[G.R. NO.

155683 : February 16, 2007] DBP's mortgage lien and Filoil's levy on or before July 31, Industrial Finance Corporation[,] and Filoil over the V.
1982. But the Monserrats failed to comply with this Mapa [p]roperty. Moreover, ENRIQUE had no reason to
PETRON CORPORATION, Petitioner, v. NATIONAL undertaking. Thus, on February 3, 1983, NCBA caused repudiate FELIPE and disavow authority he had [given]
COLLEGE OF BUSINESS AND ARTS, Respondent. the annotation of an affidavit of adverse claim on the the latter to sell his share in the V. Mapa property.
TCTs covering the V. Mapa properties.
The sole question raised in this Petition for Review On the other hand, the mortgage in favor of DBP had
on Certiorari 1 is whether petitioner Petron Corporation Shortly thereafter, NCBA filed a complaint against Felipe been fully extinguished thru dacion en pago as early as
(Petron) should be held liable to pay attorney's fees and and Enrique for specific performance with an alternative 18 June 1981 but it unjustifiably and whimsically refused
exemplary damages to respondent National College of prayer for rescission and damages in the RTC of Manila. to release the mortgage and to surrender to the buyer
Business and Arts (NCBA). The case was raffled to Branch 30 and docketed as Civil (NCBA) the owner's duplicate copies of Transfer
Case No. 83-16617. On March 30, 1983, NCBA had a Certificates of Title No[s]. 83621 to 83627, thereby
notice of lis pendens inscribed on the TCTs of the V. Mapa preventing NCBA from registering the sale in its favor.
This case, however, is but part of a larger controversy
properties. A little over two years later, NCBA impleaded
over the lawful ownership of seven parcels of land2 in the
DBP as an additional defendant in order to compel it to Similarly, [Petron] has absolutely no reason to claim the
V. Mapa area of Sta. Mesa, Manila (the V. Mapa
release the V. Mapa properties from mortgage. V. Mapa property. For, as shown above, the levy in
properties) that arose out of a series of events that began
in 1969.3 execution and sale of the shares of FELIPE and ENRIQUE
On February 28, 1985, during the pendency of Civil Case in the V. Mapa property were null and void.
No. 83-16617, Enrique's - undivided interest in the V.
Sometime in 1969, the V. Mapa properties, then owned
Mapa properties was levied on in execution of a judgment Finally, in their Memorandum of Agreement dated 25
by Felipe and Enrique Monserrat, Jr., were mortgaged to
of the RTC of Makati (the Makati case)5 holding him liable September 1992 with Technical Institute of the
the Development Bank of the Philippines (DBP) as part of
to Petron (then known as Petrophil Corporation) on a Philippines, [Petron] and DBP attempted to pre-empt this
the security for the P5.2 million loan of Manila Yellow
1972 promissory note. On April 29, 1985, the V. Mapa Court's power to adjudicate on the claim of ownership
Taxicab Co., Inc. (MYTC) and Monserrat Enterprises Co.
properties were sold at public auction to satisfy the stipulating that "to facilitate their defenses and cause of
MYTC, for its part, mortgaged four parcels of land located
judgments in the Manila and Makati cases. Petron, the action in Civil Case No. 83-16617," they agreed on the
in Quiapo, Manila.
highest bidder, acquired both Felipe's and Enrique's disposition of the V. Mapa property among themselves.
undivided interests in the property. The final deeds of For obvious reasons, this Court refused to give its
On March 31, 1975, however, Felipe's - undivided interest sale of Enrique's and Felipe's shares in the V. Mapa imprimatur and denied their prayer for dismissal of the
in the V. Mapa properties was levied upon in execution of properties were awarded to Petron in 1986. Sometime complaint against DBP.
a money judgment rendered by the Regional Trial Court later, the Monserrats' TCTs were cancelled and new ones
(RTC) of Manila in Filoil Marketing Corporation v. MYTC, were issued to Petron. Thus it was that, towards the end
Felipe Monserrat, and Rosario Vda. De Monserrat (the These acts of defendants and intervenor demonstrate
of 1987, Petron intervened in NCBA's suit against Felipe,
Manila case).4 DBP challenged the levy through a third- their wanton, fraudulent, reckless, oppressive and
Enrique and DBP (Civil Case No. 83-16617) to assert its
party claim asserting that the V. Mapa properties were malevolent conduct in their dealings with NCBA.
right to the V. Mapa properties.
mortgaged to it and were, for that reason, exempt from Furthermore, they acted with gross and evident bad faith
levy or attachment. The RTC quashed it. in refusing to satisfy NCBA's plainly valid and demandable
The RTC rendered judgment on March 11, 1996.6 It ruled, claims. Assessment of exemplary damages and attorney's
among other things, that Petron never acquired valid title fees in the amounts of P100,000.00 and P150,000.00,
On June 18, 1981, MYTC and the Monserrats got DBP to to the V. Mapa properties as the levy and sale thereof respectively, is therefore in order (Arts. 2208 and 2232,
accept a dacion en pago arrangement whereby MYTC were void and that NCBA was now the lawful owner of the Civil Code).7
conveyed to the bank the four mortgaged Quiapo properties. Moreover, the RTC held Petron, DBP, Felipe
properties as full settlement of their loan obligation. But and Enrique jointly and severally liable to NCBA for
despite this agreement, DBP did not release the V. Mapa Enrique, DBP and Petron appealed to the Court of Appeals
exemplary damages and attorney's fees for the following
properties from the mortgage. (CA). The appeal was docketed as CA G.R. CV No. 53466.
reasons:
In a decision dated June 21, 2002,8 the CA affirmed the
RTC decision in toto. On motion for reconsideration,
On May 21, 1982, Felipe, acting for himself and as FELIPE and ENRIQUE had no reason to renege on their Petron and DBP tried to have the award of exemplary
Enrique's attorney-in-fact, sold the V. Mapa properties to undertaking in the Deed of Absolute Sale "to secure the damages and attorney's fees deleted for lack of legal and
respondent NCBA. Part of the agreement was that Felipe release of the titles to the properties xxx free from all the factual basis. The Philippine National Oil Company
and Enrique would secure the release of the titles to the liens and encumbrances, and to cause the lifting of the (PNOC), which had been allowed to intervene in the
properties free of all liens and encumbrances including levy on execution of Commercial Credit Corporation,
appeal as transferee pendente lite of Petron's right to the (11) In any other case where the court deems it just and awarded.15 In other words, no exemplary damages may
V. Mapa properties, moved for reconsideration of the equitable that attorney's fees and expenses of litigation be awarded without the plaintiff's right to moral,
ruling on ownership. In a resolution dated October 16, should be recovered.10 temperate, liquidated or compensatory damages having
2002,9 the CA denied these motions for lack of merit. first been established. Therefore, in view of our ruling
Thereupon, Petron and PNOC took separate appeals to Here, the RTC held Petron liable to NCBA for attorney's that Petron cannot be made liable to NCBA for
this Court. fees under Article 2208(5), which allows such an award compensatory damages (i.e., attorney's fees), Petron
"where the defendant acted in gross and evident bad faith cannot be held liable for exemplary damages either.
In this appeal, the only issue is Petron's liability for in refusing to satisfy the plaintiff's plainly valid, just, and
exemplary damages and attorney's fees. And on this demandable claim." However, the only justification given WHEREFORE, the petition is hereby GRANTED. The
matter, we reverse the rulings of the trial and appellate for this verdict was that Petron had no reason to claim imposition of liability on Petron Corporation for exemplary
courts. the V. Mapa properties because, in the RTC's opinion, the damages and attorney's fees is REVOKED. The June 21,
levy and sale thereof were void.11 This was sorely 2002 decision and October 16, 2002 resolution of the
Article 2208 lays down the rule that in the absence of inadequate and it was erroneous for the CA to have Court of Appeals in CA G.R. CV No. 53466 and the March
stipulation, attorney's fees cannot be recovered except in upheld that ruling built on such a flimsy foundation. 11, 1996 decision of the Regional Trial Court of Manila in
the following instances: Civil Case No. 83-16617 are
Article 2208(5) contemplates a situation where one hereby MODIFIED accordingly.
(1) When exemplary damages are awarded; refuses unjustifiably and in evident bad faith to satisfy
another's plainly valid, just and demandable claim, SO ORDERED.
compelling the latter needlessly to seek redress from the
(2) When the defendant's act or omission has compelled
courts.12 In such a case, the law allows recovery of
the plaintiff to litigate with third persons or to incur
money the plaintiff had to spend for a lawyer's assistance
expense to protect his interest;
in suing the defendant - expenses the plaintiff would not
have incurred if not for the defendant's refusal to comply
(3) In criminal cases of malicious prosecution against the with the most basic rules of fair dealing. It does not
plaintiff; mean, however, that the losing party should be made to
pay attorney's fees merely because the court finds his
(4) In case of a clearly unfounded civil action or legal position to be erroneous and upholds that of the
proceeding against the plaintiff; other party, for that would be an intolerable transgression
of the policy that no one should be penalized for
(5) Where the defendant acted in gross and evident bad exercising the right to have contending claims settled by
faith in refusing to satisfy the plaintiff's plainly valid, just a court of law.13 In fact, even a clearly untenable defense
and demandable claim; does not justify an award of attorney's fees unless it
amounts to gross and evident bad faith.14

(6) In actions for legal support;

Petron's claim to the V. Mapa properties, founded as it
was on final deeds of sale on execution, was far from
(7) In actions for the recovery of wages of household untenable. No gross and evident bad faith could be
helpers, laborers and skilled workers; imputed to Petron merely for intervening in NCBA's suit
against DBP and the Monserrats in order to assert what it
(8) In actions for indemnity under workmen's believed (and had good reason to believe) were its rights
compensation and employer's liability laws; and to have the disputed ownership of the V. Mapa
properties settled decisively in a single lawsuit.
(9) In a separate civil action to recover civil liability
arising from a crime; With respect to the award of exemplary damages, the
rule in this jurisdiction is that the plaintiff must show that
(10) When at least double judicial costs are awarded; he is entitled to moral, temperate or compensatory
damages before the court may even consider the
question of whether exemplary damages should be
Asset Privatization Trust vs Court of Appeals to MMIC, and require the banks to account for their use The reasons given for not allowing direct individual suit
300 SCRA 579 [GR No. 121171 December 29, 1998] and operation in the interim; 2.) Direct the banks to are:
honor and perform their commitments under the alleged
Facts: The development, exploration and utilization  of FRP; 3.) Pay moral and exemplary damages, attorney’s 1. That the prior rights of the creditors may be
the mineral deposits in the Surigao Mineral Reservation fees, litigation expenses and costs. A compromise and prejudiced. Thus, our Supreme Court held in the
have been authorized by the Republic Act No. 1528, as arbitration agreement was entered by the parties to case of Evangelista vs Santos that the
amended by Republic Act No. 2077 and Republic Act No. which committee awarded damages in favor of Cabarrus. “Stockholders may not directly claim those
4167, by virtue of which laws, a memorandum of damages for themselves for that would result in
agreement was drawn on July 3, 1968, whereby the Issue: Whether or not the award granted to Cabarrus the appropriation by, and the distribution among
Republic of the Philippines thru the Surigao Mineral was proper. them of part of the corporate assets before the
Reservation Board, granted MMIC the exclusive right to
explore, develop and exploit nickel, cobalt, and other Held: No. Civil case no. 9900 filed before the RTC being a 2. The universally recognized doctrine that a
minerals in the Surigao Mineral Reservation. MMIC is a derivative suit, MMIC should have been impleaded as a stockholder in a corporation has no title legal or
domestic corporation engaged in mining with respondent party. It was not joined as a part plaintiff or party equitable to the corporate property; that both of
Jesus S. Cabarrus Sr. as president and among its original defendant at any stage before of the proceedings as it is, these are in the corporation itself for the benefit
stockholders. The Philippine government undertook to the award for damages to MMIC, which was not  party of the stockholders. In other words, to allow
support the financing of MMIC by purchase of MMIC before the arbitration committee is a complete nullity. shareholders to sue separately would conflict with
debenture bonds and extension of guarantees. Further, the separate corporate entity principle.
from the DBP and/or the government financing
Settled is the doctrine that in a derivative suit, the
institutions to subscribe in MMIC and issue guarantee/s of
corporation is the real party in interest while the 3. dissolution of the corporation and the liquidation
foreign loans or deferred payment arrangements secured
stockholder filing suit for the corporation’s behalf is only a of its debts and liabilities, something which
from the US Eximbank, Asian  Development Bank (ADB),
nominal party. The corporation should be included s a cannot be legally done in view of section 16 of the
Kobe steel of amount not exceeding US$100 million. On
party in the suit. corporation law.
July 13, 1981, MMIC, PNB, and DBP executed a mortgage
trust agreement whereby MMIC as mortgagor, agreed to
constitute a mortgage in favor of PNB and DBP as An individual stockholder is permitted to institute a 4. The filing of such suits would conflict with the
mortgages, over all MMIC assets; subject of real estate derivative suit on behalf of the corporation wherein he duty of the management to sue for the protection
and chattel mortgage executed by the mortgagor, and holds stock in order to protect or vindicate corporate of all concerned;
additional assets described and identified, including rights, whenever the officials of the corporation refuse to
assets of whatever kind, nature or description, which the sue, or are the ones to be sued or hold the control of the 5. It would produce wasteful multiplicity of suits;
mortgagor may acquire whether in substitution of, in corporation. In such actions, the suing stockholder is and
replenishment or in addition thereto. Due to the unsettled regarded as a nominal party, with the corporation as the
obligations, a financial restructuring plan (FRP) was real part in interest.
6. It would involve confusion in ascertaining the
suggested, however not finalized. The obligations effect of partial recovery by an individual on the
matured and the mortgage was foreclosed. The It is a condition sine qua non that the corporation be damages recoverable by the corporation for the
foreclosed assets were sold to PNB as the lone bidder and impleaded as a party because – not only is the same act.
were assigned to the  newly formed corporations namely corporation an indispensable party, but it is also the
Nonoc Mining Corporation, Maricalum Mining and present rule that it must be served with process. The
Industrial Corporation and Island Cement Corporation. In reason given is that the judgement must be made binding
1986, these assets were transferred to the asset upon the corporation in order that the corporation may
privatization trust. On February  28, 1985, Jesus S. get the benefit of the suit and may not bring a
Cabarrus Sr. together with the other stockholders of subsequent suit against the same defendants for the
MMIC, filed a derivative suit against DBP and PNB before same cause of action. In other words the corporation
the RTC of Makati branch 62, for annulment of must be joined as a party because it is its cause of action
foreclosures, specific performance and damages. The suit that is being litigated and because judgement must be a
docketed as civil case no. 9900, prayed that the court: res judicata against it.
1.) Annul the foreclosures, restore the foreclosed assets
G.R. No. 121171 / December 29, 1998 HELD:
FACTS:
No. How could the MMIC be entitled to a big amount of
Pursuant to a Mortgage Trust Agreement, the moral damages when its credit reputation was not exactly
Development Bank of the Philippines and the Philippine something to be considered sound and wholesome. Under
National Bank foreclosed the assets of the Marinduque Article 2217 of the Civil Code, moral damages include
Mining and Industrial Corporation. The assets were sold besmirched reputation which a corporation may possibly
to Philippine National Bank and later transferred to the suffer. A corporation whose overdue and unpaid debts to
Asset Privatization Trust (APT). the Government alone reached a tremendous amount of
P22 Billion Pesos cannot certainly have a solid business
In February 1985, Jesus Cabarrus, Sr., together with reputation to brag about.
other stockholders of Marinduque Mining and Industrial
Corporation, filed a derivative suit against Development Besides, it is not yet a well settled jurisprudence that
Bank of the Philippines and Philippine National Bank corporations are entitled to moral damages. While the
before the Regional Trial Court of Makati for Annulment of Supreme Court may have awarded moral damages to a
Foreclosures, Specific Performance and Damages. In the corporation for besmirched reputation in Mambulao vs.
course of the trial, Marinduque Mining and Industrial PNB, 22 SCRA 359, such ruling cannot find application in
Corporation and Asset Privatization Trust as successor in this case. It must be pointed out that when the supposed
interest of Development Bank of the Philippines and wrongful act of foreclosure was done, MMIC’s credit
Philippine National Bank, agreed to submit the case to reputation was no longer a desirable one. The company
arbitration by entering into a Compromise and Arbitration then was already suffering from serious financial crisis
Agreement. This agreement was approved by the trial which definitely projects an image not compatible with
court and the complaint was corollarily dismissed. good and wholesome reputation. So it could not be said
that there was a “reputation” besmirched by the act of
Thereafter, the Arbitration Committee rendered a decision foreclosure.
ordering Asset Privatization Trust to pay Marinduque
Mining and Industrial Corporation damages and As a rule, a corporation exercises its powers, including
arbitration costs in the amount of P2.5 the power to enter into contracts, through its board of
Billion, P13,000,000.00 of which is for moral and directors. While a corporation may appoint agents to
exemplary damages. enter into a contract in its behalf, the agent should not
exceed his authority. 54 In the case at bar, there was no
On motion of Cabarrus and the other stockholders of showing that the representatives of PNB and DBP in MMIC
Marinduque Mining and Industrial Corporation, the trial even had the requisite authority to enter into a debt-for-
court confirmed the Arbitration Committee’s award. Its equity swap. And if they had such authority, there was no
motion for reconsideration having been denied, Asset showing that the banks, through their board of directors,
Privatization Trust filed a special civil action for certiorari had ratified the FRP.
with the Court of Appeals. It was likewise denied.
WHEREFORE, the petition is GRANTED.
Hence, this petition for review on certiorari.

ISSUE:

