1

Lopez v. Pan American World Airways

Facts:

Reservations for first class accommodations in Flight No. 2 of Pan American World Airways —
hereinafter otherwise called PAN-AM — from Tokyo to San Francisco on May 24, 1960 were made
with PAN-AM on March 29, 1960, by "Your Travel Guide" agency, specifically, by Delfin Faustino, for
then Senator Fernando Lopez, his wife Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and
his daughter, Mrs. Alfredo Montelibano, Jr., (Milagros Lopez Montelibano). PAN-AM's San Francisco
head office confirmed the reservations on March 31, 1960.

First class tickets for the abovementioned flight were subsequently issued by
PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total fare of P9,444
for all of them was fully paid before the tickets were issued.

As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24, 1960, arriving in
Tokyo at 5:30 P.M. of that day. As soon as they arrived Senator Lopez requested Minister Busuego
of the Philippine Embassy to contact PAN-AM's Tokyo office regarding their first class
accommodations for that evening's flight. For the given reason that the first class seats therein were
all booked up, however, PAN-AM's Tokyo office informed Minister Busuego that PAN-AM could not
accommodate Senator Lopez and party in that trip as first class passengers. Senator Lopez
thereupon gave their first class tickets to Minister Busuego for him to show the same to PAN-AM's
Tokyo office, but the latter firmly reiterated that there was no accommodation for them in the first
class, stating that they could not go in that flight unless they took the tourist class therein.

Due to pressing engagements awaiting Senator Lopez and his wife, in the United States — he had
to attend a business conference in San Francisco the next day and she had to undergo a medical
check-up in Mayo Clinic, Rochester, Minnesota, on May 28, 1960 and needed three days rest before
that in San Francisco — Senator Lopez and party were constrained to take PAN-AM's flight from
Tokyo to San Francisco as tourist passengers. Senator Lopez however made it clear, as indicated in
his letter to PAN-AM's Tokyo office on that date (Exh. A), that they did so "under protest" and without
prejudice to further action against the airline.
1äwphï1

Issues:

(1) Whether the defendant acted in bad faith for deliberate refusal to comply with its
contract to provide first-class accommodation to the plaintiff

(2) Whether moral and exemplary damages should be awarded

Held:

(1) From the evidence of defendant it is in effect admitted that defendant - through its
agents - first cancelled plaintiffs, reservations by mistake and thereafter deliberately
and intentionally withheld from plaintiffs or their travel agent the fact of said
cancellation, letting them go on believing that their first class reservations stood valid
and confirmed. In so misleading plaintiffs into purchasing first class tickets in the
conviction that they had confirmed reservations for the same, when in fact they had
none, defendant wilfully and knowingly placed itself into the position of having to
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breach its a foresaid contracts with plaintiffs should there be no last-minute cancellation
by other passengers before flight time, as it turned out in this case.

Such actuation of defendant may indeed have been prompted by nothing more than the
promotion of its self-interest in holding on to Senator Lopez and party as passengers in
its flight and foreclosing on their chances to seek the services of other airlines that may
have been able to afford them first class accommodations. All the time, in legal
contemplation such conduct already amounts to action in bad faith.

For bad faith means a breach of a known duty through some motive of interest or ill-
will.

At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known
duty, made plaintiffs believe that their reservation had not been cancelled. Such willful-
non-disclosure of the cancellation or pretense that the reservations for plaintiffs stood -
and not simply the erroneous cancellation itself - is the factor to which is attributable
the breach of the resulting contracts. And, as above-stated, in this respect defendant
clearly acted in bad faith.

MORAL DAMAGES

(2) First, then, as to moral damages. As a proximate result of defendant's breach in bad
faith of its contracts with plaintiffs, the latter suffered

social humiliation,

wounded feelings,

serious anxiety and

mental anguish.

For plaintiffs were travelling with first class tickets issued by defendant and yet they
were given only the tourist class. At stop-overs, they were expected to be among the
first-class passengers by those awaiting to welcome them, only to be found among the
tourist passengers. It may not be humiliating to travel as tourist passengers; it is
humiliating to be compelled to travel as such, contrary to what is rightfully to be
expected from the contractual undertaking.

The rationale behind exemplary or corrective damages is, as the name implies, to
provide an example or correction for public good. Defendant having breached its
contracts in bad faith, the court, as stated earlier, may award exemplary damages in
addition to moral damages. In view of its nature, it should be imposed in such an
amount as to sufficiently and effectively deter similar breach of contracts in the future
by defendant or other airlines. In this light, we find it just to award P75,000.00 as
exemplary or corrective damages.
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G.R. No. L-22415 March 30, 1966

FERNANDO LOPEZ, ET AL., plaintiffs-appellants,

vs.
PAN AMERICAN WORLD AIRWAYS, defendant-appellant.

Ross, Selph and Carrascoso for the defendant-appellant.

Vicente J. Francisco for the plaintiffs-appellants.

BENGZON, J.P., J.:

Plaintiffs and defendant appeal from a decision of the Court of First Instance of Rizal. Since the
value in controversy exceeds P200,000 the appeals were taken directly to this Court upon all
questions involved (Sec. 17, par. 3[5], Judiciary Act).

Stated briefly the facts not in dispute are as follows: Reservations for first class accommodations in
Flight No. 2 of Pan American World Airways — hereinafter otherwise called PAN-AM — from Tokyo
to San Francisco on May 24, 1960 were made with
PAN-AM on March 29, 1960, by "Your Travel Guide" agency, specifically, by Delfin Faustino, for
then Senator Fernando Lopez, his wife Maria J. Lopez, his son-in-law Alfredo Montelibano, Jr., and
his daughter, Mrs. Alfredo Montelibano, Jr., (Milagros Lopez Montelibano). PAN-AM's San Francisco
head office confirmed the reservations on March 31, 1960.

First class tickets for the abovementioned flight were subsequently issued by
PAN-AM on May 21 and 23, 1960, in favor of Senator Lopez and his party. The total fare of P9,444
for all of them was fully paid before the tickets were issued.

As scheduled Senator Lopez and party left Manila by Northwest Airlines on May 24, 1960, arriving in
Tokyo at 5:30 P.M. of that day. As soon as they arrived Senator Lopez requested Minister Busuego
of the Philippine Embassy to contact PAN-AM's Tokyo office regarding their first class
accommodations for that evening's flight. For the given reason that the first class seats therein were
all booked up, however, PAN-AM's Tokyo office informed Minister Busuego that PAN-AM could not
accommodate Senator Lopez and party in that trip as first class passengers. Senator Lopez
thereupon gave their first class tickets to Minister Busuego for him to show the same to PAN-AM's
Tokyo office, but the latter firmly reiterated that there was no accommodation for them in the first
class, stating that they could not go in that flight unless they took the tourist class therein.

Due to pressing engagements awaiting Senator Lopez and his wife, in the United States — he had
to attend a business conference in San Francisco the next day and she had to undergo a medical
check-up in Mayo Clinic, Rochester, Minnesota, on May 28, 1960 and needed three days rest before
that in San Francisco — Senator Lopez and party were constrained to take PAN-AM's flight from
Tokyo to San Francisco as tourist passengers. Senator Lopez however made it clear, as indicated in
his letter to PAN-AM's Tokyo office on that date (Exh. A), that they did so "under protest" and without
prejudice to further action against the airline.
1äwphï1.ñët

Suit for damages was thereafter filed by Senator Lopez and party against PAN-AM on June 2, 1960
in the Court of First Instance of Rizal. Alleging breach of contracts in bad faith by defendant, plaintiffs
asked for P500,000 actual and moral damages, P100,000 exemplary damages, P25,000 attorney's
fees plus costs. PAN-AM filed its answer on June 22, 1960, asserting that its failure to provide first
class accommodations to plaintiffs was due to honest error of its employees. It also interposed a
counterclaim for attorney's fees of P25,000.
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Subsequently, further pleadings were filed, thus: plaintiffs' answer to the counterclaim, on July 25,
1960; plaintiffs' reply attached to motion for its admittance, on December 2, 1961; defendant's
supplemental answer, on March 8, 1962; plaintiffs' reply to supplemental answer, on March 10,
1962; and defendant's amended supplemental answer, on July 10, 1962.

After trial — which took twenty-two (22) days ranging from November 25, 1960 to January 5, 1963
— the Court of First Instance rendered its decision on November 13, 1963, the dispositive portion
stating:

In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs
and against the defendant, which is accordingly ordered to pay the plaintiffs the following: (a)
P100,000.00 as moral damages; (b) P20,000.00 as exemplary damages; (c) P25,000.00 as
attorney's fees, and the costs of this action.

So ordered.

Plaintiffs, however, on November 21, 1963, moved for reconsideration of said judgment, asking that
moral damages be increased to P400,000 and that six per cent (6%) interest per annum on the
amount of the award be granted. And defendant opposed the same. Acting thereon the trial court
issued an order on December 14, 1963, reconsidering the dispositive part of its decision to read as
follows:

In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs
and against the defendant, which is accordingly ordered to pay the plaintiffs the following: (a)
P150,000.00 as moral damages; (b) P25,000.00 as exemplary damages; with legal interest
on both from the date of the filing of the complaint until paid; and (c) P25,000.00 as
attorney's fees; and the costs of this action.

So ordered.

It is from said judgment, as thus reconsidered, that both parties have appealed.

Defendant, as stated, has from the start admitted that it breached its contracts with plaintiffs to
provide them with first class accommodations in its Tokyo-San Francisco flight of May 24, 1960. In
its appeal, however, it takes issue with the finding of the court a quo that it acted in bad faith in the
branch of said contracts. Plaintiffs, on the other hand, raise questions on the amount of damages
awarded in their favor, seeking that the same be increased to a total of P650,000.

Anent the issue of bad faith the records show the respective contentions of the parties as follows.

According to plaintiffs, defendant acted in bad faith because it deliberately refused to comply with its
contract to provide first class accommodations to plaintiffs, out of racial prejudice against Orientals.
And in support of its contention that what was done to plaintiffs is an oftrepeated practice of
defendant, evidence was adduced relating to two previous instances of alleged racial discrimination
by defendant against Filipinos in favor of "white" passengers. Said previous occasions are what
allegedly happened to (1) Benito Jalbuena and (2) Cenon S. Cervantes and his wife.

And from plaintiffs' evidence this is what allegedly happened; Jalbuena bought a first class ticket
from PAN-AM on April 13, 1960; he confirmed it on April 15, 1960 as to the Tokyo-Hongkong flight of
April 20, 1960; PAN-AM similarly confirmed it on April 20, 1960. At the airport he and another
Oriental — Mr. Tung — were asked to step aside while other passengers - including "white"
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passengers — boarded PAN-AM's plane. Then PAN-AM officials told them that one of them had to
stay behind. Since Mr. Tung was going all the way to London, Jalbuena was chosen to be left
behind. PAN-AM's officials could only explain by saying there was "some mistake". Jalbuena
thereafter wrote PAN-AM to protest the incident (Exh. B).

As to Cenon S. Cervantes it would appear that in Flight No. 6 of PAN-AM on September 29, 1958
from Bangkok to Hongkong, he and his wife had to take tourist class, although they had first class
tickets, which they had previously confirmed, because their seats in first class were given to
"passengers from London."

Against the foregoing, however, defendant's evidence would seek to establish its theory of honest
mistake, thus:

The first class reservations of Senator Lopez and party were made on March 29, 1960 together with
those of four members of the Rufino family, for a total of eight (8) seats, as shown in their joint
reservation card (Exh. 1). Subsequently on March 30, 1960, two other Rufinos secured reservations
and were given a separate reservation card (Exh. 2). A new reservation card consisting of two pages
(Exhs. 3 and 4) was then made for the original of eight passengers, namely, Senator Lopez and
party and four members of the Rufino family, the first page (Exh. 3) referring to 2 Lopezes, 2
Montelibanos and 1 Rufino and the second page (Exh. 4) referring to 3 Rufinos. On April 18, 1960
"Your Travel Guide" agency cancelled the reservations of the Rufinos. A telex message was
thereupon sent on that date to PAN-AM's head office at San Francisco by Mariano Herranz, PAN-
AM's reservations employee at its office in Escolta, Manila. (Annex A-Acker's to Exh. 6.) In said
message, however, Herranz mistakenly cancelled all the seats that had been reserved, that is,
including those of Senator Lopez and party.

The next day — April 1960 — Herranz discovered his mistake, upon seeing the reservation card
newly prepared by his co-employee Pedro Asensi for Sen. Lopez and party to the exclusion of the
Rufinos (Exh. 5). It was then that Herranz sent another telex wire to the San Francisco head office,
stating his error and asking for the reinstatement of the four (4) first class seats reserved for Senator
Lopez and party (Annex A-Velasco's to Exh. 6). San Francisco head office replied on April 22, 1960
that Senator Lopez and party are waitlisted and that said office is unable to reinstate them (Annex B-
Velasco's to Exh. 6).

Since the flight involved was still more than a month away and confident that reinstatement would be
made, Herranz forgot the matter and told no one about it except his co-employee, either Armando
Davila or Pedro Asensi or both of them (Tsn., 123-124, 127, Nov. 17, 1961).

Subsequently, on April 27, 1960, Armando Davila, PAN-AM's reservations employee working in the
same Escolta office as Herranz, phoned PAN-AM's ticket sellers at its other office in the Manila
Hotel, and confirmed the reservations of Senator Lopez and party.

PAN-AM's reservations supervisor Alberto Jose, discovered Herranz's mistake after "Your Travel
Guide" phone on May 18, 1960 to state that Senator Lopez and party were going to depart as
scheduled. Accordingly, Jose sent a telex wire on that date to PAN-AM's head office at San
Francisco to report the error and asked said office to continue holding the reservations of Senator
Lopez and party (Annex B-Acker's to Exh. 6). Said message was reiterated by Jose in his telex wire
of May 19, 1960 (Annex C-Acker's to Exh. 6). San Francisco head office replied on May 19, 1960
that it regrets being unable to confirm Senator Lopez and party for the reason that the flight was
solidly booked (Exh. 7). Jose sent a third telex wire on May 20, 1960 addressed to PAN-AM's offices
at San Francisco, New York (Idlewild Airport), Tokyo and Hongkong, asking all-out assistance
towards restoring the cancelled spaces and for report of cancellations at their end (Annex D-Acker's
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to Exh. 6). San Francisco head office reiterated on May 20, 1960 that it could not reinstate the
spaces and referred Jose to the Tokyo and Hongkong offices (Exh. 8). Also on May 20, the Tokyo
office of PAN-AM wired Jose stating it will do everything possible (Exh. 9).

Expecting that some cancellations of bookings would be made before the flight time, Jose decided to
withhold from Senator Lopez and party, or their agent, the information that their reservations had
been cancelled.

Armando Davila having previously confirmed Senator Lopez and party's first class reservations to
PAN-AM's ticket sellers at its Manila Hotel office, the latter sold and issued in their favor the
corresponding first class tickets on the 21st and 23rd of May, 1960.

