II.

Human relations

6. COCA-COLA BOTTLERS PHILIPPINES, INC., v. SPOUSES JOSE R. BERNARDO AND LILIBETH R. BERNARDO,
DOING BUSINESS UNDER THE NAME AND STYLE "JOLLY BEVERAGE ENTERPRISES,"

G.R. No. 190667

First Division
November 07, 2016
Sereno, C.J.

Facts: Sps. Bernardo, doing business as “Jolly Beverage Enterprises”, were distributors of petitioner’s products
from 1987-1999. In their agreement, Coca Cola will extend cash assistance and trade discount incentives to the
respondent while the latter undertook to sell petitioner's products exclusively, meet the sales quota of 7,000 cases per
month, and assist petitioner in its marketing efforts in exchange. Before the expiration of their contract, Coca Cola
required the respondents to submit a list of their customers on the pretext that it would formulate a policy defining its
territorial dealership in Quezon City and as a condition for the renewal of their contract. Despite their compliance, the
contract was not renewed.

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

The respondents filed a case against Coca-Cola PH, for violation of Articles 19, 20, 21, and 28 of the Civil Code
and alleging that the acts of petitioner constituted dishonesty, bad faith, gross negligence, fraud, and unfair competition in
commercial enterprise.

Issue: Whether the acts of the petitioner constitutes a violation of the petitioner’s right under Articles 19, 20, 21,
and 28 of the Civil Code.

Ruling:

Yes. The SC held that the acts of the petitioner constitutes abuse of rights and unfair competition under the Civil
Code. The SC denied the Petition and affirmed but modified the damages awarded by the lower court, that it shall earn
legal interest of 6% per annum from the date of finality of the Decision until its full satisfaction.

According to the SC, the petitioner shall liable for damages for abuse of rights and unfair competition under
the Civil Code. Both the RTC and the CA found that petitioner had employed oppressive and high-handed schemes to
unjustly limit the market coverage and diminish the investment returns of respondents. The CA summarized its findings as
follows:

This [cut-throat competition] is precisely what appellant did in order to take over the market: directly sell its
products to or deal them off to competing stores at a price substantially lower than those imposed on its wholesalers. As a
result, the wholesalers suffered losses, and in [respondents'] case, laid of a number of employees and alienated the
patronage of its major customers including small-scale stores.

It must be emphasized that petitioner is not only a beverage giant, but also the manufacturer of the products;
hence, it sets the price. In addition, it took advantage of the information provided by respondents to facilitate its takeover
of the latter's usual business area. Distributors like respondents, who had assisted petitioner in its marketing efforts,
suddenly found themselves with fewer customers. Other distributors were left with no choice but to fold.

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

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

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

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

In Albenson Enterprises Corp. v. CA, this Court held that under any of the above provisions of law, an act that
causes injury to another may be made the basis for an award of damages. As explained by this Court in GF Equity, Inc. v.
Valenzona:

The exercise of a right ends when the right disappears; and it disappears when it is abused, especially to
the prejudice of others. The mask of a right without the spirit of justice which gives it life is repugnant to the modern
concept of social law. It cannot be said that a person exercises a right when he unnecessarily prejudices another or
offends morals or good customs. Over and above the specific precepts of positive law are the supreme norms of
justice which the law develops and which are expressed in three principles: honeste vivere, alterum non laedere
and jus suum quique tribuere; and he who violates them violates the law. For this reason, it is not permissible to
abuse our rights to prejudice others.

Meanwhile, the use of unjust, oppressive, or high-handed business methods resulting in unfair competition also
gives a right of action to the injured party. Article 28 of the Civil Code provides:

Art. 28. Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force,
intimidation, deceit, machination or any other unjust, oppressive or highhanded method shall give rise to a right of action
by the person who thereby suffers damage.

Petitioner cites Tolentino, who in turn cited Colin and Capitant. According to the latter, the act of "a merchant [who]
puts up a store near the store of another and in this way attracts some of the latter's patrons" is not an abuse of a right.
The scenario in the present case is vastly different: the merchant was also the producer who, with the use of a list
provided by its distributor, knocked on the doors of the latter's customers and offered the products at a substantially lower
price. Unsatisfied, the merchant even sold its products at a preferential rate to another store within the vicinity.
Jurisprudence holds that when a person starts an opposing place of business, not for the sake of profit, but regardless of
Joss and for the sole purpose of driving a competitor out of business, in order to take advantage of the effects of a
malevolent purpose, that person is guilty of a wanton wrong.
 7. ST. MARTIN POLYCLINIC, INC., PETITIONER, V. LWV CONSTRUCTION CORPORATION,
RESPONDENT
G.R. NO. 217426, DECEMBER 04, 2017

NATURE OF THE ACTION

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

FACTS:

Respondent LWV Construction Corporation filed a Complaint for sum of money and damages against
petitioner St. Martin Polyclinic for its alleged negligent act. It averred that their applicant Jonathan V.
Raguindin, was referred from respondent clinic to undergo a medical examination in relation to its pre-
employment in Saudi Arabia. Relying heavily on the petitioner’s reckless medical report which states that
Jonathan is fit for employment, deployed the latter to work in Saudi Arabia. However, when Jonathan again was
subjected twice to medical examinations in General Care Dispensary of Saudi Arabia, it appears from the
medical findings that he has HCV or the hepatitis C virus. Because of this, he was repatriated in the Philippines.
Petitioner denied liability and claimed that the fact that Jonathan later tested positive for HCV does not guaranty
that he was already under the same medical state at the time petitioner issued the Medical Report on January 11,
2008. In ruling againts petitioner, MeTC, RTC and CA bases their decisions respectively in the provisions of
Articles 19, 20, and 21on human relations instead of Article 2176 of the Civil Code.

ISSUE:

Whether or not, the courts a quo’s non-application of Article 2176 of the Civil Code under the given
facts, shows their wrongful reliance in the provisions of Articles 19, 20, and 21on human relations?

HELD:

Yes. The courts a quo’s non-application of Article 2176 of the Civil Code under the given facts, shows
their wrongful reliance in the provisions of Articles 19, 20, and 21on human relations.

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

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

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

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

Article 20. Every person who, contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.
 Article 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs, or public policy shall compensate the latter for the damage.

"[Article 19], known to contain what is commonly referred to as the principle of abuse of
rights, sets certain standards which must be observed not only in the exercise of one's rights, but
also in the performance of one's duties." Case law states that "[w]hen a right is exercised in a
manner which does not conform with the norms enshrined in Article 19 and results in damage to
another, a legal wrong is thereby committed for which the wrongdoer must be held responsible.
But while Article 19 lays down a rule of conduct for the government of human relations and for the
maintenance of social order, it does not provide a remedy for its violation. Generally, an action for
damages under either Article 20 or Article 21 would [then] be proper." Between these two
provisions as worded, it is Article 20 which applies to both willful and negligent acts that are done
contrary to law. On the other hand, Article 21 applies only to willful acts done contra bonos
mores.

In the Alano case, Justice Leonen aptly elaborated on the distinctive applications of Articles
19, 20 and 21, which are general provisions on human relations, vis-a-vis Article 2176, which
particularly governs quasi-delicts:

Article 19 is the general rule which governs the conduct of human relations. By itself, it is
not the basis of an actionable tort. Article 19 describes the degree of care required so that an
actionable tort may arise when it is alleged together with Article 20 or Article 21.

Article 20 concerns violations of existing law as basis for an injury. It allows recovery
should the act have been willful or negligent. Willful may refer to the intention to do the act and
the desire to achieve the outcome which is considered by the plaintiff in tort action as injurious.
Negligence may refer to a situation where the act was consciously done but without intending the
result which the plaintiff considers as injurious.

Article 21, on the other hand, concerns injuries that may be caused by acts which are not
necessarily proscribed by law. This article requires that the act be willful, that is, that there was an
intention to do the act and a desire to achieve the outcome. In cases under Article 21, the legal
issues revolve around whether such outcome should be considered a legal injury on the part of the
plaintiff or whether the commission of the act was done in violation of the standards of care
required in Article 19.

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

Thus, with respect to negligent acts or omissions, it should therefore be discerned that Article 20 of the
Civil Code concerns "violations of existing law as basis for an injury", whereas Article 2176 applies when
the negligent act causing damage to another does not constitute "a breach of an existing law or a pre-
existing contractual obligation."

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

G.R. Nos. 127358 and G.R. Nos. 127449

March 31, 2005

Noel deceived Isabel into marrying him by professing true love instead of revealing to her that
he was under heavy parental pressure to marry and that because of pride he married defendant-
appellee; Wife claimed that she suffer mental anguish, anxiety, besmirched reputation, sleepless
nights not only in those years the parties were together but also after and throughout their
separation. Noel filed a petition for the declaration of nullity of marriage on the ground that
both he and his wife were psychologically incapacitated.

