafa, the accused's failure to account for the property received amounts to
criminal fraud. In a contract, a party's failure to comply with his obligation is only a
contractual breach. Thus, any finding that the source of obligation is a contract
negates estafa. The finding, in turn, means that there is no civil liability ex delicto. Thus, the
rulings in the foregoing cases are consistent with the concept of fused civil and criminal
actions, and the different sources of obligations under our laws.

We apply this doctrine to the facts of this case. Petitioner was acquitted by the RTC Manila
because of the absence of the element of misappropriation or conversion. The RTC Manila,
as affirmed by the CA, found that Mandy delivered the checks to petitioner pursuant to a
loan agreement. Clearly, there is no crime of estafa. There is no proof of the presence of any
act or omission constituting criminal fraud. Thus, civil liability ex delicto cannot be awarded
because there is no act or omission punished by law which can serve as the source of
obligation. Any civil liability arising from the loan takes the nature of a civil liability ex
contractu. It does not pertain to the civil action deemed instituted with the criminal case.

In Manantan, this Court explained the effects of this result on the civil liability deemed
instituted with the criminal case. At the risk of repetition, Manantan held that when there is
no delict, "civil liability ex delicto is out of the question, and the civil action, if any, which
may be instituted must be based on grounds other than the delict complained of."51 In Dy's
case, the civil liability arises out of contract—a different source of obligation apart from an
act or omission punished by law—and must be claimed in a separate civil action.

Violation of Due Process

We further note that the evidence on record never fully established the terms of this loan
contract. As the trial before the RTC Manila was focused on proving estafa, the loan
contract was, as a consequence, only tangentially considered. This provides another
compelling reason why the civil liability arising from the loan should be instituted in a
separate civil case. A civil action for collection of sum of money filed before the proper
court will provide for a better venue where the terms of the loan and other relevant details
may be received. While this may postpone a warranted recovery of the civil liability, this
Court deems it more important to uphold the principles underlying the inherent
differences in the various sources of obligations under our law, and the rule that fused
actions only refer to criminal and civil actions involving the same act or omission. These
legal tenets play a central role in this legal system. A confusion of these principles will
ultimately jeopardize the interests of the parties involved. Actions focused on
proving estafa is not the proper vehicle to thresh out civil liability arising from a
contract.52 The Due Process Clause of the Constitution dictates that a civil liability arising
from a contract must be litigated in a separate civil action.
 144

Section 1 of the Bill of Rights states that no person shall be deprived of property without
due process of law. This provision protects a person's right to both substantive and
procedural due process. Substantive due process looks into the validity of a law and
protects against arbitrariness.53 Procedural due process, on the other hand, guarantees
procedural fairness.54 It requires an ascertainment of "what process is due, when it is due,
and the degree of what is due."55 This aspect of due process is at the heart of this case.

In general terms, procedural due process means the right to notice and hearing. 56 More
specifically, our Rules of Court provides for a set of procedures through which a person
may be notified of the claims against him or her as well as methods through which he or
she may be given the adequate opportunity to be heard.

The Rules of Court requires that any person invoking the power of the judiciary to protect
or enforce a right or prevent or redress a wrong57 must file an initiatory pleading which
embodies a cause of action,58 which is defined as the act or omission by which a party
violates a right of another.59 The contents of an initiatory pleading alleging a cause of action
will vary depending on the source of the obligation involved. In the case of an obligation
arising from a contract, as in this case, the cause of action in an initiatory pleading will
involve the duties of the parties to the contract, and what particular obligation was
breached. On the other hand, when the obligation arises from an act or omission
constituting a crime, the cause of action must necessarily be different. In such a case, the
initiatory pleading will assert as a cause of action the act or omission of respondent, and
the specific criminal statute he or she violated. Where the initiatory pleading fails to state a
cause of action, the respondent may file a motion to dismiss even before trial.60 These rules
embody the fundamental right to notice under the Due Process Clause of the Constitution.

In a situation where a court (in a fused action for the enforcement of criminal and civil
liability) may validly order an accused-respondent to pay an obligation arising from a
contract, a person's right to be notified of the complaint, and the right to have the
complaint dismissed if there is no cause of action, are completely defeated. In this event,
the accused-respondent is completely unaware of the nature of the liability claimed against
him or her at the onset of the case. The accused-respondent will not have read any
complaint stating the cause of action of an obligation arising from a contract. All
throughout the trial, the accused-respondent is made to believe that should there be any
civil liability awarded against him or her, this liability is rooted from the act or omission
constituting the crime. The accused-respondent is also deprived of the remedy of having
the complaint dismissed through a motion to dismiss before trial. In a fused action, the
accused-respondent could not have availed of this remedy because he or she was not even
given an opportunity to ascertain what cause of action to look for in the initiatory pleading.
In such a case, the accused-respondent is blindsided. He or she could not even have
prepared the appropriate defenses and evidence to protect his or her interest. This is not
the concept of fair play embodied in the Due Process Clause. It is a clear violation of a
person's right to due process.

The Rules of Court also allows a party to a civil action certain remedies that enable him or
her to effectively present his or her case. A party may file a cross-claim, a counterclaim or a
 145

third-party complaint.61 The Rules of Court prohibits these remedies in a fused civil and
criminal case.62 The Rules of Court requires that any cross-claim, counterclaim or third-
party complaint must be instituted in a separate civil action. 63 In a legal regime where a
court may order an accused in a fused action to pay civil liability arising from a contract,
the accused-respondent is completely deprived of the remedy to file a cross-claim, a
counterclaim or a third-party complaint. This—coupled with an accused-respondent's
inability to adequately prepare his or her defense because of lack of adequate notice of the
claims against him or her—prevents the accused-respondent from having any right to a
meaningful hearing. The right to be heard under the Due Process Clause requires not just
any kind of an opportunity to be heard. It mandates that a party to a case must have the
chance to be heard in a real and meaningful sense. It does not require a perfunctory
hearing, but a court proceeding where the party may adequately avail of the procedural
remedies granted to him or her. A court decision resulting from this falls short of the
mandate of the Due Process Clause.

Indeed, the language of the Constitution is clear. No person shall be deprived of property
without due process of law. Due Process, in its procedural sense, requires, in essence, the
right to notice and hearing. These rights are further fleshed out in the Rules of Court. The
Rules of Court enforces procedural due process because, to repeat the words of this Court
in Secretary of Justice v. Lantion, it provides for "what process is due, when it is due, and the
degree of what is due."64 A court ordering an accused in a fused action to pay his or her
contractual liability deprives him or her of his or her property without the right to notice
and hearing as expressed in the procedures and remedies under the Rules of Court. Thus,
any court ruling directing an accused in a fused action to pay civil liability arising from a
contract is one that completely disregards the Due Process Clause. This ruling must be
reversed and the Constitution upheld.

Conclusion

The lower courts erred when they ordered petitioner to pay her civil obligation arising
from a contract of loan in the same criminal case where she was acquitted on the ground
that there was no crime. Any contractual obligation she may have must be litigated in a
separate civil action involving the contract of loan. We clarify that in cases where the
accused is acquitted on the ground that there is no crime, the civil action deemed instituted
with the criminal case cannot prosper precisely because there is no delict from which any
civil obligation may be sourced. The peculiarity of this case is the finding that petitioner, in
fact, has an obligation arising from a contract. This civil action arising from the contract is
not necessarily extinguished. It can be instituted in the proper court through the proper
civil action.

We note that while there is no written contract of loan in this case, there is an oral contract
of loan which must be brought within six years.65 Under the facts of the case, it appears that
any breach in the obligation to pay the loan may have happened between 1996 and 1999,
or more than six years since this case has been instituted. This notwithstanding, we find
that the civil action arising from the contract of loan has not yet prescribed. Article 1150 of
the Civil Code states —
 146

Art. 1150. The time for prescription for all kinds of actions, when there is no special
provision which ordains otherwise, shall be counted from the day they may be brought.
We held in numerous cases that it is the legal possibility of bringing the action that
determines the starting point for the computation of the period of prescription.67 We
highlight the unique circumstances surrounding this case. As discussed in this decision,
there has been diverse jurisprudence as to the propriety of ordering an accused to pay an
obligation arising from a contract in the criminal case where the accused was acquitted on
the ground that there is no crime. Litigants, such as MCCI, cannot be blamed for relying on
prior rulings where the recovery on a contract of loan in a criminal case for estafa was
allowed. We have found the opportunity to clarify this matter through this decision. As it is
only now that we delineate the rules governing the fusion of criminal and civil actions
pertaining to estafa, it is only upon the promulgation of this judgment that litigants have a
clear understanding of the proper recourse in similar cases. We therefore rule that insofar
as MCCI is concerned, the filing of an action, if any (that may be sourced from the contract
of loan), becomes a legal possibility only upon the finality of this decision which definitively
ruled upon the principles on fused actions.

We add, however, that upon finality of this decision, prospective litigants should become
more circumspect in ascertaining their course of action in similar cases. Whenever a
litigant erroneously pursues an estafa case, and the accused is subsequently acquitted
because the obligation arose out of a contract, the prescriptive period will still be counted
from the time the cause of action arose. In this eventuality, it is probable that the action has
already prescribed by the time the criminal case shall have been completed. This possibility
demands that prospective litigants do not haphazardly pursue the filing of an estafa case in
order to force an obligor to pay his or her obligation with the threat of criminal conviction.
It compels litigants to be honest and fair in their judgment as to the proper action to be
filed. This ruling should deter litigants from turning to criminal courts as their collection
agents, and should provide a disincentive to the practice of filing of criminal cases based on
unfounded grounds in order to provide a litigant a bargaining chip in enforcing contracts.

WHEREFORE, in view of the foregoing, the Petition is GRANTED. The Decision of the CA
dated February 25, 2009 is REVERSED. This is however, without prejudice to any civil
action which may be filed to claim civil liability arising from the contract.

G.R. No. 229856

PEOPLE OF THE PHILIPPINES, Plaintiff-appellee

vs.
RUBEN CALOMIA, Accused-appellant

RESOLUTION

LEONARDO-DE CASTRO, J.:
 147

In Criminal Case Nos. 1317 and 1318, accused-appellant Ruben Calomia was ·charged
before the Regional Trial Court (RTC) of Loay, Bohol, Branch 50, with two counts of
qualified rape of his minor daughter, AAA,1 which he allegedly committed sometime in
August 2007 and April 2008.2

After trial on the merits, the RTC promulgated its Decision on March 11, 2015 finding
accused-appellant guilty beyond reasonable doubt of both counts of qualified rape and
sentencing him as follows:

WHEREFORE, in the light of the foregoing evidence, the court finds the accused guilty
beyond reasonable doubt of (Qualified) Incestuous Rape in Crim. Case No. 1317 and
Statutory Incestuous Rape in Crim. Case No. 1318.

Accordingly, in both cases, the court has no recourse but to impose on the accused the
penalties mandated by law. Although the crimes of Qualified Incestuous Rape and Statutory
Incestuous Rape would have been punishable by death, in view of the passage of R.A. [No.]
9346 (which prohibits the imposition of the death penalty), the penalty imposable for each
of the two offenses is only reclusion perpetua.

Because of the qualifying or aggravating circumstance of relationship, the victim is entitled

to civil indemnity in each case of ₱75,000 ex delicto, ₱75,000 in moral damages (People v.
Lauga, G.R. No. 186228, Mar. 15, 2010), and ₱30,000 in exemplary damages (ibid.).3

Accused-appellant's appeal before the Court of Appeals was docketed as CA-G.R. CEB-CR-
HC No. 02040. In its Decision dated August 26, 2016, the appellate court upheld accused-
appellant's conviction, but modified the award of damages to AAA. The Court of Appeals
decreed:

WHEREFORE, in view of the foregoing, We find no error committed by the Trial Court and,
hence, DENY the appeal. The Decision dated 11 March 2015 rendered by the Regional Trial
Court of Loay, Bohol 7th Judicial Region, Branch 50, in Criminal Case Nos. 1317 and 1318, is
AFFIRMED with MODIFICATION.

As modified, [accused-]appellant Ruben Calomia is ordered to pay the victim AAA the
amounts of ₱l00,000.00 as civil indemnity, ₱l00,000.001 as moral damages, and
₱l00,000.00 as exemplary damages. Interest is imposed on all damages awarded at the rate
of 6% per annum from date of finality of this Decision until fully paid.4

On September 21, 2016, accused-appellant filed his Notice of Appeal expressing his
intention to appeal the foregoing Decision before this Court.

The Court issued a Resolution dated April 25, 2017 requiring the parties to file their
respective supplemental briefs, if they so desired, within 30 days from notice; ordering the
Provincial Jail Warden, Bohol Detention and Rehabilitation Center, Tagbilaran City, to
transfer accused-appellant to the Bureau of Corrections, Muntinlupa City and to submit a
 148

report of such transfer; and ordering the Director General of the Bureau of Corrections to
confirm the confinement of accused-appellant to said prison and submit a report thereon.

However, the Court received on September 4, 201 7 a letter dated August 2, 2017 from Jail
Chief Inspector (J/CINSP) Felipe A. Montejo (Montejo), DDM, Bohol District Jail Warden,
stating thus:

Please be informed that the said appellant [has] died while in the confinement of Bohol
District Jail last Sept. 29, 2015 due to Asphyxia due to Strangulation, Self Inflicted, Hanging
and declared dead by Dr. Calvelo, Medical Officer III, City Health Office, Tagbilaran City,
Bohol per Certificate of Death from Local Civil Registrar.

Accused Ruben Calomia was due for transfer at BUCOR Muntinlupa City at that time
pending the approval of budget but unfortunately he died with the aforementioned cause of
death before the scheduled date and time to transfer.5

Attached to J/CINSP Montejo's letter is a copy of accused-appellant's Death Certificate

issued by the Office of the Civil Registrar General indicating that accused-appellant died on
September 29, 2015 in Cabawan District, Tagbilaran City, Bohol, of "Asphyxia due to
Strangulation, Self Inflicted, Hanging."

Paragraph 1 of Article 89 of the Revised Penal Code, as amended, provides that the death of
an accused pending his appeal extinguishes both his criminal and civil liability ex
delicto, thus:

Art. 89. How criminal liability is totally extinguished. - Criminal liability is totally

extinguished:

1. By the death of the convict, as to the personal penalties; and as to pecuniary penalties,
liability therefore is extinguished only when the death of the offender occurs before final
judgment[.]

In People v. Bayotas,6 the Court construed the above provision and pronounced these
guidelines:

1. Death of the accused pending appeal of his conviction extinguishes his criminal liability
as well as the civil liability based solely thereon. As opined by Justice Regalado, in this
regard, "the death of the accused prior to final judgment terminates his criminal liability
and only the civil liability directly arising from and based solely on the offense
committed, i.e., civil liability ex delicto in senso strictiore."

2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if
the same may also be predicated on a source of obligation other than delict. Article 1157 of
the Civil Code enumerates these other sources of obligation from which the civil liability
may arise as a result of the same act or omission:
 149

a) Law

b) Contracts

c) Quasi-contracts

d) xxx

e) Quasi-delicts

3. Where the civil liability survives, as explained in Number 2 above, an action for recovery
therefor may be pursued but only by way of filing a separate civil action and subject to
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as amended. This separate
civil action may be enforced either against the executor/administrator or the estate of the
accused, depending on the source of obligation upon which the same is based as explained
above.

4. Finally, the private offended party need not fear a forfeiture of his right to file this
separate civil action by prescription, in cases where during the prosecution of the criminal
action and prior to its extinction, the private-offended party instituted together therewith
the civil action. In such case, the statute of limitations on the civil liability is deemed
interrupted during the pendency of the criminal case, conformably with provisions of
Article 1155 of the Civil Code, that should thereby avoid any apprehension on a possible
privation of right by prescription. (Emphases supplied.)

The death of an accused pending the appeal of his conviction extinguishes the criminal
action, as there is no longer a defendant to stand as the accused; and the civil action
instituted therein for the recovery of civil liability ex delicto is likewise ipso
facto extinguished, as it is grounded on the criminal action.7

In the instant case, accused-appellant's death occurred prior to the finality of the judgment
of conviction rendered against him.1âwphi1 In fact, accused-appellant died way back on
September 29, 2015, during the pendency of his appeal before the Court of Appeals.
Unfortunately, the appellate court was not timely inf9rmed of accused-appellant's death
prior to the promulgation of its Decision in CA-G.R. CEB-CR-HC No. 02040 on August 26,
2016.

Irrefragably, accused-appellant's death extinguished his criminal liability and his civil
liabilities directly arising from and based solely on the crime/s he committed. Accused-
appellant's conviction by the RTC, as affirmed by the Court of Appeals, must therefore be
set aside as the same had already been rendered ineffectual.

WHEREFORE, the Court RESOLVES to SET ASIDE the Decision dated August 26, 2016 of

the Court of Appeals in CA-G.R. CEB-CR-HC No. 02040 and to DISMISS Criminal Case Nos.
131 7 and 1318 before the Regional Trial Court of Loay, Bohol, Branch 50, by reason of the
death of the sole accused therein, Ruben Calomia, on September 29, 2015.
 150

G.R. No. 110544 October 17, 1995

REYNALDO V. TUANDA, Mayor of the Municipality of Jimalalud, Negros Oriental,

HERMINIGILDO FABURADA, (former Vice-Mayor), SANTOS A. VILLANUEVA,
Incumbent Member of the Sangguniang Bayan, MANUEL LIM, NICANOR R. AGOSTO,
ERENIETA K. MENDOZA MAXIMINO A. VIERNES, HACUBINA V. SERILLO, ILUMINADO
D. ESTRELLANES, and FORMER MEMBERS OF THE SANGGUNIANG BAYAN OF
JIMALALUD, NEGROS ORIENTAL, petitioners,
vs.
THE HONORABLE SANDIGANBAYAN, (THIRD DIVISION), BARTOLOME BINAOHAN and
DELIA ESTRELLANES, respondents.