From the foregoing evidence of defendant it is in effect admitted that defendant — through its agents
— first cancelled plaintiffs, reservations by mistake and thereafter deliberately and
intentionally withheld from plaintiffs or their travel agent the fact of said cancellation, letting them go
on believing that their first class reservations stood valid and confirmed. In so misleading plaintiffs
into purchasing first class tickets in the conviction that they had confirmed reservations for the same,
when in fact they had none, defendant wilfully and knowingly placed itself into the position of having
to breach its a foresaid contracts with plaintiffs should there be no last-minute cancellation by other
passengers before flight time, as it turned out in this case. Such actuation of defendant may indeed
have been prompted by nothing more than the promotion of its self-interest in holding on to Senator
Lopez and party as passengers in its flight and foreclosing on their chances to seek the services of
other airlines that may have been able to afford them first class accommodations. All the time, in
legal contemplation such conduct already amounts to action in bad faith. For bad faith means a
breach of a known duty through some motive of interest or ill-will (Spiegel vs. Beacon Participations,
8 NE 2d 895, 907). As stated in Kamm v. Flink, 113 N.J.L. 582, 175 A. 62, 99 A.L.R. 1, 7: "Self-
enrichment or fraternal interest, and not personal ill-will, may well have been the motive; but it is
malice nevertheless."

As of May 18, 1960 defendant's reservations supervisor, Alberto Jose knew that plaintiffs'
reservations had been cancelled. As of May 20 he knew that the San Francisco head office stated
with finality that it could not reinstate plaintiffs' cancelled reservations. And yet said reservations
supervisor made the "decision" — to use his own, word — to withhold the information from the
plaintiffs. Said Alberto Jose in his testimony:

Q Why did you not notify them?

A Well, you see, sir, in my fifteen (15) years of service with the air lines business my
experience is that even if the flights are solidly booked months in advance, usually the flight
departs with plenty of empty seats both on the first class and tourist class. This is due to late
cancellation of passengers, or because passengers do not show up in the airport, and it was
our hope others come in from another flight and, therefore, are delayed and, therefore,
missed their connections. This experience of mine, coupled with that wire from Tokyo that
they would do everything possible prompted me to withhold the information, but
unfortunately, instead of the first class seat that I was hoping for and which I anticipated only
the tourists class was open on which Senator and Mrs. Lopez, Mr. and Mrs. Montelibano
were accommodated. Well, I fully realize now the gravity of my decision in not advising
Senator and Mrs. Lopez, Mr. and Mrs. Montelibano nor their agents about the erroneous
cancellation and for which I would like them to know that I am very sorry.

xxx xxx xxx

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Q So it was not your duty to notify Sen. Lopez and parties that their reservations had been
cancelled since May 18, 1960?

A As I said before it was my duty. It was my duty but as I said again with respect to that duty
I have the power to make a decision or use my discretion and judgment whether I should go
ahead and tell the passenger about the cancellation. (Tsn., pp. 17-19, 28-29, March 15,
1962.)

At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made
plaintiffs believe that their reservation had not been cancelled. An additional indication of this is the
fact that upon the face of the two tickets of record, namely, the ticket issued to Alfredo Montelibano,
Jr. on May 21, 1960 (Exh. 22) and that issued to Mrs. Alfredo Montelibano, Jr., on May 23, 1960
(Exh. 23), the reservation status is stated as "OK". Such willful-non-disclosure of the cancellation or
pretense that the reservations for plaintiffs stood — and not simply the erroneous cancellation itself
— is the factor to which is attributable the breach of the resulting contracts. And, as above-stated, in
this respect defendant clearly acted in bad faith.

As if to further emphasize its bad faith on the matter, defendant subsequently promoted the
employee who cancelled plaintiffs' reservations and told them nothing about it. The record shows
that said employee — Mariano Herranz — was not subjected to investigation and suspension by
defendant but instead was given a reward in the form of an increase of salary in June of the
following year (Tsn., 86-88, Nov. 20, 1961).

At any rate, granting all the mistakes advanced by the defendant, there would at least be negligence
so gross and reckless as to amount to malice or bad faith (Fores vs. Miranda, L-12163, March 4,
1959; Necesito v. Paras, L-10605-06, June 30, 1958). Firstly, notwithstanding the entries in the
reservation cards (Exhs. 1 & 3) that the reservations cancelled are those of the Rufinos only,
Herranz made the mistake, after reading said entries, of sending a wire cancelling all the
reservations, including those of Senator Lopez and party (Tsn., pp. 108-109, Nov. 17, 1961).
Secondly, after sending a wire to San Francisco head office on April 19, 1960 stating his error and
asking for reinstatement, Herranz simply forgot about the matter. Notwithstanding the reply of San
Francisco head Office on April 22, 1960 that it cannot reinstate Senator Lopez and party (Annex B-
Velasco's to Exh. 6), it was assumed and taken for granted that reinstatement would be made.
Thirdly, Armando Davila confirmed plaintiff's reservations in a phone call on April 27, 1960 to
defendant's ticket sellers, when at the time it appeared in plaintiffs' reservation card (Exh. 5) that
they were only waitlisted passengers. Fourthly, defendant's ticket sellers issued plaintiffs' tickets on
May 21 and 23, 1960, without first checking their reservations just before issuing said tickets. And,
finally, no one among defendant's agents notified Senator Lopez and party that their reservations
had been cancelled, a precaution that could have averted their entering with defendant into contracts
that the latter had already placed beyond its power to perform.

Accordingly, there being a clear admission in defendant's evidence of facts amounting to a bad faith
on its part in regard to the breach of its contracts with plaintiffs, it becomes unnecessary to further
discuss the evidence adduced by plaintiffs to establish defendant's bad faith. For what is admitted in
the course of the trial does not need to be proved (Sec. 2, Rule 129, Rules of Court).

Addressing ourselves now to the question of damages, it is well to state at the outset those rules and
principles. First, moral damages are recoverable in breach of contracts where the defendant acted
fraudulently or in bad faith (Art. 2220, New Civil Code). Second, in addition to moral damages,
exemplary or corrective damages may be imposed by way of example or correction for the public
good, in breach of contract where the defendant acted in a wanton, fraudulent, reckless, oppressive
or malevolent manner (Articles 2229, 2232, New Civil Code). And, third, a written contract for an
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attorney's services shall control the amount to be paid therefor unless found by the court to be
unconscionable or unreasonable (Sec. 24, Rule 138, Rules of Court).

First, then, as to moral damages. As a proximate result of defendant's breach in bad faith of its
contracts with plaintiffs, the latter suffered social humiliation, wounded feelings, serious anxiety and
mental anguish. For plaintiffs were travelling with first class tickets issued by defendant and yet they
were given only the tourist class. At stop-overs, they were expected to be among the first-class
passengers by those awaiting to welcome them, only to be found among the tourist passengers. It
may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as
such, contrary to what is rightfully to be expected from the contractual undertaking.

Senator Lopez was then Senate President Pro Tempore. International carriers like defendant know
the prestige of such an office. For the Senate is not only the Upper Chamber of the Philippine
Congress, but the nation's treaty-ratifying body. It may also be mentioned that in his aforesaid office
Senator Lopez was in a position to preside in impeachment cases should the Senate sit as
Impeachment Tribunal. And he was former Vice-President of the Philippines. Senator Lopez was
going to the United States to attend a private business conference of the Binalbagan-Isabela Sugar
Company; but his aforesaid rank and position were by no means left behind, and in fact he had a
second engagement awaiting him in the United States: a banquet tendered by Filipino friends in his
honor as Senate President Pro Tempore (Tsn., pp. 14-15, Nov. 25, 1960). For the moral damages
sustained by him, therefore, an award of P100,000.00 is appropriate.

Mrs. Maria J. Lopez, as wife of Senator Lopez, shared his prestige and therefore his humiliation. In
addition she suffered physical discomfort during the 13-hour trip,(5 hours from Tokyo to Honolulu
and 8 hours from Honolulu to San Francisco). Although Senator Lopez stated that "she was quite
well" (Tsn., p. 22, Nov. 25, 1960) — he obviously meant relatively well, since the rest of his
statement is that two months before, she was attackedby severe flu and lost 10 pounds of weight
and that she was advised by Dr. Sison to go to the United States as soon as possible for medical
check-up and relaxation, (Ibid). In fact, Senator Lopez stated, as shown a few pages after in the
transcript of his testimony, that Mrs. Lopez was sick when she left the Philippines:

A. Well, my wife really felt very bad during the entire trip from Tokyo to San Francisco. In the
first place, she was sick when we left the Philippines, and then with that discomfort which
she [experienced] or suffered during that evening, it was her worst experience. I myself, who
was not sick, could not sleep because of the discomfort. (Tsn., pp. 27-28, Nov. 25, 1960).

It is not hard to see that in her condition then a physical discomfort sustained for thirteen hours may
well be considered a physical suffering. And even without regard to the noise and trepidation inside
the plane — which defendant contends, upon the strengh of expert testimony, to be practically the
same in first class and tourist class — the fact that the seating spaces in the tourist class are quite
narrower than in first class, there beingsix seats to a row in the former as against four to a row in the
latter, and that in tourist class there is very little space for reclining in view of the closer distance
between rows (Tsn., p. 24, Nov. 25, 1960), will suffice to show that the aforesaid passenger indeed
experienced physical suffering during the trip. Added to this, of course, was the painfull thought that
she was deprived by defendant — after having paid for and expected the same — of the most
suitable, place for her, the first class, where evidently the best of everything would have been given
her, the best seat, service, food and treatment. Such difference in comfort between first class and
tourist class is too obvious to be recounted, is in fact the reason for the former's existence, and is
recognized by the airline in charging a higher fare for it and by the passengers in paying said higher
rate Accordingly, considering the totality of her suffering and humiliation, an award to Mrs. Maria J.
Lopez of P50,000.00 for moral damages will be reasonable.
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Mr. and Mrs. Alfredo Montelibano, Jr., were travelling as immediate members of the family of
Senator Lopez. They formed part of the Senator's party as shown also by the reservation cards of
PAN-AM. As such they likewise shared his prestige and humiliation. Although defendant contends
that a few weeks before the flight they had asked their reservations to be charged from first class to
tourist class — which did not materialize due to alleged full booking in the tourist class — the same
does not mean they suffered no shared in having to take tourist class during the flight. For by that
time they had already been made to pay for first class seats and therefore to expect first class
accommodations. As stated, it is one thing to take the tourist class by free choice; a far different
thing to be compelled to take it notwithstanding having paid for first class seats. Plaintiffs-appellants
now ask P37,500.00 each for the two but we note that in their motion for reconsideration filed in the
court a quo, they were satisfied with P25,000.00 each for said persons. (Record on Appeal, p. 102).
For their social humiliation, therefore, the award to them of P25,000.00 each is reasonable.

The rationale behind exemplary or corrective damages is, as the name implies, to provide an
example or correction for public good. Defendant having breached its contracts in bad faith, the
court, as stated earlier, may award exemplary damages in addition to moral damages (Articles 2229,
2232, New Civil Code).

In view of its nature, it should be imposed in such an amount as to sufficiently and effectively deter
similar breach of contracts in the future by defendant or other airlines. In this light, we find it just to
award P75,000.00 as exemplary or corrective damages.

Now, as to attorney's fees, the record shows a written contract of services executed on June 1, 1960
(Exh. F) whereunder plaintiffs-appellants engaged the services of their counsel — Atty. Vicente J.
Francisco — and agreedto pay the sum of P25,000.00 as attorney's fees upon the termination of the
case in the Court of First Instance, and an additional sum of P25,000.00 in the event the case is
appealed to the Supreme Court. As said earlier, a written contract for attorney's services shall
control the amount to be paid therefor unless found by the court to be unconscionable or
unreasonable. A consideration of the subject matter of the present controversy, of the professional
standing of the attorney for plaintiffs-appellants, and of the extent of the service rendered by him,
shows that said amount provided for in the written agreement is reasonable. Said lawyer — whose
prominence in the legal profession is well known — studied the case, prepared and filed the
complaint, conferred with witnesses, analyzed documentary evidence, personally appeared at the
trial of the case in twenty-two days, during a period of three years, prepared four sets of cross-
interrogatories for deposition taking, prepared several memoranda and the motion for
reconsideration, filed a joint record on appeal with defendant, filed a brief for plaintiffs as appellants
consisting of 45 printed pages and a brief for plaintiffs as appellees consisting of 265 printed pages.
And we are further convinced of its reasonableness because defendant's counsel likewise valued at
P50,000.00 the proper compensation for his services rendered to defendant in the trial court and on
appealIn concluding, let it be stressed that the amount of damages awarded in this appeal has been
determined by adequately considering the official, political, social, and financial standing of the
offended parties on one hand, and the business and financial position of the offender on the other
(Domingding v. Ng, 55 O.G. 10). And further considering the present rate of exchange and the terms
at which the amount of damages awarded would approximately be in U.S. dollars, this Court is all
the more of the view that said award is proper and reasonable.Wherefore, the judgment appealed
from is hereby modified so as to award in favor of plaintiffs and against defendant, the following: (1)
P200,000.00 as moral damages, divided among plaintiffs, thus: P100,000.00 for Senate
President Pro Tempore Fernando Lopez; P50,000.00 for his wife Maria J. Lopez; P25,000.00 for his
son-in-law Alfredo Montelibano, Jr.; and P25,000.00 for his daughter Mrs. Alfredo Montelibano, Jr.;
(2) P75,000.00 as exemplary or corrective damages; (3) interest at the legal rate of 6% per annum
on the moral and exemplary damages aforestated, from December 14, 1963, the date of the
amended decision of the court a quo, until said damages are fully paid; (4) P50,000.00 as attorney's
fees; and (5) the costs. Counterclaim dismissed.So ordered.
 10