Whether or not the Marinduque Mining and Industrial

Corporation is entitled to moral damages?
[G.R. No. L-22973. January 30, 1968.] contract of mortgage clearly stipulates that the of no less than twenty different items as shown in the bill
mortgagor agrees that in all cases (extra- judicial or of sale. This makes the sale of the chattels manifestly
MAMBULAO LUMBER COMPANY, Plaintiff-Appellant, judicial foreclosure), attorney’s fees is fixed at ten objectionable. And in the absence of any evidence to
v. PHILIPPINE NATIONAL BANK and ANACLETO percent (10%) of the total indebtedness then unpaid, show that the mortgagor had agreed or consented to
HERADO, ETC., Defendants-Appellees. which in no case shall be less than P100 exclusive of all such sale in gross, the same should be set aside.
fees allowed by law, and the expenses of collections shall
SYLLABUS be the obligation of the mortgagor and shall with priority, 6. ID.; ID.; CHATTEL MORTGAGE; SALE OF PROPERTY
be paid to the mortgagee out of any sums realized from NOT IN ACCORDANCE WITH TERMS OF CONTRACT;
the proceeds of the sale of said property — the said LIABILITY OF MORTGAGEE. — The mortgagee is guilty of
1. CONTRACTS; LOAN; INTEREST; COMPOUNDED; WHEN
stipulation to pay attorney’s fees is clear enough to cover conversion when he sells under the mortgage but not in
SHALL IT BE RECKONED. — In computing the interest on
both cases of foreclosure sale, i.e., judicially or accordance with its terms, or where the proceedings as to
any obligation, promissory note or other instrument or
extrajudicially. While the phrase "in all cases" appears to the sale or foreclosure do not comply with the statute.
contract, compound interest shall not be reckoned,
be part of the second sentence, a reading of the whole This rule applies squarely to the facts of this case where,
except by agreement, or in default thereof, whenever the
context of the stipulation would readily show that it as earlier shown, herein appellee bank insisted, and the
debt is judicially claimed. Interest due shall earn legal
logically refers to extra-judicial foreclosure found in the appellee deputy sheriff of Camarines Norte proceeds with
interest only from the time it is judicially demanded.
first sentence, and to judicial foreclosure mentioned in the sale of the mortgaged chattels at Jose Panganiban,
Interest due and unpaid shall not earn interest. The
the next sentence. The ambiguity by reason of faulty Camarines Norte, in utter disregard of the valid objection
parties may, by stipulation, capitalize the interest due
sentence construction should not be made to defeat the of the mortgagor thereto for the reason that it is not the
and unpaid, which as added principal, shall earn new
otherwise clear intention of the parties in the agreement. place of sale agreed upon in the mortgage contract; and
interest; but such stipulation is nowhere to be found in
the said deputy sheriff sold all the chattels (among which
terms of the promissory note involved in this case.
4. ID.; ID.; EXTENT OF AUTHORITY OF MORTGAGEE TO were a skagit with caterpillar engine, three GMC 6x6
Clearly, therefore, the trial court fell into error when it
SELL PROPERTY MORTGAGED. — While the law grants trucks, a Herring Hall Safe, and Sawmill equipment
awarded interest on accrued interests, without any
power and authority to the mortgagee to sell the consisting of a 150 HP Murply Engine, plainer, large
agreement to that effect and before they had been
mortgaged property at a public place in the municipality circular saws, etc.) as a single lot in violation of the
judicially demanded.
where the mortgagor resides, or where the property is requirement of the law to sell the same article by article.
situated, the sale of a mortgaged chattel may be made in The PNB has resold the chattels to another buyer with
2. ID.; MORTGAGE; EXTRA-JUDICIAL FORECLOSURE
a place other than that where it is found, provided that whom it appears to have actively cooperated in
SALE; EXPENSES. — The fees enumerated under
the owner thereof consents thereto; or that there is an subsequently taking possession of and removing the
paragraphs k and n, Section 7, of Rule 130 (now Rule
agreement to this effect between the mortgagor and the chattels from appellant’s compound by force, as shown by
141) are demandable only by a sheriff serving processes
mortgagee. But when the parties agreed to have the the circumstance that they had to take along PC soldiers
of the court in connection with judicial foreclosure of
property mortgaged sold at the residence of the and municipal policemen of Jose Panganiban who placed
mortgages, under Rule 68 of the new Rules, and not in
mortgagor, the mortgagee can not retain that power and the chief security officer of the premises in jail to deprive
cases of extra-judicial foreclosure of mortgages under Act
authority to select from among the places provided for in herein appellant of its possession thereof. To exonerate
3135. The law applicable is Section 4 of Act 3135 which
the law and place designated in their agreement, over the itself of any liability for the breach of peace thus
provides that the officer conducting the sale is entitled to
objection of the mortgagor. committed, the PNB would want us to believe that it was
collect a fee of P5.00 for each day of actual work
the subsequent buyer alone, who is not a party to this
performed in addition to his expenses in connection with
5. ID.; ID.; CHATTEL MORTGAGE; SALE OF PROPERTY; case, that was responsible for the forcible taking of the
foreclosure sale. The PNB failed to prove that it actually
DUTY OF SHERIFFS. — Section 14, of Act 1508, as property; but assuming this to be so, still PNB cannot
spent any amount in connection with the said foreclosure
amended, provides that the officer making the sale escape liability for the conversion of the mortgaged
sale. In the absence of evidence to show at least the
should make a return of his doings which shall chattels by parting with its interest in the property.
number of working days the sheriff concerned actually
particularly describe the articles sold and the amount Neither would its claim that it afterwards gave a chance
spent in connection with the extra-judicial foreclosure
received from each article. From this, it is clear that the to herein appellant to repurchase or redeem the chattels,
sale, the most that he may be entitled to, would be the
law requires that sale be made article by article, improve its position, for the mortgagor is not under
amount of P10.00 as a reasonable allowance for two
otherwise, it would be impossible for him to state the obligation to take affirmative steps to repossess the
day’s work. Obviously, therefore, the award of amount of
amount received for each item. This requirement was chattels that were converted by the mortgagee. As a
P298.54 as expenses of the sale should be set aside.
totally disregarded by the Deputy Sheriff of Camarines consequence of the said wrongful acts of the PNB and the
Norte when he sold the chattels in question in bulk, Deputy Sheriff of Camarines Norte, therefore, We have to
3. ID.; ID.; ID.; ATTORNEY’S FEES. — Where the
notwithstanding the fact that the said chattels consisted declare that herein appellant is entitled to collect from
them jointly and severally, the full value of the chattels in sufferings, mental anguish, fright, serious anxiety, null and void, not only because it had already settled its
question at the time they were illegally sold by them. To wounded feelings, moral shock or social humiliation which indebtedness to the PNB at the time the sale was
this effect was the holding of this Court in a similar are the basis of moral damages. A corporation may have effected, but also for the reason that the said sale was
situation. a good reputation which, if besmirched, may also be a not conducted in accordance with the provisions of the
ground for the award of moral damages. The same Chattel Mortgage Law and the venue agreed upon by the
7. ID.; ID.; CHATTEL MORTGAGE; SALE OF PROPERTY cannot be considered under the facts of this case, parties in the mortgage contract;
NOT IN ACCORDANCE WITH CONTRACT; EXEMPLARY however, not only because it is admitted that herein
DAMAGES AND ATTORNEY’S FEES. — But for the appellant had already ceased in its business operation at 4. That the PNB, having illegally sold the chattels, is liable
wrongful acts of herein appellee bank and the deputy the time of the foreclosure sale of the chattels, but also to the plaintiff for its value; and
sheriff of Camarines Norte in proceeding with the sale in for the reason that whatever adverse effect the
utter disregard of the agreement to have the chattels sold foreclosure sale of the chattels, could have upon its 5. That for the acts of the PNB in proceeding with the sale
in Manila as provided for in mortgage contract, to which reputation or business standing would undoubtedly be the of the chattels, in utter disregard of plaintiff’s vigorous
their attentions were timely called by herein appellant same whether the sale was conducted at Jose opposition thereto, and in taking possession thereof after
and in disposing of the chattels in gross for the miserable Panganiban, Camarines Norte, or in Manila which is the the sale thru force, intimidation, coercion, and by
amount of P4,201.00, herein appellant should be awarded place agreed upon by the parties in the mortgage detaining its "man-in-charge" of said properties, the PNB
exemplary damages in the sum of P10,000.00. The contract. is liable to plaintiff for damages and attorney’s fees.
circumstances of the case also warrant the award of
P3,000.00 as attorney’s fees for herein Appellant. DECISION The antecedent facts of the case, as found by the trial
court, are as follows:jgc:chanrobles.com.ph
8. ATTORNEY’S FEES; RULE OF QUANTUM MERUIT. —
An appeal from a decision, dated April 2, 1964, of the
This Court has invariably fixed counsel fees on a quantum "On May 5, 1956, the plaintiff applied for an industrial
Court of First Instance of Manila in Civil case No. 52089,
meruit basis whenever the fees stipulated appear loan of P155,000 with the Naga Branch of defendant PNB
entitled "Mambulao Lumber Company, Plaintiff, v.
excessive, unconscionable, or unreasonable, because a and the former offered real estate, machinery, logging
Philippine National Bank and Anacleto
lawyer is primarily a court officer charged with the duty of and transportation equipments as collaterals. The
Heraldo, Defendants," dismissing the complaint against
assisting the court in administering impartial justice application, however, was approved for a loan of
both defendants and sentencing the plaintiff to pay to
between the parties. The fees should be subject to P100,000 only. To secure the payment of the loan, the
defendant Philippine National Bank (PNB for short) the
judicial control. Sound public policy demands that courts plaintiff mortgaged to defendant PNB a parcel of land,
sum of P3,582.52 with interest thereon at the rate of 6%
disregard stipulations for counsel fees, whenever they together with the buildings and improvements existing
per annum from December 22, 1961 until fully paid, and
appear to be a source of speculative profit at the expense thereon, situated in the poblacion of Jose Panganiban
the costs of suit.
of the debtor or mortgagor. (formerly Mambulao), province of Camarines Norte, and
covered by Transfer Certificate of Title No. 381 of the
In seeking the reversal of the decision, the plaintiff
9. ID.; CIRCUMSTANCES TO CONSIDER. — In land records of said province, as well as various sawmill
advances several propositions in its brief which may be
determining the compensation of an attorney, the equipment, rolling unit and other fixed assets of the
restated as follows:chanrob1es virtual 1aw library
following circumstances should be considered: the plaintiff, all situated in its compound in the
amount and character of the services rendered; the aforementioned municipality.
1. That its total indebtedness to the PNB as of November
responsibility imposed; the amount of money or the value
21, 1961, was only P56,485.87 and not P58,213.51 as
of the property affected by the controversy or involved in "On August 2, 1956, the PNB released from the approved
concluded by the court a quo; hence, the proceeds of the
the employment; the skill and experience called for in the loan the sum of P27,500, for which the plaintiff signed a
foreclosure sale of its real property alone in the amount
performance of the service; the professional standing of promissory note wherein it promised to pay to the PNB
of P56,908.00 on that date, added to the sum of P738.59
the attorney; the results secured; and whether or not the the said sum in five equal yearly installments at the rate
it remitted to the PNB thereafter was more than sufficient
fee is contingent or absolute, it being a recognized rule of P6,528.40 beginning July 31, 1957, and every year
to liquidate its obligation, thereby rendering the
that an attorney may properly charge a much larger fee thereafter, the last of which would be on July 31, 1961.
subsequent foreclosure sale of its chattels unlawful;
when it is to be contingent than when it is not.
"On October 19, 1956, the PNB made another release of
2. That it is not liable to pay PNB the amount of
10. DAMAGES; MORAL DAMAGES; AWARD OF DAMAGE P15,500 as part of the approved loan granted to the
P5,821.35 for attorney’s fees and the additional sum of
TO JURIDICAL PERSONS. — Herein appellant’s claim for plaintiff and so on the said date, the latter executed
P298.54 as expenses of the foreclosure sale;
moral damages however, seems to have no legal or another promissory note wherein it agreed to pay to the
factual basis. Obviously, an artificial person like herein former the said sum in five equal yearly installments at
3. That the subsequent foreclosure sale of its chattels is
appellant corporation cannot experience physical the rate of P3,679.64 beginning July 31, 1957, and
ending on July 31, 1961. the said Deputy Sheriff issued the corresponding notice of request that the foreclosure sale of the mortgaged
public auction sale of the mortgaged chattels to be held chattels be discontinued on the grounds that the
"The plaintiff failed to pay the amortizations on the on November 21, 1961, at 10:00 a.m., at the plaintiffs mortgaged indebtedness had been fully paid and that it
amounts released to and received by it. Repeated compound situated in the municipality of Jose could not be legally effected at a place other than the City
demands were made upon the plaintiff to pay its Panganiban, Province of Camarines Norte. of Manila.
obligation but it failed or otherwise refused to do so.
Upon inspection and verification made by employees of "On November 19, 1961, the plaintiff sent separate "In a letter dated December 16, 1961, the plaintiff
the PNB, it was found that the plaintiff had already letters, posted as registered air mail matter, one to the advised the Provincial Sheriff of Camarines Norte that it
stopped operation about the end of 1957 or early part of Naga Branch of the PNB and another to the Provincial had fully paid its obligation to the PNB, and enclosed
1958. Sheriff of Camarines Norte, protesting against the therewith a copy of its letter to the latter dated December
foreclosure of the real estate and chattel mortgages on 14, 1961.
"On September 27, 1961, the PNB sent a letter to the the grounds that they could not be effected unless a
Provincial Sheriff of Camarines Norte requesting him to Court’s order was issued against it (plaintiff) for said "On December 18, 1961, the Attorney of the Naga Branch
take possession of the parcel of land, together with the purpose and that the foreclosure proceedings, according of the PNB, wrote to the plaintiff acknowledging the
improvements existing thereon, covered by Transfer to the terms of the mortgage contracts, should be made remittance of P738.59 with the advice, however, that as
Certificate of Title No. 381 of the land records of in Manila. In said letter to the Naga Branch of the PNB, it of that date the balance of the account of the plaintiff was
Camarines Norte, and to sell it at public auction in was intimated that if the public auction sale would be P9,161.76, to which should be added the expenses of
accordance with the provisions of Act No. 3135, as suspended and the plaintiff would be given an extension guarding the mortgaged chattels at the rate of P4.00 a
amended, for the satisfaction of the unpaid obligation of of ninety (90) days, its obligation would be settled day beginning December 19, 1961. It was further
the plaintiff, which as of September 22, 1961, amounted satisfactorily because an important negotiation was then explained in said letter that the sum of P57,646.59, which
to P57,646.59, excluding attorney’s fees. In compliance going on for the sale of its "whole interest" for an amount was stated in the request for the foreclosure of the real
with the request, on October 16, 1961, the Provincial more than sufficient to liquidate said obligation. estate mortgage, did not include the 10% attorney’s fees
Sheriff of Camarines Norte issued the corresponding and expenses of the sale. Accordingly, the plaintiff was
notice of extra-judicial foreclosure sale and sent a copy "The letter of the plaintiff to the Naga Branch of the PNB advised that the foreclosure sale scheduled on the 21st of
thereof to the plaintiff. According to the notice, the was construed by the latter as a request for extension of said month would be stopped if a remittance of
mortgaged property would be sold at public auction at the foreclosure sale of the mortgaged chattels and so it P9,161.76, plus interest thereon and guarding fees,
10:00 a.m. on November 21, 1961, at the ground floor of advised the Sheriff of Camarines Norte to defer it to would be made.
the Court House in Daet, Camarines Norte. December 21, 1961, at the same time and place. A copy
of said advice was sent to the plaintiff for its information "On December 21, 1961, the foreclosure sale of the
"On November 6, 1961, the PNB sent a letter to the and guidance. mortgaged chattels was held at 10:00 a.m. and they
Provincial Sheriff of Camarines Norte requesting him to were awarded to the PNB for the sum of P4,200 and the
take possession of the chattels mortgaged to it by the "The foreclosure sale of the parcel of land, together with corresponding bill of sale was issued in its favor by
plaintiff and sell them at public auction also on November the buildings and improvements thereon, covered by Deputy Provincial Sheriff Heraldo.
21, 1961, for the satisfaction of the sum of P57,646.59, Transfer Certificate of Title No. 381, was, however, held
plus 6% annual interest thereon from September 23, on November 21, 1961, and the said property was sold to "In a letter dated December 26, 1961, the Manager of the
1961, attorney’s fees equivalent to 10% of the amount the PNB for the sum of P56,908.00, subject to the right of Naga Branch of the PNB advised the plaintiff giving it
due and the costs and expenses of the sale. On the same the plaintiff to redeem the same within a period of one priority to repurchase the chattels acquired by the former
day, the PNB sent notice to the plaintiff that the former year. On the same date, Deputy Provincial Sheriff Heraldo at public auction. This offer was reiterated in a letter
was foreclosing extrajudicially the chattels mortgaged by executed a certificate of sale in favor of the PNB and a dated January 3, 1962, of the Attorney of the Naga
the latter and that the auction sale thereof would be held copy thereof was sent to the plaintiff. Branch of the PNB to the plaintiff, with the suggestion
on November 21, 1961, between 9:00 and 12:00 a.m., in that it exercise its right of redemption and that it apply
Mambulao, Camarines Norte, where the mortgaged "In a letter dated December 14, 1961 (but apparently for the condonation of the attorney’s fees. The plaintiff
chattels were situated. posted several days later), the plaintiff sent a bank draft did not follow the advice but on the contrary it made
for P738.59 to the Naga Branch of the PNB, allegedly in known of its intention to file appropriate action or actions
"On November 8, 1961, Deputy Provincial Sheriff full settlement of the balance of the obligation of the for the protection of its interests.
Anacleto Heraldo took possession of the chattels plaintiff after the application thereto of the sum of
mortgaged by the plaintiff and made an inventory thereof P56,908.00 representing the proceeds of the foreclosure "On May 24, 1962, several employees of the PNB arrived
in the presence of a PC Sergeant and a policeman of the sale of parcel of land described in Transfer Certificate of in the compound of the plaintiff in Jose Panganiban,
municipality of Jose Panganiban. On November 9, 1961, Title No. 881. In the said letter, the plaintiff reiterated its Camarines Norte, and they informed Luis Salgado, Chief
Security Guard of the premises, that the properties favor of the PNB amounts only to P56,485.87 as of With respect to the amount of P298.54 allowed as
therein had been auctioned and bought by the PNB, November 21, 1961, when the sale of real property was expenses of the extra-judicial sale of the real property,
which in turn sold them to Mariano Bundok. Upon being effected, and not P58,213.51 as found by the trial court. appellant maintains that the same has no basis, factual or
advised that the purchaser would take delivery of the legal, and should not have been awarded. It likewise
things he bought, Salgado was at first reluctant to allow There is merit to this claim. Examining the terms of the decries the award of attorney’s fees which, according to
any piece of property to be taken out of the compound of promissory note executed by the appellant in favor of the the appellant, should not be deducted from the proceeds
the plaintiff. The employees of the PNB explained that PNB, we find that the agreed interest on the loan of of the sale of the real property, not only because there is
should Salgado refuse, he would be exposing himself to a P43,000.00 — P27,500.00 released on August 2, 1956, as no express agreement in the real estate mortgage
litigation wherein he could be held liable to pay big sum per promissory note of even date (Exhibit C-3), and contract to pay attorney’s fees in case the same is extra-
of money by way of damages. Apprehensive of the risk P15,500.00 released on October 19, 1956, as per judicially foreclosed, but also for the reason that the PNB
that he would take, Salgado immediately sent a wire to promissory note of the same date (Exhibit C-4) — was six neither spent nor incurred any obligation to pay
the President of the plaintiff in Manila, asking advice as to per cent (6%) per annum from the respective date of said attorney’s fees in connection with the said extra-judicial
what he should do. In the meantime, Mariano Bundok notes "until paid." In the statement of account of the foreclosure under consideration.
was able to take out from the plaintiffs compound two appellant as of September 22, 1961, submitted by the
truck loads of equipment. PNB, it appears that in arriving at the total indebtedness There is reason for the appellant to assail the award of
of P57,646.59 as of that date, the PNB had compounded P298.54 as expenses of the sale. In this respect, the trial
"In the afternoon of the same day, Salgado received a the principal of the loan and the accrued 6% interest court said:jgc:chanrobles.com.ph
telegram from plaintiffs President directing him not to thereon each time the yearly amortizations became due,
deliver the ‘chattels’ without court order, with the and on the basis of these compounded amounts charged "The parcel of land, together with the buildings and
information that the company was then filing an action additional delinquency interest on them up to September improvements existing thereon covered by Transfer
for damages against the PNB. On the following day, May 22, 1961; and to this erroneously computed total of Certificate of Title No. 381, was sold for P56,908. There
25, 1962, two trucks and men of Mariano Bundok arrived P57,646.59, the trial court added 6% interest per annum was, however, no evidence how much was the expenses
but Salgado did not permit them to take out any from September 23, 1961 to November 21 of the same of the foreclosure sale although from the pertinent
equipment from inside the compound of the plaintiff. Thru year. In effect, the PNB has claimed, and the trial court provisions of the Rules of Court, the Sheriff’s fees would
the intervention, however, of the local police and PC has adjudicated to it, interest on accrued interests from be P1 for advertising the sale (par. k, Sec. 7, Rule 130 of
soldiers, the trucks of Mariano Bundok were able finally to the time the various amortizations of the loan became the Old Rules) and P297.54 as his commission for the
haul the properties originally mortgaged by the plaintiff to due until the real estate mortgage executed to secure the sale (par. n, Sec. 7, Rule 130 of the Old Rules) or a total
the PNB, which were bought by it at the foreclosure sale loan was extrajudicially foreclosed on November 21, of P298.54."cralaw virtua1aw library
and subsequently sold to Mariano Bundok."cralaw 1961. This is an error. Section 5 of Act No. 2655
virtua1aw library expressly provides that in computing the interest on any There is really no evidence of record to support the
obligation, promissory note or other instrument or conclusion that the PNB is entitled to the amount
Upon the foregoing facts, the trial court rendered the contract, compound interest shall not be reckoned, awarded as expenses of the extra- judicial foreclosure
decision appealed from which, as stated in the first except by agreement, or in default thereof, whenever the sale. The court below committed error in applying the
paragraph of this opinion, sentenced the Mambulao debt is judicially claimed. This is also the clear mandate provisions of the Rules of Court for purposes of arriving at
Lumber Company to pay to the defendant PNB the sum of of Article 2212 of the new Civil Code which provides that the amount awarded. It is to be borne in mind that the
P3,582.52 with interest thereon at the rate of 6% per interest due shall earn legal interest only from the time it fees enumerated under paragraphs k and n, Section 7, of
annum from December 22, 1961 (day following the date is judicially demanded, and of Article 1959 of the same Rule 130 (now Rule 141) are demandable only by a
of the questioned foreclosure of plaintiff’s chattels) until code which ordains that interest due and unpaid shall not sheriff serving processes of the court in connection with
fully paid, and the costs. Mambulao Lumber Company earn interest. Of course, the parties may, by stipulation, judicial foreclosure of mortgages under Rule 68 of the
interposed the instant appeal. capitalize the interest due and unpaid, which as added new Rules, and not in cases of extra-judicial foreclosure
principal shall earn new interest; but such stipulation is of mortgages under Act 3135. The law applicable is
We shall discuss the various points raised in appellant’s nowhere to be found in the terms of the promissory notes Section 4 of Act 3135 which provides that the officer
brief in seriatim. involved in this case. Clearly therefore, the trial court fell conducting the sale is entitled to collect a fee of P5.00 for
into error when it awarded interest on accrued interests, each day of actual work performed in addition to his
The first question Mambulao Lumber Company poses is without any agreement to that effect and before they had expenses in connection with the foreclosure sale.
that which relates to the amount of its indebtedness to been judicially demanded. Admittedly, the PNB failed to prove during the trial of the
the PNB arising out of the principal loans and the accrued case, that it actually spent any amount in connection with
interest thereon. It is contended that its obligation under Appellant next assails the award of attorney’s fees and the said foreclosure sale. Neither may expenses for
the terms of the two promissory notes it had executed in the expenses of the foreclosure sale in favor of the PNB. publication of the notice be legally allowed in the absence
