[G.R. No. 116123.

March 13, 1997]

SERGIO F. NAGUIAT, doing business under the name and style
SERGIO F. NAGUIAT ENT., INC., & CLARK FIELD TAXI,
INC., petitioners, vs.NATIONAL LABOR
RELATIONS COMMISSION (THIRD DIVISION), NATIONAL
ORGANIZATION OF WORKINGMEN and its members,
LEONARDO T. GALANG, et al., respondents.
D E C I S I O N
PANGANIBAN, J.:
Are private respondent-employees of petitioner Clark Field Taxi, Inc., who
were separated from service due to the closure of Clark Air Base, entitled to
separation pay and, if so, in what amount? Are officers of corporations ipso
facto liable jointly and severally with the companies they represent for the
payment of separation pay?
These questions are answered by the Court in resolving this petition
for certiorari under Rule 65 of the Rules of Court assailing the Resolutions of
the National Labor Relations Commission (Third Division)
[1]
promulgated on
February 28, 1994,
[2]
and May 31, 1994.
[3]
The February 28, 1994 Resolution
affirmed with modifications the decision
[4]
of Labor Arbiter Ariel C. Santos in
NLRC Case No. RAB-III-12-2477-91. The second Resolution denied the
motion for reconsideration of herein petitioners.
The NLRC modified the decision of the labor arbiter by granting separation
pay to herein individual respondents in the increased amount of US$120.00
for every year of service or its peso equivalent, and holding Sergio F. Naguiat
Enterprises, Inc., Sergio F. Naguiat and Antolin T. Naguiat, jointly and
severally liable with Clark Field Taxi, Inc. ("CFTI").
The Facts
The following facts are derived from the records of the case:
Petitioner CFTI held a concessionaire's contract with the Army Air Force Exchange
Services ("AAFES") for the operation of taxi services within Clark Air Base. Sergio
F. Naguiat was CFTI's president, while Antolin T. Naguiat was its vice-
president. Like Sergio F. Naguiat Enterprises, Incorporated ("Naguiat Enterprises"),
a trading firm, it was a family-owned corporation.
Individual respondents were previously employed by CFTI as taxicab drivers. During
their employment, they were required to pay a daily "boundary fee" in the amount of
US$26.50 for those working from 1:00 a.m. to 12:00 noon, and US$27.00 for those
working from 12:00 noon to 12:00 midnight. All incidental expenses for the
maintenance of the vehicles they were driving were accounted against them, including
gasoline expenses.
The drivers worked at least three to four times a week, depending on the availability
of taxicabs. They earned not less than US$15.00 daily. In excess of that amount,
however, they were required to make cash deposits to the company, which they could
later withdraw every fifteen days.
Due to the phase-out of the US military bases in the Philippines, from which Clark Air
Base was not spared, the AAFES was dissolved, and the services of individual
respondents were officially terminated on November 26, 1991.
The AAFES Taxi Drivers Association ("drivers' union"), through its local president,
Eduardo Castillo, and CFTI held negotiations as regards separation benefits that
should be awarded in favor of the drivers. They arrived at an agreement that the
separated drivers will be given P500.00 for every year of service as severance
pay. Most of the drivers accepted said amount in December 1991 and January
1992. However, individual respondents herein refused to accept theirs.
Instead, after disaffiliating themselves from the drivers' union, individual respondents,
through the National Organization of Workingmen ("NOWM"), a labor organization
which they subsequently joined, filed a complaint
[5]
against "Sergio F. Naguiat doing
business under the name and style Sergio F. Naguiat Enterprises, Inc., Army-Air
Force Exchange Services (AAFES) with Mark Hooper as Area Service Manager,
Pacific Region, and AAFES Taxi Drivers Association with Eduardo Castillo as
President," for payment of separation pay due to termination/phase-out. Said
complaint was later amended
[6]
to include additional taxi drivers who were similarly
situated as complainants, and CFTI with Antolin T. Naguiat as vice president and
general manager, as party respondent.
In their complaint, herein private respondents alleged that they were
regular employees of Naguiat Enterprises, although their
individual applications for employment were approved by CFTI. They claimed
to have been assigned to Naguiat Enterprises after having been hired by
CFTI, and that the former thence managed, controlled and supervised their
employment. They averred further that they were entitled to separation pay
based on their latest daily earnings of US$15.00 for working sixteen (16) days
a month.
In their position paper submitted to the labor arbiter, herein petitioners
claimed that the cessation of business of CFTI on November 26, 1991, was
due to "great financial losses and lost business opportunity" resulting from the
phase-out of Clark Air Base brought about by the Mt. Pinatubo eruption and
the expiration of the RP-US military bases agreement. They admitted that
CFTI had agreed with the drivers' union, through its President Eduardo
Castillo who claimed to have had blanket authority to negotiate with CFTI in
behalf of union members, to grant its taxi driver-employees separation pay
equivalent to P500.00 for every year of service.
The labor arbiter, finding the individual complainants to be regular workers
of CFTI, ordered the latter to pay them P1,200.00 for every year of service "for
humanitarian consideration," setting aside the earlier agreement between
CFTI and the drivers' union of P500.00 for every year of service. The labor
arbiter rejected the allegation of CFTI that it was forced to close business due
to "great financial losses and lost business opportunity" since, at the time it
ceased operations, CFTI was profitably earning and the cessation of its
business was due to the untimely closure of Clark Air Base. In not awarding
separation pay in accordance with the Labor Code, the labor-arbiter
explained:
"To allow respondents exemption from its (sic) obligation to pay separation
pay would be inhuman to complainants but to impose a monetary obligation
to an employer whose profitable business was abruptly shot (sic) down by
force majeure would be unfair and unjust to say the least."
[7]

and thus, simply awarded an amount for "humanitarian consideration."
Herein individual private respondents appealed to the NLRC. In its
Resolution, the NLRC modified the decision of the labor arbiter by granting
separation pay to the private respondents. The concluding paragraphs of the
NLRC Resolution read:
"The contention of complainant is partly correct. One-half month salary
should be US$120.00 but this amount can not be paid to the complainant in
U.S. Dollar which is not the legal tender in the Philippines. Paras, in
commenting on Art. 1249 of the New Civil Code, defines legal tender as 'that
which a debtor may compel a creditor to accept in payment of the debt. The
complainants who are the creditors in this instance can be compelled to accept
the Philippine peso which is the legal tender, in which case, the table of
conversion (exchange rate) at the time of payment or satisfaction of the
judgment should be used. However, since the choice is left to the debtor,
(respondents) they may choose to pay in US dollar.' (Phoenix Assurance Co.
vs. Macondray & Co. Inc., L-25048, May 13, 1975)
In discharging the above obligations, Sergio F. Naguiat Enterprises, which is
headed by Sergio F. Naguiat and Antolin Naguiat, father and son at the same
time the President and Vice-President and General Manager, respectively,
should be joined as indispensable party whose liability is joint and
several. (Sec. 7, Rule 3, Rules of Court)"
[8]

As mentioned earlier, the motion for reconsideration of herein petitioners
was denied by the NLRC. Hence, this petition with prayer for issuance of a
temporary restraining order. Upon posting by the petitioners of a surety bond,
a temporary restraining order
[9]
was issued by this Court enjoining execution of
the assailed Resolutions.
Issues
The petitioners raise the following issues before this Court for resolution:
"I. Whether or not public respondent NLRC (3rd Div.) committed grave
abuse of discretion amounting to lack of jurisdiction in issuing the
appealed resolution;
II. Whether or not Messrs. Teofilo Rafols and Romeo N. Lopez could
validly represent herein private respondents; and,
III. Whether or not the resolution issued by public respondent is contrary
to law."
[10]

Petitioners also submit two additional issues by way of a supplement
[11]
to
their petition, to Wit: that Petitioners Sergio F. Naguiat and Antolin Naguiat
were denied due process; and that petitioners were not furnished copies of
private respondents' appeal to the NLRC. As to the procedural lapse of
insufficient copies of the appeal, the proper forum before which petitioners
should have raised it is the NLRC. They, however, failed to question this in
their motion for reconsideration. As a consequence, they are deemed to have
waived the same and voluntarily submitted themselves to the jurisdiction of
the appellate body.
Anent the first issue raised in their original petition, petitioners contend that
NLRC committed grave abuse of discretion amounting to lack or excess of
jurisdiction in unilaterally increasing the amount of severance pay granted by
the labor arbiter. They claim that this was not supported by substantial
evidence since it was based simply on the self-serving allegation of
respondents that their monthly take-home pay was not lower than $240.00.
On the second issue, petitioners aver that NOWM cannot make legal
representations in behalf of individual respondents who should, instead, be
bound by the decision of the union (AAFES Taxi Drivers Association) of which
they were members.
As to the third issue, petitioners incessantly insist that Sergio F. Naguiat
Enterprises, Inc. is a separate and distinct juridical entity which cannot be held
jointly and severally liable for the obligations of CFTI. And similarly, Sergio F.
Naguiat and Antolin Naguiat were merely officers and stockholders of CFTI
and, thus, could not be held personally accountable for corporate debts.
Lastly, Sergio and Antolin Naguiat assail the Resolution of NLRC holding
them solidarily liable despite not having been impleaded as parties to the
complaint.
Individual respondents filed a comment separate from that of NOWM. In
sum, both aver that petitioners had the opportunity but failed to refute, the taxi
drivers' claim of having an average monthly earning of $240.00; that
individual respondents became members of NOWM after disaffiliating
themselves from the AAFES Taxi Drivers Association which, through the
manipulations of its President Eduardo Castillo, unconscionably compromised
their separation pay; and that Naguiat Enterprises, being their indirect
employer, is solidarily liable under the law for violation of the Labor Code, in
this case, for nonpayment of their separation pay.
The Solicitor General unqualifiedly supports the allegations of private
respondents. In addition, he submits that the separate personalities of
respondent corporations and their officers should be disregarded and
considered one and the same as these were used to perpetrate injustice to
their employees.
The Court's Ruling
As will be discussed below, the petition is partially meritorious.
First Issue: Amount of Separation Pay
Firmly, we reiterate the rule that in a petition for certiorari filed pursuant to
Rule 65 of the Rules of Court, which is the only way a labor case may reach
the Supreme Court, the petitioner/s must clearly show that the NLRC acted
without or in excess of jurisdiction or with grave abuse of discretion.
[12]

Long-standing and well-settled in Philippine jurisprudence is the judicial
dictum that findings of fact of administrative agencies and quasi-judicial
bodies, which have acquired expertise because their jurisdiction is confined to
specific matters, are generally accorded not only great respect but even
finality; and are binding upon this Court unless there is a showing of grave
abuse of discretion, or where it is clearly shown that they were arrived at
arbitrarily or in disregard of the evidence on record.
[13]

Nevertheless, this Court carefully perused the records of the instant case if
only to determine whether public respondent committed grave abuse of
discretion, amounting to lack of jurisdiction, in granting the clamor of private
respondents that their separation pay should be based on the amount of
$240.00, allegedly their minimum monthly earnings as taxi drivers of
petitioners.
In their amended complaint before the Regional Arbitration Branch in San
Fernando, Pampanga, herein private respondents set forth in detail the work
schedule and financial arrangement they had with their employer. Therefrom
they inferred that their monthly take-home pay amounted to not less than
$240.00. Herein petitioners did not bother to refute nor offer any evidence to
controvert said allegations. Remaining undisputed, the labor arbiter adopted
such facts in his decision. Petitioners did not even appeal from the decision of
the labor arbiter nor manifest any error in his findings and conclusions. Thus,
petitioners are in estoppel for not having questioned such facts when they had
all opportunity to do so. Private respondents, like petitioners, are bound by the
factual findings of Respondent Commission.
Petitioners also claim that the closure of their taxi business was due to
great financial losses brought about by the eruption of Mt. Pinatubo which
made the roads practically impassable to their taxicabs. Likewise well-settled
is the rule that business losses or financial reverses, in order to sustain
retrenchment of personnel or closure of business and warrant exemption from
payment of separation pay, must be proved with clear and satisfactory
evidence.
[14]
The records, however, are devoid of such evidence.
The labor arbiter; as affirmed by NLRC, correctly found that petitioners
stopped their taxi business within Clark Air Base because of the phase-out of
U.S. military presence thereat. It was not due to any great financial loss
because petitioners' taxi business was earning profitably at the time of its
closure.
With respect to the amount of separation pay that should be granted,
Article 283 of the Labor Code provides:
"x x x In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half () month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1 ) whole year."
Considering the above, we find that NLRC did not commit grave abuse of
discretion in ruling that individual respondents were entitled to separation
pay
[15]
in the amount $120.00 (one-half of $240.00 monthly pay) or its peso
equivalent for every year of service.
Second Issue: NOWM's Personality to
Represent Individual Respondents-Employees
On the question of NOWM's authority to represent private respondents, we
hold petitioners in estoppel for not having seasonably raised this issue before
the labor arbiter or the NLRC. NOWM was already a party-litigant as the
organization representing the taxi driver-complainants before the labor arbiter.
But petitioners who were party-respondents in said complaint did not assail
the juridical personality of NOWM and the validity of its representations in
behalf of the complaining taxi drivers before the quasi-judicial
bodies. Therefore, they are now estopped from raising such question before
this Court. In any event, petitioners acknowledged before this Court that the
taxi drivers allegedly represented by NOWM, are themselves parties in this
case.
[16]