301 SCRA 572 – Business Organization – Corporation Law – Delegation of Corporate

Powers – Moral Damages
In 1992, ABS-CBN Broadcasting Corporation, through its vice president Charo Santos-
Concio, requested Viva Production, Inc. to allow ABS-CBN to air at least 14 films produced
by Viva. Pursuant to this request, a meeting was held between Viva’s representative
(Vicente Del Rosario) and ABS-CBN’s Eugenio Lopez (General Manager) and Santos-
Concio was held on April 2, 1992.
During the meeting Del Rosario proposed a film package which will allow ABS-CBN to air
104 Viva films for P60 million. Later, Santos-Concio, in a letter to Del Rosario, proposed a
counterproposal of 53 films (including the 14 films initially requested) for P35 million. Del
Rosario presented the counter offer to Viva’s Board of Directors but the Board rejected the
counter offer. Several negotiations were subsequently made but on April 29, 1992, Viva
made an agreement with Republic Broadcasting Corporation (referred to as RBS – or GMA
7) which gave exclusive rights to RBS to air 104 Viva films including the 14 films initially
requested by ABS-CBN.
ABS-CBN now filed a complaint for specific performance against Viva as it alleged that
there is already a perfected contract between Viva and ABS-CBN in the April 2, 1992
meeting. Lopez testified that Del Rosario agreed to the counterproposal and he (Lopez)
even put the agreement in a napkin which was signed and given to Del Rosario. ABS-CBN
also filed an injunction against RBS to enjoin the latter from airing the films. The injunction
was granted. RBS now filed a countersuit with a prayer for moral damages as it claimed that
its reputation was debased when they failed to air the shows that they promised to their
viewers. RBS relied on the ruling in People vs Manero and Mambulao Lumber vs PNB
which states that a corporation may recover moral damages if it “has a good reputation that
is debased, resulting in social humiliation”. The trial court ruled in favor of Viva and RBS.
The Court of Appeals affirmed the trial court.
ISSUE:
1. Whether or not a contract was perfected in the April 2, 1992 meeting between the
representatives of the two corporations.
2. Whether or not a corporation, like RBS, is entitled to an award of moral damages
upon grounds of debased reputation.
HELD:
1. No. There is no proof that a contract was perfected in the said meeting. Lopez’ testimony
about the contract being written in a napkin is not corroborated because the napkin was
never produced in court. Further, there is no meeting of the minds because Del Rosario’s
offer was of 104 films for P60 million was not accepted. And that the alleged counter-offer
made by Lopez on the same day was not also accepted because there’s no proof of such.
The counter offer can only be deemed to have been made days after the April 2 meeting
when Santos-Concio sent a letter to Del Rosario containing the counter-offer. Regardless,
there was no showing that Del Rosario accepted. But even if he did accept, such
acceptance will not bloom into a perfected contract because Del Rosario has no authority to
do so.
 11

As a rule, corporate powers, such as the power; to enter into contracts; are exercised by the
Board of Directors. But this power may be delegated to a corporate committee, a corporate
officer or corporate manager. Such a delegation must be clear and specific. In the case at
bar, there was no such delegation to Del Rosario. The fact that he has to present the
counteroffer to the Board of Directors of Viva is proof that the contract must be accepted
first by the Viva’s Board. Hence, even if Del Rosario accepted the counter-offer, it did not
result to a contract because it will not bind Viva sans authorization.
2. No. The award of moral damages cannot be granted in favor of a corporation because,
being an artificial person and having existence only in legal contemplation, it has no
feelings, no emotions, no senses, It cannot, therefore, experience physical suffering and
mental anguish, which call be experienced only by one having a nervous system. No moral
damages can be awarded to a juridical person. The statement in the case of People vs
Manero and Mambulao Lumber vs PNB is a mere obiter dictum hence it is not binding as a
jurisprudence.

G.R. No. 128690 January 21, 1999

ABS-CBN BROADCASTING CORPORATION, petitioner,
vs.
HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP, VIVA
PRODUCTION, INC., and VICENTE DEL ROSARIO, respondents.

DECISION
DAVIDE, JR., CJ.:
In this petition for review on certiorari, petitioner ABS-CBN Broadcasting Corp. (hereafter
ABS-CBN) seeks to reverse and set aside the decision 1 of 31 October 1996 and the
resolution 2 of 10 March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The former
affirmed with modification the decision 3 of 28 April 1993 of the Regional Trial Court (RTC)
of Quezon City, Branch 80, in Civil Case No. Q-92-12309. The latter denied the motion to
reconsider the decision of 31 October 1996.
The antecedents, as found by the RTC and adopted by the Court of Appeals, are as follows:
In 1990, ABS-CBN and Viva executed a Film Exhibition Agreement (Exh. “A”) whereby Viva
gave ABS-CBN an exclusive right to exhibit some Viva films. Sometime in December 1991,
in accordance with paragraph 2.4 [sic] of said agreement stating that —.
1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) Viva films for
TV telecast under such terms as may be agreed upon by the parties hereto, provided,
however, that such right shall be exercised by ABS-CBN from the actual offer in writing.
Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-president Charo
Santos-Concio, a list of three(3) film packages (36 title) from which ABS-CBN may exercise
its right of first refusal under the afore-said agreement (Exhs. “1” par, 2, “2,” “2-A” and “2-B”-
Viva). ABS-CBN, however through Mrs. Concio, “can tick off only ten (10) titles” (from the
list) “we can purchase” (Exh. “3” – Viva) and therefore did not accept said list (TSN, June 8,
 12

1992, pp. 9-10). The titles ticked off by Mrs. Concio are not the subject of the case at bar
except the film ”Maging Sino Ka Man.”
For further enlightenment, this rejection letter dated January 06, 1992 (Exh “3” – Viva) is
hereby quoted:
6 January 1992
Dear Vic,
This is not a very formal business letter I am writing to you as I would like to express my
difficulty in recommending the purchase of the three film packages you are offering ABS-
CBN.
From among the three packages I can only tick off 10 titles we can purchase. Please see
attached. I hope you will understand my position. Most of the action pictures in the list do
not have big action stars in the cast. They are not for primetime. In line with this I wish to
mention that I have not scheduled for telecast several action pictures in out very first
contract because of the cheap production value of these movies as well as the lack of big
action stars. As a film producer, I am sure you understand what I am trying to say as Viva
produces only big action pictures.
In fact, I would like to request two (2) additional runs for these movies as I can only
schedule them in our non-primetime slots. We have to cover the amount that was paid for
these movies because as you very well know that non-primetime advertising rates are very
low. These are the unaired titles in the first contract.
1. Kontra Persa [sic].
2. Raider Platoon.
3. Underground guerillas
4. Tiger Command
5. Boy de Sabog
6. Lady Commando
7. Batang Matadero
8. Rebelyon
I hope you will consider this request of mine.
The other dramatic films have been offered to us before and have been rejected because of
the ruling of MTRCB to have them aired at 9:00 p.m. due to their very adult themes.
As for the 10 titles I have chosen [sic] from the 3 packages please consider including all the
other Viva movies produced last year. I have quite an attractive offer to make.
Thanking you and with my warmest regards.
(Signed)
Charo Santos-Concio
On February 27, 1992, defendant Del Rosario approached ABS-CBN’s Ms. Concio, with a
list consisting of 52 original movie titles (i.e. not yet aired on television) including the 14
titles subject of the present case, as well as 104 re-runs (previously aired on television) from
 13

which ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to
ABS-CBN airing rights over this package of 52 originals and 52 re-runs for P60,000,000.00
of which P30,000,000.00 will be in cash and P30,000,000.00 worth of television spots (Exh.
“4” to “4-C” Viva; “9” -Viva).
On April 2, 1992, defendant Del Rosario and ABS-CBN general manager, Eugenio Lopez
III, met at the Tamarind Grill Restaurant in Quezon City to discuss the package proposal of
Viva. What transpired in that lunch meeting is the subject of conflicting versions. Mr. Lopez
testified that he and Mr. Del Rosario allegedly agreed that ABS-CBN was granted exclusive
film rights to fourteen (14) films for a total consideration of P36 million; that he allegedly put
this agreement as to the price and number of films in a “napkin” and signed it and gave it to
Mr. Del Rosario (Exh. D; TSN, pp. 24-26, 77-78, June 8, 1992). On the other hand, Del
Rosario denied having made any agreement with Lopez regarding the 14 Viva films; denied
the existence of a napkin in which Lopez wrote something; and insisted that what he and
Lopez discussed at the lunch meeting was Viva’s film package offer of 104 films (52
originals and 52 re-runs) for a total price of P60 million. Mr. Lopez promising [sic]to make a
counter proposal which came in the form of a proposal contract Annex “C” of the complaint
(Exh. “1”·- Viva; Exh. “C” – ABS-CBN).
On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president for
Finance discussed the terms and conditions of Viva’s offer to sell the 104 films, after the
rejection of the same package by ABS-CBN.
On April 07, 1992, defendant Del Rosario received through his secretary, a handwritten
note from Ms. Concio, (Exh. “5” – Viva), which reads: “Here’s the draft of the contract. I
hope you find everything in order,” to which was attached a draft exhibition agreement (Exh.
“C”- ABS-CBN; Exh. “9” – Viva, p. 3) a counter-proposal covering 53 films, 52 of which
came from the list sent by defendant Del Rosario and one film was added by Ms. Concio,
for a consideration of P35 million. Exhibit “C” provides that ABS-CBN is granted films right
to 53 films and contains a right of first refusal to “1992 Viva Films.” The said counter
proposal was however rejected by Viva’s Board of Directors [in the] evening of the same
day, April 7, 1992, as Viva would not sell anything less than the package of 104 films for
P60 million pesos (Exh. “9” – Viva), and such rejection was relayed to Ms. Concio.
On April 29, 1992, after the rejection of ABS-CBN and following several negotiations and
meetings defendant Del Rosario and Viva’s President Teresita Cruz, in consideration of P60
million, signed a letter of agreement dated April 24, 1992. granting RBS the exclusive right
to air 104 Viva-produced and/or acquired films (Exh. “7-A” – RBS; Exh. “4” – RBS) including
the fourteen (14) films subject of the present case. 4
On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance with
a prayer for a writ of preliminary injunction and/or temporary restraining order against
private respondents Republic Broadcasting Corporation 5 (hereafter RBS ), Viva Production
(hereafter VIVA), and Vicente Del Rosario. The complaint was docketed as Civil Case No.
Q-92-12309.
On 27 May 1992, RTC issued a temporary restraining order 6 enjoining private respondents
from proceeding with the airing, broadcasting, and televising of the fourteen VIVA films
subject of the controversy, starting with the film Maging Sino Ka Man, which was scheduled
to be shown on private respondents RBS’ channel 7 at seven o’clock in the evening of said
date.
 14

On 17 June 1992, after appropriate proceedings, the RTC issued an order 7 directing the
issuance of a writ of preliminary injunction upon ABS-CBN’s posting of P35 million bond.
ABS-CBN moved for the reduction of the bond, 8 while private respondents moved for
reconsideration of the order and offered to put up a counterbond. 9
In the meantime, private respondents filed separate answers with counterclaim. 10
RBS also
set up a cross-claim against VIVA.
On 3 August 1992, the RTC issued an order 11 dissolving the writ of preliminary injunction
upon the posting by RBS of a P30 million counterbond to answer for whatever damages
ABS-CBN might suffer by virtue of such dissolution. However, it reduced petitioner’s
injunction bond to P15 million as a condition precedent for the reinstatement of the writ of
preliminary injunction should private respondents be unable to post a counterbond.
At the pre-trial 12 on 6 August 1992, the parties, upon suggestion of the court, agreed to
explore the possibility of an amicable settlement. In the meantime, RBS prayed for and was
granted reasonable time within which to put up a P30 million counterbond in the event that
no settlement would be reached.
As the parties failed to enter into an amicable settlement RBS posted on 1 October 1992 a
counterbond, which the RTC approved in its Order of 15 October 1992. 13
On 19 October 1992, ABS-CBN filed a motion for reconsideration 14 of the 3 August and 15
October 1992 Orders, which RBS opposed. 15
On 29 October 1992, the RTC conducted a pre-trial. 16
Pending resolution of its motion for reconsideration, ABS-CBN filed with the Court of
Appeals a petition 17challenging the RTC’s Orders of 3 August and 15 October 1992 and
praying for the issuance of a writ of preliminary injunction to enjoin the RTC from enforcing
said orders. The case was docketed as CA-G.R. SP No. 29300.
On 3 November 1992, the Court of Appeals issued a temporary restraining order 18 to enjoin
the airing, broadcasting, and televising of any or all of the films involved in the controversy.
On 18 December 1992, the Court of Appeals promulgated a decision 19 dismissing the
petition in CA -G.R. No. 29300 for being premature. ABS-CBN challenged the dismissal in a
petition for review filed with this Court on 19 January 1993, which was docketed as G.R. No.
108363.
In the meantime the RTC received the evidence for the parties in Civil Case No. Q-192-
1209. Thereafter, on 28 April 1993, it rendered a decision 20 in favor of RBS and VIVA and
against ABS-CBN disposing as follows:
WHEREFORE, under cool reflection and prescinding from the foregoing, judgments is
rendered in favor of defendants and against the plaintiff.
(1) The complaint is hereby dismissed;
(2) Plaintiff ABS-CBN is ordered to pay defendant RBS the following:
a) P107,727.00, the amount of premium paid by RBS to the surety which issued defendant
RBS’s bond to lift the injunction;
b) P191,843.00 for the amount of print advertisement for “Maging Sino Ka Man” in various
newspapers;
 15

c) Attorney’s fees in the amount of P1 million;

d) P5 million as and by way of moral damages;
e) P5 million as and by way of exemplary damages;
(3) For defendant VIVA, plaintiff ABS-CBN is ordered to pay P212,000.00 by way of
reasonable attorney’s fees.
(4) The cross-claim of defendant RBS against defendant VIVA is dismissed.
(5) Plaintiff to pay the costs.
According to the RTC, there was no meeting of minds on the price and terms of the offer.
The alleged agreement between Lopez III and Del Rosario was subject to the approval of
the VIVA Board of Directors, and said agreement was disapproved during the meeting of
the Board on 7 April 1992. Hence, there was no basis for ABS-CBN’s demand that VIVA
signed the 1992 Film Exhibition Agreement. Furthermore, the right of first refusal under the
1990 Film Exhibition Agreement had previously been exercised per Ms. Concio’s letter to
Del Rosario ticking off ten titles acceptable to them, which would have made the 1992
agreement an entirely new contract.
On 21 June 1993, this Court denied 21 ABS-CBN’s petition for review in G.R. No. 108363, as
no reversible error was committed by the Court of Appeals in its challenged decision and
the case had “become moot and academic in view of the dismissal of the main action by the
court a quo in its decision” of 28 April 1993.
Aggrieved by the RTC’s decision, ABS-CBN appealed to the Court of Appeals claiming that
there was a perfected contract between ABS-CBN and VIVA granting ABS-CBN the
exclusive right to exhibit the subject films. Private respondents VIVA and Del Rosario also
appealed seeking moral and exemplary damages and additional attorney’s fees.
In its decision of 31 October 1996, the Court of Appeals agreed with the RTC that the
contract between ABS-CBN and VIVA had not been perfected, absent the approval by the
VIVA Board of Directors of whatever Del Rosario, it’s agent, might have agreed with Lopez
III. The appellate court did not even believe ABS-CBN’s evidence that Lopez III actually
wrote down such an agreement on a “napkin,” as the same was never produced in court. It
likewise rejected ABS-CBN’s insistence on its right of first refusal and ratiocinated as
follows:
As regards the matter of right of first refusal, it may be true that a Film Exhibition Agreement
was entered into between Appellant ABS-CBN and appellant VIVA under Exhibit “A” in
1990, and that parag. 1.4 thereof provides:
1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) VIVA films for
TV telecast under such terms as may be agreed upon by the parties hereto, provided,
however, that such right shall be exercised by ABS-CBN within a period of fifteen (15) days
from the actual offer in writing (Records, p. 14).
[H]owever, it is very clear that said right of first refusal in favor of ABS-CBN shall still be
subject to such terms as may be agreed upon by the parties thereto, and that the said right
shall be exercised by ABS-CBN within fifteen (15) days from the actual offer in writing.
Said parag. 1.4 of the agreement Exhibit “A” on the right of first refusal did not fix the price
of the film right to the twenty-four (24) films, nor did it specify the terms thereof. The same
are still left to be agreed upon by the parties.
 16