of evidence on record to support it. 1 It is true, as The principle that courts should reduce stipulated
pointed out by the appellee bank, that courts should take We find the above stipulation to pay attorney’s fees clear attorney’s fees whenever it is found under the
judicial notice of the fees provided for by law which need enough to cover both cases of foreclosure sale mentioned circumstances of the case that the same is unreasonable,
not be proved; but in the absence of evidence to show at thereunder, i.e., judicially or extra-judicially. While the is now deeply rooted in this jurisdiction to entertain any
least the number of working days the sheriff concerned phrase "in all cases" appears to be part of the second serious objection to it. Thus, this Court has
actually spent in connection with the extra-judicial sentence, a reading of the whole context of the explained:jgc:chanrobles.com.ph
foreclosure sale, the most that he may be entitled to, stipulation would readily show that it logically refers to
would be the amount of P10.00 as a reasonable extra-judicial foreclosure found in the first sentence and "But the principle that it may be lawfully stipulated that
allowance for two day’s work — one for the preparation of to judicial foreclosure mentioned in the next sentence. the legal expenses involved in the collection of a debt
the necessary notices of sale, and the other for And the ambiguity in the stipulation suggested and shall be defrayed by the debtor does not imply that such
conducting the auction sale and issuance of the pointed out by the appellant by reason of the faulty stipulations must be enforced in accordance with the
corresponding certificate of sale in favor of the buyer. sentence construction should not be made to defeat the terms, no matter how injurious or oppressive they may
Obviously, therefore, the award of P298.54 as expenses otherwise clear intention of the parties in the agreement. be. The lawful purpose to be accomplished by such a
of the sale should be set aside. stipulation is to permit the creditor to receive the amount
It is suggested by the appellant, however, that even if due him under his contract without a deduction of the
But the claim of the appellant that the real estate the above stipulation to pay attorney’s fees were expenses caused by the delinquency of the debtor. It
mortgage does not provide for attorney’s fees in case the applicable to the extra- judicial foreclosure sale of its real should not be permitted for him to convert such a
same is extra-judicially foreclosed, cannot be favorably properties, still, the award of P5,821.35 for attorney’s stipulation into a source of speculative profit at the
considered, as would readily be revealed by an fees has no legal justification, considering the expense of the debtor.
examination of the pertinent provision of the mortgage circumstance that the PNB did not actually spend
contract. The parties to the mortgage appear to have anything by way of attorney’s fees in connection with the "Contracts for attorney’s services in this jurisdiction
stipulated under paragraph (c) thereof, inter sale. In support of this proposition, appellant cites stands upon an entirely different footing from contracts
alia:jgc:chanrobles.com.ph authorities to the effect: (1) that when the mortgagee for the payment of compensation for any other services.
has neither paid nor incurred any obligation to pay an By express provision of section 29 of the Code of Civil
". . . For the purpose of extra-judicial foreclosure, the attorney in connection with the foreclosure sale, the claim Procedure, an attorney is not entitled in the absence of
Mortgagor hereby appoints the Mortgagee his attorney- for such fees should be denied; 2 and (2) that attorney’s express contract to recover more than a reasonable
in-fact to sell the property mortgaged under Act 3135, as fees will not be allowed when the attorney conducting the compensation for his services; and even when an express
amended, to sign all documents and to perform all acts foreclosure proceedings is an officer of the corporation contract is made the court can ignore it and limit the
requisite and necessary to accomplish said purpose and (mortgagee) who receives a salary for all the legal recovery to reasonable compensation of the amount of
to appoint its substitute as such attorney-in-fact with the services performed by him for the corporation. 3 These the stipulated fee is found by the court to be
same powers as above specified. In case of judicial authorities are indeed enlightening; but they should not unreasonable. This is a very different rule from that
foreclosure, the Mortgagor hereby consents to the be applied in this case. The very same authority first cited announced in section 1091 of the Civil Code with
appointment of the Mortgagee or any of its employees as suggests that said principle is not absolute, for there is reference to the obligation of contracts in general, where
receiver, without any bond, to take charge of the authority to the contrary. As to the fact that the it is said that such obligation has the force of law between
mortgaged property at once, and to hold possession of foreclosure proceedings were handled by an attorney of the contracting parties. Had the plaintiff herein made an
the same and the rents, benefits and profits derived from the legal staff of the PNB, we are reluctant to exonerate express contract to pay his attorney an uncontingent fee
the mortgaged property before the sale, less the costs herein appellant from the payment of the stipulated of P2,115.25 for the services to be rendered in reducing
and expenses of the receivership; the Mortgagor hereby attorney’s fees on this ground alone, considering the the note here in suit to judgment, it would not have been
agrees further that in all cases, attorney’s fees hereby express agreement between the parties in the mortgage enforced against him had he seen fit to oppose it, as such
fixed at Ten Per Cent (10%) of the total indebtedness contract under which appellant became liable to pay the a fee is obviously far greater than is necessary to
then unpaid, which in no case shall be less than P100.00 same. At any rate, we find merit in the contention of the remunerate the attorney for the work involved and is
exclusive of all fees allowed by law, and the expenses of appellant that the award of P5,821.35 in favor of the PNB therefore unreasonable. In order to enable the court to
collection shall be the obligation of the Mortgagor and as attorney’s fees is unconscionable and unreasonable, ignore an express contract for an attorney’s fees, it is not
shall with priority, be paid to the Mortgagee out of any considering that all that the branch attorney of the said necessary to show, as in other contracts, that it is
sums realized as rents and profits derived from the bank did in connection with the foreclosure sale of the contrary to morality or public policy (Art. 1255, Civil
mortgaged property or from the proceeds realized from real property was to file a petition with the provincial Code). It is enough that it is unreasonable or
the sale of the said property and this mortgage shall sheriff of Camarines Norte requesting the latter to sell the unconscionable." 4
likewise stand as security therefor . . ."cralaw virtua1aw same in accordance with the provisions of Act 3135.
library Since then this Court has invariably fixed counsel fees on
a quantum meruit basis whenever the fees stipulated appellee bank. Again, we find merit in this claim. From
appear excessive, unconscionable, or unreasonable, the foregoing discussion of the first two errors assigned, Deduct: Total obligation to the PNB P57,495.86
because a lawyer is primarily a court officer charged with and for purposes of determining the total obligation of
the duty of assisting the court in administering impartial herein appellant to the PNB as of November 21, 1961 ————
justice between the parties, and hence, the fees should when the real estate mortgage was foreclosed, we have
be subject to judicial control. Nor should it be ignored the following illustration in support of this Excess Payment to the PNB P150.73
that sound public policy demands that courts disregard conclusion:chanrob1es virtual 1aw library
stipulations for counsel fees, whenever they appear to be =======
a source of speculative profit at the expense of the debtor A. —
or mortgagor. 5 And it is not material that the present From the foregoing illustration or computation, it is clear
action is between the debtor and the creditor, and not I. Principal Loan that there was no further necessity to foreclose the
between attorney and client. As courts have power to fix mortgage of herein appellant’s chattels on December 21,
the fee as between attorney and client, it must (a) Promissory note dated August 2, 1956 P27,500.00 1961; and on this ground alone, we may declare the sale
necessarily have the right to say whether a stipulation of appellant’s chattels on the said date, illegal and void.
like this, inserted in a mortgage contract, is valid. 6 (1) Interest at 6% per annum from But we take into consideration the fact that the PNB must
have been led to believe that the stipulated 10% of the
In determining the compensation of an attorney, the Aug. 2, 1956 to Nov. 21, 1961 8,751.78 unpaid loan for attorney’s fees in the real estate
following circumstances should be considered: the mortgage was legally maintainable, and in accordance
amount and character of the services rendered, the (b) Promissory note dated October 19, 1956 P15,500.00 with such belief, herein appellee bank insisted that the
responsibility imposed: the amount of money or the value proceeds of the sale of appellant’s real property was
of the property affected by the controversy, or involved in (1) Interest at 6% per annum from deficient to liquidate the latter’s total indebtedness. Be
the employment: the skill and experience called for in the that as it may, however, we still find the subsequent sale
performance of the service, the professional standing of Oct. 19, 1956 to Nov. 21, 1961 4,734.08 of herein appellant’s chattels illegal and objectionable on
the attorney; the results secured; and whether or not the other grounds.
fee is contingent or absolute, it being a recognized rule II. Sheriff’s fees [for two [2]day’s work] 10.00
that an attorney may properly charge a much larger fee That appellant vigorously objected to the foreclosure of
when it is to be contingent than when it is not. 7 From III. Attorney’s fees 1,000.00 its chattel mortgage after the foreclosure of its real estate
the stipulation in the mortgage contract earlier quoted, it mortgage on November 21, 1961, cannot be doubted, as
appears that the agreed fee is 10% of the total ———— shown not only by its letter to the PNB on November 19,
indebtedness, irrespective of the manner the foreclosure 1961, but also in its letter to the provincial sheriff of
of the mortgage is to be effected. The agreement is Total obligation as of Nov. 21, 1961 P57,495.86 Camarines Norte on the same date. These letters were
perhaps fair enough in case the foreclosure proceedings is followed by another letter to the appellee bank on
prosecuted judicially but, surely, it is unreasonable when, B. — December 14, 1961, wherein herein appellant, in no
as in this case, the mortgage was foreclosed uncertain terms, reiterated its objection to the scheduled
extrajudicially, and all that the attorney did was to file a I. Proceeds of the foreclosure sale of sale of its chattels on December 21, 1961 at Jose
petition for foreclosure with the sheriff concerned. It is to Panganiban, Camarines Norte for the reasons therein
be assumed though, that the said branch attorney of the the real estate mortgage on Nov. 21, 1961 56,908.00. stated that: (1) it had settled in full its total obligation to
PNB made a study of the case before deciding to file the the PNB by the sale of the real estate and its subsequent
petition for foreclosure: but even with this in mind, we II. Additional amount remitted to the remittance of the amount of P738.59; and (2) that the
believe the amount of P5,821.35 is far too excessive a fee contemplated sale at Jose Panganiban would violate their
for such services. Considering the above circumstances PNB on Dec. 18, 1961 738.59 agreement embodied under paragraph (i) in the Chattel
mentioned, it is our considered opinion that the amount Mortgage which provides as
of P1,000.00 would be more than sufficient to ———— follows:jgc:chanrobles.com.ph
compensate the work aforementioned.
Total amount of Payment made to "(i) In case of both judicial and extra-judicial foreclosure
The next issue raised deals with the claim that the under Act 1508, as amended, the parties hereto agree
proceeds of the sale of the real properties alone together PNB as of Dec. 18, 1961 P57,646.59 that the corresponding complaint for foreclosure or the
with the amount it remitted to the PNB later was more petition for sale should be filed with the courts or the
than sufficient to liquidate its total obligation to herein ———— sheriff of the City of Manila, as the case may be; and that
the Mortgagor shall pay attorney’s fees hereby fixed at for in the law and the place designated in their as shown in the bill of sale. 13 This makes the sale of the
ten per cent (10%) of the total indebtedness then unpaid agreement, over the objection of the mortgagor. In chattels manifestly objectionable. And in the absence of
but in no case shall it be less than P100.00, exclusive of providing that the mortgaged chattel may be sold at the any evidence to show that the mortgagor had agreed or
all costs and fees allowed by law and of other expenses place of residence of the mortgagor or the place where it consented to such sale in gross, the same should be set
incurred in connection with the said foreclosure." is situated, at the option of the mortgagee, the law aside.
[Emphasis supplied] clearly contemplated benefits not only to the mortgagor
but to the mortgagee as well. Their rights arising It is said that the mortgagee is guilty of conversion when
Notwithstanding the above-quoted agreement in the thereunder, however, are personal to them; they do not he sells under the mortgage but not in accordance with
chattel mortgage contract, and in utter disregard of the affect either public policy or the rights of third persons. its terms, or where the proceedings as to the sale or
objection of herein appellant to the sale of its chattels at They may validly be waived. So, when herein mortgagor foreclosure do not comply with the statute. 14 This rule
Jose Panganiban, Camarines Norte and not in the City of and mortgagee agreed in the mortgage contract that in applies squarely to the facts of this case where, as earlier
Manila as agreed upon, the PNB proceeded with the cases of both judicial and extra-judicial foreclosure under shown, herein appellee bank insisted, and the appellee
foreclosure sale of said chattels. The trial court, however Act 1508, as amended, the corresponding complaint for deputy sheriff of Camarines Norte proceeded with the
justified said action of the PNB in the decision appealed foreclosure or the petition for sale should be filed with the sale of the mortgaged chattels at Jose Panganiban,
from in the following rationale:jgc:chanrobles.com.ph courts or the Sheriff of Manila, as the case may be, they Camarines Norte, in utter disregard of the valid objection
waived their corresponding rights under the law. The of the mortgagor thereto for the reason that it is not the
"While it is true that it was stipulated in the chattel correlative obligation arising from that agreement have place of sale agreed upon in the mortgage contract; and
mortgage contract that a petition for the extra-judicial the force of law between them and should be complied the said deputy sheriff sold all the chattels (among which
foreclosure thereof should be filed with the Sheriff of the with in good faith. 10 were a skagit with caterpillar engine, three GMC 6x6
City of Mania, nevertheless, the effect thereof was merely trucks, a Herring Hall Safe, and Sawmill equipment
to provide another place where the mortgage chattel "By said agreement the parties waived the legal venue, consisting of a 150 HP Murphy Engine, plainer, large
could be sold, in addition to those specified in the Chattel and such waiver is valid and legally effective, because it circular saws, etc.) as a single lot in violation of the
Mortgage Law. Indeed, a stipulation in a contract cannot was merely a personal privilege they waived, which is not requirement of the law to sell the same article by article.
abrogate much less impliedly repeal a specific provision of contrary to public policy or to the prejudice of third The PNB has resold the chattels to another buyer with
the statute. Considering that Section 14 of Act No. 1508 persons. It is a general principle that a person may whom it appears to have actively cooperated in
vests in the mortgagee the choice where the foreclosure renounce any right which the law gives unless such subsequently taking possession of and removing the
sale should be held, hence, in the case under renunciation is expressly prohibited or the right conferred chattels from appellant’s compound by force, as shown by
consideration, the PNB has three places from which to is of such nature that its renunciation would be against the circumstance that they had to take along PC soldiers
select, namely: (1) the place of residence of the public policy." 11 and municipal policemen of Jose Panganiban who placed
mortgagor; (2) the place of the mortgaged chattels were the chief security officer of the premises in jail to deprive
situated; and (3) the place stipulated in the contract. The "On the other hand, if a place of sale is specified in the herein appellant of its possession thereof. To exonerate
PNB selected the second and, accordingly, the foreclosure mortgage and statutory requirements in regard thereto itself of any liability for the breach of peace thus
sale held in Jose Panganiban, Camarines Norte, was legal are complied with, a sale is properly conducted in that committed, the PNB would want us to believe that it was
and valid."cralaw virtua1aw library place. Indeed, in the absence of a statute to the contrary, the subsequent buyer alone, who is not a party to this
a sale conducted at a place other than that stipulated for case, that was responsible for the forcible taking of the
To the foregoing conclusion, We disagree. While the law in the mortgage is invalid, unless the mortgagor consents property; but assuming this to be so, still the PNB cannot
grants power and authority to the mortgagee to sell the to such sale." 12 escape liability for the conversion of the mortgaged
mortgaged property at a public place in the municipality chattels by parting with its interest in the property.
where the mortgagor resides, or where the property is Moreover, Section 14 of Act 1508, as amended, provides Neither would its claim that it afterwards gave a chance
situated, 8 this Court has said that the sale of a that the officer making the sale should make a return of to herein appellant to repurchase or redeem the chattels,
mortgaged chattel may be made in a place other than his doings which shall particularly describe the articles improve its position, for the mortgagor is not under
that where it is found, provided that the owner thereof sold and the amount received from each article. From obligation to take affirmative steps to repossess the
consents thereto; or that there is an agreement to this this, it is clear that the law requires that sale be made chattels that were converted by the mortgagee. 15 As a
effect between the mortgagor and the mortgagee. 9 But article by article, otherwise, it would be impossible for consequence of the said wrongful acts of the PNB and the
when, as in this case, the parties agreed to have the sale him to state the amount received for each item. This Deputy Sheriff of Camarines Norte, therefore, We have to
of the mortgaged chattels in the City of Manila, which, requirement was totally disregarded by the Deputy declare that herein appellant is entitled to collect from
any way, is the residence of the mortgagor, it cannot be Sheriff of Camarines Norte which he sold the chattels in them, jointly and severally, the full value of the chattels
rightly said that the mortgagee still retained the power question in bulk, notwithstanding the fact that the said in question at the time they were illegally sold by them.
and authority to select from among the places provided chattels consisted of no less than twenty different items To this effect was the holding of this Court in a similar
situation. 16 rusty," but were "with a shed, free from rains," 20 humiliation which are the basis of moral damages. 21 A
showing that although they were no longer in use at the corporation may have a good reputation which, if
"The effect of this irregularity was in our opinion to make time, they were kept in a proper place and not exposed besmirched, may also be a ground for the award of moral
the plaintiff liable to the defendant for the full value of to the elements. The President of the appellant company, damages. The same cannot be considered under the facts
the truck at the time the plaintiff thus carried it off to be on the other hand, testified that its caterpillar (tractor) of this case, however, not only because it is admitted that
sold; and of course, the burden is on the defendant to alone is worth P35,000.00 in the market, and that the herein appellant had already ceased in its business
prove the damage to which he was thus value of its two trucks acquired by it with part of the operation at the time of the foreclosure sale of the
subjected. . . ."cralaw virtua1aw library proceeds of the loan and included as additional items in chattels, but also for the reason that whatever adverse
the mortgaged chattels were worth no less than effect the foreclosure sale of the chattels could have upon
This brings us to the problem of determining the value of P14,000.00. He likewise appraised the worth of its its reputation or business standing would undoubtedly be
the mortgaged chattels at the time of their sale in 1961. Murphy engine at P16,000.00 which, according to him, the same whether the sale was conducted at Jose
The that court did not make any finding on the value of when taken together with the heavy equipment he Panganiban. Camarines Norte, or in Manila which is the
the chattels in the decision appealed from and denied mentioned, the sawmill itself and all other equipment place agreed upon by the parties in the mortgage
altogether the right of the appellant to recover the same. forming part of the chattels under consideration, and contract.
We find enough evidence of record, however, which may bearing in mind the current cost of equipment these days
be used as a guide to ascertain their value. The record which he alleged to have increased by about five (5) But for the wrongful acts of herein appellee bank and the
shows that at the time herein appellant applied for its times, could safely be estimated at P120,000.00. This deputy sheriff of Camarines Norte in proceeding with the
loan with the PNB in 1956, for which the chattels in testimony, except for the appraised and market values sale in utter disregard of the agreement to have the
question were mortgaged as part of the security therefor, appearing in the inspection and reinspection reports of chattels sold in Manila as provided for in the mortgage
herein appellant submitted a list of the chattels together the PNB official earlier mentioned, stand uncontroverted contract, to which their attentions were timely called by
with its application for the loan with a stated value of in the record; but We are not inclined to accept such herein appellant, and in disposing of the chattels in gross
P107,115.85. An official of the PNB made an inspection of testimony at its par value, knowing that the equipment of for the miserable amount of P4,200.00, herein appellant
the chattels in the same year giving it an appraised value herein appellant had been idle and unused since it should be awarded exemplary damages in the sum of
of P42,850.00 and a market value of P85,700.00. 17 The stopped operating its sawmill in 1958 up to the time of P10,000.00. The circumstances of the case also warrant
same chattels with some additional equipment acquired the sale of the chattels in 1961. We have no doubt that the award of P3,000.00 as attorney’s fees for
by herein appellant with part of the proceeds of the loan the value of the chattels was depreciated after all those herein Appellant.
were reappraised in a reinspection conducted by the years of inoperation, although from the evidence
same official in 1958, in the report of which he gave all aforementioned, We may also safely conclude that the Wherefore and considering all the foregoing, the decision
the chattels an appraised value of P26,850.00 and a amount of P4,200.00 for which the chattels were sold in appealed from should be, as hereby, it is set aside. The
market value of P48,200.00. 18 Another reinspection the foreclosure sale in question was grossly unfair to the Philippine National Bank and the Deputy Sheriff of the
report in 1959 gave the appraised value as P19,400.00 mortgagor. Considering, however, the facts that the province of Camarines Norte are ordered to pay, jointly
and the market value of P25,600.00. 19 The said official appraised value of P42,850.00 and the market value of and severally, to Mambulao Lumber Company the total
of the PNB who made the foregoing reports of inspection P85,700.00 originally given by the PNB official were amount of P56,000.73, broken as follows: P150.73
and reinspections testified in court that in giving the admittedly conservative; that two 6x6 trucks overpaid by the latter to the PNB, P42,850.00 the value
values appearing in the reports, he used a conservative subsequently bought by the appellant company had of the chattels at the time of the sale with interest at the
method of appraisal which, of course, is to be expected of thereafter been added to the chattels; and that the real rate of 6% per annum from December 21, 1961, until
an official of the appellee bank. And it appears that the value thereof, although depreciated after several years of fully paid, P10,000.00 in exemplary damages, and
values were considerably reduced in all the reinspection inoperation, was in a way maintained because the P3,000.00 as attorney’s fees. Costs against both
reports for the reason that when he went to herein depreciation is off-set by the marked increase in the cost appellees.
appellant’s premises at the time, he found the chattels no of heavy equipment in the market, it is our opinion that
longer in use with some of the heavier equipment the market value of the chattels at the time of the sale
dismantled with parts thereof kept in the bodega; and should be fixed at the original appraised value of
finding it difficult to ascertain the value of the dismantled P42,850.00.
chattels in such condition, he did not give them anymore
any value in his reports. Noteworthy is the fact, however, Herein appellant’s claim for moral damages, however,
that in the last reinspection report he made of the seems to have no legal or factual basis. Obviously, an
chattels in 1961, just a few months before the foreclosure artificial person like herein appellant corporation cannot
sale, the same inspector of the PNB reported that the experience physical sufferings, mental anguish, fright,
heavy equipments of herein appellant were "lying idle and serious anxiety, wounded feelings, moral shock or social
[G.R. No. L-32409. February 27, 1971.] They brought with them the following papers: respondent tax assessments on petitioner corporation in the total
Vera’s aforesaid letter-request; an application for search sum of P2,594,729.97, partly, if not entirely, based on
BACHE & CO. (PHIL.), INC. and FREDERICK E. warrant already filled up but still unsigned by respondent the documents thus seized. Petitioners came to this
SEGGERMAN, Petitioners, v. HON. JUDGE VIVENCIO De Leon; an affidavit of respondent Logronio subscribed Court.
M. RUIZ, MISAEL P. VERA, in his capacity as before respondent De Leon; a deposition in printed form
Commissioner of Internal Revenue, ARTURO of respondent Logronio already accomplished and signed The petition should be granted for the following