Third Issue: Liability of Petitioner-
Corporations and Their Respective Officers
The resolution of this issue involves another factual finding that Naguiat
Enterprises actually managed, supervised and controlled employment terms
of the taxi drivers, making it their indirect employer. As adverted to earlier,
factual findings of quasi-judicial bodies are binding upon the court in the
absence of a showing of grave abuse of discretion.
Unfortunately, the NLRC did not discuss or give any explanation for
holding Naguiat Enterprises and its officers jointly and severally liable in
discharging CFTI's liability for payment of separation pay. We again remind
those concerned that decisions, however concisely written, must distinctly and
clearly set forth the facts and law upon which they are based.
[17]
This rule
applies as well to dispositions by quasi-judicial and administrative bodies.
Naguiat Enterprises Not Liable
In impleading Naguiat Enterprises as solidarily liable for the obligations of
CFTI, respondents rely on Articles 106,
[18]
107
[19]
and 109
[20]
of the Labor Code.
Based on factual submissions of the parties, the labor arbiter, however,
found that individual respondents were regular employees of CFTI who
received wages on a boundary or commission basis.
We find no reason to make a contrary finding. Labor-only contracting
exists where: (1) the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machinery,
and work premises, among others; and (2) the workers recruited and placed
by such person are performing activities which are directly related to the
principal business of the employer.
[21]
Independent contractors, meanwhile, are
those who exercise independent employment, contracting to do a piece of
work according to their own methods without being subject to control of their
employer except as to the result of their work.
[22]

From the evidence proffered by both parties, there is no substantial basis
to hold that Naguiat Enterprises is an indirect employer of individual
respondents much less a labor only contractor. On the contrary, petitioners
submitted documents such as the drivers' applications for employment with
CFTI,
[23]
and social security remittances
[24]
and payroll
[25]
of Naguiat Enterprises
showing that none of the individual respondents were its
employees. Moreover, in the contract
[26]
between CFTI and AAFES, the
former, as concessionaire, agreed to purchase from AAFES for a certain
amount within a specified period a fleet of vehicles to be "ke(pt) on the road"
by CFTI, pursuant to their concessionaire's contract. This indicates that CFTI
became the owner of the taxicabs which became the principal investment and
asset of the company.
Private respondents failed to substantiate their claim that Naguiat
Enterprises managed, supervised and controlled their employment. It
appears that they were confused on the personalities of Sergio F. Naguiat as
an individual who was the president of CFTI, and Sergio F. Naguiat
Enterprises, Inc., as a separate corporate entity with a separate
business. They presumed that Sergio F. Naguiat, who was at the same time
a stockholder and director
[27]
of Sergio F. Naguiat Enterprises, Inc., was
managing and controlling the taxi business on behalf of the latter. A closer
scrutiny and analysis of the records, however, evince the truth of the
matter: that Sergio F. Naguiat, in supervising the-taxi drivers and determining
their employment terms, was rather carrying out his responsibilities as
president of CFTI. Hence, Naguiat Enterprises as a separate corporation
does not appear to be involved at all in the taxi business.
To illustrate further, we refer to the testimony of a driver-claimant on cross
examination.
"Atty. Suarez
Is it not true that you applied not with Sergio F. Naguiat but with Clark Field Taxi?
Witness
I applied for (sic) Sergio F. Naguiat
Atty. Suarez
Sergio F. Naguiat as an individual or the corporation?
Witness
'Sergio F. Naguiat na tao.'
Atty. Suarez
Who is Sergio F. Naguiat?
Witness
He is the one managing the Sergio F. Naguiat Enterprises and he is the one whom
we believe as our employer.
Atty. Suarez
What is exactly the position of Sergio F. Naguiat with the Sergio F. Naguiat
Enterprises?
Witness
He is the owner, sir.
Atty. Suarez
How about with Clark Field Taxi Incorporated what is the position of Mr. Naguiat?
Witness
What I know is that he is a concessionaire.
xxx xxx
xxx
Atty. Suarez
But do you also know that Sergio F. Naguiat is the President of Clark Field Taxi,
Incorporated?
Witness
Yes. sir.
Atty. Suarez
How about Mr. Antolin Naguiat what is his role in the taxi services, the operation of
the Clark Field Taxi, Incorporated?
Witness
He is the vice president."
[28]

And, although the witness insisted that Naguiat Enterprises was his
employer, he could not deny that he received his salary from the office of
CFTI inside the base.
[29]

Another driver-claimant admitted, upon the prodding of counsel for the
corporations, that Naguiat Enterprises was in the trading business while CFTI
was in taxi services.
[30]

In addition, the Constitution
[31]
of CFTI-AAFES Taxi Drivers Association
which, admittedly, was the union of individual respondents while still working
at Clark Air Base, states that members thereof are the employees of CFTI and
"(f)or collective bargaining purposes, the definite employer is the Clark Field
Taxi Inc."
From the foregoing, the ineludible conclusion is that CFTI was the actual
and direct employer of individual respondents, and that Naguiat Enterprises
was neither their indirect employer nor labor-only contractor. It was not
involved at all in the taxi business.
CFTI president solidarily liable
Petitioner-corporations would likewise want to avoid the solidary liability of
their officers. To bolster their position, Sergio F. Naguiat and Antolin T.
Naguiat specifically aver that they were denied due process since they were
not parties to the complaint below.
[32]
In the broader interest of justice, we,
however, hold that Sergio F. Naguiat, in his capacity as president of CFTI,
cannot be exonerated from joint and several liability in the payment of
separation pay to individual respondents.
A.C. Ransom Labor Union-CCLU vs. NLRC
[33]
is the case in point. A.C.
Ransom Corporation was a family corporation, the stockholders of which were
members of the Hernandez family. In 1973, it filed an application for
clearance to close or cease operations, which was duly granted by the
Ministry of Labor and Employment, without prejudice to the right of employees
to seek redress of grievance, if any. Backwages of 22 employees, who
engaged in a strike prior to the closure, were subsequently computed
at P164,984.00. Up to September 1976, the union filed about ten (10)
motions for execution against the corporation, but none could be
implemented, presumably for failure to find leviable assets of said
corporation. In its last motion for execution, the union asked that officers and
agents of the company be held personally liable for payment of the
backwages. This was granted by the labor arbiter. In the corporation's appeal
to the NLRC, one of the issues raised was: "Is the judgment against a
corporation to reinstate its dismissed employees with backwages, enforceable
against its officer and agents, in their individual, private and personal
capacities, who were not parties in the case where the judgment was
rendered?" The NLRC answered in the negative, on the ground that officers
of a corporation are not liable personally for official acts unless they exceeded
the scope of their authority.
On certiorari, this Court reversed the NLRC and upheld the labor
arbiter. In imposing joint and several liability upon the company president, the
Court, speaking through Mme. Justice Ameurfina Melencio-Herrera,
ratiocinated this wise:
"(b) How can the foregoing (Articles 265 and 273 of the Labor Code)
provisions be implemented when the employer is a corporation? The answer
is found in Article 212(c) of the Labor Code which provides:
'(c) 'Employer' includes any person acting in the interest of an employer,
directly or indirectly. The term shall not include any labor organization or any of its
officers or agents except when acting as employer.'
The foregoing was culled from Section 2 of RA 602, the Minimum Wage
Law. Since RANSOM is an artificial person, it must have an officer who can
be presumed to be the employer, being the 'person acting in the interest of
(the) employer' RANSOM. The corporation, only in the technical sense, is
the employer.
The responsible officer of an employer corporation can be held personally, not
to say even criminally, liable for nonpayment of back wages. That is the
policy of the law. x x x
(c) If the policy of the law were otherwise, the corporation employer can have
devious ways for evading payment of back wages. x x x
(d) The record does not clearly identify 'the officer or officers' of RANSOM
directly responsible for failure to pay the back wages of the 22 strikers. In the
absence of definite proof in that regard, we believe it should be presumed that the
responsible officer is the President of the corporation who can be deemed the chief
operation officer thereof. Thus, in RA 602, criminal responsibility is with
the 'Manager or in his default, the person acting as such.' In RANSOM, the President
appears to be the Manager." (Underscoring supplied.)
Sergio F. Naguiat, admittedly, was the president of CFTI who actively
managed the business. Thus, applying the ruling in A. C. Ransom, he falls
within the meaning of an "employer" as contemplated by the Labor Code, who
may be held jointly and severally liable for the obligations of the corporation to
its dismissed employees.
Moreover, petitioners also conceded that both CFTI and Naguiat
Enterprises were "close family corporations"
[34]
owned by the Naguiat
family. Section 100, paragraph 5, (under Title XII on Close Corporations) of
the Corporation Code, states:
"(5) To the extent that the stockholders are actively engage(d) in the
management or operation of the business and affairs of a close corporation,
the stockholders shall be held to strict fiduciary duties to each other and
among themselves. Said stockholders shall be personally liable for corporate
torts unless the corporation has obtained reasonably adequate liability
insurance." (underscoring supplied)
Nothing in the records show whether CFTI obtained "reasonably adequate
liability insurance;" thus, what remains is to determine whether there was
corporate tort.
Our jurisprudence is wanting as to the definite scope of "corporate
tort." Essentially, "tort" consists in the violation of a right given or the omission
of a duty imposed by law.
[35]
Simply stated, tort is a breach of a legal
duty.
[36]
Article 283 of the Labor Code mandates the employer to grant
separation pay to employees in case of closure or cessation of operations of
establishment or undertaking not due to serious business losses or financial
reverses, which is the condition obtaining at bar. CFTI failed to comply with
this law-imposed duty or obligation. Consequently, its stockholder who was
actively engaged in the management or operation of the business should be
held personally liable.
Furthermore, in MAM Realty Development vs. NLRC,
[37]
the Court
recognized that a director or officer may still be held solidarily liable with a
corporation by specific provision of law. Thus:
"x x x A corporation, being a juridical entity, may act only through its
directors, officers and employees. Obligations incurred by them, acting as
such corporate agents, are not theirs but the direct accountabilities of the
corporation they represent. True, solidary liabilities may at times be incurred
but only when exceptional circumstances warrant such as, generally, in the
following cases:
xxx xxx
xxx
4. When a director, trustee or officer is made, by specific provision of law,
personally liable for his corporate action." (footnotes omitted)
As pointed out earlier, the fifth paragraph of Section 100 of the
Corporation Code specifically imposes personal liability upon the stockholder
actively managing or operating the business and affairs of the close
corporation.
In fact, in posting the surety bond required by this Court for the issuance of
a temporary restraining order enjoining the execution of the assailed NLRC
Resolutions, only Sergio F. Naguiat, in his individual and personal capacity,
principally bound himself to comply with the obligation thereunder, i.e., "to
guarantee the payment to private respondents of any damages which they
may incur by reason of the issuance of a temporary restraining order sought, if
it should be finally adjudged that said principals were not entitled thereto."
[38]

The Court here finds no application to the rule that a corporate officer
cannot be held solidarily liable with a corporation in the absence of evidence
that he had acted in bad faith or with malice.
[39]
In the present case, Sergio
Naguiat is held solidarily liable for corporate tort because he had actively
engaged in the management and operation of CFTI, a close corporation.
Antolin Naguiat not personally liable
Antolin T. Naguiat was the vice president of the CFTI. Although he carried
the title of "general manager" as well, it had not been shown that he had acted
in such capacity. Furthermore, no evidence on the extent of his participation in
the management or operation of the business was proffered. In this light, he
cannot be held solidarily liable for the obligations of CFTI and Sergio Naguiat
to the private respondents.
Fourth Issue: No Denial of Due Process
Lastly, in petitioners' Supplement to their original petition, they assail the
NLRC Resolution holding Sergio F. Naguiat and Antolin T. Naguiat jointly and
severally liable with petitioner-corporations in the payment of separation pay,
averring denial of due process since the individual Naguiats were not
impleaded as parties to the complaint.
We advert to the case of A.C. Ransom once more. The officers of the
corporation were not parties to the case when the judgment in favor of the
employees was rendered. The corporate officers raised this issue when the
labor arbiter granted the motion of the employees to enforce the judgment
against them. In spite of this, the Court held the corporation president
solidarily liable with the corporation.
Furthermore, Sergio and Antolin Naguiat voluntarily submitted themselves
to the jurisdiction of the labor arbiter when they, in their individual capacities,
filed a position paper
[40]
together with CFTI, before the arbiter. They cannot
now claim to have been denied due process since they availed of the
opportunity to present their positions.
WHEREFORE, the foregoing premises considered, the petition is PARTLY
GRANTED. The assailed February 28, 1994 Resolution of the NLRC is
hereby MODIFIED as follows:
(1) Petitioner Clark Field Taxi, Incorporated, and Sergio F. Naguiat, president and
co-owner thereof, are ORDERED to pay, jointly and severally, the individual
respondents their separation pay computed at US$120.00 for every year of service, or
its peso equivalent at the time of payment or satisfaction of the judgment;
(2) Petitioner Sergio F. Naguiat Enterprises, Incorporated, and Antolin T. Naguiat
are ABSOLVED from liability in the payment of separation pay to individual
respondents.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.


G.R. No. L-27155 May 18, 1978
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE COURT OF APPEALS, RITA GUECO TAPNIO, CECILIO GUECO and THE PHILIPPINE
AMERICAN GENERAL INSURANCE COMPANY, INC., respondents.
Medina, Locsin, Corua, & Sumbillo for petitioner.
Manuel Lim & Associates for private respondents.