KAPUNAN, J.:

Petitioners institute this special civil action for certiorari and prohibition under Rule 65 of
the Revised Rules of Court to set aside the resolution of the Sandiganbayan dated 17
February 1992 and its orders dated 19 August 1992 and 13 May 1993 in Criminal Case No.
16936 entitled "People of the Philippines versus Reynaldo Tuanda, et al." denying
petitioners' motion for suspension of their arraignment.

The present controversy arose from the following antecedents:

On 9 February 1989, private respondents Delia Estrellanes and Bartolome Binaohan were
designated as industrial labor sectoral representative and agricultural labor sectoral
representative respectively, for the Sangguniang Bayan of Jimalalud, Province of Negros
Oriental by then Secretary Luis T. Santos of the Department of Local Government. Private
respondents Binaohan and Estrellanes took their oath of office on 16 February 1989 and 17
February 1989, respectively.

Subsequently, petitioners filed an undated petition with the Office of the President for
review and recall of said designations. The latter, however, in a letter dated 20 March 1989,
denied the petition and enjoined Mayor Reynaldo Tuanda to recognize private respondents
as sectoral representatives.
 151

On 4 May 1990, private respondents filed a petition for mandamus with the Regional Trial
Court of Negros Oriental, Branch 35, docketed as Special Civil Action No. 9661, for
recognition as members of the Sangguniang Bayan. It was dismissed on 23 July 1991.

Thereafter, on 20 June 1991, petitioners filed an action with the Regional Trial Court of
Dumaguete City to declare null and void the designations of private respondents as sectoral
representatives, docketed as Civil Case No. 9955 entitled "Reynaldo Tuanda, et al. versus
Secretary of the Department of Local Government, et al."

On 21 July 1991, an information was filed before the Sandiganbayan, docketed as Criminal
Case No. 16936 entitled "People of the Philippines versus Reynaldo Tuanda, et al." charging
petitioners thus:

INFORMATION

The undersigned Special Prosecution Officer of the Special Prosecutor, hereby accuses
REYNALDO V. TUANDA, HERMENEGILDO G. FABURADA, MANUEL LIM, NICANOR P.
AGOSTO, ERENIETA K. MENDOZA, MAXIMO VIERNES, HACUBINA V. SERILLO, and SANTOS
A. VILLANUEVA of Violation of Section 3(e) of R.A. No. 3019, as amended, committed as
follows:

That during the period from February 1989 to February 1991 and
subsequent thereto, in the Municipality of Jimalalud, Negros Oriental, and
within the jurisdiction of this Honorable Court, accused, all public officers,
Mayor REYNALDO V. TUANDA, Vice-Mayor HERMENEGILDO G. FABURADA,
Sangguniang Members MANUEL LIM, NICANOR P. AGOSTO, ERENIETA K.
MENDOZA, MAXIMO A. VIERNES, HACUBINA V. SERILLO, ILUMINADO D.
ESTRELLANES and SANTOS A. VILLANUEVA while in the performance of
their official functions and taking advantage of their public positions, with
evident bad faith, manifest partiality, and conspiring and confederating with
each other did, then and there, wilfully and unlawfully cause undue injury to
Sectoral Members Bartolome M. Binaohan and Delia T. Estrellanes by
refusing to pay despite demand the amount of NINETY FIVE THOUSAND
THREE HUNDRED FIFTY PESOS (P95,350.00) and ONE HUNDRED EIGHT
THOUSAND NINE HUNDRED PESOS (P108,900.00) representing respectively
their per diems, salaries and other privileges and benefits, and such undue
injury continuing to the present to the prejudice and damage of Bartolome
Binaohan and Delia Estrellanes.

CONTRARY TO LAW. 1

On 9 September 1991, petitioners filed a motion with the Sandiganbayan for suspension of
the proceedings in Criminal Case No. 16936 on the ground that a prejudicial question exists
in Civil Case No. 9955 pending before the Regional Trial Court of Dumaguete City.2
 152

On 16 January 1992, the Regional Trial Court rendered a decision declaring null and
void ab initio the designations issued by the Department of Local Government to the
private respondents as sectoral representatives for having been done in violation of Section
146 (2) of B.P. Blg. 337, otherwise known as the Local Government Code.3

The trial court expounded thus:

The Supreme Court in the case of Johnny D. Supangan Jr. v. Luis T. Santos, et al., G.R. No.
84663, along with 7 companion cases of similar import, (G.R. Nos. 05012, 87601, 87602,
87792, 87935, 88072, and 90205) all promulgated on August 24, 1990, ruled that:

B.P. Blg. 337 explicitly required that before the President (or the Secretary of
the Department of Local Government) may appoint members of the local
legislative bodies to represent the Industrial and Agricultural Labor Sectors,
there must be a determination to be made by the Sanggunian itself that the
said sectors are of sufficient number in the city or municipality to warrant
representation after consultation with associations and persons belonging to
the sector concerned.

The Supreme Court further ruled —

For that matter, the Implementing Rules and Regulations of the Local
Government Code even prescribe the time and manner by which such
determination is to be conducted by the Sanggunian.

Consequently, in cases where the Sanggunian concerned has not yet

determined that the Industrial and Agricultural Labor Sectors in their
particular city or municipality are of sufficient number to warrant
representation, there will absolutely be no basis for the
designation/appointments.

In the process of such inquiry as to the sufficiency in number of the sector concerned to
warrant representation, the Sanggunian is enjoined by law (B.P. Blg. 337) to consult with
associations and persons belonging to the sector concerned. Consultation with the sector
concerned is made a pre-requisite. This is so considering that those who belong to the said
sector are the ones primarily interested in being represented in the Sanggunian. In the
same aforecited case, the Supreme Court considers such prior determination by the
Sanggunian itself (not by any other person or body) as a condition sine qua non to a valid
appointment or designation.

Since in the present case, there was total absence of the required prior determination by
the Sangguniang Bayan of Jimalalud, this Court cannot help but declare the designations of
private defendants as sectoral representatives null and void.
 153

This verdict is not without precedence. In several similar cases, the Supreme Court
invariably nullified the designations where the requirements of Sec. 146 (2), B.P. Blg. 337
were not complied with. Just to cite one case, the Supreme Court ruled:

There is no certification from the Sangguniang Bayan of Valenzuela that the

sectors concerned are of sufficient number to warrant representation and
there was no consultation whatsoever with the associations and persons
belonging to the Industrial and Agricultural Labor Sectors. Therefore, the
appointment of private respondents Romeo F. Bularan and Rafael Cortez are
null and void (Romeo Llanado, et al. v. Hon. Luis Santos, et al., G.R. No. 86394,
August 24, 1990).4

Private respondents appealed the aforestated decision to the Court of Appeals, docketed as
CA-G.R. CV No. 36769, where the same is currently pending resolution.

Meanwhile, on 17 February 1992, respondent Sandiganbayan issued a resolution denying

the motion for suspension of proceedings filed by petitioners. Said respondent
Sandiganbayan:

Despite the pendency of Civil Case No. 9955 of the Regional Trial Court of
Negros Oriental, it appears, nevertheless, that the private complainants have
been rendering services on the basis of their respective appointments as
sectoral members of the Sangguniang Bayan of the Municipality of Jimalalud,
Negros Oriental; and that their said appointments enjoy the presumption of
regularity. Having rendered such services, the private complainants are
entitled to the salaries attached to their office. Even assuming arguendo that
the said Regional Trial Court shall later decide that the said appointments of
the private complainants are null and void, still the private complainants are
entitled to their salaries and compensation for service they have actually
rendered, for the reason that before such judicial declaration of nullity, the
private complainants are considered at least de facto public officers acting as
such on the basis of apparently valid appointments issued by competent
authorities. In other words, regardless of the decision that may be rendered
in Civil Case
No. 9955, the private complainants are entitled to their withheld salaries for
the services they have actually rendered as sectoral representatives of the
said Sangguniang Bayan. Hence, the decision that may be rendered by the
Regional Trial Court in Civil Case No. 9955 would not be determinative of the
innocence or guilt of the accused.

WHEREFORE, the subject Petition for the Suspension of Proceedings in

Virtue of Prejudicial Question filed by the accused through counsel, is hereby
DENIED for lack of merit.

SO ORDERED.5
 154

Petitioners filed a motion for reconsideration of the aforementioned resolution in view of

the decision promulgated by the trial court nullifying the appointments of private
respondents but it was, likewise, denied in an order issued by respondent Sandiganbayan
on 19 August 1992 on the justification that the grounds stated in the said motion were a
mere rehash of petitioners' original motion to hold the case in abeyance. 6 The dispositive
portion of its order reads as follows:

WHEREFORE, in view of the foregoing, the arraignment of the accused which

was scheduled today is cancelled. Mayor Reynaldo Tuanda, Hermenegildo
Faburada, Nicanor P. Agosto, Erenieta K. Mendoza, Hacubina V. Serillo and
Iluminado Estrellanes are, however, hereby ordered to show cause in writing
within ten (10) days from service hereof why they should not be cited for
contempt of court for their failure to appear in court today for arraignment.

In case of an adverse resolution on the motion to quash which is to be filed

by the counsel for the defense, set this case for arraignment, pre-trial and
trial on January 4 & 5, 1993, on all dates the trial to start at 8:30 o'clock in the
morning.

SO ORDERED.7

On 19 February 1993, respondent Sandiganbayan issued an order holding consideration of

all incidents pending the issuance of an extended resolution.8

No such resolution, however, was issued and in its assailed order dated 13 May 1992,
respondent Sandiganbayan set the arraignment of petitioners on 30 June 1993. The
dispositive portion of the order reads:

WHEREFORE, considering the absence of the accused from the scheduled

hearing today which We deem to be excusable, reset this case for
arraignment on June 30, 1993 and for trial on the merits on June 30 and July
1 and 2, 1993, on all dates the trial to start at 8:30 o'clock in the morning.

Give proper notice to the accused and principal counsel, Atty. Alfonso
Briones. Considering that the accused come all the way from Himalalud,
Negros Oriental, no postponement will be allowed.

SO ORDERED.9

Hence, this special civil action for certiorari and prohibition where petitioners attribute to
respondent Sandiganbayan the following errors:

A. The Respondent Court committed grave abuse of discretion in denying

petitioners' motions for the suspension of the proceedings in Criminal Case
No. 16936 in spite of the pendency of a prejudicial issue before the Court of
Appeals in CA-G.R. CV No. 36769;
 155

B. The Respondent Court acted without or in excess of jurisdiction in refusing

to suspend the proceedings that would entail a retrial and rehearing by it of
the basic issue involved, i.e., the validity of the appointments of private
respondents and their entitlement to compensation which is already pending
resolution by the Court of Appeals in C.A. G.R. CV No. 36769; and

C. The Respondent Court committed grave abuse of discretion and/or acted

without or in excess of jurisdiction in effectively allowing petitioners to be
prosecuted under two alternative theories that private respondents are de
jure and/or de facto officers in violation of petitioners' right to due process.10

In sum, the only issue in the case at bench is whether or not the legality or validity of
private respondents' designation as sectoral representatives which is pending resolution in
CA-G.R. No. 36769 is a prejudicial question justifying suspension of the proceedings in the
criminal case against petitioners.

A prejudicial question is one that must be decided before any criminal prosecution may be
instituted or before it may proceed (see Art. 36, Civil Code) because a decision on that point
is vital to the eventual judgment in the criminal case. Thus, the resolution of the prejudicial
question is a logical antecedent of the issues involved in said criminal case.11

A prejudicial question is defined as that which arises in a case the resolution of which is a
logical antecedent of the issue involved therein, and the cognizance of which pertains to
another tribunal. The prejudicial question must be determinative of the case before the
court but the jurisdiction to try and resolve the question must be lodged in another court or
tribunal.12 It is a question based on a fact distinct and separate from "the crime but so
intimately connected with it that it determines the guilt or innocence of the accused, and
for it to suspend the criminal action, it must appear not only that said case involves facts
intimately related to those upon which the criminal prosecution would be based but also
that in the resolution of the issue or issues raised in the civil case, the guilt or innocence of
the accused would necessarily be determined. It comes into play generally in a situation
where a civil action and a criminal action are both pending and there exists in the former
an issue which must be preemptively resolved before the criminal action may proceed,
because howsoever the issue raised in the civil action is resolved would be
determinative juris et de jure of the guilt or innocence of the accused in the criminal case."13

The rationale behind the principle of prejudicial question is to avoid two conflicting
decisions.14 It has two essential elements:

(a) the civil action involves an issue similar or intimately related to the issue
raised in the criminal action; and

(b) the resolution of such issue determines whether or not the criminal
action may proceed.15
 156

Applying the foregoing principles to the case at bench, we find that the issue in the civil
case, CA-G.R. CV No. 36769, constitutes a valid prejudicial question to warrant suspension
of the arraignment and further proceedings in the criminal case against petitioners.

All the elements of a prejudicial question are clearly and unmistakably present in this case.
There is no doubt that the facts and issues involved in the civil action (No. 36769) and the
criminal case (No. 16936) are closely related. The filing of the criminal case was premised
on petitioners' alleged partiality and evident bad faith in not paying private respondents'
salaries and per diems as sectoral representatives, while the civil action was instituted
precisely to resolve whether or not the designations of private respondents as sectoral
representatives were made in accordance with law.

More importantly, ,the resolution of the civil case will certainly determine if there will still
be any reason to proceed with the criminal action.

Petitioners were criminally charged under the Anti-Graft & Corrupt Practices Act (RA 3019,
sec, 3[e]) due to their refusal, allegedly in bad faith and with manifest partiality, to pay
private respondents' salaries as sectoral representatives. This refusal, however, was
anchored on petitioners' assertion that said designations were made in violation of the
Local Government Code (B.P. Blg. 337) and thus, were null and void. Therefore, should the
Court of Appeals uphold the trial court's decision declaring null and void private
respondents' designations as sectoral representatives for failure to comply with the
provisions of the Local Government Code (B.P. Blg. 337, sec. 146[2]), the charges against
petitioners would no longer, so to speak, have a leg to stand on. Petitioners cannot be
accused of bad faith and partiality there being in the first place no obligation on their part
to pay private respondents' claims. Private respondents do not have any legal right to
demand salaries, per diems and other benefits. In other words, the Court of Appeals'
resolution of the issues raised in the civil action will ultimately determine whether or not
there is basis to proceed with the criminal case.

Private respondents insist that even if their designations are nullified, they are entitled to
compensation for actual services rendered.16 We disagree. As found by the trial court and
as borne out by the records, from the start, private respondents' designations as sectoral
representatives have been challenged by petitioners. They began with a petition filed with
the Office of the President copies of which were received by private respondents on 26
February 1989, barely eight (8) days after they took their oath of office.17 Hence, private
respondents' claim that they have actually rendered services as sectoral representatives
has not been established.

Finally, we find unmeritorious respondent Sandiganbayan's thesis that even in the event
that private respondents' designations are finally declared invalid, they may still be
considered de facto public officers entitled to compensation for services actually rendered.

The conditions and elements of de facto officership are the following:

1) There must be a de jure office;

 157

2) There must be color of right or general acquiescence by the public; and

3) There must be actual physical possession of the office in good faith.18

One can qualify as a de facto officer only if all the aforestated elements are present. There
can be no de facto officer where there is no de jure office, although there may be a de
facto officer in a de jure office.19

WHEREFORE, the resolution dated 17 February 1992 and orders dated 19 August 1992
and 13 May 1993 of respondent Sandiganbayan in Criminal Case No. 16936 are hereby SET
ASIDE. Respondent Sandiganbayan is enjoined from proceeding with the arraignment and
trial of petitioners in Criminal Case No. 16936 pending final resolution of CA-G.R. CV No.
36769.

G.R. No. 137567 June 20, 2000

MEYNARDO L. BELTRAN, Petitioner, v. PEOPLE OF THE PHILIPPINES, and HON. JUDGE

FLORENTINO TUAZON, JR., being the Judge of the RTC, Brach 139, Makati
City, Respondents.

BUENA, J.:

This petition for review, filed under Rule 45 of the 1997 Rules of Civil Procedure, seeks to
review and set aside the Order dated January 28, 1999 issued by Judge Florentino A.
Tuazon, Jr. of the Regional Trial Court of Makati City, Branch 139 in Special Civil Case No.
98-3056, entitled "Meynardo Beltran vs. People of the Philippines and Hon. Judge Alden
Cervantes of the Metropolitan Trial Court of Makati City, Branch 61." The said Order denied
petitioner's prayer for the issuance of a writ of preliminary injunction to enjoin Judge
Cervantes from proceeding with the trial of Criminal Case No. 236176, a concubinage case
against petitioner on the ground that the pending petition for declaration of nullity of
marriage filed by petitioner against his wife constitutes a prejudicial question.

The antecedent facts of the case are undisputed:

Petitioner Meynardo Beltran and wife Charmaine E. Felix were married on June 16, 1973 at
the Immaculate Concepcion Parish Church in Cubao, Quezon City. 1
 158

On February 7, 1997, after twenty-four years of marriage and four

children, 2 petitioner filed a petition for nullity of marriage on the ground of psychological
incapacity under Article 36 of the Family Code before Branch 87 of the Regional Trial Court
of Quezon City. The case was docketed as Civil Case No. Q-97-30192. 3

In her Answer to the said petition, petitioner's wife Charmaine Felix alleged that it was
petitioner who abandoned the conjugal home and lived with a certain woman named
Milagros Salting. 4 Charmaine subsequently filed a criminal complaint for
concubinage 5 under Article 334 of the Revised Penal Code against petitioner and his
paramour before the City Prosecutor's Office of Makati who, in a Resolution dated
September 16, 1997, found probable cause and ordered the filing of an
Information 6 against them. The case, docketed as Criminal Case No. 236176, was filed
before the Metropolitan Trial Court of Makati City, Branch 61.