LOGRONIO, RODOLFO DE LEON, GAVINO by him but not yet subscribed; and a search warrant reasons:chanrob1es virtual 1aw library
VELASQUEZ, MIMIR DELLOSA, NICANOR ALCORDO, already accomplished but still unsigned by respondent
JOHN DOE, JOHN DOE, JOHN DOE, and JOHN Judge. 1. Respondent Judge failed to personally examine the
DOE, Respondents. complainant and his witness.
At that time respondent Judge was hearing a certain
This is an original action of certiorari, prohibition and case; so, by means of a note, he instructed his Deputy The pertinent provisions of the Constitution of the
mandamus, with prayer for a writ of preliminary Clerk of Court to take the depositions of respondents De Philippines and of the Revised Rules of Court
mandatory and prohibitory injunction. In their petition Leon and Logronio. After the session had adjourned, are:jgc:chanrobles.com.ph
Bache & Co. (Phil.), Inc., a corporation duly organized respondent Judge was informed that the depositions had
and existing under the laws of the Philippines, and its already been taken. The stenographer, upon request of "(3) The right of the people to be secure in their persons,
President, Frederick E. Seggerman, pray this Court to respondent Judge, read to him her stenographic notes; houses, papers and effects against unreasonable searches
declare null and void Search Warrant No. 2-M-70 issued and thereafter, respondent Judge asked respondent and seizures shall not be violated, and no warrants shall
by respondent Judge on February 25, 1970; to order Logronio to take the oath and warned him that if his issue but upon probable cause, to be determined by the
respondents to desist from enforcing the same and/or deposition was found to be false and without legal basis, judge after examination under oath or affirmation of the
keeping the documents, papers and effects seized by he could be charged for perjury. Respondent Judge complainant and the witnesses he may produce, and
virtue thereof, as well as from enforcing the tax signed respondent de Leon’s application for search particularly describing the place to be searched, and the
assessments on petitioner corporation alleged by warrant and respondent Logronio’s deposition, Search persons or things to be seized." (Art. III, Sec. 1,
petitioners to have been made on the basis of the said Warrant No. 2-M-70 was then sign by respondent Judge Constitution.)
documents, papers and effects, and to order the return of and accordingly issued.
the latter to petitioners. We gave due course to the "SEC. 3. Requisites for issuing search warrant. — A
petition but did not issue the writ of preliminary Three days later, or on February 28, 1970, which was a search warrant shall not issue but upon probable cause in
injunction prayed for therein. Saturday, the BIR agents served the search warrant connection with one specific offense to be determined by
petitioners at the offices of petitioner corporation on the judge or justice of the peace after examination under
The pertinent facts of this case, as gathered from record, Ayala Avenue, Makati, Rizal. Petitioners’ lawyers oath or affirmation of the complainant and the witnesses
are as follows:chanrob1es virtual 1aw library protested the search on the ground that no formal he may produce, and particularly describing the place to
complaint or transcript of testimony was attached to the be searched and the persons or things to be seized.
On February 24, 1970, respondent Misael P. Vera, warrant. The agents nevertheless proceeded with their
Commissioner of Internal Revenue, wrote a letter search which yielded six boxes of documents. "No search warrant shall issue for more than one specific
addressed to respondent Judge Vivencio M. Ruiz offense.
requesting the issuance of a search warrant against On March 3, 1970, petitioners filed a petition with the
petitioners for violation of Section 46(a) of the National Court of First Instance of Rizal praying that the search "SEC. 4. Examination of the applicant. — The judge or
Internal Revenue Code, in relation to all other pertinent warrant be quashed, dissolved or recalled, that justice of the peace must, before issuing the warrant,
provisions thereof, particularly Sections 53, 72, 73, 208 preliminary prohibitory and mandatory writs of injunction personally examine on oath or affirmation the
and 209, and authorizing Revenue Examiner Rodolfo de be issued, that the search warrant be declared null and complainant and any witnesses he may produce and take
Leon, one of herein respondents, to make and file the void, and that the respondents be ordered to pay their depositions in writing, and attach them to the
application for search warrant which was attached to the petitioners, jointly and severally, damages and attorney’s record, in addition to any affidavits presented to him."
letter. fees. On March 18, 1970, the respondents, thru the (Rule 126, Revised Rules of Court.)
Solicitor General, filed an answer to the petition. After
In the afternoon of the following day, February 25, 1970, hearing, the court, presided over by respondent Judge, The examination of the complainant and the witnesses he
respondent De Leon and his witness, respondent Arturo issued on July 29, 1970, an order dismissing the petition may produce, required by Art. III, Sec. 1, par. 3, of the
Logronio, went to the Court of First Instance of Rizal. for dissolution of the search warrant. In the meantime, or Constitution, and by Secs. 3 and 4, Rule 126 of the
on April 16, 1970, the Bureau of Internal Revenue made Revised Rules of Court, should be conducted by the judge
himself and not by others. The phrase "which shall be recall the salient facts. The transcript of stenographic was the one conducted by the Deputy Clerk of Court. But,
determined by the judge after examination under oath or notes (pp. 61-76, April 1, 1970, Annex J-2 of the Petition) as stated, the Constitution and the rules require a
affirmation of the complainant and the witnesses he may taken at the hearing of this case in the court below shows personal examination by the judge. It was precisely on
produce," appearing in the said constitutional provision, that per instruction of respondent Judge, Mr. Eleodoro V. account of the intention of the delegates to the
was introduced by Delegate Francisco as an amendment Gonzales, Special Deputy Clerk of Court, took the Constitutional Convention to make it a duty of the issuing
to the draft submitted by the Sub-Committee of Seven. depositions of the complainant and his witness, and that judge to personally examine the complainant and his
The following discussion in the Constitutional Convention stenographic notes thereof were taken by Mrs. Gaspar. At witnesses that the question of how much time would be
(Laurel, Proceedings of the Philippine Constitutional that time respondent Judge was at the sala hearing a consumed by the judge in examining them came up
Convention, Vol. III, pp. 755-757) is enlightening: case. After respondent Judge was through with the before the Convention, as can be seen from the record of
hearing, Deputy Clerk Gonzales, stenographer Gaspar, the proceedings quoted above. The reading of the
"MR. LAUREL. . . . The reason why we are in favor of this complainant De Leon and witness Logronio went to stenographic notes to respondent Judge did not constitute
amendment is because we are incorporating in our respondent Judge’s chamber and informed the Judge that sufficient compliance with the constitutional mandate and
constitution something of a fundamental character. Now, they had finished the depositions. Respondent Judge then the rule; for by that manner respondent Judge did not
before a judge could issue a search warrant, he must be requested the stenographer to read to him her have the opportunity to observe the demeanor of the
under the obligation to examine personally under oath stenographic notes. Special Deputy Clerk Gonzales complainant and his witness, and to propound initial and
the complainant and if he has any witness, the witnesses testified as follows:jgc:chanrobles.com.ph follow-up questions which the judicial mind, on account of
that he may produce . . ."cralaw virtua1aw library its training, was in the best position to conceive. These
"A And after finishing reading the stenographic notes, the were important in arriving at a sound inference on the all-
The implementing rule in the Revised Rules of Court, Sec. Honorable Judge requested or instructed them, requested important question of whether or not there was probable
4, Rule 126, is more emphatic and candid, for it requires Mr. Logronio to raise his hand and warned him if his cause.
the judge, before issuing a search warrant, to "personally deposition will be found to be false and without legal
examine on oath or affirmation the complainant and any basis, he can be charged criminally for perjury. The 2. The search warrant was issued for more than one
witnesses he may produce . . ."cralaw virtua1aw library Honorable Court told Mr. Logronio whether he affirms the specific offense.
facts contained in his deposition and the affidavit
Personal examination by the judge of the complainant executed before Mr. Rodolfo de Leon. Search Warrant No. 2-M-70 was issued for" [v]iolation of
and his witnesses is necessary to enable him to Sec. 46(a) of the National Internal Revenue Code in
determine the existence or non-existence of a probable "Q And thereafter? relation to all other pertinent provisions thereof
cause, pursuant to Art. III, Sec. 1, par. 3, of the particularly Secs. 53, 72, 73, 208 and 209." The question
Constitution, and Sec. 3, Rule 126 of the Revised Rules of "A And thereafter, he signed the deposition of Mr. is: Was the said search warrant issued "in connection
Court, both of which prohibit the issuance of warrants Logronio. with one specific offense," as required by Sec. 3, Rule
except "upon probable cause." The determination of 126?
whether or not a probable cause exists calls for the "Q Who is this he?
exercise of judgment after a judicial appraisal of facts and To arrive at the correct answer it is essential to examine
should not be allowed to be delegated in the absence of "A The Honorable Judge. closely the provisions of the Tax Code referred to above.
any rule to the contrary. Thus we find the following:chanrob1es virtual 1aw library
"Q The deposition or the affidavit?
In the case at bar, no personal examination at all was Sec. 46(a) requires the filing of income tax returns by
conducted by respondent Judge of the complainant "A The affidavit, Your Honor."cralaw virtua1aw library corporations.
(respondent De Leon) and his witness (respondent
Logronio). While it is true that the complainant’s Thereafter, respondent Judge signed the search warrant. Sec. 53 requires the withholding of income taxes at
application for search warrant and the witness’ printed- source.
form deposition were subscribed and sworn to before The participation of respondent Judge in the proceedings
respondent Judge, the latter did not ask either of the two which led to the issuance of Search Warrant No. 2-M-70 Sec. 72 imposes surcharges for failure to render income
any question the answer to which could possibly be the was thus limited to listening to the stenographer’s tax returns and for rendering false and fraudulent
basis for determining whether or not there was probable readings of her notes, to a few words of warning against returns.
cause against herein petitioners. Indeed, the participants the commission of perjury, and to administering the oath
seem to have attached so little significance to the matter to the complainant and his witness. This cannot be Sec. 73 provides the penalty for failure to pay the income
that notes of the proceedings before respondent Judge consider a personal examination. If there was an tax, to make a return or to supply the information
were not even taken. At this juncture it may be well to examination at all of the complainant and his witness, it required under the Tax Code.
 Court deemed it fit to amend Section 3 of Rule 122 of the petitioners herein, regardless of whether the transactions
Sec. 208 penalizes" [a]ny person who distills, rectifies, former Rules of Court that ‘a search warrant shall not were legal or illegal. The warrants sanctioned the seizure
repacks, compounds, or manufactures any article subject issue but upon probable cause in connection with one of all records of the petitioners and the aforementioned
to a specific tax, without having paid the privilege tax specific offense.’ Not satisfied with this qualification, the corporations, whatever their nature, thus openly
therefore, or who aids or abets in the conduct of illicit Court added thereto a paragraph, directing that ‘no contravening the explicit command of our Bill of Rights —
distilling, rectifying, compounding, or illicit manufacture search warrant shall issue for more than one specific that the things to be seized be particularly described —
of any article subject to specific tax . . .," and provides offense.’" as well as tending to defeat its major objective: the
that in the case of a corporation, partnership, or elimination of general warrants."cralaw virtua1aw library
association, the official and/or employee who caused the 3. The search warrant does not particularly describe the
violation shall be responsible. things to be seized. While the term "all business transactions" does not
appear in Search Warrant No. 2-M-70, the said warrant
Sec. 209 penalizes the failure to make a return of The documents, papers and effects sought to be seized nevertheless tends to defeat the major objective of the
receipts, sales, business, or gross value of output are described in Search Warrant No. 2-M-70 in this Bill of Rights, i.e., the elimination of general warrants, for
removed, or to pay the tax due thereon. manner:jgc:chanrobles.com.ph the language used therein is so all-embracing as to
include all conceivable records of petitioner corporation,
The search warrant in question was issued for at least "Unregistered and private books of accounts (ledgers, which, if seized, could possibly render its business
four distinct offenses under the Tax Code. The first is the journals, columnars, receipts and disbursements books, inoperative.
violation of Sec. 46(a), Sec. 72 and Sec. 73 (the filing of customers ledgers); receipts for payments received;
income tax returns), which are interrelated. The second is certificates of stocks and securities; contracts, promissory In Uy Kheytin, Et. Al. v. Villareal, etc., Et Al., 42 Phil.
the violation of Sec. 53 (withholding of income taxes at notes and deeds of sale; telex and coded messages; 886, 896, this Court had occasion to explain the purpose
source). The third is the violation of Sec. 208 (unlawful business communications, accounting and business of the requirement that the warrant should particularly
pursuit of business or occupation); and the fourth is the records; checks and check stubs; records of bank describe the place to be searched and the things to be
violation of Sec. 209 (failure to make a return of receipts, deposits and withdrawals; and records of foreign seized, to wit:jgc:chanrobles.com.ph
sales, business or gross value of output actually removed remittances, covering the years 1966 to 1970."cralaw
or to pay the tax due thereon). Even in their classification virtua1aw library ". . . Both the Jones Law (sec. 3) and General Orders No.
the six above-mentioned provisions are embraced in two 58 (sec. 97) specifically require that a search warrant
different titles: Secs. 46(a), 53, 72 and 73 are under Title The description does not meet the requirement in Art III, should particularly describe the place to be searched and
II (Income Tax); while Secs. 208 and 209 are under Title Sec. 1, of the Constitution, and of Sec. 3, Rule 126 of the the things to be seized. The evident purpose and intent of
V (Privilege Tax on Business and Occupation). Revised Rules of Court, that the warrant should this requirement is to limit the things to be seized to
particularly describe the things to be seized. those, and only those, particularly described in the search
Respondents argue that Stonehill, Et. Al. v. Diokno, Et warrant — to leave the officers of the law with no
Al., L-19550, June 19, 1967 (20 SCRA 383), is not In Stonehill, this Court, speaking thru Mr. Chief Justice discretion regarding what articles they shall seize, to the
applicable, because there the search warrants were Roberto Concepcion, said:jgc:chanrobles.com.ph end that ‘unreasonable searches and seizures’ may not be
issued for "violation of Central Bank Laws, Internal made, — that abuses may not be committed. That this is
Revenue (Code) and Revised Penal Code;" whereas, here "The grave violation of the Constitution made in the the correct interpretation of this constitutional provision is
Search Warrant No 2-M-70 was issued for violation of application for the contested search warrants was borne out by American authorities."cralaw virtua1aw
only one code, i.e., the National Internal Revenue Code. compounded by the description therein made of the library
The distinction more apparent than real, because it was effects to be searched for and seized, to wit:chanrob1es
precisely on account of the Stonehill incident, which virtual 1aw library The purpose as thus explained could, surely and
occurred sometime before the present Rules of Court took effectively, be defeated under the search warrant issued
effect on January 1, 1964, that this Court amended the ‘Books of accounts, financial records, vouchers, journals, in this case.
former rule by inserting therein the phrase "in connection correspondence, receipts, ledgers, portfolios, credit
with one specific offense," and adding the sentence "No journals, typewriters, and other documents and/or paper A search warrant may be said to particularly describe the
search warrant shall issue for more than one specific showing all business transactions including disbursement things to be seized when the description therein is as
offense," in what is now Sec. 3, Rule 126. Thus we said in receipts, balance sheets and related profit and loss specific as the circumstances will ordinarily allow (People
Stonehill:jgc:chanrobles.com.ph statements.’ v. Rubio; 57 Phil. 384); or when the description
expresses a conclusion of fact — not of law — by which
"Such is the seriousness of the irregularities committed in "Thus, the warrants authorized the search for and seizure the warrant officer may be guided in making the search
connection with the disputed search warrants, that this of records pertaining to all business transactions of and seizure (idem., dissent of Abad Santos, J.,); or when
the things described are limited to those which bear "Although, for the reasons above stated, we are of the documents, papers and things seized from the offices and
direct relation to the offense for which the warrant is opinion that an officer of a corporation which is charged premises of the corporations adverted to above, since the
being issued (Sec. 2, Rule 126, Revised Rules of Court). with a violation of a statute of the state of its creation, or right to object to the admission of said papers in evidence
The herein search warrant does not conform to any of the of an act of Congress passed in the exercise of its belongs exclusively to the corporations, to whom the
foregoing tests. If the articles desired to be seized have constitutional powers, cannot refuse to produce the books seized effects belong, and may not be invoked by the
any direct relation to an offense committed, the applicant and papers of such corporation, we do not wish to be corporate officers in proceedings against them in their
must necessarily have some evidence, other than those understood as holding that a corporation is not entitled to individual capacity . . ."cralaw virtua1aw library
articles, to prove the said offense; and the articles immunity, under the 4th Amendment, against
subject of search and seizure should come in handy unreasonable searches and seizures. A corporation is, In the Stonehill case only the officers of the various
merely to strengthen such evidence. In this event, the after all, but an association of individuals under an corporations in whose offices documents, papers and
description contained in the herein disputed warrant assumed name and with a distinct legal entity. In effects were searched and seized were the petitioners. In
should have mentioned, at least, the dates, amounts, organizing itself as a collective body it waives no the case at bar, the corporation to whom the seized
persons, and other pertinent data regarding the receipts constitutional immunities appropriate to such body. Its documents belong, and whose rights have thereby been
of payments, certificates of stocks and securities, property cannot be taken without compensation. It can impaired, is itself a petitioner. On that score, petitioner
contracts, promissory notes, deeds of sale, messages and only be proceeded against by due process of law, and is corporation here stands on a different footing from the
communications, checks, bank deposits and withdrawals, protected, under the 14th Amendment, against unlawful corporations in Stonehill.
records of foreign remittances, among others, discrimination . . ." (Hale v. Henkel, 201 U.S. 43, 50 L.
enumerated in the warrant. ed. 652.) The tax assessments referred to earlier in this opinion
were, if not entirely — as claimed by petitioners — at
Respondents contend that certiorari does not lie because "In Linn v. United States, 163 C.C.A. 470, 251 Fed. 476, least partly — as in effect admitted by respondents —
petitioners failed to file a motion for reconsideration of 480, it was thought that a different rule applied to a based on the documents seized by virtue of Search
respondent Judge’s order of July 29, 1970. The corporation, the ground that it was not privileged from Warrant No. 2-M-70. Furthermore, the fact that the
contention is without merit. In the first place, when the producing its books and papers. But the rights of a assessments were made some one and one-half months
questions raised before this Court are the same as those corporation against unlawful search and seizure are to be after the search and seizure on February 25, 1970, is a
which were squarely raised in and passed upon by the protected even if the same result might have been strong indication that the documents thus seized served
court below, the filing of a motion for reconsideration in achieved in a lawful way." (Silverthorne Lumber as basis for the assessments. Those assessments should
said court before certiorari can be instituted in this Court Company, Et. Al. v. United States of America, 251 U.S. therefore not be enforced.
is no longer a prerequisite. (Pajo, etc., Et. Al. v. Ago, Et 385, 64 L. ed. 319.)
Al., 108 Phil., 905). In the second place, the rule PREMISES CONSIDERED, the petition is granted.
requiring the filing of a motion for reconsideration before In Stonehill, Et. Al. v. Diokno, Et Al., supra, this Court Accordingly, Search Warrant No. 2-M-70 issued by
an application for a writ of certiorari can be entertained impliedly recognized the right of a corporation to object respondent Judge is declared null and void; respondents
was never intended to be applied without considering the against unreasonable searches and seizures, are permanently enjoined from enforcing the said search
circumstances. (Matutina v. Buslon, Et Al., 109 Phil., thus:jgc:chanrobles.com.ph warrant; the documents, papers and effects seized
140.) In the case at bar time is of the essence in view of thereunder are ordered to be returned to petitioners; and
the tax assessments sought to be enforced by respondent "As regards the first group, we hold that petitioners respondent officials the Bureau of Internal Revenue and
officers of the Bureau of Internal Revenue against herein have no cause of action to assail the legality of the their representatives are permanently enjoined from
petitioner corporation, On account of which immediate contested warrants and of the seizures made in enforcing the assessments mentioned in Annex "G" of the
and more direct action becomes necessary. (Matute v. pursuance thereof, for the simple reason that said present petition, as well as other assessments based on
Court of Appeals, Et Al., 26 SCRA 768.) Lastly, the rule corporations have their respective personalities, separate the documents, papers and effects seized under the
does not apply where, as in this case, the deprivation of and distinct from the personality of herein petitioners, search warrant herein nullified, and from using the same
petitioners’ fundamental right to due process taints the regardless of the amount of shares of stock or the against petitioners in any criminal or other proceeding.
proceeding against them in the court below not only with interest of each of them in said corporations, whatever, No pronouncement as to costs
irregularity but also with nullity. (Matute v. Court of the offices they hold therein may be. Indeed, it is well
Appeals, Et Al., supra.) settled that the legality of a seizure can be contested only
by the party whose rights have been impaired thereby,
It is next contended by respondents that a corporation is and that the objection to an unlawful search and seizure
not entitled to protection against unreasonable search is purely personal and cannot be availed of by third
and seizures. Again, we find no merit in the contention. parties. Consequently, petitioners herein may not validly
object to the use in evidence against them of the
 G.R. No. L-31061 August 17, 1976 time in the year 1961 that the land in question "had been During the pendency of the motion to dismiss, plaintiff-
either fraudelently or erroneously included, by direct or appellant filed a motion, dated October 7, 1966, praying
SULO NG BAYAN INC., Plaintiff- constructive fraud, in Original Certificate of Title No. 466 that the case be transferred to another branch of the
Appellant, v. GREGORIO ARANETA, INC., PARADISE of the Land of Records of the province of Bulacan", issued Court of First Instance sitting at Malolos, Bulacan,
FARMS, INC., NATIONAL WATERWORKS & on May 11, 1916, which title is fictitious, non-existent According to defendants-appellees, they were not
SEWERAGE AUTHORITY, HACIENDA CARETAS, INC, and devoid of legal efficacy due to the fact that "no furnished a copy of said motion, hence, on October 14,
and REGISTER OF DEEDS OF BULACAN, defendants- original survey nor plan whatsoever" appears to have 1966, the lower court issued an Order requiring plaintiff-
appellees. been submitted as a basis thereof and that the Court of appellant to furnish the appellees copy of said motion,
First Instance of Bulacan which issued the decree of hence, on October 14, 1966, defendant-appellant's
registration did not acquire jurisdiction over the land motion dated October 7, 1966 and, consequently, prayed
The issue posed in this appeal is whether or not plaintiff
registration case because no notice of such proceeding that the said motion be denied for lack of notice and for
corporation (non- stock may institute an action in behalf
was given to the members of the plaintiff corporation who failure of the plaintiff-appellant to comply with the Order
of its individual members for the recovery of certain
were then in actual possession of said properties; that as of October 14, 1966. Similarly, defendant-appellee
parcels of land allegedly owned by said members; for the
a consequence of the nullity of the original title, all paradise Farms, Inc. filed, on December 2, 1966, a
nullification of the transfer certificates of title issued in
subsequent titles derived therefrom, such as Transfer manifestation information the court that it also did not
favor of defendants appellees covering the aforesaid
Certificate of Title No. 4903 issued in favor of Gregorio receive a copy of the afore-mentioned of appellant. On
parcels of land; for a declaration of "plaintiff's members
Araneta and Carmen Zaragoza, which was subsequently January 24, 1967, the trial court issued an Order
as absolute owners of the property" and the issuance of
cancelled by Transfer Certificate of Title No. 7573 in the dismissing the amended complaint.
the corresponding certificate of title; and for
chanroblesvirtualawlibrary chanrobles virtual law library