In the instant case, ABS-CBN’s letter of rejection Exhibit 3 (Records, p. 89) stated that it can
only tick off ten (10) films, and the draft contract Exhibit “C” accepted only fourteen (14)
films, while parag. 1.4 of Exhibit “A” speaks of the next twenty-four (24) films.
The offer of VIVA was sometime in December 1991 (Exhibits 2, 2-A. 2-B; Records, pp. 86-
88; Decision, p. 11, Records, p. 1150), when the first list of VIVA films was sent by Mr. Del
Rosario to ABS-CBN. The Vice President of ABS-CBN, Ms. Charo Santos-Concio, sent a
letter dated January 6, 1992 (Exhibit 3, Records, p. 89) where ABS-CBN exercised its right
of refusal by rejecting the offer of VIVA.. As aptly observed by the trial court, with the said
letter of Mrs. Concio of January 6, 1992, ABS-CBN had lost its right of first refusal. And
even if We reckon the fifteen (15) day period from February 27, 1992 (Exhibit 4 to 4-C)
when another list was sent to ABS-CBN after the letter of Mrs. Concio, still the fifteen (15)
day period within which ABS-CBN shall exercise its right of first refusal has already
expired. 22
Accordingly, respondent court sustained the award of actual damages consisting in the cost
of print advertisements and the premium payments for the counterbond, there being
adequate proof of the pecuniary loss which RBS had suffered as a result of the filing of the
complaint by ABS-CBN. As to the award of moral damages, the Court of Appeals found
reasonable basis therefor, holding that RBS’s reputation was debased by the filing of the
complaint in Civil Case No. Q-92-12309 and by the non-showing of the film “Maging Sino
Ka Man.” Respondent court also held that exemplary damages were correctly imposed by
way of example or correction for the public good in view of the filing of the complaint despite
petitioner’s knowledge that the contract with VIVA had not been perfected, It also upheld the
award of attorney’s fees, reasoning that with ABS-CBN’s act of instituting Civil Case No, Q-
92-1209, RBS was “unnecessarily forced to litigate.” The appellate court, however, reduced
the awards of moral damages to P2 million, exemplary damages to P2 million, and
attorney’s fees to P500, 000.00.
On the other hand, respondent Court of Appeals denied VIVA and Del Rosario’s appeal
because it was “RBS and not VIVA which was actually prejudiced when the complaint was
filed by ABS-CBN.”
Its motion for reconsideration having been denied, ABS-CBN filed the petition in this case,
contending that the Court of Appeals gravely erred in
I
. . . RULING THAT THERE WAS NO PERFECTED CONTRACT BETWEEN PETITIONER
AND PRIVATE RESPONDENT VIVA NOTWITHSTANDING PREPONDERANCE OF
EVIDENCE ADDUCED BY PETITIONER TO THE CONTRARY.
II
. . . IN AWARDING ACTUAL AND COMPENSATORY DAMAGES IN FAVOR OF PRIVATE
RESPONDENT RBS.
III
. . . IN AWARDING MORAL AND EXEMPLARY DAMAGES IN FAVOR OF PRIVATE
RESPONDENT RBS.
IV
. . . IN AWARDING ATTORNEY’S FEES IN FAVOR OF RBS.
 17

ABS-CBN claims that it had yet to fully exercise its right of first refusal over twenty-four titles
under the 1990 Film Exhibition Agreement, as it had chosen only ten titles from the first list.
It insists that we give credence to Lopez’s testimony that he and Del Rosario met at the
Tamarind Grill Restaurant, discussed the terms and conditions of the second list (the 1992
Film Exhibition Agreement) and upon agreement thereon, wrote the same on a paper
napkin. It also asserts that the contract has already been effective, as the elements thereof,
namely, consent, object, and consideration were established. It then concludes that the
Court of Appeals’ pronouncements were not supported by law and jurisprudence, as per our
decision of 1 December 1995 in Limketkai Sons Milling, Inc. v. Court of Appeals, 23 which
cited Toyota Shaw, Inc. v. Court of Appeals, 24 Ang Yu Asuncion v. Court of
Appeals, 25 and Villonco Realty Company v. Bormaheco. Inc. 26
Anent the actual damages awarded to RBS, ABS-CBN disavows liability therefor. RBS
spent for the premium on the counterbond of its own volition in order to negate the
injunction issued by the trial court after the parties had ventilated their respective positions
during the hearings for the purpose. The filing of the counterbond was an option available to
RBS, but it can hardly be argued that ABS-CBN compelled RBS to incur such expense.
Besides, RBS had another available option, i.e., move for the dissolution or the injunction;
or if it was determined to put up a counterbond, it could have presented a cash bond.
Furthermore under Article 2203 of the Civil Code, the party suffering loss or injury is also
required to exercise the diligence of a good father of a family to minimize the damages
resulting from the act or omission. As regards the cost of print advertisements, RBS had not
convincingly established that this was a loss attributable to the non showing “Maging Sino
Ka Man”; on the contrary, it was brought out during trial that with or without the case or the
injunction, RBS would have spent such an amount to generate interest in the film.
ABS-CBN further contends that there was no clear basis for the awards of moral and
exemplary damages. The controversy involving ABS-CBN and RBS did not in any way
originate from business transaction between them. The claims for such damages did not
arise from any contractual dealings or from specific acts committed by ABS-CBN against
RBS that may be characterized as wanton, fraudulent, or reckless; they arose by virtue only
of the filing of the complaint, An award of moral and exemplary damages is not warranted
where the record is bereft of any proof that a party acted maliciously or in bad faith in filing
an action. 27 In any case, free resort to courts for redress of wrongs is a matter of public
policy. The law recognizes the right of every one to sue for that which he honestly believes
to be his right without fear of standing trial for damages where by lack of sufficient evidence,
legal technicalities, or a different interpretation of the laws on the matter, the case would
lose ground. 28 One who makes use of his own legal right does no injury. 29 If damage results
front the filing of the complaint, it is damnum absque injuria. 30 Besides, moral damages are
generally not awarded in favor of a juridical person, unless it enjoys a good reputation that
was debased by the offending party resulting in social humiliation. 31
As regards the award of attorney’s fees, ABS-CBN maintains that the same had no factual,
legal, or equitable justification. In sustaining the trial court’s award, the Court of Appeals
acted in clear disregard of the doctrines laid down in Buan v. Camaganacan 32 that the text
of the decision should state the reason why attorney’s fees are being awarded; otherwise,
the award should be disallowed. Besides, no bad faith has been imputed on, much less
proved as having been committed by, ABS-CBN. It has been held that “where no sufficient
showing of bad faith would be reflected in a party’ s persistence in a case other than an
 18

erroneous conviction of the righteousness of his cause, attorney’s fees shall not be
recovered as cost.” 33
On the other hand, RBS asserts that there was no perfected contract between ABS-CBN
and VIVA absent any meeting of minds between them regarding the object and
consideration of the alleged contract. It affirms that the ABS-CBN’s claim of a right of first
refusal was correctly rejected by the trial court. RBS insist the premium it had paid for the
counterbond constituted a pecuniary loss upon which it may recover. It was obliged to put
up the counterbond due to the injunction procured by ABS-CBN. Since the trial court found
that ABS-CBN had no cause of action or valid claim against RBS and, therefore not entitled
to the writ of injunction, RBS could recover from ABS-CBN the premium paid on the
counterbond. Contrary to the claim of ABS-CBN, the cash bond would prove to be more
expensive, as the loss would be equivalent to the cost of money RBS would forego in case
the P30 million came from its funds or was borrowed from banks.
RBS likewise asserts that it was entitled to the cost of advertisements for the cancelled
showing of the film “Maging Sino Ka Man” because the print advertisements were put out to
announce the showing on a particular day and hour on Channel 7, i.e., in its entirety at one
time, not a series to be shown on a periodic basis. Hence, the print advertisement were
good and relevant for the particular date showing, and since the film could not be shown on
that particular date and hour because of the injunction, the expenses for the advertisements
had gone to waste.
As regards moral and exemplary damages, RBS asserts that ABS-CBN filed the case and
secured injunctions purely for the purpose of harassing and prejudicing RBS. Pursuant then
to Article 19 and 21 of the Civil Code, ABS-CBN must be held liable for such
damages. Citing Tolentino, 34 damages may be awarded in cases of abuse of rights even if
the act done is not illicit and there is abuse of rights were plaintiff institutes and action purely
for the purpose of harassing or prejudicing the defendant.
In support of its stand that a juridical entity can recover moral and exemplary damages,
private respondents RBS cited People v. Manero, 35 where it was stated that such entity
may recover moral and exemplary damages if it has a good reputation that is debased
resulting in social humiliation. it then ratiocinates; thus:
There can be no doubt that RBS’ reputation has been debased by ABS-CBN’s acts in this
case. When RBS was not able to fulfill its commitment to the viewing public to show the film
“Maging Sino Ka Man” on the scheduled dates and times (and on two occasions that RBS
advertised), it suffered serious embarrassment and social humiliation. When the showing
was canceled, late viewers called up RBS’ offices and subjected RBS to verbal abuse
(“Announce kayo nang announce, hindi ninyo naman ilalabas,” “nanloloko yata kayo”) (Exh.
3-RBS, par. 3). This alone was not something RBS brought upon itself. it was exactly what
ABS-CBN had planned to happen.
The amount of moral and exemplary damages cannot be said to be excessive. Two reasons
justify the amount of the award.
The first is that the humiliation suffered by RBS is national extent. RBS operations as a
broadcasting company is [sic] nationwide. Its clientele, like that of ABS-CBN, consists of
those who own and watch television. It is not an exaggeration to state, and it is a matter of
judicial notice that almost every other person in the country watches television. The
humiliation suffered by RBS is multiplied by the number of televiewers who had anticipated
 19

the showing of the film “Maging Sino Ka Man” on May 28 and November 3, 1992 but did not
see it owing to the cancellation. Added to this are the advertisers who had placed
commercial spots for the telecast and to whom RBS had a commitment in consideration of
the placement to show the film in the dates and times specified.
The second is that it is a competitor that caused RBS to suffer the humiliation. The
humiliation and injury are far greater in degree when caused by an entity whose ultimate
business objective is to lure customers (viewers in this case) away from the competition. 36
For their part, VIVA and Vicente del Rosario contend that the findings of fact of the trial
court and the Court of Appeals do not support ABS-CBN’s claim that there was a perfected
contract. Such factual findings can no longer be disturbed in this petition for review under
Rule 45, as only questions of law can be raised, not questions of fact. On the issue of
damages and attorneys fees, they adopted the arguments of RBS.
The key issues for our consideration are (1) whether there was a perfected contract
between VIVA and ABS-CBN, and (2) whether RBS is entitled to damages and attorney’s
fees. It may be noted that the award of attorney’s fees of P212,000 in favor of VIVA is not
assigned as another error.
I.
The first issue should be resolved against ABS-CBN. A contract is a meeting of minds
between two persons whereby one binds himself to give something or to render some
service to another 37 for a consideration. There is no contract unless the following requisites
concur: (1) consent of the contracting parties; (2) object certain which is the subject of the
contract; and (3) cause of the obligation, which is established. 38 A contract undergoes three
stages:
(a) preparation, conception, or generation, which is the period of negotiation and bargaining,
ending at the moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment when the parties come to agree
on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of the terms agreed upon
in the contract. 39
Contracts that are consensual in nature are perfected upon mere meeting of the minds,
Once there is concurrence between the offer and the acceptance upon the subject matter,
consideration, and terms of payment a contract is produced. The offer must be certain. To
convert the offer into a contract, the acceptance must be absolute and must not qualify the
terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any
sort from the proposal. A qualified acceptance, or one that involves a new proposal,
constitutes a counter-offer and is a rejection of the original offer. Consequently, when
something is desired which is not exactly what is proposed in the offer, such acceptance is
not sufficient to generate consent because any modification or variation from the terms of
the offer annuls the offer. 40
When Mr. Del Rosario of VIVA met with Mr. Lopez of ABS-CBN at the Tamarind Grill on 2
April 1992 to discuss the package of films, said package of 104 VIVA films was VIVA’s offer
to ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent, through
Ms. Concio, a counter-proposal in the form of a draft contract proposing exhibition of 53
films for a consideration of P35 million. This counter-proposal could be nothing less than the
 20

counter-offer of Mr. Lopez during his conference with Del Rosario at Tamarind Grill
Restaurant. Clearly, there was no acceptance of VIVA’s offer, for it was met by a counter-
offer which substantially varied the terms of the offer.
ABS-CBN’s reliance in Limketkai Sons Milling, Inc. v. Court of Appeals 41 and Villonco
Realty Company v. Bormaheco, Inc., 42 is misplaced. In these cases, it was held that an
acceptance may contain a request for certain changes in the terms of the offer and yet be a
binding acceptance as long as “it is clear that the meaning of the acceptance is positively
and unequivocally to accept the offer, whether such request is granted or not.” This ruling
was, however, reversed in the resolution of 29 March 1996, 43 which ruled that the
acceptance of all offer must be unqualified and absolute, i.e., it “must be identical in all
respects with that of the offer so as to produce consent or meeting of the minds.”
On the other hand, in Villonco, cited in Limketkai, the alleged changes in the revised
counter-offer were not material but merely clarificatory of what had previously been agreed
upon. It cited the statement in Stuart v.Franklin Life Insurance Co. 44 that “a vendor’s change
in a phrase of the offer to purchase, which change does not essentially change the terms of
the offer, does not amount to a rejection of the offer and the tender of a counter-
offer.” 45 However, when any of the elements of the contract is modified upon acceptance,
such alteration amounts to a counter-offer.
In the case at bar, ABS-CBN made no unqualified acceptance of VIVA’s offer. Hence, they
underwent a period of bargaining. ABS-CBN then formalized its counter-proposals or
counter-offer in a draft contract, VIVA through its Board of Directors, rejected such counter-
offer. Even if it be conceded arguendo that Del Rosario had accepted the counter-offer, the
acceptance did not bind VIVA, as there was no proof whatsoever that Del Rosario had the
specific authority to do so.
Under Corporation Code, 46 unless otherwise provided by said Code, corporate powers,
such as the power; to enter into contracts; are exercised by the Board of Directors.
However, the Board may delegate such powers to either an executive committee or officials
or contracted managers. The delegation, except for the executive committee, must be for
specific purposes, 47 Delegation to officers makes the latter agents of the corporation;
accordingly, the general rules of agency as to the bindings effects of their acts
would apply. 48 For such officers to be deemed fully clothed by the corporation to exercise a
power of the Board, the latter must specially authorize them to do so. That Del Rosario did
not have the authority to accept ABS-CBN’s counter-offer was best evidenced by his
submission of the draft contract to VIVA’s Board of Directors for the latter’s approval. In any
event, there was between Del Rosario and Lopez III no meeting of minds. The following
findings of the trial court are instructive:
A number of considerations militate against ABS-CBN’s claim that a contract was perfected
at that lunch meeting on April 02, 1992 at the Tamarind Grill.
FIRST, Mr. Lopez claimed that what was agreed upon at the Tamarind Grill referred to the
price and the number of films, which he wrote on a napkin. However, Exhibit “C”
contains numerous provisions which, were not discussed at the Tamarind Grill, if Lopez
testimony was to be believed nor could they have been physically written on a napkin.
There was even doubt as to whether it was a paper napkin or a cloth napkin. In short what
were written in Exhibit “C” were not discussed, and therefore could not have been agreed
upon, by the parties. How then could this court compel the parties to sign Exhibit “C” when
the provisions thereof were not previously agreed upon?
 21