ISSUE: Whether or not damages should be awarded by reason of the performance or non-
performance of marital obligations.

HELD: No. Moral and Exemplary damages are deleted.

RATIO: The acts or omissions of petitioner constitute psychological incapacity. A marriage

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

It is contradictory to characterize acts as a product of psychological incapacity, and hence

beyond the control of the party because of an innate inability, while at the same time
considering the same set of acts as willful. By declaring the petitioner as psychologically
incapacitated, the possibility of awarding moral damages on the same set of facts was negated.
The award of moral damages should be predicated, not on the mere act of entering into the
marriage, but on specific evidence that it was done deliberately and with malice by a party who
had knowledge of his or her disability and yet willfully concealed the same. No such evidence
appears to have been adduced in this case.
Article 22
9. FILINVEST LAND v. NGILAY, GR No. 174715, 2012-10-11
Facts:

For this Court's consideration is the Petition for Review on Certiorari under Rule 45,
dated November 9, 2006, of petitioner Filinvest Land, Inc., which seeks to set aside
the Decision[1] dated March 30, 2006 and

Resolution[2] dated September 18, 2006 of the Court of Appeals (CA) partially
reversing the Decision[3] dated October 1, 2003 of the Regional Trial Court, Las
Piñas, Branch 253 (RTC Respondents were grantees of agricultural public lands
located in Tambler, General Santos City through Homestead and Fee patents
sometime in 1986 Respondents were grantees of agricultural public lands located in
Tambler, General Santos City through Homestead and Fee patents sometime in 1986
and 1991Negotiations were made by petitioner, represented by Lina de Guzman-Ferrer
with the patriarch of the Ngilays, Hadji Gulam Ngilay sometime in 1995. a Deed of
Conditional Sale of the above- enumerated properties in favor of petitioner Filinvest
Land, Inc. was executed. Respondents received the downpayment for the properties
on October 28, 1995.

A few days after the execution of the aforestated deeds and the delivery of the
corresponding documents to petitioner, respondents came to know that the sale of
their properties was null and void, because it was done within the period that they
were not allowed to do so and that... the sale did not have the approval of the
Secretary of the Department of Environment and Natural Resources (DENR)
prompting them to file a case for the declaration of nullity of the deeds of conditional
and absolute sale of the questioned properties and the grant of right of way... with
the RTC. According to petitioner, Ngilay and his children prevailed upon the
representatives of petitioner to make an advance payment. To accommodate the
Ngilays, petitioner acceded to making an advance with the understanding that
petitioner could demand anytime the return of the advance... payment should Ngilay
not be able to comply with the conditions of the sale.

The RTC ruled in favor of Filinvest Land, Inc. and upheld the sale of all the properties
in litigation

It found that the sale of those properties whose original certificates of title were
issued by virtue of the 1986 Patents was valid, considering that the prohibitory
period... ended in 1991, or way before the transaction took place

The RTC also upheld the grant of right of way as it adjudged that the right of way
agreement showed that the right of way was granted to provide access from the
highway to the properties to be purchased.

Decision... dated October 1, 2003 reads:

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

No pronouncement as to damages for failure to prove the same. Costs against the
petitioners.

Respondents elevated the case to the CA in which the latter modified the judgment of
the RTC

The CA Decision dated March 30, 2006 disposed the case as follows:
WHEREFORE, the assailed Decision dated October 1, 2003 is MODIFIED:... a) The
Deed of Conditional Sale and Deed of Absolute Sale for the properties covered by the
"1991 Patents", as well as the Right of Way Agreement thereto, are declared null and
void. The Register of Deeds of General Santos City is consequently directed to cancel
the... certificates of title covered by the "1991 Patents" issued in favor of appellee
Filinvest and to issue new titles in favor of herein appellants.

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

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

Nevertheless, petitioner does not err in seeking the return of the down payment as a
consequence of the sale having been declared void. The rule is settled that the
declaration of nullity of a contract which is void ab initio operates to restore things to
the... state and condition in which they were found before the execution thereof.[17]
Petitioner is correct in its argument that allowing respondents to keep the amount
received from petitioner is tantamount to judicial acquiescence to unjust enrichment.

Issues: petitioner insists that the prohibition against alienation and disposition of
land covered by Homestead Patents is a prohibition against the actual loss of the
homestead within the five-year prohibitory period, not... against all contracts
including those that do not result in such an actual loss of ownership or possession

Ruling:

Petitioner argues that the correct formulation of the issue is not whether there was a
perfected contract between the parties during the period of prohibition, but whether
by such deed of conditional sale there was "alienation or encumbrance" within the
contemplation of the law.

This is wrong. The prohibition does not distinguish between consummated and
executory sale. The conditional sale entered into by the parties is still a conveyance
of the homestead patent.

As correctly ruled by the CA, citing Ortega v. Tan:[

And, even assuming that the disputed sale was not yet perfected or consummated,
still, the transaction cannot be validated.

The prohibition of the law on the sale or encumbrance of the homestead within five
years after the grant is MANDATORY. The purpose of the law... is to promote a definite
policy, i.e., "to preserve and keep in the family of the homesteader that portion of the
public land which the State has gratuitously given to him." Thus, the law does not
distinguish between executory and consummated sales. Where the sale of a...
homestead was perfected within the prohibitory period of five years, the fact that the
formal deed of sale was executed after the expiration of the staid period DID NOT and
COULD NOT legalize a contract that was void from its inception

Thus, the sale which created the obligation of petitioner to pay the agreed amount
having been declared... void, respondents have the duty to return the down payment
as they no longer have the right to keep it. The principle of unjust enrichment
essentially contemplates payment when there is no duty to pay, and the person who
receives the payment has no right to receive... it.[20] As found by the CA and
undisputed by the parties, the amount of the down payment made is P14,000,000.00
which shall also be the amount to be returned by respondents.

WHEREFORE, the Petition for Review on Certiorari dated November 9, 2006 of

petitioner Filinvest Land, Inc. is hereby DENIED. Consequently, the Decision dated
March 30, 2006 and Resolution dated September 18, 2006 of the Court of Appeals are
hereby

AFFIRMED with the MODIFICATION that respondents return the amount of

P14,000,000.00 given by petitioner as down payment for the sale which is ruled to be
void ab initio.

SO ORDERED.

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

The prohibition of the law on the sale or encumbrance of the homestead within five
years after the grant is MANDATORY. The purpose of the law... is to promote a definite
policy, i.e., "to preserve and keep in the family of the homesteader that portion of the
public land which the State has gratuitously given to him." Thus, the law does not
distinguish between executory and consummated sales. Where the sale of a...
homestead was perfected within the prohibitory period of five years, the fact that the
formal deed of sale was executed after the expiration of the staid period DID NOT and
COULD NOT legalize a contract that was void from its inception.

Unjust... enrichment exists "when a person unjustly retains a benefit to the loss of
another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience."[18] There is unjust
enrichment under

Article 22 of the Civil Code when (1) a person is unjustly benefited, and (2) such
benefit is derived at the expense of or with damages to another.

10. DOMINGO GONZALO v. JOHN TARNATE, GR No. 160600, 2014-01-15

Facts:

After the Department of Public Works and Highways (DPWH) had awarded on July 22,
1997 the contract for the improvement of the Sadsadan-Maba-ay Section of the
Mountain Province-Benguet Road in the total amount of P7,014,963.33 to his
company, Gonzalo Construction,[1] petitioner Domingo Gonzalo (Gonzalo)
subcontracted to respondent John Tarnate, Jr. (Tarnate) on October 15, 1997, the
supply of materials and labor for the project under the latter's business known as
JNT Aggregates.

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

assignment whereby he, as the contractor, was assigning to Tarnate an amount
equivalent to 10% of the total collection from the DPWH for the project.

This 10% retention fee (equivalent to

P233,526.13) was the rent for Tarnate's equipment that had been utilized in the
project.
Gonzalo further authorized Tarnate to use the official receipt of Gonzalo Construction
in the processing of the documents relative to the collection of... the 10% retention
fee and in encashing the check to be issued by the DPWH for that purpose.

The deed of assignment was submitted to the DPWH on April 15, 1999.