On March 20, 1998, petitioner, in order to forestall the issuance of a warrant for his arrest,
filed a Motion to Defer Proceedings Including the Issuance of the Warrant of Arrest in the
criminal case. Petitioner argued that the pendency of the civil case for declaration of nullity
of his marriage posed a prejudicial question to the determination of the criminal case.
Judge Alden Vasquez Cervantes denied the foregoing motion in the Order 7 dated August 31,
1998. Petitioner's motion for reconsideration of the said Order of denial was likewise
denied in an Order dated December 9, 1998.

In view of the denial of his motion to defer the proceedings in the concubinage case,
petitioner went to the Regional Trial Court of Makati City, Branch 139 on certiorari,
questioning the Orders dated August 31, 1998 and December 9, 1998 issued by Judge
Cervantes and praying for the issuance of a writ of preliminary injunction.  8 In an
Order 9 dated January 28, 1999, the Regional Trial Court of Makati denied the petition
for certiorari. Said Court subsequently issued another Order 10 dated February 23, 1999,
denying his motion for reconsideration of the dismissal of his petition.

Undaunted, petitioner filed the instant petition for review.

Petitioner contends that the pendency of the petition for declaration of nullity of his
marriage based on psychological incapacity under Article 36 of the Family Code is a
prejudicial question that should merit the suspension of the criminal case for concubinage
filed against him by his wife.

Petitioner also contends that there is a possibility that two conflicting decisions might
result from the civil case for annulment of marriage and the criminal case for concubinage.
In the civil case, the trial court might declare the marriage as valid by dismissing
petitioner's complaint but in the criminal case, the trial court might acquit petitioner
because the evidence shows that his marriage is void on ground of psychological
incapacity. Petitioner submits that the possible conflict of the courts' ruling regarding
petitioner's marriage can be avoided, if the criminal case will be suspended, until the court
rules on the validity of marriage; that if petitioner's marriage is declared void by reason of
psychological incapacity then by reason of the arguments submitted in the subject petition,
 159

his marriage has never existed; and that, accordingly, petitioner could not be convicted in
the criminal case because he was never before a married man.

Petitioner's contentions are untenable.

The rationale behind the principle of prejudicial question is to avoid two conflicting
decisions. It has two essential elements: (a) the civil action involves an issue similar or
intimately related to the issue raised in the criminal action; and (b) the resolution of such
issue determines whether or not the criminal action may proceed. 11

The pendency of the case for declaration of nullity of petitioner's marriage is not a
prejudicial question to the concubinage case. For a civil case to be considered prejudicial to
a criminal action as to cause the suspension of the latter pending the final determination of
the civil case, it must appear not only that the said civil case involves the same facts upon
which the criminal prosecution would be based, but also that in the resolution of the issue
or issues raised in the aforesaid civil action, the guilt or innocence of the accused would
necessarily be determined.

Art. 40 of the Family Code provides:

The absolute nullity of a previous marriage may be invoked for purposes of remarriage on
the basis solely of a final judgment declaring such previous marriage void.

In Domingo vs. Court of Appeals, 12 this Court ruled that the import of said provision is that
for purposes of remarriage, the only legally acceptable basis for declaring a previous
marriage an absolute nullity is a final judgment declaring such previous marriage void,
whereas, for purposes of other than remarriage, other evidence is acceptable. The
pertinent portions of said Decision read:

. . . Undoubtedly, one can conceive of other instances where a party might well invoke the
absolute nullity of a previous marriage for purposes other than remarriage, such as in case
of an action for liquidation, partition, distribution and separation of property between the
erstwhile spouses, as well as an action for the custody and support of their common
children and the delivery of the latters' presumptive legitimes. In such cases, evidence
needs must be adduced, testimonial or documentary, to prove the existence of grounds
rendering such a previous marriage an absolute nullity. These needs not be limited solely
to an earlier final judgment of a court declaring such previous marriage void.

So that in a case for concubinage, the accused, like the herein petitioner need not present a
final judgment declaring his marriage void for he can adduce evidence in the criminal case
of the nullity of his marriage other than proof of a final judgment declaring his marriage
void.

With regard to petitioner's argument that he could be acquitted of the charge of

concubinage should his marriage be declared null and void, suffice it to state that even a
subsequent pronouncement that his marriage is void from the beginning is not a defense.
 160

Analogous to this case is that of Landicho vs. Relova 1 cited in Donato vs. Luna 14 where this

Court held that:

. . . Assuming that the first marriage was null and void on the ground alleged by petitioner,
that fact would not be material to the outcome of the criminal case. Parties to the marriage
should not be permitted to judge for themselves its nullity, for the same must be submitted
to the judgment of the competent courts and only when the nullity of the marriage is so
declared can it be held as void, and so long as there is no such declaration the presumption
is that the marriage exists. Therefore, he who contracts a second marriage before the
judicial declaration of nullity of the first marriage assumes the risk of being prosecuted for
bigamy.

Thus, in the case at bar it must also be held that parties to the marriage should not be
permitted to judge for themselves its nullity, for the same must be submitted to the
judgment of the competent courts and only when the nullity of the marriage is so declared
can it be held as void, and so long as there is no such declaration the presumption is that
the marriage exists for all intents and purposes. Therefore, he who cohabits with a woman
not his wife before the judicial declaration of nullity of the marriage assumes the risk of
being prosecuted for concubinage. The lower court therefore, has not erred in affirming the
Orders of the judge of the Metropolitan Trial Court ruling that pendency of a civil action for
nullity of marriage does not pose a prejudicial question in a criminal case for concubinage.

WHEREFORE, for lack of merit, the instant petition is DISMISSED.

[G.R. NO. 134887 : July 27, 2006]

PHILIPPINE AGILA SATELLITE, INC. represented by MICHAEL C. U. DE

GUZMAN, Petitioner, v. SEC. JOSEFINA TRINIDAD LICHAUCO and the HON.
OMBUDSMAN, Respondents.

DECISION

CARPIO MORALES, J.:

On June 6, 1994, a Memorandum of Understanding1 (MOU) was entered into by a

consortium of private telecommunications carriers and the Department of Transportation
and Communications (DOTC) represented by then Secretary Jesus B. Garcia, Jr. relative to
the launching, ownership, operation and management of a Philippine satellite by a Filipino-
owned or controlled private consortium or corporation.

Pursuant to Article IV of the MOU, the consortium of private telecommunications carriers

formed a corporation and adopted the corporate name Philippine Agila Satellite, Inc.
(PASI), herein petitioner.
 161

By letter2 dated June 28, 1996, PASI president Rodrigo A. Silverio (Silverio) requested the
then DOTC Secretary Amado S. Lagdameo, Jr. for official government confirmation of the
assignment of Philippine orbital slots 161 E and 153 E to PASI for its AGILA satellites.

In response to Silverio's letter, Secretary Lagdameo, by letter 3 dated July 3, 1996,

confirmed the government's assignment of Philippine orbital slots 161 E and 153 E to PASI
for its AGILA satellites.

PASI thereupon undertook preparations for the launching, operation and management of
its satellites by, among other things, obtaining loans, increasing its capital, conducting
negotiations with its business partners, and making an initial payment of US$ 3.5 million to
Aerospatiale, a French satellite manufacturer.

Michael de Guzman (de Guzman), PASI President and Chief Executive Officer (CEO), later
informed Jesli Lapuz (Lapuz), President and CEO of the Landbank of the Philippines, by
letter4 of December 3, 1996, of the government's assignment to PASI of orbital slots 161 E
and 153 E and requested the bank's confirmation of its participation in a club loan in the
amount of US$ 11 million, the proceeds of which would be applied to PASI's interim
satellite.

It appears that Lapuz sent a copy of De Guzman's letter to then DOTC Undersecretary
Josefina T. Lichauco, (Lichauco) who, by letter5 of December 5, 1996, wrote Lapuz as
follows:

1. Kindly be informed that there is simply no basis for Michael de Guzman to allege that the
DOTC has assigned two (2) slots to PASI. He conveniently neglected to attach as another
annex, in addition to Sec. Lagdameo's letter of 3 July 1996 (Annex "A") the letter of 28 June
(Annex "B") in response to which the July 3rd letter had been sent to PASI. Annex "B"
precisely provides that one slot (153' E, to which the interim satellite was supposed to
migrate) was to be used for the migration of the Russian satellite in time for the APEC
Leaders' Summit. This particular endeavor was not successful. The interim satellite
"Gorizont" never moved from its orbital location of 130 E Longitude. Annex "C" is a letter
from an official of the Subic Bay Satellite Systems Inc., with its attachments, addressed to
me stating that as of the 13th of November, no such voyage to 153 E orbital slot had been
commenced. In fact DHI hid this fact from me, and in fact stated that Gorizont had already
moved and was on its way to 153 E.

Since this timely migration did not happen in time for the APEC Leaders Meeting on 24
November, this 153 E Longitude slot can no longer be assigned to PASI.

The other slot 161 E Longitude is the one that can be made available for PASI's eventual
launch, in 1998 most likely, in exchange for one free satellite transponder unit utilization,
for all requirements of Government. These have yet to be embodied in a contract between
PASI and the DOTC.
 162

2. I understand from my meeting with DHI/PASI this morning, and from the de Guzman
letter you sent to me, that the latter are still interested in pursuing their "interim satellite
project" and are applying for a loan with your bank. Of course they can always pursue this
as a business venture of DHI/PASI which is their own corporate business decision. The
DOTC supports this venture but they will be getting only one orbital slot for both the
Interim Satellite Project and for the Launch Project. I understand from today's meeting
with them that this is technically feasible.

3. As regards the use of the name "Agila", Mr. de Guzman's allegation that DHI/PASI has
registered "Agila" as a "corporate alias/trademark" is FALSE. There is no such thing as
registration of a "corporate alias". Nor for that matter can the trade name of a satellite be
registered for just any satellite, where it was the President who chose the name for the first
Philippine satellite in orbit. No one else coined that name but he. He has therefore given the
name "Agila I" to the Mabuhay satellite now in orbit at 144 E, being the first Philippine
satellite in orbit. He made this announcement in the presence of all the APEC Heads of State
just before the presentation to him of the Manila Action Plan for APEC. (Underscoring
supplied)cralawlibrary

Lichauco subsequently issued, in December 1997, a Notice of Offer6 for several orbital slots
including 153 E.

PASI, claiming that the offer was without its knowledge and that it subsequently came to
learn that another company whose identity had not been disclosed had submitted a bid and
won the award for orbital slot 153 E, filed on January 23, 1998 a complaint7 before the
Regional Trial Court (RTC) of Mandaluyong City against Lichauco and the "Unknown
Awardee," for injunction to enjoin the award of orbital slot 153 E, declare its nullity, and for
damages.

PASI also filed on February 23, 1998 a complaint before the Office of the Ombudsman
against Secretary Josefina Trinidad Lichauco. In his affidavit-complaint, de Guzman charged
Lichauco with gross violation of Section 3(e) of Republic Act No. 3019, otherwise known as
the Anti-Graft and Corrupt Practices Act, as amended, reading:

(e) Causing any undue injury to any party, including the Government, or giving any private
party any unwarranted benefits, advantage or preference in the discharge of his official,
administrative or judicial functions through manifest partiality, evident bad faith or gross
inexcusable negligence. This provision shall apply to officers and employees of officers or
government corporations charged with the grant of licenses or permits or other
concessions.

The complaint was docketed as OMB Case No. 0-98-0416. The Evaluation and Preliminary
Investigation Bureau (EPIB) of the Office of the Ombudsman, by Evaluation Report8 dated
April 15, 1998, found the existence of a prejudicial question after considering that "the case
filed with the RTC involves facts intimately related to those upon which the criminal
prosecution would be based and that the guilt or the innocence of the accused would
necessarily be determined in the resolution of the issues raised in the civil case." It thus
 163

concluded that the filing of the complaint before the Ombudsman "is premature since the
issues involved herein are now subject of litigation in the case filed with the RTC," and
accordingly recommended its dismissal. Then Ombudsman Aniano A. Desierto approved on
April 24, 1998 the recommendation of the EPIB.

PASI moved to reconsider9 the dismissal of the complaint, but was denied by Order 10 dated
July 17, 1998.

In the meantime, a motion to dismiss the civil case against respondent was denied by the
trial court. On elevation of the order of denial to the Court of Appeals, said court, by
Decision dated February 21, 2000, ordered the dismissal of the case. This Court, by
Decision dated May 3, 2006, ordered the reinstatement of the case, however.11

PASI is now before this Court via Petition for Review on Certiorari, arguing that the
Ombudsman erred in dismissing the complaint.

In issue are 1) whether there exists a prejudicial question and, if in the affirmative, 2)
whether the dismissal of the complaint on that account is in order.

Section 7, Rule 111 of the Rules on Criminal Procedure provides:

Section 7. Elements of prejudicial question. - The elements of a prejudicial question are: (a)
the previously instituted civil action involves an issue similar or intimately related to the
issue raised in the subsequent criminal action, and (b) the resolution of such issue
determines whether or not the criminal action may proceed.

The rationale for the principle of prejudicial question is that although it does not
conclusively resolve the guilt or innocence of the accused, it tests the sufficiency of the
allegations in the complaint or information in order to sustain the further prosecution of
the criminal case.12 Hence, the need for its prior resolution before further proceedings in
the criminal action may be had.

PASI concedes that the issues in the civil case are similar or intimately related to the issue
raised in the criminal case. It contends, however, that the resolution of the issues in the
civil case is not determinative of the guilt or innocence of Lichauco, it arguing that even if
she is adjudged liable for damages, it does not necessarily follow that she would be
convicted of the crime charged.

To determine the existence of a prejudicial question in the case before the Ombudsman, it
is necessary to examine the elements of Section 3(e) of R.A. 3019 for which Lichauco was
charged and the causes of action in the civil case.

Section 3(e) of R.A. 3019 which was earlier quoted has the following elements:

1. The accused is a public officer discharging administrative or official functions or private

persons charged in conspiracy with them;
 164

2. The public officer committed the prohibited act during the performance of his official
duty or in relation to his public position;

3. The public officer acted with manifest partiality, evident bad faith or gross, inexcusable
negligence; andcralawlibrary

4. His action caused undue injury to the Government or any private party, or gave any party
any unwarranted benefit, advantage or preference to such parties.13

The civil case against Lichauco on the other hand involves three causes of action. The first,
for injunction, seeks to enjoin the award of orbital slot 153 E, the DOTC having previously
assigned the same to PASI; the second, for declaration of nullity of award, seeks to nullify
the award given to the undisclosed bidder for being beyond Lichauco's authority; and the
third, for damages arising from Lichauco's questioned acts.

If the award to the undisclosed bidder of orbital slot 153 E is, in the civil case, declared
valid for being within Lichauco's scope of authority to thus free her from liability for
damages, there would be no prohibited act to speak of nor would there be basis for undue
injury claimed to have been suffered by petitioner. The finding by the Ombudsman of the
existence of a prejudicial question is thus well-taken.

Respecting the propriety of the dismissal by the Ombudsman of the complaint due to the
pendency of a prejudicial question, PASI argues that since the Rules of Procedure of the
Office of the Ombudsman is silent on the matter, the Rules of Court, specifically Section 6,
Rule 111 of the Rules of Court, which now reads:

SECTION 6. Suspension by reason of prejudicial question. - A petition for suspension of the

criminal action based upon the pendency of a prejudicial question in a civil action may be
filed in the office of the prosecutor or the court conducting the preliminary investigation.
When the criminal action has been filed in court for trial, the petition to suspend shall be
filed in the same criminal action at any time before the prosecution rests. (Underscoring
supplied),

applies in a suppletory character.

The Ombudsman, on the other hand, argues that the above-quoted provision of the Rules of
Court applies to cases which are at the preliminary or trial stage and not to those, like the
case subject of the present petition, at the evaluation stage.

The Ombudsman goes on to proffer that at the evaluation stage, the investigating officer
may recommend any of several causes of action including dismissal of the complaint for
want of palpable merit or subjecting the complaint to preliminary investigation, and the
evaluation of the complaint involves the discretion of the investigating officer which this
Court cannot interfere with.
 165

While the evaluation of a complaint involves the discretion of the investigating officer, its
exercise should not be abused14 or wanting in legal basis.

Rule II, Section 2 of the Rules of Procedure of the Office of the Ombudsman reads:

SECTION 2. Evaluation. - Upon evaluating the complaint, the investigating officer shall
recommend whether it may be:

a) dismissed outright for want of palpable merit;

b) referred to respondent for comment;

c) indorsed to the proper government office or agency which has jurisdiction over the case;

d) forwarded to the appropriate office or official for fact-finding investigation;

e) referred for administrative adjudication; or

f) subjected to a preliminary investigation. (Underscoring supplied)cralawlibrary

From the above-quoted provision, a complaint at the evaluation stage may be dismissed
outright only for want of palpable merit. Want of palpable merit obviously means that there
is no basis for the charge or charges. If the complaint has prima faciemerit, however, the
investigating officer shall recommend the adoption of any of the actions enumerated above
from (b) to (f).15

When, in the course of the actions taken by those to whom the complaint is endorsed or
forwarded, a prejudicial question is found to be pending, Section 6, Rule 111 of the Rules of
Court should be applied in a suppletory character. 16 As laid down in Yap v. Paras,17 said rule
directs that the proceedings may only be suspended, not dismissed, and that it may be
made only upon petition,and not at the instance of the judge alone or as in this case, the
investigating officer.