SECOND, Mr. Lopez claimed that what was agreed upon as the subject matter of the
contract was 14 films. The complaint in fact prays for delivery of 14 films. But Exhibit “C”
mentions 53 films as its subject matter. Which is which If Exhibits “C” reflected the true
intent of the parties, then ABS-CBN’s claim for 14 films in its complaint is false or if what it
alleged in the complaint is true, then Exhibit “C” did not reflect what was agreed upon by the
parties. This underscores the fact that there was no meeting of the minds as to the subject
matter of the contracts, so as to preclude perfection thereof. For settled is the rule that there
can be no contract where there is no object which is its subject matter (Art. 1318, NCC).
THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit testimony (Exh. “D”) states:
We were able to reach an agreement. VIVA gave us the exclusive license to show these
fourteen (14) films, and we agreed to pay Viva the amount of P16,050,000.00 as well as
grant Viva commercial slots worth P19,950,000.00. We had already earmarked this
P16,050,000.00.
which gives a total consideration of P36 million (P19,950,000.00 plus P16,050,000.00.
equals P36,000,000.00).
On cross-examination Mr. Lopez testified:
Q. What was written in this napkin?
A. The total price, the breakdown the known Viva movies, the 7 blockbuster movies and the
other 7 Viva movies because the price was broken down accordingly. The none [sic] Viva
and the seven other Viva movies and the sharing between the cash portion and the
concerned spot portion in the total amount of P35 million pesos.
Now, which is which? P36 million or P35 million? This weakens ABS-CBN’s claim.
FOURTH. Mrs. Concio, testifying for ABS-CBN stated that she transmitted Exhibit “C” to Mr.
Del Rosario with a handwritten note, describing said Exhibit “C” as a “draft.” (Exh. “5” –
Viva; tsn pp. 23-24 June 08, 1992). The said draft has a well defined meaning.
Since Exhibit “C” is only a draft, or a tentative, provisional or preparatory writing prepared
for discussion, the terms and conditions thereof could not have been previously agreed
upon by ABS-CBN and Viva Exhibit “C” could not therefore legally bind Viva, not having
agreed thereto. In fact, Ms. Concio admitted that the terms and conditions embodied in
Exhibit “C” were prepared by ABS-CBN’s lawyers and there was no discussion on said
terms and conditions. . . .
As the parties had not yet discussed the proposed terms and conditions in Exhibit “C,” and
there was no evidence whatsoever that Viva agreed to the terms and conditions thereof,
said document cannot be a binding contract. The fact that Viva refused to sign Exhibit “C”
reveals only two [sic] well that it did not agree on its terms and conditions, and this court has
no authority to compel Viva to agree thereto.
FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del Rosario agreed upon at the
Tamarind Grill was only provisional, in the sense that it was subject to approval by the
Board of Directors of Viva. He testified:
Q. Now, Mr. Witness, and after that Tamarind meeting … the second meeting wherein you
claimed that you have the meeting of the minds between you and Mr. Vic del Rosario, what
happened?
 22

A. Vic Del Rosario was supposed to call us up and tell us specifically the result of the
discussion with the Board of Directors.
Q. And you are referring to the so-called agreement which you wrote in [sic] a piece of
paper?
A. Yes, sir.
Q. So, he was going to forward that to the board of Directors for approval?
A. Yes, sir. (Tsn, pp. 42-43, June 8, 1992)
Q. Did Mr. Del Rosario tell you that he will submit it to his Board for approval?
A. Yes, sir. (Tsn, p. 69, June 8, 1992).
The above testimony of Mr. Lopez shows beyond doubt that he knew Mr. Del Rosario had
no authority to bind Viva to a contract with ABS-CBN until and unless its Board of Directors
approved it. The complaint, in fact, alleges that Mr. Del Rosario “is the Executive Producer
of defendant Viva” which “is a corporation.” (par. 2, complaint). As a mere agent of Viva, Del
Rosario could not bind Viva unless what he did is ratified by its Board of Directors. (Vicente
vs. Geraldez, 52 SCRA 210; Arnold vs. Willets and Paterson, 44 Phil. 634). As a mere
agent, recognized as such by plaintiff, Del Rosario could not be held liable jointly and
severally with Viva and his inclusion as party defendant has no legal basis. (Salonga
vs. Warner Barner [sic] , COLTA , 88 Phil. 125; Salmon vs. Tan, 36 Phil. 556).
The testimony of Mr. Lopez and the allegations in the complaint are clear admissions that
what was supposed to have been agreed upon at the Tamarind Grill between Mr. Lopez
and Del Rosario was not a binding agreement. It is as it should be because corporate power
to enter into a contract is lodged in the Board of Directors. (Sec. 23, Corporation Code).
Without such board approval by the Viva board, whatever agreement Lopez and Del
Rosario arrived at could not ripen into a valid contract binding upon Viva (Yao Ka Sin
Trading vs. Court of Appeals, 209 SCRA 763). The evidence adduced shows that the Board
of Directors of Viva rejected Exhibit “C” and insisted that the film package for 140 films be
maintained (Exh. “7-1” – Viva ). 49
The contention that ABS-CBN had yet to fully exercise its right of first refusal over twenty-
four films under the 1990 Film Exhibition Agreement and that the meeting between Lopez
and Del Rosario was a continuation of said previous contract is untenable. As observed by
the trial court, ABS-CBN right of first refusal had already been exercised when Ms. Concio
wrote to VIVA ticking off ten films, Thus:
[T]he subsequent negotiation with ABS-CBN two (2) months after this letter was sent, was
for an entirely different package. Ms. Concio herself admitted on cross-examination to
having used or exercised the right of first refusal. She stated that the list was not acceptable
and was indeed not accepted by ABS-CBN, (TSN, June 8, 1992, pp. 8-10). Even Mr. Lopez
himself admitted that the right of the first refusal may have been already exercised by Ms.
Concio (as she had). (TSN, June 8, 1992, pp. 71-75). Del Rosario himself knew and
understand [sic] that ABS-CBN has lost its rights of the first refusal when his list of 36 titles
were rejected (Tsn, June 9, 1992, pp. 10-11) 50
II
However, we find for ABS-CBN on the issue of damages. We shall first take up actual
damages. Chapter 2, Title XVIII, Book IV of the Civil Code is the specific law on actual or
 23

compensatory damages. Except as provided by law or by stipulation, one is entitled to

compensation for actual damages only for such pecuniary loss suffered by him as he has
duly proved. 51 The indemnification shall comprehend not only the value of the loss suffered,
but also that of the profits that the obligee failed to obtain. 52 In contracts and quasi-contracts
the damages which may be awarded are dependent on whether the obligor acted with good
faith or otherwise, It case of good faith, the damages recoverable are those which are the
natural and probable consequences of the breach of the obligation and which the parties
have foreseen or could have reasonably foreseen at the time of the constitution of the
obligation. If the obligor acted with fraud, bad faith, malice, or wanton attitude, he shall be
responsible for all damages which may be reasonably attributed to the non-performance of
the obligation. 53 In crimes and quasi-delicts, the defendant shall be liable for all damages
which are the natural and probable consequences of the act or omission complained of,
whether or not such damages has been foreseen or could have reasonably been foreseen
by the defendant. 54
Actual damages may likewise be recovered for loss or impairment of earning capacity in
cases of temporary or permanent personal injury, or for injury to the plaintiff’s business
standing or commercial credit. 55
The claim of RBS for actual damages did not arise from contract, quasi-contract, delict, or
quasi-delict. It arose from the fact of filing of the complaint despite ABS-CBN’s alleged
knowledge of lack of cause of action. Thus paragraph 12 of RBS’s Answer with
Counterclaim and Cross-claim under the heading COUNTERCLAIM specifically alleges:
12. ABS-CBN filed the complaint knowing fully well that it has no cause of action RBS. As a
result thereof, RBS suffered actual damages in the amount of P6,621,195.32. 56
Needless to state the award of actual damages cannot be comprehended under the above
law on actual damages. RBS could only probably take refuge under Articles 19, 20, and 21
of the Civil Code, which read as follows:
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 tile same.
Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the latter for the damage.
It may further be observed that in cases where a writ of preliminary injunction is issued, the
damages which the defendant may suffer by reason of the writ are recoverable from the
injunctive bond. 57 In this case, ABS-CBN had not yet filed the required bond; as a matter of
fact, it asked for reduction of the bond and even went to the Court of Appeals to challenge
the order on the matter, Clearly then, it was not necessary for RBS to file a counterbond.
Hence, ABS-CBN cannot be held responsible for the premium RBS paid for the
counterbond.
Neither could ABS-CBN be liable for the print advertisements for “Maging Sino Ka Man” for
lack of sufficient legal basis. The RTC issued a temporary restraining order and later, a writ
of preliminary injunction on the basis of its determination that there existed sufficient ground
for the issuance thereof. Notably, the RTC did not dissolve the injunction on the ground of
 24

lack of legal and factual basis, but because of the plea of RBS that it be allowed to put up a
counterbond.
As regards attorney’s fees, the law is clear that in the absence of stipulation, attorney’s fees
may be recovered as actual or compensatory damages under any of the circumstances
provided for in Article 2208 of the Civil Code. 58
The general rule is that attorney’s fees cannot be recovered as part of damages because of
the policy that no premium should be placed on the right to litigate. 59 They are not to be
awarded every time a party wins a suit. The power of the court to award attorney’s fees
under Article 2208 demands factual, legal, and equitable justification. 60 Even when claimant
is compelled to litigate with third persons or to incur expenses to protect his rights, still
attorney’s fees may not be awarded where no sufficient showing of bad faith could be
reflected in a party’s persistence in a case other than erroneous conviction of the
righteousness of his cause. 61
As to moral damages the law is Section 1, Chapter 3, Title XVIII, Book IV of the Civil Code.
Article 2217 thereof defines what are included in moral damages, while Article 2219
enumerates the cases where they may be recovered, Article 2220 provides that moral
damages may be recovered in breaches of contract where the defendant acted fraudulently
or in bad faith. RBS’s claim for moral damages could possibly fall only under item (10) of
Article 2219, thereof which reads:
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
Moral damages are in the category of an award designed to compensate the claimant for
actual injury suffered. and not to impose a penalty on the wrongdoer. 62 The award is not
meant to enrich the complainant at the expense of the defendant, but to enable the injured
party to obtain means, diversion, or amusements that will serve to obviate then moral
suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of
the spiritual status quo ante, and should be proportionate to the suffering inflicted. 63 Trial
courts must then guard against the award of exorbitant damages; they should exercise
balanced restrained and measured objectivity to avoid suspicion that it was due to passion,
prejudice, or corruption on the part of the trial court. 64
The award of moral damages cannot be granted in favor of a corporation because, being an
artificial person and having existence only in legal contemplation, it has no feelings, no
emotions, no senses, It cannot, therefore, experience physical suffering and mental
anguish, which call be experienced only by one having a nervous system. 65 The statement
in People v. Manero 66 and Mambulao Lumber Co. v. PNB 67 that a corporation may recover
moral damages if it “has a good reputation that is debased, resulting in social humiliation” is
an obiter dictum. On this score alone the award for damages must be set aside, since RBS
is a corporation.
The basic law on exemplary damages is Section 5, Chapter 3, Title XVIII, Book IV of the
Civil Code. These are imposed by way of example or correction for the public good, in
addition to moral, temperate, liquidated or compensatory damages. 68 They are recoverable
in criminal cases as part of the civil liability when the crime was committed with one or more
aggravating circumstances; 69 in quasi-contracts, if the defendant acted with gross
negligence; 70 and in contracts and quasi-contracts, if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner. 71
 25

It may be reiterated that the claim of RBS against ABS-CBN is not based on contract, quasi-
contract, delict, or quasi-delict, Hence, the claims for moral and exemplary damages can
only be based on Articles 19, 20, and 21 of the Civil Code.
The elements of abuse of right under Article 19 are the following: (1) the existence of a legal
right or duty, (2) which is exercised in bad faith, and (3) for the sole intent of prejudicing or
injuring another. Article 20 speaks of the general sanction for all other provisions of law
which do not especially provide for their own sanction; while Article 21 deals with
acts contra bonus mores, and has the following elements; (1) there is an act which is legal,
(2) but which is contrary to morals, good custom, public order, or public policy, and (3) and it
is done with intent to injure.72
Verily then, malice or bad faith is at the core of Articles 19, 20, and 21. Malice or bad faith
implies a conscious and intentional design to do a wrongful act for a dishonest purpose or
moral obliquity. 73 Such must be substantiated by evidence. 74
There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It was
honestly convinced of the merits of its cause after it had undergone serious negotiations
culminating in its formal submission of a draft contract. Settled is the rule that the adverse
result of an action does not per se make the action wrongful and subject the actor to
damages, for the law could not have meant to impose a penalty on the right to litigate. If
damages result from a person’s exercise of a right, it is damnum absque injuria. 75
WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of
Appeals in CA-G.R. CV No, 44125 is hereby REVERSED except as to unappealed award of
attorney’s fees in favor of VIVA Productions, Inc.
No pronouncement as to costs.
SO ORDERED.
Filipinas Broadcasting vs. Ago Medical Center

GRN 141994 January 17, 2005

Carpio, J.:
 26

FACTS:

Rima & Alegre were host of Filipinas Broadcasting Network Inc. radio program “Expose”.

Respondent Ago was the owner of the Medical & Educational center, subject of the radio program
“Expose”. AMEC claimed that the broadcasts were defamatory and owner Ago and school AMEC claimed
for damages. The complaint further alleged that AMEC is a reputable learning institution. With the
supposed expose, FBNI, Rima and Alegre “transmitted malicious imputations and as such, destroyed
plaintiff’s reputation. FBNI was included as defendant for allegedly failing to exercise due diligence in
the selection and supervision of its employees. The trial court found Rima’s statements to be within the
bounds of freedom of speech and ruled that the broadcast was libelous. It ordered the defendants
Alegre and FBNI to pay AMEC 300k for moral damages.”