name of Gregorio Araneta, Inc., Transfer Certificate of

damages.
Title No. 4988 issued in the name of, the National On February 14, 1967, appellant filed a motion to
chanroblesvirtualawlibrary chanrobles virtual law library

Waterworks & Sewerage Authority (NWSA), Transfer reconsider the Order of dismissal on the grounds that the
On April 26, 1966, plaintiff-appellant Sulo ng Bayan, Inc. Certificate of Title No. 4986 issued in the name of court had no jurisdiction to issue the Order of dismissal,
filed an accion de revindicacion with the Court of First Hacienda Caretas, Inc., and another transfer certificate of because its request for the transfer of the case from the
Instance of Bulacan, Fifth Judicial District, Valenzuela, title in the name of Paradise Farms, Inc., are therefore Valenzuela Branch of the Court of First Instance to the
Bulacan, against defendants-appellees to recover the void. Plaintiff-appellant consequently prayed (1) that Malolos Branch of the said court has been approved by
ownership and possession of a large tract of land in San Original Certificate of Title No. 466, as well as all transfer the Department of Justice; that the complaint states a
Jose del Monte, Bulacan, containing an area of certificates of title issued and derived therefrom, be sufficient cause of action because the subject matter of
27,982,250 square meters, more or less, registered nullified; (2) that "plaintiff's members" be declared as the controversy in one of common interest to the
under the Torrens System in the name of defendants- absolute owners in common of said property and that the members of the corporation who are so numerous that
appellees' predecessors-in-interest. 1 The complaint, as corresponding certificate of title be issued to plaintiff; and the present complaint should be treated as a class suit;
amended on June 13, 1966, specifically alleged that (3) that defendant-appellee Gregorio Araneta, Inc. be and that the action is not barred by the statute of
plaintiff is a corporation organized and existing under the ordered to pay to plaintiff the damages therein limitations because (a) an action for the reconveyance of
laws of the Philippines, with its principal office and place specified.chanroblesvirtualawlibrary chanrobles virtual law library

property registered through fraud does not prescribe, and

of business at San Jose del Monte, Bulacan; that its
(b) an action to impugn a void judgment may be brought
membership is composed of natural persons residing at
On September 2, 1966, defendant-appellee Gregorio any time. This motion was denied by the trial court in its
San Jose del Monte, Bulacan; that the members of the
Araneta, Inc. filed a motion to dismiss the amended Order dated February 22, 1967. From the afore-
plaintiff corporation, through themselves and their
complaint on the grounds that (1) the complaint states no mentioned Order of dismissal and the Order denying its
predecessors-in-interest, had pioneered in the clearing of
cause of action; and (2) the cause of action, if any, is motion for reconsideration, plaintiff-appellant appealed to
the fore-mentioned tract of land, cultivated the same
barred by prescription and laches. Paradise Farms, Inc. the Court of Appeals.
since the Spanish regime and continuously possessed the
chanroblesvirtualawlibrary chanrobles virtual law library

and Hacienda Caretas, Inc. filed motions to dismiss based

said property openly and public under concept of
on the same grounds. Appellee National Waterworks & On September 3, 1969, the Court of Appeals, upon
ownership adverse against the whole world; that
Sewerage Authority did not file any motion to dismiss. finding that no question of fact was involved in the appeal
defendant-appellee Gregorio Araneta, Inc., sometime in
However, it pleaded in its answer as special and but only questions of law and jurisdiction, certified this
the year 1958, through force and intimidation, ejected
affirmative defenses lack of cause of action by the case to this Court for resolution of the legal issues
the members of the plaintiff corporation fro their
plaintiff-appellant and the barring of such action by involved in the controversy.
possession of the aforementioned vast tract of land; that
prescription and laches.
chanroblesvirtualawlibrary chanrobles virtual law library

upon investigation conducted by the members and

chanroblesvirtualawlibrary chanrobles virtual law library

officers of plaintiff corporation, they found out for the first I chanrobles virtual law library
Appellant contends, as a first assignment of error, that is composed of two elements: (1) the right of the plaintiff a one-man corporation. 6 The mere fact that one is
the trial court acted without authority and jurisdiction in and (2) the violation of such right by the defendant. president of a corporation does not render the property
dismissing the amended complaint when the Secretary of (Moran, Vol. 1, p. 111). For these reasons, the rules which he owns or possesses the property of the
Justice had already approved the transfer of the case to require that every action must be prosecuted and corporation, since the president, as individual, and the
any one of the two branches of the Court of First Instance defended in the name of the real party in interest and corporation are separate similarities. 7 Similarly,
of Malolos, Bulacan. chanroblesvirtualawlibrary chanrobles virtual law library that all persons having an interest in the subject of the stockholders in a corporation engaged in buying and
action and in obtaining the relief demanded shall be dealing in real estate whose certificates of stock entitled
Appellant confuses the jurisdiction of a court and the joined as plaintiffs (Sec. 2, Rule 3). In the amended the holder thereof to an allotment in the distribution of
venue of cases with the assignment of cases in the complaint, the people whose rights were alleged to have the land of the corporation upon surrender of their stock
different branches of the same Court of First Instance. been violated by being deprived and dispossessed of their certificates were considered not to have such legal or
Jurisdiction implies the power of the court to decide a land are the members of the corporation and not the equitable title or interest in the land, as would support a
case, while venue the place of action. There is no corporation itself. The corporation has a separate. and suit for title, especially against parties other than the
question that respondent court has jurisdiction over the distinct personality from its members, and this is not a corporation. 8 
chanrobles virtual law library

case. The venue of actions in the Court of First Instance mere technicality but a matter of substantive law. There
is prescribed in Section 2, Rule 4 of the Revised Rules of is no allegation that the members have assigned their It must be noted, however, that the juridical personality
Court. The laying of venue is not left to the caprice of rights to the corporation or any showing that the of the corporation, as separate and distinct from the
plaintiff, but must be in accordance with the aforesaid corporation has in any way or manner succeeded to such persons composing it, is but a legal fiction introduced for
provision of the rules. 2 The mere fact that a request for rights. The corporation evidently did not have any rights the purpose of convenience and to subserve the ends of
the transfer of a case to another branch of the same violated by the defendants for which it could seek justice. 9 This separate personality of the corporation may
court has been approved by the Secretary of Justice does redress. Even if the Court should find against the be disregarded, or the veil of corporate fiction pierced, in
not divest the court originally taking cognizance thereof defendants, therefore, the plaintiff corporation would not cases where it is used as a cloak or cover for fraud or
of its jurisdiction, much less does it change the venue of be entitled to the reliefs prayed for, which are recoveries illegality, or to work -an injustice, or where necessary to
the action. As correctly observed by the trial court, the of ownership and possession of the land, issuance of the achieve equity. 10 
corresponding title in its name, and payment of damages.
chanrobles virtual law library

indorsement of the Undersecretary of Justice did not

order the transfer of the case to the Malolos Branch of the Neither can such reliefs be awarded to the members
Thus, when "the notion of legal entity is used to defeat
Bulacan Court of First Instance, but only "authorized" it allegedly deprived of their land, since they are not parties
public convenience, justify wrong, protect fraud, or
for the reason given by plaintiff's counsel that the to the suit. It appearing clearly that the action has not
defend crime, ... the law will regard the corporation as an
transfer would be convenient for the parties. The trial been filed in the names of the real parties in interest, the
association of persons, or in the case of two corporations,
court is not without power to either grant or deny the complaint must be dismissed on the ground of lack of
merge them into one, the one being merely regarded as
motion, especially in the light of a strong opposition cause of action. 3
part or instrumentality of the other. 11 The same is true
thereto filed by the defendant. We hold that the court a where a corporation is a dummy and serves no business
quo acted within its authority in denying the motion for Viewed in the light of existing law and jurisprudence, We purpose and is intended only as a blind, or an alter ego or
the transfer the case to Malolos notwithstanding the find that the trial court correctly dismissed the amended business conduit for the sole benefit of the
authorization" of the same by the Secretary of complaint. chanroblesvirtualawlibrary chanrobles virtual law library

stockholders. 12 This doctrine of disregarding the distinct

Justice. chanroblesvirtualawlibrary chanrobles virtual law library

personality of the corporation has been applied by the

It is a doctrine well-established and obtains both at law courts in those cases when the corporate entity is used
II  chanrobles virtual law library and in equity that a corporation is a distinct legal entity to for the evasion of taxes 13 or when the veil of corporate
be considered as separate and apart from the individual fiction is used to confuse legitimate issue of employer-
Let us now consider the substantive aspect of the Order stockholders or members who compose it, and is not employee relationship, 14 or when necessary for the
of dismissal. affected by the personal rights, obligations and protection of creditors, in which case the veil of corporate
transactions of its stockholders or members. 4 The fiction may be pierced and the funds of the corporation
chanroblesvirtualawlibrary chanrobles virtual law library

property of the corporation is its property and not that of may be garnished to satisfy the debts of a principal
In dismissing the amended complaint, the court a
the stockholders, as owners, although they have equities stockholder. 15 The aforecited principle is resorted to by
quo said:
in it. Properties registered in the name of the corporation the courts as a measure protection for third parties to
are owned by it as an entity separate and distinct from its prevent fraud, illegality or injustice. 16  chanrobles virtual law library

The issue of lack of cause of action raised in the motions members. 5 Conversely, a corporation ordinarily has no
to dismiss refer to the lack of personality of plaintiff to file interest in the individual property of its stockholders It has not been claimed that the members have assigned
the instant action. Essentially, the term 'cause of action' unless transferred to the corporation, "even in the case of or transferred whatever rights they may have on the land
in question to the plaintiff corporation. Absent any The interest that will allow parties to join in a bill of
showing of interest, therefore, a corporation, like plaintiff- complaint, or that will enable the court to dispense with
appellant herein, has no personality to bring an action for the presence of all the parties, when numerous, except a
and in behalf of its stockholders or members for the determinate number, is not only an interest in the
purpose of recovering property which belongs to said question, but one in common in the subject Matter of the
stockholders or members in their personal capacities.
virtual law library
chanroblesvirtualawlibrary chanrobles suit; ... a community of interest growing out of the nature
and condition of the right in dispute; for, although there
It is fundamental that there cannot be a cause of action may not be any privity between the numerous parties,
'without an antecedent primary legal right conferred' by there is a common title out of which the question arises,
law upon a person. 17 Evidently, there can be no wrong and which lies at the foundation of the proceedings ...
without a corresponding right, and no breach of duty by [here] the only matter in common among the plaintiffs,
one person without a corresponding right belonging to or between them and the defendants, is an interest in the
some other person. 18 Thus, the essential elements of a Question involved which alone cannot lay a foundation for
cause of action are legal right of the plaintiff, correlative the joinder of parties. There is scarcely a suit at law, or in
obligation of the defendant, an act or omission of the equity which settles a Principle or applies a principle to a
defendant in violation of the aforesaid legal given state of facts, or in which a general statute is
right. 19 Clearly, no right of action exists in favor of interpreted, that does not involved a Question in which
plaintiff corporation, for as shown heretofore it does not other parties are interested. ... (Emphasis supplied )
have any interest in the subject matter of the case which
is material and, direct so as to entitle it to file the suit as Here, there is only one party plaintiff, and the plaintiff
a real party in interest. chanroblesvirtualawlibrary chanrobles virtual law library
corporation does not even have an interest in the subject
matter of the controversy, and cannot, therefore,
III represent its members or stockholders who claim to own
in their individual capacities ownership of the said
chanrobles virtual law library

property. Moreover, as correctly stated by the appellees,

Appellant maintains, however, that the amended a class suit does not lie in actions for the recovery of
complaint may be treated as a class suit, pursuant to property where several persons claim Partnership of their
Section 12 of Rule 3 of the Revised Rules of Court. chanroblesvirtualawlibrary chanrobles virtual law library

respective portions of the property, as each one could

alleged and prove his respective right in a different way
In order that a class suit may prosper, the following for each portion of the land, so that they cannot all be
requisites must be present: (1) that the subject matter of held to have Identical title through acquisition
the controversy is one of common or general interest to prescription. 23 
chanrobles virtual law library

many persons; and (2) that the parties are so numerous

that it is impracticable to bring them all before the Having shown that no cause of action in favor of the
court. 20  chanrobles virtual law library

plaintiff exists and that the action in the lower court

cannot be considered as a class suit, it would be
Under the first requisite, the person who sues must have unnecessary and an Idle exercise for this Court to resolve
an interest in the controversy, common with those for the remaining issue of whether or not the plaintiffs action
whom he sues, and there must be that unity of interest for reconveyance of real property based upon
between him and all such other persons which would constructive or implied trust had already prescribed. chanroblesvirtualawlibrary chanrobles virtual law

entitle them to maintain the action if suit was brought by

library

them jointly. 21 
ACCORDINGLY, the instant appeal is hereby DISMISSED
chanrobles virtual law library

with costs against the plaintiff-appellant.

As to what constitutes common interest in the subject
matter of the controversy, it has been explained in Scott
v. Donald 22 thus:
ALFREDO CHING,cralawG. R. No. 164317 When the trust receipts matured, petitioner failed to
Petitioner, 1824 11-28-80 02-26-81 P707,879.71
v.   return the goods to respondent bank, or to return their
THE SECRETARY OF JUSTICE, value amounting to P6,940,280.66 despite demands.
ASST. CITY PROSECUTOR 1798 11-21-80 02-19-81 P835,526.25
Thus, the bank filed a criminal complaint
CECILYN BURGOS-VILLAVERT,
JUDGE EDGARDO SUDIAM ofcralawcralawPromulgated: 1808 11-21-80 02-19-81 P370,332.52 for estafa[6] against petitioner in the Office of the City
the Regional Trial Court, Manila, Prosecutor of Manila.
Branch 52; RIZAL COMMERCIALcralawFebruary 6, 2006 2042 01-30-81 04-30-81 P469,669.29  
BANKING CORP. and THE PEOPLE
After the requisite preliminary investigation, the City
OF THE PHILIPPINES, 1801 11-21-80 02-19-81 P2,001,715.17
Respondents.cralawcralawcralaw Prosecutor found probable cause estafa under Article
x--------------------------------------------------------------- 315, paragraph 1(b) of the Revised Penal Code, in
x
relation to Presidential Decree (P.D.) No. 115, otherwise
cralaw Before the Court is a petition for review 1857 12-09-80 03-09-81 P197,843.61
known as the Trust Receipts Law. Thirteen (13)
on certiorari of the Decision[1] of the Court of Appeals
Informations were filed against the petitioner before the
(CA) in CA-G.R. SP No. 57169 dismissing the petition 1895 12-17-80 03-17-81 P67,652.04 Regional Trial Court (RTC) of Manila. The cases were
for certiorari, prohibition and mandamus filed by 1911 12-22-80 03-20-81 P91,497.85
docketed as Criminal Cases No. 86-42169 to 86-42181,
petitioner Alfredo Ching, and its Resolution[2] dated June 2041 01-30-81 04-30-81 P91,456.97
2099 02-10-81 05-11-81 P66,162.26 raffled to Branch 31 of said court.
28, 2004 denying the motion for reconsideration thereof.  
  Petitioner appealed the resolution of the City
2100 02-10-81 05-12-81 P210,748.00 cralaw

cralaw Petitioner was the Senior Vice-President of Philippine Prosecutor to the then Minister of Justice. The appeal was
Blooming Mills, Inc. (PBMI). Sometime in September to dismissed in a Resolution[7] dated March 17, 1987, and
October 1980, PBMI, through petitioner, applied with the  
petitioner moved for its reconsideration. On December
 
Rizal Commercial Banking Corporation (respondent bank) 23, 1987, the Minister of Justice granted the motion, thus
cralaw Under the receipts, petitioner agreed to hold the
for the issuance of commercial letters of credit to finance reversing the
goods in trust for the said bank, with authority to sell but
its importation of assorted goods.[3]chanroblesvirtuallawlibrary previous resolution finding probable cause against
  not by way of conditional sale, pledge or otherwise; and
Respondent bank approved the application, and petitioner.[8] The City Prosecutor was ordered to move
in case such goods were sold, to turn over the proceeds
irrevocable letters of credit were issued in favor of for the withdrawal of the Informations.
thereof as soon as received, to apply against the relative
 
petitioner. The goods were purchased and delivered in acceptances and payment of other indebtedness to
This time, respondent bank filed a motion for
trust to PBMI. Petitioner signed 13 trust receipts[4] as respondent bank. In case the goods remained unsold
reconsideration, which, however, was denied on February
surety, acknowledging delivery of the following goods: within the specified period, the goods were to be returned
24, 1988.[9]The RTC, for its part, granted the Motion to
T/R Date Maturity to respondent bank without any need of demand. Thus,
Nos. Granted Date Principal Quash the Informations filed by petitioner on the ground
said 'goods, manufactured products or proceeds thereof,
that the material allegations therein did not amount
1845 12-05-80 03-05-81 P1,596,470.05 whether in the form of money or bills, receivables, or
to estafa.[10]chanroblesvirtuallawlibrary
accounts separate and capable of identification were  
1853 12-08-80 03-06-81 P198,150.67 respondent bank's property. In the meantime, the Court rendered judgment in Allied
 
Banking Corporation v. Ordoez,[11] holding that the penal
provision of P.D. No. 115 encompasses any act violative
of an obligation covered by the trust receipt; it is not the offense. Thus, the execution of said receipts is Branch 52 of said court. Petitioner filed a motion for
limited to transactions involving goods which are to be enough to indict the petitioner as the official responsible reconsideration, which the Secretary of Justice denied in
sold (retailed), reshipped, stored or processed as a for violation of P.D. No. 115. The Justice Secretary also a Resolution[18] dated January 17, 2000.
component of a product ultimately sold. The Court also declared that petitioner could not contend that P.D. No.  

ruled that 'the non-payment of the amount covered by a 115 covers only goods ultimately destined for sale, as this Petitioner then filed a petition for certiorari, prohibition

trust receipt is an act violative of the obligation of the issue had already been settled in Allied Banking and mandamus with the CA, assailing the resolutions of

entrustee to pay.[12] Corporation v. Ordoez,[16] where the Court ruled that the Secretary of Justice on the following grounds:
   
P.D. No. 115 is 'not limited to transactions in goods which 1. THE RESPONDENTS ARE ACTING WITH
On February 27, 1995, respondent bank re-filed the are to be sold (retailed), reshipped, stored or processed AN UNEVEN HAND AND IN FACT, ARE
criminal complaint for estafa against petitioner before the ACTING OPPRESSIVELY AGAINST
as a component of a product ultimately sold but covers
ALFREDO CHING WHEN THEY ALLOWED
Office of the City Prosecutor of Manila. The case was failure to turn over the proceeds of the sale of entrusted HIS PROSECUTION DESPITE THE FACT
docketed as I.S. No. 95B-07614. goods, or to return said goods if unsold or not otherwise THAT NO EVIDENCE HAD BEEN
  PRESENTED TO PROVE HIS
disposed of in accordance with the terms of the trust
cralaw Preliminary investigation ensued. On December 8, PARTICIPATION IN THE ALLEGED
receipts. TRANSACTIONS.
1995, the City Prosecutor ruled that there was no    
probable cause to charge petitioner with violating P.D. The Justice Secretary further stated that the respondent 2. THE RESPONDENT SECRETARY OF
No. 115, as petitioner's liability was only civil, not JUSTICE COMMITTED AN ACT IN GRAVE
bound himself under the terms of the trust receipts not ABUSE OF DISCRETION AND IN EXCESS
criminal, having signed the trust receipts as surety. only as a corporate official of PBMI but also as its surety; OF HIS JURISDICTION WHEN THEY
[13]Respondent bank appealed the resolution to the CONTINUED PROSECUTION OF THE
hence, he could be proceeded against in two (2)
PETITIONER DESPITE THE LENGTH OF
Department of Justice (DOJ) via petition for review, ways: first, as surety as determined by the Supreme TIME INCURRED IN THE TERMINATION
alleging that the City Prosecutor erred in ruling: Court in its decision in Rizal Commercial Banking OF THE PRELIMINARY INVESTIGATION
  THAT SHOULD JUSTIFY THE DISMISSAL
1. That there is no evidence to show that Corporation v. Court of Appeals;[17] and second, as the
OF THE INSTANT CASE.
respondent participated in the corporate official responsible for the offense under P.D.  
misappropriation of the goods subject of 3. THE RESPONDENT SECRETARY OF
No. 115, via criminal prosecution. Moreover, P.D. No. 115
the trust receipts; JUSTICE AND ASSISTANT CITY
2. That the respondent is a mere surety explicitly allows the prosecution of corporate officers PROSECUTOR ACTED IN GRAVE ABUSE
of the trust receipts; and 'without prejudice to the civil liabilities arising from the OF DISCRETION AMOUNTING TO AN
  EXCESS OF JURISDICTION WHEN THEY
criminal offense. Thus, according to the Justice Secretary,
3. That the liability of the respondent is CONTINUED THE PROSECUTION OF THE
only civil in nature.[14]chanroblesvirtuallawlibrary following Rizal Commercial Banking Corporation, the civil PETITIONER DESPITE LACK OF
  liability imposed is clearly separate and distinct from the SUFFICIENT BASIS.[19]chanroblesvirtuallawlibrary
 
criminal liability of the accused under P.D. No. 115.  
On July 13, 1999, the Secretary of Justice issued   cralaw In his petition, petitioner incorporated a certification
Resolution No. 250[15] granting the petition and Conformably with the Resolution of the Secretary of stating that 'as far as this Petition is concerned, no action
reversing the assailed resolution of the City Justice, the City Prosecutor filed 13 Informations against or proceeding in the Supreme Court, the Court of Appeals
Prosecutor.According to the Justice Secretary, the petitioner for violation of P.D. No. 115 before the RTC of or different divisions thereof, or any tribunal or agency. It
petitioner, as Senior Vice-President of PBMI, executed the Manila.The cases were docketed as Criminal Cases No. is finally certified that if the affiant should learn that a
13 trust receipts and as such, was the one responsible for 99-178596 to 99-178608 and consolidated for trial before similar action or proceeding has been filed or is pending
before the Supreme Court, the Court of Appeals, or Civil Procedure; and (b) the petition for certiorari, The petitioner avers that the CA erred in dismissing his
different divisions thereof, of any other tribunal or prohibition and mandamus was not the proper remedy of petition on a mere technicality.He claims that the rules of
agency, it hereby undertakes to notify this Honorable the petitioner. procedure should be used to promote, not frustrate,
Court within five (5) days from such notice.[20]   substantial justice. He insists that the Rules of Court
cralaw
cralaw On the merits of the petition, the CA ruled that the should be construed liberally especially when, as in this
In its Comment on the petition, the Office of the Solicitor assailed resolutions of the Secretary of Justice were case, his substantial rights are adversely affected; hence,
General alleged that - correctly issued for the following reasons: (a) petitioner, the deficiency in his certification of non-forum shopping
A. being the Senior Vice-President of PBMI and the signatory
THE HONORABLE SECRETARY OF JUSTICE should not result in the dismissal of his petition.
CORRECTLY RULED THAT PETITIONER to the trust receipts, is criminally liable for violation of  
ALFREDO CHING IS THE OFFICER P.D. No. 115; (b) the issue raised by the petitioner, on The Office of the Solicitor General (OSG) takes the
RESPONSIBLE FOR THE OFFENSE
whether he violated P.D. No. 115 by his actuations, had opposite view, and asserts that indubitably, the certificate
CHARGED AND THAT THE ACTS OF
PETITIONER FALL WITHIN THE AMBIT OF already been resolved and laid to rest in Allied Bank of non-forum shopping incorporated in the petition before
VIOLATION OF P.D. [No.] 115 IN Corporation v. Ordoez;[22] and (c) petitioner was the CA is defective because it failed to disclose essential
RELATION TO ARTICLE 315, PAR. 1(B) OF
THE REVISED PENAL CODE. estopped from raising the facts about pending actions concerning similar issues and
    parties.It asserts that petitioner's failure to comply with
B.   the Rules of Court is fatal to his petition. The OSG cited
 
THERE IS NO MERIT IN PETITIONER'S City Prosecutor's delay in the final disposition of the Section 2, Rule 42, as well as the ruling of this Court
CONTENTION THAT EXCESSIVE DELAY preliminary investigation because he failed to do so in the in Melo v. Court of Appeals.[24]
HAS MARRED THE CONDUCT OF THE
DOJ.  
PRELIMINARY INVESTIGATION OF THE cralaw
CASE, JUSTIFYING ITS DISMISSAL. cralaw We agree with the ruling of the CA that the
Thus, petitioner filed the instant petition, alleging that:
  certification of non-forum shopping petitioner
C.  
incorporated in his petition before the appellate court is
  I
THE PRESENT SPECIAL CIVIL ACTION THE COURT OF APPEALS ERRED WHEN IT defective.The certification reads:
FOR CERTIORARI, PROHIBITION AND DISMISSED THE PETITION ON THE  
MANDAMUS IS NOT THE PROPER MODE GROUND THAT THE CERTIFICATION OF It is further certified that as far as this
OF REVIEW FROM THE RESOLUTION OF NON-FORUM SHOPPING INCORPORATED Petition is concerned, no action or
THE DEPARTMENT OF JUSTICE. THE THEREIN WAS DEFECTIVE. proceeding in the Supreme Court, the
PRESENT PETITION MUST THEREFORE BE   Court of Appeals or different divisions
DISMISSED.[21]chanroblesvirtuallawlibrary II thereof, or any tribunal or agency.
   