To give imprimatur to the Ombudsman's dismissal of petitioner's criminal complaint due to

prejudicial question would not only run counter to the provision of Section 6 of Rule 111 of
the Rules of Court. It would sanction the extinguishment of criminal liability, if there be any,
through prescription under Article 89 vis a vis Articles 90 and 91 of the Revised Penal Code
which respectively read:

ART. 89. How criminal liability is totally extinguished. - Criminal liability is totally

extinguished:

1. By the death of the convict, as to the personal penalties; and as to pecuniary penalties,
liability therefore is extinguished only when the death of the offender occurs before final
judgment;
 166

2. By service of the sentence;

3. By amnesty, which completely extinguishes the penalty and all its effects;

4. By absolute pardon;

5. By prescription of the crime;

6. By prescription of the penalty;

7. By the marriage of the offended woman, as provided in Article 344 of this Code.
(Underscoring supplied)cralawlibrary

ART. 90. Prescription of crimes. - Crimes punishable by death, reclusion perpetuaor reclusion

temporal shall prescribe in twenty years.

Crimes punishable by other afflictive penalties shall prescribe in fifteen years.

Those punishable by a correctional penalty shall prescribe in ten years; with the exception
of those punishable by arresto mayor, which shall prescribe in five years.

The crime of libel or other similar offenses shall prescribe in one year.

The offenses of oral defamation and slander by deed shall prescribe in six months.

Light offenses prescribe in two months.

When the penalty fixed by law is a compound one, the highest penalty shall be made the
basis of the application of the rules contained in the first, second, and third paragraphs of
this article. x x x

ART. 91. Computation of prescription of offenses. ' The period of prescription shall

commence to run from the day on which the crime is discovered by the offended party, the
authorities, or their agents, and shall be interrupted by the filing of the complaint or
information, and shall commence to run again when such proceedings terminate without
the accused being convicted or acquitted, or are unjustifiably stopped for any reason
not imputable to him.

x x x x (Emphasis and underscoring supplied)cralawlibrary

WHEREFORE, the Order dated July 17, 1998 of respondent Ombudsman dismissing OMB
Case No. 0-98-0416 against respondent then Secretary Josefina Trinidad Lichauco is SET
ASIDE.

The Ombudsman is ORDERED to REINSTATE to its docket for further proceedings, in line

with the foregoing ratiocination, OMB Case No. 0-98-0416.
 167

G.R. No. 159186               June 5, 2009

JESSE Y. YAP, Petitioner,
vs.
HON. MONICO G. CABALES, Presiding Judge, Regional Trial Court, Branch 35, General
Santos City; MUNICIPAL TRIAL COURT, Branch 1, General Santos City; COURT OF
APPEALS, PEOPLE OF THE PHILIPPINES, JOVITA DIMALANTA and MERGYL
MIRABUENO, Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court with prayer
for the issuance of a writ of preliminary injunction and/or issuance of status quo
order seeking to annul and set aside the Resolution1 of the Court of Appeals (CA) dated July
17, 2003 denying petitioner's motion for reconsideration of the Decision2 dated April 30,
2003 in CA-G.R. SP No. 68250.

The facts of the case are as follows:

Petitioner Jesse Y. Yap and his spouse Bessie Yap are engaged in the real estate business
through their company Primetown Property Group.

Sometime in 1996, petitioner purchased several real properties from a certain Evelyn Te
(Evelyn). In consideration of said purchases, petitioner issued several Bank of the
Philippine Islands (BPI) postdated checks to Evelyn. Thereafter, spouses Orlando and
 168

Mergyl Mirabueno and spouses Charlie and Jovita Dimalanta, rediscounted the checks from
Evelyn.

In the beginning, the first few checks were honored by the bank, but in the early part of
1997, when the remaining checks were deposited with the drawee bank, they were
dishonored for the reason that the "Account is Closed." Demands were made by Spouses
Mirabueno and Spouses Dimalanta to the petitioner to make good the checks. Despite this,
however, the latter failed to pay the amounts represented by the said checks.

On December 8, 1997, Spouses Mirabueno filed a civil action for collection of sum of money,
damages and attorney's fee with prayer for the issuance of a writ of preliminary
attachment against petitioner before the Regional Trial Court (RTC) of General Santos City,
docketed as Civil Case No. 6231.3 On December 15, 1997, Spouses Dimalanta followed suit
and instituted a similar action, which was docketed as Civil Case No. 6238.4

Subsequently, on various dates, the Office of the City Prosecutor of General Santos City filed
several informations for violation of Batas Pambansa Bilang (B.P. Blg.) 22 against the
petitioner with the Municipal Trial Court in Cities (MTCC), General Santos City. The
criminal complaints were docketed as Criminal Case Nos. 34873, 34874, 34862 to 34869,
and Criminal Case No. 35522-I.5

In the criminal cases, petitioner filed separate motions to suspend proceedings on account
of the existence of a prejudicial question and motion to exclude the private prosecutor from
participating in the proceedings.6 Petitioner prayed that the proceedings in the criminal
cases be suspended until the civil cases pending before the RTC were finally resolved.

The MTCC, in its Orders7 dated June 21, 2000 and July 4, 2000, denied the motions for lack
of merit. Petitioner filed a Partial Motion for Reconsideration8 relative to Criminal Case
Nos. 34873, 34874, 34862 to 34869 and a Motion for Reconsideration of the Part of the
Order Denying the Motion to Suspend Proceedings on Account of the Existence of a
Prejudicial Question relative to Criminal Case No. 35522-I.9 The subsequent motions were
denied in the Order10 dated October 18, 2000.

Aggrieved, petitioner filed a Petition for Certiorari with a Prayer for the Issuance of a Writ
of Preliminary Injunction11 before the RTC, docketed as SPL. Civil Case No. 539, imputing
grave abuse of discretion on the part of the MTCC Judge. On July 2, 2001, the RTC issued an
Order12 denying the petition.

Petitioner then filed a Motion for Reconsideration,13 which was denied in an Order dated
October 18, 2001.14

Thereafter, petitioner filed with the CA a Petition for Certiorari

Prohibition and Mandamus with Urgent Prayer for the Issuance of Status Quo Order and
Writ of Preliminary Injunction,15 docketed as CA-G.R. SP No. 68250.
 169

On April 30, 2003, the CA rendered a Decision16 dismissing the petition for lack of merit.
The CA opined that Civil Case Nos. 6231 and 6238 did not pose a prejudicial question to the
prosecution of the petitioner for violation of B.P. Blg. 22.

The CA ruled:

In the instant case, a careful perusal of Civil Cases Nos. 6231 and 6238 reveals that the
issue involved therein is not the validity of the sale as incorrectly pointed out by the
petitioner, but it is, whether or not the complainants therein are entitled to collect from the
petitioner the sum or the value of the checks which they have rediscounted from Evelyn Te.
It behooves this Court to state that the sale and the rediscounting of the checks are two
transactions, separate and distinct from each other. It so happened that in the subject civil
cases it is not the sale that is in question, but rather the rediscounting of the checks.
Therefore, petitioner's contention that the main issue involved in said civil cases is the
validity of the sale stands on hollow ground. Furthermore, if it is indeed the validity of the
sale that is contested in the subject civil cases, then, We cannot fathom why the petitioner
never contested such sale by filing an action for the annulment thereof or at least invoked
or prayed in his answer that the sale be declared null and void. Accordingly, even if Civil
Cases Nos. 6231 and 6238 are tried and the resolution of the issues therein is had, it cannot
be deduced therefrom that the petitioner cannot be held liable anymore for violation of B.P.
Blg. 22.17

Petitioner filed a Motion for Reconsideration,18 which was denied in the Order19 dated July
17, 2003.

Hence, the petition assigning the following errors:

1. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THERE IS NO

PREJUDICIAL QUESTION IN THE CIVIL CASES (FOR COLLECTION OF SUMS OF
MONEY INSTITUTED BY PRIVATE RESPONDENTS OVER CHECKS ISSUED BY THE
PETITIONER, CIVIL CASE NOS. 6238 AND 6231) THAT WOULD WARRANT
SUSPENSION OF THE CRIMINAL CASES (CASE NO. 35522-1, FOR VIOLATION OF B.P.
22, SUBJECT OF WHICH ARE THE VERY SAME CHECKS).

2. THE HONORABLE COURT OF APPEALS ERRED IN NOT GRANTING THE PRAYER

FOR THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION AND/OR STATUS
QUO ORDER.20

The main contention of the petitioner is that a prejudicial question, as defined by law and
jurisprudence, exists in the present case. It is the petitioner's assertion that Civil Case Nos.
6231 and 6238 for collection of sum of money and damages were filed ahead of the
criminal cases for violation of B.P. Blg. 22. He further alleged that, in the pending civil cases,
the issue as to whether private respondents are entitled to collect from the petitioner
despite the lack of consideration, is an issue that is a logical antecedent to the criminal
cases for violation of B.P. Blg. 22. For if the court rules that there is no valid consideration
 170

for the check's issuance, as petitioner contends, then it necessarily follows that he could not
also be held liable for violation of B.P. Blg. 22.

Petitioner further avers that B.P. Blg. 22 specifically requires, among other elements, that
the check should have been issued for account or for value. There must be a valid
consideration; otherwise, no violation of the said law could be rightfully pursued.
Petitioner said that the reason for the dishonor of the checks was his order to the drawee
bank to stop payment and to close his account in order to avoid necessary penalty from the
bank. He made this order due to the failure of Evelyn to deliver to him the titles to the
purchased properties to him.

On the other hand, the Office of the Solicitor General (OSG) contends that there is no
prejudicial question in Civil Case Nos. 6231 and 6238 which would warrant the suspension
of the proceedings in the criminal cases for violation of B.P. Blg. 22 against the petitioner.
The issue in the civil cases is not the validity of the sale between the petitioner and Evelyn,
but whether the complainants therein are entitled to damages arising from the checks.
These checks were issued by the petitioner in favor of Evelyn, who, thereafter, negotiated
the same checks to private complainants. The checks were subsequently dishonored due to
insufficiency of funds. The OSG maintains that the resolution of such issue has absolutely
no bearing on the issue of whether petitioner may be held liable for violation of B.P. Blg.
22.21

The present case hinges on the determination of whether there exists a prejudicial question
that necessitates the suspension of the proceedings in the MTCC.

We find that there is none and, thus, we resolve to deny the petition.

A prejudicial question generally exists in a situation where a civil action and a criminal
action are both pending, and there exists in the former an issue that must be preemptively
resolved before the latter may proceed, because howsoever the issue raised in the civil
action is resolved would be determinative juris et de jure of the guilt or innocence of the
accused in the criminal case. The rationale behind the principle of prejudicial question is to
avoid two conflicting decisions. It has two essential elements: (i) the civil action involves an
issue similar or intimately related to the issue raised in the criminal action; and (ii) the
resolution of such issue determines whether or not the criminal action may proceed.22

If both civil and criminal cases have similar issues, or the issue in one is intimately related
to the issues raised in the other, then a prejudicial question would likely exist, provided the
other element or characteristic is satisfied. It must appear not only that the civil case
involves the same facts upon which the criminal prosecution would be based, but also that
the resolution of the issues raised in the civil action would be necessarily determinative of
the guilt or innocence of the accused. If the resolution of the issue in the civil action will not
determine the criminal responsibility of the accused in the criminal action based on the
same facts, or if there is no necessity that the civil case be determined first before taking up
the criminal case, the civil case does not involve a prejudicial question. 23 Neither is there a
 171

prejudicial question if the civil and the criminal action can, according to law, proceed
independently of each other.24

The issue in the criminal cases is whether the petitioner is guilty of violating B.P. Blg. 22,
while in the civil case, it is whether the private respondents are entitled to collect from the
petitioner the sum or the value of the checks that they have rediscounted from
Evelyn.lavvphil

The resolution of the issue raised in the civil action is not determinative of the guilt or
innocence of the accused in the criminal cases against him, and there is no necessity that
the civil case be determined first before taking up the criminal cases.

In the aforementioned civil actions, even if petitioner is declared not liable for the payment
of the value of the checks and damages, he cannot be adjudged free from criminal liability
for violation of B.P. Blg. 22. The mere issuance of worthless checks with knowledge of the
insufficiency of funds to support the checks is in itself an offense.25

In Jose v. Suarez,26 the prejudicial question under determination was whether the daily
interest rate of 5% was void, such that the checks issued by respondents to cover said
interest were likewise void for being contra bonos mores, and thus the cases for B.P. Blg. 22
will no longer prosper. In resolving the issue, We ruled that "whether or not the interest
rate imposed by petitioners is eventually declared void for being contra bonos mores will
not affect the outcome of the BP Blg. 22 cases because what will ultimately be penalized is
the mere issuance of bouncing checks. In fact, the primordial question posed before the
court hearing the B.P. Blg. 22 cases is whether the law has been breached; that is, if a
bouncing check has been issued."

Further, We held in Ricaforte v. Jurado,27 that:

The gravamen of the offense punished by B.P. Blg. 22 is the act of making and issuing a
worthless check; that is, a check that is dishonored upon its presentation for payment. In
Lozano v. Martinez, we have declared that it is not the non-payment of an obligation which
the law punishes. The law is not intended or designed to coerce a debtor to pay his debt.
The thrust of the law is to prohibit, under pain of penal sanctions, the making and
circulation of worthless checks. Because of its deleterious effects on the public interest, the
practice is proscribed by the law. The law punishes the act not as an offense against
property, but an offense against public order. In People v. Nitafan, we said that a check
issued as an evidence of debt - though not intended to be presented for payment - has the
same effect as an ordinary check and would fall within the ambit of B.P. Blg. 22.

xxxx

x x x The mere act of issuing a worthless check - whether as a deposit, as a guarantee or

even as evidence of pre-existing debt - is malum prohibitum.
 172

To determine the reason for which checks are issued, or the terms and conditions for their
issuance, will greatly erode the faith the public reposes in the stability and commercial
value of checks as currency substitutes, and bring about havoc in trade and in banking
communities. So what the law punishes is the issuance of a bouncing check and not the
purpose for which it was issued or the terms and conditions relating to its issuance. The
mere act of issuing a worthless check is malum prohibitum.28

Moreover, petitioner's reliance on Ras v. Rasul29 is misplaced. The case of Ras involves a

complaint for nullification of a deed of sale on the ground of an alleged double sale. While
the civil case was pending, an information for estafa was filed against Ras (the defendant in
the civil case) arising from the same alleged double sale, subject matter of the civil
complaint. The Court ruled that there was a prejudicial question considering that the
defense in the civil case was based on the very same facts that would be determinative of
the guilt or innocence of the accused in the estafa case.

The instant case is different from Ras, inasmuch as the determination of whether the
petitioner is liable to pay the private respondents the value of the checks and damages, will
not affect the guilt or innocence of the petitioner because the material question in the
criminal cases is whether petitioner had issued bad checks, regardless of the purpose or
condition of its issuance.

Guided by the following legal precepts, it is clear that the determination of the issues
involved in Civil Case Nos. 6231 and 6238 for collection of sum of money and damages is
irrelevant to the guilt or innocence of the petitioner in the criminal cases for violation of
B.P. Blg. 22.

In addition, petitioner's claim of lack of consideration may be raised as a defense during the
trial of the criminal cases against him. The validity and merits of a party’s defense and
accusation, as well as the admissibility and weight of testimonies and evidence brought
before the court, are better ventilated during trial proper.

Precisely, the reason why a state has courts of law is to ascertain the respective rights of
the parties, to examine and to put to test all their respective allegations and evidence
through a well designed machinery termed "trial." Thus, all the defenses available to the
accused should be invoked in the trial of the criminal cases. This court is not the
proper forum that should ascertain the facts and decide the case for violation of B.P. Blg. 22
filed against the petitioner.

In fine, the CA committed no reversible error in affirming the decision of the RTC.

WHEREFORE, the petition is DENIED and the Decision dated April 30, 2003 and the
Resolution dated July 17, 2003 of the Court of Appeals in CA-G.R. SP No. 68250
are AFFIRMED.
 173

G.R. No. 184861               June 30, 2009

DREAMWORK CONSTRUCTION, INC., Petitioner,

vs.
CLEOFE S. JANIOLA and HON. ARTHUR A. FAMINI, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Petitioner Dreamwork Construction, Inc. seeks the reversal of the August 26, 2008
Decision1 in SCA No. 08-0005 of the Regional Trial Court (RTC), Branch 253 in Las Piñ as
City. The Decision affirmed the Orders dated October 16, 20072 and March 12, 20083 in
Criminal Case Nos. 55554-61 issued by the Metropolitan Trial Court (MTC), Branch 79 in
Las Piñ as City.

The Facts

On October 18, 2004, petitioner, through its President, Roberto S. Concepcion, and Vice-
President for Finance and Marketing, Normandy P. Amora, filed a Complaint Affidavit dated
October 5, 20044 for violation of Batas Pambansa Bilang 22 (BP 22) against private
respondent Cleofe S. Janiola with the Office of the City Prosecutor of Las Piñ as City. The
case was docketed as I.S. No. 04-2526-33. Correspondingly, petitioner filed a criminal
information for violation of BP 22 against private respondent with the MTC on February 2,
2005 docketed as Criminal Case Nos. 55554-61, entitled People of the Philippines v. Cleofe
S. Janiola.

On September 20, 2006, private respondent, joined by her husband, instituted a civil
complaint against petitioner by filing a Complaint dated August 2006 5 for the rescission of
an alleged construction agreement between the parties, as well as for damages. The case
was filed with the RTC, Branch 197 in Las Piñ as City and docketed as Civil Case No. LP-06-
0197. Notably, the checks, subject of the criminal cases before the MTC, were issued in
consideration of the construction agreement.

Thereafter, on July 25, 2007, private respondent filed a Motion to Suspend Proceedings
dated July 24, 20076 in Criminal Case Nos. 55554-61, alleging that the civil and criminal
cases involved facts and issues similar or intimately related such that in the resolution of
the issues in the civil case, the guilt or innocence of the accused would necessarily be
determined. In other words, private respondent claimed that the civil case posed a
prejudicial question as against the criminal cases.