During the processing of the documents for the retention fee, however, Tarnate...
learned that Gonzalo had unilaterally rescinded the deed of assignment by means of
an affidavit of cancellation of deed of assignment dated April 19, 1999 filed in the
DPWH

Tarnate demanded the payment of the retention fee from Gonzalo, but to no avail.
Thus, he brought this suit against Gonzalo on September 13, 1999 in the Regional
Trial Court (RTC) in Mountain Province to recover the retention fee

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

On January 26, 2001, the RTC, opining that the deed of assignment was a valid and
binding contract, and that Gonzalo must comply with his obligations under the deed
of assignment

Defendant Domingo Gonzalo to pay the Plaintiff, John Tarnate, Jr., the amount of TWO
HUNDRED THIRTY THREE THOUSAND FIVE HUNDRED TWENTY SIX and 13/100 PESOS
(P233,526.13) representing the rental of equipment;

Defendant to pay Plaintiff the sum of THIRTY THOUSAND (P30,000.00) PESOS by way
of reasonable Attorney's Fees for having forced/compelled the plaintiff to litigate and
engage the services of a lawyer in order to protect his interest and to enforce his
right. The claim of the... plaintiff for attorney's fees in the amount of FIFTY
THOUSAND PESOS (P50,000.00) plus THREE THOUSAND PESOS (P3,000.00) clearly
appears to be unconscionable and therefore reduced to Thirty Thousand Pesos
(P30,000.00) as aforestated making the same to be reasonable;

Defendant to pay Plaintiff the sum of FIFTEEN THOUSAND PESOS (P15,000.00) by

way of litigation expenses;

Defendant to pay Plaintiff the sum of TWENTY THOUSAND PESOS (P20,000.00) for
moral damages and for the breach of contract; and

To pay the cost of this suit.

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

Issues:

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

Ruling:

We deny the petition for review, but we delete the grant of moral damages, attorney's
fees and litigation expenses.
There is no question that every contractor is prohibited from subcontracting with or
assigning to another person any contract or project that he has with the DPWH
unless the DPWH Secretary has approved the subcontracting or assignment.

Gonzalo, who was the sole contractor of the project in question, subcontracted the
implementation of the project to Tarnate in violation of the statutory prohibition.
Their subcontract was illegal, therefore, because it did not bear the approval of the
DPWH Secretary.

Necessarily, the deed of assignment was also illegal, because it sprung from the
subcontract.

According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal contract
cannot recover from one another and are not entitled to an affirmative relief because
they are in pari delicto or in equal fault.

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

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

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

There is no question that Tarnate provided the equipment, labor and materials for the
project in compliance with his obligations under the subcontract and the deed of
assignment; and that it was Gonzalo as the contractor who received the payment for
his contract with... the DPWH as well as the 10% retention fee that should have been
paid to Tarnate pursuant to the deed of assignment.[22] Considering that Gonzalo
refused despite demands to deliver to Tarnate the stipulated 10% retention fee that
would have... compensated the latter for the use of his equipment in the project,
Gonzalo would be unjustly enriched at the expense of Tarnate if the latter was to be
barred from recovering because of the rigid application of the doctrine of in pari
delicto. The prevention of unjust... enrichment called for the exception to apply in
Tarnate's favor. Consequently, the RTC and the CA properly adjudged Gonzalo liable
to pay Tarnate the equivalent amount of the 10% retention fee (i.e., P233,526.13).

WHEREFORE, we AFFIRM the decision promulgated on February 18, 2003

Principles:

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

Unjust enrichment exists, according to Hulst v. PR Builders, Inc.,[20]

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

11. BLISS DEVELOPMENT CORP. v. MONTANO DIAZ

The Case

This is a Petition for Review on Certiorari assailing the Decision[1] of the Court of Appeals (CA), promulgated
on January 21, 2014, and its subsequent Resolution dated June 27, 2014, both in CA-G.R. CV No. 99179. The
assailed Decision reversed and set aside the Decision of the Regional Trial Court (RTC), Makati City, Branch
59, dated November 21, 2011, in Civil Case No. 96-1372. The assailed Resolution, meanwhile, denied
petitioner’s Motion for Reconsideration.

The Facts

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

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

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

On August 27, 1996, Diaz filed the present complaint for sum of money against BDC before the RTC, Makati
City, Branch 59.[6] This was later amended to include Arreza and Tapay as defendants. Diaz argued that BDC
and Tapay’s representations led him to believe that he had a good title over the property, but due to the court’s
ruling in the interpleader case, he was constrained to transfer the property to Arreza. Thus, he prayed for the
following:

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

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

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

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

(5) For BDC, Tapay, and Arreza to pay him ?100,000 as attorney’s fees and costs of suit.[7]

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

The Decision of the RTC

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

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

xxxx

WHEREFORE, premises considered, plaintiff’s Complaint is hereby DISMISSED for lack of merit. Defendant
Domingo Tapay’s [counterclaim] is likewise dismissed. No costs.[9]

Aggrieved, Diaz appealed to the CA.

The Decision of the CA

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

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

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

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

Thus, the CA dispositively held:

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

Petitioner BDC moved for reconsideration, insisting that Diaz cannot be declared a buyer in good faith, in light
of the March 27, 1996 Decision of the Makati City RTC, Branch 146 in the Interpleader case, which had long
been final and executory. Tapay also moved for reconsideration, arguing that he was not aware of the defect in
the title sold to Diaz, and, hence, he should not be made liable for the P600,000.00 that Diaz paid to him. In the
CA’s assailed Resolution dated June 27, 2014,[12] the CA denied both motions for reconsideration.

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

I. WHETHER THE CA ERREDIN NOT DISMISSING THE APPEAL, IN VIEW OF THE APPLICATION OF
THE DOCTRINE OF IMMUTABILITY OF JUDGMENT IN THE DECISION OF THE COURT IN G.R. NO.
133113

II.WHETHER THE CA ERRED IN DECLARING BDC IN BAD FAITH

III. WHETHER THE CA ERRED IN DECLARING THAT THERE WAS UNJUST ENRICHMENT ON THE
PART OF BDC

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

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

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

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

The Court’s Ruling

The petition is partially granted. The CA committed reversible error in ruling that Diaz was a buyer in good
faith and for value. Nevertheless, BDC is liable to Diaz because it acted in bad faith, as discussed below.
The claim is not barred by the
doctrine of immutability of judgment

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

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

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

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

Petitioner BDC acted in bad faith

in dealing with respondent Diaz

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

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

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

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

Respondent Diaz is not a purchaser

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

The CA, in disposing the issue of Diaz’s good faith, merely said that “considering that the property involved is
registered land, Diaz need not go beyond the title to be considered a buyer in good faith.”[19]We find this to be a
serious and reversible error on the part of the CA. In the first place, while it is true that the subject lot is
registered lot, the doctrine of not going beyond the face of the title does not apply in the case here, because what
was subjected to a series of sales was not the lot itself but the right to purchase the lot from BDC. The CA itself
observed: “while [BDC] executed a Deed of Sale with Mortgage in favor of the spouses Emiliano and Leonila
Melgazo, title over the property was in [BDC’s] name. The title remained in [BDC’s] name when Tapay offered
to transfer his rights over the property to Diaz.”[20]Notably, the several transfers themselves did not purport to be
Deeds of Absolute Sale, but merely deeds of assignment of rights. The subject of those deeds of assignment was
never the real right over the subject property, but merely the personal right to purchase it. Therefore, the mirror
doctrine finds no application in the case at bar.

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

Petitioner BDC is liable to return the

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

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

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

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

Even if BDC can prove that there was no overlap between the payments made by Diaz and those made by
Arreza, allowing it to keep the amortizations paid by Diaz still amounts to unjust enrichment. As a direct result
of the final and executory ruling that Arreza is the rightful buyer of the subject property, the buyer-seller
relationship between Diaz and BDC is rendered null and void. Consequently, there remains no valid
consideration whatsoever for the payments made by Diaz to BDC. There being no indication of intent to donate,
because such payments were made under the impression that Diaz is the rightful buyer of the property, it is only
but just that Diaz be allowed to claim back what he has paid. This is only a natural consequence of the final and
executory ruling that Diaz is not the rightful buyer of the subject property. Allowing BDC to keep such
payments, at the expense of and to the damage of Diaz, still amounts to unjust enrichment.
Both parties being in bad faith,
BDC is liable to Diaz for the value
of the improvements he introduced
on the subject property

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

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

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

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

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

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

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

The CA may have made the erroneous conclusion that Diaz acted in good faith, but because BDC equally acted
in bad faith, Art. 453 of the Civil Code commands that the rights of one and the other shall be the same as
though both had acted in good faith. The CA made the correct observation then, when it said:

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

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

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

WHEREFORE, in view of the foregoing, the January 21, 2014 Decision of the Court of Appeals in CA-G.R.
CV No. 99179 is hereby MODIFIED to read as follows: (1) petitioner Bliss Development Corporation/Home
Guaranty Corporation is ordered topay respondent Montano M. Diaz the amount of P1,106,915.58 for the
amortizations paid and the amount spent on improvements on the property; and (2) Domingo Tapay is ordered
to pay respondent Montano M. Diaz the amount of P600,000.00, the amount he paid for the transfer of rights.
Article 26
12. 1. CASTRO V. PEOPLE
G.R. No. 171672
February 2, 2015
Facts:
Matuguina and Cornejo had left their savings account passbooks with the accused-petitioner, Marieta de
Castro, within the space of a week in October-November 1993. Matuguina tried to claim her passbook twice
before the branch manager Cynthia Zialcita sensed that something wrong was going on. Learning of
Matuguina's problem, Zialcita told the accused to return the passbook to her on November 8. However, the
accused came up with the convenient excuse that she had already returned the passbook.
Skeptical, Zialcita reviewed Matuguina's account and found three withdrawal slips dated October 19, 29
and November 4, 1993 containing signatures radically different from the specimen signatures of the depositor
and covering a total of P65,000. After Maguguina had found out about such withdrawal, she denied signing
those withdrawal slips.
On the same day, November 8, Zialcita instructed Misa to visit another depositor, Milagrosa Cornejo,
whom they feared was also victimized by the accused. According to Cornejo, on November 3, she went to the
bank to deposit a check and because there were many people there at the time, she left her passbook with the
accused. She returned days later to get it back, but the accused told her that she left it at home. Misa now
showed to her a withdrawal slip dated November 4, 1993 in which a signature purporting to be hers appeared.
Cornejo denied that it was her signature. As with the slips affecting Matuguina, the initials of the accused were
unquestionably affixed to the paper.
Zialcita reported her findings posthaste to her superiors. The accused initially denied the claims against
her but when she was asked to write her statement down, she confessed to her guilt. She started crying and
locked herself inside the bathroom. She came out only when another superior Fed Cortez arrived to ask her
some questions. Since then, she executed three more statements in response to the investigation conducted by
the bank's internal auditors. She also gave a list of the depositors' accounts from which she drew cash and which
were listed methodically in her diary.
The RTC and the CA convicted her of the four (4) of charges of estafa through falsification of
commercial documents y forging the signatures of bank depositors Amparo Matuguina and Milagrosa Cornejo
in withdrawal slips.
Issue: Whether there is a violation of the right to self-incrimination
Held: The US Supreme Court in Miranda spells out in precise words the occasion for the exercise of the new
right and the protections that it calls for. The occasion is when an individual is subjected to police interrogation
while in custody at the station or otherwise deprived of his freedom in a significant way. It is when custodial
investigation is underway that the certain procedural safeguards takes over – the person must be warned prior to
any questioning that he has the right to remain silent, that anything he says can be used against him in a court of
law, that he has the right to the presence of an attorney, and that if he cannot afford an attorney one will be
appointed for him prior to any questioning.
In Navallo v. Sandiganbayan, the Supreme Court said very clearly that the rights are invocable only
when the accused is under custodial investigation. A person undergoing a normal audit examination is not under
custodial investigation and, hence, the audit examiner may not be considered the law enforcement officer
contemplated by the rule.
By a fair analogy, the accused in the case before us may not be said to be under custodial investigation.
She was not even being investigated by any police or law enforcement officer. She was under administrative
investigation by her superiors in a private firm and in purely voluntary manner. She was not restrained of her
freedom in any manner. She was free to stay or go. There was no evidence that she was forced or pressured to
say anything. It was an act of conscience that compelled her to speak, a true mental and moral catharsis that
religion and psychology recognize to have salutary effects on the soul. In this setting, the invocation of the right
to remain silent or to counsel is simply irrelevant.
Article 27
13. Ledesma vs Court of Appeals (Article 27 of the New Civil Code)
Jose B. Ledesma vs Court of Appeals 160 SCRA 449 (1988)
Facts:
A student, Violeta Delmo, was not able to graduate as Magna Cum Laude, because the president, herein
petitioner Jose Ledesma, of the West Visayas College neglected his duty to inform the student on the result of a
case against the student which has, as its punishment, the removal of awards or citations of the student. Said
case was the extension of loans to students, which the president contends to be against the school rules and
regulations, and which the student innocently performed in her capacity as the treasurer of the Student
Leadership Club and in accordance to the Constitution and By-Laws of the club, on the belief that said
constitution was presented and approved by the president. The student appealed to the Director of the Bureau of
Public Schools after being denied for reconsideration by the president, where upon investigation, it was found
out that the student acted in good faith and that her awards be reinstituted. The president, upon receiving said
decision, delayed action and even e-mailed the director to reverse his decision. The student therefore graduated
as a plain student and without honors and her award as Magna Cum Laude was only entered on the scholastic
records weeks after the receipt by the president of the decision and after the graduation.
Issue: Whether or not the petitioner is liable for damages under Article 27 of the Civil Code of the Philippines.
Ruling: Yes. The president’s failure to graduate a student with honors and blatant disregard of the student’s
rights on the account of him being embarrassed shows neglect of duty without just cause, rendering him liable
for damages under Article 27 of the Civil Code. Undoubtedly, the student and the student’s parents went
through a painful ordeal brought about by such neglect. Thus, moral and exemplary damages under Article 27
are but proper.
14. Campugan vs Tolentino, Jr.