ANTONIO, J.:
Certiorari to review the decision of the Court of Appeals which affirmed the judgment of the Court of
First Instance of Manila in Civil Case No. 34185, ordering petitioner, as third-party defendant, to pay
respondent Rita Gueco Tapnio, as third-party plaintiff, the sum of P2,379.71, plus 12% interest per
annum from September 19, 1957 until the same is fully paid, P200.00 attorney's fees and costs, the
same amounts which Rita Gueco Tapnio was ordered to pay the Philippine American General
Insurance Co., Inc., to be paid directly to the Philippine American General Insurance Co., Inc. in full
satisfaction of the judgment rendered against Rita Gueco Tapnio in favor of the former; plus P500.00
attorney's fees for Rita Gueco Tapnio and costs. The basic action is the complaint filed by
Philamgen (Philippine American General Insurance Co., Inc.) as surety against Rita Gueco Tapnio
and Cecilio Gueco, for the recovery of the sum of P2,379.71 paid by Philamgen to the Philippine
National Bank on behalf of respondents Tapnio and Gueco, pursuant to an indemnity agreement.
Petitioner Bank was made third-party defendant by Tapnio and Gueco on the theory that their failure
to pay the debt was due to the fault or negligence of petitioner.
The facts as found by the respondent Court of Appeals, in affirming the decision of the Court of First
Instance of Manila, are quoted hereunder:
Plaintiff executed its Bond, Exh. A, with defendant Rita Gueco Tapnio as principal, in
favor of the Philippine National Bank Branch at San Fernando, Pampanga, to
guarantee the payment of defendant Rita Gueco Tapnio's account with said Bank. In
turn, to guarantee the payment of whatever amount the bonding company would pay
to the Philippine National Bank, both defendants executed the indemnity agreement,
Exh. B. Under the terms and conditions of this indemnity agreement, whatever
amount the plaintiff would pay would earn interest at the rate of 12% per annum, plus
attorney's fees in the amount of 15 % of the whole amount due in case of court
litigation.
The original amount of the bond was for P4,000.00; but the amount was later
reduced to P2,000.00.
It is not disputed that defendant Rita Gueco Tapnio was indebted to the bank in the
sum of P2,000.00, plus accumulated interests unpaid, which she failed to pay despite
demands. The Bank wrote a letter of demand to plaintiff, as per Exh. C; whereupon,
plaintiff paid the bank on September 18, 1957, the full amount due and owing in the
sum of P2,379.91, for and on account of defendant Rita Gueco's obligation (Exhs. D
and D-1).
Plaintiff, in turn, made several demands, both verbal and written, upon defendants
(Exhs. E and F), but to no avail.
Defendant Rita Gueco Tapnio admitted all the foregoing facts. She claims, however,
when demand was made upon her by plaintiff for her to pay her debt to the Bank,
that she told the Plaintiff that she did not consider herself to be indebted to the Bank
at all because she had an agreement with one Jacobo-Nazon whereby she had
leased to the latter her unused export sugar quota for the 1956-1957 agricultural
year, consisting of 1,000 piculs at the rate of P2.80 per picul, or for a total of
P2,800.00, which was already in excess of her obligation guaranteed by plaintiff's
bond, Exh. A. This lease agreement, according to her, was with the knowledge of the
bank. But the Bank has placed obstacles to the consummation of the lease, and the
delay caused by said obstacles forced 'Nazon to rescind the lease contract. Thus,
Rita Gueco Tapnio filed her third-party complaint against the Bank to recover from
the latter any and all sums of money which may be adjudged against her and in favor
of the plaitiff plus moral damages, attorney's fees and costs.
Insofar as the contentions of the parties herein are concerned, we quote with
approval the following findings of the lower court based on the evidence presented at
the trial of the case:
It has been established during the trial that Mrs. Tapnio had an export
sugar quota of 1,000 piculs for the agricultural year 1956-1957 which
she did not need. She agreed to allow Mr. Jacobo C. Tuazon to use
said quota for the consideration of P2,500.00 (Exh. "4"-Gueco). This
agreement was called a contract of lease of sugar allotment.
At the time of the agreement, Mrs. Tapnio was indebted to the
Philippine National Bank at San Fernando, Pampanga. Her
indebtedness was known as a crop loan and was secured by a
mortgage on her standing crop including her sugar quota allocation
for the agricultural year corresponding to said standing crop. This
arrangement was necessary in order that when Mrs. Tapnio harvests,
the P.N.B., having a lien on the crop, may effectively enforce
collection against her. Her sugar cannot be exported without sugar
quota allotment Sometimes, however, a planter harvest less sugar
than her quota, so her excess quota is utilized by another who pays
her for its use. This is the arrangement entered into between Mrs.
Tapnio and Mr. Tuazon regarding the former's excess quota for 1956-
1957 (Exh. "4"-Gueco).
Since the quota was mortgaged to the P.N.B., the contract of lease
had to be approved by said Bank, The same was submitted to
the branch manager at San Fernando, Pampanga. The latter
required the parties to raise the consideration of P2.80 per picul or a
total of P2,800.00 (Exh. "2-Gueco") informing them that "the minimum
lease rental acceptable to the Bank, is P2.80 per picul." In a letter
addressed to the branch manager on August 10, 1956, Mr. Tuazon
informed the manager that he was agreeable to raising the
consideration to P2.80 per picul. He further informed the manager
that he was ready to pay said amount as the funds were in his folder
which was kept in the bank.
Explaining the meaning of Tuazon's statement as to the funds, it was
stated by him that he had an approved loan from the bank but he had
not yet utilized it as he was intending to use it to pay for the quota.
Hence, when he said the amount needed to pay Mrs. Tapnio was in
his folder which was in the bank, he meant and the manager
understood and knew he had an approved loan available to be used
in payment of the quota. In said Exh. "6-Gueco", Tuazon also
informed the manager that he would want for a notice from the
manager as to the time when the bank needed the money so that
Tuazon could sign the corresponding promissory note.
Further Consideration of the evidence discloses that when the branch manager of
the Philippine National Bank at San Fernando recommended the approval of the
contract of lease at the price of P2.80 per picul (Exh. 1 1-Bank), whose
recommendation was concurred in by the Vice-president of said Bank, J. V.
Buenaventura, the board of directors required that the amount be raised to 13.00 per
picul. This act of the board of directors was communicated to Tuazon, who in turn
asked for a reconsideration thereof. On November 19, 1956, the branch manager
submitted Tuazon's request for reconsideration to the board of directors with another
recommendation for the approval of the lease at P2.80 per picul, but the board
returned the recommendation unacted upon, considering that the current price
prevailing at the time was P3.00 per picul (Exh. 9-Bank).
The parties were notified of the refusal on the part of the board of directors of the
Bank to grant the motion for reconsideration. The matter stood as it was until
February 22, 1957, when Tuazon wrote a letter (Exh. 10-Bank informing the Bank
that he was no longer interested to continue the deal, referring to the lease of sugar
quota allotment in favor of defendant Rita Gueco Tapnio. The result is that the latter
lost the sum of P2,800.00 which she should have received from Tuazon and which
she could have paid the Bank to cancel off her indebtedness,
The court below held, and in this holding we concur that failure of the negotiation for
the lease of the sugar quota allocation of Rita Gueco Tapnio to Tuazon was due to
the fault of the directors of the Philippine National Bank, The refusal on the part of
the bank to approve the lease at the rate of P2.80 per picul which, as stated above,
would have enabled Rita Gueco Tapnio to realize the amount of P2,800.00 which
was more than sufficient to pay off her indebtedness to the Bank, and its insistence
on the rental price of P3.00 per picul thus unnecessarily increasing the value by only
a difference of P200.00. inevitably brought about the rescission of the lease contract
to the damage and prejudice of Rita Gueco Tapnio in the aforesaid sum of
P2,800.00. The unreasonableness of the position adopted by the board of directors
of the Philippine National Bank in refusing to approve the lease at the rate of P2.80
per picul and insisting on the rate of P3.00 per picul, if only to increase the retail
value by only P200.00 is shown by the fact that all the accounts of Rita Gueco
Tapnio with the Bank were secured by chattel mortgage on standing crops,
assignment of leasehold rights and interests on her properties, and surety bonds,
aside from the fact that from Exh. 8-Bank, it appears that she was offering to execute
a real estate mortgage in favor of the Bank to replace the surety bond This statement
is further bolstered by the fact that Rita Gueco Tapnio apparently had the means to
pay her obligation fact that she has been granted several value of almost P80,000.00
for the agricultural years from 1952 to 56.
1

Its motion for the reconsideration of the decision of the Court of Appeals having been denied,
petitioner filed the present petition.
The petitioner contends that the Court of Appeals erred:
(1) In finding that the rescission of the lease contract of the 1,000 piculs of sugar quota allocation of
respondent Rita Gueco Tapnio by Jacobo C. Tuazon was due to the unjustified refusal of petitioner
to approve said lease contract, and its unreasonable insistence on the rental price of P3.00 instead
of P2.80 per picul; and
(2) In not holding that based on the statistics of sugar price and prices of sugar quota in the
possession of the petitioner, the latter's Board of Directors correctly fixed the rental of price per picul
of 1,000 piculs of sugar quota leased by respondent Rita Gueco Tapnio to Jacobo C. Tuazon at
P3.00 per picul.
Petitioner argued that as an assignee of the sugar quota of Tapnio, it has the right, both under its
own Charter and under the Corporation Law, to safeguard and protect its rights and interests under
the deed of assignment, which include the right to approve or disapprove the said lease of sugar
quota and in the exercise of that authority, its
Board of Directors necessarily had authority to determine and fix the rental price per picul of the
sugar quota subject of the lease between private respondents and Jacobo C. Tuazon. It argued
further that both under its Charter and the Corporation Law, petitioner, acting thru its Board of
Directors, has the perfect right to adopt a policy with respect to fixing of rental prices of export sugar
quota allocations, and in fixing the rentals at P3.00 per picul, it did not act arbitrarily since the said
Board was guided by statistics of sugar price and prices of sugar quotas prevailing at the time. Since
the fixing of the rental of the sugar quota is a function lodged with petitioner's Board of Directors and
is a matter of policy, the respondent Court of Appeals could not substitute its own judgment for that
of said Board of Directors, which acted in good faith, making as its basis therefore the prevailing
market price as shown by statistics which were then in their possession.
Finally, petitioner emphasized that under the appealed judgment, it shall suffer a great injustice
because as a creditor, it shall be deprived of a just claim against its debtor (respondent Rita Gueco
Tapnio) as it would be required to return to respondent Philamgen the sum of P2,379.71, plus
interest, which amount had been previously paid to petitioner by said insurance company in behalf
of the principal debtor, herein respondent Rita Gueco Tapnio, and without recourse against
respondent Rita Gueco Tapnio.
We must advert to the rule that this Court's appellate jurisdiction in proceedings of this nature is
limited to reviewing only errors of law, accepting as conclusive the factual fin dings of the Court of
Appeals upon its own assessment of the evidence.
2

The contract of lease of sugar quota allotment at P2.50 per picul between Rita Gueco Tapnio and
Jacobo C. Tuazon was executed on April 17, 1956. This contract was submitted to the Branch
Manager of the Philippine National Bank at San Fernando, Pampanga. This arrangement was
necessary because Tapnio's indebtedness to petitioner was secured by a mortgage on her standing
crop including her sugar quota allocation for the agricultural year corresponding to said standing
crop. The latter required the parties to raise the consideration to P2.80 per picul, the minimum lease
rental acceptable to the Bank, or a total of P2,800.00. Tuazon informed the Branch Manager, thru a
letter dated August 10, 1956, that he was agreeable to raising the consideration to P2.80 per picul.
He further informed the manager that he was ready to pay the said sum of P2,800.00 as the funds
were in his folder which was kept in the said Bank. This referred to the approved loan of Tuazon
from the Bank which he intended to use in paying for the use of the sugar quota. The Branch
Manager submitted the contract of lease of sugar quota allocation to the Head Office on September
7, 1956, with a recommendation for approval, which recommendation was concurred in by the Vice-
President of the Bank, Mr. J. V. Buenaventura. This notwithstanding, the Board of Directors of
petitioner required that the consideration be raised to P3.00 per picul.
Tuazon, after being informed of the action of the Board of Directors, asked for a reconsideration
thereof. On November 19, 1956, the Branch Manager submitted the request for reconsideration and
again recommended the approval of the lease at P2.80 per picul, but the Board returned the
recommendation unacted, stating that the current price prevailing at that time was P3.00 per picul.
On February 22, 1957, Tuazon wrote a letter, informing the Bank that he was no longer interested in
continuing the lease of sugar quota allotment. The crop year 1956-1957 ended and Mrs. Tapnio
failed to utilize her sugar quota, resulting in her loss in the sum of P2,800.00 which she should have
received had the lease in favor of Tuazon been implemented.
It has been clearly shown that when the Branch Manager of petitioner required the parties to raise
the consideration of the lease from P2.50 to P2.80 per picul, or a total of P2,800-00, they readily
agreed. Hence, in his letter to the Branch Manager of the Bank on August 10, 1956, Tuazon
informed him that the minimum lease rental of P2.80 per picul was acceptable to him and that he
even offered to use the loan secured by him from petitioner to pay in full the sum of P2,800.00 which
was the total consideration of the lease. This arrangement was not only satisfactory to the Branch
Manager but it was also approves by Vice-President J. V. Buenaventura of the PNB. Under that
arrangement, Rita Gueco Tapnio could have realized the amount of P2,800.00, which was more
than enough to pay the balance of her indebtedness to the Bank which was secured by the bond of
Philamgen.
There is no question that Tapnio's failure to utilize her sugar quota for the crop year 1956-1957 was
due to the disapproval of the lease by the Board of Directors of petitioner. The issue, therefore, is
whether or not petitioner is liable for the damage caused.
As observed by the trial court, time is of the essence in the approval of the lease of sugar quota
allotments, since the same must be utilized during the milling season, because any allotment which
is not filled during such milling season may be reallocated by the Sugar Quota Administration to
other holders of allotments.
3
There was no proof that there was any other person at that time willing to
lease the sugar quota allotment of private respondents for a price higher than P2.80 per picul. "The fact
that there were isolated transactions wherein the consideration for the lease was P3.00 a picul",
according to the trial court, "does not necessarily mean that there are always ready takers of said price. "
The unreasonableness of the position adopted by the petitioner's Board of Directors is shown by the fact
that the difference between the amount of P2.80 per picul offered by Tuazon and the P3.00 per picul
demanded by the Board amounted only to a total sum of P200.00. Considering that all the accounts of
Rita Gueco Tapnio with the Bank were secured by chattel mortgage on standing crops, assignment of
leasehold rights and interests on her properties, and surety bonds and that she had apparently "the
means to pay her obligation to the Bank, as shown by the fact that she has been granted several sugar
crop loans of the total value of almost P80,000.00 for the agricultural years from 1952 to 1956", there was
no reasonable basis for the Board of Directors of petitioner to have rejected the lease agreement because
of a measly sum of P200.00.
While petitioner had the ultimate authority of approving or disapproving the proposed lease since the
quota was mortgaged to the Bank, the latter certainly cannot escape its responsibility of observing,
for the protection of the interest of private respondents, that degree of care, precaution and vigilance
which the circumstances justly demand in approving or disapproving the lease of said sugar quota.
The law makes it imperative that every person "must in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe honesty and good
faith,
4
This petitioner failed to do. Certainly, it knew that the agricultural year was about to expire, that by
its disapproval of the lease private respondents would be unable to utilize the sugar quota in question. In
failing to observe the reasonable degree of care and vigilance which the surrounding circumstances
reasonably impose, petitioner is consequently liable for the damages caused on private respondents.
Under Article 21 of the New Civil Code, "any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall compensate the latter for the
damage." The afore-cited provisions on human relations were intended to expand the concept of torts in
this jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is
impossible for human foresight to specifically provide in the statutes.
5

A corporation is civilly liable in the same manner as natural persons for torts, because "generally
speaking, the rules governing the liability of a principal or master for a tort committed by an agent or
servant are the same whether the principal or master be a natural person or a corporation, and
whether the servant or agent be a natural or artificial person. All of the authorities agree that a
principal or master is liable for every tort which he expressly directs or authorizes, and this is just as
true of a corporation as of a natural person, A corporation is liable, therefore, whenever a tortious act
is committed by an officer or agent under express direction or authority from the stockholders or
members acting as a body, or, generally, from the directors as the governing body."
6

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is hereby AFFIRMED.
Fernando, Aquino, Concepcion, Jr., and Santos, JJ., concur.