ISSUE:

Whether AMEC is entitled to moral damages

RULING:

FBNI contends that AMEC is not entitled to moral damages because it is a

corporation.[39]
A juridical person is generally not entitled to moral damages because,
unlike a natural person, it cannot experience physical suffering or such
sentiments as wounded feelings, serious anxiety, mental anguish or moral
shock.[40] The Court of Appeals cites Mambulao Lumber Co. v. PNB, et
al.[41] to justify the award of moral damages. However, the Courts statement
in Mambulao that a corporation may have a good reputation which, if
besmirched, may also be a ground for the award of moral damages is
an obiter dictum.[42]
Nevertheless, AMECs claim for moral damages falls under item 7 of
Article 2219[43] of the Civil Code. This provision expressly authorizes the
recovery of moral damages in cases of libel, slander or any other form of
defamation. Article 2219(7) does not qualify whether the plaintiff is a natural or
juridical person. Therefore, a juridical person such as a corporation can validly
complain for libel or any other form of defamation and claim for moral
damages.[44]
Moreover, where the broadcast is libelous per se, the law implies
damages.[45] In such a case, evidence of an honest mistake or the want of
character or reputation of the party libeled goes only in mitigation of
damages.[46] Neither in such a case is the plaintiff required to introduce
evidence of actual damages as a condition precedent to the recovery of some
 27

damages.[47] In this case, the broadcasts are libelous per se. Thus, AMEC is
entitled to moral damages.
However, we find the award of P300,000 moral damages unreasonable.
The record shows that even though the broadcasts were libelous per se,
AMEC has not suffered any substantial or material damage to its reputation.
Therefore, we reduce the award of moral damages from P300,000
to P150,000.

[G.R. No. 141994. January 17, 2005]

FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs. AGO

MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN
COLLEGE OF MEDICINE, (AMEC-BCCM) and ANGELITA F.
AGO, respondents.

DECISION
CARPIO, J.:

The Case

This petition for review[1] assails the 4 January 1999 Decision[2] and 26
January 2000 Resolution of the Court of Appeals in CA-G.R. CV No. 40151.
The Court of Appeals affirmed with modification the 14 December 1992
Decision[3] of the Regional Trial Court of Legazpi City, Branch 10, in Civil Case
No. 8236. The Court of Appeals held Filipinas Broadcasting Network, Inc. and
its broadcasters Hermogenes Alegre and Carmelo Rima liable for libel and
ordered them to solidarily pay Ago Medical and Educational Center-Bicol
Christian College of Medicine moral damages, attorneys fees and costs of
suit.

The Antecedents

Expos is a radio documentary[4] program hosted by Carmelo Mel Rima

(Rima) and Hermogenes Jun Alegre (Alegre).[5] Expos is aired every morning
over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc.
(FBNI). Expos is heard over Legazpi City, the Albay municipalities and other
Bicol areas.[6]
 28

In the morning of 14 and 15 December 1989, Rima and Alegre exposed

various alleged complaints from students, teachers and parents against Ago
Medical and Educational Center-Bicol Christian College of Medicine (AMEC)
and its administrators. Claiming that the broadcasts were defamatory, AMEC
and Angelita Ago (Ago), as Dean of AMECs College of Medicine, filed a
complaint for damages[7] against FBNI, Rima and Alegre on 27 February
1990. Quoted are portions of the allegedly libelous broadcasts:

JUN ALEGRE:

Let us begin with the less burdensome: if you have children taking medical course
at AMEC-BCCM, advise them to pass all subjects because if they fail in any
subject they will repeat their year level, taking up all subjects including those
they have passed already. Several students had approached me stating that they had
consulted with the DECS which told them that there is no such regulation. If [there] is
no such regulation why is AMEC doing the same?

xxx

Second: Earlier AMEC students in Physical Therapy had complained that the
course is not recognized by DECS. xxx

Third: Students are required to take and pay for the subject even if the subject
does not have an instructor - such greed for money on the part of AMECs
administration. Take the subject Anatomy: students would pay for the subject upon
enrolment because it is offered by the school. However there would be no instructor
for such subject. Students would be informed that course would be moved to a later
date because the school is still searching for the appropriate instructor.

xxx

It is a public knowledge that the Ago Medical and Educational Center has survived
and has been surviving for the past few years since its inception because of funds
support from foreign foundations. If you will take a look at the AMEC premises youll
find out that the names of the buildings there are foreign soundings. There is a
McDonald Hall. Why not Jose Rizal or Bonifacio Hall? That is a very concrete and
undeniable evidence that the support of foreign foundations for AMEC is substantial,
isnt it? With the report which is the basis of the expose in DZRC today, it would be
very easy for detractors and enemies of the Ago family to stop the flow of support of
foreign foundations who assist the medical school on the basis of the latters purpose.
But if the purpose of the institution (AMEC) is to deceive students at cross purpose
 29

with its reason for being it is possible for these foreign foundations to lift or suspend
their donations temporarily.[8]

xxx

On the other hand, the administrators of AMEC-BCCM, AMEC Science High

School and the AMEC-Institute of Mass Communication in their effort to
minimize expenses in terms of salary are absorbing or continues to accept
rejects. For example how many teachers in AMEC are former teachers of Aquinas
University but were removed because of immorality? Does it mean that the present
administration of AMEC have the total definite moral foundation from catholic
administrator of Aquinas University. I will prove to you my friends, that AMEC is a
dumping ground, garbage, not merely of moral and physical misfits. Probably
they only qualify in terms of intellect. The Dean of Student Affairs of AMEC is
Justita Lola, as the family name implies. She is too old to work, being an old woman.
Is the AMEC administration exploiting the very [e]nterprising or compromising and
undemanding Lola? Could it be that AMEC is just patiently making use of Dean
Justita Lola were if she is very old. As in atmospheric situation zero visibility the
plane cannot land, meaning she is very old, low pay follows. By the way, Dean Justita
Lola is also the chairman of the committee on scholarship in AMEC. She had retired
from Bicol University a long time ago but AMEC has patiently made use of her.

xxx

MEL RIMA:

xxx My friends based on the expose, AMEC is a dumping ground for moral and
physically misfit people. What does this mean? Immoral and physically misfits as
teachers.

May I say Im sorry to Dean Justita Lola. But this is the truth. The truth is this, that
your are no longer fit to teach. You are too old. As an aviation, your case is zero
visibility. Dont insist.

xxx Why did AMEC still absorb her as a teacher, a dean, and chairman of the
scholarship committee at that. The reason is practical cost saving in salaries, because
an old person is not fastidious, so long as she has money to buy the ingredient of
beetle juice. The elderly can get by thats why she (Lola) was taken in as Dean.

xxx
 30

xxx On our end our task is to attend to the interests of students. It is likely that the
students would be influenced by evil. When they become members of society
outside of campus will be liabilities rather than assets. What do you expect from a
doctor who while studying at AMEC is so much burdened with unreasonable
imposition? What do you expect from a student who aside from peculiar problems
because not all students are rich in their struggle to improve their social status are
even more burdened with false regulations. xxx[9] (Emphasis supplied)

The complaint further alleged that AMEC is a reputable learning institution.

With the supposed exposs, FBNI, Rima and Alegre transmitted malicious
imputations, and as such, destroyed plaintiffs (AMEC and Ago) reputation.
AMEC and Ago included FBNI as defendant for allegedly failing to exercise
due diligence in the selection and supervision of its employees, particularly
Rima and Alegre.
On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares,
filed an Answer[10] alleging that the broadcasts against AMEC were fair and
true. FBNI, Rima and Alegre claimed that they were plainly impelled by a
sense of public duty to report the goings-on in AMEC, [which is] an institution
imbued with public interest.
Thereafter, trial ensued. During the presentation of the evidence for the
defense, Atty. Edmundo Cea, collaborating counsel of Atty. Lozares, filed a
Motion to Dismiss[11] on FBNIs behalf. The trial court denied the motion to
dismiss. Consequently, FBNI filed a separate Answer claiming that it
exercised due diligence in the selection and supervision of Rima and Alegre.
FBNI claimed that before hiring a broadcaster, the broadcaster should (1) file
an application; (2) be interviewed; and (3) undergo an apprenticeship and
training program after passing the interview. FBNI likewise claimed that it
always reminds its broadcasters to observe truth, fairness and objectivity in
their broadcasts and to refrain from using libelous and indecent language.
Moreover, FBNI requires all broadcasters to pass the Kapisanan ng mga
Brodkaster sa Pilipinas (KBP) accreditation test and to secure a KBP permit.
On 14 December 1992, the trial court rendered a Decision[12] finding FBNI
and Alegre liable for libel except Rima. The trial court held that the broadcasts
are libelous per se. The trial court rejected the broadcasters claim that their
utterances were the result of straight reporting because it had no factual
basis. The broadcasters did not even verify their reports before airing them to
show good faith. In holding FBNI liable for libel, the trial court found that FBNI
failed to exercise diligence in the selection and supervision of its employees.
 31

In absolving Rima from the charge, the trial court ruled that Rimas only
participation was when he agreed with Alegres expos. The trial court found
Rimas statement within the bounds of freedom of speech, expression, and of
the press. The dispositive portion of the decision reads:

WHEREFORE, premises considered, this court finds for the plaintiff. Considering
the degree of damages caused by the controversial utterances, which are not
found by this court to be really very serious and damaging, and there being no
showing that indeed the enrollment of plaintiff school dropped, defendants
Hermogenes Jun Alegre, Jr. and Filipinas Broadcasting Network (owner of the radio
station DZRC), are hereby jointly and severally ordered to pay plaintiff Ago Medical
and Educational Center-Bicol Christian College of Medicine (AMEC-BCCM) the
amount of P300,000.00 moral damages, plus P30,000.00 reimbursement of attorneys
fees, and to pay the costs of suit.

SO ORDERED. [13] (Emphasis supplied)

Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC
and Ago, on the other, appealed the decision to the Court of Appeals. The
Court of Appeals affirmed the trial courts judgment with modification. The
appellate court made Rima solidarily liable with FBNI and Alegre. The
appellate court denied Agos claim for damages and attorneys fees because
the broadcasts were directed against AMEC, and not against her. The
dispositive portion of the Court of Appeals decision reads:

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

modification that broadcaster Mel Rima is SOLIDARILY ADJUDGED liable with
FBN[I] and Hermo[g]enes Alegre.

SO ORDERED.[14]

FBNI, Rima and Alegre filed a motion for reconsideration which the Court
of Appeals denied in its 26 January 2000 Resolution.
Hence, FBNI filed this petition.[15]

The Ruling of the Court of Appeals

The Court of Appeals upheld the trial courts ruling that the questioned
broadcasts are libelous per se and that FBNI, Rima and Alegre failed to
overcome the legal presumption of malice. The Court of Appeals found Rima
and Alegres claim that they were actuated by their moral and social duty to
 32

inform the public of the students gripes as insufficient to justify the utterance
of the defamatory remarks.
Finding no factual basis for the imputations against AMECs administrators,
the Court of Appeals ruled that the broadcasts were made with reckless
disregard as to whether they were true or false. The appellate court pointed
out that FBNI, Rima and Alegre failed to present in court any of the students
who allegedly complained against AMEC. Rima and Alegre merely gave a
single name when asked to identify the students. According to the Court of
Appeals, these circumstances cast doubt on the veracity of the broadcasters
claim that they were impelled by their moral and social duty to inform the
public about the students gripes.
The Court of Appeals found Rima also liable for libel since he remarked
that (1) AMEC-BCCM is a dumping ground for morally and physically misfit
teachers; (2) AMEC obtained the services of Dean Justita Lola to minimize
expenses on its employees salaries; and (3) AMEC burdened the students
with unreasonable imposition and false regulations.[16]
The Court of Appeals held that FBNI failed to exercise due diligence in the
selection and supervision of its employees for allowing Rima and Alegre to
make the radio broadcasts without the proper KBP accreditation. The Court of
Appeals denied Agos claim for damages and attorneys fees because the
libelous remarks were directed against AMEC, and not against her. The Court
of Appeals adjudged FBNI, Rima and Alegre solidarily liable to pay AMEC
moral damages, attorneys fees and costs of suit.

Issues

FBNI raises the following issues for resolution:

I. WHETHER THE BROADCASTS ARE LIBELOUS;

II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;

III. WHETHER THE AWARD OF ATTORNEYS FEES IS PROPER; and

IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE

FOR PAYMENT OF MORAL DAMAGES, ATTORNEYS FEES AND
COSTS OF SUIT.
 33

The Courts Ruling

We deny the petition.

This is a civil action for damages as a result of the allegedly defamatory
remarks of Rima and Alegre against AMEC.[17] While AMEC did not point out
clearly the legal basis for its complaint, a reading of the complaint reveals that
AMECs cause of action is based on Articles 30 and 33 of the Civil Code.
Article 30[18] authorizes a separate civil action to recover civil liability arising
from a criminal offense. On the other hand, Article 33[19] particularly provides
that the injured party may bring a separate civil action for damages in cases of
defamation, fraud, and physical injuries. AMEC also invokes Article 19 [20] of
the Civil Code to justify its claim for damages. AMEC cites Articles
2176[21] and 2180[22] of the Civil Code to hold FBNI solidarily liable with Rima
and Alegre.