In this consolidated administrative case, complainants Jessie T. Campugan and Robert C. Torres
seek the disbarment of respondents Atty. Federico S. Tolentino, Jr., Atty. Daniel F. Victorio, Jr.,
Atty. Renato G. Cunanan, Atty. Elbert T. Quilala and Atty. Constante P. Caluya, Jr. for allegedly
falsifying a court order that became the basis for the cancellation of their annotation of the
notice ofadverse claim and the notice of lis pendens in the Registry of Deeds in Quezon City.
Antecedents Atty. Victorio, Jr. had replaced Atty. Edgardo Abad as counsel of the complainants
in a civil action they brought to seek the annulment of Transfer Certificate of Title (TCT) No.
N-290546 of the Registry of Deeds of Quezon City in the first week of January 2007 in the
Regional Trial Court (RTC) in Quezon City (Civil Case No. Q-07-59598). They impleaded as
defendants Ramon and Josefina Ricafort, Juliet Vargas and the Register of Deeds of Quezon
City.
They caused to be annotated on TCT No. N290546 their affidavit of adverse claim, as well as
the notice of lis pendens.
1 Atty. Tolentino, Jr. was the counsel of defendant Ramon and Josefina Ricafort. In their sworn
complaint for disbarment dated April 23, 2009 (later docketed as A.C. No. 8261),
2 the complainants narrated that as the surviving children of the late Spouses Antonio and
Nemesia Torres, they inherited upon the deaths of their parents a residential lot located at No.
251 Boni Serrano Street, Murphy, Cubao, Quezon City registered under Transfer Certificate of
Title (TCT) No. RT-64333(35652) of the Register of Deeds of Quezon City;
3 that on August 24, 2006, they discovered that TCT No. RT64333(35652) had been unlawfully
cancelled and replaced by TCT No. N-290546 of the Register of Deeds of Quezon City under
the names of Ramon and Josefina Ricafort;4 and that, accordingly, they immediately caused the
annotation of their affidavit of adverse claim on TCT No. N-290546. It appears that the parties
entered into an amicable settlement during the pendency of Civil Case No. Q-07-59598 in order
to end their dispute,5 whereby the complainants agreed to sell the property and the proceeds
thereof would be equally divided between the parties, and the complaint and counterclaim
would be withdrawn respectively by the complainants (as the plaintiffs) and the defendants.
Pursuant to the terms of the amicable settlement, Atty. Victorio, Jr. filed a Motion to Withdraw
Complaint dated February 26, 2008,6 which the RTC granted in its order dated May 16, 2008
upon noting the defendants’ lack of objection thereto and the defendants’ willingness to
similarly withdraw their counterclaim.7 The complainants alleged that from the time of the
issuance by the RTC of the order dated May 16, 2008, they could no longer locate or contact
Atty. Victorio, Jr. despite making several phone calls and visits to his office; that they found out
upon verification at the Register of Deeds of Quezon City that new annotations were made on
TCT No. N-290546, specifically: (1) the annotation of the letter-request appearing to be filed by
Atty. Tolentino, Jr.8 seeking the cancellation of the affidavit of adverse claim and the notice of
lis pendens annotated on TCT No. N290546; and (2) the annotation of the decision dated May
16, 2008 rendered in Civil Case No. Q-07-59598 by the RTC, Branch 95, in Quezon City,
granting the complainants’ Motion to Withdraw Complaint;9 and that a copy of the letter
request dated June 30, 2008 addressed to Atty. Quilala, Registrar of Deeds of Quezon City,
disclosed that it was defendant Ramon Ricafort who had signed the letter. Feeling aggrieved by
their discovery, the complainants filed an appeal en consulta with the Land Registration
Authority (LRA), docketed as Consulta No. 4707, assailing the unlawful cancellation of their
notice of adverse claim and their notice of lis pendens under primary entries PE-2742 and PE-
3828-9, respectively. The LRA set Consulta No. 4707 for hearing on March 30, 2009, and
directed the parties to submit their respective memoranda and/or supporting documents on or
beforesuch scheduled hearing.10 However, the records do not disclose whether Consulta No.
4707 was already resolved, or remained pending at the LRA. Unable to receive any response or
assistance from Atty. Victorio, Jr. despite their having paid him for his professional services, the
complainants felt that said counsel had abandoned their case. They submitted that the
cancellation of their notice of adverse claim and their notice of lis pendens without a court order
specifically allowing such cancellation resulted from the connivance and conspiracy between
Atty. Victorio, Jr. and Atty. Tolentino, Jr., and from the taking advantage of their positions as
officials in the Registry of Deeds by respondents Atty. Quilala, the Chief Registrar, and Atty.
Cunanan, the acting Registrar and signatory of the new annotations. Thus, they claimed to be
thereby prejudiced. On July 6, 2009, the Court required the respondents to comment on the
verified complaint.11 Atty. Victorio, Jr. asserted in his Comment dated August 17, 200912 that
complainant Robert Torres had been actively involved in the proceedings in Civil Case No. Q-
07-59598, which included the mediation process; that the complainants, after having
aggressively participated in the drafting of the amicable settlement, could not now claim that
they had been deceived into entering the agreement in the same way that they could not feign
ignorance of the conditions contained therein; that he did not commit any abandonment as
alleged, but had performed in good faith his duties as the counsel for the complainants in Civil
Case No. Q-07-59598; that he should not be held responsible for their representation in other
proceedings, such as that before the LRA, which required a separate engagement; and that the
only payment he had received from the complainants were those for his appearance fees of
P1,000.00 for every hearing in the RTC. In his Comment dated August 24, 2009,13 Atty.
Tolentino, Jr. refuted the charge of conspiracy, stressing that he was not acquainted with the
other respondents, except Atty. Victorio, Jr. whom he had met during the hearings in Civil Case
No. Q-07- 59598; that although he had notarized the letter request dated June 30, 2008 of
Ramon Ricafort to the Register of Deeds, he had no knowledge about how said letter-request
had been disposed of by the Register of Deeds; and that the present complaint was the second
disbarment case filed by the complainants against him with no other motive except to harass
and intimidate him. Atty. Quilala stated in his Comment dated September 1, 200914 that it was
Atty. Caluya, Jr., another Deputy Register of Deeds, who was the actual signing authority of the
annotations that resulted in the cancellation of the affidavit of adverse claim and the notice of lis
pendens on TCT No. N-290546; that the cancellation of the annotations was undertaken in the
regular course of official duty and in the exercise of the ministerial duty of the Register of
Deeds; that no irregularity occurred or was performed in the cancellation of the annotations; and
that the Register of Deeds was impleaded in Civil Case No. Q-07-59598 only as a nominal
party, thereby discounting any involvement in the proceedings in the case. Atty. Cunanan did
not file any comment.15 As the result of Atty. Quilala’s allegation in his Comment in A.C. No.
8261 that it had been Atty. Caluya, Jr.’s signature that appeared below the cancelled entries, the
complainants filed another sworn disbarment complaint dated August 26, 2010 alleging that
Atty. Caluya, Jr. had forged the signature of Atty. Cunanan.16 This disbarment complaint was
docketed as A.C. No. 8725, and was later on consolidated with A.C. No. 826117 because the
complaints involved the same parties and rested on similar allegations against the respondents.
Atty. Quilala filed his Comment in A.C. No. 8725 to belie the allegation of forgery and to
reiterate the arguments he had made in A.C. No. 8261.18 On his part, Atty. Caluya, Jr.
manifested that he adopted Atty. Quilala’s Comment.19 Ruling We dismiss the complaints for
disbarment for being bereft of merit. Well entrenched in this jurisdiction is the rule that a lawyer
may be disciplined for misconduct committed either in his professional or private capacity. The
test is whether his conduct shows him to be wanting in moral character, honesty, probity, and
good demeanor, or whether his conduct renders him unworthy to continue as an officer of the
Court.20 Verily, Canon 7 of the Code of Professional Responsibility mandates all lawyers to
uphold at all times the dignity and integrity of the Legal Profession. Lawyers are similarly
required under Rule 1.01, Canon 1 of the same Code not to engage in any unlawful, dishonest
and immoral or deceitful conduct. Failure to observe these tenets of the Code of Professional
Responsibility exposes the lawyer to disciplinary sanctions as provided in Section 27, Rule 138
of the Rules of Court, as amended, viz.: Section 27. Disbarment or suspension of attorneys by
Supreme Court, grounds therefor. — A member of the bar may be disbarred or suspended from
his office as attorney by the Supreme Court for any deceit, malpractice, or other gross
misconduct in such office, grossly immoral conduct, or by reason of his conviction of a crime
involving moral turpitude, or for any violation of the oath which he is required to take before
the admission to practice, or for a wilful disobedience appearing as an attorney for a party to a
case without authority so to do. The practice of soliciting cases at law for the purpose of gain,
either personally or through paid agents or brokers, constitutes malpractice. The complainants’
allegations of the respondents’ acts and omissions are insufficient to establish any censurable
conduct against them. Section 10 of Presidential Decree No. 1529 (Property Registration
Decree) enumerates the general duties of the Register of Deeds, as follows: Section 10. General
functions of Registers of Deeds. – x x x It shall be the duty of the Register of Deeds to
immediately register an instrument presented for registration dealing with real or personal
property which complies with all the requisites for registration. He shall see to it that said
instrument bears the proper documentary science stamps and that the same are properly
canceled. If the instrument is not registrable, he shall forthwith deny registration thereof and
inform the present or of such denial in writing, stating the ground or reason therefor, and
advising him of his right to appeal by consulta in accordance with Section 117 of this Decree.
(Emphasis supplied) The aforementioned duty of the Register of Deeds is ministerial in
nature.21 A purely ministerial act or duty is one that an officer or tribunal performs in a given
state of facts, in a prescribed manner, in obedience to the mandate of a legal authority, without
regard to or the exercise of his own judgment upon the propriety or impropriety of the act done.
If the law imposes a duty upon a public officer and gives him the right to decide how or when
the duty shall be performed, such duty is discretionary, not ministerial. The duty is ministerial
only when its discharge requires neither the exercise of official discretion nor the exercise of
judgment.22 In Gabriel v. Register of Deeds of Rizal,23 the Court underscores that registration
is a merely ministerial act of the Register of Deeds, explaining: x x x [W]hether the document is
invalid, frivolous or intended to harass, is not the duty of a Register of Deeds to decide, but a
court of competent jurisdiction, and that it is his concern to see whether the documents sought
to be registered conform with the formal and legal requirements for such documents. In view of
the foregoing, we find no abuse of authority or irregularity committed by Atty. Quilala, Atty.
Cunanan, and Atty. Caluya, Jr. with respect to the cancellation of the notice of adverse claim
and the notice of lis pendens annotated on TCT No. N-290546. Whether or not the RTC order
dated May 16, 2008 or the letter-request dated June 30,2008 had been falsified, fraudulent or
invalid was not for them to determine inasmuch as their duty to examine documents presented
for registration was limited only to what appears on the face of the documents. If, upon their
evaluation of the letter-request and the RTC order, they found the same to be sufficient in law
and to be in conformity with existing requirements, it became obligatory for them to perform
their ministerial duty without unnecessary delay.24 Should they be aggrieved by said
respondents’ performance of duty, the complainants were not bereft of any remedy because they
could challenge the performance of duty by bringing the matter by way of consulta with the
LRA, as provided by Section 11725 of Presidential Decree No. 1529. But, as enunciated in
Gabriel v. Register of Deeds of Rizal,26 it was ultimately within the province of a court of
competent jurisdiction to resolve issues concerning the validity or invalidity of a document
registered by the Register of Deeds. The complainants charge Atty. Victorio, Jr. and Atty.
Tolentino, Jr. with having conspired with each other to guarantee that the parties in Civil Case
No. Q-59598 would enter into the amicable settlement, and then to cause the cancellation of the
affidavit of adverse claim and notice of lis pendens annotated on TCT No. N-290546. The
complainants further fault Atty. Victorio, Jr. with having abandoned their cause since the
issuance of the RTC of its order dated May 16, 2008. The complainants’ charges are devoid of
substance. Although it is not necessary to prove a formal agreement in order to establish
conspiracy because conspiracy may be inferred from the circumstances attending the
commission of an act, it is nonetheless essential that conspiracy be established by clear and
convincing evidence.27 The complainants failed in this regard. Outside of their bare assertions
that Atty. Victorio, Jr. and Atty. Tolentino, Jr. had conspired with each other in order to cause the
dismissal of the complaint and then discharge of the annotations, they presented no evidence to
support their allegation of conspiracy. On the contrary, the records indicated their own active
participation in arriving at the amicable settlement with the defendants in Civil Case No. Q-07-
59598. Hence, they could not now turn their backs on the amicable settlement that they had
themselves entered into. Even assuming that Atty. Victorio, Jr. and Atty. Tolentino, Jr. initiated
and participated in the settlement of the case, there was nothing wrong in their doing so. It was
actually their obligation as lawyers to do so, pursuant to Rule 1.04, Canon 1 of the Code of
Professional Responsibility, viz.: RULE 1.04 – A lawyer shall encourage his clients to avoid,
end or settle a controversy if it will admit of a fair settlement.1âwphi1 In fine, the presumption
of the validity of the amicable settlement of the complainants and the defendants in Civil Case
No. Q-07- 59598 subsisted.28 Anent the complainants’ charge of abandonment against Atty.
Victorio, Jr., Rule 18.03 and Rule 18.04, Canon 18 of the Code of Professional Responsibility
are applicable, to wit: CANON 18 – A lawyer shall serve his client with competence and
diligence. Rule 18.03 – A lawyer shall not neglecta legal matter entrusted to him, and his
negligence in connection therewith shall render him liable. Rule 18.04 – A lawyer shall keep the
client informed of the status of his case and shall respond within a reasonable time to the
client’s request for information. There is no issue that the complainants engaged the services of
Atty. Victorio, Jr. as their counsel in Civil Case No. Q-07-59598. Atty. Victorio, Jr. served as
such counsel. With Atty. Victorio, Jr. assistance, the complainants obtained a fair settlement
consisting in receiving half of the proceeds of the sale of the property in litis, without any
portion of the proceeds accruing to counsel as his legal fees. The complainants did not
competently and persuasively show any unfaithfulness on the part of Atty. Victorio, Jr. as far as
their interest in the litigation was concerned. Hence, Atty. Victorio, Jr. was not liable for
abandonment. Atty. Victorio, Jr. could not be faulted for the perceived inattention to any other
matters subsequent to the termination of Civil Case No. Q-07-59598. Unless otherwise
expressly stipulated between them at any time during the engagement, the complainants had no
right to assume that Atty. Victorio, Jr.’s legal representation was indefinite as to extend to his
representation of them in the LRA. The Law Profession did not burden its members with the
responsibility of indefinite service to the clients; hence, the rendition of professional services
depends on the agreement between the attorney and the client. Atty. Victorio, Jr.’s alleged
failure to respond to the complainants’ calls or visits, or to provide them with his whereabouts
to enable them to have access to him despite the termination of his engagement in Civil Case
No. Q-07-59598 did not equate to abandonment without the credible showing that he continued
to come under the professional obligation towards them after the termination of Civil Case No.
Q-07-59598.
WHEREFORE, the Court DISMISSES the baseless disbarment complaints against Atty.
Federico S. Tolentino, Jr., Atty. Renato G. Cunanan, Atty. Daniel F. Victoria, Jr., Atty. Elbert T.
Quilala and Atty. Constante P. Caluya, Jr. SO ORDERED.