 
THE COURT OF APPEALS ERRED WHEN IT It is finally certified that if the affiant
On April 22, 2004, the CA rendered judgment dismissing should learn that a similar action or
RULED THAT NO GRAVE ABUSE OF
the petition for lack of merit, and on procedural DISCRETION AMOUNTING TO LACK OR proceeding has been filed or is pending
EXCESS OF JURISDICTION WAS before the Supreme Court, the Court of
grounds.On the procedural issue, it ruled that (a) the
COMMITTED BY THE SECRETARY OF Appeals, or different divisions thereof, of
certification of non-forum shopping executed by petitioner JUSTICE IN COMING OUT WITH THE any other tribunal or agency, it hereby
and incorporated in the petition was defective for failure ASSAILED RESOLUTIONS.[23] undertakes to notify this Honorable Court
  within five (5) days from such notice.[25]
to comply with the first two of the three-fold undertakings
The Court will delve into and resolve the issues seriatim. cralaw Under Section 1, second paragraph of Rule 65 of the
prescribed in Rule 7, Section 5 of theRevised Rules of
  Revised Rules of Court, the petition should be
accompanied by a sworn certification of non-forum cralaw Indubitably, the first paragraph of petitioner's Be that as it may, even on the merits, the
arguments advanced in support of the
shopping, as provided in the third paragraph of Section 3, certification is incomplete and unintelligible.Petitioner petition are not persuasive enough to
Rule 46 of said Rules. The latter provision reads in part: failed to certify that he 'had not heretofore commenced justify the desired conclusion that
  respondent Secretary of Justice gravely
any other action involving the same issues in the
cralawSEC. 3. Contents and filing of abused its discretion in coming out with
petition; effect of non-compliance with Supreme Court, the Court of Appeals or the different his assailed Resolutions. Petitioner posits
requirements. ' The petition shall contain divisions thereof or any other tribunal or agency as that, except for his being the Senior Vice-
the full names and actual addresses of all President of the PBMI, there is no iota of
required by paragraph 4, Section 3, Rule 46 of the
the petitioners and respondents, a evidence that he was a participes
concise statement of the matters Revised Rules of Court. crimines in violating the trust receipts
involved, the factual background of the   sued upon; and that his liability, if at all,
case and the grounds relied upon for the cralaw We agree with petitioner's contention that the is purely civil because he signed the said
relief prayed for. trust receipts merely as a xxx surety and
certification is designed to promote and facilitate the not as the entrustee.These assertions are,
 
xxx orderly administration of justice, and therefore, should however, too dull that they cannot even
  just dent the findings of the respondent
not be interpreted with absolute literalness. In his works
cralawThe petitioner shall also submit Secretary, viz:
together with the petition a sworn on the Revised Rules of Civil Procedure, former Supreme  
certification that he has not theretofore Court Justice Florenz Regalado states that, with respect  
commenced any other action involving x x x it is apropos to quote
to the contents of the certification which the pleader may
the same issues in the Supreme Court, section 13 of PD 115 which
the Court of Appeals or different divisions prepare, the rule of substantial compliance may be states in part, viz:
thereof, or any other tribunal or agency; availed of.[27] However, there must be a special  
if there is such other action or  
circumstance or compelling reason which makes the strict xxx If the violation or
proceeding, he must state the status of
the same; and if he should thereafter application of the requirement clearly unjustified. The offense is committed by a
learn that a similar action or proceeding instant petition has not alleged any such extraneous corporation, partnership,
has been filed or is pending before the association or other
Supreme Court, the Court of Appeals, or circumstance. Moreover, as worded, the certification judicial entities, the
different divisions thereof, or any other cannot even be regarded as substantial compliance with penalty provided for in
tribunal or agency, he undertakes to this Decree shall be
the procedural requirement. Thus, the CA was not
promptly inform the aforesaid courts and imposed upon the
other tribunal or agency thereof within informed whether, aside from the petition before it, directors, officers,
five (5) days therefrom. xxx petitioner had commenced any other action involving the employees or other
officials or persons therein
  same issues in other tribunals. responsible for the
Compliance with the certification against forum shopping   offense, without prejudice
is separate from and independent of the avoidance of cralaw On the merits of the petition, the CA ruled that the to the civil liabilities
petitioner failed to establish that the Secretary of Justice arising from the criminal
forum shopping itself. The requirement is mandatory.The offense.
failure of the petitioner to comply with the foregoing committed grave abuse of discretion in finding probable  
requirement shall be sufficient ground for the dismissal of cause against the petitioner for violation of estafa under There is no dispute that it was the
respondent, who as senior vice-president
the petition without prejudice, unless otherwise provided. Article 315, paragraph 1(b) of the Revised Penal Code,in
of PBM, executed the thirteen (13) trust
[26]chanroblesvirtuallawlibrary relation to P.D. No. 115. Thus, the appellate court receipts. As such, the law points to him as
  ratiocinated: the official responsible for the offense.
cralaw Since a corporation cannot be proceeded
against criminally because it cannot
commit crime in which personal violence liability imposed on respondent in RCBC entrustee to turn over the
or malicious intent is required, criminal vs. Court of Appeals case is clearly proceeds of the sale of the
action is limited to the corporate agents separate and distinct from his criminal goods, documents or
guilty of an act amounting to a crime and liability under PD 115. instruments covered by a trust
never against the corporation itself (West [28]chanroblesvirtuallawlibrary receipt to the extent of the
Coast Life Ins. Co. vs. Hurd, 27 Phil. 401;   amount owing to the entruster
Times, [I]nc. v. Reyes, 39 SCRA 303). or as appears in the trust
Thus, the execution by respondent of said receipt or to return said goods,
receipts is enough to indict him as the documents or instruments if
cralaw Petitioner asserts that the appellate court's ruling is
official responsible for violation of PD 115. they were not sold or disposed
  erroneous because (a) the transaction between PBMI and of in accordance with the terms
Parenthetically, respondent is estopped to respondent bank is not a trust receipt transaction; (b) he of the trust receipt shall
still contend that PD 115 covers only constitute the crime of estafa,
goods which are ultimately destined for entered into the transaction and was sued in his capacity punishable under the provisions
sale and not goods, like those imported as PBMI Senior Vice-President; (c) he never received the of Article Three hundred and
by PBM, for use in manufacture. This goods as an entrustee for PBMI, hence, could not have fifteen, paragraph one (b) of Act
issue has already been settled in the Numbered Three thousand eight
Allied Banking Corporation case, supra, committed any dishonesty or abused the confidence of hundred and fifteen, as
where he was also a party, when the respondent bank; and (d) PBMI acquired the goods and amended, otherwise known as
Supreme Court ruled that PD 115 is 'not the Revised Penal Code.If the
used the same in operating its machineries and
limited to transactions in goods which are violation or offense is committed
to be sold (retailed), reshipped, stored or equipment and not for resale. by a corporation, partnership,
processed as a component or a product   association or other juridical
ultimately sold but 'covers failure to turn The OSG, for its part, submits a contrary view, to wit: entities, the penalty provided for
over the proceeds of the sale of entrusted   in this Decree shall be imposed
goods, or to return said goods if unsold or 34. Petitioner further claims that he is not a upon the directors, officers,
disposed of in accordance with the terms person responsible for the offense allegedly employees or other officials or
of the trust receipts. because '[b]eing charged as the Senior persons therein responsible for
  Vice-President of Philippine Blooming Mills the offense, without prejudice to
In regard to the other assigned errors, we (PBM), petitioner cannot be held criminally the civil liabilities arising from
note that the respondent bound himself liable as the transactions sued upon were the criminal offense. (Emphasis
under the terms of the trust receipts not clearly entered into in his capacity as an supplied)
only as a corporate official of PBM but officer of the corporation and that [h]e  
also as its surety.It is evident that these never received the goods as an entrustee 36. Petitioner having participated in the
are two (2) capacities which do not for PBM as he never had or took possession negotiations for the trust receipts and
exclude the other. Logically, he can be of the goods nor did he commit dishonesty having received the goods for PBM, it was
proceeded against in two (2) ways: first, nor 'abuse of confidence in transacting with inevitable that the
as surety as determined by the Supreme RCBC. Such argument is bereft of merit. petitioner is the proper corporate officer to
Court in its decision in RCBC vs. Court of   be proceeded against by virtue of the PBM's
Appeals, 178 SCRA 739; and, secondly, 35. Petitioner's being a Senior Vice-President of the violation of P.D. No. 115.
as the corporate official responsible for Philippine Blooming Mills does not exculpate [29]chanroblesvirtuallawlibrary
the offense under PD 115, the present him from any liability. Petitioner's  
case is an appropriate remedy under our responsibility as the corporate official of  
penal law. PBM who received the goods in trust is cralaw The ruling of the CA is correct.
  premised on Section 13 of P.D. No. 115,  
Moreover, PD 115 explicitly allows the which provides:  
prosecution of corporate officers 'without   cralaw In Mendoza-Arce v. Office of the
prejudice to the civil liabilities arising Section 13. Penalty
from the criminal offense thus, the civil Ombudsman  (Visayas),[30] this Court held that
Clause.  The failure of an
thecralawacts of a quasi-judicial  officer may be assailed by cralaw A preliminary investigation, designed to secure the Decree as the entruster, and another
person referred to in this Decree as
the aggrieved party viaa petition for certiorari and respondent against hasty, malicious and oppressive entrustee, whereby the entruster, who
enjoined (a) when necessary to afford adequate prosecution, is an inquiry to determine whether (a) a owns or holds absolute title or security
interests over certain specified goods,
protection to the constitutional rights of the accused; (b) crime has been committed; and (b) whether there is
documents or instruments, releases the
when necessary for the orderly administration of justice; probable cause to believe that the accused is guilty same to the possession of the entrustee
(c) when the acts of the officer are without or in excess of thereof.It is a means of discovering the person or persons upon the latter's execution and delivery to
the entruster of a signed document called
authority; (d) where the charges are manifestly false and who may be reasonably charged with a crime. Probable a 'trust receipt wherein the entrustee
motivated by the lust for vengeance; and (e) when there cause need not be based on clear and convincing binds himself to hold the designated
is clearly no prima facie case against the accused. evidence of guilt, as the investigating officer acts upon goods, documents or instruments in trust
for the entruster and to sell or otherwise
[31] The Court also declared that, if the officer conducting probable cause of reasonable belief.Probable cause dispose of the goods, documents or
a preliminary investigation (in that case, the Office of the implies probability of guilt and requires more than bare instruments with the obligation to turn
over to the entruster the proceeds thereof
Ombudsman) acts without or in excess of his authority suspicion but less than evidence which would justify a
to the extent of the amount owing to the
and resolves to file an Information despite the absence of conviction. A finding of probable cause needs only to rest entruster or as appears in the trust
probable cause, such act may be nullified by a writ on evidence showing that more likely than not, a crime receipt or the goods, documents or
instruments themselvesif they are unsold
of certiorari.[32] has been committed by the suspect.[36]chanroblesvirtuallawlibrary
or not otherwise disposed of, in
   
accordance with the terms and conditions
Indeed, under Section 4, Rule 112 of the 2000 Rules of cralaw However, while probable cause should be determined specified in the trust receipt, or for other
Criminal Procedure,[33] the Information shall be prepared in a summary manner, there is a need to examine the purposes substantially equivalent to any
of the following:
by the Investigating Prosecutor against the respondent evidence with care to prevent material damage to a  
only if he or she finds probable cause to hold such potential accused's constitutional right to liberty and the 1. In case of goods or documents, (a) to
respondent for trial.The Investigating Prosecutor acts guarantees of freedom and fair play[37] and to protect sell the goods or procure their sale; or (b)
to manufacture or process the goods with
without or in excess of his authority under the Rule if the the State from the burden of unnecessary expenses in the purpose of ultimate sale; Provided,
Information is filed against the respondent despite prosecuting alleged offenses and holding trials arising That, in the case of goods delivered under
trust receipt for the purpose of
absence of evidence showing probable cause therefor. from false, fraudulent or groundless charges.[38]
manufacturing or processing before its
[34] If the Secretary of Justice reverses the Resolution of
 
ultimate sale, the entruster shall retain its
the Investigating Prosecutor who found no probable cralaw In this case, petitioner failed to establish that the title over the goods whether in its original
Secretary of Justice committed grave abuse of discretion or processed form until the entrustee has
cause to hold the respondent for trial, and orders such complied fully with his obligation under
prosecutor to file the Information despite the absence of in issuing the assailed resolutions. Indeed, he acted in the trust receipt; or (c) to load, unload,
probable cause, the Secretary of Justice acts contrary to accord with law and the evidence. ship or otherwise deal with them in a
  manner preliminary or necessary to their
law, without authority and/or in excess of authority. Such sale; or
Section 4of P.D. No. 115 defines a trust receipt
resolution may  
transaction, thus: 2. In the case of instruments a) to sell or
likewise be nullified in a petition for certiorari under Rule   procure their sale or exchange; or b) to
65 of the Revised Rules of Civil Procedure. Section 4. What constitutes a trust deliver them to a principal; or c) to effect
receipt transaction.  A trust receipt the consummation of some transactions
[35]chanroblesvirtuallawlibrary
transaction, within the meaning of this involving delivery to a depository or
 
Decree, is any transaction by and register; ord) to effect their presentation,
between a person referred to in this collection or renewal.
   receipt, or to the return of the goods, documents or goods under this Trust Receipt to the
The sale of goods, documents or BANK without any need of demand.
instruments by a person in the business instruments in case of non-sale, and to the enforcement  
of selling goods, documents or of all other rights conferred on him in the trust receipt; I/we agree to keep the said goods,
instruments for profit who, at the outset manufactured products or proceeds
provided, such are not contrary to the provisions of the
of the transaction, has, as against the thereof, whether in the form of money or
buyer, general property rights in such document.[41] bills, receivables, or accounts separate
goods, documents or instruments, or who   and capable of identification as property
sells the same to the buyer on credit, cralaw In the case at bar, the transaction between petitioner of the BANK.[42]
retaining title or other interest as security  
and respondent bank falls under the trust receipt
for the payment of the purchase price,
does not constitute a trust receipt transactions envisaged in P.D. No. 115.Respondent bank It must be stressed that P.D. No. 115 is a declaration by
transaction and is outside the purview imported the goods and entrusted the same to PBMI legislative authority that, as a matter of public policy, the
and coverage of this Decree.
under the trust receipts signed by petitioner, as failure of person to turn over the proceeds of the sale of
 
entrustee, with the bank as entruster.The agreement was the goods covered by a trust receipt or to return said
An entrustee is one having or taking possession of goods,
as follows: goods, if not sold, is a public nuisance to be abated by
documents or instruments under a trust receipt   the imposition of penal sanctions.[43]chanroblesvirtuallawlibrary
transaction, and any successor in interest of such person And in consideration thereof, I/we hereby cralaw

agree to hold said goods in trust for the The Court likewise rules that the issue of whether P.D.
for the purpose of payment specified in the trust receipt
said BANK as its property with liberty to
agreement.[39]The entrustee is obliged to: (1) hold the No. 115 encompasses transactions involving goods
sell the same within ____days from the
goods, documents or instruments in trust for the date of the execution of this Trust Receipt procured as a component of a product ultimately sold has
and for the Bank's account, but without been resolved in the affirmative in Allied Banking
entruster and shall dispose of them strictly in accordance
authority to make any other disposition
with the terms and conditions of the trust receipt; (2) whatsoever of the said goods or any part Corporation v. Ordoez.[44]The law applies to goods used

receive the proceeds in trust for the entruster and turn thereof (or the proceeds) either by way of by the entrustee in the operation of its machineries and
conditional sale, pledge or otherwise. equipment. The non-payment of the amount covered by
over the same to the entruster to the extent of the  
amount owing to the entruster or as appears on the trust I/we agree to keep the said goods insured the trust receipts or the non-return of the goods covered

receipt; (3) insure the goods for their total value against to their full value against loss from fire, by the receipts, if not sold or otherwise not disposed of,
theft, pilferage or other casualties as
loss from fire, theft, pilferage or other casualties; (4) violate the entrustee's obligation to pay the amount or to
directed by the BANK, the sum insured to
keep said goods or proceeds thereof whether in money or be payable in case of loss to the BANK, return the goods to the entruster.
with the understanding that the BANK is,  
whatever form, separate and capable of identification as
not to be chargeable with the storage In Colinares v. Court of Appeals,[45]the Court declared
property of the entruster; (5) return the goods, premium or insurance or any other
that there are two possible situations in a trust receipt
documents or instruments in the event of non-sale or expenses incurred on said goods.
  transaction. The first is covered by the provision which
upon demand of the entruster; and (6) observe all other In case of sale, I/we further agree to turn refers to money received under the obligation involving
terms and conditions of the trust receipt not contrary to over the proceeds thereof as soon as
received to the BANK, to apply against the duty to deliver it (entregarla) to the owner of the
the provisions of the decree.[40]chanroblesvirtuallawlibrary
  the relative acceptances (as described merchandise sold. The second is covered by the provision
above) and for the payment of any other
The entruster shall be entitled to the proceeds from which refers to merchandise received under the obligation
cralaw
indebtedness of mine/ours to the BANK.
the sale of the goods, documents or instruments released In case of non-sale within the period to return it (devolvera) to the owner.[46]Thus, failure of
specified herein, I/we agree to return the the entrustee to turn over the proceeds of the sale of the
under a trust receipt to the entrustee to the extent of the
amount owing to the entruster or as appears in the trust goods covered by the trust receipts to the entruster or to
return said goods if they were not disposed of in without prejudice to the civil liabilities 4th. By arresto mayor in its medium and
arising from the criminal offense. maximum periods, if such amount does
accordance with the terms of the trust receipt is a crime   not exceed 200 pesos, provided that in
under P.D. No. 115, without need of proving intent to The crime defined in P.D. No. 115 is malum the four cases mentioned, the fraud be
committed by any of the following means;
defraud. The law punishes dishonesty and abuse of prohibitum but is classified as estafa under paragraph xxx
confidence in the handling of money or goods to the 1(b), Article 315 of the Revised Penal Code,  
prejudice of the entruster, regardless of whether the or estafa with abuse of confidence.It may be committed Though the entrustee is a corporation, nevertheless, the
latter is the owner or not.A mere failure to deliver the by a corporation or other juridical entity or by natural law specifically makes the officers, employees or other
proceeds of the sale of the goods, if not sold, constitutes persons. However, the penalty for the crime is officers or persons responsible for the offense, without
a criminal offense that causes prejudice, not only to imprisonment for the periods provided in said Article 315, prejudice to the civil liabilities of such corporation and/or
another, but more to the public interest. which reads: board of directors, officers, or other officials or
[47]chanroblesvirtuallawlibrary   employees responsible for the offense.The rationale is
  ARTICLE 315. Swindling (estafa). ' Any
person who shall defraud another by any that such officers or employees are vested with the
The Court rules that although petitioner signed the trust
of the means mentioned hereinbelow shall authority and responsibility to devise means necessary to
receipts merely as Senior Vice-President of PBMI and had be punished by: ensure compliance with the law and, if they fail to do so,
no physical possession of the goods, he cannot avoid  
1st. The penalty of prision correccional  in are held criminally accountable; thus, they have a
prosecution for violation of P.D. No. 115. its maximum period to prision mayor in responsible share in the violations of the law.
  its minimum period, if the amount of the
The penalty clause of the law, Section 13 of P.D. No. 115 [48]chanroblesvirtuallawlibrary
fraud is over 12,000 pesos but does not
reads:  
exceed 22,000 pesos; and if such amount
  If the crime is committed by a corporation or other
exceeds the latter sum, the penalty
Section 13. Penalty Clause. The failure of provided in this paragraph shall be juridical entity, the directors, officers, employees or other
an entrustee to turn over the proceeds of imposed in its maximum period, adding
the sale of the goods, documents or officers thereof responsible for the offense shall be
one year for each additional 10,000
instruments covered by a trust receipt to charged and penalized for the crime, precisely because of
pesos; but the total penalty which may be
the extent of the amount owing to the imposed shall not exceed twenty years. In the nature of the crime and the penalty therefor.A
entruster or as appears in the trust such cases, and in connection with the
receipt or to return said goods, corporation cannot be arrested and imprisoned; hence,
accessory penalties which may be
documents or instruments if they were imposed and for the purpose of the other cannot be penalized for a crime punishable by
not sold or disposed of in accordance with provisions of this Code, the penalty shall
the terms of the trust receipt shall imprisonment.[49] However, a corporation may be
be termed prision mayor or reclusion
constitute the crime of estafa, punishable charged and prosecuted for a crime if the imposable
temporal, as the case may be;
under the provisions of Article Three   penalty is fine. Even if the statute prescribes both fine
hundred and fifteen, paragraph one (b) of 2nd. The penalty of prision correccional  in
Act Numbered Three thousand eight and imprisonment as penalty, a corporation may be
its minimum and medium periods, if the
hundred and fifteen, as amended, prosecuted and, if found guilty, may be fined.
amount of the fraud is over 6,000 pesos
otherwise known as the Revised Penal but does not exceed 12,000 pesos; [50]chanroblesvirtuallawlibrary
Code.If the violation or offense is    
committed by a corporation, partnership, 3rd. The penalty of arresto mayor in its
association or other juridical entities, the A crime is the doing of that which the penal code forbids
maximum period to prision correccional in
penalty provided for in this Decree shall its minimum period, if such amount is to be done, or omitting to do what it commands.A
be imposed upon the directors, officers, over 200 pesos but does not exceed necessary part of the definition of every crime is the
employees or other officials or persons 6,000 pesos; and
therein responsible for the offense, designation of the author of the crime upon whom the
 
penalty is to be inflicted.When a criminal statute protect himself behind a corporation where he is the
designates an act of a corporation or a crime and actual, present and efficient actor.[55]
prescribes punishment therefor, it creates a criminal  

offense which, otherwise, would not exist and such can IN LIGHT OF ALL THE FOREGOING, the petition is DENIED

be for lack of merit.Costs against the petitioner.

committed only by the corporation. But when a penal

statute does not
expressly apply to corporations, it does not create an
offense for which a corporation may be punished.On the
other hand, if the State, by statute, defines a crime that
may be committed by a corporation but prescribes the
penalty therefor to be suffered by the officers, directors,
or employees of such corporation or other persons
responsible for the offense, only such individuals will
suffer such penalty.[51]Corporate officers or employees,
through whose act, default or omission the corporation
commits a crime, are themselves individually guilty of the
crime.[52]chanroblesvirtuallawlibrary
 
The principle applies whether or not the crime requires
the consciousness of wrongdoing. It applies to those
corporate agents who themselves commit the crime and
to those, who, by virtue of their managerial positions or
other similar relation to the corporation, could be deemed
responsible for its commission, if by virtue of their
relationship to the corporation, they had the power to
prevent the act.[53]Moreover, all parties active in
promoting a crime, whether agents or not, are principals.
[54]Whether such officers or employees are benefited by
their delictual acts is not a touchstone of their criminal
liability.Benefit is not an operative fact.
 