Separate Opinions

BARREDO, J., concurring:
concurs on the basis of Article 19 of the Civil Code, or at least, of equity. He reserves his opinion on
the matter of torts relied upon in the main opinion.


Separate Opinions
BARREDO, J., concurring:
concurs on the basis of Article 19 of the Civil Code, or at least, of equity. He reserves his opinion on
the matter of torts relied upon in the main opinion.

G.R. No. L-13114, Silva et al. v. Peralta, 110 Phil. 57, 2 SCRA 1025
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

November 25, 1960

G.R. No. L-13114
ELENITA LEDESMA SILVA, ET AL., plaintiffs-appellees,
vs.
ESTHER PERALTA, defendant-appellee.

E.B. Garcia Law Office & Ledesma, Puno, Guytingco, Antonio and Associates for appellants.
Quijano, Alberto, Santos, Corrales and Nitorreda for appellee.

REYES, J.B.L., J.:

Direct appeal on both questions of fact and law from the decision of the Court of First Instance of Davao,
the amount involved being more than P200,000.00.

This action was commenced in the Court of First Instance of Davao on December 27, 1954 by Elenita
Ledesma Silva, assisted by her husband Saturnino R. Silva, against Esther Peralta, seeking to enjoin the
latter from representing herself as Mrs. Esther Peralta Silva; to order said defendant to pay Elenita Silva
the sum of P250,000.00 as moral, nominal and exemplary damages, allegedly suffered by reason of such
misrepresentation, plus P10,000.00 byway of the attorney's fees. Defendant's answer contains both
specific denials and counterclaims for actual damages and fees due to harassment and moral damages
caused by Silva's marital relation with defendant, without disclosing to her that he was married; and his
subsequent refusal to acknowledge their offspring.

After trial the lower court rendered judgment, the dispositive portion of which reads, to wit:

EN SU VIRTUD, el jusgado dicta decision en esta causa contra de los demandantes, y a favor de la
demanda;
a) Ordena el sobreseimiento de la demanda; en autos por falta de meritos;
b) Condena a los demandantes, mancumonada y solidariamente a pagar a la demanda la suma de
P30,000.00 por los conceptos indicados;
c) Condena a los demandantes a pagar la suma de P5,000.00 por honorarios de abogado; y
d) Las costas del juicio.

ASI SE ORDENA.

The findings of the fact of the lower court may be briefly summarized as follows:

At the outbreak of the war in 1941, the defendant Esther Peralta abandoned her studies as a student
nurse at the Zamboanga General Hospital. In June of 1942, she resided with her sister, Mrs. Pedro Pia, in
Maco, Tagum, Mabini Davao. Saturnino Silva, then an American citizen and an officer of the United
States Army and married to one Prescilla Isabel of Australia, had been ordered to sent to the Philippines
during the enemy occupation to help unite the guerillas in their fight for freedom. In 1944, he was the
commanding officer of the 130th Regiment, under the overall command of Colonel Claro Laureta of the
107th Division, with general headquarters at Magugpo, Tagum, Davao.

Sometime during the year 1944, Florence, a younger sister of the defendant, was accused of having
collaborated with the enemy, and for this she was arrested, and accompanied by Esther, brought to
Anibongan and later to the general headquarters at Magugpo for investigation that Silva first met Esther
Florence was exonorated of the charges made against her and was ordered released, but with the
advice that she should not return to Maco for the time being. Heeding such advice, Florence and her
sister, appellee herein, went to live with the spouses Mr. and Mrs. Camilo Doctolero at Tipas, Magugpo,
Davao.

Silva started to frequent the house of the Doctoleros, and soon professed love for Esther. Having been
made to believe that he was single, she accepted his marriage proposal; and the two were married on
January 14, 1945 by one Father Cote on the occasion of a house blessing. No documents of marriage
were prepared nor executed, allegedly because there were no available printed forms for the purpose.
Hence, the lovers lived together as husband and wife. From the "marriage", a child, named Saturnino
Silva, Jr., was born.

On May 8, 1945, Silva sustained serious wounds in the battle of Ising, for which reason, he was
transferred to Leyte, and later to the United States, he divorced Precilla Isabel and later, on May 9,
1948, contracted marriage with plaintiff Elenita Ledesma Silva.

Upon his return to the Philippines, appellee Esther Peralta demanded support for their child, and, his
refusal, instituted a suit for support in the Court of First Instance of Manila. Thereupon, the present
action was filed against Esther, and another suit against her was instituted in Cotabato.

Except for the statement that a marriage actually took place between Saturnino Silva and Esther Peralta;
the evidence on record fully supports the foregoing findings of fact the lower court. No evidence was
offered, other than the testimonies of the defendant herself and her counsel, Atty. Juan Quijano, to
prove any such alleged marriage, although there is convincing proof that the defendant and Saturnino
Silva, for a time, actually lived together as common-law husband and wife. But the witness'
asseverations regarding the marriage, taken by themselves and considered with other circumstances
appearing on the record, reveal too much uncertainty and incoherence as to be convincing.

In the course of the pre-trial conference, Esther Peralta testified as follows:

Court, (To the defendant)

Do you have any evidence to show that you are married?

DEFENDANT:

That was during guerilla days and it was the justice of the peace of free Davao who solemnized our
marriage. (pp. 2-3, t.s.n.) (Emphasis supplied).

On cross-examination, however, she declared.

Q. Who was the justice of the peace who performed the marriage?

A. It was Father Cote who asked us the questions and after that he said I pronounce you as husband
and wife. The justice of the peace was also there (p. 411 t.s.n.) (Emphasis supplied).

It is difficult to imagine how appellee could have easily forgotten or be confused as to who performed
the alleged marriage when such fact, if true, heralded an important and memorable event in her life. But
this is not all. In her written statement to the President of the Davao Local Council, Girl Scouts of the
Philippines, when asked to explain on her use of the surnames Silvas, this witness-defendant never
revealed any marriage contracted by herself and Silva. In fact, she declared

Sometime later, he proposed marriage to me. As was natural, I told him to talk to my sisters and to the
oldest relative of mine living in Magugpo. With all sincerity, he complied with my request and in due
times my relatives gave their consent to our marriage.

For some reason or another, and because I myself wished that our marriage take place after liberation
which was then nearing marriage was delayed. But he pleaded to me that he needs me and that I
join him and live with him in his quarters. After thinking the matter over, I agreed. I have nothing to be
ashamed of for this because I was convinced of the sincerity of his request and of the fact that we were
going to get married soon after liberation.

We started living together as man and wife in December, 1944. As a result of our living together, I bore a
child, named after him. He was baptized and registered as Saturnino Silva, Jr., and he has been carrying
that name eversince. . . . (Exh. 22-C).

Noteworthy also is the fact that while in her foregoing declarations she asserted that they started living
together as man and wife since December, 1944, in her testimony in court, however, she attested as
follows:

Q. And it was also on that day (January 14, 1945) when you said you were married to Mr. Silva?

A. Yes, sir.

xxx xxx xxx

Q. Do we understand from you now that it was the first time that you began to live together as
husband and wife with Mr. Silva?

A. Yes sir, because that was the time when we were legally married. (p. 411, t.s.n.)

Again, Juan Quijano, presented as witness for the defendant, only testified to the following:

xxx xxx xxx

Q. And you affirm to this Court that plaintiff Saturnino R. Silva is lawfully wedded to the defendant
Esther Peralta?

A. Except for the fact of final formal marriage contract, for all intents and purposes they were legally
married.

xxx xxx xxx

Q. Would you, Mr. Quijano, say that a man and women are legally married without the marriage
contract having been signed by both contracting parties to the marriage, and the marriage solemnized?

A. I would say, in my humble way of thinking, having in mind the provisions of the new civil code, that
even without the signing of marriage contract by the parties, but if the parties have acted and believed
that they are husband and wife, to my humble way of thinking, that is even better than signing marriage
contract which the parties cannot agree.

Q. Do I understand from you that between plaintiff Saturnino R. Silva and defendant Esther Peralta,
no marriage was ever solemnized?

xxx xxx xxx

A. I did not say that there was marriage solemnized, but I was present when Silva asked the hands of
Esther Peralta in marriage from her older sister. (t.s.n., pp. 223-226, Exhibit A-1).

The records also disclose that in a complaint for support in Civil Case No. 22816 of the Court of First
Instance of Manila, filed by appellee "as his common-law-wife" (Exhs. "H" and "H-1"). In the affidavit
(Exhibit "H-2")attached to the aforementioned complaint she affirmed under oath that she was "single".
Appellee Esther Peralta, being a woman of sufficient schooling, must have known the significance of the
terms thus employed.

All the foregoing circumstances, coupled with the admitted fact that no marriage documents of any kind
of prior to, during or after the marriage were ever prepared or executed by anybody, and that a
vigorous denial of the supposed marriage was made by Saturnino Silva, the alleged consort, lead to the
conclusion that no marriage had really taken place.

In the face of the evidence, we cannot give value on the presumption of the marriage under section 69
(bb) of the Rules of Court, especially because, at the time of the alleged marriage on January 14, 1945,
Saturnino Silva was still married to one Priscilla Isabel, an Australian national.

In view of the non-existence of appellee's marriage with Saturnino Silva, and the latter's actual marriage
to plaintiff Ledesma, it is not proper for Esther to continue representing herself as the wife of Saturnino.
Article 370 of the Civil Code of the Philippines authorizes a married woman to use the surname of her
husband; impliedly, it also excludes others from doing likewise.

As to plaintiff Elenita Silva's claim for moral damages, the Court below has carefully analyzed the
evidence in its decision and found (Rec. App., 47-49)that her claims of humiliation and distress are not
satisfactorily proved; and we have found no ground to disturb such findings, considering the trial judge's
ample opportunity to observe the witnesses at the stand. The plaintiff's distress upon learning from her
lawyer that her husband had a child by the defendant, and was being sued for its support, confers no
right to claim damages, in the absence of proof that the suit was reckless or malicious. Although Article
2216 of the Civil Code expressly provided that "no proof of pecuniary loss is necessary in order the
moral, nominal,... or exemplary damages may be adjudicated", and the assessment thereof "is left to the
discretion of the court, there should be a clear showing of the facts giving rise to such damages (Art
2217). This is particularly the case here, since it appears that appellee had acted in good faith, Silva
having formerly introduced appellee to other persons as Mrs. Silva, and sent her letters thus addressed
(Exh. 2), implying authority to used the disputed appellation prior to his subsequent marriage to Elenita
Ledesma.

Regarding the counterclaim for damages, the lower court awarded damages to the defendant appellee,
stating in its decision;

El jusgado estima en P15,000.00, los daos que la demandada ha sufridi porhaber perdido el puesto en
la Davao Council, y por los sufrimientos moralque aquella ha sufrido, la suma de P15,000.00, mas la
adicional de P5,000.00 por honorarios de abogado.

This award is contested by appellants on the ground that defendant appellee's resignation from the Girl
Scouts Davao Council was voluntary; according to her own letter Exhibit "S", she applied for an indefinite
leave of absence to attend to a personal matter in Manila, which turned out to be the civil case that she
had filed against Silva for the support for her child by him. Witness Felicidad Santos, asked about the
reason why Esther Peralta left her position, testified:

She resigned. She told me there was a case. In fact that was the time when she told me that there was a
case which (she) filed in Manila and to attend that case it will interfere too much of her activities as an
Executive of the Davao Girl Scout." (t.s.n., pp. 245-246, Restauro).

No great effort is needed to discern that Esther Peralta would never have agreed to live maritally with
appellant Silva nor beget a child by him had not Silva concealed that he was already married; and in the
case appellee Peralta would not have been compelled to relinguish her employment to attend to the
litigation filed to obtain for the child the support that Silva refused. Wherefore, Esther's loss of
employment is ultimately a result of Silva's deception and she should indemnified therefor. It is well to
note in this connection, that Silva's act in hiding from appellee that he could not legally marry her,
because, he allegedly have an Australian wife, was not mere negligence, but actual fraud (dolo)
practiced upon the appellee. Consequently, he should stand liable for any and all damages arising
therefrom, which include the expense of maintaining the offspring and the expenses of litigation to
protect the child's right's and the loss of the mother's own earnings. This is a liability that flows even
from Articles 1902 and 1107 (par. 2) of 1889 (Arts. 2176 and 2202 of the New Code).