Petitioner opposed the suspension of the proceedings in the criminal cases in an undated
Comment/Opposition to Accused’s Motion to Suspend Proceedings based on Prejudicial
Question7 on the grounds that: (1) there is no prejudicial question in this case as the
 174

rescission of the contract upon which the bouncing checks were issued is a separate and
distinct issue from the issue of whether private respondent violated BP 22; and (2) Section
7, Rule 111 of the Rules of Court states that one of the elements of a prejudicial question is
that "the previously instituted civil action involves an issue similar or intimately related to
the issue raised in the subsequent criminal action"; thus, this element is missing in this
case, the criminal case having preceded the civil case.

Later, the MTC issued its Order dated October 16, 2007, granting the Motion to Suspend
Proceedings, and reasoned that:

Should the trial court declare the rescission of contract and the nullification of the checks
issued as the same are without consideration, then the instant criminal cases for alleged
violation of BP 22 must be dismissed. The belated filing of the civil case by the herein
accused did not detract from the correctness of her cause, since a motion for suspension of
a criminal action may be filed at any time before the prosecution rests (Section 6, Rule 111,
Revised Rules of Court).8

In an Order dated March 12, 2008,9 the MTC denied petitioner’s Motion for Reconsideration
dated November 29, 2007.

Petitioner appealed the Orders to the RTC with a Petition dated May 13, 2008. Thereafter,
the RTC issued the assailed decision dated August 26, 2008, denying the petition. On the
issue of the existence of a prejudicial question, the RTC ruled:

Additionally, it must be stressed that the requirement of a "previously" filed civil case is
intended merely to obviate delays in the conduct of the criminal proceedings. Incidentally,
no clear evidence of any intent to delay by private respondent was shown. The criminal
proceedings are still in their initial stages when the civil action was instituted. And, the fact
that the civil action was filed after the criminal action was instituted does not render the
issues in the civil action any less prejudicial in character.10

Hence, we have this petition under Rule 45.

The Issue

WHETHER OR NOT THE COURT A QUO SERIOUSLY ERRED IN NOT PERCEIVING GRAVE
ABUSE OF DISCRETION ON THE PART OF THE INFERIOR COURT, WHEN THE LATTER
RULED TO SUSPEND PROCEEDINGS IN CRIM. CASE NOS. 55554-61 ON THE BASIS OF
"PREJUDICIAL QUESTION" IN CIVIL CASE NO. LP-06-0197.11

The Court’s Ruling

This petition must be granted.

The Civil Action Must Precede the Filing of the

 175

Criminal Action for a Prejudicial Question to Exist

Under the 1985 Rules on Criminal Procedure, as amended by Supreme Court Resolutions
dated June 17, 1988 and July 7, 1988, the elements of a prejudicial question are contained
in Rule 111, Sec. 5, which states:

SEC. 5. Elements of prejudicial question. — The two (2) essential elements of a prejudicial
question are: (a) the civil action involves an issue similar or intimately related to the issue
raised in the criminal action; and (b) the resolution of such issue determines whether or
not the criminal action may proceed.

Thus, the Court has held in numerous cases12 that the elements of a prejudicial question, as
stated in the above-quoted provision and in Beltran v. People,13 are:

The rationale behind the principle of prejudicial question is to avoid two conflicting
decisions. It has two essential elements: (a) the civil action involves an issue similar or
intimately related to the issue raised in the criminal action; and (b) the resolution of such
issue determines whether or not the criminal action may proceed.

On December 1, 2000, the 2000 Rules on Criminal Procedure, however, became effective
and the above provision was amended by Sec. 7 of Rule 111, which applies here and now
provides:

SEC. 7. Elements of prejudicial question.—The elements of a prejudicial question are: (a)

the previously instituted civil action involves an issue similar or intimately related to the
issue raised in the subsequent criminal action, and (b) the resolution of such issue
determines whether or not the criminal action may proceed. (Emphasis supplied.)

Petitioner interprets Sec. 7(a) to mean that in order for a civil case to create a prejudicial
question and, thus, suspend a criminal case, it must first be established that the civil case
was filed previous to the filing of the criminal case. This, petitioner argues, is specifically to
guard against the situation wherein a party would belatedly file a civil action that is related
to a pending criminal action in order to delay the proceedings in the latter.

On the other hand, private respondent cites Article 36 of the Civil Code which provides:

Art. 36. Pre-judicial questions which must be decided before any criminal prosecution may
be instituted or may proceed, shall be governed by rules of court which the Supreme Court
shall promulgate and which shall not be in conflict with the provisions of this Code.
(Emphasis supplied.)

Private respondent argues that the phrase "before any criminal prosecution may be
instituted or may proceed" must be interpreted to mean that a prejudicial question exists
when the civil action is filed either before the institution of the criminal action or during
the pendency of the criminal action. Private respondent concludes that there is an apparent
conflict in the provisions of the Rules of Court and the Civil Code in that the latter considers
 176

a civil case to have presented a prejudicial question even if the criminal case preceded the
filing of the civil case.

We cannot agree with private respondent.

First off, it is a basic precept in statutory construction that a "change in phraseology by

amendment of a provision of law indicates a legislative intent to change the meaning of the
provision from that it originally had."14 In the instant case, the phrase, "previously
instituted," was inserted to qualify the nature of the civil action involved in a prejudicial
question in relation to the criminal action. This interpretation is further buttressed by the
insertion of "subsequent" directly before the term criminal action. There is no other logical
explanation for the amendments except to qualify the relationship of the civil and criminal
actions, that the civil action must precede the criminal action.

Thus, this Court ruled in Torres v. Garchitorena15 that:

Even if we ignored petitioners’ procedural lapse and resolved their petition on the merits,
we hold that Sandiganbayan did not abuse its discretion amounting to excess or lack of
jurisdiction in denying their omnibus motion for the suspension of the proceedings
pending final judgment in Civil Case No. 7160. Section 6, Rule lll of the Rules of Criminal
Procedure, as amended, reads:

Sec. 6. Suspension by reason of prejudicial question. - A petition for suspension of the

criminal action based upon the pendency of a prejudicial question in a civil action may be
filed in the office of the prosecutor or the court conducting the preliminary investigation.
When the criminal action has been filed in court for trial, the petition to suspend shall be
filed in the same criminal action at any time before the prosecution rests.

Sec. 7. Elements of prejudicial question. - The elements of a prejudicial question are: (a) the
previously instituted civil action involves an issue similar or intimately related to the issue
raised in the subsequent criminal action, and (b) the resolution of such issue determines
whether or not the criminal action may proceed.

Under the amendment, a prejudicial question is understood in law as that which must
precede the criminal action and which requires a decision before a final judgment can be
rendered in the criminal action with which said question is closely connected. The civil
action must be instituted prior to the institution of the criminal action. In this case, the
Information was filed with the Sandiganbayan ahead of the complaint in Civil Case No.
7160 filed by the State with the RTC in Civil Case No. 7160. Thus, no prejudicial question
exists. (Emphasis supplied.)

Additionally, it is a principle in statutory construction that "a statute should be construed

not only to be consistent with itself but also to harmonize with other laws on the same
subject matter, as to form a complete, coherent and intelligible system." 16 This principle is
consistent with the maxim, interpretare et concordare leges legibus est optimus
 177

interpretandi modus or every statute must be so construed and harmonized with other
statutes as to form a uniform system of jurisprudence.171 a vv p h i l

In other words, every effort must be made to harmonize seemingly conflicting laws. It is
only when harmonization is impossible that resort must be made to choosing which law to
apply.

In the instant case, Art. 36 of the Civil Code and Sec. 7 of Rule 111 of the Rules of Court are
susceptible of an interpretation that would harmonize both provisions of law. The phrase
"previously instituted civil action" in Sec. 7 of Rule 111 is plainly worded and is not
susceptible of alternative interpretations. The clause "before any criminal prosecution may
be instituted or may proceed" in Art. 36 of the Civil Code may, however, be interpreted to
mean that the motion to suspend the criminal action may be filed during the preliminary
investigation with the public prosecutor or court conducting the investigation, or during
the trial with the court hearing the case.

This interpretation would harmonize Art. 36 of the Civil Code with Sec. 7 of Rule 111 of the
Rules of Court but also with Sec. 6 of Rule 111 of the Civil Code, which provides for the
situations when the motion to suspend the criminal action during the preliminary
investigation or during the trial may be filed. Sec. 6 provides:

SEC. 6. Suspension by reason of prejudicial question.—A petition for suspension of the

criminal action based upon the pendency of a prejudicial question in a civil action may be
filed in the office of the prosecutor or the court conducting the preliminary investigation.
When the criminal action has been filed in court for trial, the petition to suspend shall be
filed in the same criminal action at any time before the prosecution rests.

Thus, under the principles of statutory construction, it is this interpretation of Art. 36 of the
Civil Code that should govern in order to give effect to all the relevant provisions of law.

It bears pointing out that the circumstances present in the instant case indicate that the
filing of the civil action and the subsequent move to suspend the criminal proceedings by
reason of the presence of a prejudicial question were a mere afterthought and instituted to
delay the criminal proceedings.

In Sabandal v. Tongco,18 we found no prejudicial question existed involving a civil action for
specific performance, overpayment, and damages, and a criminal complaint for BP 22, as
the resolution of the civil action would not determine the guilt or innocence of the accused
in the criminal case. In resolving the case, we said:

Furthermore, the peculiar circumstances of the case clearly indicate that the filing of the
civil case was a ploy to delay the resolution of the criminal cases. Petitioner filed the civil
case three years after the institution of the criminal charges against him. Apparently, the
civil action was instituted as an afterthought to delay the proceedings in the criminal
cases.19
 178

Here, the civil case was filed two (2) years after the institution of the criminal complaint
and from the time that private respondent allegedly withdrew its equipment from the job
site. Also, it is worth noting that the civil case was instituted more than two and a half (2 ½)
years from the time that private respondent allegedly stopped construction of the
proposed building for no valid reason. More importantly, the civil case praying for the
rescission of the construction agreement for lack of consideration was filed more than
three (3) years from the execution of the construction agreement.

Evidently, as in Sabandal, the circumstances surrounding the filing of the cases involved
here show that the filing of the civil action was a mere afterthought on the part of private
respondent and interposed for delay. And as correctly argued by petitioner, it is this
scenario that Sec. 7 of Rule 111 of the Rules of Court seeks to prevent. Thus, private
respondent’s positions cannot be left to stand.

The Resolution of the Civil Case Is Not

Determinative of the Prosecution of the Criminal Action

In any event, even if the civil case here was instituted prior to the criminal action, there is,
still, no prejudicial question to speak of that would justify the suspension of the
proceedings in the criminal case.

To reiterate, the elements of a prejudicial question under Sec. 7 of Rule 111 of the Rules of
Court are: (1) the previously instituted civil action involves an issue similar or intimately
related to the issue raised in the subsequent criminal action; and (2) the resolution of such
issue determines whether or not the criminal action may proceed.

Petitioner argues that the second element of a prejudicial question, as provided in Sec. 7 of
Rule 111 of the Rules, is absent in this case. Thus, such rule cannot apply to the present
controversy.

Private respondent, on the other hand, claims that if the construction agreement between
the parties is declared null and void for want of consideration, the checks issued in
consideration of such contract would become mere scraps of paper and cannot be the basis
of a criminal prosecution.

We find for petitioner.

It must be remembered that the elements of the crime punishable under BP 22 are as
follows:

(1) the making, drawing, and issuance of any check to apply for account or for value;

(2) the knowledge of the maker, drawer, or issuer that at the time of issue there are
no sufficient funds in or credit with the drawee bank for the payment of such check
in full upon its presentment; and
 179

(3) the subsequent dishonor of the check by the drawee bank for insufficiency of
funds or credit, or dishonor for the same reason had not the drawer, without any
valid cause, ordered the bank to stop payment.20

Undeniably, the fact that there exists a valid contract or agreement to support the issuance
of the check/s or that the checks were issued for valuable consideration does not make up
the elements of the crime. Thus, this Court has held in a long line of cases 21 that the
agreement surrounding the issuance of dishonored checks is irrelevant to the prosecution
for violation of BP 22. In Mejia v. People,22 we ruled:

It must be emphasized that the gravamen of the offense charge is the issuance of a bad
check. The purpose for which the check was issued, the terms and conditions relating to its
issuance, or any agreement surrounding such issuance are irrelevant to the prosecution
and conviction of petitioner. To determine the reason for which checks are issued, or the
terms and conditions for their issuance, will greatly erode the faith the public reposes in
the stability and commercial value of checks as currency substitutes, and bring havoc in
trade and in banking communities. The clear intention of the framers of B.P. 22 is to make
the mere act of issuing a worthless check malum prohibitum.

Lee v. Court of Appeals23 is even more poignant. In that case, we ruled that the issue of lack
of valuable consideration for the issuance of checks which were later on dishonored for
insufficient funds is immaterial to the success of a prosecution for violation of BP 22, to wit:

Third issue. Whether or not the check was issued on account or for value.

Petitioner’s claim is not feasible. We have held that upon issuance of a check, in the absence
of evidence to the contrary, it is presumed that the same was issued for valuable
consideration. Valuable consideration, in turn, may consist either in some right, interest,
profit or benefit accruing to the party who makes the contract, or some forbearance,
detriment, loss or some responsibility, to act, or labor, or service given, suffered or
undertaken by the other side. It is an obligation to do, or not to do in favor of the party who
makes the contract, such as the maker or indorser.

In this case, petitioner himself testified that he signed several checks in blank, the subject
check included, in exchange for 2.5% interest from the proceeds of loans that will be made
from said account. This is a valuable consideration for which the check was issued. That
there was neither a pre-existing obligation nor an obligation incurred on the part of
petitioner when the subject check was given by Bautista to private complainant on July 24,
1993 because petitioner was no longer connected with Unlad or Bautista starting July
1989, cannot be given merit since, as earlier discussed, petitioner failed to adequately
prove that he has severed his relationship with Bautista or Unlad.

At any rate, we have held that what the law punishes is the mere act of issuing a bouncing
check, not the purpose for which it was issued nor the terms and conditions relating to its
issuance. This is because the thrust of the law is to prohibit the making of worthless checks
and putting them into circulation.24 (Emphasis supplied.)
 180

Verily, even if the trial court in the civil case declares that the construction agreement
between the parties is void for lack of consideration, this would not affect the prosecution
of private respondent in the criminal case. The fact of the matter is that private respondent
indeed issued checks which were subsequently dishonored for insufficient funds. It is this
fact that is subject of prosecution under BP 22.lawphil.net

Therefore, it is clear that the second element required for the existence of a prejudicial
question, that the resolution of the issue in the civil action would determine whether the
criminal action may proceed, is absent in the instant case. Thus, no prejudicial question
exists and the rules on it are inapplicable to the case before us.

WHEREFORE, we GRANT this petition. We hereby REVERSE and SET ASIDE the August 26,
2008 Decision in SCA No. 08-0005 of the RTC, Branch 253 in Las Piñ as City and the Orders
dated October 16, 2007 and March 12, 2008 in Criminal Case Nos. 55554-61 of the MTC,
Branch 79 in Las Piñ as City. We order the MTC to continue with the proceedings in
Criminal Case Nos. 55554-61 with dispatch.

[G.R. No. 172060 : September 13, 2010]

JOSELITO R. PIMENTEL, PETITIONER, VS. MARIA CHRYSANTINE L. PIMENTEL AND

PEOPLE OF THE PHILIPPINES, RESPONDENTS.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review[1] assailing the Decision[2] of  the Court of Appeals,
promulgated on 20 March 2006, in CA-G.R. SP      No. 91867.

The Antecedent Facts

The facts are stated in the Court of Appeals' decision:

On 25 October 2004, Maria Chrysantine Pimentel y Lacap (private respondent)      filed an

action for frustrated parricide against Joselito R. Pimentel (petitioner), docketed as
Criminal Case No. Q-04-130415, before the Regional Trial Court of Quezon City, which was
raffled to Branch 223 (RTC Quezon City).

On 7 February 2005, petitioner received summons to appear before the Regional Trial
Court of Antipolo City, Branch 72 (RTC Antipolo)  for the pre-trial and trial of Civil Case No.
04-7392 (Maria Chrysantine Lorenza L. Pimentel v. Joselito Pimentel) for Declaration of
Nullity of Marriage under Section 36 of the Family Code on the ground of psychological
 181

incapacity.

On 11 February 2005, petitioner filed an urgent motion to suspend the proceedings before
the RTC Quezon City on the ground of the existence of a prejudicial question.  Petitioner
asserted that since the relationship between the offender and the victim is a key element in
parricide, the outcome of Civil Case No. 04-7392 would have a bearing in the criminal case
filed against him before the RTC Quezon City.

The Decision of the Trial Court

The RTC Quezon City issued an Order dated 13 May 2005[3] holding that the pendency of
the case before the RTC Antipolo is not a prejudicial question that warrants the suspension
of the criminal case before it.  The RTC Quezon City held that the issues in  Criminal Case
No. Q-04-130415 are the injuries sustained by respondent and whether the case could be
tried even if the validity of petitioner's marriage with respondent is in question.  The RTC
Quezon City ruled:

WHEREFORE, on the basis of the foregoing, the Motion to Suspend Proceedings On the
[Ground] of the Existence of a Prejudicial Question is, for lack of merit, DENIED.

SO ORDERED.[4]
Petitioner filed a motion for reconsideration.  In its 22 August 2005 Order,[5] the RTC
Quezon City denied the motion.

Petitioner filed a petition for certiorari with application for a writ of preliminary injunction
and/or temporary restraining order before the Court of Appeals, assailing the 13 May 2005
and 22 August 2005 Orders of the RTC Quezon City.