Article 29-35

15. PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROGELIO BAYOTAS y

CORDOVA, accused-appellant
G.R. No. 102207. September 2, 1994

FACTS:

Rogelio Bayotas, accused and charged with Rape, died on February 4, 1992 due to cardio respiratory
arrest. The Solicitor General then submitted a comment stating that the death of the accused does not
excuse him from his civil liability (supported by the Supreme Court’s decision in People vs
Sendaydiego). On the other hand, the counsel of the accused claimed that in the Supreme Court’s
decision in People vs Castillo, civil liability is extinguished if accused should die before the final
judgement is rendered.

ISSUE:

Whether or not the death of the accused pending appeal of his conviction extinguish his civil liability.

RULING:

The Court decided on this case through stating the cases of Castillo and Sendaydiego. In the Castillo
case, the Court said that civil liability is extinguished only when death of the accused occurred before
the final judgement. Judge Kapunan further stated that civil liability is extinguished because there
will be “no party defendant” in the case. There will be no civil liability if criminal liability does not
exist. Further, the Court stated “it is, thus, evident that… the rule established was that the survival of
the civil liability depends on whether the same can be predicated on the sources of obligations other
than delict.

In the Sendaydiego case, the Court issued Resolution of July 8, 1977 where it states that civil liability
will only survive if death came after the final judgement of the CFI of Pangasinan. However, Article 30
of the Civil Code could not possibly lend support to the ruling in Sendaydiego. Civil liability ex delicto
is extinguished by the death of the accused while his conviction is on appeal. The Court also gave a
summary on which cases should civil liability be extinguished, to wit:

Death of the accused pending appeal of his conviction extinguishes his criminal liability as well as the
civil liability based solely thereon. Therefore, Bayotas’s death extinguished his criminal and civil
liability based solely on the act complained of.
16. BOBIE ROSE V. FRIAS v. FLORA SAN DIEGO-SISON, GR NO. 155223, 2007-04-03
Facts:

On December 7, 1990, petitioner, as the FIRST PARTY, and Dra. Flora San Diego-Sison
(respondent), as the SECOND PARTY, entered into a Memorandum of Agreement

Petitioner received from respondent two million pesos in cash and one million pesos
in a post-dated check dated February 28, 1990, instead of 1991, which rendered said
check stale.[

On April 1, 1993, respondent filed with the Regional Trial Court (RTC) of Manila, a
complaint[10] for sum of money with preliminary attachment against petitioner.

t... the RTC issued a decision

1. Ordering defendant to pay plaintiff the sum of P2 Million plus interest thereon
at the rate of thirty two (32%) per cent per annum beginning December 7, 1991
until fully paid.

2. Ordering defendant to pay plaintiff the sum of P70,000.00 representing

premiums paid by plaintiff on the attachment bond with legal interest thereon
counted from the date of this decision until fully paid.

3. Ordering defendant to pay plaintiff the sum of P100,000.00 by way of moral,

corrective and exemplary damages.

4. Ordering defendant to pay plaintiff attorney's fees of P100,000.00 plus cost of

litigation.[

Issues:

(A) WHETHER OR NOT THE COMPOUNDED BANK INTEREST SHOULD BE LIMITED TO

SIX (6) MONTHS AS CONTAINED IN THE MEMORANDUM OF AGREEMENT.

(B) WHETHER OR NOT THE RESPONDENT IS ENTITLED TO MORAL DAMAGES.

(C) WHETHER OR NOT THE GRANT OF CORRECTIVE AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES IS PROPER EVEN IF NOT MENTIONED IN THE TEXT OF THE
DECISION

Ruling:

We are not persuaded.

n this case, the phrase "for the last six months only" should be taken in the context
of the entire agreement.

In

We agree with and adopt the CA's interpretation

Petitioner and respondent stipulated that the loaned amount shall earn compounded
bank interests, and per the certification issued by Prudential Bank, the interest rate
for loans in 1991 ranged from 25% to 32% per annum.

Petitioner next claims that moral damages were awarded on the erroneous finding
that she used a fraudulent scheme to deprive respondent of her security for the loan;
that such finding is baseless

We agree.

Article 2208[41] of the New Civil Code enumerates the instances where such may be
awarded and, in all cases, it must be reasonable, just and equitable if the same were
to be granted.[42] Attorney's fees as part of damages are not meant... to enrich the
winning party at the expense of the losing litigant.

WHEREFORE, in view of all the foregoing, the Decision dated June 18, 2002 and the
Resolution dated September 11, 2002 of the Court of Appeals in CA-G.R. CV No. 52839
are AFFIRMED with MODIFICATION that the award of attorney's fees is DELETED.

17. ANTONIO L. DALURAYA v. MARLA OLIVA, GR No. 210148, 2014-12-08

Facts:

Daluraya was charged... for Reckless Imprudence Resulting in Homicide... in

connection with the death... of Marina Oliva... sometime in the afternoon of January
3, 2006, Marina Oliva... was crossing the street when a Nissan Vanette,... traversing
EDSA near the Quezon Avenue flyover in Quezon City, ran her over.

While Marina Oliva was rushed to the hospital to receive medical attention, she
eventually died,... prompting her daughter,... Marla... to file a criminal case... against
Daluraya, the purported driver of the vehicle.

The prosecution also offered the testimonies of (a) Marla, who testified as to the civil
damages sustained by her family as a result of her mother's death; (b) Dr. Paul Ortiz
(Dr. Ortiz), who presented his findings on the autopsy conducted upon the... body of
Marina Oliva; and (c)Police Senior Inspector Lauro Gomez (PSI Gomez), who
conducted the investigation following the incident and claimed that Marina Olivawas
hit by the vehicle being driven by Daluraya, albeit he did not witness the incident.

After the prosecution rested its case, Daluraya filed an Urgent Motion to Dismiss
(demurrer)... sserting, inter alia, that he was not positively identified by any of the
prosecution witnesses as the driver of the vehicle that hit the victim, and... that there
was no clear and competent evidence of how the incident transpired.

MeTC... granted Daluraya's demurrer and dismissed the case for insufficiency of
evidence. It found that the testimonies of the prosecution witnesses were wanting
in... material details and that they failed to sufficiently establish that Daluraya
committed the crime imputed upon him.