Art. 1902. Any person who by an act or omission causes damage to another by his fault or negligence
shall be liable for the damage as done.

Art. 1107. In case of fraud (dolo) the debtor shall be liable for all losses and damages which clearly arise
from the failure to fulfill the obligation.

Considering that the child was born on October 30, 1945, and has had to be supported exclusively by his
mother since then up to the present, because the appellant Silva has refused to pay or even contribute
to such support, and that appellee was earning P150.00 a month until she had to leave Davao to attend
to her son's case, we can not say that P15,000.00 pecuniary damages awarded by the Court below are
excessive or inequitable.

The lower court's award of moral damages is, likewise, assailed as unjustified and not allowable under
the law and jurisprudence governing before the effectivity of the New Civil Code of the Philippines.

Granting arguendo the correctness of the proposition that, under the old law, no moral damages were
allowable as a consequence of sexual relations outside of wedlock, still the evidence of record satisfies
us that after the filing in May of 1954 of the first action by Esther Peralta against appellant Saturnino
Silva, seeking support of their minor child, said appellant managed to avoid the services of summons,
which were still unserved on him until the case at bar was tried, and an addition exercised improper
pressure upon the appellee to make her withdraw the suit; that to this effect, appellant's brother and
one Mrs. Misa, Girl Scouts executive of Iloilo, went to see Esther Peralta to press her to drop the case,
warning her of untoward consequences otherwise; and when she refused, appellants, through counsel,
filed against her the present action in Davao and another one in the Court of First Instance of Cotabato,
charging her with conversion of Silva's properties in addition to bringing to the attention of the higher
authorities of the Girl Scouts organization (wherein Esther Peralta was then employed) appellee's claim
to be the wife of Col. Saturnino Silva, to whom "she must have been wedded in contemplation" (sic, Exh.
22), and unchaining a series of investigations that brought to light her condition as an unwedded
mother, there is apparent here an obvious pattern of harassment, with a view to forcing appellee into
abandoning the interests of her child. That such deliberate maneuvers caused the mother mental
anguish and even physical suffering (she actually became ill as a result), can be easily understood and
needs no special demonstration beyond her testimony to that effect.

As this injury was inflicted upon the appellee from 1945 onwards, after the new Civil Code had become
operative, in constitutes a justification for the award of moral damages (Art. 2217), claimed by appellee
in the first counterclaim of her amended answer (Record on Appeal, pp. 26-27). The court below, as
already noted, awarded her P15,000.00 as moral damages and P5,000.00 attorney's fees; and taking all
the circumstances of record, we are not inclined to disturb the award. However, we agree with
appellants that it was error for the court to sentence both appellants to the solidary payment of the
damages. The liability therefor should be exclusively shouldered by the husband Saturnino Silva.

As to the admission of the amended complaint, is discretionary in the trial court, and we do not see that
the appellants were substantially prejudiced by the admission.

In view of the forgoing, the judgement appealed from is modified and defendant appellee Esther Peralta
is enjoined from representing herself, directly or indirectly to be the wife of appellant Saturnino R. Silva;
and appellant Saturnino R. Silva is in turn ordered to pay Esther Peralta the amount of P30,000.00 by
way of pecuniary and moral damages, plus P5,000.00 as attorney's fees. No costs.

Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Barrera, Gutierrez David, Paredes, and Dizon, JJ.,
concur.

R E S O L U T I O N

August 29, 1961

REYES, J.B.L., J.:

Appellants spouses Saturnino Silva and Elenita Ledesma Silva pray for the reconsideration of this Court's
decision of November 25, 1960, claiming that:

(1) Appellant Elenita Silva should be awarded moral damages for Esther Peralta's unauthorized use of
the designation in "Mrs. Esther Silva".

(2) The award of pecuniary damages against appellant Saturnino Silva is unwarranted by the facts and
the law.

I

It is contended that the prohibition imposed upon appellee Esther Peralta from representing herself,
directly or indirectly, as the wife of Saturnino Silva should result in an award of moral damages in favor
of appellant Elenita Ledesma, whose exclusive right to the appellation is recognized by the decision.

This argument misapprehends the basis of the decision. Esther Peralta from representing herself as Mrs.
Saturnino Silva for the reason that it was proved in the case that she was legally married to him, and
because he is now lawfully married to Elenita Ledesma. But an award of damages in the latter's favor
would require a further finding that the assumption of the disputed status by Esther Peralta was made
in bad faith or through culpable negligence and no such finding has been made in the decision. The facts
are that Esther in good faith regarded herself as Saturnino's lawful wife, and that the man himself led
her into this belief prior to his desertion. That later on, unknown to Esther, Silva should have married his
co-appellant in the United States is not sufficient to impose upon Esther any liability for damages or to
destroy her original good faith, there being no proof that the existence of a valid marriage between
Saturnino and Elenita was adequately driven home to Esther before this case was instituted. That the
two appellants Silva were living together as husband and wife was certainly not sufficient proof,
considering Saturnino Silva's past history and conduct. How was appellee to know that Saturnino's
connection with Elenita Ledesma was anymore legitimate than his previous one with appellee herself?

Moreover, the trial court found that Elenita Silva's claim for damages not adequately proved, and we
have not found in the record any justification to depart from that finding.

II

As to the award of damages against Saturnino Silva, it is to be noted that while the latter's liability was
extra-contractual in origin, still, under the Civil Code in 1889, the damages resulting from a tort are
measured in the same manner as those due from a contractual debtor in bad faith, since he must
answer for such damages, whether he had forseen them or not, just as he must indemnify not only for
damnum emergens but also for lacrum cessans, as required by Article 1106. Article 1002 of the 1889
Civil Code of Spain formulated no standard for measuring quasi-delictual damages, the article merely
prescribing that the guilty party "shall be liable for the damages so done". This indefiniteness led
modern civil law writers to hold that the standards set is articles 1106 and 1107, placed in the general
rules on obligations, "rigen por igual para las contractuales y las extras contractuales, las pre
establecidas y las que borten ex-lege de actos ilicitos". (Roces, Notes to Fisher)" Los Daos Civiles y su
Reparacion,"(1927). Since liability for damages arises in either case from a breach of a pre-existing
obligation (to behave without fault or negligence in case of quasi-delicts, and, in case of contracts, to
observe the conduct required by the stipulation), it is logical to conclude with Planiol that "La
responsabilidad contractual y la extra contractual tienen el mismo fundamento, por lo que se hallan
sujetas en principio a identicas reglas" (6 Planiol-Ripert, Derecho Civil, p. 529, sec. 378). Giorgi is of the
same opinion (5 Teoria de Obligaciones, pp. 133, 207-208). So is de Cossio y Corral ("El Dolo en el
Derecho Civil", pp. 132-133):

Pero si ello es asi, resulta claro que la aproximacion entre esta clasede culpa y la contractual, es cada dia
mayor, hasta el extremo de que, segun hemos antes indicado, solamente de pueden sealar diferencias
accessorias, y muchas veces aparentes entre una y otra. En primer termino, porque el concepto de culpa
contractual se extiende no solo a las obligaciones nacidas ex contractu, sino, en general a todas aquellas
preexistentes entres las partes a la realidad del acto daoso (obligaciones legales). De otra parte,
porque si bien consideramos las cosas, la responsabilidad llamada extracontratual, deriva siempre
delquebrantamiento de un deber general, implicitamente reconocido por la ley cual es el que todos
deben actuar socialmente con la debida diligencia, evitando correlativamente, a no ser daado en su
patrimonio y bienes porla conducta dolosa o negligente de los demas. En tal sentido, habria siempre
entre el autor del dao y la victima, una relacion juridica, constituida por este derecho y aquel deber.

Esta idea de unidad entre ambas instituciones se traduce en que laspretendidas diferencias en orden a
la extension de la indemnizacion, en ambos casos, no puedan defenderse a la vista de los preseptos de
nuestro Derecho positivo. En efecto, no contiene el Capitulo II de Titulo XVI del Libro de nuestro Codigo
civil norma alguna referente a la extension de la indemnizacion que en cada caso haya de prestarse, lo
que nos obliga forzosamente a acudir a las normas generales contenidas en el capitulo II, del Titulo I de
dicho libro IV, relativo a los "efectos de las obligaciones", que ninguna razon permite limitar a las de
naturaleza contractual, ya que el articulo 1.101 habla genericamente de obligaciones; el 1.102, de
"todaslas obligaciones"; el 1.103, de "toda clase de obligaciones", y en ningunode los articulos
subsiguientes se hace referencia a una clase especial deobligaciones, sino a todas en general.

Que las disposiciones de este Capitulo son aplicables en los casos de culpaextracontractual, es doctrina
constatemente reconocida por la jurisprudencia del Tribunal Supremo. Asi, en la sentencia de 14 de
diciembre de 1984, concretandose a los articulos 1.101, 1.103 y 1.104, afirma que son de caracter
general y aplicables a toda clase de obligaciones, no ofreciendocontadiccion con las especiales de los
articulos 1.902 y 1.903; la sentencia de 15 enero de 1902, permite interpretar los articulos 1.902 y 1.903
por los 1.103 y 1.106, a los efectos de determinar los elementos que han de entrar en la indemnizacion.
La misma doctrina se mantiene en la sentencia de 2 de deciembre de 1946, y en otras muchas que
pudieramos aducir.

Whether or not the damages awarded to appellee are a natural and direct consequence of Silva's
deceitful maneuvers in making love to appellee, and inducing her to yield to his advances and live with
him as his wife (when Silva knew all the time that he could not marry Esther Peralta because of his
undissolved marriage to an Autralian woman, a prior wedlock that he concealed from appellee), is a
question of appreciation. It is clear that Esther Peralta would not have consented to the liaison had
there been no concealment of Silva's previous marriage, or that the birth of the child was direct result of
this connection. That Esther had to support the child because Silva abandoned her before it was born is
likewise patent upon the record, and we can not see how said appellant can be excused from liability
therefor.

Silva's seduction and subsequent abandonment of appellee and his illigitimate child where likewise the
direct cause for the filing of the support case in Manila, and in order to prosecute the same, appellee
had to quit her employment in Davao. While the case could have been filed in Davao, we do not believe
that this error in selecting a more favorable venue(due to her unfamiliarity with the technicalities of the
law) should be allowed to neutralize the appellant Silva's responsibility as the primary causative factor
of the prejudice and damage suffered by the appellee.

It is argued that the maintenance of the child can not be considered as an element of damage because
the child's case for support was dismissed. This contention fails to take into account the action there
was for the support as an acknowledged natural child, and that under the Civil Code of 1889(the law in
force when the child was born), the right of natural children to be supported by their father depended
exclusively on the recognition by the father of his paternity; the rule being thus

The mere fact of birth gave no legal right to the child, and imposed no legal duty upon the father,
except, perhaps, in cases arising under the criminal law. . . . The father was not, prior to the Civil Code,
and is not now, bound to recognize his natural son by reason of the mere fact that he is its father. . . .
But as to the father the question is, and always has been, has he performed any acts which indicates his
intention to recognize the child as his?" (Buenaventura vs. Urbano, 5 Phil., pp. 2-3).

It follows that in said suit, the real issue was whether the child had been duly recognized, the support
being a mere consequence of the recognition. Therefore, the failure of the child's action for support did
not adjudge that we was not the defendant's child, but that the defendant never recognized him as
such. That the decision of the Court of Appeals(CA-G.R. No. 24532-E) rejecting the child's action did not
declare him without right to support under all circumstances can be seen from the following statement
in the decision:

The proofs so far found in the record my possibly warrant the filing of an action for cumpolsory
recognition, under paragraphs 3 and 4 of Art. 283, but there was no action presented to that effect.

Plainly, the issue and parties being different, the result of the child's action can not constitute res
judicata with regard to the mother's claim for damages against the father on account of the amounts
she was compelled to spend for the maintenance of their child. On the contrary, the very fact that the
child was not allowed to collect support from the father (appellant therein) merely emphasizes a direct
consequences of appellants tortuous conduct. Since Esther Peralta had expressly pleaded that she had
to support the child (Record of Appeal, p. 27, in fine), and had prayed for such relief "as may be deemed
just and equitable in the premises", there is no reason why her expenses for the child's maintenance
should not be taken into account.

Appellants submit that the damages allowed for maintenance of the son should be limited to P600.00 a
year, because the income tax law allows only that much deduction for each child. We do not believe
that income tax deductions constitute a reasonable basis for an award of damages, since they are fixed
for an entirely different purpose (to arrive at the next taxable income)and merely represent the amount
that the state is willing to exempt from taxation. At that, it should be noted that the deductible amount
has been lately increased to P1,000.00 per annum. But even the P600.00 per annum, the damages
suffered by appellee on this count, from 1945 to 1960, already amounts to around P9,000.00, to which
must be added the loss of appellees salary as executive of the Girl Scouts in Davao; so that the
P15,000.00 damages awarded by the court below is by no means excessive, as already held in our
decision in chief.

Appellants also contend that the claim for pecuniary damages has prescribe, because they date back to
1945. Suffice it to note that the defense of prescription was not invoked by appellants against the claim
for pecuniary damages, and this defense must be regarded as waived in relation to the same.
Appellant's reply to the appellee's first counterclaim in her second amended answer (which was for
actual or pecuniary damages) reads as follows (Answer to Counterclaim, Rec. App. p. 33):

1. That plaintiff is without knowledge or information sufficient to form a belief as to the truth of the
allegations contained under paragraphs 6, 7,8, 9, 10, 11 and 12 of the first counterclaim and, therefore,
specifically denies the same.