In this case, petitioner signed the trust receipts in
question.He cannot, thus, hide behind the cloak of the
separate corporate personality of PBMI.In the words of
Chief Justice Earl Warren, a corporate officer cannot
 [G.R. NO. 141994 - January 17, 2005] passed already. Several students had approached me On the other hand, the administrators of AMEC-
stating that they had consulted with the DECS which told BCCM, AMEC Science High School and the AMEC-
FILIPINAS BROADCASTING NETWORK, them that there is no such regulation. If [there] is no Institute of Mass Communication in their effort to
INC., Petitioner, v. AGO MEDICAL AND EDUCATIONAL such regulation why is AMEC doing the same? minimize expenses in terms of salary are absorbing
CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, or continues to accept "rejects". For example how
(AMEC-BCCM) and ANGELITA F. AGO, Respondents. xxx many teachers in AMEC are former teachers of Aquinas
University but were removed because of immorality?
Does it mean that the present administration of AMEC
This Petition for Review 1 assails the 4 January 1999 Second: Earlier AMEC students in Physical Therapy
have the total definite moral foundation from catholic
Decision2 and 26 January 2000 Resolution of the Court of had complained that the course is not recognized
administrator of Aquinas University. I will prove to you
Appeals in CA-G.R. CV No. 40151. The Court of Appeals by DECS. xxx
my friends, that AMEC is a dumping ground, garbage,
affirmed with modification the 14 December 1992
not merely of moral and physical misfits. Probably
Decision3 of the Regional Trial Court of Legazpi City, Third: Students are required to take and pay for the they only qualify in terms of intellect. The Dean of
Branch 10, in Civil Case No. 8236. The Court of Appeals subject even if the subject does not have an Student Affairs of AMEC is Justita Lola, as the family
held Filipinas Broadcasting Network, Inc. and its instructor - such greed for money on the part of name implies. She is too old to work, being an old
broadcasters Hermogenes Alegre and Carmelo Rima liable AMEC's administration. Take the subject Anatomy: woman. Is the AMEC administration exploiting the very
for libel and ordered them to solidarily pay Ago Medical students would pay for the subject upon enrolment [e]nterprising or compromising and undemanding Lola?
and Educational Center-Bicol Christian College of Medicine because it is offered by the school. However there would Could it be that AMEC is just patiently making use of
moral damages, attorney's fees and costs of suit. be no instructor for such subject. Students would be Dean Justita Lola were if she is very old. As in
informed that course would be moved to a later date atmospheric situation - zero visibility - the plane cannot
The Antecedents because the school is still searching for the appropriate land, meaning she is very old, low pay follows. By the
instructor. way, Dean Justita Lola is also the chairman of the
"Exposé" is a radio documentary4 program hosted by committee on scholarship in AMEC. She had retired from
Carmelo 'Mel' Rima ("Rima") and Hermogenes 'Jun' xxx Bicol University a long time ago but AMEC has patiently
Alegre ("Alegre").5 Exposé is aired every morning over made use of her.
DZRC-AM which is owned by Filipinas Broadcasting It is a public knowledge that the Ago Medical and
Network, Inc. ("FBNI"). "Exposé" is heard over Legazpi Educational Center has survived and has been surviving xxx
City, the Albay municipalities and other Bicol areas.6 for the past few years since its inception because of funds
support from foreign foundations. If you will take a look MEL RIMA:
In the morning of 14 and 15 December 1989, Rima and at the AMEC premises you ll find out that the names of
Alegre exposed various alleged complaints from students, the buildings there are foreign soundings. There is a
xxx My friends based on the expose, AMEC is a dumping
teachers and parents against Ago Medical and Educational McDonald Hall. Why not Jose Rizal or Bonifacio Hall? That
ground for moral and physically misfit people. What does
Center-Bicol Christian College of Medicine ("AMEC") and is a very concrete and undeniable evidence that the
this mean? Immoral and physically misfits as teachers.
its administrators. Claiming that the broadcasts were support of foreign foundations for AMEC is substantial,
defamatory, AMEC and Angelita Ago ("Ago"), as Dean of isn't it? With the report which is the basis of the expose in
AMEC's College of Medicine, filed a complaint for DZRC today, it would be very easy for detractors and May I say I m sorry to Dean Justita Lola. But this is the
damages7 against FBNI, Rima and Alegre on 27 February enemies of the Ago family to stop the flow of support of truth. The truth is this, that your are no longer fit to
1990. Quoted are portions of the allegedly libelous foreign foundations who assist the medical school on the teach. You are too old. As an aviation, your case is zero
broadcasts: basis of the latter's purpose. But if the purpose of the visibility. Don't insist.
institution (AMEC) is to deceive students at cross purpose
JUN ALEGRE: with its reason for being it is possible for these foreign xxx Why did AMEC still absorb her as a teacher, a dean,
foundations to lift or suspend their donations and chairman of the scholarship committee at that. The
temporarily.8 reason is practical cost saving in salaries, because an old
Let us begin with the less burdensome: if you have
person is not fastidious, so long as she has money to buy
children taking medical course at AMEC-BCCM,
xxx the ingredient of beetle juice. The elderly can get by -
advise them to pass all subjects because if they fail
that's why she (Lola) was taken in as Dean.
in any subject they will repeat their year level,
taking up all subjects including those they have
 xxx On 14 December 1992, the trial court rendered a WHEREFORE, the decision appealed from is
Decision12 finding FBNI and Alegre liable for libel except hereby AFFIRMED, subject to the modification that
xxx On our end our task is to attend to the interests of Rima. The trial court held that the broadcasts are broadcaster Mel Rima is SOLIDARILY ADJUDGED liable
students. It is likely that the students would be influenced libelous per se. The trial court rejected the broadcasters' with FBN[I] and Hermo[g]enes Alegre.
by evil. When they become members of society claim that their utterances were the result of straight
outside of campus will be liabilities rather than reporting because it had no factual basis. The SO ORDERED.14
assets. What do you expect from a doctor who while broadcasters did not even verify their reports before
studying at AMEC is so much burdened with unreasonable airing them to show good faith. In holding FBNI liable for
FBNI, Rima and Alegre filed a motion for reconsideration
imposition? What do you expect from a student who aside libel, the trial court found that FBNI failed to exercise
which the Court of Appeals denied in its 26 January 2000
from peculiar problems - because not all students are rich diligence in the selection and supervision of its
Resolution.
- in their struggle to improve their social status are even employees.
more burdened with false regulations. xxx9 (Emphasis
Hence, FBNI filed this petition.15
supplied)ςrαlαωlιbrαrÿ In absolving Rima from the charge, the trial court ruled
that Rima's only participation was when he agreed with
Alegre's exposé. The trial court found Rima's statement The Ruling of the Court of Appeals
The complaint further alleged that AMEC is a reputable
learning institution. With the supposed exposés, FBNI, within the "bounds of freedom of speech, expression, and
Rima and Alegre "transmitted malicious imputations, and of the press." The dispositive portion of the decision The Court of Appeals upheld the trial court's ruling that
as such, destroyed plaintiffs' (AMEC and Ago) reputation." reads: the questioned broadcasts are libelous per se and that
AMEC and Ago included FBNI as defendant for allegedly FBNI, Rima and Alegre failed to overcome the legal
failing to exercise due diligence in the selection and WHEREFORE, premises considered, this court finds for the presumption of malice. The Court of Appeals found Rima
supervision of its employees, particularly Rima and plaintiff. Considering the degree of damages caused and Alegre's claim that they were actuated by their moral
Alegre. by the controversial utterances, which are not and social duty to inform the public of the students'
found by this court to be really very serious and gripes as insufficient to justify the utterance of the
damaging, and there being no showing that indeed defamatory remarks.
On 18 June 1990, FBNI, Rima and Alegre, through Atty.
Rozil Lozares, filed an Answer10 alleging that the the enrollment of plaintiff school
broadcasts against AMEC were fair and true. FBNI, Rima dropped, defendants Hermogenes "Jun" Alegre, Jr. and Finding no factual basis for the imputations against
and Alegre claimed that they were plainly impelled by a Filipinas Broadcasting Network (owner of the radio station AMEC's administrators, the Court of Appeals ruled that
sense of public duty to report the "goings-on in AMEC, DZRC), are hereby jointly and severally ordered to pay the broadcasts were made "with reckless disregard as to
[which is] an institution imbued with public interest." plaintiff Ago Medical and Educational Center-Bicol whether they were true or false." The appellate court
Christian College of Medicine (AMEC-BCCM) the amount pointed out that FBNI, Rima and Alegre failed to present
of P300,000.00 moral damages, plus P30,000.00 in court any of the students who allegedly complained
Thereafter, trial ensued. During the presentation of the
reimbursement of attorney's fees, and to pay the costs of against AMEC. Rima and Alegre merely gave a single
evidence for the defense, Atty. Edmundo Cea,
suit. name when asked to identify the students. According to
collaborating counsel of Atty. Lozares, filed a Motion to
the Court of Appeals, these circumstances cast doubt on
Dismiss11 on FBNI's behalf. The trial court denied the
SO ORDERED.13 (Emphasis supplied) the veracity of the broadcasters' claim that they were
motion to dismiss. Consequently, FBNI filed a separate ςrαlαωlιbrαrÿ

"impelled by their moral and social duty to inform the

Answer claiming that it exercised due diligence in the
public about the students' gripes."
selection and supervision of Rima and Alegre. FBNI Both parties, namely, FBNI, Rima and Alegre, on one
claimed that before hiring a broadcaster, the broadcaster hand, and AMEC and Ago, on the other, appealed the
should (1) file an application; (2) be interviewed; and (3) decision to the Court of Appeals. The Court of Appeals The Court of Appeals found Rima also liable for libel since
undergo an apprenticeship and training program after affirmed the trial court's judgment with modification. The he remarked that "(1) AMEC-BCCM is a dumping ground
passing the interview. FBNI likewise claimed that it appellate court made Rima solidarily liable with FBNI and for morally and physically misfit teachers; (2) AMEC
always reminds its broadcasters to "observe truth, Alegre. The appellate court denied Ago's claim for obtained the services of Dean Justita Lola to minimize
fairness and objectivity in their broadcasts and to refrain damages and attorney's fees because the broadcasts expenses on its employees' salaries; and (3) AMEC
from using libelous and indecent language." Moreover, were directed against AMEC, and not against her. The burdened the students with unreasonable imposition and
FBNI requires all broadcasters to pass the Kapisanan ng dispositive portion of the Court of Appeals' decision false regulations."16
mga Brodkaster sa Pilipinas ("KBP") accreditation test reads:
and to secure a KBP permit. The Court of Appeals held that FBNI failed to exercise due
diligence in the selection and supervision of its employees
for allowing Rima and Alegre to make the radio A libel23 is a public and malicious imputation of a crime, or many and not because there is proof that what they are
broadcasts without the proper KBP accreditation. The of a vice or defect, real or imaginary, or any act or saying is true."28 This plainly shows Rima and Alegre's
Court of Appeals denied Ago's claim for damages and omission, condition, status, or circumstance tending to reckless disregard of whether their report was true or
attorney's fees because the libelous remarks were cause the dishonor, discredit, or contempt of a natural or not.
directed against AMEC, and not against her. The Court of juridical person, or to blacken the memory of one who is
Appeals adjudged FBNI, Rima and Alegre solidarily liable dead.24 Contrary to FBNI's claim, the broadcasts were not "the
to pay AMEC moral damages, attorney's fees and costs of result of straight reporting." Significantly, some courts in
suit.
ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

There is no question that the broadcasts were made the United States apply the privilege of "neutral
public and imputed to AMEC defects or circumstances reportage" in libel cases involving matters of public
Issues tending to cause it dishonor, discredit and contempt. interest or public figures. Under this privilege, a
Rima and Alegre's remarks such as "greed for money on republisher who accurately and disinterestedly reports
FBNI raises the following issues for resolution: the part of AMEC's administrators"; "AMEC is a dumping certain defamatory statements made against public
ground, garbage of xxx moral and physical misfits"; and figures is shielded from liability, regardless of the
AMEC students who graduate "will be liabilities rather republisher's subjective awareness of the truth or falsity
I. WHETHER THE BROADCASTS ARE LIBELOUS;
than assets" of the society are libelous per se. Taken as a of the accusation.29 Rima and Alegre cannot invoke the
whole, the broadcasts suggest that AMEC is a money- privilege of neutral reportage because unfounded
II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES; making institution where physically and morally unfit comments abound in the broadcasts. Moreover, there is
teachers abound. no existing controversy involving AMEC when the
III. WHETHER THE AWARD OF ATTORNEY'S FEES IS broadcasts were made. The privilege of neutral reportage
PROPER; and cralawlibrary
However, FBNI contends that the broadcasts are not applies where the defamed person is a public figure who
malicious. FBNI claims that Rima and Alegre were plainly is involved in an existing controversy, and a party to that
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA impelled by their civic duty to air the students' gripes. controversy makes the defamatory statement.30
AND ALEGRE FOR PAYMENT OF MORAL DAMAGES, FBNI alleges that there is no evidence that ill will or spite
ATTORNEY'S FEES AND COSTS OF SUIT. motivated Rima and Alegre in making the broadcasts. However, FBNI argues vigorously that malice in law does
FBNI further points out that Rima and Alegre exerted not apply to this case. Citing Borjal v. Court of
The Court's Ruling efforts to obtain AMEC's side and gave Ago the Appeals,31 FBNI contends that the broadcasts "fall within
opportunity to defend AMEC and its administrators. FBNI the coverage of qualifiedly privileged communications" for
concludes that since there is no malice, there is no libel. being commentaries on matters of public interest. Such
We deny the petition. being the case, AMEC should prove malice in fact or
FBNI's contentions are untenable. actual malice. Since AMEC allegedly failed to prove actual
This is a civil action for damages as a result of the malice, there is no libel.
allegedly defamatory remarks of Rima and Alegre against
AMEC.17 While AMEC did not point out clearly the legal Every defamatory imputation is presumed
malicious.25 Rima and Alegre failed to show adequately FBNI's reliance on Borjal is misplaced. In Borjal, the
basis for its complaint, a reading of the complaint reveals Court elucidated on the "doctrine of fair comment," thus:
that AMEC's cause of action is based on Articles 30 and their good intention and justifiable motive in airing the
33 of the Civil Code. Article 3018 authorizes a separate supposed gripes of the students. As hosts of a
civil action to recover civil liability arising from a criminal documentary or public affairs program, Rima and Alegre [F]air commentaries on matters of public interest are
offense. On the other hand, Article 3319 particularly should have presented the public issues "free privileged and constitute a valid defense in an action for
provides that the injured party may bring a separate civil from inaccurate and misleading information."26 Hearing libel or slander. The doctrine of fair comment means that
action for damages in cases of defamation, fraud, and the students' alleged complaints a month before the while in general every discreditable imputation publicly
physical injuries. AMEC also invokes Article 1920 of the exposé,27 they had sufficient time to verify their sources made is deemed false, because every man is presumed
Civil Code to justify its claim for damages. AMEC cites and information. However, Rima and Alegre hardly made innocent until his guilt is judicially proved, and every false
Articles 217621 and 218022 of the Civil Code to hold FBNI a thorough investigation of the students' alleged gripes. imputation is deemed malicious, nevertheless, when the
solidarily liable with Rima and Alegre. Neither did they inquire about nor confirm the purported discreditable imputation is directed against a public
irregularities in AMEC from the Department of Education, person in his public capacity, it is not necessarily
Culture and Sports. Alegre testified that he merely went actionable. In order that such discreditable
I. to AMEC to verify his report from an alleged AMEC official imputation to a public official may be actionable, it
who refused to disclose any information. Alegre simply must either be a false allegation of fact or a
Whether the broadcasts are libelous relied on the words of the students "because they were comment based on a false supposition. If the
comment is an expression of opinion, based on The allegation that plaintiff was getting tremendous aids happens to be mistaken, as long as it might reasonably
established facts, then it is immaterial that the opinion from foreign foundations like Mcdonald Foundation prove be inferred from the facts.34 However, the comments of
happens to be mistaken, as long as it might reasonably not to be true also. The truth is there is no Mcdonald Rima and Alegre were not backed up by facts. Therefore,
be inferred from the facts.32 (Emphasis supplied) ςrαlαωlιbrαrÿ Foundation existing. Although a big building of plaintiff the broadcasts are not privileged and remain libelous per
school was given the name Mcdonald building, that was se.
True, AMEC is a private learning institution whose only in order to honor the first missionary in Bicol of
business of educating students is "genuinely imbued with plaintiffs' religion, as explained by Dr. Lita Ago. Contrary The broadcasts also violate the Radio Code35 of
public interest." The welfare of the youth in general and to the claim of defendants over the air, not a single the Kapisanan ng mga Brodkaster sa Pilipinas,
AMEC's students in particular is a matter which the public centavo appears to be received by plaintiff school from Ink. ("Radio Code"). Item I(B) of the Radio Code
has the right to know. Thus, similar to the newspaper the aforementioned McDonald Foundation which does not provides:
articles in Borjal, the subject broadcasts dealt with exist.
matters of public interest. However, unlike in Borjal, the B. PUBLIC AFFAIRS, PUBLIC ISSUES AND
questioned broadcasts are not based on established Defendants did not even also bother to prove their claim, COMMENTARIES
facts. The record supports the following findings of the though denied by Dra. Ago, that when medical students
trial court: fail in one subject, they are made to repeat all the other
1. x x x
subject[s], even those they have already passed, nor
xxx Although defendants claim that they were motivated their claim that the school charges laboratory fees even if
there are no laboratories in the school. No evidence was 4. Public affairs program shall present public issues
by consistent reports of students and parents against
presented to prove the bases for these claims, at least in free from personal bias, prejudice and inaccurate and
plaintiff, yet, defendants have not presented in court, nor
order to give semblance of good faith. misleading information. x x x Furthermore, the station
even gave name of a single student who made the
shall strive to present balanced discussion of issues. x x
complaint to them, much less present written complaint
x.
or petition to that effect. To accept this defense of As for the allegation that plaintiff is the dumping ground
defendants is too dangerous because it could easily give for misfits, and immoral teachers, defendant[s] singled
license to the media to malign people and establishments out Dean Justita Lola who is said to be so old, with zero xxx
based on flimsy excuses that there were reports to them visibility already. Dean Lola testified in court last Jan. 21,
although they could not satisfactorily establish it. Such 1991, and was found to be 75 years old. xxx Even older 7. The station shall be responsible at all times in the
laxity would encourage careless and irresponsible people prove to be effective teachers like Supreme Court supervision of public affairs, public issues and
broadcasting which is inimical to public interests. Justices who are still very much in demand as law commentary programs so that they conform to the
professors in their late years. Counsel for defendants is provisions and standards of this code.
Secondly, there is reason to believe that defendant radio past 75 but is found by this court to be still very sharp
broadcasters, contrary to the mandates of their duties, and effective. ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