Aggrieved, Marla appealed

RTC... insisting that the MeTC failed to make any finding as to the civil liability of
Daluraya,... which finding was not precluded by the dismissal... of the criminal aspect
of the case.

RTC dismissed the appeal and affirmed the MeTC's ruling, declaring that "the act
from which the criminal responsibility may spring did not at all exist."

CA granted the petition and reversed the RTC Decision

In so ruling, the CA held that the MeTC's Order showed that Daluraya's acquittal was
based on the fact that the prosecution failed to prove his guilt beyond reasonable
doubt. As such, Daluraya was not exonerated from civil liability.

Issues:

whether or not the CA was correct in finding Daluraya civilly liable for Marina Oliva's
death despite his acquittal in the criminal case for Reckless Imprudence Resulting in
Homicide on the ground of insufficiency of... evidence.

Ruling:

Every person criminally liable for a felony is also civilly liable. The acquittal of an
accused of the crime charged, however, does not necessarily extinguish his civil
liability.

the civil action based on delict may be deemed extinguished if there is a finding on
the final judgment in the criminal action that the act or omission from which the civil
liability may arise did not exist or where the accused did not commit the acts or
omission... imputed to him.

Thus, if demurrer is granted and the accused is acquitted by the court, the accused
has the right to adduce evidence on the civil aspect of the case unless the court also
declares that the act or omission from which the civil liability may arise did not exist.

In case of an acquittal, the Rules of Court requires that the judgment state "whether
the evidence of the prosecution absolutely failed to prove the guilt of the accused or
merely failed to prove his guilt beyond reasonable doubt. In either case, the judgment
shall determine if... the act or omission from which the civil liability might arise did
not exist."

A punctilious examination of the MeTC's Order, which the RTC sustained, will show
that Daluraya's acquittal was based on the conclusion that the act or omission from
which the civil liability may arise did not exist, given that the prosecution was not
able to establish... that he was the author of the crime imputed against him. Such
conclusion is clear and categorical when the MeTC declared that "the testimonies of
the prosecution witnesses are wanting in material details and they did not
sufficiently establish that the accused precisely... committed the crime charged
against him."

Furthermore, when Marla sought reconsideration of the MeTC's Order acquitting

Daluraya, said court reiterated and firmly clarified that "the prosecution was not able
to establish that the accused was the driver... of the Nissan Vanette which bumped
Marina Oliva"... and that "there is no competent evidence on hand which proves that
the accused was the person responsible for the death of Marina Oliva."

Clearly, therefore, the CA erred in construing the findings of the MeTC, as affirmed by
the RTC, that Daluraya's acquittal was anchored on reasonable doubt, which would
necessarily call for a remand of the case to the court a quo for the reception of
Daluraya's evidence... on the civil aspect. Records disclose that Daluraya's acquittal
was based on the fact that "the act or omission from which the civil liability may
arise did not exist" in view of the failure of the prosecution to sufficiently establish
that he was the author of the crime... ascribed against him. Consequently,his civil
liability should be deemed as non-existent by the nature of such acquittal.

18. PEOPLE v. ARMANDO DIONALDO Y EBRON +

The Facts: At around 8 o'clock in the morning of May 16, 2003, Roderick Navarro (Roderick) dropped his
brother Edwin Navarro (Edwin) off at the Health Is Wealth Gym in Caloocan City. Thirty minutes later, he
received a text message from another brother who told him that Edwin had been kidnapped.[2] Records show
that three (3) men, later identified as Armando, Renato, and Mariano, forcibly dragged a bloodied Edwin down
the stairway of the gym and pushed him inside a dark green Toyota car with plate number UKF 194.[3] Upon
receiving the message, Roderick immediately reported the incident to the police. At around 10 o'`1clock in the
morning of the same day, he received a phone call from Edwin's kidnappers who threatened to kill Edwin if he
should report the matter to the police.[4]

The following day, Roderick received another call from the kidnappers, who demanded the payment of ransom
money in the amount of P15,000,000.00. Roderick told them he had no such money, as he only had P50,000.00.
On May 19, 2003, after negotiations over the telephone, the kidnappers agreed to release Edwin in exchange for
the amount of P110,000.00. Roderick was then instructed to bring the money to Batangas and wait for their next
call.[5]

At around 7:30 in the evening of the same day, as Roderick was on his way to Batangas to deliver the ransom
money, the kidnappers called and instructed him to open all the windows of the car he was driving and to turn
on the hazard light when he reaches the designated place. After a while, Roderick received another call directing
him to exit in Bicutan instead and proceed to C-5 until he arrives at the Centennial Village. He was told to park
beside the Libingan ng mga Bayani. After several hours, an orange Mitsubishi car with plate number DEH 498
pulled up in front of his vehicle where four (4) men alighted. Roderick saw one of the men take a mobile phone
and upon uttering the word "alat," the men returned to their car and drove away.[6]

Meanwhile, a team had been organized to investigate the kidnapping of Edwin, headed by SPO3 Romeo
Caballero (SPO3 Caballero) and PO3 Nestor Acebuche (PO3 Acebuche) of the Camp Crame Police Anti-Crime
Emergency Response (PACER). During the course of the investigation, Rodolfo, an employee at the Health Is
Wealth Gym, confessed to PO3 Acebuche that he was part of the plan to kidnap Edwin, as in fact he was the one
who tipped off Mariano, Renato, Armando and a certain Virgilio[7] Varona[8] (Virgilio) on the condition that he
will be given a share in the ransom money. Rodolfo gave information on the whereabouts of his cohorts, leading
to their arrest on June 12, 2003. In the early morning of the following day or on June 13, 2003, the PACER team
found the dead body of Edwin at Sitio Pugpugan Laurel, Batangas, which Roderick identified.[9]

Thus, accused-appellants as well as Virgilio were charged in an Information[10] which reads:

That on or about the 16th day of May, 2003 in Caloocan City, Metro Manila and within the jurisdiction of this
Honorable Court, the above-named accused, conspiring together and mutually helping one another, being then
private persons, did then and there by force and intimidation willfully, unlawfully and feloniously with the use
of motor vehicle and superior strength take, carry and deprive EDWIN NAVARRO Y ONA, of his liberty
against his will, for the purpose of extorting ransom as in fact a demand of P15,000,000.00 was made as a
condition of the victim's release and on the occasion thereof, the death of the victim resulted.

Contrary to law.

During arraignment, accused-appellants pleaded not guilty[11] and interposed the defenses of denial and alibi.
Except for Rodolfo, they individually claimed that on said date and time, they were in their respective houses
when they were taken by men in police uniforms, then subsequently brought to Camp Crame, and there
allegedly tortured and detained. On the other hand, Rodolfo, for himself, averred that at around 8 o?clock in the
evening of June 12, 2003, while walking on his way home, he noticed that a van had been following him.
Suddenly, four (4) persons alighted from the vehicle, boarded him inside, blindfolded him, and eventually
tortured him. He likewise claimed that he was made to sign an extrajudicial confession, purporting too that
while a certain Atty. Nepomuceno had been summoned to assist him, the latter failed to do so.[12]

During trial, the death of the victim, Edwin, was established through a Certificate of Death[13] with Registry No.
2003-050 (subject certificate of death) showing that he died on May 19, 2003 from a gunshot wound on the
head.

The RTC Ruling

In a Decision[14] dated June 13, 2007, the Regional Trial Court of Caloocan City, Branch 129 (RTC), in Crim.
Case No. C-68329, convicted accused-appellants of the crime of Kidnapping and Serious Illegal Detention,
sentencing each of them to suffer the penalty of reclusion perpetua.

It gave credence to the positive and straightforward testimonies of the prosecution witnesses which clearly
established that it was the accused- appellants who forcibly dragged a bloodied Edwin into a car and,
consequently, deprived him of his liberty.[15] In light thereof, it rejected accused-appellants' respective alibis and
claims of torture, which were not substantiated. It also held that the crime of Kidnapping had been committed
for the purpose of extorting ransom, which is punishable by death. However, in view of the suspended
imposition of the death penalty pursuant to Republic Act No. (RA) 9346,[16] only the penalty of reclusion
perpetua was imposed.[17] Further, the RTC found that conspiracy attended the commission of the crime, as the
accused-appellants' individual participation was geared toward a joint purpose and criminal design.[18]

Notably, while the RTC found that the testimonies of the prosecution witnesses prove that the victim Edwin was
abducted, deprived of liberty, and eventually killed,[19] a fact which is supported by the subject certificate of
death, it did not consider said death in its judgment.