The defense of prescription was actually interposed on against the second counterclaim, in this wise:

1. That the cause of action alleged in the second counterclaim has already prescribed, more than ten
years having already elapsed. (Answer, to Counterclaim, Rec. App. 34).

The second counterclaim reffered to was for damages due to "mental torture, anguish and hurt feelings,
all to her damage in amount of P250,000.00"(Rec. App. p. 28). Upon the other hand, our own award for
moral damages was based, not on the deceit practiced by Silva in securing Esther's assent to live
maritally with him, but on his subsequent harassment of her in 1954, by filing suits against her in
different provinces and otherwise applying pressure to cause her to abandon her child's case. As this
cause of action arose less than three years before the present action was filed, the defense of
prescription is rendered untenable against it, for the limitation period had not yet expired when the suit
was brought.

Wherefore, the motion for reconsideration is denied.
G.R. No. L-24803 May 26, 1977
PEDRO ELCANO and PATRICIA ELCANO, in their capacity as Ascendants of Agapito Elcano,
deceased,plaintiffs-appellants,
vs.
REGINALD HILL, minor, and MARVIN HILL, as father and Natural Guardian of said
minor, defendants-appellees.
Cruz & Avecilla for appellants.
Marvin R. Hill & Associates for appellees.

BARREDO, J.:
Appeal from the order of the Court of First Instance of Quezon City dated January 29, 1965 in Civil
Case No. Q-8102, Pedro Elcano et al. vs. Reginald Hill et al. dismissing, upon motion to dismiss of
defendants, the complaint of plaintiffs for recovery of damages from defendant Reginald Hill, a
minor, married at the time of the occurrence, and his father, the defendant Marvin Hill, with whom he
was living and getting subsistence, for the killing by Reginald of the son of the plaintiffs, named
Agapito Elcano, of which, when criminally prosecuted, the said accused was acquitted on the ground
that his act was not criminal, because of "lack of intent to kill, coupled with mistake."
Actually, the motion to dismiss based on the following grounds:
1. The present action is not only against but a violation of section 1, Rule 107, which
is now Rule III, of the Revised Rules of Court;
2. The action is barred by a prior judgment which is now final and or in res-
adjudicata;
3. The complaint had no cause of action against defendant Marvin Hill, because he
was relieved as guardian of the other defendant through emancipation by marriage.
(P. 23, Record [p. 4, Record on Appeal.])
was first denied by the trial court. It was only upon motion for reconsideration of the defendants of
such denial, reiterating the above grounds that the following order was issued:
Considering the motion for reconsideration filed by the defendants on January 14,
1965 and after thoroughly examining the arguments therein contained, the Court
finds the same to be meritorious and well-founded.
WHEREFORE, the Order of this Court on December 8, 1964 is hereby reconsidered
by ordering the dismissal of the above entitled case.
SO ORDERED.
Quezon City, Philippines, January 29, 1965. (p. 40, Record [p. 21, Record on
Appeal.)
Hence, this appeal where plaintiffs-appellants, the spouses Elcano, are presenting for Our resolution
the following assignment of errors:
THE LOWER COURT ERRED IN DISMISSING THE CASE BY UPHOLDING THE
CLAIM OF DEFENDANTS THAT -
I
THE PRESENT ACTION IS NOT ONLY AGAINST BUT ALSO A VIOLATION OF
SECTION 1, RULE 107, NOW RULE 111, OF THE REVISED RULES OF COURT,
AND THAT SECTION 3(c) OF RULE 111, RULES OF COURT IS APPLICABLE;
II
THE ACTION IS BARRED BY A PRIOR JUDGMENT WHICH IS NOW FINAL OR
RES-ADJUDICTA;
III
THE PRINCIPLES OF QUASI-DELICTS, ARTICLES 2176 TO 2194 OF THE CIVIL
CODE, ARE INAPPLICABLE IN THE INSTANT CASE; and
IV
THAT THE COMPLAINT STATES NO CAUSE OF ACTION AGAINST DEFENDANT
MARVIN HILL BECAUSE HE WAS RELIEVED AS GUARDIAN OF THE OTHER
DEFENDANT THROUGH EMANCIPATION BY MARRIAGE. (page 4, Record.)
It appears that for the killing of the son, Agapito, of plaintiffs-appellants, defendant- appellee
Reginald Hill was prosecuted criminally in Criminal Case No. 5102 of the Court of First Instance of
Quezon City. After due trial, he was acquitted on the ground that his act was not criminal because of
"lack of intent to kill, coupled with mistake." Parenthetically, none of the parties has favored Us with a
copy of the decision of acquittal, presumably because appellants do not dispute that
such indeed was the basis stated in the court's decision. And so, when appellants filed their
complaint against appellees Reginald and his father, Atty. Marvin Hill, on account of the death of
their son, the appellees filed the motion to dismiss above-referred to.
As We view the foregoing background of this case, the two decisive issues presented for Our
resolution are:
1. Is the present civil action for damages barred by the acquittal of Reginald in the criminal case
wherein the action for civil liability, was not reversed?
2. May Article 2180 (2nd and last paragraphs) of the Civil Code he applied against Atty. Hill,
notwithstanding the undisputed fact that at the time of the occurrence complained of. Reginald,
though a minor, living with and getting subsistenee from his father, was already legally married?
The first issue presents no more problem than the need for a reiteration and further clarification of
the dual character, criminal and civil, of fault or negligence as a source of obligation which was firmly
established in this jurisdiction in Barredo vs. Garcia, 73 Phil. 607. In that case, this Court postulated,
on the basis of a scholarly dissertation by Justice Bocobo on the nature of culpa aquiliana in relation
to culpa criminal or delito and mereculpa or fault, with pertinent citation of decisions of the Supreme
Court of Spain, the works of recognized civilians, and earlier jurisprudence of our own, that the same
given act can result in civil liability not only under the Penal Code but also under the Civil Code.
Thus, the opinion holds:
The, above case is pertinent because it shows that the same act machinist. come
under both the Penal Code and the Civil Code. In that case, the action of the agent
killeth unjustified and fraudulent and therefore could have been the subject of a
criminal action. And yet, it was held to be also a proper subject of a civil action under
article 1902 of the Civil Code. It is also to be noted that it was the employer and not
the employee who was being sued. (pp. 615-616, 73 Phil.).
1

It will be noticed that the defendant in the above case could have been prosecuted in
a criminal case because his negligence causing the death of the child was
punishable by the Penal Code. Here is therefore a clear instance of the same act of
negligence being a proper subject matter either of a criminal action with its
consequent civil liability arising from a crime or of an entirely separate and
independent civil action for fault or negligence under article 1902 of the Civil Code.
Thus, in this jurisdiction, the separate individuality of a cuasi-delito or culpa aquiliana,
under the Civil Code has been fully and clearly recognized, even with regard to a
negligent act for which the wrongdoer could have been prosecuted and convicted in
a criminal case and for which, after such a conviction, he could have been sued for
this civil liability arising from his crime. (p. 617, 73 Phil.)
2

It is most significant that in the case just cited, this Court specifically applied article 1902
of the Civil Code. It is thus that although J. V. House could have been criminally
prosecuted for reckless or simple negligence and not only punished but also made civilly
liable because of his criminal negligence, nevertheless this Court awarded damages in
an independent civil action for fault or negligence under article 1902 of the Civil Code. (p.
618, 73 Phil.)
3

The legal provisions, authors, and cases already invoked should ordinarily be
sufficient to dispose of this case. But inasmuch as we are announcing doctrines that
have been little understood, in the past, it might not he inappropriate to indicate their
foundations.
Firstly, the Revised Penal Code in articles 365 punishes not only reckless but also
simple negligence. If we were to hold that articles 1902 to 1910 of the Civil Code
refer only to fault or negligence not punished by law, accordingly to the literal import
of article 1093 of the Civil Code, the legal institution of culpa aquiliana would have
very little scope and application in actual life. Death or injury to persons and damage
to property- through any degree of negligence - even the slightest - would have to be
Idemnified only through the principle of civil liability arising from a crime. In such a
state of affairs, what sphere would remain for cuasi-delito or culpa aquiliana? We are
loath to impute to the lawmaker any intention to bring about a situation so absurd and
anomalous. Nor are we, in the interpretation of the laws, disposed to uphold the letter
that killeth rather than the spirit that giveth life. We will not use the literal meaning of
the law to smother and render almost lifeless a principle of such ancient origin and
such full-grown development as culpa aquiliana or cuasi-delito, which is conserved
and made enduring in articles 1902 to 1910 of the Spanish Civil Code.
Secondary, to find the accused guilty in a criminal case, proof of guilt beyond
reasonable doubt is required, while in a civil case, preponderance of evidence is
sufficient to make the defendant pay in damages. There are numerous cases of
criminal negligence which can not be shown beyond reasonable doubt, but can be
proved by a preponderance of evidence. In such cases, the defendant can and
should be made responsible in a civil action under articles 1902 to 1910 of the Civil
Code. Otherwise. there would be many instances of unvindicated civil wrongs. "Ubi
jus Idemnified remedium." (p. 620,73 Phil.)
Fourthly, because of the broad sweep of the provisions of both the Penal Code and
the Civil Code on this subject, which has given rise to the overlapping or concurrence
of spheres already discussed, and for lack of understanding of the character and
efficacy of the action for culpa aquiliana, there has grown up a common practice to
seek damages only by virtue of the civil responsibility arising from a crime, forgetting
that there is another remedy, which is by invoking articles 1902-1910 of the Civil
Code. Although this habitual method is allowed by, our laws, it has nevertheless
rendered practically useless and nugatory the more expeditious and effective remedy
based on culpa aquiliana or culpa extra-contractual. In the present case, we are
asked to help perpetuate this usual course. But we believe it is high time we pointed
out to the harms done by such practice and to restore the principle of responsibility
for fault or negligence under articles 1902 et seq. of the Civil Code to its full rigor. It is
high time we caused the stream of quasi-delict or culpa aquiliana to flow on its own
natural channel, so that its waters may no longer be diverted into that of a crime
under the Penal Code. This will, it is believed, make for the better safeguarding or
private rights because it realtor, an ancient and additional remedy, and for the further
reason that an independent civil action, not depending on the issues, limitations and
results of a criminal prosecution, and entirely directed by the party wronged or his
counsel, is more likely to secure adequate and efficacious redress. (p. 621, 73 Phil.)
Contrary to an immediate impression one might get upon a reading of the foregoing excerpts from
the opinion in Garcia that the concurrence of the Penal Code and the Civil Code therein referred to
contemplate only acts of negligence and not intentional voluntary acts - deeper reflection would
reveal that the thrust of the pronouncements therein is not so limited, but that in fact it actually
extends to fault or culpa. This can be seen in the reference made therein to the Sentence of the
Supreme Court of Spain of February 14, 1919, supra, which involved a case of fraud or estafa, not a
negligent act. Indeed, Article 1093 of the Civil Code of Spain, in force here at the time of Garcia,
provided textually that obligations "which are derived from acts or omissions in which fault or
negligence, not punishable by law, intervene shall be the subject of Chapter II, Title XV of this book
(which refers to quasi-delicts.)" And it is precisely the underline qualification, "not punishable by law",
that Justice Bocobo emphasized could lead to an ultimo construction or interpretation of the letter of
the law that "killeth, rather than the spirit that giveth lift- hence, the ruling that "(W)e will not use the
literal meaning of the law to smother and render almost lifeless a principle of such ancient origin and
such full-grown development as culpa aquiliana orquasi-delito, which is conserved and made
enduring in articles 1902 to 1910 of the Spanish Civil Code." And so, because Justice Bacobo was
Chairman of the Code Commission that drafted the original text of the new Civil Code, it is to be
noted that the said Code, which was enacted after the Garcia doctrine, no longer uses the term, 11
not punishable by law," thereby making it clear that the concept of culpa aquiliana includes acts
which are criminal in character or in violation of the penal law, whether voluntary or matter. Thus, the
corresponding provisions to said Article 1093 in the new code, which is Article 1162, simply says,
"Obligations derived from quasi-delicto shall be governed by the provisions of Chapter 2, Title XVII of
this Book, (on quasi-delicts) and by special laws." More precisely, a new provision, Article 2177 of
the new code provides:
ART. 2177. Responsibility for fault or negligence under the preceding article is
entirely separate and distinct from the civil liability arising from negligence under the
Penal Code. But the plaintiff cannot recover damages twice for the same act or
omission of the defendant.
According to the Code Commission: "The foregoing provision (Article 2177) through at first sight
startling, is not so novel or extraordinary when we consider the exact nature of criminal and civil
negligence. The former is a violation of the criminal law, while the latter is a "culpa aquiliana" or
quasi-delict, of ancient origin, having always had its own foundation and individuality, separate from
criminal negligence. Such distinction between criminal negligence and "culpa extracontractual" or
"cuasi-delito" has been sustained by decision of the Supreme Court of Spain and maintained as
clear, sound and perfectly tenable by Maura, an outstanding Spanish jurist. Therefore, under the
proposed Article 2177, acquittal from an accusation of criminal negligence, whether on reasonable
doubt or not, shall not be a bar to a subsequent civil action, not for civil liability arising from criminal
negligence, but for damages due to a quasi-delict or 'culpa aquiliana'. But said article forestalls a
double recovery.", (Report of the Code) Commission, p. 162.)
Although, again, this Article 2177 does seem to literally refer to only acts of negligence, the same
argument of Justice Bacobo about construction that upholds "the spirit that giveth lift- rather than that
which is literal that killeth the intent of the lawmaker should be observed in applying the same. And
considering that the preliminary chapter on human relations of the new Civil Code definitely
establishes the separability and independence of liability in a civil action for acts criminal in character
(under Articles 29 to 32) from the civil responsibility arising from crime fixed by Article 100 of the
Revised Penal Code, and, in a sense, the Rules of Court, under Sections 2 and 3 (c), Rule 111,
contemplate also the same separability, it is "more congruent with the spirit of law, equity and justice,
and more in harmony with modern progress"- to borrow the felicitous relevant language in Rakes vs.
Atlantic. Gulf and Pacific Co., 7 Phil. 359, to hold, as We do hold, that Article 2176, where it refers to
"fault or negligencia covers not only acts "not punishable by law" but also acts criminal in character,
whether intentional and voluntary or negligent. Consequently, a separate civil action lies against the
offender in a criminal act, whether or not he is criminally prosecuted and found guilty or acquitted,
provided that the offended party is not allowed, if he is actually charged also criminally, to recover
damages on both scores, and would be entitled in such eventuality only to the bigger award of the
two, assuming the awards made in the two cases vary. In other words, the extinction of civil liability
referred to in Par. (e) of Section 3, Rule 111, refers exclusively to civil liability founded on Article 100
of the Revised Penal Code, whereas the civil liability for the same act considered as a quasi-
delict only and not as a crime is not estinguished even by a declaration in the criminal case that the
criminal act charged has not happened or has not been committed by the accused. Briefly stated,
We here hold, in reiteration of Garcia, thatculpa aquiliana includes voluntary and negligent acts
which may be punishable by law.
4