8. It shall be the responsibility of the newscaster,

did not verify and analyze the truth of the reports before commentator, host and announcer to protect public
they aired it, in order to prove that they are in good faith. So is plaintiffs' counsel. interest, general welfare and good order in the
presentation of public affairs and public
Alegre contended that plaintiff school had no permit and Dr. Lola was observed by this court not to be physically issues.36 (Emphasis supplied) ςrαlαωlιbrαrÿ

is not accredited to offer Physical Therapy courses. Yet, decrepit yet, nor mentally infirmed, but is still alert and
plaintiff produced a certificate coming from DECS that as docile. The broadcasts fail to meet the standards prescribed in
of Sept. 22, 1987 or more than 2 years before the the Radio Code, which lays down the code of ethical
controversial broadcast, accreditation to offer Physical The contention that plaintiffs' graduates become liabilities conduct governing practitioners in the radio broadcast
Therapy course had already been given the plaintiff, rather than assets of our society is a mere conclusion. industry. The Radio Code is a voluntary code of conduct
which certificate is signed by no less than the Secretary Being from the place himself, this court is aware that imposed by the radio broadcast industry on its own
of Education and Culture herself, Lourdes R. Quisumbing majority of the medical graduates of plaintiffs pass the members. The Radio Code is a public warranty by the
(Exh. C-rebuttal). Defendants could have easily known board examination easily and become prosperous and radio broadcast industry that radio broadcast
this were they careful enough to verify. And yet, responsible professionals.33 practitioners are subject to a code by which their conduct
defendants were very categorical and sounded too are measured for lapses, liability and sanctions.
positive when they made the erroneous report that
Had the comments been an expression of opinion based
plaintiff had no permit to offer Physical Therapy courses
on established facts, it is immaterial that the opinion
which they were offering.
The public has a right to expect and demand that radio broadcasts are libelous per se. Thus, AMEC is entitled to IV.
broadcast practitioners live up to the code of conduct of moral damages.
their profession, just like other professionals. A Whether FBNI is solidarily liable with Rima and Alegre for
professional code of conduct provides the standards for However, we find the award of P300,000 moral damages moral damages, attorney's fees and costs of suit
determining whether a person has acted justly, honestly unreasonable. The record shows that even though the
and with good faith in the exercise of his rights and broadcasts were libelous per se, AMEC has not suffered FBNI contends that it is not solidarily liable with Rima and
performance of his duties as required by Article 1937 of any substantial or material damage to its reputation. Alegre for the payment of damages and attorney's fees
the Civil Code. A professional code of conduct also Therefore, we reduce the award of moral damages because it exercised due diligence in the selection and
provides the standards for determining whether a person from P300,000 to P150,000. supervision of its employees, particularly Rima and
who willfully causes loss or injury to another has acted in
Alegre. FBNI maintains that its broadcasters, including
a manner contrary to morals or good customs under
III. Rima and Alegre, undergo a "very regimented process"
Article 2138 of the Civil Code.
before they are allowed to go on air. "Those who apply
Whether the award of attorney's fees is proper for broadcaster are subjected to interviews, examinations
II. and an apprenticeship program."
FBNI contends that since AMEC is not entitled to moral
Whether AMEC is entitled to moral damages FBNI further argues that Alegre's age and lack of training
damages, there is no basis for the award of attorney's
fees. FBNI adds that the instant case does not fall under are irrelevant to his competence as a broadcaster. FBNI
FBNI contends that AMEC is not entitled to moral the enumeration in Article 220848 of the Civil Code. points out that the "minor deficiencies in the KBP
damages because it is a corporation.39 accreditation of Rima and Alegre do not in any way prove
that FBNI did not exercise the diligence of a good father
The award of attorney's fees is not proper because AMEC
A juridical person is generally not entitled to moral of a family in selecting and supervising them." Rima's
failed to justify satisfactorily its claim for attorney's fees.
damages because, unlike a natural person, it cannot accreditation lapsed due to his non-payment of the KBP
AMEC did not adduce evidence to warrant the award of
experience physical suffering or such sentiments as annual fees while Alegre's accreditation card was delayed
attorney's fees. Moreover, both the trial and appellate
wounded feelings, serious anxiety, mental anguish or allegedly for reasons attributable to the KBP Manila
courts failed to explicitly state in their respective
moral shock.40 The Court of Appeals cites Mambulao Office. FBNI claims that membership in the KBP is merely
decisions the rationale for the award of attorney's
Lumber Co. v. PNB, et al.41 to justify the award of voluntary and not required by any law or government
fees.49 In Inter-Asia Investment Industries, Inc. v.
moral damages. However, the Court's statement regulation.
Court of Appeals ,50 we held that:
in Mambulao that "a corporation may have a good
reputation which, if besmirched, may also be a ground for FBNI's arguments do not persuade us.
[I]t is an accepted doctrine that the award thereof as an
the award of moral damages" is an obiter dictum.42
item of damages is the exception rather than the rule,
and counsel's fees are not to be awarded every time a The basis of the present action is a tort. Joint tort feasors
Nevertheless, AMEC's claim for moral damages falls under party wins a suit. The power of the court to award are jointly and severally liable for the tort which they
item 7 of Article 221943 of the Civil Code. This provision attorney's fees under Article 2208 of the Civil Code commit.52 Joint tort feasors are all the persons who
expressly authorizes the recovery of moral damages in demands factual, legal and equitable justification, command, instigate, promote, encourage, advise,
cases of libel, slander or any other form of defamation. without which the award is a conclusion without a countenance, cooperate in, aid or abet the commission of
Article 2219(7) does not qualify whether the plaintiff is a premise, its basis being improperly left to a tort, or who approve of it after it is done, if done for
natural or juridical person. Therefore, a juridical person speculation and conjecture. In all events, the court their benefit.53 Thus, AMEC correctly anchored its cause of
such as a corporation can validly complain for libel or any must explicitly state in the text of the decision, and not action against FBNI on Articles 2176 and 2180 of the Civil
other form of defamation and claim for moral damages.44 only in the decretal portion thereof, the legal reason for Code. ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

the award of attorney's fees.51 (Emphasis supplied) ςrαlαωlιbrαrÿ

Moreover, where the broadcast is libelous per se, the law As operator of DZRC-AM and employer of Rima and
implies damages.45 In such a case, evidence of an honest While it mentioned about the award of attorney's fees by Alegre, FBNI is solidarily liable to pay for damages arising
mistake or the want of character or reputation of the stating that it "lies within the discretion of the court and from the libelous broadcasts. As stated by the Court of
party libeled goes only in mitigation of damages.46 Neither depends upon the circumstances of each case," the Court Appeals, "recovery for defamatory statements published
in such a case is the plaintiff required to introduce of Appeals failed to point out any circumstance to justify by radio or television may be had from the owner of the
evidence of actual damages as a condition precedent to the award. station, a licensee, the operator of the station, or a
the recovery of some damages.47 In this case, the person who procures, or participates in, the making of
the defamatory statements."54 An employer and WHEREFORE, we DENY the instant petition. We AFFIRM
employee are solidarily liable for a defamatory statement the Decision of 4 January 1999 and Resolution of 26
by the employee within the course and scope of his or her January 2000 of the Court of Appeals in CA-G.R. CV No.
employment, at least when the employer authorizes or 40151 with the MODIFICATION that the award of moral
ratifies the defamation.55 In this case, Rima and Alegre damages is reduced from P300,000 to P150,000 and the
were clearly performing their official duties as hosts of award of attorney's fees is deleted. Costs against
FBNI's radio program Exposé when they aired the petitioner.
broadcasts. FBNI neither alleged nor proved that Rima
and Alegre went beyond the scope of their work at that SO ORDERED.
time. There was likewise no showing that FBNI did not
authorize and ratify the defamatory broadcasts.

Moreover, there is insufficient evidence on record that

FBNI exercised due diligence in
the selection and supervision of its employees,
particularly Rima and Alegre. FBNI merely showed that it
exercised diligence in the selection of its broadcasters
without introducing any evidence to prove that it
observed the same diligence in the supervision of Rima
and Alegre. FBNI did not show how it exercised diligence
in supervising its broadcasters. FBNI's alleged constant
reminder to its broadcasters to "observe truth, fairness
and objectivity and to refrain from using libelous and
indecent language" is not enough to prove due diligence
in the supervision of its broadcasters. Adequate training
of the broadcasters on the industry's code of conduct,
sufficient information on libel laws, and continuous
evaluation of the broadcasters' performance are but a few
of the many ways of showing diligence in the supervision
of broadcasters.

FBNI claims that it "has taken all the precaution in

the selection of Rima and Alegre as broadcasters,
bearing in mind their qualifications." However, no clear
and convincing evidence shows that Rima and Alegre
underwent FBNI's "regimented process" of application.
Furthermore, FBNI admits that Rima and Alegre had
deficiencies in their KBP accreditation,56 which is one of
FBNI's requirements before it hires a broadcaster.
Significantly, membership in the KBP, while voluntary,
indicates the broadcaster's strong commitment to
observe the broadcast industry's rules and regulations.
Clearly, these circumstances show FBNI's lack of diligence
in selecting and supervising Rima and Alegre. Hence,
FBNI is solidarily liable to pay damages together with
Rima and Alegre.
CITIZENS UNITED V. FEDERAL ELECTION COMM'N disclaimer, disclosure, and reporting requirements, BCRA litigation, Citizens United has asserted a claim that the
§§201 and 311, were unconstitutional as applied FEC has violated its right to free speech; and (3) the
appeal from the united states district court for the district to Hillary  and the ads. The District Court denied Citizens parties cannot enter into a stipulation that prevents the
of columbia United a preliminary injunction and granted appellee Court from considering remedies necessary to resolve a
Federal Election Commission (FEC) summary judgment. claim that has been preserved. Because Citizen United’s
narrower arguments are not sustainable, this Court must,
No. 08–205. Argued March 24, 2009—Reargued
Held: in an exercise of its judicial responsibility, consider
September 9, 2009––Decided January 21, 2010
§441b’s facial validity. Any other course would prolong
the substantial, nationwide chilling effect caused by
As amended by §203 of the Bipartisan Campaign Reform      1. Because the question whether §441b applies to
§441b’s corporate expenditure ban. This conclusion is
Act of 2002 (BCRA), federal law prohibits corporations Hillary cannot be resolved on other, narrower grounds
further supported by the following: (1) the uncertainty
and unions from using their general treasury funds to without chilling political speech, this Court must consider
caused by the Government’s litigating position; (2)
make independent expenditures for speech that is an the continuing effect of the speech suppression upheld
substantial time would be required to clarify §441b’s
“electioneering communication” or for speech that in Austin. Pp. 5–20.
application on the points raised by the Government’s
expressly advocates the election or defeat of a candidate. position in order to avoid any chilling effect caused by an
2 U. S. C. §441b. An electioneering communication is       (a) Citizen United’s narrower arguments— improper interpretation; and (3) because speech itself is
“any broadcast, cable, or satellite communication” that that Hillary is not an “electioneering of primary importance to the integrity of the election
“refers to a clearly identified candidate for Federal office” communication”  covered by §441b because it is not process, any speech arguably within the reach of rules
and is made within 30 days of a primary election, §434(f) “publicly distributed” under 11 CFR §100.29(a)(2); that created for regulating political speech is chilled. The
(3)(A), and that is “publicly distributed,” 11 CFR §441b may not be applied to Hillary under Federal regulatory scheme at issue may not be a prior restraint in
§100.29(a)(2), which in “the case of a candidate for Election Comm’n v. Wisconsin Right to Life, Inc., 551 U. the strict sense. However, given its complexity and the
nomination for President … means” that the S. 449 (WRTL), which found §441b unconstitutional as deference courts show to administrative determinations,
communication “[c]an be received by 50,000 or more applied to speech that was not “express advocacy or its a speaker wishing to avoid criminal liability threats and
persons in a State where a primary election … is being functional equivalent,” id., at 481 (opinion of Roberts, the heavy costs of defending against FEC enforcement
held within 30 days,” §100.29(b)(3)(ii). Corporations and C. J.), determining that a communication “is the must ask a governmental agency for prior permission to
unions may establish a political action committee (PAC) functional equivalent of express advocacy only if [it] is speak. The restrictions thus function as the equivalent of
for express advocacy or electioneering communications susceptible of no reasonable interpretation other than as a prior restraint, giving the FEC power analogous to the
purposes. 2 U. S. C. §441b(b)(2). an appeal to vote for or against a specific candidate,” id., type of government practices that the First Amendment
In McConnell v. Federal Election Comm’n, 540 U. S. 93, at 469–470; that §441b should be invalidated as applied was drawn to prohibit. The ongoing chill on speech makes
203–209, this Court upheld limits on electioneering to movies shown through video-on-demand because this it necessary to invoke the earlier precedents that a
communications in a facial challenge, relying on the delivery system has a lower risk of distorting the political statute that chills speech can and must be invalidated
holding in Austin v. Michigan Chamber of Commerce, 494 process than do television ads; and that there should be where its facial invalidity has been demonstrated. Pp. 12–
U. S. 652, that political speech may be banned based on an exception to §441b’s ban for nonprofit corporate 20.
the speaker’s corporate identity. political speech funded overwhelming by individuals—are
not sustainable under a fair reading of the statute. Pp. 5–
   2. Austin is overruled, and thus provides no basis for
      In January 2008, appellant Citizens United, a 12.
allowing the Government to limit corporate independent
nonprofit corporation, released a documentary expenditures. Hence, §441b’s restrictions on such
(hereinafter Hillary) critical of then-Senator Hillary       (b) Thus, this case cannot be resolved on a narrower expenditures are invalid and cannot be applied
Clinton, a candidate for her party’s Presidential ground without chilling political speech, speech that is to Hillary. Given this conclusion, the part
nomination. Anticipating that it would central to the First Amendment’s meaning and purpose. of McConnell that upheld BCRA §203’s extension of
make Hillary available on cable television through video- Citizens United did not waive this challenge §441b’s restrictions on independent corporate
on-demand within 30 days of primary elections, Citizens to Austin  when it stipulated to dismissing the facial expenditures is also overruled. Pp. 20–51.
United produced television ads to run on broadcast and challenge below, since (1) even if such a challenge could
cable television. Concerned about possible civil and be waived, this Court may reconsider Austin and §441b’s
      (a) Although the First Amendment provides that
criminal penalties for violating §441b, it sought facial validity here because the District Court “passed
“Congress shall make no law … abridging the freedom of
declaratory and injunctive relief, arguing that (1) §441b upon” the issue, Lebron v. National Railroad Passenger
speech,” §441b’s prohibition on corporate independent
is unconstitutional as applied to Hillary; and (2) BCRA’s Corporation, 513 U. S. 374, 379; (2) throughout the
expenditures is an outright ban on speech, backed by
criminal sanctions. It is a ban notwithstanding the fact §441b, the provision at issue. Less than two years amassed from the economic marketplace to fund their
that a PAC created by a corporation can still speak, for a after Buckley, Bellotti  reaffirmed the First Amendment speech, and the First Amendment protects the resulting
PAC is a separate association from the corporation. principle that the Government lacks the power to restrict speech. Under the antidistortion rationale, Congress could
Because speech is an essential mechanism of democracy political speech based on the speaker’s corporate identity. also ban political speech of media corporations. Although
—it is the means to hold officials accountable to the 435 U.S., at 784–785. Thus the law stood currently exempt from §441b, they accumulate wealth
people—political speech must prevail against laws that until Austin upheld a corporate independent expenditure with the help of their corporate form, may have
would suppress it by design or inadvertence. Laws restriction, bypassing Buckley and Bellotti  by recognizing aggregations of wealth, and may express views “hav[ing]
burdening such speech are subject to strict scrutiny, a new governmental interest in preventing “the corrosive little or no correlation to the public’s support” for those
which requires the Government to prove that the and distorting effects of immense aggregations of views. Differential treatment of media corporations and
restriction “furthers a compelling interest and is narrowly [corporate] wealth … that have little or no correlation to other corporations cannot be squared with the First
tailored to achieve that interest.” WRTL,  551 U. S.,  at the public’s support for the corporation’s political ideas.” Amendment, and there is no support for the view that the
464. This language provides a sufficient framework for 494 U. S., at 660. Pp. 25–32. Amendment’s original meaning would permit suppressing
protecting the interests in this case. Premised on mistrust media corporations’ political speech. Austin interferes
of governmental power, the First Amendment stands       (c) This Court is confronted with conflicting lines of with the “open marketplace” of ideas protected by the
against attempts to disfavor certain subjects or precedent: a pre-Austin line forbidding speech First Amendment. New York State Bd. of
viewpoints or to distinguish among different speakers, restrictions based on the speaker’s corporate identity and Elections v. Lopez Torres, 552 U. S. 196, 208. Its
which may be a means to control content. The a post-Austin  line permitting them. Neither Austin’s censorship is vast in its reach, suppressing the speech of
Government may also commit a constitutional wrong antidistortion rationale nor the Government’s other both for-profit and nonprofit, both small and large,
when by law it identifies certain preferred speakers. justifications support §441b’s restrictions. Pp. 32–47. corporations. Pp. 32–40.
There is no basis for the proposition that, in the political
speech context, the Government may impose restrictions          (2) This reasoning also shows the invalidity of the
         (1) The First Amendment prohibits Congress from
on certain disfavored speakers. Both history and logic Government’s other arguments. It reasons that corporate
fining or jailing citizens, or associations of citizens, for
lead to this conclusion. Pp. 20–25. political speech can be banned to prevent corruption or
engaging in political speech, but Austin’s antidistortion
rationale would permit the Government to ban political its appearance. The Buckley Court found this rationale
      (b) The Court has recognized that the First speech because the speaker is an association with a “sufficiently important” to allow contribution limits but
Amendment applies to corporations, e.g., First Nat. Bank corporate form. Political speech is “indispensable to refused to extend that reasoning to expenditure limits,
of Boston v. Bellotti, 435 U. S. 765, 778, n. 14, and decisionmaking in a democracy, and this is no less true 424 U.S., at 25, and the Court does not do so here. While
extended this protection to the context of political speech, because the speech comes from a corporation.” Bellotti, a single Bellotti  footnote purported to leave the question
see, e.g., NAACP v. Button, 371 U. S. 415, 428–429. supra, at 777 (footnote omitted). This protection is open, 435 U. S., at 788, n. 26, this Court now concludes
Addressing challenges to the Federal Election Campaign inconsistent with Austin’s rationale, which is meant to that independent expenditures, including those made by
Act of 1971, the Buckley Court upheld limits on direct prevent corporations from obtaining “ ‘an unfair corporations, do not give rise to corruption or the
contributions to candidates, 18 U. S. C. §608(b), advantage in the political marketplace’ ” by using appearance of corruption. That speakers may have
recognizing a governmental interest in preventing quid “ ‘resources amassed in the economic marketplace.’ ” 494 influence over or access to elected officials does not mean
pro quo corruption. 424 U. S., at 25–26. However, the U. S., at 659. First Amendment protections do not that those officials are corrupt. And the appearance of
Court invalidated §608(e)’s expenditure ban, which depend on the speaker’s “financial ability to engage in influence or access will not cause the electorate to lose
applied to individuals, corporations, and unions, because public discussion.” Buckley, supra, at 49. These faith in this democracy. Caperton v. A. T. Massey Coal
it “fail[ed] to serve any substantial governmental interest conclusions were reaffirmed when the Court invalidated a Co., 556 U. S. ___, distinguished. Pp. 40–45.
in stemming the reality or appearance of corruption in the BCRA provision that increased the cap on contributions to
electoral process,” id., at 47–48. While Buckley did not one candidate if the opponent made certain expenditures          (3) The Government’s asserted interest in
consider a separate ban on corporate and union from personal funds. Davis v. Federal Election Comm’n, protecting shareholders from being compelled to fund
independent expenditures found in §610, had that 554 U. S. ___, ___. Distinguishing wealthy individuals corporate speech, like the antidistortion rationale, would
provision been challenged in Buckley’s  wake, it could not from corporations based on the latter’s special allow the Government to ban political speech even of
have been squared with the precedent’s reasoning and advantages of, e.g.,  limited liability, does not suffice to media corporations. The statute is underinclusive; it only
analysis. The Buckley Court did not invoke the allow laws prohibiting speech. It is irrelevant for First protects a dissenting shareholder’s interests in certain
overbreadth doctrine to suggest that §608(e)’s Amendment purposes that corporate funds may “have media for 30 or 60 days before an election when such
expenditure ban would have been constitutional had it little or no correlation to the public’s support for the interests would be implicated in any media at any time. It
applied to corporations and unions but not individuals. corporation’s political ideas.” Austin, supra, at 660. All is also overinclusive because it covers all corporations,
Notwithstanding this precedent, Congress soon recodified speakers, including individuals and the media, use money including those with one shareholder. P. 46.
§610’s corporate and union expenditure ban at 2 U. S. C.
            (4) Because §441b is not limited to corporations harassment, or reprisals from either Government officials
or associations created in foreign countries or funded or private parties.’ ” Id., at 198. Pp. 50–52.
predominately by foreign shareholders, it would be
overbroad even if the Court were to recognize a       (b) The disclaimer and disclosure requirements are
compelling governmental interest in limiting foreign valid as applied to Citizens United’s ads. They fall within
influence over the Nation’s political process. Pp. 46–47. BCRA’s “electioneering communication” definition: They
referred to then-Senator Clinton by name shortly before a
      (d) The relevant factors in deciding whether to primary and contained pejorative references to her
adhere to stare decisis, beyond workability—the candidacy. Section 311 disclaimers provide information to
precedent’s antiquity, the reliance interests at stake, and the electorate, McConnell, supra,  at 196, and “insure that
whether the decision was well reasoned—counsel in favor the voters are fully informed” about who is
of abandoning Austin,  which itself contravened the speaking, Buckley, supra, at 76. At the very least, they
precedents of Buckley  and Bellotti. As already avoid confusion by making clear that the ads are not
explained, Austin was not well reasoned. It is also funded by a candidate or political party. Citizens United’s
undermined by experience since its announcement. arguments that §311 is underinclusive because it requires
Political speech is so ingrained in this country’s culture disclaimers for broadcast advertisements but not for print
that speakers find ways around campaign finance laws. or Internet advertising and that §311 decreases the
Rapid changes in technology—and the creative dynamic quantity and effectiveness of the group’s speech were
inherent in the concept of free expression—counsel rejected in McConnell. This Court also rejects their
against upholding a law that restricts political speech in contention that §201’s disclosure requirements must be
certain media or by certain speakers. In addition, no confined to speech that is the functional equivalent of
serious reliance issues are at stake. Thus, due express advocacy under WRTL’s test for restrictions on
consideration leads to the conclusion that Austin should independent expenditures, 551 U. S., at 469–476
be overruled. The Court returns to the principle (opinion of Roberts, C.J.). Disclosure is the less-
established in Buckley and Bellotti that the Government restrictive alternative to more comprehensive speech
may not suppress political speech based on the speaker’s regulations. Such requirements have been upheld
corporate identity. No sufficient governmental interest in Buckley  and McConnell. Citizens United’s argument
justifies limits on the political speech of nonprofit or for- that no informational interest justifies applying §201 to
profit corporations. Pp. 47–50. its ads is similar to the argument this Court rejected with
regard to disclaimers. Citizens United finally claims that
   3. BCRA §§201 and 311 are valid as applied to the ads disclosure requirements can chill donations by exposing
for Hillary and to the movie itself. Pp. 50–57. donors to retaliation, but offers no evidence that
its  members face the type of threats, harassment, or
reprisals that might make §201 unconstitutional as
      (a) Disclaimer and disclosure requirements may
applied. Pp. 52–55.
burden the ability to speak, but they “impose no ceiling
on campaign-related activities,” Buckley, 424 U. S., at
64, or “ ‘ “prevent anyone from       (c) For these same reasons, this Court affirms the
speaking,” ’ ” McConnell, supra, at 201. application of the §§201 and 311 disclaimer and
The Buckley Court explained that disclosure can be disclosure requirements to Hillary. Pp. 55–56.
justified by a governmental interest in providing “the
electorate with information” about election-related Reversed in part, affirmed in part, and remanded.
spending sources. The McConnell  Court applied this
interest in rejecting facial challenges to §§201 and 311.
540 U. S., at 196. However, the Court acknowledged that
as-applied challenges would be available if a group could
show a “ ‘reasonable probability’ ” that disclosing its
contributors’ names would “ ‘subject them to threats,