The Decision of the Court of Appeals

In its 20 March 2006 Decision, the Court of Appeals dismissed the petition.  The Court of
Appeals ruled that in the criminal case for frustrated parricide, the issue is whether the
offender commenced the commission of the crime of parricide directly by overt acts and
did not perform all the acts of execution by reason of some cause or accident other than his
own spontaneous desistance.  On the other hand, the issue in the civil action for annulment
of marriage is whether petitioner is psychologically incapacitated to comply with the
essential marital obligations.  The Court of Appeals ruled that even if the marriage between
petitioner and respondent would be declared void, it would be immaterial to the criminal
case  because prior to the declaration of nullity, the alleged acts constituting the crime of
frustrated parricide had already been committed.  The Court of Appeals ruled that all that is
required for the charge of frustrated parricide is that at the time of the commission of the
crime, the marriage is still subsisting.

Petitioner filed a petition for review before this Court assailing the Court of Appeals'
decision.
 182

The Issue

The only issue in this case is whether the resolution of the action for annulment of
marriage is a prejudicial question that warrants the suspension of the criminal case for
frustrated parricide against petitioner.

The Ruling of this Court

The petition has no merit.

Civil Case Must be Instituted

Before the Criminal Case

Section 7, Rule 111 of the 2000 Rules on Criminal Procedure[6] provides:

Section 7.  Elements of Prejudicial Question. - The elements of a prejudicial question are:
(a) the previously instituted civil action involves an issue similar or intimately related to
the issue raised in the subsequent criminal action and (b) the resolution of such issue
determines whether or not the criminal action may proceed.

The rule is clear that the civil action must be instituted first before the filing of the criminal
action. In this case, the Information[7] for Frustrated Parricide was dated 30 August 2004.  It
was raffled to RTC Quezon City on 25 October 2004 as per the stamped date of receipt on
the Information.   The RTC Quezon City set Criminal Case No. Q-04-130415 for pre-trial and
trial on 14 February 2005.  Petitioner was served summons in Civil Case No. 04-7392 on 7
February 2005.[8]  Respondent's petition[9] in Civil Case No. 04-7392 was dated 4 November
2004 and was filed on 5 November 2004.  Clearly, the civil case for annulment was filed
after the filing of the criminal case for frustrated parricide.  As such, the requirement of
Section 7, Rule 111 of the 2000 Rules on Criminal Procedure was not met since the civil
action was filed subsequent to the filing of the criminal action.

Annulment of Marriage is not a Prejudicial Question

in Criminal Case for Parricide

Further, the resolution of the civil action is not a prejudicial question that would warrant
the suspension of the criminal action.

There is a prejudicial question when a civil action and a criminal action are both pending,
and there exists in the civil action an issue which must be preemptively resolved before the
criminal action may proceed because howsoever the issue raised in the civil action is
resolved would be determinative of the guilt or innocence of the accused in the criminal
case.[10]  A prejudicial question is defined as:

x x x one that arises in a case the resolution of which is a logical antecedent of the issue
involved therein, and the cognizance of which pertains to another tribunal. It is a question
based on a fact distinct and separate from the crime but so intimately connected with it
 183

that it determines the guilt or innocence of the accused, and for it to suspend the criminal
action, it must appear not only that said case involves facts intimately related to those upon
which the criminal prosecution would be based but also that in the resolution of the issue
or issues raised in the civil case, the guilt or innocence of the accused would necessarily be
determined.[11]

The relationship between the offender and the victim is a key element in the crime of
parricide,[12] which punishes any person "who shall kill his father, mother, or child, whether
legitimate or illegitimate, or any of his ascendants or descendants, or his spouse."[13]  The
relationship between the offender and the victim distinguishes the crime of parricide from
murder[14] or homicide.[15]  However, the issue in the annulment of marriage is not similar
or intimately related to the issue in the criminal case for parricide.  Further, the
relationship between the offender and the victim is not determinative of the guilt or
innocence of the accused.

The issue in the civil case for annulment of marriage under Article 36  of the Family Code  is
whether petitioner is psychologically incapacitated to comply with the essential marital
obligations.  The issue in parricide is whether the accused killed the victim.  In this case,
since petitioner was charged with frustrated parricide, the issue is whether he performed
all the acts of execution which would have killed respondent as a consequence but which,
nevertheless, did not produce it by reason of causes independent of petitioner's will. [16]  At
the time of the commission of the alleged crime, petitioner and respondent were married.
The subsequent dissolution of their marriage, in case the petition in Civil Case No. 04-7392
is granted, will have no effect on the alleged crime that was committed at the time of the
subsistence of the marriage.  In short, even if the marriage between petitioner and
respondent is annulled, petitioner could still be held criminally liable since at the time of
the commission of the alleged crime, he was still married to respondent.

We cannot accept petitioner's reliance on Tenebro v. Court of Appeals[17] that "the judicial

declaration of the nullity of a marriage on the ground of psychological incapacity retroacts
to the date of the celebration   of the marriage insofar as the vinculum between the spouses
is concerned     x x x."    First, the issue in Tenebro is the effect of the judicial declaration of
nullity of a second or subsequent marriage on the ground of psychological incapacity on a
criminal liability for bigamy.  There was no issue of prejudicial question in that case.
Second, the Court ruled in Tenebro that "[t]here is x x x a recognition written into the law
itself that such a marriage, although void ab initio, may still produce legal
consequences."[18]  In fact, the Court declared in that case that "a declaration of the nullity of
the second marriage on the ground of psychological incapacity is of absolutely no moment
insofar as the State's penal laws are concerned."[19]

In view of the foregoing, the Court upholds the decision of the Court of Appeals.  The trial
in  Criminal Case No. Q-04-130415 may proceed as the resolution of the issue in  Civil Case
No. 04-7392 is not determinative of the guilt or innocence of petitioner in the criminal case.
 184

WHEREFORE, we DENY the petition.  We AFFIRM the 20 March 2006 Decision of the Court

of Appeals in CA-G.R. SP No. 91867.

G.R. No. 161075               July 15, 2013

RAFAEL JOSE-CONSING, JR., Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

BERSAMIN, J.:

An independent civil action based on fraud initiated by the defrauded party does not raise a
prejudicial question to stop the proceedings in a pending criminal prosecution of the
defendant for estafa through falsification. This is because the result of the independent civil
action is irrelevant to the issue of guilt or innocence of the accused.

The Case

On appeal is the amended decision promulgated on August 18, 2003,1 whereby the Court of
Appeals (CA) granted the writ of certiorari upon petition by the State in C.A.-G.R. No. 71252
entitled People v. Han. Winlove M Dumayas, Presiding Judge, Branch 59, Regional Trial
Court, Makati City and Rafael Consing, Jr., and set aside the assailed order issued on
November 26, 2001 by the Regional Trial Court (RTC), Branch 59, in Makati City deferring
the arraignment of petitioner in Criminal Case No. 00-120 entitled People v. Rafael Consing,
Jr. upon his motion on the ground of the existence of a prejudicial question in the civil cases
pending between him and the complainant in the trial courts in Pasig City and Makati City.

Antecedents

Petitioner negotiated with and obtained for himself and his mother, Cecilia de la Cruz (de la
Cruz) various loans totaling ₱18,000,000.00 from Unicapital Inc. (Unicapital). The loans
were secured by a real estate mortgage constituted on a parcel of land (property) covered
by Transfer Certificate of Title (TCT) No. T-687599 of the Registry of Deeds for the
Province of Cavite registered under the name of de la Cruz.2 In accordance with its option
to purchase the mortgaged property, Unicapital agreed to purchase one-half of the
property for a total consideration of ₱21,221,500.00. Payment was effected by off-setting
the amounts due to

Unicapital under the promissory notes of de la Cruz and Consing in the amount of
₱18,000,000.00 and paying an additional amount of ₱3,145,946.50. The other half of the
property was purchased by Plus Builders, Inc. (Plus Builders), a joint venture partner of
Unicapital.3
 185

Before Unicapital and Plus Builders could develop the property, they learned that the title
to the property was really TCT No. 114708 in the names of Po Willie Yu and Juanito Tan
Teng, the parties from whom the property had been allegedly acquired by de la Cruz. TCT
No. 687599 held by De la Cruz appeared to be spurious.4

On its part, Unicapital demanded the return of the total amount of ₱41,377,851.48 as of
April 19, 1999 that had been paid to and received by de la Cruz and Consing, but the latter
ignored the demands.5

On July 22, 1999, Consing filed Civil Case No. 1759 in the Pasig City Regional Trial Court
(RTC) (Pasig civil case) for injunctive relief, thereby seeking to enjoin Unicapital from
proceeding against him for the collection of the ₱41,377,851.48 on the ground that he had
acted as a mere agent of his mother.

On the same date, Unicapital initiated a criminal complaint for estafa through falsification
of public document against Consing and de la Cruz in the Makati City Prosecutor’s Office.6

On August 6, 1999, Unicapital sued Consing in the RTC in Makati City (Civil Case No. 99-
1418) for the recovery of a sum of money and damages, with an application for a writ of
preliminary attachment (Makati civil case).7

On January 27, 2000, the Office of the City Prosecutor of Makati City filed against Consing
and De la Cruz an information for estafa through falsification of public document in the RTC
in Makati City (Criminal Case No. 00-120), which was assigned to Branch 60 (Makati
criminal case).8

On February 15, 2001, Consing moved to defer his arraignment in the Makati criminal case
on the ground of existence of a prejudicial question due to the pendency of the Pasig and
Makati civil cases. On September 25, 2001, Consing reiterated his motion for deferment of
his arraignment, citing the additional ground of pendency of CA-G.R. SP No. 63712 in the
CA. On November 19, 2001, the Prosecution opposed the motion.9

On November 26, 2001, the RTC issued an order suspending the proceedings in the Makati
criminal case on the ground of the existence of a prejudicial question, and on March 18,
2001, the RTC denied the Prosecution’s motion for reconsideration.10

The State thus assailed in the CA the last two orders of the RTC in the Makati criminal case
via petition for certiorari (C.A.-G.R. SP No. 71252).

On May 20, 2003, the CA promulgated its decision in C.A.-G.R. SP No. 71252,11 dismissing
the petition for certiorari and upholding the RTC’s questioned orders, explaining:

Is the resolution of the Pasig civil case prejudicial to the Cavite and Makati criminal cases?
 186

We hold that it is. The resolution of the issue in the Pasig case, i.e. whether or not private
respondent may be held liable in the questioned transaction, will determine the guilt or
innocence of private respondent Consing in both the Cavite and Makati criminal cases.

The analysis and comparison of the Pasig civil case, Makati criminal case, Makati civil case
and Cavite criminal case show that: (1) the parties are identical; (2) the transactions in
controversy are identical; (3) the Transfer Certificate of Titles (TCT) involved are identical;
(4) the questioned Deeds of Sale/Mortgage are identical; (5) the dates in question are
identical; and (6) the issue of private respondent’s culpability for the questioned
transactions is identical in all the proceedings.

As discussed earlier, not only was the issue raised in the Pasig civil case identical to or
intimately related to the criminal cases in Cavite and Makati. The similarities also extend to
the parties in the cases and the TCT and Deed of Sale/ Mortgage involved in the questioned
transactions.

The respondent Judge, in ordering the suspension of the arraignment of private respondent
in the Makati case, in view of CA-G.R. SP No. 63712, where Unicapital was not a party
thereto, did so pursuant to its mandatory power to take judicial notice of an official act of
another judicial authority. It was also a better legal tack to prevent multiplicity of action, to
which our legal system abhors.

Applying the Tuanda ruling, the pendency of CA-G.R. SP No. 63712 may be validly invoked
to suspend private respondent’s arraignment in the Makati City criminal case,
notwithstanding the fact that CA-G.R. SP No. 63712 was an offshoot, merely, in the Cavite
criminal case.12

In the meanwhile, on October 13, 1999, Plus Builders commenced its own suit for damages
against Consing (Civil Case No. 99-95381) in the RTC in Manila (Manila civil case).13

On January 21, 2000, an information for estafa through falsification of public document was
filed against Consing and De la Cruz in the RTC in Imus, Cavite, docketed as Criminal Case
No. 7668-00 and assigned to Branch 21 (Cavite criminal case). Consing filed a motion to
defer the arraignment on the ground of the existence of a prejudicial question, i.e., the
pendency of the Pasig and Manila civil cases. On January 27, 2000, however, the RTC
handling the Cavite criminal case denied Consing’s motion. Later on, it also denied his
motion for reconsideration. Thereafter, Consing commenced in the CA a special civil action
for certiorari with prayer for the issuance of a temporary restraining order (TRO) and/or
writ of preliminary injunction (C.A.-G.R. SP No. 63712), seeking to enjoin his arraignment
and trial in the Cavite criminal case. The CA granted the TRO on March 19, 2001, and later
promulgated its decision on May 31, 2001, granting Consing’ petition for certiorari and
setting aside the January 27, 2000 order of the RTC, and permanently enjoining the RTC
from proceeding with the arraignment and trial until the Pasig and Manila civil cases had
been finally decided.
 187

Not satisfied, the State assailed the decision of the CA in this Court (G.R. No. 148193),
praying for the reversal of the May 31, 2001 decision of the CA. On January 16, 2003, the
Court granted the petition for review in G.R. No. 148193, and reversed and set aside the
May 31, 2001 decision of the CA,14 viz:

In the case at bar, we find no prejudicial question that would justify the suspension of the
proceedings in the criminal case (the Cavite criminal case). The issue in Civil Case No. SCA
1759 (the Pasig civil case) for Injunctive Relief is whether or not respondent (Consing)
merely acted as an agent of his mother, Cecilia de la Cruz; while in Civil Case No. 99-95381
(the Manila civil case), for Damages and Attachment, the question is whether respondent
and his mother are liable to pay damages and to return the amount paid by PBI for the
purchase of the disputed lot. Even if respondent is declared merely an agent of his mother
in the transaction involving the sale of the questioned lot, he cannot be adjudged free from
criminal liability. An agent or any person may be held liable for conspiring to falsify public
documents. Hence, the determination of the issue involved in Civil Case No. SCA 1759 for
Injunctive Relief is irrelevant to the guilt or innocence of the respondent in the criminal
case for estafa through falsification of public document.

Likewise, the resolution of PBI’s right to be paid damages and the purchase price of the lot
in question will not be determinative of the culpability of the respondent in the criminal
case for even if PBI is held entitled to the return of the purchase price plus damages, it does
not ipso facto follow that respondent should be held guilty of estafa through falsification of
public document. Stated differently, a ruling of the court in the civil case that PBI should not
be paid the purchase price plus damages will not necessarily absolve respondent of liability
in the criminal case where his guilt may still be established under penal laws as determined
by other evidence.

Moreover, neither is there a prejudicial question if the civil and the criminal action can,
according to law, proceed independently of each other. Under Rule 111, Section 3 of the
Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176
of the Civil Code, 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.

Thus, in Rojas v. People, the petitioner was accused in a criminal case for violation of
Article 319 of the Revised Penal Code, for executing a new chattel mortgage on personal
property in favor of another party without consent of the previous mortgagee. Thereafter,
the offended party filed a civil case for termination of management contract, one of the
causes of action of which consisted of petitioner having executed a chattel mortgage while
the previous chattel mortgage was still valid and subsisting. Petitioner moved that the
arraignment and trial of the criminal case be held in abeyance on the ground that the civil
case was a prejudicial question, the resolution of which was necessary before the criminal
proceedings could proceed. The trial court denied the suspension of the criminal case on
the ground that no prejudicial question exist. We affirmed the order of the trial court and
ruled that:
 188

… the resolution of the liability of the defendant in the civil case on the eleventh cause of
action based on the fraudulent misrepresentation that the chattel mortgage the defendant
executed in favor of the said CMS Estate, Inc. on February 20, 1957, that his D-6
"Caterpillar" Tractor with Serial No. 9-U-6565 was "free from all liens and encumbrances"
will not determine the criminal liability of the accused in the said Criminal Case No. 56042
for violation of paragraph 2 of Article 319 of the Revised Penal Code. . . . (i) That, even
granting for the sake of argument, a prejudicial question is involved in this case, the fact
remains that both the crime charged in the information in the criminal case and the
eleventh cause of action in the civil case are based upon fraud, hence both the civil and
criminal cases could proceed independently of the other pursuant to Article 33 of the new
Civil Code which provides: "In cases of defamation, fraud and physical injuries, a civil action
for damages, entirely separate and distinct from the criminal action shall proceed
independently of the criminal prosecution, and shall require only a preponderance of
evidence." (j) That, therefore, the act of respondent judge in issuing the orders referred to
in the instant petition was not made with "grave abuse of discretion."

In the instant case, Civil Case No. 99-95381, for Damages and Attachment on account of the
alleged fraud committed by respondent and his mother in selling the disputed lot to PBI is
an independent civil action under Article 33 of the Civil Code. As such, it will not operate as
a prejudicial question that will justify the suspension of the criminal case at bar.15

Turning back to the Makati criminal case, the State moved for the reconsideration of the
adverse decision of the CA, citing the ruling in G.R. No. 148193, supra, to the effect that the
Pasig and Manila civil cases did not present a prejudicial question that justified the
suspension of the proceedings in the Cavite criminal case, and claiming that under the
ruling in G.R. No. 148193, the Pasig and Makati civil cases did not raise a prejudicial
question that would cause the suspension of the Makati criminal case.

In his opposition to the State’s motion for reconsideration, Consing contended that the
ruling in G.R. No. 148193 was not binding because G.R. No. 148193 involved Plus Builders,
which was different from Unicapital, the complainant in the Makati criminal case. He added
that the decision in G.R. No. 148193 did not yet become final and executory, and could still
be reversed at any time, and thus should not control as a precedent to be relied upon; and
that he had acted as an innocent attorney-in-fact for his mother, and should not be held
personally liable under a contract that had involved property belonging to his mother as
his principal.