I.
Whether the broadcasts are libelous

A libel[23] is a public and malicious imputation of a crime, or of a vice or

defect, real or imaginary, or any act or omission, condition, status, or
circumstance tending to cause the dishonor, discredit, or contempt of a
natural or juridical person, or to blacken the memory of one who is dead.[24]
There is no question that the broadcasts were made public and imputed to
AMEC defects or circumstances tending to cause it dishonor, discredit and
contempt. Rima and Alegres remarks such as greed for money on the part of
AMECs administrators; AMEC is a dumping ground, garbage of xxx moral and
physical misfits; and AMEC students who graduate will be liabilities rather
than assets of the society are libelous per se. Taken as a whole, the
broadcasts suggest that AMEC is a money-making institution where physically
and morally unfit teachers abound.
However, FBNI contends that the broadcasts are not malicious. FBNI
claims that Rima and Alegre were plainly impelled by their civic duty to air the
students gripes. FBNI alleges that there is no evidence that ill will or spite
motivated Rima and Alegre in making the broadcasts. FBNI further points out
that Rima and Alegre exerted efforts to obtain AMECs side and gave Ago the
opportunity to defend AMEC and its administrators. FBNI concludes that since
there is no malice, there is no libel.
FBNIs contentions are untenable.
 34

Every defamatory imputation is presumed malicious.[25] Rima and Alegre

failed to show adequately their good intention and justifiable motive in airing
the supposed gripes of the students. As hosts of a documentary or public
affairs program, Rima and Alegre should have presented the public issues
free from inaccurate and misleading information.[26] Hearing the students
alleged complaints a month before the expos,[27] they had sufficient time to
verify their sources and information. However, Rima and Alegre hardly made
a thorough investigation of the students alleged gripes. Neither did they
inquire about nor confirm the purported irregularities in AMEC from the
Department of Education, Culture and Sports. Alegre testified that he merely
went to AMEC to verify his report from an alleged AMEC official who refused
to disclose any information. Alegre simply relied on the words of the students
because they were many and not because there is proof that what they are
saying is true.[28] This plainly shows Rima and Alegres reckless disregard of
whether their report was true or not.
Contrary to FBNIs claim, the broadcasts were not the result of straight
reporting. Significantly, some courts in the United States apply the privilege of
neutral reportage in libel cases involving matters of public interest or public
figures. Under this privilege, a republisher who accurately and disinterestedly
reports certain defamatory statements made against public figures is shielded
from liability, regardless of the republishers subjective awareness of the truth
or falsity of the accusation.[29] Rima and Alegre cannot invoke the privilege of
neutral reportage because unfounded comments abound in the broadcasts.
Moreover, there is no existing controversy involving AMEC when the
broadcasts were made. The privilege of neutral reportage applies where the
defamed person is a public figure who is involved in an existing controversy,
and a party to that controversy makes the defamatory statement.[30]
However, FBNI argues vigorously that malice in law does not apply to this
case. Citing Borjal v. Court of Appeals,[31] FBNI contends that the
broadcasts fall within the coverage of qualifiedly privileged communications
for being commentaries on matters of public interest. Such being the case,
AMEC should prove malice in fact or actual malice. Since AMEC allegedly
failed to prove actual malice, there is no libel.
FBNIs reliance on Borjal is misplaced. In Borjal, the Court elucidated on
the doctrine of fair comment, thus:

[F]air commentaries on matters of public interest are privileged and constitute a valid
defense in an action for libel or slander. The doctrine of fair comment means that
while in general every discreditable imputation publicly made is deemed false,
because every man is presumed innocent until his guilt is judicially proved, and every
 35

false imputation is deemed malicious, nevertheless, when the discreditable imputation

is directed against a public person in his public capacity, it is not necessarily
actionable. In order that such discreditable imputation to a public official may be
actionable, it must either be a false allegation of fact or a comment based on a
false supposition. If the comment is an expression of opinion, based on
established facts, then it is immaterial that the opinion happens to be mistaken, as
long as it might reasonably be inferred from the facts.[32] (Emphasis supplied)

True, AMEC is a private learning institution whose business of educating

students is genuinely imbued with public interest. The welfare of the youth in
general and AMECs students in particular is a matter which the public has the
right to know. Thus, similar to the newspaper articles in Borjal, the subject
broadcasts dealt with matters of public interest. However, unlike in Borjal, the
questioned broadcasts are not based on established facts. The record
supports the following findings of the trial court:

xxx Although defendants claim that they were motivated by consistent reports of
students and parents against plaintiff, yet, defendants have not presented in court, nor
even gave name of a single student who made the complaint to them, much less
present written complaint or petition to that effect. To accept this defense of
defendants is too dangerous because it could easily give license to the media to malign
people and establishments based on flimsy excuses that there were reports to them
although they could not satisfactorily establish it. Such laxity would encourage
careless and irresponsible broadcasting which is inimical to public interests.

Secondly, there is reason to believe that defendant radio broadcasters, contrary to the
mandates of their duties, did not verify and analyze the truth of the reports before they
aired it, in order to prove that they are in good faith.

Alegre contended that plaintiff school had no permit and is not accredited to offer
Physical Therapy courses. Yet, plaintiff produced a certificate coming from DECS
that as of Sept. 22, 1987 or more than 2 years before the controversial broadcast,
accreditation to offer Physical Therapy course had already been given the plaintiff,
which certificate is signed by no less than the Secretary of Education and Culture
herself, Lourdes R. Quisumbing (Exh. C-rebuttal). Defendants could have easily
known this were they careful enough to verify. And yet, defendants were very
categorical and sounded too positive when they made the erroneous report that
plaintiff had no permit to offer Physical Therapy courses which they were offering.

The allegation that plaintiff was getting tremendous aids from foreign foundations like
Mcdonald Foundation prove not to be true also. The truth is there is no Mcdonald
Foundation existing. Although a big building of plaintiff school was given the name
 36

Mcdonald building, that was only in order to honor the first missionary in Bicol of
plaintiffs religion, as explained by Dr. Lita Ago. Contrary to the claim of defendants
over the air, not a single centavo appears to be received by plaintiff school from the
aforementioned McDonald Foundation which does not exist.

Defendants did not even also bother to prove their claim, though denied by Dra. Ago,
that when medical students fail in one subject, they are made to repeat all the other
subject[s], even those they have already passed, nor their claim that the school charges
laboratory fees even if there are no laboratories in the school. No evidence was
presented to prove the bases for these claims, at least in order to give semblance of
good faith.

As for the allegation that plaintiff is the dumping ground for misfits, and immoral
teachers, defendant[s] singled out Dean Justita Lola who is said to be so old, with zero
visibility already. Dean Lola testified in court last Jan. 21, 1991, and was found to be
75 years old. xxx Even older people prove to be effective teachers like Supreme Court
Justices who are still very much in demand as law professors in their late years.
Counsel for defendants is past 75 but is found by this court to be still very sharp and
effective. So is plaintiffs counsel.

Dr. Lola was observed by this court not to be physically decrepit yet, nor mentally
infirmed, but is still alert and docile.

The contention that plaintiffs graduates become liabilities rather than assets of our
society is a mere conclusion. Being from the place himself, this court is aware that
majority of the medical graduates of plaintiffs pass the board examination easily and
become prosperous and responsible professionals.[33]

Had the comments been an expression of opinion based on established

facts, it is immaterial that the opinion happens to be mistaken, as long as it
might reasonably be inferred from the facts.[34] However, the comments of
Rima and Alegre were not backed up by facts. Therefore, the broadcasts are
not privileged and remain libelous per se.
The broadcasts also violate the Radio Code[35] of the Kapisanan ng mga
Brodkaster sa Pilipinas, Ink. (Radio Code). Item I(B) of the Radio Code
provides:

B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES

1. x x x
 37

4. Public affairs program shall present public issues free from personal
bias, prejudice and inaccurate and misleading information. x x x
Furthermore, the station shall strive to present balanced discussion of
issues. x x x.

xxx

7. The station shall be responsible at all times in the supervision of public

affairs, public issues and commentary programs so that they conform to
the provisions and standards of this code.

8. It shall be the responsibility of the newscaster, commentator, host and

announcer to protect public interest, general welfare and good order in the
presentation of public affairs and public issues.[36](Emphasis supplied)

The broadcasts fail to meet the standards prescribed in the Radio Code,
which lays down the code of ethical conduct governing practitioners in the
radio broadcast industry. The Radio Code is a voluntary code of conduct
imposed by the radio broadcast industry on its own members. The Radio
Code is a public warranty by the radio broadcast industry that radio broadcast
practitioners are subject to a code by which their conduct are measured for
lapses, liability and sanctions.
The public has a right to expect and demand that radio broadcast
practitioners live up to the code of conduct of their profession, just like other
professionals. A professional code of conduct provides the standards for
determining whether a person has acted justly, honestly and with good faith in
the exercise of his rights and performance of his duties as required by Article
19[37] of the Civil Code. A professional code of conduct also provides the
standards for determining whether a person who willfully causes loss or injury
to another has acted in a manner contrary to morals or good customs under
Article 21[38] of the Civil Code.
 38

PEOPLE OF THE PHILIPPINES, G.R. No. 182687

Plaintiff-Appellee,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

WARLITO MARTINEZ, Promulgated:

Accused-Appellant.
July 23, 2009
x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

The Case

This is an appeal from the October 9, 2007 Decision[1] of the Court of

Appeals (CA) in CA-G.R. CR-H.C. No. 00217 entitled People of the Philippines v.
Warlito Martinez which held accused-appellant Warlito Martinez guilty of
qualified rape. The assailed Decision affirmed the January 29, 2003 Decision[2] in
Criminal Case Nos. 98-297, 98-298, and 98-299 of the Regional Trial Court
(RTC), Branch 68 in P.D. Monfort North, Dumangas, Iloilo.

The Facts

The spouses Warlito and BBB live in Janipaan, Mina, Iloilo. They have six
children: the three elder daughters have left home, while the three younger ones,
a mentally retarded daughter
and two sons, live with them. AAA[3] is their mentally retarded daughter.
 39

In the early morning of November 8, 1997, BBB went to Iloilo City to

procure a ship ticket for her trip to Manila. At around eight oclock in the morning,
AAA, then 13 years old, was tasked to cook rice while her brothers gathered
firewood in a distant place. While AAA was cooking, Warlito approached
her. Without a word, Warlito removed AAAs clothes and panties. He then forced
his naked daughter to lie down on a bed just two arms length away from the
kitchen. Thereafter, he stripped off his shirt, pants, and underwear. He parted
AAAs thighs, went on top of her, and inserted his penis into AAAs vagina. AAA
could only cry in pain.[4]

After the molestation, Warlito threatened to kill AAA if she would reveal the
incident to her mother. Thereafter, Warlito left AAA. AAA then walked away from
their home. After about an hour, AAA returned.

Around noontime, while AAAs brothers were playing outside the house,
Warlito again forced AAA to lie down on the bed. After removing his clothes, he
undressed AAA and went on top of her. He then inserted his penis into her
vagina. When he was done, he put on his clothes and left her. AAA then put on her
clothes and went out of the house.She kept the incident a secret.[5]

In the evening of November 8, 1997, Warlito went to the room where his
children were sleeping together. Inside, he saw his two sons sleeping on the left
side of AAA. He went beside AAA, removed her clothes and underwear, and
likewise, removed his clothes. He, thereafter, went on top of AAA and inserted his
penis inside her vagina. AAA cried in pain but Warlito muffled her cries by
covering her mouth. After which, Warlito dressed up and went downstairs to
sleep. AAA likewise got dressed and fell asleep.

Remembering her fathers threat, AAA did not tell her mother that her father
had raped her. When AAAs mother left for Manila a few days later, AAA had to
endure her fathers weekly assault on her virtue.[7]
 40

Incident with the teacher

-On March 11, 1998, AAAs grade one teacher, Lorline Siccio, noticed AAA
leaning dizzily on her desk. She also observed that AAA appeared to be unusually
weak, hardly having the strength to move. Alarmed, Lorline reported the matter to
the officer-in-charge of the Janipaan Elementary School. Aware of the fact that
Warlito had sired two children from AAAs elder sister, Lorline asked AAA if her
father had raped her. AAA answered in the affirmative. The teachers then reported
the matter to the Department of Social Welfare and Development.[8]

-On March 15, 1998, Mother and AAA filed a complaint against him.

-Dr. Flaviano Nestor Tordesillas, a resident physician at

the Iloilo Provincial Hospital in Pototan, Iloilo, physically examined AAA. His
medical report stated that AAA suffered [o]ld healed hymenal lacerations
at 7:00, 10:00 and 3:00 positions and that her vagina admitted one examining
finger with ease.[9] Dr. Flaviano noted that the lacerations could have been caused
by sexual intercourse or by trauma caused by large blood clots during the
menstrual period, or masturbation and insertion of an object.[10]

-Warlito was then charged with three counts of qualified rape.

On January 29, 2003, the RTC rendered a Decision, the dispositive part of
which reads:

WHEREFORE, in view of the foregoing, the court finds the

accused WARLITO MARTINEZ GUILTY beyond reasonable doubt of
three (3) counts of rape under Art. 395 of the Revised Penal Code as
amended in relation to Republic Act No. 7695 and imposes on him the
extreme penalty of death on each of the three (3) counts of rape he
committed. It is further ordered that on each count of rape, the accused
must pay the victim the sum of SEVENTY FIVE THOUSAND (PhP
75,000.00) PESOS as civil indemnity; FIFTY THOUSAND (PHP
50,000.00) PESOS as moral damages; and TWENTY THOUSAND
(PhP 25,000.00) as exemplary damages.
 41

SO ORDERED.

The case was appealed to the CA.

The Ruling of the CA

Convinced of AAAs credibility, the appellate court affirmed the trial courts
decision. It emphasized that AAAs mental retardation alone is not a ground for her
disqualification as a witness. It stressed that the qualification of a witness is
anchored on the ability to relate to others the event that was witnessed. In this case,
although AAAs intelligence quotient is equivalent to that of a four years old child,
the CA found her testimony to be credible, clear, and convincing.

Hence, we have this appeal.

The Issues

In a Resolution dated July 16, 2008, this Court required the parties to submit
supplemental briefs if they so desired. On September 2, 2008, Warlito, through
counsel, signified that he was no longer filing a supplemental brief. Thus, the
following issues raised in accused-appellants Brief dated April 15, 2004 are now
deemed adopted in this present appeal:

I.
The trial court erred in not finding the private complainants testimony as
incredible and that there was apparent improbability in the commission
of the rape charges.

II.
The trial court erred in finding the accused-appellant guilty beyond
reasonable doubt of three (3) counts of rape.[14]

The Ruling of the Court

The appeal is without merit.

 42

In attacking AAAs credibility, Warlito asserts that her mental retardation

affects her ability to convey her experience, thus, making her testimony unreliable.
He then points to the inability of AAA to state with certainty the dates when the
alleged acts of rape happened. He claims that it was against human experience to
forget such a harrowing experience. Moreover, he maintains that AAAs teachers
coached her in fabricating the charge against him.

It was established that AAA has an intelligent quotient equivalent to that of a

four years old. Further, her mental condition makes her gullible and vulnerable to
coercion.Despite these, the RTC and the CA considered AAAs testimony as
credible, clear, and convincing. There is no reason to overturn this finding.
It is a basic doctrine that anyone who can perceive, and perceiving, can
make known such perception to others, may be a witness.[15] Thus, by itself, mental
retardation does not disqualify a person from testifying. What is essential is the
quality of perception, and the manner in which this perception is made known to
the court.[16]

Accordingly, People v. Tabio[17] upheld the credibility of the mentally

retarded complaining witness after noting that the witness spoke unequivocally on
the details of the crime. The Court in that case observed that the witness would not
have spoken so tenaciously about her experience had it not really happened to
her. In People v. Macapal, Jr.,[18] the court stressed that testimonial discrepancies
caused by a witness natural fickleness of memory does not destroy the substance of
the testimony of said witness. Likewise, People v. Martin[19] appreciated the
natural and straightforward narration of the mentally deficient victim and
dismissed her inaccurate and unresponsive answers. The Court in Martin reasoned
that even children of normal intelligence can not be expected to give a precise
account of events considering their naivet and still undeveloped vocabulary and
command of language.
 43

In this case, AAA testified in a straightforward and categorical manner that

her father had raped her. She even demonstrated before the court their relative
positions during the molestations.[20] And even during grueling cross-examination,
she remained consistent with her statement that her father had raped her. Thus, her
conduct before the court does not indicate that she had been coached, as Warlito
would have us believe.

Furthermore, the inconsistencies that Warlito faults AAA with are too minor
to be considered. The date of the commission of the crime is not an element of the
crime of rape and has no substantial bearing on its commission.[21] What is
essential is that there be proof of carnal knowledge of a woman against her
will.[22] And the testimony of AAA clearly proved that Warlito had raped her. She
would not have been firm in her allegations had not the same really happened.