The CA Ruling

In a Decision[20] dated February 15, 2013, the CA affirmed in toto the RTC's conviction of accused-appellants,
finding that the prosecution was able to clearly establish all the elements of the crime of Kidnapping and
Serious Illegal Detention, namely: (a) the offender is a private individual; (b) he kidnaps or detains another, or
in any manner deprives the latter of his liberty; (c) the act of detention or kidnapping must be illegal; and (d) in
the commission of the offense, any of the following circumstances is present: (1) the kidnapping or detention
lasts for more than three days; (2) it is committed simulating public authority; (3) any serious physical injuries
are inflicted upon the person kidnapped or detained or threats to kill him are made; or (4) the person kidnapped
or detained is a minor, except when the accused is any of the parents, female or a public officer.[21] It likewise
sustained the finding that the kidnapping was committed for the purpose of extorting ransom, as sufficiently
proven by the testimony of the brother of the victim.[22] Moreover, the CA affirmed that conspiracy attended the
commission of the crime, as the acts of accused-appellants emanated from the same purpose or common design,
and they were united in its execution.[23]

Separately, the CA found that accused-appellants? claims of torture were never supported, and that Rodolfo
voluntarily signed the extrajudicial confession and was afforded competent and independent counsel in its
execution.[24]

Aggrieved by their conviction, accused-appellants filed the instant appeal.

The Issue Before the Court

The sole issue to be resolved by the Court is whether or not accused- appellants are guilty of the crime of
Kidnapping and Serious Illegal Detention.

The Court's Ruling

The appeal is devoid of merit.

Well-settled is the rule that the question of credibility of witnesses is primarily for the trial court to determine.
Its assessment of the credibility of a witness is entitled to great weight, and it is conclusive and binding unless
shown to be tainted with arbitrariness or unless, through oversight, some fact or circumstance of weight and
influence has not been considered. Absent any showing that the trial judge overlooked, misunderstood, or
misapplied some facts or circumstances of weight which would affect the result of the case, or that the judge
acted arbitrarily, his assessment of the credibility of witnesses deserves high respect by the appellate court.[25]

In this case, the RTC, as affirmed by the CA, gave weight and credence to the testimonies of the prosecution
witnesses, which they found to be straightforward and consistent. Through these testimonies, it was clearly
established that accused-appellants, who were all private individuals, took the victim Edwin and deprived
him of his liberty, which acts were illegal, and for the purpose of extorting ransom.[26] Thus, seeing no
semblance of arbitrariness or misapprehension on the part of the court a quo, the Court finds no compelling
reason to disturb its factual findings on this score.

Anent the finding that conspiracy attended the commission of the crime, the Court likewise finds the conclusion
of the RTC in this regard, as affirmed by the CA, to be well-taken. Conspiracy exists when two or more persons
come to an agreement concerning the commission of a felony and decide to commit it, and when conspiracy is
established, the responsibility of the conspirators is collective, not individual, rendering all of them equally
liable regardless of the extent of their respective participations.[27] In this relation, direct proof is not essential to
establish conspiracy, as it can be presumed from and proven by the acts of the accused pointing to a joint
purpose, design, concerted action, and community of interests.[28] Hence, as the factual circumstances in this
case clearly show that accused-appellants acted in concert at the time of the commission of the crime and that
their acts emanated from the same purpose or common design, showing unity in its execution,[29] the CA,
affirming the trial court, correctly ruled that there was conspiracy among them.

The foregoing notwithstanding, the Court is, however, constrained to modify the ruling of the RTC and the CA,
as the crime the accused- appellants have committed does not, as the records obviously bear, merely constitute
Kidnapping and Serious Illegal Detention, but that of the special complex crime of Kidnapping for Ransom
with Homicide. This is in view of the victim?s (i.e., Edwin's) death, which was (a) specifically charged in the
Information, [30] and (b) clearly established during the trial of this case. Notably, while this matter was not
among the issues raised before the Court, the same should nonetheless be considered in accordance with the
settled rule that in a criminal case, an appeal, as in this case, throws open the entire case wide open for
review, and the appellate court can correct errors, though unassigned, that may be found in the appealed
judgment.[31]

After the amendment of the Revised Penal Code on December 31, 1993 by RA 7659, Article 267 of the same
Code now provides:

Art. 267. Kidnapping and serious illegal detention. Any private individual who shall kidnap or detain another,
or in any other manner deprive him of his liberty, shall suffer the penalty of reclusion perpetua to death:

1. If the kidnapping or detention shall have lasted more than three days.

2. If it shall have been committed simulating public authority.

3. If any serious physical injuries shall have been inflicted upon the person kidnapped or detained; or if threats
to kill him shall have been made.

4. If the person kidnapped or detained shall be a minor, except when the accused is any of the parents, female or
a public officer;
The penalty shall be death where the kidnapping or detention was committed for the purpose of extorting
ransom from the victim or any other person, even if none of the circumstances above-mentioned were present in
the commission of the offense.

When the victim is killed or dies as a consequence of the detention or is raped, or is subjected to torture or
dehumanizing acts, the maximum penalty shall be imposed. (Emphases supplied)

The Court further elucidated in People v. Mercado:[32]

In People v. Ramos, the accused was found guilty of two separate heinous crimes of kidnapping for ransom
and murdercommitted on July 13, 1994 and sentenced to death. On appeal, this Court modified the ruling and
found the accused guilty of the"special complex crime" of kidnapping for ransom with murder under the
last paragraph of Article 267, as amended by Republic Act No. 7659. This Court said:

x x x This amendment introduced in our criminal statutes the concept of „special complex crime? of kidnapping
with murder or homicide. It effectively eliminated the distinction drawn by the courts between those cases
where the killing of the kidnapped victim was purposely sought by the accused, and those where the killing of
the victim was not deliberately resorted to but was merely an afterthought. Consequently, the rule now
is: Where the person kidnapped is killed in the course of the detention, regardless of whether the killing
was purposely sought or was merely an afterthought, the kidnapping and murder or homicide can no
longer be complexed under Art. 48, nor be treated as separate crimes, but shall be punished as a special
complex crime under the last paragraph of Art. 267, as amended by RA No. 7659.[33]
(Emphases supplied; citations omitted)

Thus, further taking into account the fact that the kidnapping was committed for the purpose of extorting
ransom, accused-appellants' conviction must be modified from Kidnapping and Serious Illegal Detention
to the special complex crime of Kidnapping for Ransom with Homicide, which carries the penalty of death.
As earlier intimated, the enactment of RA 9346 had suspended the imposition of the death penalty. This means
that the accused-appellants could, as the CA and trial court properly ruled, only be sentenced to the penalty
of reclusion perpetua. To this, the Court adds that the accused-appellants are not eligible for parole.[34]
On a final note, the Court observes that the RTC and the CA failed to award civil indemnity as well as damages
to the family of the kidnap victim. In People v. Quiachon,[35] the Court explained that even if the death penalty
was not to be imposed on accused-appellants in view of the prohibition in RA 9346, the award of civil
indemnity was nonetheless proper, not being dependent on the actual imposition of the death penalty but on the
fact that qualifying circumstances warranting the imposition of the death penalty attended the commission of
the crime.[36] In the present case, considering that both the qualifying circumstances of ransom and the death of
the victim during captivity were duly alleged in the information and proven during trial, civil indemnity in the
amount of P100,000.00 must therefore be awarded to the family of the victim, to conform with prevailing
jurisprudence.[37]

Similarly, the Court finds that the award of moral damages is warranted in this case. Under Article 2217 of the
Civil Code, moral damages include physical suffering, mental anguish, fright, serious anxiety, wounded
feelings, moral shock and similar injury, while Article 2219 of the same Code provides that moral damages may
be recovered in cases of illegal detention. It cannot be denied, in this case, that the kidnap victim?s family
suffered mental anguish, fright, and serious anxiety over the detention and eventually, the death of Edwin. As
such, and in accordance with prevailing jurisprudence,[38] moral damages in the amount of P100,000.00 must
perforce be awarded to the family of the victim.

Finally, exemplary damages must be awarded in this case, in view of the confluence of the aforesaid qualifying
circumstances and in order to deter others from committing the same atrocious acts. In accordance with
prevailing jurisprudence,[39] therefore, the Court awards exemplary damages in the amount of P100,000.00 to
the family of the kidnap victim.

In addition, interest at the rate of six percent (6%) per annum shall be imposed on all damages awarded from the
date of finality of judgment until fully paid, pursuant to prevailing jurisprudence.[40]

WHEREFORE, the appeal is DISMISSED. The Decision dated February 15, 2013 of the Court of Appeals in
CA-G.R. CR-H.C. No. 02888 is hereby AFFIRMED with the MODIFICATION that all the accused
appellants herein are equally found GUlLTY of the special complex crime of Kidnapping for Ransom with
Homicide, and are sentenced to each suffer the penalty of reclusion perpetua, without eligibility for parole, and
to pay, jointly and severally, the family of the kidnap victim Edwin Navarro the following amounts: (1)
P100,000.00 as civil indemnity; (2) P100,000.00 as moral damages; and (3) P100,000.00 as exemplary
damages, all with interest at the rate of six percent (6%) per annum from the date of finality of judgment until
fully paid.

SO ORDERED.