On August 18, 2003, the CA amended its decision, reversing itself. It relied upon the ruling
in G.R. No. 148193, and held thusly:

CA-G.R. SP No. 63712 is similar with the case at bench. The transactions in controversy, the
documents involved; the issue of the respondent’s culpability for the questioned
transactions are all identical in all the proceedings; and it deals with the same parties with
the exception of private complainant Unicapital.
 189

However, the Supreme Court, upon review of CA-G.R. SP No. 63712, People of the
Philippines vs. Rafael Jose Consing, Jr. (G.R. No. 148193, January 16, 2003) held that "Civil
Case No. 99-95381, for Damages and attachment on account of alleged fraud committed by
respondent and his mother in selling the disputed lot to Plus Builders, Inc. is an
independent civil action under Article 33 of the Civil Code. As such, it will not operate as a
prejudicial question that will justify the suspension of the criminal case at bar." In view of
the aforementioned decision of the Supreme Court, We are thus amending Our May 20,
2003 decision.

WHEREFORE, the petitioner’s motion for reconsideration is GRANTED. The Orders dated
November 26, 2001 and March 18, 2002 issued by the respondent Judge are hereby
REVERSED and SET ASIDE. Respondent Judge is hereby ordered to proceed with the
hearing of Criminal Case No. 00-120 with dispatch.

SO ORDERED.16

Consing filed a motion for reconsideration,17 but the CA denied the motion through the
second assailed resolution of December 11, 2003.18

Hence, this appeal by petition for review on certiorari.

Issue

Petitioner reiterates his contention that the decision in G.R. No. 148193 was not controlling
in relation to C.A.-G.R. No. 71252, which involved Plus Builders, not Unicapital, the
complainant in Criminal Case No. 00-120. He posits that in arriving at its amended decision,
the CA did not consider the pendency of the Makati civil case (Civil Case No. 99-1418),
which raised a prejudicial question, considering that the resolution of such civil action
would include the issue of whether he had falsified a certificate of title or had willfully
defrauded Unicapital, the resolution of either of which would determine his guilt or
innocence in Criminal Case No. 00-120.

In its comment,19 the Office of the Solicitor General (OSG) counters that Unicapital brought
the Makati civil case as an independent civil action intended to exact civil liability
separately from Criminal Case No. 00-120 in a manner fully authorized under Section 1(a)
and Section 2, Rule 111 of the Rules of Court. 20 It argues that the CA correctly took
cognizance of the ruling in G.R. No. 148193, holding in its challenged amended decision that
the Makati civil case, just like the Manila civil case, was an independent civil action
instituted by virtue of Article 33 of the Civil Code; that the Makati civil case did not raise a
prejudicial question that justified the suspension of Criminal Case No. 00-120; and that as
finally settled in G.R. No. 148193, the Pasig civil case did not also raise any prejudicial
question, because the sole issue thereat was whether Consing, as the mere agent of his
mother, had any obligation or liability toward Unicapital.

In his reply,21 Consing submits that the Pasig civil case that he filed and Unicapital’s Makati
civil case were not intended to delay the resolution of Criminal Case No. 00-120, nor to pre-
 190

empt such resolution; and that such civil cases could be validly considered determinative of
whether a prejudicial question existed to warrant the suspension of Criminal Case No. 00-
120.

Did the CA err in reversing itself on the issue of the existence of a prejudicial question that
warranted the suspension of the proceedings in the Makati criminal case?

Ruling

The petition for review on certiorari is absolutely meritless.

Consing has hereby deliberately chosen to ignore the firm holding in the ruling in G.R. No.
148193 to the effect that the proceedings in Criminal Case No. 00-120 could not be
suspended because the Makati civil case was an independent civil action, while the Pasig
civil case raised no prejudicial question. That was wrong for him to do considering that the
ruling fully applied to him due to the similarity between his case with Plus Builders and his
case with Unicapital.

A perusal of Unicapital’s complaint in the Makati civil case reveals that the action was
predicated on fraud. This was apparent from the allegations of Unicapital in its complaint
to the effect that Consing and de la Cruz had acted in a "wanton, fraudulent, oppressive, or
malevolent manner in offering as security and later object of sale, a property which they do
not own, and foisting to the public a spurious title."22 As such, the action was one that could
proceed independently of Criminal Case No. 00-120 pursuant to Article 33 of the Civil Code,
which states as follows:

Article 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.

It is well settled that a civil action based on defamation, fraud and physical injuries may be
independently instituted pursuant to Article 33 of the Civil Code, and does not operate as a
prejudicial question that will justify the suspension of a criminal case.23 This was precisely
the Court’s thrust in G.R. No. 148193, thus:

Moreover, neither is there a prejudicial question if the civil and the criminal action can,
according to law, proceed independently of each other. Under Rule 111, Section 3 of the
Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176
of the Civil Code, 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.

xxxx
 191

In the instant case, Civil Case No. 99-95381, for Damages and Attachment on account of the
alleged fraud committed by respondent and his mother in selling the disputed lot to PBI is
an independent civil action under Article 33 of the Civil Code. As such, it will not operate as
a prejudicial question that will justify the suspension of the criminal case at bar.24

Contrary to Consing’s stance, it was not improper for the CA to apply the ruling in G.R. No.
148193 to his case with Unicapital, for, although the Manila and Makati civil cases involved
different complainants (i.e., Plus Builders and Unicapital), the civil actions Plus Builders
and Unicapital had separately instituted against him were undeniably of similar mold, i.e.,
they were both based on fraud, and were thus covered by Article 33 of the Civil Code.
Clearly, the Makati criminal case could not be suspended pending the resolution of the
Makati civil case that Unicapital had filed.

As far as the Pasig civil case is concerned, the issue of Consing’s being a mere agent of his
mother who should not be criminally liable for having so acted due to the property
involved having belonged to his mother as principal has also been settled in G.R. No.
148193, to wit:

In the case at bar, we find no prejudicial question that would justify the suspension of the
proceedings in the criminal case (the Cavite criminal case). The issue in Civil Case No. SCA
1759 (the Pasig civil case) for Injunctive Relief is whether or not respondent (Consing)
merely acted as an agent of his mother, Cecilia de la Cruz; while in Civil Case No. 99-95381
(the Manila civil case), for Damages and Attachment, the question is whether respondent
and his mother are liable to pay damages and to return the amount paid by PBI for the
purchase of the disputed lot. Even if respondent is declared merely an agent of his mother
in the transaction involving the sale of the questioned lot, he cannot be adjudged free from
criminal liability. An agent or any person may be held liable for conspiring to falsify public
documents. Hence, the determination of the issue involved in Civil Case No. SCA 1759 for
Injunctive Relief is irrelevant to the guilt or innocence of the respondent in the criminal
case for estafa through falsification of public document.25 (Words in parentheses supplied;
bold underscoring supplied for emphasis)

WHEREFORE, the Court AFFIRMS the amended decision promulgated on August 18, 2003;
and ORDERS petitioner to pay the costs of suit.

G.R. No. 205972

CATERPILLAR, INC., Petitioner
vs.
MANOLO P. SAMSON, Respondent

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

G.R. No. 164352

 192

CATERPILLAR, INC., Petitioner,
vs.
MANOLO P. SAMSON, Respondent.

DECISION

BERSAMIN, J.:

The determination of probable cause to charge a person in court for a criminal offense is
exclusively lodged in the Executive Branch of the Government, through the Department of
Justice. Initially, the determination is done by the investigating public prosecutor, and on
review by the Secretary of Justice or his duly authorized subordinate. The courts will
respect the determination, unless the same shall be shown to have been made in grave
abuse of discretion amounting to lack or excess of jurisdiction.

The Cases

Before us are the consolidated cases of G.R. No. 2059721 and G.R. No. 164352.2

G.R. No. 164352 involves the appeal by petition for review on certiorari of Caterpillar, Inc.
(Caterpillar) to reverse the decision promulgated on January 21, 20043 by the Court of
Appeals (CA) in CA-G.R. SP No. 75526, and the resolution promulgated on June 30, 2004
denying the motion for reconsideration thereof.4

G.R. No. 205972 relates to the appeal brought by Caterpillar to assail the decision and
resolution promulgated in CA-G.R. SP No. 102316 respectively on May 8, 20125 and
February 12, 2013,6 whereby the CA affirmed the resolutions of the Department of Justice
(DOJ) finding that there was no probable cause to indict Manolo P. Samson (Samson) for
unfair competition.

Antecedents

Caterpillar is a foreign corporation engaged in the manufacture and distribution of

footwear, clothing and related items, among others. Its products are known for six core
trademarks, namely, "CATERPILLAR", "CAT" "CATERPILLAR & DESIGN" "CAT AND
DESIGN", "WALKING MACHINES" and "TRACK-TYPE TRACTOR & DESIGN (Core Marks),7 all
of which are alleged as internationally known. On the other hand, Samson, doing business
under the names and styles of Itti Shoes Corporation, Kolm's Manufacturing Corporation
and Caterpillar Boutique and General Merchandise, is the proprietor of various retail
outlets in the Philippines selling footwear, bags, clothing, and related items under the
trademark "CATERPILLAR", registered in 1997 under Trademark Registration No. 64705
issued by the Intellectual Property Office (IPO).8

G.R. No. 164352

 193

On July 26, 2000, upon application of the National Bureau of Investigation (NBI), the
Regional Trial Court (RTC), Branch 56, in Makati City issued Search Warrants Nos. 00-022
to 00-032, inclusive, all for unfair competition, 9 to search the establishments owned,
controlled and operated by Samson. The implementation of the search warrants on July 27,
2000 led to the seizure of various products bearing Caterpillar's Core Marks.

Caterpillar filed against Samson several criminal complaints for unfair competition in the
Department of Justice (DOJ), docketed as LS. Nos. 2000-13 54 to 2000-13 64, inclusive.

Additionally, on July 31, 2000, Caterpillar commenced a civil action against Samson and his
business entities, with the IPO as a nominal party 10 - for Unfair Competition, Damages and
Cancellation of Trademark with Application for Temporary Restraining Order (TRO) and/or
Writ of Preliminary Injunction - docketed as Civil Case No. Q-00-41446 of the RTC in
Quezon City. In said civil action, the RTC denied Caterpillar's application for the issuance of
the TRO on August 17, 2000.

The DOJ, through Senior State Prosecutor Jude R. Romano, issued a joint resolution dated
November 15, 200111 recommending that Samson be criminally charged with unfair
competition under Section 168.3 (a),12 in relation to Section 123.l(e),13 Section 131.114 and
Section 170,15 all of Republic Act No. 8293, or the Intellectual Property Code of the
Philippines (IP Code).

However, because Samson and his affiliate companies allegedly continued to sell and
distribute products clothed with the general appearance of its own products, Caterpillar
again applied for another set of search warrants against Samson and his businesses. The
RTC, Branch 172, in Valenzuela City issued Search Warrants Nos. 12-V-00,16 13-V-00,17 20-
V-0018 and 29-V-0019 upon application of the NBI, by virtue of the implementation of which
several goods were seized and confiscated by the NBI agents.

As a consequence, Caterpillar filed 26 criminal complaints for unfair competition on

January 31, 2001, docketed as LS. Nos. 2001-42 to 2001-67, against Samson and/or the
occupants of his affiliate entities before the DOJ.20 In due course, the DOJ, through State
Prosecutor Zenaida M. Lim, issued a joint resolution dated September 28,
200121 recommending the filing of criminal complaints for unfair competition under
Section 168.3(a), in relation to Section 123 .1, Section 131.1 and Section 170 of the IP Code.
Accordingly, six criminal complaints were filed in the RTC, Branch 256, in Muntinlupa City,
presided by Judge Alberto L. Lerma, docketed as Criminal Cases Nos. 02-238 to 02-243.

On January 17 and 22, 2002, Samson filed a petitions for review with the Office of the
Secretary of Justice to appeal the joint resolutions in LS. Nos. 2000-1354 to 2000-
136422 and LS. Nos. 2001-042 to 2001-067.23

On May 30, 2002, Samson filed a Motion to Suspend Arraignment in Criminal Cases Nos. 02-
238 to 243,24 citing the following as grounds:25

I.
 194

THERE EXISTS PREJUDICIAL QUESTIONS PENDING LITIGATION BEFORE THE REGIONAL

TRIAL COURT OF QUEZON CITY, BRANCH 90, IN CIVIL CASE NO. Q-00-41446 ENTITLED:
"CATERPILLAR, INC., ET AL. VS. ITTI SHOES CORPORATION, ET AL.," THE FINAL
RESOLUTIONS OF WHICH WILL DETERMINE THE OUTCOME OF THE INSTANT CRIMINAL
CASES.

II.

ACCUSED HAS FILED PETITIONS FOR REVIEW WITH THE DEPARTMENT OF JUSTICE
ASSAILING THE RESOLUTIONS OF THE CHIEF STATE PROSECUTOR WHO CAUSED THE
FILING OF THE INSTANT CASES AND ARE STILL PENDING THEREIN UP TO THE PRESENT.

In the meanwhile, on July 10, 2002, the DOJ, through Secretary Hernando B. Perez, issued a
resolution26 denying Samson's petition for review in I.S. Nos. 2000-1354 to 2000-1364.
Samson's motion for reconsideration was likewise denied on May 26, 2003.

On September 23, 2002, Presiding Judge Lerma of the RTC granted Samson's Motion to
Suspend Arraignment, and suspended the arraignment and all other proceedings in
Criminal Cases Nos. 02-240 to 02-243 until Civil Case No. Q-00-41446 was finally
resolved,27 holding:

After a careful scrutiny of the case, this Court finds that private complainant, in Civil Case
No. Q-00-41446, seeks for the cancellation of the trademark "CATERPILLAR" which is
registered in the name of the accused and to prevent the latter from using the said
trademark ("CATERPILLAR"), while the issue in the instant case is the alleged unlawful use
by the accused of the trademark "CATERPILLAR" which is claimed to be owned by the
private complainant. From the foregoing, this Court believes that there exists a prejudicial
question since the determination of who is really the lawful or registered user of the
trademark "CATERPILLAR" will ultimately determine whether or not the instant criminal
action shall proceed. Clearly, the issues raised in Civil Case No. Q-00-41446 is similar or
intimately related to the issue in the case at bar for if the civil case will be resolved
sustaining the trademark registration of the accused for the trademark CATERPILLAR, then
the latter would have all the authority to continue the use of the said trademark as a
consequence of a valid registration, and by reason of which there may be no more basis to
proceed with the instant criminal action.28

After the RTC denied its motion for reconsideration 29 on December 5, 2002,30 Caterpillar
elevated the matter to the CA by petition for certiorari on February 14, 2003,31 docketed as
C.A.-G.R. SP No. 75526 entitled Caterpillar, Inc. v. Hon. Alberto L. Lerma, in his capacity as
Presiding Judge of Branch 256 of the Regional Trial Court, Muntinlupa City, and Manolo P.
Samson, alleging grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of the RTC in suspending the arraignment and other proceedings in Criminal Cases
Nos. 02-238 to 02-243 on the ground of the existence of an alleged prejudicial question in
Civil Case No. Q-00-41446 then pending in the RTC in Quezon City whose resolution would
determine the outcome of the criminal cases.
 195

Meanwhile, on January 13, 2003, Acting Justice Secretary Ma. Merceditas N. Gutierrez
reversed and set aside the resolution issued by State Prosecutor Lim in I.S. No. 2001-042 to
2001-067, and directed the Chief State Prosecutor to cause the withdrawal of the criminal
informations filed against Samson in court,32 disposing as follows:

ACCORDINGLY, the assailed joint resolution is hereby REVERSED and SET ASIDE. The

Chief State Prosecutor is directed to forthwith cause the withdrawal of the informations
filed in court against respondent Manolo P. Samson and to report action taken hereon
within ten (10) days from receipts hereof.33

Acting Justice Secretary Gutierrez based her resolution on the order dated June 26, 2001,
whereby the RTC of Valenzuela City, Branch 172, had quashed the 26 search warrants upon
motion of Samson.34 Consequently, the goods seized and confiscated by virtue of the
quashed search warrants could no longer be admitted in evidence

Correspondingly, Presiding Judge Lerma of the RTC ordered the withdrawal of Criminal
Cases Nos. 02-240 to 02-243 on February 4, 2003.35

Aggrieved, Caterpillar assailed the order of Judge Lerma for the withdrawal of Criminal
Cases Nos. 02-240 to 02-2432003 by petition for certiorari in the CA on October 16, 2003,
docketed as CA-G.R. SP No. 79937,36 and the CA ultimately granted the petition
for certiorari,37 setting aside the assailed January 13, 2003 resolution of the Acting Justice
Secretary and directing the re-filing of the withdrawn informations against Samson. The
Court ultimately affirmed the CA's dec ision through the resolution promulgated on
October 17, 2005 in G.R. No. 169199, and ruling that probable cause existed for the re-filing
of the criminal charges for unfair competition under the IP Code.38

In the assailed January 21, 2004 decision,39 the CA dismissed Caterpillar's petition

for certiorari in CA-G.R. SP No. 75526, viz.:

Petition has no merit.

The mere fact that public respondent denied petitioner's motion for reconsideration does
not justify this petition on the ground of abuse of discretion. Grave abuse of discretion
means such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, or, in other words where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility and it must be so patent and gross as to
amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or
to act at all in contemplation of law. (Benito vs. Comelec, 349 SCRA 705).

Petitioner in this case failed to overcome the burden of showing how public respondent
acted with grave abuse of discretion in granting private respondent's motion and denying
his own motion for reconsideration. What is clear is that public respondent court acted
judiciously. A petition for certiorari under Rule 65 of the Rules of Court will prosper only if
there is showing of grave abuse of discretion or an act without or in excess of jurisdiction
on the part of respondent tribunal (Garcia vs. HRET, 312 SCRA 353).
 196

Granting arguendo that public respondent court erred in its ruling, still a petition
for certiorari under Rule 65 cannot be justified. Where the court has jurisdiction over the
subject matter, the orders or decision upon all questions pertaining to the cause are orders
or decisions within its jurisdiction and however erroneous they may be, they cannot be
corrected by certiorari (De Baron vs. Court of Appeals, 368 SCRA 407).