Nonetheless, Warlito insists that AAAs testimony is not supported by

physical evidence. He maintains that the lacerations on AAAs hymen are not
conclusive proof of the crime attributed to him because such injuries could result
from AAAs own activities as jumping, running, or falling on a hard object.

We are not persuaded. As correctly held by the CA, AAAs healed

lacerations on her hymen support her testimony rather than destroy it. True, a
physicians finding that the hymen of the alleged victim was lacerated does not
establish rape. Such result, however, is not presented to prove the fact of rape;
rather, it is presented to show the loss of virginity.[23] And when, as in this case, the
victims forthright testimony is consistent with the physical finding of penetration,
there is then, sufficient basis for concluding that sexual intercourse did take
place.[24]

As regards Warlitos defense of alibi, we affirm the findings of the CA, thus:

In the instant case, the place where the alleged rape was
committed and the river where the accused was tending his motor pump
at the time of the alleged incident was just separated by a 50 meter
 44

distance and the accused admitted that it would not take five minutes to
reach his house by normal walking at an average speed. Thus, it was not
physically impossible for accused to be at the crime scene. Moreover,
positive identification of an eyewitness prevails over the defense of
alibi. Hence, accuseds attempt to exculpate himself through alibi must
fail.[25]

As to the damages, we note that the appellate court correctly modified the
amount of moral damages that should be awarded to AAAfrom PhP 50,000 to PhP
75,000, in line with current jurisprudence on qualified rape. The amount of
exemplary damages, however, should also be modified. Following People v.
Layco,[26] the award of exemplary damages is increased from PhP 25,000 to PhP
30,000, in order to serve as public example and to protect the young from sexual
abuse.

WHEREFORE, the Court AFFIRMS the October 9, 2007 CA Decision in

CA-G.R. CR-H.C. No. 00217 with MODIFICATIONS. As modified, the
dispositive portion of the CA Decision shall read:

WHEREFORE, the accused WARLITO MARTINEZ is found

GUILTY beyond reasonable doubt of committing three (3) counts of
QUALIFIED RAPE and is sentenced to suffer the penalty of reclusion
perpetua for each count of rape, without benefit of parole. Likewise, for
each count of rape, he is ordered to pay the victim, the sum of PhP
75,000 as civil indemnity, PhP 75,000 as moral damages, and PhP
30,000 as exemplary damages.

SO ORDERED.
 45

ROMEO ILISAN y PIABOL vs

LEONARDO-DE CASTRO,*ABAD, and
MENDOZA, JJ. November 15, 2010

FACTS
-On February 3, 2002, a baptismal celebration was held at the residence of Ricky
Silva in Barangay Nagkaisang Nayon, Novaliches, Quezon City.
-Among those who attended were petitioner and one Joey Gaton (Gaton). They
belonged to different groups of guests.
-While Gaton and petitioner were having a drinking spree with their respective
groups, one of petitioners companions apparently got irked by the way Gaton
looked at him.
-This prompted petitioner and his companions to maul Gaton
-petitioner shot Gaton at the abdomen, causing the latters instantaneous death.
-On February 7, 2002, an Information for murder was filed against petitioner with
the RTC of Quezon City
-in his defense, petitioner and his witnesses, Jomarie Ilisan and Jaime Escasinas,
petitioners brother and cousin, respectively, claimed that another guest, Chito
Partisala, a jail guard in Bicutan, was the assailant.
-the RTC accorded more weight to the positive testimonies of the prosecution
witnesses over the declarations of the defense. There being no adequate proof
that treachery and evident premeditation qualified the killing of Gaton, the RTC
convicted petitioner of homicide, viz, punishable under Article 249 of the Revised
Penal Code.

-the accused is hereby sentenced to suffer imprisonment for a term ranging from
eight years and one day of prision mayor as minimum to fourteen years and eight
months of reclusion temporal as maximum, and to indemnify the heirs of the
deceased in the amounts of P75,000.00 as actual damages, P50,000.00 for the death
of the victim and P50,000.00 as moral damages.
 46

-the CA affirmed the RTCs finding of guilt, but modified the amount of
actual damages awarded and the maximum period of the penalty imposed
by adding one (1) more day thereto, viz.:

-Hence, the present petition wherein petitioner reiterates the issues he raised
before the CA.

RULING:

-Petition denied 

-The civil indemnity and moral damages awarded by the RTC and the CA were in
order and consistent with current jurisprudence.
-Civil indemnity is mandatory and granted to the heirs of the victim without need
of proof other than the commission of the crime.[24] Under prevailing
jurisprudence, the award of P50,000.00 to the heirs of the victim as civil
indemnity is proper.[25]
-Moral damages must also be awarded because these are mandatory in cases of
homicide, without need of allegation and proof other than the death of the
victim.[26] The award of P50,000.00 as moral damages[27]is correct.
 47

[G.R. No. 160709. February 23, 2005]

6. NELEN LAMBERT, assisted by her husband, GLENROY ALOYSUIS

LAMBERT, petitioners, vs. HEIRS OF RAY CASTILLON,
Represented by MARILOU T. CASTILLON and SERGIO
LABANG, respondents.
FACTS: In the evening of January 13, 1991, Ray Castillon visited the house
of his brother Joel Castillon at Tambo, Iligan City and borrowed his
motorcycle. He then invited his friend, Sergio Labang, to roam around Iligan
City. Ray drove the motorcycle with Sergio as the backrider [2]

-At around past 10:00 p.m., after eating supper at Honas Restaurant and
imbibing a bottle of beer, they traversed the highway towards Tambo at a high
speed. Upon reaching Brgy. Sto. Rosario, they figured in an accident with a
Tamaraw jeepney, owned by petitioner Nelen Lambert and driven by
Reynaldo Gamot, which was traveling on the same direction but made a
sudden left turn. The incident resulted in the instantaneous death of Ray and
injuries to Sergio.
[3]

-Respondents, the heirs of Ray Castillon, thus filed an action for damages
with prayer for preliminary attachment against the petitioner Nelen Lambert.
-On June 29, 1993, after a full-blown trial, the court a quo rendered a decision
in favor of herein private respondents but reduced petitioners liability by 20%
in view of the contributory negligence of Ray. The dispositive portion of the
decision reads:

-The sum of SIX HUNDRED THIRTY-THREE THOUSAND AND NINETY-ONE

(P633,091) PESOS, representing loss of support, death indemnity, funeral and related
expenses, moral damages and attorneys fees

-The Court of Appeals affirmed the decision of the trial court. 1. The Honorable
-Petitioner insists that the negligence of Ray Castillon was the proximate
cause of his unfortunate death and therefore she is not liable for damages.
-While we agree with the trial court that Ray was likewise guilty of contributory
negligence as defined under Article 2179 of the Civil Code, we find it equitable
to increase the ratio of apportionment of damages on account of the victims
negligence.
 48

Article 2179 reads as follows:

When the plaintiffs negligence was the immediate and proximate cause of his injury,
he cannot recover damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the defendants lack of due care,
the plaintiff may recover damages, but the courts shall mitigate the damages to be
awarded.

-In the case at bar, it was established that Ray, at the time of the mishap: (1)
was driving the motorcycle at a high speed; (2) was tailgating the Tamaraw
jeepney; (3) has imbibed one or two bottles of beer; and (4) was not wearing a
protective helmet. These circumstances, although not constituting the
[21]

proximate cause of his demise and injury to Sergio, contributed to the same
result. The contribution of these circumstances are all considered and
determined in terms of percentages of the total cause. Hence, pursuant
to Rakes v. AG & P, the heirs of Ray Castillon shall recover damages only up
to 50% of the award. In other words, 50% of the damage shall be borne by the
private respondents; the remaining 50% shall be paid by the petitioner.
ON MORAL DAMAGES

-The spouse, legitimate and illegitimate descendants and ascendants of the deceased
may demand moral damages for mental anguish by reason of the death of the
deceased.

However, the amount has been gradually increased through the years. At
present, prevailing jurisprudence fixes the amount at P50,000.00. [26]

Paragraph 3 of the same provision also serves as the basis for the award
of moral damages in quasi-delict. The reason for the grant of moral damages
has been explained, thus:

the award of moral damages is aimed at a restoration, within the limits possible, of the
spiritual status quo ante; and therefore, it must be proportionate to the suffering
inflicted. The intensity of the pain experienced by the relatives of the victim is
proportionate to the intensity of affection for him and bears no relation whatsoever
with the wealth or means of the offender. [27]

While it is true that there can be no exact or uniform rule for measuring the
value of human life and the measure of damages cannot be arrived at by a
precise mathematical calculation, we hold that the trial courts award of moral
[28]

damages of P50,000.00 for the death of Ray Castillon is in accord with the
prevailing jurisprudence. [29]
 49

7. SAN MIGUEL PROPERTIES G.R. No. 153982

PHILIPPINES, INC.,
Petitioner, Present:

CARPIO,* J.,
VELASCO, JR., J., Chairperson,
- versus - PERALTA,
ABAD, and
MENDOZA, JJ.

GWENDELLYN ROSE S. Promulgated:

GUCABAN,
Respondent. July 18, 2011
x-----------------------------------------------------------------------------------------x

This is a Petition for Review under Rule 45 of the Rules of Court assailing the
April 11, 2002 Decision[1] of the Court of Appeals in CA-G.R. SP No. 60135, as
well as the June 14, 2002 Resolution[2] therein which denied reconsideration. The
assailed decision affirmed the November 29, 1999 decision[3] of the National Labor
Relations Commission (NLRC) in NLRC NCR-CA No. 019439-99, but modified
the award of damages in the case. In turn, the decision of the NLRC had reversed
and set aside the finding of illegal dismissal in the March 26, 1999 ruling[4] of the
Labor Arbiter in NLRC NCR Case No. 00-06-05215-98.

FACTS:

-Respondent Gwendellyn Rose Gucaban (Gucaban) was well into the tenth year of
her career as a licensed civil engineer when she joined the workforce of petitioner
San Miguel Properties Philippines, Inc. (SMPI) in 1991.

-Initially engaged as a construction management specialist, she, by her satisfactory

performance on the job, was promoted in 1994 and 1995, respectively, to the
position of technical services manager, and then of project development
manager. As project development manager, she also sat as a member of the
companys management committee. She had been in continuous service in the latter
capacity until her severance from the company in February 1998.
 50

-In her complaint[6] for illegal dismissal filed on June 26, 1998, Gucaban alleged
that her separation from service was practically forced upon her by management.

-She claimed that on January 27, 1998, she was informed by SMPIs President and
Chief Executive Officer, Federico Gonzalez (Gonzalez), that the company was
planning to reorganize its manpower in order to cut on costs, and that she must file
for resignation or otherwise face termination. Three days later, the Human
Resource Department allegedly furnished her a blank resignation form which she
refused to sign. From then on, she had been hounded by Gonzalez to sign and
submit her resignation letter.[7]

-She claimed she had been kept off from all the meetings of the management
committee,[8] and that

-on February 12, 1998, she received an evaluation report signed by Gonzalez
showing that for the covered period she had been negligent and unsatisfactory in
the performance of her duties.[9] She found said report to be unfounded and unfair,

- She herself professed having been consistently satisfactory in her job

performance as shown by her successive promotions in the company.[11] It was
supposedly the extreme humiliation and alienation that impelled her to submit a
signed resignation letter on February 18, 1998.[12]

-Gucaban surmised that she had merely been tricked by SMPI into filing her
resignation letter because it never actualized its reorganization and streamlining
plan; on the contrary, SMPI allegedly expanded its employee population and also
made new appointments and promotions to various other positions. She felt that
she had been dismissed without cause and, hence, prayed for reinstatement and
payment of backwages and damages.[13]

SMPI argued that it truly encountered a steep market decline in 1997 that
necessitated cost-cutting measures and streamlining of its employee structure
which, in turn, would require the abolition of certain job positions; Gucabans post
as project development manager was one of such positions. As a measure of
generosity, it allegedly proposed to Gucaban that she voluntarily resign from office
 51

in consideration of a financial package[14] an offer for which Gucaban was

supposedly given the first week of February 1998 to evaluate. Gucaban, however,
did not communicate her acceptance of the offer and, instead, she allegedly
conferred with the Human Resource Department and negotiated to augment her
benefits package.[15]

-SMPI claimed that Gucaban was able to grasp the favorable end of the bargain
and, expectant of an even more generous benefits package, she voluntarily
tendered her resignation effective February 27, 1998. On the day before her
effective date of resignation, she signed a document denominated as Receipt and
Release whereby she acknowledged receipt of P1,131,865.67 cash representing her
monetary benefits and waived her right to demand satisfaction of any employment-
related claims which she might have against management.[16] SMPI admitted
having made several other appointments in June 1998, but the same, however,
were supposedly part of the full implementation of its reorganization scheme. [17]

-Labor Arbiter dismissed the complaint for lack of merit.

-Addressing in the affirmative the issue of whether the subject resignation was
voluntary, the Labor Arbiter found no proven force, coercion, intimidation or any
other circumstance which could otherwise invalidate Gucabans resignation. He
found incredible Gucabans claim of humiliation and alienation, because the mere
fact that she was excluded from the meetings of the management committee would
not be so humiliating and alienating as to compel her to decide to leave the
company.[20] He likewise dismissed her claim that SMPI merely feigned the
necessity of reorganization in that while the company indeed made new other
appointments following Gucabans resignation, still, this measure was an
implementation of its reorganization plan.[21]

-NLRC Found that Gucaban has been illegally dismissed,

-directed to pay complainant moral damages limited however to P200,000.00,
exemplary damages of P100,000.00, and ten percent (10%) of the total award as
attorneys fees.
 52

-Court of Appeals issued the assailed Decision[28] finding partial merit in the
petition. It affirmed the NLRCs finding of illegal/constructive dismissal, but
modified the monetary award as follows:

-The damages awarded are reduced to P50,000.00 fromm 200K moral

damages and P25,000.00 from 100k exemplary damages

ISSUE: genuine reorganization or wla in relation to the award of moral

damages

In the instant case, the pressing matter is whether there was in place a
genuine reorganization plan awaiting immediate implementation in good faith at or
about the time Gucaban resolved to hand in her resignation letter.

This issue is primordial, because to reiterate, Gucaban indeed would not

have opted to resign without the company having laid out to her its prospect of a
corporate restructuring which SMPI failed to establish as existing at the time as
well as the certainty of a consequent termination should she not resign.
HERE NA
A final word. Moral damages are awarded in termination cases where the
employees dismissal was attended by bad faith, malice or fraud, or where it
constitutes an act oppressive to labor, or where it was done in a manner contrary to
morals, good customs or public policy

- In Gucabans case, the said bases indeed obtain when she was fraudulently
induced to resign and accede to a quitclaim upon the false representation of
an impending and genuine reorganization as well as on the pretext that such
option would be the most beneficial.

- This, coupled with the subsequent oppression that immediately preceded her
involuntary resignation, deserves an award of moral damages consistent with
the Court of Appeals ruling.
53