It results, therefore, that the acquittal of Reginal Hill in the criminal case has not extinguished his
liability for quasi-delict, hence that acquittal is not a bar to the instant action against him.
Coming now to the second issue about the effect of Reginald's emancipation by marriage on the
possible civil liability of Atty. Hill, his father, it is also Our considered opinion that the conclusion of
appellees that Atty. Hill is already free from responsibility cannot be upheld.
While it is true that parental authority is terminated upon emancipation of the child (Article 327, Civil
Code), and under Article 397, emancipation takes place "by the marriage of the minor (child)", it is,
however, also clear that pursuant to Article 399, emancipation by marriage of the minor is not really
full or absolute. Thus "(E)mancipation by marriage or by voluntary concession shall terminate
parental authority over the child's person. It shall enable the minor to administer his property as
though he were of age, but he cannot borrow money or alienate or encumber real property without
the consent of his father or mother, or guardian. He can sue and be sued in court only with the
assistance of his father, mother or guardian."
Now under Article 2180, "(T)he obligation imposed by article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible. The father and, in
case of his death or incapacity, the mother, are responsible. The father and, in case of his death or
incapacity, the mother, are responsible for the damages caused by the minor children who live in
their company." In the instant case, it is not controverted that Reginald, although married, was living
with his father and getting subsistence from him at the time of the occurrence in question. Factually,
therefore, Reginald was still subservient to and dependent on his father, a situation which is not
unusual.
It must be borne in mind that, according to Manresa, the reason behind the joint and solidary liability
of presuncion with their offending child under Article 2180 is that is the obligation of the parent to
supervise their minor children in order to prevent them from causing damage to third persons.
5
On
the other hand, the clear implication of Article 399, in providing that a minor emancipated by marriage
may not, nevertheless, sue or be sued without the assistance of the parents, is that such emancipation
does not carry with it freedom to enter into transactions or do any act that can give rise to judicial
litigation. (See Manresa, Id., Vol. II, pp. 766-767, 776.) And surely, killing someone else invites judicial
action. Otherwise stated, the marriage of a minor child does not relieve the parents of the duty to see to it
that the child, while still a minor, does not give answerable for the borrowings of money and alienation or
encumbering of real property which cannot be done by their minor married child without their consent.
(Art. 399; Manresa, supra.)
Accordingly, in Our considered view, Article 2180 applies to Atty. Hill notwithstanding the
emancipation by marriage of Reginald. However, inasmuch as it is evident that Reginald is now of
age, as a matter of equity, the liability of Atty. Hill has become milling, subsidiary to that of his son.
WHEREFORE, the order appealed from is reversed and the trial court is ordered to proceed in
accordance with the foregoing opinion. Costs against appellees.
Fernando (Chairman), Antonio, and Martin, JJ., concur.
Concepcion Jr., J, is on leave.
Martin, J, was designated to sit in the Second Division.


Separate Opinions

AQUINO, J, concurring:
Article 2176 of the Civil Code comprehends any culpable act, which is blameworthy, when judged by
accepted legal standards. "The Idea thus expressed is undoubtedly board enough to include any
rational conception of liability for the tortious acts likely to be developed in any society." (Street, J. in
Daywalt vs. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587, 600). See article 38, Civil Code
and the ruling that "the infant tortfeasor is liable in a civil action to the injured person in the same
manner and to the same extent as an adult" (27 Am. Jur. 812 cited by Bocobo, J., in Magtibay vs.
Tiangco, 74 Phil. 576, 579).


Separate Opinions
AQUINO, J, concurring:
Article 2176 of the Civil Code comprehends any culpable act, which is blameworthy, when judged by
accepted legal standards. "The Idea thus expressed is undoubtedly board enough to include any
rational conception of liability for the tortious acts likely to be developed in any society." (Street, J. in
Daywalt vs. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587, 600). See article 38, Civil Code
and the ruling that "the infant tortfeasor is liable in a civil action to the injured person in the same
manner and to the same extent as an adult" (27 Am. Jur. 812 cited by Bocobo, J., in Magtibay vs.
Tiangco, 74 Phil. 576, 579).

G.R. No. 88694 January 11, 1993
ALBENSON ENTERPRISES CORP., JESSE YAP, AND BENJAMIN MENDIONA, petitioners,
vs.
THE COURT OF APPEALS AND EUGENIO S. BALTAO, respondents.
Puruganan, Chato, Chato & Tan for petitioners.
Lino M. Patajo, Francisco Ma. Chanco, Ananiano Desierto and Segundo Mangohig for private
respondent.