WHEREFORE, foregoing premises considered, the Petition having no merit in fact and in
law is hereby DENIED DUE COURSE and ordered DISMISSED. With costs to Petitioners.

SO ORDERED.40

Caterpillar sought the reconsideration of the dismissal, but the CA denied the motion on
June 30, 2004.41

Hence, Caterpillar appealed the CA's decision in C.A.-G.R. SP No. 75526 (G.R. No. 164352).

G .R. No. 205972

In the meanwhile, in August 2002, upon receiving the information that Samson and his
affiliate entities continuously sold and distributed products bearing Caterpillar's Core
Marks without Caterpillar's consent, the latter requested the assistance of the Regional
Intelligence and Investigation Division of the National Region Public Police (RIID-NCRPO)
for the conduct of an investigation. Subsequently, after the investigation, the RIID-NCRPO
applied for and was granted 16 search warrants against various outlets owned or operated
by Samson in Mandaluyong, Quezon City, Manila, Caloocan, Makati, Parañ aque, Las Piñ as,
Pampanga and Cavite. The warrants were served on August 27, 2002, 42 and as the result
products bearing Caterpillar's Core Marks were seized and confiscated. Consequently, on
the basis of the search warrants issued by the various courts, Caterpillar again instituted
criminal complaints in the DOJ for violation of Section 168.3(a), in relation to Sections
131.3, 123.l(e) and 170 of the IP Code against Samson, docketed as LS. Nos. 2002-995 to
2002-997; 2002-999 to 2002-1010; and 2002-1036.

After the conduct of the preliminary investigation, the DOJ, through State Prosecutor
Melvin J.Abad, issued a joint resolution dated August 21, 2003 dismissing the complaint
upon finding that there was no probable cause to charge Samson with unfair competition.43

Caterpillar moved for the reconsideration of the dismissal, but State Prosecutor Abad
denied the motion on June 18, 2004.44

The Secretary of Justice affirmed the dismissal of the complaint through the resolution
issued on September 19, 2005,45 and denied Caterpillar's motion for reconsideration on
December 20, 2007.

Accordingly, Caterpillar appealed to the CA through a petition for review under Rule
43, Rules of Court (C.A.-G.R. SP No. 102316).46
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On May 8, 2012,47 however, the CA denied due course to Caterpillar's petition for

review, viz.:

WHEREFORE, premises considered, the petition is DENIED DUE COURSE, and

accordingly, DISMISSED.

SO ORDERED.48

The CA opined that an appeal under Rule 43 to assail the resolution by the Secretary of
Justice determining the existence or non-existence of probable cause was an improper
remedy; and that while it could treat an appeal as a special civil action for certiorari under
Rule 65, it could not do so therein because the allegations of the petition did not sufficiently
show grave abuse of discretion on the part of the Secretary of Justice in issuing the assailed
resolutions.

Caterpillar filed a motion for reconsideration, but the CA denied the motion for its lack of
merit on February 12, 2013.49

Hence, Caterpillar commenced G.R. No. 205972.

Issues

Caterpillar submits that the CA erred as follows:

G.R. No. 164352

A.

THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN DENYING DUE

COURSE TO CATERPILLAR INC.'S PETITION FOR CERTIORARI.

B.

THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN NOT HOLDING

THAT THE ORDER SUSPENDING PROCEEDINGS IN CRIMINAL CASES NOS. 02-238 TO 02-
243, ON THE BASIS OF AN ALLEGED PREJUDICIAL QUESTION, WAS CONTRARY TO LAW
AND ESTABLISHED JURISPRUDENCE.

C.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN NOT

HOLDING THAT A CRIMINAL COMPLAINT FOR UNFAIR COMPETITION CAN PROCEED
INDEPENDENTLY OF, AND SIMULTANEOUS WITH, THE CIVIL CASE FOR THE SAME.50

Caterpillar posits that the suspension of proceedings in Criminal Cases Nos. 02-238 to 02-
243 was contrary to Rule 111 of the Rules of Court, Article 33 of the Civil Code on
 198

independent civil actions, and Section 170 of the IP Code, which specifically provides that
the criminal penalties for unfair competition were independent of the civil and
administrative sanctions imposed by law; that the determination of the lawful owner of the
"CATERPILLAR" trademark in Civil Case No. Q-00-41446 would not be decisive of the guilt
of Samson for unfair competition in Criminal Cases Nos. 02-238 to 02-243 because
registration was not an element of the crime of unfair competition; that the civil case
sought to enforce Samson's civil liability arising from the IP Code while the criminal cases
would enforce Samson's liability arising from the crime of unfair competition; and that the
Court already ruled in Samson v. Daway51 that Civil Case No. Q-00-41446 was an
independent civil action under Article 33 of the Civil Code and, as such, could proceed
independently of the criminal actions.

In his comment,52 Samson counters that the issues of the lawful and registered owner of the
trademark, the true owner of the goodwill, and whether "CATERPILLAR" was an
internationally well-known mark are intimately related to the issue of guilt in the criminal
actions, the resolution of which should determine whether or not the criminal actions for
unfair competition could proceed.

G.R. No. 205972

In this appeal, the petitioner interposes that:

THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONER'S

PETITION FOR REVIEW SOLELY ON THE GROUND OF AN ALLEGED WRONG REMEDY,
DESPITE PETITIONERS HAVING CLEARLY ESTABLISHED THAT THE SECRETARY OF
JUSTICE ACTED WITH GRAVE ABUSE OF DISCRETION IN ISSUING THE RESOLUTIONS
DATED 19 SEPTEMBER 2005 AND 20 DECEMBER 2007, AFFIRMING THE FINDINGS OF
THE INVESTIGATING PROSECUTOR THAT NO PROBABLE CAUSE EXISTS TO CHARGE THE
RESPONDENT OF THE CRIME OF UNFAIR COMPETITION.53

Caterpillar seeks the liberal interpretation of procedural rules in order to serve the higher
interest of substantial justice following the denial by the CA of its petition for being an
incorrect remedy; and insists that it presented substantial evidence to warrant a finding of
probable cause for unfair competition against Samson.

In sum, the issues to be resolved in these consolidated cases are: firstly, whether or not the
CA committed a reversible error in ruling that the trial court a quo did not commit grave
abuse of discretion in suspending the criminal proceedings on account of a prejudicial
question; and, secondly, whether or not the CA committed reversible error in upholding the
decision of the Secretary of Justice finding that there was no probable cause to charge
Samson with unfair competition.

Rulings of the Court

G.R. No. 164352

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The appeal in G.R. No. 164352 is meritorious.

We note, to begin with, that Civil Case No. Q-00-41446, the civil case filed by Caterpillar in
the RTC in Quezon City, was for unfair competition, damages and cancellation of trademark,
while Criminal Cases Nos. Q-02-108043-44 were the criminal prosecution of Samson for
unfair competition. A common element of all such cases for unfair competition - civil and
criminal - was fraud. Under Article 33 of the Civil Code, a civil action entirely separate and
distinct from the criminal action may be brought by the injured party in cases of fraud, and
such civil action shall proceed independently of the criminal prosecution. In view of its
being an independent civil action, Civil Case No. Q-00-41446 did not operate as a
prejudicial question that justified the suspension of the proceedings in Criminal Cases Nos.
Q-02-108043-44.

In fact, this issue has already been raised in relation to the suspension of the arraignment
of Samson in Criminal Cases Nos. Q-02-108043-44 in Samson v. Daway,54 and the Court
resolved it against Samson and in favor of Caterpillar thusly:

Anent the second issue, petitioner failed to substantiate his claim that there was a
prejudicial question. In his petition, he prayed for the reversal of the March 26, 2003 order
which sustained the denial of his motion to suspend arraignment and other proceedings in
Criminal Case Nos. Q-02-108043-44. For unknown reasons, however, he made no
discussion in support of said prayer in his petition and reply to comment. Neither did he
attach a copy of the complaint in Civil Case No. Q-00-41446 nor quote the pertinent portion
thereof to prove the existence of a prejudicial question.

At any rate, there is no prejudicial question if the civil and the criminal action can,
according to law, proceed independently of each other. Under Rule 111, Section 3 of the
Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176
of the Civil Code, 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 the case at bar, the common element in the acts constituting unfair competition under
Section 168 of R.A. No. 8293 is fraud. Pursuant to Article 33 of the Civil Code, 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. Hence, Civil Case
No. Q-00-41446, which as admitted by private respondent also relate to unfair
competition, is an independent civil action under Article 33 of the Civil Code. As such,
it will not operate as a prejudicial question that will justify the suspension of the
criminal cases at bar.55 (Bold emphasis supplied)

Secondly, a civil action for damages and cancellation of trademark cannot be considered a
prejudicial question by which to suspend the proceedings in the criminal cases for unfair
competition. A prejudicial question is that which arises in a civil case the resolution of
which is a logical antecedent of the issues to be determined in the criminal case. It must
appear not only that the civil case involves facts upon which the criminal action is based,
 200

but also that the resolution of the issues raised in the civil action will necessarily be
determinative of the criminal case.56 As stated in Librodo v. Judge Coscolluela, Jr.:57

A prejudicial question is one based on a fact distinct and separate from the crime but so
intimately connected with it that it determines the guilt or innocence of the accused, and
for it to suspend the criminal action, it must appear not only that said case involves facts
intimately related to those upon which the criminal prosecution would be based but also
that in the resolution of the issue or issues raised in the civil case, the guilt or innocence of
the accused would necessarily be determined. It comes into play generally in a situation
where a civil action and a criminal action are both pending and there exists in the
former an issue which must be preemptively resolved before the criminal action may
proceed, because howsoever the issue raised in the civil action is resolved would be
determinative juris et de jure of the guilt or innocence of the accused in the criminal
case.58 (Bold underscoring supplied for emphasis)

The elements of a prejudicial question are provided in Section 7 of Rule 111, Rules of

Court, to wit: (a) a previously instituted civil action involves an issue similar to or
intimately related to the issue raised in the subsequent criminal action, and (b) the
resolution of such issue determines whether or not the criminal action may proceed.59

An examination of the nature of the two kinds of cases involved is necessary to determine
whether a prejudicial question existed.

An action for the cancellation of trademark like Civil Case No. Q-00-41446 is a remedy
available to a person who believes that he is or will be damaged by the registration of a
mark.60 On the other hand, the criminal actions for unfair competition (Criminal Cases Nos.
Q-02-108043-44) involved the determination of whether or not Samson had given his
goods the general appearance of the goods of Caterpillar, with the intent to deceive the
public or defraud Caterpillar as his competitor.61 In the suit for the cancellation of
trademark, the issue of lawful registration should necessarily be determined, but
registration was not a consideration necessary in unfair competition. 62 Indeed, unfair
competition is committed if the effect of the act is "to pass off to the public the goods of one
man as the goods of another;" 63 it is independent of registration. As fittingly put in R.F. &
Alexander & Co. v. Ang,64 "one may be declared unfair competitor even if his competing trade-
mark is registered."

Clearly, the determination of the lawful ownership of the trademark in the civil action was
not determinative of whether or not the criminal actions for unfair competition shall
proceed against Samson.

G.R. No. 205972

The petition for review on certiorari in G.R. No. 205972 is denied for being bereft of
merit.1âwphi1
 201

Firstly, Caterpillar assailed the resolution of the Secretary of Justice by filing a petition for
review under Rule 43 of the Rules of Court. Such resort to the petition for review under
Rule 43 was erroneous,65 and the egregious error warranted the denial of the appeal. The
petition for review under Rule 43 applied to all appeals to the CA from quasi-judicial
agencies or bodies, particularly those listed in Section 1 of Rule 43. However, the Secretary
of Justice, in the review of the findings of probable cause by the investigating public
prosecutor, was not exercising a quasi-judicial function, but performing an executive
function.66

Moreover, the courts could intervene in the determination of probable cause only through
the special civil action for certiorari under Rule 65 of the Rules of Court, not by appeal
through the petition for review under Rule 43. Thus, the CA could not reverse or undo the
findings and conclusions on probable cause by the Secretary of Justice except upon clear
demonstration of grave abuse of discretion amounting to lack or excess of jurisdiction
committed by the Secretary of Justice.67 Caterpillar did not so demonstrate.

And, secondly, even discounting the technicalities as to consider Caterpillar's petition for
review as one brought under Rule 65, the recourse must still fail.

Probable cause for the purpose of filing an information in court consists in such facts and
circumstances as would engender a well-founded belief that a crime has been committed
and the accused may probably be guilty thereof.68 The determination of probable cause lies
solely within the sound discretion of the investigating public prosecutor after the conduct
of a preliminary investigation. It is a sound judicial policy to refrain from interfering with
the determination of what constitutes sufficient and convincing evidence to establish
probable cause for the prosecution of the accused.69 Thus, it is imperative that by the
nature of his office, the public prosecutor cannot be compelled to file a criminal
information in court if he is not convinced of the sufficiency of the evidence adduced for a
finding of probable cause.70 Neither can he be precluded from filing an information if he is
convinced of the merits of the case.

In not finding probable cause to indict Samson for unfair competition, State Prosecutor
Abad as the investigating public prosecutor discharged the discretion given to him by the
law. Specifically, he resolved as follows:

It appears from the records that respondent started marketing his (class 25) products
bearing the trademark Caterpillar as early as 1992. In 1994, respondent caused the
registration of the trademark "Caterpillar With A Triangle Device Beneath The Letter [A]"
with the Intellectual Property Office. Sometime on June 16, 1997, the IPO issued Certificate
of Registration No. 64705 which appears to be valid for twenty (20) years, or up to June 16,
2017. Upon the strength of this registration, respondent continued with his business of
marketing shoes, slippers, sandals, boots and similar Class 25 items bearing his registered
trademark "Caterpillar". Under the law, respondent's operative act of registering his
Caterpillar trademark and the concomitant approval/issuance by the governmental entity
concerned, conferred upon him the exclusive right to use said trademark unless otherwise
declared illegal. There being no evidence to controvert the fact that respondent's Certificate
 202

of Registration No. 64705 covering Caterpillar trademark was fraudulently or illegally

obtained, it necessarily follows that its subsequent use and/or being passed on to the
public militates malice or fraudulent intent on the part of respondent. Otherwise stated and
from the facts obtaining, presumption of regularity lies, both from the standpoint of
registration and use/passing on of the assailed Caterpillar products.

Complainant's argument that respondent may still be held liable for unfair competition by
reason of his having passed on five (5) other Caterpillar products like "Cat", "Caterpillar",
"Cat and Design", "Walking Machines" and "Track-Type Tractor Design" is equally difficult
to sustain. As may be gleaned from the records, respondent has been engaged in the sale
and distribution of Caterpillar products since 1992 leading to the establishment of
numerous marketing outlets. As such, it would be difficult to assail the presumption that
respondent has already established goodwill insofar as his registered Caterpillar products
are concerned. On the other hand, complainant's registration of the other Caterpillar
products appears to have been caused only in 1995. In this premise, respondent may be
considered as prior user, while the latter, a subsequent one. Jurisprudence dictates that
prior user of the trademark by one, will controvert the claim by a subsequent one.71

We reiterate that the full discretionary authority to determine the existence of probable
cause is lodged in the Executive Branch of the Government, through the public prosecutor,
in the first instance, and the Secretary of Justice, on review. Such authority is exclusive, and
the courts are prohibited from encroaching on the executive function, unless there is a
clear showing of grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of the public prosecutor or the Secretary of Justice. As declared in Callo-Claridad v.
Esteban:72

A public prosecutor alone determines the sufficiency of evidence that establishes the
probable cause justifying the filing of a criminal information against the respondent
because the determination of existence of a probable cause is the function of the public
prosecutor. Generally, the public prosecutor is afforded a wide latitude of discretion in the
conduct of a preliminary investigation. Consequently, it is a sound judicial policy to refrain
from interfering in the conduct of preliminary investigations, and to just leave to the
Department of Justice the ample latitude of discretion in the determination of what
constitutes sufficient evidence to establish probable cause for the prosecution of supposed
offenders. Consistent with this policy, courts do not reverse the Secretary of Justice's
findings and conclusions on the matter of probable cause except in clear cases of grave
abuse of discretion. By way of exception, however, judicial review is permitted where the
respondent in the preliminary investigation clearly establishes that the public prosecutor
committed grave abuse of discretion, that is, when the public prosecutor has exercised his
discretion in an arbitrary, capricious, whimsical or despotic manner by reason of passion
or personal hostility, patent and gross enough as to amount to an evasion of a positive duty
or virtual refusal to perform a duty enjoined by law. Moreover, the trial court may
ultimately resolve the existence or nonexistence of probable cause by examining the
records of the preliminary investigation when necessary for the orderly administration of
justice. Although policy considerations call for the widest latitude of deference to the public
prosecutor's findings, the courts should never shirk from exercising their power, when the
 203

circumstances warrant, to determine whether the public prosecutor's findings are

supported by the facts, and by the law.

Relevantly, grave abuse of discretion means such capricious or whimsical exercise of

judgment that is equivalent to lack of jurisdiction. The abuse of discretion must be grave, as
when the power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility, and it must be so patent and gross as to amount to an evasion of a
positive duty or to a virtual refusal to perform the duty enjoined, or to act at all, in
contemplation of law, as to be equivalent to having acted without jurisdiction. 73 Herein,
Caterpillar did not show the grave abuse of discretion on the part of the Secretary of
Justice.

WHEREFORE, the Court GRANTS the petition for review in G.R. No. 164352; SETS

ASIDE the decision promulgated on January 21, 2004 in CA-G.R. SP No.
75526; DIRECTS the Regional Trial Court in Muntinlupa City to reinstate Criminal Cases
Nos. Q-02-108043-44 and forthwith try and decide them without undue delay; DENIES the
petition for review on certiorari in G.R. No. 205972; and ORDERS respondent Manolo P.
Samson to pay the costs of suit.