BIDIN, J.:
This petition assails the decision of respondent Court of Appeals in
CA-GR CV No. 14948 entitled "Eugenio S. Baltao, plaintiff-appellee vs. Albenson Enterprises
Corporation, et al, defendants-appellants", which modified the judgment of the Regional Trial
Court of Quezon City, Branch XCVIII in Civil Case No. Q-40920 and ordered petitioner to pay private
respondent, among others, the sum of P500,000.00 as moral damages and attorney's fees in the
amount of P50,000.00.
The facts are not disputed.
In September, October, and November 1980, petitioner Albenson Enterprises Corporation (Albenson
for short) delivered to Guaranteed Industries, Inc. (Guaranteed for short) located at 3267 V. Mapa
Street, Sta. Mesa, Manila, the mild steel plates which the latter ordered. As part payment thereof,
Albenson was given Pacific Banking Corporation Check No. 136361 in the amount of P2,575.00 and
drawn against the account of E.L. Woodworks (Rollo, p. 148).
When presented for payment, the check was dishonored for the reason "Account Closed."
Thereafter, petitioner Albenson, through counsel, traced the origin of the dishonored check. From
the records of the Securities and Exchange Commission (SEC), Albenson discovered that the
president of Guaranteed, the recipient of the unpaid mild steel plates, was one "Eugenio S. Baltao."
Upon further inquiry, Albenson was informed by the Ministry of Trade and Industry that E.L.
Woodworks, a single proprietorship business, was registered in the name of one "Eugenio Baltao".
In addition, upon verification with the drawee bank, Pacific Banking Corporation, Albenson was
advised that the signature appearing on the subject check belonged to one "Eugenio Baltao."
After obtaining the foregoing information, Albenson, through counsel, made an extrajudicial demand
upon private respondent Eugenio S. Baltao, president of Guaranteed, to replace and/or make good
the dishonored check.
Respondent Baltao, through counsel, denied that he issued the check, or that the signature
appearing thereon is his. He further alleged that Guaranteed was a defunct entity and hence, could
not have transacted business with Albenson.
On February 14, 1983, Albenson filed with the Office of the Provincial Fiscal of Rizal a complaint
against Eugenio S. Baltao for violation of Batas Pambansa Bilang 22. Submitted to support said
charges was an affidavit of petitioner Benjamin Mendiona, an employee of Albenson. In said
affidavit, the above-mentioned circumstances were stated.
It appears, however, that private respondent has a namesake, his son Eugenio Baltao III, who
manages a business establishment, E.L. Woodworks, on the ground floor of the Baltao Building,
3267 V. Mapa Street, Sta. Mesa, Manila, the very same business address of Guaranteed.
On September 5, 1983, Assistant Fiscal Ricardo Sumaway filed an information against Eugenio S.
Baltao for Violation of Batas Pambansa Bilang 22. In filing said information, Fiscal Sumaway claimed
that he had given Eugenio S. Baltao opportunity to submit controverting evidence, but the latter
failed to do so and therefore, was deemed to have waived his right.
Respondent Baltao, claiming ignorance of the complaint against him, immediately filed with the
Provincial Fiscal of Rizal a motion for reinvestigation, alleging that it was not true that he had been
given an opportunity to be heard in the preliminary investigation conducted by Fiscal Sumaway, and
that he never had any dealings with Albenson or Benjamin Mendiona, consequently, the check for
which he has been accused of having issued without funds was not issued by him and the signature
in said check was not his.
On January 30, 1984, Provincial Fiscal Mauro M. Castro of Rizal reversed the finding of Fiscal
Sumaway and exonerated respondent Baltao. He also instructed the Trial Fiscal to move for
dismissal of the information filed against Eugenio S. Baltao. Fiscal Castro found that the signature in
PBC Check No. 136361 is not the signature of Eugenio S. Baltao. He also found that there is no
showing in the records of the preliminary investigation that Eugenio S. Baltao actually received
notice of the said investigation. Fiscal Castro then castigated Fiscal Sumaway for failing to exercise
care and prudence in the performance of his duties, thereby causing injustice to respondent who
was not properly notified of the complaint against him and of the requirement to submit his counter
evidence.
Because of the alleged unjust filing of a criminal case against him for allegedly issuing a check which
bounced in violation of Batas Pambansa Bilang 22 for a measly amount of P2,575.00, respondent
Baltao filed before the Regional Trial Court of Quezon City a complaint for damages against herein
petitioners Albenson Enterprises, Jesse Yap, its owner, and Benjamin Mendiona, its employee.
In its decision, the lower court observed that "the check is drawn against the account of "E.L.
Woodworks," not of Guaranteed Industries of which plaintiff used to be President. Guaranteed
Industries had been inactive and had ceased to exist as a corporation since 1975. . . . . The
possibility is that it was with Gene Baltao or Eugenio Baltao III, a son of plaintiff who had a business
on the ground floor of Baltao Building located on V. Mapa Street, that the defendants may have been
dealing with . . . ." (Rollo, pp. 41-42).
The dispositive portion of the trial court 's decision reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendants ordering the latter to pay plaintiff jointly and severally:
1. actual or compensatory damages of P133,350.00;
2. moral damages of P1,000,000.00 (1 million pesos);
3. exemplary damages of P200,000.00;
4. attorney's fees of P100,000.00;
5 costs.
Defendants' counterclaim against plaintiff and claim for damages against
Mercantile Insurance Co. on the bond for the issuance of the writ of attachment at
the instance of plaintiff are hereby dismissed for lack of merit. (Rollo, pp. 38-39).
On appeal, respondent court modified the trial court's decision as follows:
WHEREFORE, the decision appealed from is MODIFIED by reducing the moral
damages awarded therein from P1,000,000.00 to P500,000.00 and the attorney's
fees from P100,000.00 to P50,000.00, said decision being hereby affirmed in all its
other aspects. With costs against appellants. (Rollo, pp. 50-51)
Dissatisfied with the above ruling, petitioners Albenson Enterprises Corp., Jesse Yap, and Benjamin
Mendiona filed the instant Petition, alleging that the appellate court erred in:
1. Concluding that private respondent's cause of action is not one based on
malicious prosecution but one for abuse of rights under Article 21 of the Civil Code
notwithstanding the fact that the basis of a civil action for malicious prosecution is
Article 2219 in relation to Article 21 or Article 2176 of the Civil Code . . . .
2. Concluding that "hitting at and in effect maligning (private respondent) with an
unjust criminal case was, without more, a plain case of abuse of rights by
misdirection" and "was therefore, actionable by itself," and which "became
inordinately blatant and grossly aggravated when . . . (private respondent) was
deprived of his basic right to notice and a fair hearing in the so-called preliminary
investigation . . . . "
3. Concluding that petitioner's "actuations in this case were coldly deliberate and
calculated", no evidence having been adduced to support such a sweeping
statement.
4. Holding the petitioner corporation, petitioner Yap and petitioner Mendiona jointly
and severally liable without sufficient basis in law and in fact.
5. Awarding respondents
5.1. P133,350.00 as actual or compensatory damages, even in the
absence of sufficient evidence to show that such was actually
suffered.
5.2. P500,000.00 as moral damages considering that the evidence in
this connection merely involved private respondent's alleged
celebrated status as a businessman, there being no showing that the
act complained of adversely affected private respondent's reputation
or that it resulted to material loss.
5.3. P200,000.00 as exemplary damages despite the fact that
petitioners were duly advised by counsel of their legal recourse.
5.4. P50,000.00 as attorney's fees, no evidence having been
adduced to justify such an award (Rollo, pp. 4-6).
Petitioners contend that the civil case filed in the lower court was one for malicious prosecution.
Citing the case ofMadera vs. Lopez (102 SCRA 700 [1981]), they assert that the absence of malice
on their part absolves them from any liability for malicious prosecution. Private respondent, on the
other hand, anchored his complaint for Damages on Articles 19, 20, and 21 ** of the Civil Code.
Article 19, known to contain what is commonly referred to as the principle of abuse of rights, sets
certain standards which may be observed not only in the exercise of one's rights but also in the
performance of one's duties. These standards are the following: to act with justice; to give everyone
his due; and to observe honesty and good faith. The law, therefore, recognizes the primordial
limitation on all rights: that in their exercise, the norms of human conduct set forth in Article 19 must
be observed. A right, though by itself legal because recognized or granted by law as such, may
nevertheless become the source of some illegality. When a right is exercised in a manner which
does not conform with the norms enshrined in Article 19 and results in damage to another, a legal
wrong is thereby committed for which the wrongdoer must be held responsible. Although the
requirements of each provision is different, these three (3) articles are all related to each other. As
the eminent Civilist Senator Arturo Tolentino puts it: "With this article (Article 21), combined with
articles 19 and 20, the scope of our law on civil wrongs has been very greatly broadened; it has
become much more supple and adaptable than the Anglo-American law on torts. It is now difficult to
conceive of any malevolent exercise of a right which could not be checked by the application of
these articles" (Tolentino, 1 Civil Code of the Philippines 72).
There is however, no hard and fast rule which can be applied to determine whether or not the
principle of abuse of rights may be invoked. The question of whether or not the principle of abuse of
rights has been violated, resulting in damages under Articles 20 and 21 or other applicable provision
of law, depends on the circumstances of each case. (Globe Mackay Cable and Radio Corporation
vs. Court of Appeals, 176 SCRA 778 [1989]).
The elements of an abuse of right under Article 19 are the following: (1) There is a legal right or duty;
(2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. Article 20
speaks of the general sanction for all other provisions of law which do not especially provide for their
own sanction (Tolentino, supra, p. 71). Thus, anyone who, whether willfully or negligently, in the
exercise of his legal right or duty, causes damage to another, shall indemnify his victim for injuries
suffered thereby. Article 21 deals with acts contra bonus mores, and has the following elements: 1)
There is an act which is legal; 2) but which is contrary to morals, good custom, public order, or public
policy; 3) and it is done with intent to injure.
Thus, under any of these three (3) provisions of law, an act which causes injury to another may be
made the basis for an award of damages.
There is a common element under Articles 19 and 21, and that is, the act must be intentional.
However, Article 20 does not distinguish: the act may be done either "willfully", or "negligently". The
trial court as well as the respondent appellate court mistakenly lumped these three (3) articles
together, and cited the same as the bases for the award of damages in the civil complaint filed
against petitioners, thus:
With the foregoing legal provisions (Articles 19, 20, and 21) in focus, there is not
much difficulty in ascertaining the means by which appellants' first assigned error
should be resolved, given the admitted fact that when there was an attempt to collect
the amount of P2,575.00, the defendants were explicitly warned that plaintiff Eugenio
S. Baltao is not the Eugenio Baltao defendants had been dealing with (supra, p. 5).
When the defendants nevertheless insisted and persisted in filing a case a
criminal case no less against plaintiff, said defendants ran afoul of the legal
provisions (Articles 19, 20, and 21 of the Civil Code) cited by the lower court and
heretofore quoted (supra).
Defendants, not having been paid the amount of P2,575.00, certainly had the right to
complain. But that right is limited by certain constraints. Beyond that limit is the area
of excess, of abuse of rights. (Rollo, pp.
44-45).
Assuming, arguendo, that all the three (3) articles, together and not independently of each one,
could be validly made the bases for an award of damages based on the principle of "abuse of right",
under the circumstances, We see no cogent reason for such an award of damages to be made in
favor of private respondent.
Certainly, petitioners could not be said to have violated the aforestated principle of abuse of right.
What prompted petitioners to file the case for violation of Batas Pambansa Bilang 22 against private
respondent was their failure to collect the amount of P2,575.00 due on a bounced check which they
honestly believed was issued to them by private respondent. Petitioners had conducted inquiries
regarding the origin of the check, and yielded the following results: from the records of the Securities
and Exchange Commission, it was discovered that the President of Guaranteed (the recipient of the
unpaid mild steel plates), was one "Eugenio S. Baltao"; an inquiry with the Ministry of Trade and
Industry revealed that E.L. Woodworks, against whose account the check was drawn, was
registered in the name of one "Eugenio Baltao"; verification with the drawee bank, the Pacific
Banking Corporation, revealed that the signature appearing on the check belonged to one "Eugenio
Baltao".
In a letter dated December 16, 1983, counsel for petitioners wrote private respondent demanding
that he make good the amount of the check. Counsel for private respondent wrote back and denied,
among others, that private respondent ever transacted business with Albenson Enterprises
Corporation; that he ever issued the check in question. Private respondent's counsel even went
further: he made a warning to defendants to check the veracity of their claim. It is pivotal to note at
this juncture that in this same letter, if indeed private respondent wanted to clear himself from the
baseless accusation made against his person, he should have made mention of the fact that there
are three (3) persons with the same name, i.e.: Eugenio Baltao, Sr., Eugenio S. Baltao, Jr. (private
respondent), and Eugenio Baltao III (private respondent's son, who as it turned out later, was the
issuer of the check). He, however, failed to do this. The last two Baltaos were doing business in the
same building Baltao Building located at 3267 V. Mapa Street, Sta. Mesa, Manila. The mild
steel plates were ordered in the name of Guaranteed of which respondent Eugenio S. Baltao is the
president and delivered to Guaranteed at Baltao building. Thus, petitioners had every reason to
believe that the Eugenio Baltao who issued the bouncing check is respondent Eugenio S. Baltao
when their counsel wrote respondent to make good the amount of the check and upon refusal, filed
the complaint for violation of BP Blg. 22.
Private respondent, however, did nothing to clarify the case of mistaken identity at first hand.
Instead, private respondent waited in ambush and thereafter pounced on the hapless petitioners at a
time he thought was propitious by filing an action for damages. The Court will not countenance this
devious scheme.
The criminal complaint filed against private respondent after the latter refused to make good the
amount of the bouncing check despite demand was a sincere attempt on the part of petitioners to
find the best possible means by which they could collect the sum of money due them. A person who
has not been paid an obligation owed to him will naturally seek ways to compel the debtor to pay
him. It was normal for petitioners to find means to make the issuer of the check pay the amount
thereof. In the absence of a wrongful act or omission or of fraud or bad faith, moral damages cannot
be awarded and that the adverse result of an action does not per se make the action wrongful and
subject the actor to the payment of damages, for the law could not have meant to impose a penalty
on the right to litigate (Rubio vs. Court of Appeals, 141 SCRA 488 [1986]).
In the case at bar, private respondent does not deny that the mild steel plates were ordered by and
delivered to Guaranteed at Baltao building and as part payment thereof, the bouncing check was
issued by one Eugenio Baltao. Neither had private respondent conveyed to petitioner that there are
two Eugenio Baltaos conducting business in the same building he and his son Eugenio Baltao III.
Considering that Guaranteed, which received the goods in payment of which the bouncing check
was issued is owned by respondent, petitioner acted in good faith and probable cause in filing the
complaint before the provincial fiscal.
To constitute malicious prosecution, there must be proof that the prosecution was prompted by a
sinister design to vex and humiliate a person, and that it was initiated deliberately by the defendant
knowing that his charges were false and groundless. Concededly, the mere act of submitting a case
to the authorities for prosecution does not make one liable for malicious prosecution. (Manila Gas
Corporation vs. Court of Appeals, 100 SCRA 602 [1980]). Still, private respondent argues that
liability under Articles 19, 20, and 21 of the Civil Code is so encompassing that it likewise includes
liability for damages for malicious prosecution under Article 2219 (8). True, a civil action for damages
for malicious prosecution is allowed under the New Civil Code, more specifically Articles 19, 20, 26,
29, 32, 33, 35, and 2219 (8) thereof. In order that such a case can prosper, however, the following
three (3) elements must be present, to wit: (1) The fact of the prosecution and the further fact that
the defendant was himself the prosecutor, and that the action was finally terminated with an
acquittal; (2) That in bringing the action, the prosecutor acted without probable cause; (3) The
prosecutor was actuated or impelled by legal malice (Lao vs. Court of Appeals, 199 SCRA 58,
[1991]).
Thus, a party injured by the filing of a court case against him, even if he is later on absolved, may file
a case for damages grounded either on the principle of abuse of rights, or on malicious prosecution.
As earlier stated, a complaint for damages based on malicious prosecution will prosper only if the
three (3) elements aforecited are shown to exist. In the case at bar, the second and third elements
were not shown to exist. It is well-settled that one cannot be held liable for maliciously instituting a
prosecution where one has acted with probable cause. "Probable cause is the existence of such
facts and circumstances as would excite the belief, in a reasonable mind, acting on the facts within
the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was
prosecuted. In other words, a suit will lie only in cases where a legal prosecution has been carried
on without probable cause. The reason for this rule is that it would be a very great discouragement
to public justice, if prosecutors, who had tolerable ground of suspicion, were liable to be sued at law
when their indictment miscarried" (Que vs. Intermediate Appellate Court, 169 SCRA 137 [1989]).
The presence of probable cause signifies, as a legal consequence, the absence of malice. In the
instant case, it is evident that petitioners were not motivated by malicious intent or by sinister design
to unduly harass private respondent, but only by a well-founded anxiety to protect their rights when
they filed the criminal complaint against private respondent.
To constitute malicious prosecution, there must be proof that the prosecution was
prompted by a sinister design to vex and humiliate a person, that it was initiated
deliberately by the defendant knowing that his charges were false and groundless.
Concededly, the mere act of submitting a case to the authorities for prosecution does
not make one liable for malicious prosecution. Proof and motive that the institution of
the action was prompted by a sinister design to vex and humiliate a person must be
clearly and preponderantly established to entitle the victims to damages (Ibid.).
In the case at bar, there is no proof of a sinister design on the part of petitioners to vex or humiliate
private respondent by instituting the criminal case against him. While petitioners may have been
negligent to some extent in determining the liability of private respondent for the dishonored check,
the same is not so gross or reckless as to amount to bad faith warranting an award of damages.
The root of the controversy in this case is founded on a case of mistaken identity. It is possible that
with a more assiduous investigation, petitioners would have eventually discovered that private
respondent Eugenio S. Baltao is not the "Eugenio Baltao" responsible for the dishonored check.
However, the record shows that petitioners did exert considerable effort in order to determine the
liability of private respondent. Their investigation pointed to private respondent as the "Eugenio
Baltao" who issued and signed the dishonored check as the president of the debtor-corporation
Guaranteed Enterprises. Their error in proceeding against the wrong individual was obviously in the
nature of an innocent mistake, and cannot be characterized as having been committed in bad faith.
This error could have been discovered if respondent had submitted his counter-affidavit before
investigating fiscal Sumaway and was immediately rectified by Provincial Fiscal Mauro Castro upon
discovery thereof, i.e., during the reinvestigation resulting in the dismissal of the complaint.
Furthermore, the adverse result of an action does not per se make the act wrongful and subject the
actor to the payment of moral damages. The law could not have meant to impose a penalty on the
right to litigate, such right is so precious that moral damages may not be charged on those who may
even exercise it erroneously. And an adverse decision does not ipso facto justify the award of
attorney's fees to the winning party (Garcia vs. Gonzales, 183 SCRA 72 [1990]).
Thus, an award of damages and attorney's fees is unwarranted where the action was filed in good
faith. If damage results from a person's exercising his legal rights, it is damnum absque
injuria (Ilocos Norte Electric Company vs. Court of Appeals, 179 SCRA 5 [1989]).
Coming now to the claim of private respondent for actual or compensatory damages, the records
show that the same was based solely on his allegations without proof to substantiate the same. He
did not present proof of the cost of the medical treatment which he claimed to have undergone as a
result of the nervous breakdown he suffered, nor did he present proof of the actual loss to his
business caused by the unjust litigation against him. In determining actual damages, the court
cannot rely on speculation, conjectures or guesswork as to the amount. Without the actual proof of
loss, the award of actual damages becomes erroneous (Guilatco vs. City of Dagupan, 171 SCRA
382 [1989]).
Actual and compensatory damages are those recoverable because of pecuniary loss in business,
trade, property, profession, job or occupation and the same must be proved, otherwise, if the
proof is flimsy and unsubstantiated, no damages will be given (Rubio vs. Court of Appeals, 141
SCRA 488 [1986]). For these reasons, it was gravely erroneous for respondent court to have
affirmed the award of actual damages in favor of private respondent in the absence of proof thereof.
Where there is no evidence of the other party having acted in wanton, fraudulent or reckless, or
oppressive manner, neither may exemplary damages be awarded (Dee Hua Liong Electrical
Equipment Corporation vs. Reyes, 145 SCRA 488 [1986]).
As to the award of attorney's fees, it is well-settled that the same is the exception rather than the
general rule. Needless to say, the award of attorney's fees must be disallowed where the award of
exemplary damages is eliminated (Article 2208, Civil Code; Agustin vs. Court of Appeals, 186 SCRA
375 [1990]). Moreover, in view of the fact that there was no malicious prosecution against private
respondent, attorney's fees cannot be awarded him on that ground.
In the final analysis, there is no proof or showing that petitioners acted maliciously or in bad faith in
the filing of the case against private respondent. Consequently, in the absence of proof of fraud and
bad faith committed by petitioners, they cannot be held liable for damages (Escritor, Jr. vs.
Intermediate Appellate Court, 155 SCRA 577 [1987]). No damages can be awarded in the instant
case, whether based on the principle of abuse of rights, or for malicious prosecution. The questioned
judgment in the instant case attests to the propensity of trial judges to award damages without basis.
Lower courts are hereby cautioned anew against awarding unconscionable sums as damages
without bases therefor.
WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals in C.A. G.R. C.V.
No. 14948 dated May 13, 1989, is hereby REVERSED and SET ASIDE. Costs against respondent
Baltao.
SO ORDERED.
Gutierrez, Jr., Davide, Jr., Romero and Melo, JJ., concur.

# Footnotes
** "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, willfully or negligently causes damage to
another, shall indemnify the latter for the same.
"Art. 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage.