G.R. No. 128066.

June 19, 2000

JARDINE DAVIES INC., Petitioner, vs. COURT OF APPEALS and FAR EAST MILLS SUPPLY CORPORATION, Respondents.

[G.R. No. 128069 June 19, 2000

PURE FOODS CORPORATION, Petitioner, vs. COURT OF APPEALS and FAR EAST MILLS SUPPLY CORPORATION, Respondents.

DECISION

BELLOSILLO, J.:

This is rather a simple case for specific performance with damages which could have been resolved through mediation and conciliation during
its infancy stage had the parties been earnest in expediting the disposal of this case. They opted however to resort to full court proceedings and
denied themselves the benefits of alternative dispute resolution, thus making the process more arduous and long-drawn.

The controversy started in 1992 at the height of the power crisis which the country was then experiencing. To remedy and curtail further losses
due to the series of power failures, petitioner PURE FOODS CORPORATION (hereafter PUREFOODS) decided to install two (2) 1500 KW
generators in its food processing plant in San Roque, Marikina City.

Sometime in November 1992 a bidding for the supply and installation of the generators was held. Several suppliers and dealers were invited to
attend a pre-bidding conference to discuss the conditions, propose scheme and specifications that would best suit the needs of PUREFOODS. Out
of the eight (8) prospective bidders who attended the pre-bidding conference, only three (3) bidders, namely, respondent FAR EAST MILLS
SUPPLY CORPORATION (hereafter FEMSCO), MONARK and ADVANCE POWER submitted bid proposals and gave bid bonds equivalent to 5% of
their respective bids, as required.

Thereafter, in a letter dated 12 December 1992 addressed to FEMSCO President Alfonso Po, PUREFOODS confirmed the award of the contract to
FEMSCO -

Gentlemen:

This will confirm that Pure Foods Corporation has awarded to your firm the project: Supply and Installation of two (2) units of 1500 KW/unit
Generator Sets at the Processed Meats Plant, Bo. San Roque, Marikina, based on your proposal number PC 28-92 dated November 20, 1992,
subject to the following basic terms and conditions:

1. Lump sum contract of P6,137,293.00 (VAT included), for the supply of materials and labor for the local portion and the labor for the imported
materials, payable by progress billing twice a month, with ten percent (10%) retention. The retained amount shall be released thirty (30) days
after acceptance of the completed project and upon posting of Guarantee Bond in an amount equivalent to twenty percent (20%) of the contract
price. The Guarantee Bond shall be valid for one (1) year from completion and acceptance of project. The contract price includes future
increase/s in costs of materials and labor;

2. The project shall be undertaken pursuant to the attached specifications. It is understood that any item required to complete the project, and
those not included in the list of items shall be deemed included and covered and shall be performed;

3. All materials shall be brand new;

4. The project shall commence immediately and must be completed within twenty (20) working days after the delivery of Generator Set to
Marikina Plant, penalty equivalent to 1/10 of 1% of the purchase price for every day of delay;

5. The Contractor shall put up Performance Bond equivalent to thirty (30%) of the contract price, and shall procure All Risk Insurance
equivalent to the contract price upon commencement of the project. The All Risk Insurance Policy shall be endorsed in favor of and shall be
delivered to Pure Foods Corporation;

6. Warranty of one (1) year against defective material and/or workmanship.

Once finalized, we shall ask you to sign the formal contract embodying the foregoing terms and conditions.

Immediately, FEMSCO submitted the required performance bond in the amount of P1,841,187.90 and contractors all-risk insurance policy in the
amount of P6,137,293.00 which PUREFOODS through its Vice President Benedicto G. Tope acknowledged in a letter dated 18 December 1992.
FEMSCO also made arrangements with its principal and started the PUREFOODS project by purchasing the necessary materials. PUREFOODS on
the other hand returned FEMSCOs Bidders Bond in the amount of P1,000,000.00, as requested.
Later, however, in a letter dated 22 December 1992, PUREFOODS through its Senior Vice President Teodoro L. Dimayuga unilaterally canceled
the award as "significant factors were uncovered and brought to (their) attention which dictate (the) cancellation and warrant a total review
and re-bid of (the) project." Consequently, FEMSCO protested the cancellation of the award and sought a meeting with PUREFOODS. However,
on 26 March 1993, before the matter could be resolved, PUREFOODS already awarded the project and entered into a contract with JARDINE
NELL, a division of Jardine Davies, Inc. (hereafter JARDINE), which incidentally was not one of the bidders.

FEMSCO thus wrote PUREFOODS to honor its contract with the former, and to JARDINE to cease and desist from delivering and installing the
two (2) generators at PUREFOODS. Its demand letters unheeded, FEMSCO sued both PUREFOODS and JARDINE: PUREFOODS for reneging on its
contract, and JARDINE for its unwarranted interference and inducement. Trial ensued. After FEMSCO presented its evidence, JARDINE filed
a Demurrer to Evidence.

On 27 June 1994 the Regional Trial Court of Pasig, Br. 68,1 granted JARDINEs Demurrer to Evidence. The trial court concluded that "[w]hile it
may seem to the plaintiff that by the actions of the two defendants there is something underhanded going on, this is all a matter of perception,
and unsupported by hard evidence, mere suspicions and suppositions would not stand up very well in a court of law." 2 Meanwhile trial
proceeded as regards the case against PUREFOODS.

On 28 July 1994 the trial court rendered a decision ordering PUREFOODS: (a) to indemnify FEMSCO the sum of P2,300,000.00 representing the
value of engineering services it rendered; (b) to pay FEMSCO the sum of US$14,000.00 or its peso equivalent, and P900,000.00 representing
contractor's mark-up on installation work, considering that it would be impossible to compel PUREFOODS to honor, perform and fulfill its
contractual obligations in view of PUREFOOD's contract with JARDINE and noting that construction had already started thereon; (c) to pay
attorneys fees in an amount equivalent to 20% of the total amount due; and, (d) to pay the costs. The trial court dismissed the counterclaim filed
by PUREFOODS for lack of factual and legal basis.

Both FEMSCO and PUREFOODS appealed to the Court of Appeals. FEMSCO appealed the 27 June 1994 Resolution of the trial court which granted
the Demurrer to Evidence filed by JARDINE resulting in the dismissal of the complaint against it, while PUREFOODS appealed the 28 July 1994
Decision of the same court which ordered it to pay FEMSCO.

On 14 August 1996 the Court of Appeals affirmed in toto the 28 July 1994 Decision of the trial court.3 It also reversed the 27 June 1994
Resolution of the lower court and ordered JARDINE to pay FEMSCO damages for inducing PUREFOODS to violate the latters contract with
FEMSCO. As such, JARDINE was ordered to pay FEMSCO P2,000,000.00 for moral damages. In addition, PUREFOODS was also directed to pay
FEMSCO P2,000,000.00 as moral damages and P1,000,000.00 as exemplary damages as well as 20% of the total amount due as attorney's fees.

On 31 January 1997 the Court of Appeals denied for lack of merit the separate motions for reconsideration filed by PUREFOODS and JARDINE.
Hence, these two (2) petitions for review filed by PUREFOODS and JARDINE which were subsequently consolidated.

PUREFOODS maintains that the conclusions of both the trial court and the appellate court are premised on a misapprehension of facts. It argues
that its 12 December 1992 letter to FEMSCO was not an acceptance of the latter's bid proposal and award of the project but more of a qualified
acceptance constituting a counter-offer which required FEMSCO's express conforme. Since PUREFOODS never received
FEMSCOs conforme, PUREFOODS was very well within reason to revoke its qualified acceptance or counter-offer. Hence, no contract was
perfected between PUREFOODS and FEMSCO. PUREFOODS also contends that it was never in bad faith when it dealt with FEMSCO. Hence moral
and exemplary damages should not have been awarded.

Corollarily, JARDINE asserts that the records are bereft of any showing that it had prior knowledge of the supposed contract between
PUREFOODS and FEMSCO, and that it induced PUREFOODS to violate the latters alleged contract with FEMSCO. Moreover, JARDINE reasons that
FEMSCO, an artificial person, is not entitled to moral damages. But granting arguendo that the award of moral damages is proper, P2,000,000.00
is extremely excessive.

In the main, these consolidated cases present two (2) issues: first, whether there existed a perfected contract between PUREFOODS and
FEMSCO; and second, granting there existed a perfected contract, whether there is any showing that JARDINE induced or connived with
PUREFOODS to violate the latter's contract with FEMSCO.

A contract is defined as "a juridical convention manifested in legal form, by virtue of which one or more persons bind themselves in favor of
another or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do." 4 There can be no contract unless the following
requisites concur: (a) consent of the contracting parties; (b) object certain which is the subject matter of the contract; and, (c) cause of the
obligation which is established.5 A contract binds both contracting parties and has the force of law between them.

Contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror. From that moment, the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be
in keeping with good faith, usage and law.6 To produce a contract, the acceptance must not qualify the terms of the offer. However, the
acceptance may be express or implied.7 For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance
can be withdrawn or revoked before it is made known to the offeror.

In the instant case, there is no issue as regards the subject matter of the contract and the cause of the obligation. The controversy lies in the
consent - whether there was an acceptance of the offer, and if so, if it was communicated, thereby perfecting the contract.
To resolve the dispute, there is a need to determine what constituted the offer and the acceptance. Since petitioner PUREFOODS started the
process of entering into the contract by conducting a bidding, Art. 1326 of the Civil Code, which provides that "[a]dvertisements for bidders are
simply invitations to make proposals," applies. Accordingly, the Terms and Conditions of the Bidding disseminated by petitioner PUREFOODS
constitutes the "advertisement" to bid on the project. The bid proposals or quotations submitted by the prospective suppliers including
respondent FEMSCO, are the offers. And, the reply of petitioner PUREFOODS, the acceptance or rejection of the respective offers.

Quite obviously, the 12 December 1992 letter of petitioner PUREFOODS to FEMSCO constituted acceptance of respondent FEMSCOs offer as
contemplated by law. The tenor of the letter, i.e., "This will confirm that Pure Foods has awarded to your firm (FEMSCO) the project," could not
be more categorical. While the same letter enumerated certain "basic terms and conditions," these conditions were imposed on the performance
of the obligation rather than on the perfection of the contract. Thus, the first "condition" was merely a reiteration of the contract price and
billing scheme based on the Terms and Conditions of Bidding and the bid or previous offer of respondent FEMSCO. The second and third
"conditions" were nothing more than general statements that all items and materials including those excluded in the list but necessary to
complete the project shall be deemed included and should be brand new. The fourth "condition" concerned the completion of the work to be
done, i.e., within twenty (20) days from the delivery of the generator set, the purchase of which was part of the contract. The fifth "condition"
had to do with the putting up of a performance bond and an all-risk insurance, both of which should be given upon commencement of the
project. The sixth "condition" related to the standard warranty of one (1) year. In fine, the enumerated "basic terms and conditions" were
prescriptions on how the obligation was to be performed and implemented. They were far from being conditions imposed on the perfection of
the contract.

In Babasa v. Court of Appeals8 we distinguished between a condition imposed on the perfection of a contract and a condition imposed merely on
the performance of an obligation. While failure to comply with the first condition results in the failure of a contract, failure to comply with the
second merely gives the other party options and/or remedies to protect his interests.

We thus agree with the conclusion of respondent appellate court which affirmed the trial court -

As can be inferred from the actual phrase used in the first portion of the letter, the decision to award the contract has already been made. The
letter only serves as a confirmation of such decision. Hence, to the Courts mind, there is already an acceptance made of the offer received by
Purefoods. Notwithstanding the terms and conditions enumerated therein, the offer has been accepted and/or amplified the details of the terms
and conditions contained in the Terms and Conditions of Bidding given out by Purefoods to prospective bidders. 9crlwvirtualibrry

But even granting arguendo that the 12 December 1992 letter of petitioner PUREFOODS constituted a "conditional counter-offer," respondent
FEMCO's submission of the performance bond and contractor's all-risk insurance was an implied acceptance, if not a clear indication of its
acquiescence to, the "conditional counter-offer," which expressly stated that the performance bond and the contractor's all-risk insurance
should be given upon the commencement of the contract. Corollarily, the acknowledgment thereof by petitioner PUREFOODS, not to mention its
return of FEMSCO's bidder's bond, was a concrete manifestation of its knowledge that respondent FEMSCO indeed consented to the "conditional
counter-offer." After all, as earlier adverted to, an acceptance may either be express or implied, 10 and this can be inferred from the
contemporaneous and subsequent acts of the contracting parties.

Accordingly, for all intents and purposes, the contract at that point has been perfected, and respondent FEMSCO's conforme would only be a
mere surplusage. The discussion of the price of the project two (2) months after the 12 December 1992 letter can be deemed as nothing more
than a pressure being exerted by petitioner PUREFOODS on respondent FEMSCO to lower the price even after the contract had been perfected.
Indeed from the facts, it can easily be surmised that petitioner PUREFOODS was haggling for a lower price even after agreeing to the earlier
quotation, and was threatening to unilaterally cancel the contract, which it eventually did. Petitioner PUREFOODS also makes an issue out of the
absence of a purchase order (PO). Suffice it to say that purchase orders or POs do not make or break a contract. Thus, even the tenor of the
subsequent letter of petitioner PUREFOODS, i.e., "Pure Foods Corporation is hereby canceling the award to your company of the project,"
presupposes that the contract has been perfected. For, there can be no cancellation if the contract was not perfected in the first place.

Petitioner PUREFOODS also argues that it was never in bad faith. On the contrary, it believed in good faith that no such contract was perfected.
We are not convinced. We subscribe to the factual findings and conclusions of the trial court which were affirmed by the appellate court -

Hence, by the unilateral cancellation of the contract, the defendant (petitioner PURE FOODS) has acted with bad faith and this was further
aggravated by the subsequent inking of a contract between defendant Purefoods and erstwhile co-defendant Jardine. It is very evident that
Purefoods thought that by the expedient means of merely writing a letter would automatically cancel or nullify the existing contract entered into
by both parties after a process of bidding. This, to the Courts mind, is a flagrant violation of the express provisions of the law and is contrary to
fair and just dealings to which every man is due.11crlwvirtualibrry

This Court has awarded in the past moral damages to a corporation whose reputation has been besmirched. 12 In the instant case, respondent
FEMSCO has sufficiently shown that its reputation was tarnished after it immediately ordered equipment from its suppliers on account of the
urgency of the project, only to be canceled later. We thus sustain respondent appellate court's award of moral damages. We however reduce the
award from P2,000,000.00 to P1,000,000.00, as moral damages are never intended to enrich the recipient. Likewise, the award of exemplary
damages by way of example for the public good is excessive and should be reduced to P100,000.00.

Petitioner JARDINE maintains on the other hand that respondent appellate court erred in ordering it to pay moral damages to respondent
FEMSCO as it supposedly induced PUREFOODS to violate the contract with FEMSCO. We agree. While it may seem that petitioners PUREFOODS
and JARDINE connived to deceive respondent FEMSCO, we find no specific evidence on record to support such perception. Likewise, there is no
showing whatsoever that petitioner JARDINE induced petitioner PUREFOODS. The similarity in the design submitted to petitioner PUREFOODS
by both petitioner JARDINE and respondent FEMSCO, and the tender of a lower quotation by petitioner JARDINE are insufficient to show that
petitioner JARDINE indeed induced petitioner PUREFOODS to violate its contract with respondent FEMSCO.

WHEREFORE , judgment is hereby rendered as follows:

(a) The petition in G.R. No. 128066 is GRANTED. The assailed Decision of the Court of Appeals reversing the 27 June 1994 resolution of the trial
court and ordering petitioner JARDINE DAVIES, INC., to pay private respondent FAR EAST MILLS SUPPLY CORPORATION P2,000,000.00 as
moral damages is REVERSED and SET ASIDE for insufficiency of evidence; and

(b) The petition in G.R. No. 128069 is DENIED. The assailed Decision of the Court of Appeals ordering petitioner PURE FOODS CORPORATION to
pay private respondent FAR EAST MILLS SUPPLY CORPORATION the sum of P2,300,000.00 representing the value of engineering services it
rendered, US$14,000.00 or its peso equivalent, and P900,000.00 representing the contractor's mark-up on installation work, as well as
attorney's fees equivalent to twenty percent (20%) of the total amount due, is AFFIRMED. In addtion, petitioner PURE FOODS CORPORATION is
ordered to pay private respondent FAR EAST MILLS SUPPLY CORPORATION moral damages in the amount of P1,000,000.00 and exemplary
damages in the amount of P1,000,000.00. Costs against petitioner.

SO ORDERED.
 FIRST DIVISION

[G.R. NO. 141994 - January 17, 2005]

FILIPINAS BROADCASTING NETWORK, INC., Petitioner, v. AGO MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF
MEDICINE, (AMEC-BCCM) and ANGELITA F. AGO, Respondents.

DECISION

CARPIO, J.:

The Case

This Petition for Review 1 assails the 4 January 1999 Decision2 and 26 January 2000 Resolution of the Court of Appeals in CA-G.R. CV No. 40151.
The Court of Appeals affirmed with modification the 14 December 1992 Decision3 of the Regional Trial Court of Legazpi City, Branch 10, in Civil
Case No. 8236. The Court of Appeals held Filipinas Broadcasting Network, Inc. and its broadcasters Hermogenes Alegre and Carmelo Rima liable
for libel and ordered them to solidarily pay Ago Medical and Educational Center-Bicol Christian College of Medicine moral damages, attorney's
fees and costs of suit.

The Antecedents

"Expos" is a radio documentary4 program hosted by Carmelo 'Mel' Rima ("Rima") and Hermogenes 'Jun' Alegre ("Alegre").5 Expos is aired
every morning over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc. ("FBNI"). "Expos" is heard over Legazpi City, the Albay
municipalities and other Bicol areas.6

In the morning of 14 and 15 December 1989, Rima and Alegre exposed various alleged complaints from students, teachers and parents against
Ago Medical and Educational Center-Bicol Christian College of Medicine ("AMEC") and its administrators. Claiming that the broadcasts were
defamatory, AMEC and Angelita Ago ("Ago"), as Dean of AMEC's College of Medicine, filed a complaint for damages 7 against FBNI, Rima and
Alegre on 27 February 1990. Quoted are portions of the allegedly libelous broadcasts:

JUN ALEGRE:

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

xxx

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

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

xxx

It is a public knowledge that the Ago Medical and Educational Center has survived and has been surviving for the past few years since its
inception because of funds support from foreign foundations. If you will take a look at the AMEC premises you ll find out that the names of the
buildings there are foreign soundings. There is a McDonald Hall. Why not Jose Rizal or Bonifacio Hall? That is a very concrete and undeniable
evidence that the support of foreign foundations for AMEC is substantial, isn't it? With the report which is the basis of the expose in DZRC today,
it would be very easy for detractors and enemies of the Ago family to stop the flow of support of foreign foundations who assist the medical
school on the basis of the latter's purpose. But if the purpose of the institution (AMEC) is to deceive students at cross purpose with its reason for
being it is possible for these foreign foundations to lift or suspend their donations temporarily.8

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

xxx

MEL RIMA:

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

May I say I m sorry to Dean Justita Lola. But this is the truth. The truth is this, that your are no longer fit to teach. You are too old. As an aviation,
your case is zero visibility. Don't insist.

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

xxx

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

The complaint further alleged that AMEC is a reputable learning institution. With the supposed exposs, FBNI, Rima and Alegre "transmitted
malicious imputations, and as such, destroyed plaintiffs' (AMEC and Ago) reputation." AMEC and Ago included FBNI as defendant for allegedly
failing to exercise due diligence in the selection and supervision of its employees, particularly Rima and Alegre.

On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an Answer10alleging that the broadcasts against AMEC were fair and
true. FBNI, Rima and Alegre claimed that they were plainly impelled by a sense of public duty to report the "goings-on in AMEC, [which is] an
institution imbued with public interest."

Thereafter, trial ensued. During the presentation of the evidence for the defense, Atty. Edmundo Cea, collaborating counsel of Atty. Lozares, filed
a Motion to Dismiss11 on FBNI's behalf. The trial court denied the motion to dismiss. Consequently, FBNI filed a separate Answer claiming that it
exercised due diligence in the selection and supervision of Rima and Alegre. FBNI claimed that before hiring a broadcaster, the broadcaster
should (1) file an application; (2) be interviewed; and (3) undergo an apprenticeship and training program after passing the interview. FBNI
likewise claimed that it always reminds its broadcasters to "observe truth, fairness and objectivity in their broadcasts and to refrain from using
libelous and indecent language." Moreover, FBNI requires all broadcasters to pass the Kapisanan ng mga Brodkaster sa Pilipinas ("KBP")
accreditation test and to secure a KBP permit.

On 14 December 1992, the trial court rendered a Decision12 finding FBNI and Alegre liable for libel except Rima. The trial court held that the
broadcasts are libelous per se. The trial court rejected the broadcasters' claim that their utterances were the result of straight reporting because
it had no factual basis. The broadcasters did not even verify their reports before airing them to show good faith. In holding FBNI liable for libel,
the trial court found that FBNI failed to exercise diligence in the selection and supervision of its employees.

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

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

SO ORDERED.13 (Emphasis supplied)rllbrr

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

WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the modification that broadcaster Mel Rima is SOLIDARILY
ADJUDGED liable with FBN[I] and Hermo[g]enes Alegre.

SO ORDERED.14

FBNI, Rima and Alegre filed a motion for reconsideration which the Court of Appeals denied in its 26 January 2000 Resolution.

Hence, FBNI filed this petition.15

The Ruling of the Court of Appeals

The Court of Appeals upheld the trial court's ruling that the questioned broadcasts are libelous per se and that FBNI, Rima and Alegre failed to
overcome the legal presumption of malice. The Court of Appeals found Rima and Alegre's claim that they were actuated by their moral and social
duty to inform the public of the students' gripes as insufficient to justify the utterance of the defamatory remarks.

Finding no factual basis for the imputations against AMEC's administrators, the Court of Appeals ruled that the broadcasts were made "with
reckless disregard as to whether they were true or false." The appellate court pointed out that FBNI, Rima and Alegre failed to present in court
any of the students who allegedly complained against AMEC. Rima and Alegre merely gave a single name when asked to identify the students.
According to the Court of Appeals, these circumstances cast doubt on the veracity of the broadcasters' claim that they were "impelled by their
moral and social duty to inform the public about the students' gripes."

The Court of Appeals found Rima also liable for libel since he remarked that "(1) AMEC-BCCM is a dumping ground for morally and physically
misfit teachers; (2) AMEC obtained the services of Dean Justita Lola to minimize expenses on its employees' salaries; and (3) AMEC burdened
the students with unreasonable imposition and false regulations."16

The Court of Appeals held that FBNI failed to exercise due diligence in the selection and supervision of its employees for allowing Rima and
Alegre to make the radio broadcasts without the proper KBP accreditation. The Court of Appeals denied Ago's claim for damages and attorney's
fees because the libelous remarks were directed against AMEC, and not against her. The Court of Appeals adjudged FBNI, Rima and Alegre
solidarily liable to pay AMEC moral damages, attorney's fees and costs of suit.rbl rl l lbrr

Issues

FBNI raises the following issues for resolution:

I. WHETHER THE BROADCASTS ARE LIBELOUS;

II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;

III. WHETHER THE AWARD OF ATTORNEY'S FEES IS PROPER; andcralawlibrary

IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE FOR PAYMENT OF MORAL DAMAGES, ATTORNEY'S FEES AND COSTS OF
SUIT.

The Court's Ruling

We deny the petition.

This is a civil action for damages as a result of the allegedly defamatory remarks of Rima and Alegre against AMEC. 17 While AMEC did not point
out clearly the legal basis for its complaint, a reading of the complaint reveals that AMEC's cause of action is based on Articles 30 and 33 of the
Civil Code. Article 3018 authorizes a separate civil action to recover civil liability arising from a criminal offense. On the other hand, Article
3319particularly provides that the injured party may bring a separate civil action for damages in cases of defamation, fraud, and physical injuries.
AMEC also invokes Article 1920 of the Civil Code to justify its claim for damages. AMEC cites Articles 2176 21 and 218022 of the Civil Code to hold
FBNI solidarily liable with Rima and Alegre.

I.

Whether the broadcasts are libelous

A libel23 is a public and malicious imputation of a crime, or of a vice or defect, real or imaginary, or any act or omission, condition, status, or
circumstance tending to cause the dishonor, discredit, or contempt of a natural or juridical person, or to blacken the memory of one who is
dead.24

There is no question that the broadcasts were made public and imputed to AMEC defects or circumstances tending to cause it dishonor, discredit
and contempt. Rima and Alegre's remarks such as "greed for money on the part of AMEC's administrators"; "AMEC is a dumping ground, garbage
of xxx moral and physical misfits"; and AMEC students who graduate "will be liabilities rather than assets" of the society are libelous per se.
Taken as a whole, the broadcasts suggest that AMEC is a money-making institution where physically and morally unfit teachers abound.

However, FBNI contends that the broadcasts are not malicious. FBNI claims that Rima and Alegre were plainly impelled by their civic duty to air
the students' gripes. FBNI alleges that there is no evidence that ill will or spite motivated Rima and Alegre in making the broadcasts. FBNI
further points out that Rima and Alegre exerted efforts to obtain AMEC's side and gave Ago the opportunity to defend AMEC and its
administrators. FBNI concludes that since there is no malice, there is no libel.

FBNI's contentions are untenable.

Every defamatory imputation is presumed malicious.25 Rima and Alegre failed to show adequately their good intention and justifiable motive in
airing the supposed gripes of the students. As hosts of a documentary or public affairs program, Rima and Alegre should have presented the
public issues "free from inaccurate and misleading information."26Hearing the students' alleged complaints a month before the expos,27 they
had sufficient time to verify their sources and information. However, Rima and Alegre hardly made a thorough investigation of the students'
alleged gripes. Neither did they inquire about nor confirm the purported irregularities in AMEC from the Department of Education, Culture and
Sports. Alegre testified that he merely went to AMEC to verify his report from an alleged AMEC official who refused to disclose any information.
Alegre simply relied on the words of the students "because they were many and not because there is proof that what they are saying is
true."28 This plainly shows Rima and Alegre's reckless disregard of whether their report was true or not.

Contrary to FBNI's claim, the broadcasts were not "the result of straight reporting." Significantly, some courts in the United States apply the
privilege of "neutral reportage" in libel cases involving matters of public interest or public figures. Under this privilege, a republisher
who accurately and disinterestedly reports certain defamatory statements made against public figures is shielded from liability, regardless of
the republisher's subjective awareness of the truth or falsity of the accusation.29 Rima and Alegre cannot invoke the privilege of neutral
reportage because unfounded comments abound in the broadcasts. Moreover, there is no existing controversy involving AMEC when the
broadcasts were made. The privilege of neutral reportage applies where the defamed person is a public figure who is involved in an existing
controversy, and a party to that controversy makes the defamatory statement.30

However, FBNI argues vigorously that malice in law does not apply to this case. Citing Borjal v. Court of Appeals,31 FBNI contends that the
broadcasts "fall within the coverage of qualifiedly privileged communications" for being commentaries on matters of public interest. Such being
the case, AMEC should prove malice in fact or actual malice. Since AMEC allegedly failed to prove actual malice, there is no libel.

FBNI's reliance on Borjal is misplaced. In Borjal, the Court elucidated on the "doctrine of fair comment," thus:

[F]air commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel or slander. The doctrine of
fair comment means that while in general every discreditable imputation publicly made is deemed false, because every man is presumed
innocent until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless, when the discreditable imputation is
directed against a public person in his public capacity, it is not necessarily actionable. In order that such discreditable imputation to a public
official may be actionable, it must either be a false allegation of fact or a comment based on a false supposition. If the comment is an
expression of opinion, based on established facts, then it is immaterial that the opinion happens to be mistaken, as long as it might
reasonably be inferred from the facts.32 (Emphasis supplied)rllbrr

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

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

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

Alegre contended that plaintiff school had no permit and is not accredited to offer Physical Therapy courses. Yet, plaintiff produced a certificate
coming from DECS that as of Sept. 22, 1987 or more than 2 years before the controversial broadcast, accreditation to offer Physical Therapy
course had already been given the plaintiff, which certificate is signed by no less than the Secretary of Education and Culture herself, Lourdes R.
Quisumbing (Exh. C-rebuttal). Defendants could have easily known this were they careful enough to verify. And yet, defendants were very
categorical and sounded too positive when they made the erroneous report that plaintiff had no permit to offer Physical Therapy courses which
they were offering.
The allegation that plaintiff was getting tremendous aids from foreign foundations like Mcdonald Foundation prove not to be true also. The truth
is there is no Mcdonald Foundation existing. Although a big building of plaintiff school was given the name Mcdonald building, that was only in
order to honor the first missionary in Bicol of plaintiffs' religion, as explained by Dr. Lita Ago. Contrary to the claim of defendants over the air,
not a single centavo appears to be received by plaintiff school from the aforementioned McDonald Foundation which does not exist.

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

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

So is plaintiffs' counsel.

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

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

Had the comments been an expression of opinion based on established facts, it is immaterial that the opinion happens to be mistaken, as long as
it might reasonably be inferred from the facts.34 However, the comments of Rima and Alegre were not backed up by facts. Therefore, the
broadcasts are not privileged and remain libelous per se.

The broadcasts also violate the Radio Code35 of the Kapisanan ng mga Brodkaster sa Pilipinas, Ink. ("Radio Code"). Item I(B) of the Radio Code
provides:

B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES

1. x x x

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

xxx

7. The station shall be responsible at all times in the supervision of public affairs, public issues and commentary programs so that they conform
to the provisions and standards of this code.

8. It shall be the responsibility of the newscaster, commentator, host and announcer to protect public interest, general welfare and good order in
the presentation of public affairs and public issues.36 (Emphasis supplied)rllbrr

The broadcasts fail to meet the standards prescribed in the Radio Code, which lays down the code of ethical conduct governing practitioners in
the radio broadcast industry. The Radio Code is a voluntary code of conduct imposed by the radio broadcast industry on its own members. The
Radio Code is a public warranty by the radio broadcast industry that radio broadcast practitioners are subject to a code by which their conduct
are measured for lapses, liability and sanctions.

The public has a right to expect and demand that radio broadcast practitioners live up to the code of conduct of their profession, just like other
professionals. A professional code of conduct provides the standards for determining whether a person has acted justly, honestly and with good
faith in the exercise of his rights and performance of his duties as required by Article 19 37 of the Civil Code. A professional code of conduct also
provides the standards for determining whether a person who willfully causes loss or injury to another has acted in a manner contrary to
morals or good customs under Article 2138 of the Civil Code.

II.

Whether AMEC is entitled to moral damages

FBNI contends that AMEC is not entitled to moral damages because it is a corporation. 39

A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience physical suffering or such
sentiments as wounded feelings, serious anxiety, mental anguish or moral shock.40 The Court of Appeals cites Mambulao Lumber Co. v. PNB, et
al.41 to justify the award of moral damages. However, the Court's statement in Mambulao that "a corporation may have a good reputation which,
if besmirched, may also be a ground for the award of moral damages" is an obiter dictum.42

Nevertheless, AMEC's claim for moral damages falls under item 7 of Article 2219 43 of the Civil Code. This provision expressly authorizes the
recovery of moral damages in cases of libel, slander or any other form of defamation. Article 2219(7) does not qualify whether the plaintiff is a
natural or juridical person. Therefore, a juridical person such as a corporation can validly complain for libel or any other form of defamation and
claim for moral damages.44

Moreover, where the broadcast is libelous per se, the law implies damages.45 In such a case, evidence of an honest mistake or the want of
character or reputation of the party libeled goes only in mitigation of damages. 46 Neither in such a case is the plaintiff required to introduce
evidence of actual damages as a condition precedent to the recovery of some damages. 47 In this case, the broadcasts are libelous per se. Thus,
AMEC is entitled to moral damages.

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

III.

Whether the award of attorney's fees is proper

FBNI contends that since AMEC is not entitled to moral damages, there is no basis for the award of attorney's fees. FBNI adds that the instant
case does not fall under the enumeration in Article 220848 of the Civil Code.

The award of attorney's fees is not proper because AMEC failed to justify satisfactorily its claim for attorney's fees. AMEC did not adduce
evidence to warrant the award of attorney's fees. Moreover, both the trial and appellate courts failed to explicitly state in their respective
decisions the rationale for the award of attorney's fees.49 In Inter-Asia Investment Industries, Inc. v. Court of Appeals ,50 we held that:

[I]t is an accepted doctrine that the award thereof as an item of damages is the exception rather than the rule, and counsel's fees are not to be
awarded every time a party wins a suit. The power of the court to award attorney's fees under Article 2208 of the Civil Code demands
factual, legal and equitable justification, without which the award is a conclusion without a premise, its basis being improperly left to
speculation and conjecture. In all events, the court must explicitly state in the text of the decision, and not only in the decretal portion thereof,
the legal reason for the award of attorney's fees.51 (Emphasis supplied)rllbrr

While it mentioned about the award of attorney's fees by stating that it "lies within the discretion of the court and depends upon the
circumstances of each case," the Court of Appeals failed to point out any circumstance to justify the award.

IV.

Whether FBNI is solidarily liable with Rima and Alegre for moral damages, attorney's fees and costs of suit

FBNI contends that it is not solidarily liable with Rima and Alegre for the payment of damages and attorney's fees because it exercised due
diligence in the selection and supervision of its employees, particularly Rima and Alegre. FBNI maintains that its broadcasters, including Rima
and Alegre, undergo a "very regimented process" before they are allowed to go on air. "Those who apply for broadcaster are subjected to
interviews, examinations and an apprenticeship program."

FBNI further argues that Alegre's age and lack of training are irrelevant to his competence as a broadcaster. FBNI points out that the "minor
deficiencies in the KBP accreditation of Rima and Alegre do not in any way prove that FBNI did not exercise the diligence of a good father of a
family in selecting and supervising them." Rima's accreditation lapsed due to his non-payment of the KBP annual fees while Alegre's
accreditation card was delayed allegedly for reasons attributable to the KBP Manila Office. FBNI claims that membership in the KBP is merely
voluntary and not required by any law or government regulation.

FBNI's arguments do not persuade us.

The basis of the present action is a tort. Joint tort feasors are jointly and severally liable for the tort which they commit.52 Joint tort feasors are
all the persons who command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or who
approve of it after it is done, if done for their benefit.53 Thus, AMEC correctly anchored its cause of action against FBNI on Articles 2176 and
2180 of the Civil Code.rbl rl l lbrr

As operator of DZRC-AM and employer of Rima and Alegre, FBNI is solidarily liable to pay for damages arising from the libelous broadcasts. As
stated by the Court of Appeals, "recovery for defamatory statements published by radio or television may be had from the owner of the station,
a licensee, the operator of the station, or a person who procures, or participates in, the making of the defamatory statements."54 An employer
and employee are solidarily liable for a defamatory statement by the employee within the course and scope of his or her employment, at least
when the employer authorizes or ratifies the defamation.55 In this case, Rima and Alegre were clearly performing their official duties as hosts of
FBNI's radio program Expos when they aired the broadcasts. FBNI neither alleged nor proved that Rima and Alegre went beyond the scope of
their work at that 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.

WHEREFORE, we DENY the instant petition. We AFFIRM the Decision of 4 January 1999 and Resolution of 26 January 2000 of the Court of
Appeals in CA-G.R. CV No. 40151 with the MODIFICATION that the award of moral damages is reduced from P300,000 to P150,000 and the
award of attorney's fees is deleted. Costs against petitioner.

SO ORDERED
 THIRD DIVISION

[G.R. NO. 131723 : December 13, 2007]

MANILA ELECTRIC COMPANY, Petitioner, v. T.E.A.M. ELECTRONICS CORPORATION, TECHNOLOGY ELECTRONICS ASSEMBLY and
MANAGEMENT PACIFIC CORPORATION; and ULTRA ELECTRONICS INSTRUMENTS, INC., Respondents.

DECISION

NACHURA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the Decision1 of the Court of Appeals (CA)
dated June 18, 1997 and its Resolution2 dated December 3, 1997 in CA-G.R. CV No. 40282 denying the appeal filed by petitioner Manila Electric
Company.

The facts of the case, as culled from the records, are as follows:

Respondent T.E.A.M. Electronics Corporation (TEC) was formerly known as NS Electronics (Philippines), Inc. before 1982 and National Semi-
Conductors (Phils.) before 1988. TEC is wholly owned by respondent Technology Electronics Assembly and Management Pacific Corporation
(TPC). On the other hand, petitioner Manila Electric Company (Meralco) is a utility company supplying electricity in the Metro Manila area.

Petitioner and NS Electronics (Philippines), Inc., the predecessor-in-interest of respondent TEC, were parties to two separate contracts
denominated as Agreements for the Sale of Electric Energy under the following account numbers: 09341-1322-163 and 09341-1812-13.4 Under
the aforesaid agreements, petitioner undertook to supply TEC's building known as Dyna Craft International Manila (DCIM) located at Electronics
Avenue, Food Terminal Complex, Taguig, Metro Manila, with electric power. Another contract was entered into for the supply of electric power
to TEC's NS Building under Account No. 19389-0900-10.

In September 1986, TEC, under its former name National Semi-Conductors (Phils.) entered into a Contract of Lease5 with respondent Ultra
Electronics Industries, Inc. (Ultra) for the use of the former's DCIM building for a period of five years or until September 1991. Ultra was,
however, ejected from the premises on February 12, 1988 by virtue of a court order, for repeated violation of the terms and conditions of the
lease contract.

On September 28, 1987, a team of petitioner's inspectors conducted a surprise inspection of the electric meters installed at the DCIM building,
witnessed by Ultra's6 representative, Mr. Willie Abangan. The two meters covered by account numbers 09341-1322-16 and 09341-1812-13,
were found to be allegedly tampered with and did not register the actual power consumption in the building. The results of the inspection were
reflected in the Service Inspection Reports7 prepared by the team.

In a letter dated November 25, 1987, petitioner informed TEC of the results of the inspection and demanded from the latter the payment
of P7,040,401.01 representing its unregistered consumption from February 10, 1986 until September 28, 1987, as a result of the alleged
tampering of the meters.8 TEC received the letters on January 7, 1988. Since Ultra was in possession of the subject building during the covered
period, TEC's Managing Director, Mr. Bobby Tan, referred the demand letter to Ultra9 which, in turn, informed TEC that its Executive Vice-
President had met with petitioner's representative. Ultra further intimated that assuming that there was tampering of the meters, petitioner's
assessment was excessive.10 For failure of TEC to pay the differential billing, petitioner disconnected the electricity supply to the DCIM building
on April 29, 1988.

TEC demanded from petitioner the reconnection of electrical service, claiming that it had nothing to do with the alleged tampering but the latter
refused to heed the demand. Hence, TEC filed a complaint on May 27, 1988 before the Energy Regulatory Board (ERB) praying that electric
power be restored to the DCIM building.11 The ERB immediately ordered the reconnection of the service but petitioner complied with it only on
October 12, 1988 after TEC paid P1,000,000.00, under protest. The complaint before the ERB was later withdrawn as the parties deemed it best
to have the issues threshed out in the regular courts. Prior to the reconnection, or on June 7, 1988, petitioner conducted a scheduled inspection
of the questioned meters and found them to have been tampered anew.12

Meanwhile, on April 25, 1988, petitioner conducted another inspection, this time, in TEC's NS Building. The inspection allegedly revealed that
the electric meters were not registering the correct power consumption. Petitioner, thus, sent a letter dated June 18, 1988 demanding payment
of P280,813.72 representing the differential billing.13 TEC denied petitioner's allegations and claim in a letter dated June 29, 1988. 14 Petitioner,
thus, sent TEC another letter demanding payment of the aforesaid amount, with a warning that the electric service would be disconnected in
case of continued refusal to pay the differential billing.15 To avert the impending disconnection of electrical service, TEC paid the above amount,
under protest.16

On January 13, 1989, TEC and TPC filed a complaint for damages against petitioner and Ultra 17before the Regional Trial Court (RTC) of Pasig.
The case was raffled to Branch 162 and was docketed as Civil Case No. 56851. 18 Upon the filing of the parties' answer to the complaint, pre-trial
was scheduled.

At the pre-trial, the parties agreed to limit the issues, as follows:

1. Whether or not the defendant Meralco is liable for the plaintiffs' disconnection of electric service at DCIM Building.

2. Whether or not the plaintiff is liable for (sic) the defendant for the differential billings in the amount of P7,040,401.01.

3. Whether or not the plaintiff is liable to defendant for exemplary damages. 19

For failure of the parties to reach an amicable settlement, trial on the merits ensued. On June 17, 1992, the trial court rendered a Decision in
favor of respondents TEC and TPC, and against respondent Ultra and petitioner. The pertinent portion of the decision reads:

WHEREFORE, judgment is hereby rendered in this case in favor of the plaintiffs and against the defendants as follows:

(1) Ordering both defendants Meralco and ULTRA Electronics Instruments, Inc. to jointly and severally reimburse plaintiff TEC actual damages
in the amount of ONE MILLION PESOS with legal rate of interest from the date of the filing of this case on January 19, 1989 until the said amount
shall have been fully paid;

(2) Ordering defendant Meralco to pay to plaintiff TEC the amount of P280,813.72 as actual damages with legal rate of interest also from January
19, 1989;

(3) Ordering defendant Meralco to pay to plaintiff TPC the amount of P150,000.00 as actual damages with interest at legal rate from January 19,
1989;

(4) Condemning defendant Meralco to pay both plaintiffs moral damages in the amount pf P500,000.00;

(5) Condemning defendant Meralco to pay both plaintiffs corrective and/or exemplary damages in the amount of P200,000.00;

(6) Ordering defendant Meralco to pay attorney's fees in the amount of P200,000.00

Costs against defendant Meralco.

SO ORDERED.20

The trial court found the evidence of petitioner insufficient to prove that TEC was guilty of tampering the meter installations. The deformed
condition of the meter seal and the existence of an opening in the wire duct leading to the transformer vault did not, in themselves, prove the
alleged tampering, especially since access to the transformer was given only to petitioner's employees. 21 The sudden drop in TEC's (or Ultra's)
electric consumption did not, per se, show meter tampering. The delay in the sending of notice of the results of the inspection was likewise
viewed by the court as evidence of inefficiency and arbitrariness on the part of petitioner. More importantly, petitioner's act of disconnecting the
DCIM building's electric supply constituted bad faith and thus makes it liable for damages. 22 The court further denied petitioner's claim of
differential billing primarily on the ground of equitable negligence.23 Considering that TEC and TPC paid P1,000,000.00 to avert the
disconnection of electric power; and because Ultra manifested to settle the claims of petitioner, the court imposed solidary liability on both Ultra
and petitioner for the payment of the P1,000,000.00.

Ultra and petitioner appealed to the CA which affirmed the RTC decision, with a modification of the amount of actual damages and interest
thereon. The dispositive portion of the CA decision dated June 18, 1997, states:

WHEREFORE, this Court renders judgment affirming in toto the Decision rendered by the trial court with the slight modification that the interest
at legal rate shall be computed from January 13, 1989 and that Meralco shall pay plaintiff T.E.A.M. Electronics Corporation and Technology
Electronics Assembly and Management Pacific Corporation the sum of P150,000.00 per month for five (5) months for actual damages incurred
when it was compelled to lease a generator set with interest at the legal rate from the above-stated date.

SO ORDERED.24

The appellate court agreed with the RTC's conclusion. In addition, it considered petitioner negligent for failing to discover the alleged defects in
the electric meters; in belatedly notifying TEC and TPC of the results of the inspection; and in disconnecting the electric power without prior
notice.
Petitioner now comes before this Court in this Petition for Review on Certiorari contending that:

The Court of Appeals committed grievous errors and decided matters of substance contrary to law and the rulings of this Honorable Court:

1. In finding that the issue in the case is whether there was deliberate tampering of the metering installations at the building owned by TEC.

2. In not finding that the issue is: whether or not, based on the tampered meters, whether or not petitioner is entitled to differential billing, and if
so, how much.

3. In declaring that petitioner ME RALCO had the burden of proof to show by clear and convincing evidence that with respect to the tampered
meters that TEC and/or TPC authored their tampering.

4. In finding that petitioner Meralco should not have held TEC and/or TPC responsible for the acts of Ultra.

5. In finding that TEC should not be held liable for the tampering of this electric meter in its DCIM Building.

6. In finding that there was no notice of disconnection.

7. In finding that petitioner MERALCO was negligent in informing TEC of the alleged tampering.

8. In making the finding that it is difficult to believe that when petitioner MERALCO inspected on June 7, 1988 the meter installations, they were
found to be tampered.

9. In declaring that petitioner MERALCO estopped from claiming any tampering of the meters.

10. In finding that "the method employed by MERALCO to as certain (sic) the 'correct' amount of electricity consumed is questionable";

11. In declaring that MERALCO all throughout its dealings with TEC took on an "attitude" which is oppressive, wanton and reckless.

12. In declaring that MERALCO acted arbitrarily in inspecting TEC's DCIM building and the NS building.

13. In declaring that respondents TEC and TPC are entitled to the damages which it awarded.

14. In not declaring that petitioner is entitled to the differential bill.

15. In not declaring that respondents are liable to petitioner for exemplary damages, attorney's fee and expenses for litigation.25

The petition must fail.

The issues for resolution can be summarized as follows: 1) whether or not TEC tampered with the electric meters installed at its DCIM and NS
buildings; 2) If so, whether or not it is liable for the differential billing as computed by petitioner; and 3) whether or not petitioner was justified
in disconnecting the electric power supply in TEC's DCIM building.

Petitioner insists that the tampering of the electric meters installed at the DCIM and NS buildings owned by respondent TEC has been
established by overwhelming evidence, as specifically shown by the shorting devices found during the inspection. Thus, says petitioner,
tampering of the meter is no longer an issue.

It is obvious that petitioner wants this Court to revisit the factual findings of the lower courts. Well-established is the doctrine that under Rule
45 of the Rules of Court, only questions of law, not of fact, may be raised before the Court. We would like to stress that this Court is not a trier of
facts and may not re-examine and weigh anew the respective evidence of the parties. Factual findings of the trial court, especially those affirmed
by the Court of Appeals, are binding on this Court.26

Looking at the record, we note that petitioner claims to have discovered three incidences of meter-tampering; twice in the DCIM building on
September 28, 1987 and June 7, 1988; and once in the NS building on April 24, 1988.

The first instance was supposedly discovered on September 28, 1987. The inspector allegedly found the presence of a short circuiting device and
saw that the meter seal was deformed. In addition, petitioner, through the Supervising Engineer of its Special Billing Analysis
Department,27 claimed that there was a sudden and unexplainable drop in TEC's electrical consumption starting February 10, 1986. On the basis
of the foregoing, petitioner concluded that the electric meters were tampered with.

However, contrary to petitioner's claim that there was a drastic and unexplainable drop in TEC's electric consumption during the affected
period, the Pattern of TEC's Electrical Consumption28 shows that the sudden drop is not peculiar to the said period. Noteworthy is the
observation of the RTC in this wise:
In fact, in Account No. 09341-1812-13 (heretofore referred as Account/Meter No. 2), as evidenced by Exhibits "35" and "35-A," there was
likewise a sudden drop of electrical consumption from the year 1984 which recorded an average 141,300 kwh/month to 1985 which recorded
an average kwh/month at 87,600 or a difference-drop of 53,700 kwh/month; from 1985's 87,600 recorded consumption, the same dropped to
18,600 kwh/month or a difference-drop of 69,000 kwh/month. Surely, a drop of 53,700 could be equally categorized as a sudden
drop amounting to 69,000 which, incidentally, the Meralco claimed as "unexplainable. x x x.29

The witnesses for petitioner who testified on the alleged tampering of the electric meters, declared that tampering is committed by consumers
to prevent the meter from registering the correct amount of electric consumption, and result in a reduced monthly electric bill, while continuing
to enjoy the same power supply. Only the registration of actual electric energy consumption, not the supply of electricity, is affected when a
meter is tampered with.30 The witnesses claimed that after the inspection, the tampered electric meters were corrected, so that they would
register the correct consumption of TEC. Logically, then, after the correction of the allegedly tampered meters, the customer's registered
consumption would go up.

In this case, the period claimed to have been affected by the tampered electric meters is from February 1986 until September 1987. Based on
petitioner's Billing Record31 (for the DCIM building), TEC's monthly electric consumption on Account No. 9341-1322-16 was between 4,500 and
27,000 kwh.32 Account No. 9341-1812-13 showed a monthly consumption between 9,600 and 34,200 kwh.33It is interesting to note that, after
correction of the allegedly tampered meters, TEC's monthly electric consumption from October 1987 to February 1988 (the last month that
Ultra occupied the DCIM building) was between 8,700 and 24,300 kwh in its first account, and 16,200 to 46,800 kwh on the second account.

Even more revealing is the fact that TEC's meters registered 9,300 kwh and 19,200 kwh consumption on the first and second accounts,
respectively, a month prior to the inspection. On the first month after the meters were corrected, TEC's electric consumption registered at 9,300
kwh and 22,200 kwh on the respective accounts. These figures clearly show that there was no palpably drastic difference between the
consumption before and after the inspection, casting a cloud of doubt over petitioner's claim of meter-tampering. Indeed, Ultra's explanation
that the corporation was losing; thus, it had lesser consumption of electric power appear to be the more plausible reason for the drop in electric
consumption.

Petitioner likewise claimed that when the subject meters were again inspected on June 7, 1988, they were found to have been tampered anew.
The Court notes that prior to the inspection, TEC was informed about it; and months before the inspection, there was an unsettled controversy
between TEC and petitioner, brought about by the disconnection of electric power and the non-payment of differential billing. We are more
disposed to accept the trial court's conclusion that it is hard to believe that a customer previously apprehended for tampered meters and
assessed P7 million would further jeopardize itself in the eyes of petitioner.34 If it is true that there was evidence of tampering found on
September 28, 1987 and again on June 7, 1988, the better view would be that the defective meters were not actually corrected after the first
inspection. If so, then Manila Electric Company v. Macro Textile Mills Corporation35 would apply, where we said that we cannot sanction a
situation wherein the defects in the electric meter are allowed to continue indefinitely until suddenly, the public utilities demand payment for
the unrecorded electricity utilized when they could have remedied the situation immediately. Petitioner's failure to do so may encourage neglect
of public utilities to the detriment of the consuming public. Corollarily, it must be underscored that petitioner has the imperative duty to make a
reasonable and proper inspection of its apparatus and equipment to ensure that they do not malfunction, and the due diligence to discover and
repair defects therein. Failure to perform such duties constitutes negligence. 36 By reason of said negligence, public utilities run the risk of
forfeiting amounts originally due from their customers.37

As to the alleged tampering of the electric meter in TEC's NS building, suffice it to state that the allegation was not proven, considering that the
meters therein were enclosed in a metal cabinet the metal seal of which was unbroken, with petitioner having sole access to the said meters.38

In view of the negative finding on the alleged tampering of electric meters on TEC's DCIM and NS buildings, petitioner's claim of differential
billing was correctly denied by the trial and appellate courts. With greater reason, therefore, could petitioner not exercise the right of immediate
disconnection.

The law in force at the time material to this controversy was Presidential Decree (P.D.) No. 401 39issued on March 1, 1974.40 The decree
penalized unauthorized installation of water, electrical or telephone connections and such acts as the use of tampered electrical meters. It was
issued in answer to the urgent need to put an end to illegal activities that prejudice the economic well-being of both the companies concerned
and the consuming public.41 P.D. 401 granted the electric companies the right to conduct inspections of electric meters and the criminal
prosecution42 of erring consumers who were found to have tampered with their electric meters. It did not expressly provide for more expedient
remedies such as the charging of differential billing and immediate disconnection against erring consumers. Thus, electric companies found a
creative way of availing themselves of such remedies by inserting into their service contracts (or agreements for the sale of electric energy) a
provision for differential billing with the option of disconnection upon non-payment by the erring consumer. The Court has recognized the
validity of such stipulations.43 However, recourse to differential billing with disconnection was subject to the prior requirement of a 48-hour
written notice of disconnection.44

Petitioner, in the instant case, resorted to the remedy of disconnection without prior notice. While it is true that petitioner sent a demand letter
to TEC for the payment of differential billing, it did not include any notice that the electric supply would be disconnected. In fine, petitioner
abused the remedies granted to it under P.D. 401 and Revised General Order No. 1 by outrightly depriving TEC of electrical services without first
notifying it of the impending disconnection. Accordingly, the CA did not err in affirming the RTC decision.

As to the damages awarded by the CA, we deem it proper to modify the same. Actual damages are compensation for an injury that will put the
injured party in the position where it was before the injury. They pertain to such injuries or losses that are actually sustained and susceptible of
measurement. Except as provided by law or by stipulation, a party is entitled to adequate compensation only for such pecuniary loss as is duly
proven. Basic is the rule that to recover actual damages, not only must the amount of loss be capable of proof; it must also be actually proven
with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable. 45
Respondent TEC sufficiently established, and petitioner in fact admitted, that the former paid P1,000,000.00 and P280,813.72 under protest, the
amounts representing a portion of the latter's claim of differential billing. With the finding that no tampering was committed and, thus, no
differential billing due, the aforesaid amounts should be returned by petitioner, with interest, as ordered by the Court of Appeals and pursuant
to the guidelines set forth by the Court.46

However, despite the appellate court's conclusion that no tampering was committed, it held Ultra solidarily liable with petitioner
for P1,000,000.00, only because the former, as occupant of the building, promised to settle the claims of the latter. This ruling is erroneous.
Ultra's promise was conditioned upon the finding of defect or tampering of the meters. It did not acknowledge any culpability and liability, and
absent any tampered meter, it is absurd to make the lawful occupant liable. It was petitioner who received the P1 million; thus, it alone should
be held liable for the return of the amount.

TEC also sufficiently established its claim for the reimbursement of the amount paid as rentals for the generator set it was constrained to rent by
reason of the illegal disconnection of electrical service. The official receipts and purchase orders submitted by TEC as evidence sufficiently show
that such rentals were indeed made. However, the amount of P150,000.00 per month for five months, awarded by the CA, is excessive. Instead, a
total sum of P150,000.00, as found by the RTC, is proper.

As to the payment of exemplary damages and attorney's fees, we find no cogent reason to disturb the same. Exemplary damages are imposed by
way of example or correction for the public good in addition to moral, temperate, liquidated, or compensatory damages. 47 In this case, to serve
as an example - that before a disconnection of electrical supply can be effected by a public utility, the requisites of law must be complied with -
we affirm the award of P200,000.00 as exemplary damages. With the award of exemplary damages, the award of attorney's fees is likewise
proper, pursuant to Article 220848 of the Civil Code. It is obvious that TEC needed the services of a lawyer to argue its cause through three levels
of the judicial hierarchy. Thus, the award of P200,000.00 is in order.49

We, however, deem it proper to delete the award of moral damages. TEC's claim was premised allegedly on the damage to its goodwill and
reputation.50 As a rule, a corporation is not entitled to moral damages because, not being a natural person, it cannot experience physical
suffering or sentiments like wounded feelings, serious anxiety, mental anguish and moral shock. The only exception to this rule is when the
corporation has a reputation that is debased, resulting in its humiliation in the business realm.51 But in such a case, it is imperative for the
claimant to present proof to justify the award. It is essential to prove the existence of the factual basis of the damage and its causal relation to
petitioner's acts.52 In the present case, the records are bereft of any evidence that the name or reputation of TEC/TPC has been debased as a
result of petitioner's acts. Besides, the trial court simply awarded moral damages in the dispositive portion of its decision without stating the
basis thereof.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 40282 dated June 18, 1997 and its Resolution
dated December 3, 1997 are AFFIRMED with the following MODIFICATIONS: (1) the award of P150,000.00 per month for five months as
reimbursement for the rentals of the generator set is REDUCED to P150,000.00; and (2) the award of P500,000.00 as moral damages is
hereby DELETED.

SO ORDERED.
 SECOND DIVISION

[G.R. No. 96161. February 21, 1992.]

PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT,
INC., Petitioners, v. COURT OF APPEALS, SECURITIES & EXCHANGE COMMISSION and STANDARD PHILIPS
CORPORATION, Respondents.

Emeterio V. Soliven & Associates, for Petitioners.

Narciso A. Manantan for Private Respondent.

SYLLABUS

1. COMMERCIAL LAW; CORPORATION CODE; SECTION 18 THEREOF APPLICABLE ONLY WHEN CORPORATE NAMES ARE
IDENTICAL. Section 18 of the Corporation Code is applicable only when the corporate names in question are identical. In the
instant case, there is no confusing similarity between Petitioners and Private Respondents corporate names as those of the
Petitioners contain at least two words different from that of the Respondent.

2. ID.; CORPORATION; RIGHT TO USE ITS CORPORATE AND TRADE NAME, A PROPERTY RIGHT. As early as Western
Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927), the Court declared that a corporations right to use its corporate and
trade name is a property right, a right in rem, which it may assert and protect against the world in the same manner as it may
protect its tangible property, real or personal, against trespass or conversion. It is regarded, to a certain extent, as a property
right and one which cannot be impaired or defeated by subsequent appropriation by another corporation in the same field (Red
Line Transportation Co. v. Rural Transit co., September 6, 1934, 60 Phil. 549).

3. ID.; ID.; IMPORTANCE OF CORPORATE NAME. A name is peculiarly important as necessary to the very existence of a
corporation. Its name is one of its attributes, an element of its existence, and essential to its identity (6 Fletcher [Perm Ed], pp.
3-4). The general rule as to corporations is that each corporation must have a name by which it is to sue and be sued and do all
legal acts. The name of a corporation in this respect designates the corporation in the same manner as the name of an individual
designates the person (Cincinnati Cooperage Co. v. Bate, 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. v. Starbird, 10
NH 123); and the right to use its corporate name is as much a part of the corporate franchise as any other privilege granted.

4. ID.; ID.; CORPORATE NAME DISTINGUISHED FROM INDIVIDUALS NAME. A corporation acquires its name by choice and
need not select a name identical with or similar to one already appropriated by a senior corporation while an individuals name is
thrust upon him (See Standard Oil Co. of New Mexico, Inc. v. Standard Oil Co. of California, 56 F 2d 973, 977). A corporation
can no more use a corporate name in violation of the rights of others that an individual can use his name legally acquired so as
to mislead the public and injure another (Armington v. Palmer, 21 RI 109, 42 A 308).

5. ID.; ID.; ID.; STATUTORY PROHIBITION PROVIDED IN SEC. 18 OF CORPORATION CODE; REQUISITES. Our own
Corporation Code, in its Section 18, expressly provides that: "No corporate name may be allowed by the Securities and
Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation
or to any other name already protected by law or is patently deceptive, confusing or contrary to existing law. Where a change in
the corporate name is approved, the commission shall issue an amended certificate of incorporation under the amended name."
(Emphasis supplied) The statutory prohibition cannot be any clearer. To come within its scope, two requisites must be proven,
namely: (1) that the complainant corporation acquired a prior right over the use of such corporate name; and (2) the proposed
name is either: (a) identical or (b) deceptively or confusingly similar to that of any existing corporation or to any other name
already protected by law; or (c) patently deceptive, confusing or contrary to existing law.

6. ID.; ID.; ID.; RIGHT TO EXCLUSIVE USE OF CORPORATE NAME DETERMINED BY PRIORITY OF ADOPTION; APPLIED IN CASE
AT BAR. The right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by
priority of adoption (1 Thompson, p.80 citing Munn v. Americana Co., 82 N., Eq. 63 88 Atl. 30; San Francisco Oyster House v.
Mihich, 75 Wash. 274, 134 Pac. 921). In this regard, there is no doubt with respect to Petitioners prior adoption of the name
"PHILIPS" as part of its corporate name. Petitioners Philips Electrical and Philips Industrial were incorporated on 29 August 1956
and 25 May 1956, respectively, while Respondent Standard Philips was issued a Certificate of Registration on 19 April 1982,
twenty-six (26) years later (Rollo, p.16). Petitioner PEBV has also used the trademark "PHILIPS" on electrical lamps of all types
and their accessories since 30 September 1922, as evidenced by Certificate of Registration No. 1651.

7. ID.; ID.; ID.; TEST IN DETERMINING EXISTENCE OF CONFUSING SIMILARITY; PROOF OF ACTUAL CONFUSION NOT
NECESSARY. In determining the existence of confusing similarity in corporate names, the test is whether the similarity is such
as to mislead a person using ordinary care and discrimination. In so doing, the Court must look to the record as well as the
names themselves (Ohio Nat. Life Ins. Co. v. Ohio Life Ins. Co., 210 NE 2d 298). It is settled, however, that proof of actual
confusion need not be shown. It suffices that confusion is probably or likely to occur (6 Fletcher [Perm Ed], pp. 107-108,
enumerating a long line of cases).

8. ID.; ID.; ID.; INTENT OF SUBSEQUENT APPROPRIATOR OF NAME. Petitioners pointed out that" [p]rivate respondents
choice of PHILIPS as part of its corporate name [STANDARD PHILIPS CORPORATION] . . . tends to show said respondents
intention to ride on the popularity and established goodwill of said petitioners business throughout the world." The subsequent
appropriator of the name or one confusingly similar thereto usually seeks an unfair advantage, a free ride on anothers goodwill
(American Gold Star Mothers, Inc. v. National Gold Star Mothers, Inc., et al, 89 App DC 269, 191 F 2d 488).

9. ID.; ID.; ID.; RULE ON PROPOSED NAME. True, under the Guidelines in the Approval of Corporate and Partnership Names
formulated by the SEC, the proposed name "should not be similar to one already used by another corporation or partnership. If
the proposed name contains a word already used as part of the firm name or style of a registered company, the proposed name
must contain two other words different from the company already registered." It is then pointed out that Petitioners Philips
Electrical and Philips Industrial have two words different from that of Private Respondents name.

10. ID.; ID.; ID.; CORPORATION HAS EXCLUSIVE RIGHT TO THE USE OF ITS NAME WHICH MAY BE PROTECTED BY
INJUNCTION; BASIS FOR SUCH PRINCIPLE. A corporation has an exclusive right to the use of its name, which may be
protected by injunction upon a principle similar to that upon which persons are protected in the use of trademarks and
tradenames (18 C.J.S. 574). Such principle proceeds upon the theory that it is a fraud on the corporation which has acquired a
right to that name and perhaps carried on its business thereunder, that another should attempt to use the same name, or the
same name with a slight variation in such a way as to induce persons to deal with it in the belief that they are dealing with the
corporation which has given a reputation to the name (6 Fletcher [Perm Ed.], pp. 39-40, citing Borden Ice Cream Co. v.
Bordens Condensed Milk Co., 210 F 510).

DECISION

MELENCIO-HERRERA, J.:

Petitioners challenge the Decision of the Court of Appeals, dated 31 July 1990, in CA-GR Sp. No. 20067, upholding the Order of
the Securities and Exchange Commission, dated 2 January 1990, in SEC-AC No. 202, dismissing petitioners prayer for the
cancellation or removal of the word "PHILIPS" for private respondents corporate name.

Petitioner Philips Export B.V. (PEBV), a foreign corporation organized under the laws of the Netherlands, although not engaged
in business here, is the registered owner of the trademarks PHILIPS and PHILIPS SHIELD EMBLEM under Certificate of
Registration Nos. R-1641 and R-1674, respectively issued by the Philippine Patent Office (presently known as the Bureau of
Patents, Trademarks and Technology Transfer). Petitioners Philips Electrical Lamps, Inc. (Philips Electrical, for brevity) and
Philips Industrial Development, Inc. (Philips Industrial, for short), authorized users of the trademarks PHILIPS and PHILIPS
SHIELD EMBLEM, were incorporated on 29 August 1956 and 25 may 1956, respectively. All petitioner corporations belong to the
PHILIPS Group of Companies.

Respondent Standard Philips Corporation (Standard Philips), on the other hand, was issued a Certificate of Registration by
respondent Commission on 19 May 1982.

On 24 September 1984, Petitioners filed a letter complaint with the Securities & Exchange Commission (SEC) asking for the
cancellation of the word "PHILIPS" from Private Respondents corporate name in view of the prior registration with the Bureau of
Patents of the trademark "PHILIPS" and the logo "PHILIPS SHIELD EMBLEM" in the name of Petitioner PEBV, and the previous
registration of Petitioners Philips Electrical and Philips Industrial with the SEC.

As a result of Private Respondents refusal to amend its Articles of Incorporation, Petitioners filed with the SEC, on 6 February
1985, a Petition (SEC Case No. 2743), praying for the issuance of a Writ of Preliminary Injunction, alleging, among others, that
Private Respondents use of the word PHILIPS amounts to an infringement and clear violation of Petitioners exclusive right to
use the same considering that both parties engage in the same business.

In its Answer, dated 7 March 1985, Private Respondent countered that Petitioner PEBV has no legal capacity to sue; that its use
of its corporate name is not at all similar to Petitioners trademark PHILIPS when considered in its entirety; and that its products
consisting of chain rollers, belts, bearings and cutting saw are grossly different from Petitioners electrical products.

After conducting hearings with respect to the prayer for Injunction, the SEC Hearing Officer, on 27 September 1985, ruled
against the issuance of such Writ.

On 30 January 1987, the same Hearing Officer dismissed the Petition for lack of merit. In so ruling, the latter declared that
inasmuch as the SEC found no sufficient ground for the granting of injunctive relief on the basis of the testimonial and
documentary evidence presented, it cannot order the removal or cancellation of the word "PHILIPS" from Private Respondents
corporate name on the basis of the same evidence adopted in toto during trial on the merits. Besides, Section 18 of the
Corporation Code (infra) is applicable only when the corporate names in question are identical. Here, there is no confusing
similarity between Petitioners and Private Respondents corporate names as those of the Petitioners contain at least two words
different from that of the Respondent. Petitioners Motion for Reconsideration was likewise denied on 17 June 1987. chanro bles. com:cra law:red

On appeal, the SEC en banc affirmed the dismissal declaring that the corporate names of Petitioners and Private Respondent
hardly breed confusion inasmuch as each contains at least two different words and, therefore, rules out any possibility of
confusing one for the other.

On 30 January 1990, Petitioners sought an extension of time to file a Petition for Review on Certiorari before this Court, which
Petition was later referred to the Court of Appeals in a Resolution dated 12 February 1990.
In deciding to dismiss the petition on 31 July 1990, the Court of Appeals 1 swept aside Petitioners claim that following the ruling
in Converse Rubber Corporation v. Universal Converse Rubber Products, Inc., et al, (G.R. No. L-27906, January 8, 1987, 147
SCRA 154), the word PHILIPS cannot be used as part of Private Respondents corporate name as the same constitutes a
dominant part of Petitioners corporate names. In so holding, the Appellate Court observed that the Converse case is not four-
square with the present case inasmuch as the contending parties in Converse are engaged in a similar business, that is, the
manufacture of rubber shoes. Upholding the SEC, the Appellate Court concluded that "private respondents products consisting
of chain rollers, belts, bearings and cutting saw are unrelated and non-competing with petitioners products i.e. electrical lamps
such that consumers would not in any probability mistake one as the source or origin of the product of the other." cralaw virt ua1aw lib ra ry

The Appellate Court denied Petitioners Motion for Reconsideration on 20 November 1990, hence, this Petition which was given
due course on 22 April 1991, after which the parties were required to submit their memoranda, the latest of which was received
on 2 July 1991. In December 1991, the SEC was also required to elevate its records for the perusal of this Court, the same not
having been apparently before respondent Court of Appeals.

We find basis for petitioners plea.

As early as Western Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927), the Court declared that a corporations right to
use its corporate and trade name is a property right, a right in rem, which it may assert and protect against the world in the
same manner as it may protect its tangible property, real or personal, against trespass or conversion. It is regarded, to a certain
extent, as a property right and one which cannot be impaired or defeated by subsequent appropriation by another corporation in
the same field (Red Line Transportation Co. v. Rural Transit Co., September 6, 1934, 60 Phil 549).

A name is peculiarly important as necessary to the very existence of a corporation (American Steel Foundries v. Robertson, 269
US 372, 70 L ed 317, 46 S Ct 160; Lauman v. Lebanon Valley R. Co., 30 Pa 42; First National Bank v. Huntington Distilling Co,
40 W Va 530, 23 SE 792). Its name is one of its attributes, an element of its existence, and essential to its identity (6 Fletcher
[Perm Ed], pp. 3-4). The general rule as to corporations is that each corporation must have name by which it is to sue and be
sued and do all legal acts. The name of a corporation in this respect designates the corporation in the same manner as the name
of an individual designates the person (Cincinnati Cooperage Co. v. Bate, 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. v.
Starbird, 10 NH 123); and the right to use its corporate name is as much a part of the corporate franchise as any other privilege
granted (Federal Secur. Co. v. Federal Secur. Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino v. Portuguese Beneficial
Association, 18 RI 165, 26 A 36). chanro bles vi rtua l lawli bra ry

A corporation acquires its name by choice and need not select a name identical with or similar to one already appropriated by a
senior corporation while an individuals name is thrust upon him (See Standard Oil Co. of New Mexico, Inc. v. Standard Oil Co. of
California, 56 F 2d 973, 977). A corporation can no more use a corporate name in violation of the rights of others than an
individual can use his name legally acquired so as to mislead the public and injure another (Armington v. Palmer, 21 RI 109, 42
A 308).

Our own Corporation Code, in its Section 18, expressly provides that: jgc:chan roble s.com.p h

"No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively
or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive,
confusing or contrary to existing law. Where a change in the corporate name is approved, the commission shall issue an
amended certificate of incorporation under the amended name." (Emphasis supplied).

The statutory prohibition cannot be any clearer. To come within its scope, two requisites must be proven, namely: chan rob1es v irt ual 1aw l ibra ry

(1) that the complainant corporation acquired a prior right over the use of such corporate name; and

(2) the proposed name is either: chan rob1e s virtual 1aw lib rary

(a) identical or

(b) deceptively or confusingly similar

to that of any existing corporation or to any other name already protected by law; or

(c) patently deceptive, confusing or contrary to existing law.

The right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of
adoption (1 Thomson, p.80 citing Munn v. Americana Co., 82 N., Eq. 63, 88 Atl. 30; San Francisco Oyster House v. Mihich, 75
Wash, 274, 134 Pac. 921). In this regard, there is no doubt with respect to Petitioners prior adoption of the name "PHILIPS" as
part of its corporate name. Petitioners Philips Electrical and Philips Industrial were incorporated on 29 August 1956 and 25 May
1956, respectively, while Respondent Standard Philips was issued a Certificate of Registration on 19 April 1982, twenty-six (26)
years later (Rollo, p.16). Petitioner PEBV has also used the trademark "PHILIPS" on electrical lamps of all types and their
accessories since 30 September 1922, as evidenced by Certificate of Registration No. 1651.

The second requisite no less exists in this case. In determining the existence of confusing similarity in corporate names, the test
is whether the similarity is such as to mislead a person using ordinary care and discrimination. In so doing, the Court must look
to the record as well as the names themselves (Ohio Nat. Life Ins. Co. v. Ohio Life Ins. Co., 210 NE 2d 298). While the corporate
names of Petitioners and Private Respondent are not identical, a reading of Petitioners corporate names, to wit: PHILIPS
EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC., inevitably leads one to
conclude that "PHILIPS" is, indeed, the dominant word in that all the companies affiliated or associated with the principal
corporation, PEBV, are known in the Philippines and abroad as the PHILIPS Group of Companies. chanroblesv irtualawl ibra ry

Respondents maintain, however, that Petitioners did not present an iota of proof of actual confusion or deception of the public
much less a single purchaser or their product who has been deceived or confused or showed any likelihood of confusion. It is
settled, however, that proof of actual confusion need not be shown. It suffices that confusion is probably or likely to occur (6
Fletcher [Perm Ed], pp. 107-108, enumerating a long line of cases).

It may be that Private Respondents products also consist of chain rollers, belts, bearing and the like while petitioners deal
principally with electrical products. It is significant to note, however, that even the Director of Patents had denied Private
Respondents application for registration of the trademarks "Standard Philips & Device" for chains, rollers, belts, bearings and
cutting saw. That office held that PEBV "had shipped to its subsidiaries in the Philippines equipment, machines and their parts
which fall under international class where chains, rollers, belts, bearings and cutting saw, the goods in connection with which
Respondent is seeking to register "STANDARD PHILIPS . . . also belong" (Inter Partes Case No. 2010, June 17, 1988, SEC Rollo).

Furthermore, the records show that among Private Respondents primary purposes in its Articles of Incorporation (Annex D,
Petition; p. 37, Rollo) are the following: jg c:cha nrob les.com. ph

"To buy, sell, barter, trade, manufacture, import, export or otherwise acquire, dispose of, and deal in and deal with any kind of
goods, wares, and merchandise such as but not limited to plastics, carbon products, office stationery and supplies, hardware
parts, electrical wiring devices, electrical component parts and/or complement of industrial, agricultural or commercial
machineries, constructive supplies, electrical supplies and other merchandise which are or may become articles of commerce
except food, drugs, and cosmetics and to carry on such business as manufacturer, distributor, dealer, indentor, factor,
manufacturers representative capacity for domestic or foreign companies." (Emphasis ours).

For its part, Philips Electrical also includes, among its primary purposes, the following: jgc:chan roble s.com. ph

"To develop, manufacture and deal in electrical products, including electronic, mechanical and other similar products . . ." (p. 30,
Record of SEC Case No. 2743)

Given Private Respondents aforesaid underlined primary purpose, nothing could prevent it from dealing in the same line of
business of electrical devices, products or supplies which fall under its primary purposes. Besides, there is showing that Private
Respondent not only manufactured and sold ballasts for fluorescent lamps with their corporate name printed thereon but also
advertised the same as, among others, Standard Philips (TSN, before the SEC, pp. 14, 17, 25, 26, 37-42, June 14, 1985; pp.
16-19, July 25, 1985). As aptly pointed out by Petitioners," [p]rivate respondents choice of PHILIPS as part of its corporate
name [STANDARD PHILIPS CORPORATION] . . . tends to show said respondents intention to ride on the popularity and
established goodwill of said petitioners business throughout the world" (Rollo, p. 137). The subsequent appropriator of the
name or one confusingly similar thereto usually seeks an unfair advantage, a free ride on anothers goodwill (American Gold Star
Mothers, Inc. v. National Gold Star Mothers, Inc., et al, 89 App DC 269, 191 F 2d 488). chanro bles. com.ph : vi rtua l law lib rary

In allowing Private Respondent the continued use to its corporate name, the SEC maintains that the corporate names of
Petitioners PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC. contain at least two words different
from that of the corporate name of respondent STANDARD PHILIPS CORPORATION, which words will readily identify Private
Respondent from Petitioners and vice-versa.

True, under the Guidelines in the Approval of Corporate and Partnership Names formulated by the SEC, the proposed name
"should not be similar to one already used by another corporation or partnership. If the proposed name contains a word already
used as part of the firm name or style of a registered company, the proposed name must contain two other words different from
the company already registered" (Emphasis ours). It is then pointed out that Petitioners Philips Electrical and Philips Industrial
have two words different from that of Private Respondents name.

What is lost sight of, however, is that PHILIPS is a trademark or trade name which was registered as far back as 1922.
Petitioners, therefore, have the exclusive right to its use which must be free from any infringement by similarity. A corporation
has an exclusive right to the use of its name, which may be protected by injunction upon a principle similar to that upon which
persons are protected in the use of trademarks and tradenames (18 C.J.S. 574). Such principle proceeds upon the theory that it
is a fraud on the corporation which has acquired a right to that name and perhaps carried on its business thereunder, that
another should attempt to use the same name, or the same name with a slight variation in such a way as to induce persons to
deal with it in the belief that they are dealing with the corporation which has given a reputation to the name (6 Fletcher [Perm
Ed], pp. 39-40, citing Borden Ice Cream Co. v. Bordens Condensed Milk Co., 210 F 510). Notably, too, Private Respondents
name actually contains only a single word, that is, "STANDARD", different from that of Petitioners inasmuch as the inclusion of
the term "Corporation" or "Corp." merely serves the purpose of distinguishing the corporation from partnerships and other
business organizations.

The fact that there are other companies engaged in other lines of business using the word "PHILIPS" as part of their corporate
names is no defense and does not warrant the use by Private Respondent of such word which constitutes an essential feature of
Petitioners corporate name previously adopted and registered and having acquired the status of a well-known mark in the
Philippines and internationally, as well (Bureau of Patents Decision No. 88-35 [TM], June 17, 1988, SEC Records).

In support of its application for the registration of its Articles of Incorporation with the SEC, Private Respondent had submitted
an undertaking "manifesting its willingness to change its corporate name in the event another person, firm or entity has
acquired a prior right to the use of the said firm name or one deceptively or confusingly similar to it." Private Respondent must
now be held its undertaking. chanroblesv irt ualawli bra ry
"As a general rule, parties organizing a corporation must choose a name at their peril; and the use of a name similar to one
adopted by another corporation, whether a business or a nonbusiness or nonprofit organization if misleading and likely to injure
it in the exercise of its corporate functions, regardless of intent, may be prevented by the corporation having the prior right, by
a suit for injunction against the new corporation to prevent the use of the name (American Gold Star Mothers, Inc. v. National
Gold Star Mothers, Inc. 89 App DC 269, 191 F 2d 488, 27 ALR 2d 948)." cralaw virtua1aw l ibra ry

WHEREFORE, the Decision of the Court of Appeals dated 31 July 1990, and its Resolution dated 20 November 1990, are SET
ASIDE and a new one entered ENJOINING private respondent from using "PHILIPS" as a feature of its corporate name, and
ORDERING the Securities and Exchange Commission to amend private respondents Articles of Incorporation by deleting the
word PHILIPS from the corporate name of private Respondent.

No costs.

SO ORDERED.

THIRD DIVISION
 G.R. No. 101897 March 5, 1993

LYCEUM OF THE PHILIPPINES, INC. Petitioner, vs. COURT OF APPEALS, LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF CAMALANIUGAN, INC.,
LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC., BUHI LYCEUM, CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN PHILIPPINES, LYCEUM OF
EASTERN MINDANAO, INC. and WESTERN PANGASINAN LYCEUM, INC., Respondents.

Quisumbing, Torres & Evaangelista Law Offices and Ambrosio Padilla for petitioner.chanrobles virtual law library

Antonio M. Nuyles and Purungan, Chato, Chato, Tarriela & Tan Law Offices for respondents.chanrobles virtual law library

Froilan Siobal for Western Pangasinan Lyceum.

FELICIANO, J.:

Petitioner is an educational institution duly registered with the Securities and Exchange Commission ("SEC"). When it first registered with the SEC on 21
September 1950, it used the corporate name Lyceum of the Philippines, Inc. and has used that name ever since.chanroblesvirtualawlibrarychanrobles virtual law
library

On 24 February 1984, petitioner instituted proceedings before the SEC to compel the private respondents, which are also educational institutions, to delete the
word "Lyceum" from their corporate names and permanently to enjoin them from using "Lyceum" as part of their respective
names.chanroblesvirtualawlibrarychanrobles virtual law library

Some of the private respondents actively participated in the proceedings before the SEC. These are the following, the dates of their original SEC registration being
set out below opposite their respective names:

Western Pangasinan Lyceum - 27 October 1950

Lyceum of Cabagan - 31 October 1962
Lyceum of Lallo, Inc. - 26 March 1972
Lyceum of Aparri - 28 March 1972
Lyceum of Tuao, Inc. - 28 March 1972
Lyceum of Camalaniugan - 28 March 1972

The following private respondents were declared in default for failure to file an answer despite service of summons:

Buhi Lyceum;
Central Lyceum of Catanduanes;
Lyceum of Eastern Mindanao, Inc.; and
Lyceum of Southern Philippines

Petitioner's original complaint before the SEC had included three (3) other entities:

1. The Lyceum of Malacanay;

2. The Lyceum of Marbel; and
3. The Lyceum of Araullo.

The complaint was later withdrawn insofar as concerned the Lyceum of Malacanay and the Lyceum of Marbel, for failure to serve summons upon these two (2)
entities. The case against the Lyceum of Araullo was dismissed when that school motu proprio change its corporate name to "Pamantasan ng Araullo."chanrobles
virtual law library

The background of the case at bar needs some recounting. Petitioner had sometime before commenced in the SEC a proceeding (SEC-Case No. 1241) against the
Lyceum of Baguio, Inc. to require it to change its corporate name and to adopt another name not "similar [to] or identical" with that of petitioner. In an Order
dated 20 April 1977, Associate Commissioner Julio Sulit held that the corporate name of petitioner and that of the Lyceum of Baguio, Inc. were substantially
identical because of the presence of a "dominant" word, i.e., "Lyceum," the name of the geographical location of the campus being the only word which
distinguished one from the other corporate name. The SEC also noted that petitioner had registered as a corporation ahead of the Lyceum of Baguio, Inc. in point
of time, 1 and ordered the latter to change its name to another name "not similar or identical [with]" the names of previously registered
entities.chanroblesvirtualawlibrarychanrobles virtual law library

The Lyceum of Baguio, Inc. assailed the Order of the SEC before the Supreme Court in a case docketed as G.R. No. L-46595. In a Minute Resolution dated 14
September 1977, the Court denied the Petition for Review for lack of merit. Entry of judgment in that case was made on 21 October 1977. 2chanrobles virtual law
library

Armed with the Resolution of this Court in G.R. No. L-46595, petitioner then wrote all the educational institutions it could find using the word "Lyceum" as part of
their corporate name, and advised them to discontinue such use of "Lyceum." When, with the passage of time, it became clear that this recourse had failed,
petitioner instituted before the SEC SEC-Case No. 2579 to enforce what petitioner claims as its proprietary right to the word "Lyceum." The SEC hearing officer
rendered a decision sustaining petitioner's claim to an exclusive right to use the word "Lyceum." The hearing officer relied upon the SEC ruling in the Lyceum of
Baguio, Inc. case (SEC-Case No. 1241) and held that the word "Lyceum" was capable of appropriation and that petitioner had acquired an enforceable exclusive
right to the use of that word.chanroblesvirtualawlibrarychanrobles virtual law library

On appeal, however, by private respondents to the SEC En Banc, the decision of the hearing officer was reversed and set aside. The SEC En Banc did not consider
the word "Lyceum" to have become so identified with petitioner as to render use thereof by other institutions as productive of confusion about the identity of the
schools concerned in the mind of the general public. Unlike its hearing officer, the SEC En Banc held that the attaching of geographical names to the word "Lyceum"
served sufficiently to distinguish the schools from one another, especially in view of the fact that the campuses of petitioner and those of the private respondents
were physically quite remote from each other. 3chanrobles virtual law library

Petitioner then went on appeal to the Court of Appeals. In its Decision dated 28 June 1991, however, the Court of Appeals affirmed the questioned Orders of the
SEC En Banc. 4Petitioner filed a motion for reconsideration, without success.chanroblesvirtualawlibrarychanrobles virtual law library

Before this Court, petitioner asserts that the Court of Appeals committed the following errors:

1. The Court of Appeals erred in holding that the Resolution of the Supreme Court in G.R. No. L-46595 did not constitute stare decisis as to apply to this case and in
not holding that said Resolution bound subsequent determinations on the right to exclusive use of the word Lyceum.chanroblesvirtualawlibrarychanrobles virtual
law library

2. The Court of Appeals erred in holding that respondent Western Pangasinan Lyceum, Inc. was incorporated earlier than
petitioner.chanroblesvirtualawlibrarychanrobles virtual law library

3. The Court of Appeals erred in holding that the word Lyceum has not acquired a secondary meaning in favor of petitioner.chanroblesvirtualawlibrarychanrobles
virtual law library

4. The Court of Appeals erred in holding that Lyceum as a generic word cannot be appropriated by the petitioner to the exclusion of others. 5chanrobles virtual law
library

We will consider all the foregoing ascribed errors, though not necessarily seriatim. We begin by noting that the Resolution of the Court in G.R. No.
L-46595 does not, of course, constitute res adjudicata in respect of the case at bar, since there is no identity of parties. Neither is stare decisis pertinent, if only
because the SEC En Banc itself has re-examined Associate Commissioner Sulit's ruling in the Lyceum of Baguio case. The Minute Resolution of the Court in G.R. No.
L-46595 was not a reasoned adoption of the Sulit ruling.chanroblesvirtualawlibrarychanrobles virtual law library

The Articles of Incorporation of a corporation must, among other things, set out the name of the corporation. 6 Section 18 of the Corporation Code establishes a
restrictive rule insofar as corporate names are concerned:

Sec. 18. Corporate name. - No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or
confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws.
When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name. (Emphasis
supplied)

The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively or confusingly similar" to that of
any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public which
would have occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of difficulties of administration and
supervision over corporations. 7chanrobles virtual law library

We do not consider that the corporate names of private respondent institutions are "identical with, or deceptively or confusingly similar" to that of the petitioner
institution. True enough, the corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by
the appending of geographic names to the word "Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be mistaken by the general public for the
Lyceum of the Philippines, or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines.chanroblesvirtualawlibrarychanrobles
virtual law library

Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion which in turn referred to a locality on the river Ilissius in ancient Athens "comprising an
enclosure dedicated to Apollo and adorned with fountains and buildings erected by Pisistratus, Pericles and Lycurgus frequented by the youth for exercise and by
the philosopher Aristotle and his followers for teaching." 8 In time, the word "Lyceum" became associated with schools and other institutions providing public
lectures and concerts and public discussions. Thus today, the word "Lyceum" generally refers to a school or an institution of learning. While the Latin word
"lyceum" has been incorporated into the English language, the word is also found in Spanish (liceo ) and in French (lycee ). As the Court of Appeals noted in its
Decision, Roman Catholic schools frequently use the term; e.g., "Liceo de Manila," "Liceo de Baleno" (in Baleno, Masbate), "Liceo de Masbate," "Liceo de
Albay." 9 "Lyceum" is in fact as generic in character as the word "university." In the name of the petitioner, "Lyceum" appears to be a substitute for "university;" in
other places, however, "Lyceum," or "Liceo" or "Lycee" frequently denotes a secondary school or a college. It may be (though this is a question of fact which we
need not resolve) that the use of the word "Lyceum" may not yet be as widespread as the use of "university," but it is clear that a not inconsiderable number of
educational institutions have adopted "Lyceum" or "Liceo" as part of their corporate names. Since "Lyceum" or "Liceo" denotes a school or institution of learning, it
is not unnatural to use this word to designate an entity which is organized and operating as an educational institution.chanroblesvirtualawlibrarychanrobles
virtual law library

It is claimed, however, by petitioner that the word "Lyceum" has acquired a secondary meaning in relation to petitioner with the result that that word, although
originally a generic, has become appropriable by petitioner to the exclusion of other institutions like private respondents
herein.chanroblesvirtualawlibrarychanrobles virtual law library

The doctrine of secondary meaning originated in the field of trademark law. Its application has, however, been extended to corporate names since the right to use
a corporate name to the exclusion of others is based upon the same principle which underlies the right to use a particular trademark or tradename. 10 In Philippine
Nut Industry, Inc. v. Standard Brands, Inc., 11 the doctrine of secondary meaning was elaborated in the following terms:

. . . a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive,
might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing
public, the word or phrase has come to mean that the article was his product. 12chanrobles virtual law library
The question which arises, therefore, is whether or not the use by petitioner of "Lyceum" in its corporate name has been for such length of time and with such
exclusivity as to have become associated or identified with the petitioner institution in the mind of the general public (or at least that portion of the general public
which has to do with schools). The Court of Appeals recognized this issue and answered it in the negative:

Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive appropriation with reference to an article in the market, because
geographical or otherwise descriptive might nevertheless have been used so long and so exclusively by one producer with reference to this article that, in that trade
and to that group of the purchasing public, the word or phrase has come to mean that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This
circumstance has been referred to as the distinctiveness into which the name or phrase has evolved through the substantial and exclusive use of the same for a
considerable period of time. Consequently, the same doctrine or principle cannot be made to apply where the evidence did not prove that the business (of the
plaintiff) has continued for so long a time that it has become of consequence and acquired a good will of considerable value such that its articles and produce have
acquired a well-known reputation, and confusion will result by the use of the disputed name (by the defendant) (Ang Si Heng vs. Wellington Department Store,
Inc., 92 Phil. 448).chanroblesvirtualawlibrarychanrobles virtual law library

With the foregoing as a yardstick, [we] believe the appellant failed to satisfy the aforementioned requisites. No evidence was ever presented in the hearing before
the Commission which sufficiently proved that the word "Lyceum" has indeed acquired secondary meaning in favor of the appellant. If there was any of this kind, the
same tend to prove only that the appellant had been using the disputed word for a long period of time. Nevertheless, its (appellant) exclusive use of the word (Lyceum)
was never established or proven as in fact the evidence tend to convey that the cross-claimant was already using the word "Lyceum" seventeen (17) years prior to the
date the appellant started using the same word in its corporate name. Furthermore, educational institutions of the Roman Catholic Church had been using the same or
similar word like "Liceo de Manila," "Liceo de Baleno" (in Baleno, Masbate), "Liceo de Masbate," "Liceo de Albay" long before appellant started using the word
"Lyceum". The appellant also failed to prove that the word "Lyceum" has become so identified with its educational institution that confusion will surely arise in the
minds of the public if the same word were to be used by other educational institutions.chanroblesvirtualawlibrarychanrobles virtual law library

In other words, while the appellant may have proved that it had been using the word "Lyceum" for a long period of time, this fact alone did not amount to mean
that the said word had acquired secondary meaning in its favor because the appellant failed to prove that it had been using the same word all by itself to the
exclusion of others. More so, there was no evidence presented to prove that confusion will surely arise if the same word were to be used by other educational
institutions. Consequently, the allegations of the appellant in its first two assigned errors must necessarily fail. 13 (Emphasis partly in the original and partly
supplied)

We agree with the Court of Appeals. The number alone of the private respondents in the case at bar suggests strongly that petitioner's use of the word "Lyceum"
has not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning. It may be noted also that at least one of the private
respondents, i.e., the Western Pangasinan Lyceum, Inc., used the term "Lyceum" seventeen (17) years before the petitioner registered its own corporate name
with the SEC and began using the word "Lyceum." It follows that if any institution had acquired an exclusive right to the word "Lyceum," that institution would
have been the Western Pangasinan Lyceum, Inc. rather than the petitioner institution.chanroblesvirtualawlibrarychanrobles virtual law library

In this connection, petitioner argues that because the Western Pangasinan Lyceum, Inc. failed to reconstruct its records before the SEC in accordance with the
provisions of R.A. No. 62, which records had been destroyed during World War II, Western Pangasinan Lyceum should be deemed to have lost all rights it may
have acquired by virtue of its past registration. It might be noted that the Western Pangasinan Lyceum, Inc. registered with the SEC soon after petitioner had filed
its own registration on 21 September 1950. Whether or not Western Pangasinan Lyceum, Inc. must be deemed to have lost its rights under its original 1933
registration, appears to us to be quite secondary in importance; we refer to this earlier registration simply to underscore the fact that petitioner's use of the word
"Lyceum" was neither the first use of that term in the Philippines nor an exclusive use thereof. Petitioner's use of the word "Lyceum" was not exclusive but was in
truth shared with the Western Pangasinan Lyceum and a little later with other private respondent institutions which registered with the SEC using "Lyceum" as
part of their corporation names. There may well be other schools using Lyceum or Liceo in their names, but not registered with the SEC because they have not
adopted the corporate form of organization.chanroblesvirtualawlibrarychanrobles virtual law library

We conclude and so hold that petitioner institution is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its corporate name and that
other institutions may use "Lyceum" as part of their own corporate names. To determine whether a given corporate name is "identical" or "confusingly or
deceptively similar" with another entity's corporate name, it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. One must evaluate
corporate names in their entirety and when the name of petitioner is juxtaposed with the names of private respondents, they are not reasonably regarded as
"identical" or "confusingly or deceptively similar" with each other.chanroblesvirtualawlibrarychanrobles virtual law library

WHEREFORE, the petitioner having failed to show any reversible error on the part of the public respondent Court of Appeals, the Petition for Review is DENIED
for lack of merit, and the Decision of the Court of Appeals dated 28 June 1991 is hereby AFFIRMED. No pronouncement as to
costs.chanroblesvirtualawlibrarychanrobles virtual law library

SO ORDERED.
 SECOND DIVISION

[G.R. No. 125221. June 19, 1997.]

REYNALDO M. LOZANO, Petitioner, v. HON. ELIEZER R. DE LOS SANTOS, Presiding Judge, RTC, Br. 58, Angeles City;
and ANTONIO ANDA, Respondents.

DECISION

PUNO, J.:

This petition for certiorari seeks to annul and set aside the decision of the Regional Trial Court, Branch 58, Angeles City which
ordered the Municipal Circuit Trial Court, Mabalacat and Magalang, Pampanga to dismiss Civil Case No. 1214 for lack of
jurisdiction.

The facts are undisputed. On December 19, 1995, petitioner Reynaldo M. Lozano filed Civil Case No. 1214 for damages against
respondent Antonio Anda before the Municipal Circuit Trial Court (MCTC), Mabalacat and Magalang, Pampanga. Petitioner alleged
that he was the president of the Kapatirang Mabalacat-Angeles Jeepney Drivers Association, Inc. (KAMAJDA) while respondent
Anda was the president of the Samahang Angeles-Mabalacat Jeepney Operators and Drivers Association, Inc. (SAMAJODA); in
August 1995, upon the request of the Sangguniang Bayan of Mabalacat, Pampanga, petitioner and private respondent agreed to
consolidate their respective associations and form the Unified Mabalacat-Angeles Jeepney Operators and Drivers Association,
Inc. (UMAJODA); petitioner and private respondent also agreed to elect one set of officers who shall be given the sole authority
to collect the daily dues from the members of the consolidated association; elections were held on October 29, 1995 and both
petitioner and private respondent ran for president; petitioner won; private respondent protested and, alleging fraud, refused to
recognize the results of the election; private respondent also refused to abide by their agreement and continued collecting the
dues from the members of his association despite several demands to desist. Petitioner was thus constrained to file the
complaint to restrain private respondent from collecting the dues and to order him to pay damages in the amount of P25,000.00
and attorneys fees of P500.00. 1

Private respondent moved to dismiss the complaint for lack of jurisdiction, claiming that jurisdiction was lodged with the
Securities and Exchange Commission (SEC). The MCTC denied the motion on February 9, 1996. 2 It denied reconsideration on
March 8, 1996. 3

Private respondent filed a petition for certiorari before the Regional Trial Court, Branch 58, Angeles City. 4 The trial court found
the dispute to be intracorporate, hence, subject to the jurisdiction of the SEC, and ordered the MCTC to dismiss Civil Case No.
1214 accordingly. 5 It denied reconsideration on May 31, 1996. 6

Hence this petition. Petitioner claims that: jgc:chanro bles. com.ph

"THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
AND SERIOUS ERROR OF LAW IN CONCLUDING THAT THE SECURITIES AND EXCHANGE COMMISSION HAS JURISDICTION
OVER A CASE OF DAMAGES BETWEEN HEADS/PRESIDENTS OF TWO (2) ASSOCIATIONS WHO INTENDED TO
CONSOLIDATE/MERGE THEIR ASSOCIATIONS BUT NOT YET [SIC] APPROVED AND REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION." 7

The jurisdiction of the Securities and Exchange Commission (SEC) is set forth in Section 5 of Presidential Decree No. 902-A.
Section 5 reads as follows: jgc:chanro bles .com.ph

"Section 5. . . . [T]he Securities and Exchange Commission [has] original and exclusive jurisdiction to hear and decide cases
involving:c han rob1es v irt ual 1aw l ibra ry

(a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners,
amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders,
partners, members of associations or organizations registered with the Commission. chanrobl esvirt ual|awlib rary

(b) Controversies arising out of intracorporate or partnership relations, between and among stockholders, members or
associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members,
or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their
individual franchise or right to exist as such entity.

(c) Controversies in the election or appointment of directors, trustees, officers or managers of such corporations, partnerships or
associations.

(d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where
the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of
meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient
assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee created
pursuant to this Decree." cralaw virtua1aw li bra ry
The grant of jurisdiction to the SEC must be viewed in the light of its nature and function under the law. 8 This jurisdiction is
determined by a concurrence of two elements: (1) the status or relationship of the parties; and (2) the nature of the question
that is the subject of their controversy. 9

The first element requires that the controversy must arise out of intracorporate or partnership relations between and among
stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they
are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State
in so far as it concerns their individual franchises. 10 The second element requires that the dispute among the parties be
intrinsically connected with the regulation of the corporation, partnership or association or deal with the internal affairs of the
corporation, partnership or association. 11 After all, the principal function of the SEC is the supervision and control of
corporations, partnerships and associations with the end in view that investments in these entities may be encouraged and
protected, and their activities pursued for the promotion of economic development. 12

There is no intracorporate nor partnership relation between petitioner and private Respondent. The controversy between them
arose out of their plan to consolidate their respective jeepney drivers and operators associations into a single common
association. This unified association was, however, still a proposal. It had not been approved by the SEC, neither had its officers
and members submitted their articles of consolidation in accordance with Sections 78 and 79 of the Corporation Code.
Consolidation becomes effective not upon mere agreement of the members but only upon issuance of the certificate of
consolidation by the SEC. 13 When the SEC, upon processing and examining the articles of consolidation, is satisfied that the
consolidation of the corporations is not inconsistent with the provisions of the Corporation Code and existing laws, it issues a
certificate of consolidation which makes the reorganization official. 14 The new consolidated corporation comes into existence
and the constituent corporations dissolve and cease to exist. 15

The KAMAJDA and SAMAJODA to which petitioner and private respondent belong are duly registered with the SEC, but these
associations are two separate entities. The dispute between petitioner and private respondent is not within the KAMAJDA nor the
SAMAJODA. It is between members of separate and distinct associations. Petitioner and private respondent have no
intracorporate relation much less do they have an intracorporate dispute. The SEC therefore has no jurisdiction over the
complaint.

The doctrine of corporation by estoppel 16 advanced by private respondent cannot override jurisdictional requirements.
Jurisdiction is fixed by law and is not subject to the agreement of the parties. 17 It cannot be acquired through or waived,
enlarged or diminished by, any act or omission of the parties, neither can it be conferred by the acquiescence of the court. 18

Corporation by estoppel is founded on principles of equity and is designed to prevent injustice and unfairness. 19 It applies when
persons assume to form a corporation and exercise corporate functions and enter into business relations with third persons.
Where there is no third person involved and the conflict arises only among those assuming the form of a corporation, who
therefore know that it has not been registered there is no corporation by estoppel. 20

IN VIEW WHEREOF, the petition is granted and the decision dated April 18, 1996 and the order dated May 31, 1996 of the
Regional Trial Court, Branch 58, Angeles City are set aside. The Municipal Circuit Trial Court of Mabalacat and Magalang,
Pampanga is ordered to proceed with dispatch in resolving Civil Case No. 1214. No costs.

SO ORDERED.
 FIRST DIVISION

[G.R. No. 119002. October 19, 2000.]

INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., Petitioner, v. HON. COURT OF APPEALS, HENRI KAHN,
PHILIPPINES FOOTBALL FEDERATION, Respondents.

DECISION

KAPUNAN, J.:

On June 30 1989, petitioner International Express Travel and Tour Services, Inc., through its managing director, wrote a letter
to the Philippine Football Federation (Federation), through its president private respondent Henri Kahn, wherein the former
offered its services as a travel agency to the latter. 1

The offer was accepted. chanrob 1es vi rtua 1 1aw 1ib ra ry

Petitioner secured the airline tickets for the trips of the athletes and officials of the Federation to the South East Asian Games in
Kuala Lumpur as well as various other trips to the Peoples Republic of China and Brisbane. The total cost of the tickets
amounted to P449,654.83. For the tickets received, the Federation made two partial payments, both in September of 1989, in
the total amount of P176,467.50. 2

On 4 October 1989, petitioner wrote the Federation, through the private respondent a demand letter requesting for the amount
of P265,894.33. 3 On 30 October 1989, the Federation, through the Project Gintong Alay, paid the amount of P31,603.00. 4

On 27 December 1989, Henri Kahn issued a personal check in the amount of P50,000 as partial payment for the outstanding
balance of the Federation. 5 Thereafter, no further payments were made despite repeated demands. chanrob1e s virtua1 1aw 1ib rary

This prompted petitioner to file a civil case before the Regional Trial Court of Manila. Petitioner sued Henri Kahn in his personal
capacity and as President of the Federation and impleaded the Federation as an alternative defendant. Petitioner sought to hold
Henri Kahn liable for the unpaid balance for the tickets purchased by the Federation on the ground that Henri Kahn allegedly
guaranteed the said obligation. 6

Henri Kahn filed his answer with counterclaim. While not denying the allegation that the Federation owed the amount
P207,524.20, representing the unpaid balance for the plane tickets, he averred that the petitioner has no cause of action against
him either in his personal capacity or in his official capacity as president of the Federation. He maintained that he; did not
guarantee payment but merely acted as an agent of the Federation which has a separate and distinct juridical personality. 7

On the other hand, the Federation failed to file its answer, hence, was declared in default by the trial court. 8

In due course, the trial court rendered judgment and ruled in favor of the petitioner and declared Henri Kahn personally liable
for the unpaid obligation of the Federation. In arriving at the said ruling, the trial court rationalized: c han rob1es v irt ual 1aw l ibra ry

Defendant Henri Kahn would have been correct in his contentions had it been duly established that defendant Federation is a
corporation The trouble, however, is that neither the plaintiff nor the defendant Henri Kahn has adduced any evidence proving
the corporate existence of the defendant Federation. In paragraph 2 of its complaint, plaintiff asserted that "defendant Philippine
Football Federation is a sports association . . ." This has not been denied by defendant Henri Kahn in his Answer. Being the
President of defendant Federation, its corporate existence is within the personal knowledge of defendant Henri Kahn. He could
have easily denied specifically the assertion of the plaintiff that it is a mere sports association if it were a domestic corporation.
But he did not.

x x x

A voluntary unincorporated association, like defendant Federation has no power to enter into, or to ratify, a contract. The
contract entered into by its officers or agents on behalf of such association is not binding on, or enforceable against it. The
officers or agents are themselves personally liable.

x x x9

The dispositive portion of the trial courts decision reads: chan rob1es v irt ual 1aw l ibra ry

WHEREFORE, judgment is rendered ordering defendant Henri Kahn to pay the plaintiff the principal sum of P207,524.20, plus
the interest thereon at the legal rate computed from July 5, 1990, the date the complaint was filed, until the principal obligation
is fully liquidated; and another sum of P15,000.00 for attorneys fees. chanro b1es vi rt ua1 1aw 1i bra ry

The complaint of the plaintiff against the Philippine Football Federation and the counterclaims of the defendant Henri Kahn are
hereby dismissed.
With the costs against defendant Henri Kahn. 10

Only Henri Kahn elevated the above decision to the Court of Appeals. On 21 December 1994, the respondent court rendered a
decision reversing the trial court, the decretal portion of said decision reads: cha nro b1es vi rtua l 1aw lib ra ry

WHEREFORE, premises considered, the judgment appealed from is hereby REVERSED and SET ASIDE and another one is
rendered dismissing the complaint against defendant Henri S. Kahn. 11

In finding for Henri Kahn, the Court of Appeals recognized the juridical existence of the Federation. It rationalized that since
petitioner failed to prove that Henri Kahn guaranteed the obligation of the Federation, he should not be held liable for the same
as said entity has a separate and distinct personality from its officers.

Petitioner filed a motion for reconsideration and as an alternative prayer pleaded that the Federation be held liable for the
unpaid obligation. The same was denied by the appellate court in its resolution of 8 February 1995, where it stated that: chanrob 1es vi rtua1 1aw 1ib rary

As to the alternative prayer for the Modification of the Decision by expressly declaring in the dispositive portion thereof the
Philippine Football Federation (PFF) as liable for the unpaid obligation, it should be remembered that the trial court dismissed the
complaint against the Philippine Football Federation, and the plaintiff did not appeal from this decision. Hence, the Philippine
Football Federation is not a party to this appeal and consequently, no judgment may be pronounced by this Court against the
PFF without violating the due process clause, let alone the fact that the judgment dismissing the complaint against it, had
already become final by virtue of the plaintiffs failure to appeal therefrom. The alternative prayer is therefore similarly DENIED.
12

Petitioner now seeks recourse to this Court and alleges that the respondent court committed the following assigned errors: 13

A. THE, HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD DEALT WITH THE PHILIPPINE FOOTBALL
FEDERATION (PFF) AS A CORPORATE ENTITY AND IN NOT HOLDING THAT PRIVATE RESPONDENT HENRI KAHN WAS THE ONE,
WHO REPRESENTED THE PFF AS HAVING CORPORATE PERSONALITY.

B. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING PRIVATE RESPONDENT HENRI KAHN PERSONALLY LIABLE
FOR THE OBLIGATION OF THE UNINCORPORATED PFF, HAVING NEGOTIATED WITH PETITIONER AND CONTRACTED THE
OBLIGATION IN BEHALF OF THE PFF, MADE A PARTIAL PAYMENT AN ASSURED PETITIONER OF FULLY SETTLING THE
OBLIGATION.

C. ASSUMING ARGUENDO THAT PRIVATE RESPONDENT KAHN IS NOT PERSONALLY LIABLE, THE HONORABLE COURT OF
APPEALS ERRED IN NOT EXPRESSLY DECLARING IN ITS DECISION THAT THE PFF IS SOLELY LIABLE FOR THE OBLIGATION. chanrob1es v irt ua1 1aw 1 ibra ry

The resolution of the case at bar hinges on the determination of the existence of the Philippine Football Federation as a juridical
person. In the assailed decision, the appellate court recognized the existence of the Federation. In support of this, the CA cited
Republic Act 3135, otherwise known as the Revised Charter of the Philippine Amateur Athletic Federation, and Presidential
Decree No. 604 as the laws from which said Federation derives its existence. chan rob1e s virtua1 1aw 1ib rary

As correctly observed by the appellate court, both R.A. 3135 and P.D. No. 604 recognized the juridical existence of national
sports associations. This may be gleaned from the powers and functions granted to these associations. Section 14 of R.A. 3135
provides:c han rob1es v irt ual 1aw l ibra ry

SECTION 14. Functions, powers and duties of Associations. The National Sports Association shall have the following functions,
powers and duties: chan rob1e s virtual 1aw l ib rary

1. To adopt a constitution and by-laws for their internal organization and government.

2. To raise funds by donations benefits, and other means for their purposes.

3. To purchase, sell, lease or otherwise encumber property both real and personal, for the accomplishment of their purpose;

4. To affiliate with international or regional sports Associations after due consultation with the executive committee;

x x x

13. To perform such other acts as may be necessary for the proper accomplishment of their purposes and not inconsistent with
this Act.

Section 8 of P.D. 604, grants similar functions to these sports associations: chanrob1e s virtual 1aw lib rary

SECTION. 8. Functions, Powers, and Duties of National Sports Association. The National sports associations shall have the
following functions, powers, and duties: chanrob1es vi rt ual 1aw li bra ry

1. Adopt a Constitution and By-Laws for their internal organization and government which shall be submitted to the Department
and any amendment hereto shall take effect upon approval by the Department: Provided, however, That no team, school, club,
organization or entity shall be admitted as a voting member of an association unless 60 per cent of the athletes composing said
team, school, club, organization or entity are Filipino citizens.
2. Raise funds by donations, benefits, and other means for their purpose subject to the approval of the Department;

3. Purchase, sell, lease, or otherwise encumber property, both real and personal, for the accomplishment of their purpose;

4. Conduct local, interport, and international competitions, other than the Olympic and Asian Games, for the promotion of their
sport;

5. Affiliate with international or regional sports associations after due consultation with the Department;

x x x

13. Perform such other functions as may be provided by law.

The above powers and functions granted to national sports associations clearly indicate that these entities may acquire a
juridical personality. The power to purchase, sell, lease and encumber property are acts which may only be done by persons,
whether natural or artificial, with juridical capacity. However, while we agree with the appellate court that national sports
associations may be accorded corporate status, such does not automatically take place by the mere passage of these laws. chanrob 1es vi rtua 1 1aw 1ib rary

It is a basic postulate that before a corporation may acquire juridical personality, the State must give its consent either in the
form of a special law or a general enabling act. We cannot agree with the view of the appellate court; and the private
respondent that the Philippine Football Federation came into existence upon the passage of these laws. Nowhere can it be found
in R.A. 3135 or P.D. 604 any provision creating the Philippine Football Federation. These laws merely recognized the existence of
national sports associations and provided the manner by which these entities may acquire juridical personality. Section 11 of
R.A. 3135 provides: chan rob1e s virtual 1aw l ibra ry

SECTION 11. National Sports Association; organization and recognition. A National Association shall be organized for each
individual sports in the Philippines in the manner hereinafter provided to constitute the Philippine Amateur Athletic Federation.
Applications for recognition as a National Sports Association shall be filed with the executive committee together with, among
others, a copy of the constitution and by-laws and a list of the members of the proposed association, and a filing fee of ten
pesos.

The Executive Committee shall give the recognition applied for if it is satisfied that said association will promote the purposes of
this Act and particularly section three thereof. No application shall be held pending for more than three months after the filing
thereof without any action having been taken thereon by the executive committee. Should the application be rejected, the
reasons for such rejection shall be clearly stated in a written communication to the applicant. Failure to specify the reasons for
the rejection shall not affect the application which shall be considered as unacted upon: Provided however, That until the
executive committee herein provided shall have been formed, applications for recognition shall be passed upon by the duly
elected members of the present executive committee of the Philippine Amateur Athletic Federation. The said executive
committee shall be dissolved upon the organization of the executive committee herein provided: Provided, further, That the
functioning executive committee is charged with the responsibility of seeing to it that the National Sports Associations are
formed and organized within six months from and after the passage of this Act. chanrob1es vi rt ua1 1aw 1i bra ry

Section 7 of P.D. 604, similarly provides: cha nrob 1es vi rtual 1aw lib rary

SECTION 7. National Sports Associations: Application for accreditation or recognition as a national sports association for each
individual sport in the Philippines shall be filed with the Department together with, among others, a copy of the Constitution and
By-Laws and a list of the members of the proposed association.

The Department shall give the recognition applied for if it is satisfied that the national sports association to be organized will
promote the objectives of this Decree and has substantially complied with the rules and regulations of the Department:
Provided, That the Department may withdraw accreditation or recognition for violation of this Decree and such rules and
regulations formulated by it.

The Department shall supervise the national sports association: Provided, That the latter shall have exclusive technical control
over the development and promotion of the particular sport for which they are organized.

Clearly the above cited provisions require that before an entity may be considered as a national sports association, such entity
must be recognized by the accrediting organization, the Philippine, Amateur Athletic Federation under R.A. 3135, and the
Department of Youth and Sports Development under P.D. 604.

This fact of recognition, however, Henri Kahn failed to substantiate. In attempting to prove the juridical existence of the
Federation, Henri Kahn attached to his motion for reconsideration before the trial court a copy of the constitution and by-laws of
the Philippine, Football Federation. Unfortunately, the same does not prove that said Federation has indeed been recognized and
accredited by either the Philippine Amateur Athletic Federation or the Department of Youth and Sports Development.
Accordingly, we rule that the Philippine Football Federation is not a national sports association within the purview of the
aforementioned laws and does not have corporate existence of its own. chanrob1e s virtua1 1aw 1ib rary

Thus being said, it follows that private respondent Henry Kahn should be held liable for the unpaid obligations of the
unincorporated Philippine Football Federation. It is a settled principal in corporation law that any person acting or purporting to
act on behalf of a corporation which has no valid existence assumes such privileges and becomes personally liable for contract
entered into or for other acts performed as such agent. 14 As president of the Federation, Henri Kahn is presumed to have
known about the corporate existence or non-existence of the Federation. We cannot subscribe to the position taken by the
appellate court that even assuming that the Federation was defectively incorporated, the petitioner cannot deny the corporate
existence of the Federation because it had contracted and dealt with the Federation in such a manner as to recognize and in
effect admit its existence. 15 The doctrine of corporation by estoppel is mistakenly applied by the respondent court to the
petitioner. The application of the doctrine applies to a third party only when he tries to escape liabilities on a contract from which
he has benefited on the irrelevant ground of defective incorporation. 16 In the case at bar, the petitioner is not trying to escape
liability from the contract but rather is the one claiming from the contract.

WHEREFORE, the decision appealed from is REVERSED and SET ASIDE. The decision of the Regional Trial Court of Manila,
Branch 35, in Civil Case No. 90-53595 is hereby REINSTATED.

SO ORDERED.
 EN BANC

[G.R. NO. 141735 : June 8, 2005]

SAPPARI K. SAWADJAAN, Petitioner, v. THE HONORABLE COURT OF APPEALS, THE CIVIL SERVICE COMMISSION and AL-AMANAH INVESTMENT BANK OF
THE PHILIPPINES, Respondents.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Certiorari under Rule 65 of the Rules of Court of the Decision1 of the Court of Appeals of 30 March 1999 affirming Resolutions No. 94-4483
and No. 95-2754 of the Civil Service Commission (CSC) dated 11 August 1994 and 11 April 1995, respectively, which in turn affirmed Resolution No. 2309 of the
Board of Directors of the Al-Amanah Islamic Investment Bank of the Philippines (AIIBP) dated 13 December 1993, finding petitioner guilty of Dishonesty in the
Performance of Official Duties and/or Conduct Prejudicial to the Best Interest of the Service and dismissing him from the service, and its Resolution2 of 15
December 1999 dismissing petitioner's Motion for Reconsideration.

The records show that petitioner Sappari K. Sawadjaan was among the first employees of the Philippine Amanah Bank (PAB) when it was created by virtue of
Presidential Decree No. 264 on 02 August 1973. He rose through the ranks, working his way up from his initial designation as security guard, to settling clerk,
bookkeeper, credit investigator, project analyst, appraiser/ inspector, and eventually, loans analyst. 3

In February 1988, while still designated as appraiser/investigator, Sawadjaan was assigned to inspect the properties offered as collaterals by Compressed Air
Machineries and Equipment Corporation (CAMEC) for a credit line of Five Million Pesos (P5,000,000.00). The properties consisted of two parcels of land covered
by Transfer Certificates of Title (TCTs) No. N-130671 and No. C-52576. On the basis of his Inspection and Appraisal Report, 4 the PAB granted the loan application.
When the loan matured on 17 May 1989, CAMEC requested an extension of 180 days, but was granted only 120 days to repay the loan. 5

In the meantime, Sawadjaan was promoted to Loans Analyst I on 01 July 1989.6

In January 1990, Congress passed Republic Act 6848 creating the AIIBP and repealing P.D. No. 264 (which created the PAB). All assets, liabilities and capital
accounts of the PAB were transferred to the AIIBP, 7 and the existing personnel of the PAB were to continue to discharge their functions unless discharged.8 In the
ensuing reorganization, Sawadjaan was among the personnel retained by the AIIBP.

When CAMEC failed to pay despite the given extension, the bank, now referred to as the AIIBP, discovered that TCT No. N-130671 was spurious, the property
described therein non-existent, and that the property covered by TCT No. C-52576 had a prior existing mortgage in favor of one Divina Pablico.

On 08 June 1993, the Board of Directors of the AIIBP created an Investigating Committee to look into the CAMEC transaction, which had cost the bank Six Million
Pesos (P6,000,000.00) in losses.9 The subsequent events, as found and decided upon by the Court of Appeals, 10 are as follows:

On 18 June 1993, petitioner received a memorandum from Islamic Bank [AIIBP] Chairman Roberto F. De Ocampo charging him with Dishonesty in the
Performance of Official Duties and/or Conduct Prejudicial to the Best Interest of the Service and preventively suspending him.

In his memorandum dated 8 September 1993, petitioner informed the Investigating Committee that he could not submit himself to the jurisdiction of the
Committee because of its alleged partiality. For his failure to appear before the hearing set on 17 September 1993, after the hearing of 13 September 1993 was
postponed due to the Manifestation of even date filed by petitioner, the Investigating Committee declared petitioner in default and the prosecution was allowed to
present its evidence ex parte.

On 08 December 1993, the Investigating Committee rendered a decision, the pertinent portions of which reads as follows:

In view of respondent SAWADJAAN'S abject failure to perform his duties and assigned tasks as appraiser/inspector, which resulted to the prejudice and
substantial damage to the Bank, respondent should be held liable therefore. At this juncture, however, the Investigating Committee is of the considered opinion
that he could not be held liable for the administrative offense of dishonesty considering the fact that no evidence was adduced to show that he profited or
benefited from being remiss in the performance of his duties. The record is bereft of any evidence which would show that he received any amount in consideration
for his non-performance of his official duties.

This notwithstanding, respondent cannot escape liability. As adverted to earlier, his failure to perform his official duties resulted to the prejudice and substantial
damage to the Islamic Bank for which he should be held liable for the administrative offense of CONDUCT PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE.

Premises considered, the Investigating Committee recommends that respondent SAPPARI SAWADJAAN be meted the penalty of SIX (6) MONTHS and ONE (1) DAY
SUSPENSION from office in accordance with the Civil Service Commission's Memorandum Circular No. 30, Series of 1989.

On 13 December 1993, the Board of Directors of the Islamic Bank [AIIBP] adopted Resolution No. 2309 finding petitioner guilty of Dishonesty in the Performance
of Official Duties and/or Conduct Prejudicial to the Best Interest of the Service and imposing the penalty of Dismissal from the Service.

On reconsideration, the Board of Directors of the Islamic Bank [AIIBP] adopted the Resolution No. 2332 on 20 February 1994 reducing the penalty imposed on
petitioner from dismissal to suspension for a period of six (6) months and one (1) day.

On 29 March 1994, petitioner filed a notice of appeal to the Merit System Protection Board (MSPB).
On 11 August 1994, the CSC adopted Resolution No. 94-4483 dismissing the appeal for lack of merit and affirming Resolution No. 2309 dated 13 December 1993 of
the Board of Directors of Islamic Bank.

On 11 April 1995, the CSC adopted Resolution No. 95-2574 denying petitioner's Motion for Reconsideration.

On 16 June 1995, the instant petition was filed with the Honorable Supreme Court on the following assignment of errors:

I. Public respondent Al-Amanah Islamic Investment Bank of the Philippines has committed a grave abuse of discretion amounting to excess or lack of jurisdiction
when it initiated and conducted administrative investigation without a validly promulgated rules of procedure in the adjudication of administrative cases at the
Islamic Bank.

II. Public respondent Civil Service Commission has committed a grave abuse of discretion amounting to lack of jurisdiction when it prematurely and falsely
assumed jurisdiction of the case not appealed to it, but to the Merit System Protection Board.

III. Both the Islamic Bank and the Civil Service Commission erred in finding petitioner Sawadjaan of having deliberately reporting false information and therefore
guilty of Dishonesty and Conduct Prejudicial to the Best Interest of the Service and penalized with dismissal from the service.

On 04 July 1995, the Honorable Supreme Court En Banc referred this petition to this Honorable Court pursuant to Revised Administrative Circular No. 1-95, which
took effect on 01 June 1995.

We do not find merit [in] the petition.

Anent the first assignment of error, a reading of the records would reveal that petitioner raises for the first time the alleged failure of the Islamic Bank [AIIBP] to
promulgate rules of procedure governing the adjudication and disposition of administrative cases involving its personnel. It is a rule that issues not properly
brought and ventilated below may not be raised for the first time on appeal, save in exceptional circumstances (Casolita, Sr. v. Court of Appeals, 275 SCRA 257)
none of which, however, obtain in this case. Granting arguendo that the issue is of such exceptional character that the Court may take cognizance of the same, still,
it must fail. Section 26 of Republic Act No. 6848 (1990) provides:

Section 26. Powers of the Board. The Board of Directors shall have the broadest powers to manage the Islamic Bank, x x x The Board shall adopt policy guidelines
necessary to carry out effectively the provisions of this Charter as well as internal rules and regulations necessary for the conduct of its Islamic banking business
and all matters related to personnel organization, office functions and salary administration. (Italics ours)

On the other hand, Item No. 2 of Executive Order No. 26 (1992) entitled "Prescribing Procedure and Sanctions to Ensure Speedy Disposition of Administrative
Cases" directs, "all administrative agencies" to "adopt and include in their respective Rules of Procedure" provisions designed to abbreviate administrative
proceedings.

The above two (2) provisions relied upon by petitioner does not require the Islamic Bank [AIIBP] to promulgate rules of procedure before administrative
discipline may be imposed upon its employees. The internal rules of procedures ordained to be adopted by the Board refers to that necessary for the conduct of its
Islamic banking business and all matters related to "personnel organization, office functions and salary administration." On the contrary, Section 26 of RA 6848
gives the Board of Directors of the Islamic Bank the "broadest powers to manage the Islamic Bank." This grant of broad powers would be an idle ceremony if it
would be powerless to discipline its employees.

The second assignment of error must likewise fail. The issue is raised for the first time via this petition for certiorari. Petitioner submitted himself to the
jurisdiction of the CSC. Although he could have raised the alleged lack of jurisdiction in his Motion for Reconsideration of Resolution No. 94-4483 of the CSC, he did
not do so. By filing the Motion for Reconsideration, he is estopped from denying the CSC's jurisdiction over him, as it is settled rule that a party who asks for an
affirmative relief cannot later on impugn the action of the tribunal as without jurisdiction after an adverse result was meted to him. Although jurisdiction over the
subject matter of a case may be objected to at any stage of the proceedings even on appeal, this particular rule, however, means that jurisdictional issues in a case
can be raised only during the proceedings in said case and during the appeal of said case (Aragon v. Court of Appeals, 270 SCRA 603). The case at bar is a petition
[for] certiorari and not an appeal.

But even on the merits the argument must falter. Item No. 1 of CSC Resolution No. 93-2387 dated 29 June 1993, provides:

Decisions in administrative cases involving officials and employees of the civil service appealable to the Commission pursuant to Section 47 of Book V of the Code
(i.e., Administrative Code of 1987) including personnel actions such as contested appointments shall now be appealed directly to the Commission and not to the
MSPB.

In Rubenecia v. Civil Service Commission, 244 SCRA 640, 651, it was categorically held:

. . . The functions of the MSPB relating to the determination of administrative disciplinary cases were, in other words, re-allocated to the Commission itself.

Be that as it may, "(i)t is hornbook doctrine that in order `(t)o ascertain whether a court (in this case, administrative agency) has jurisdiction or not, the provisions
of the law should be inquired into. 'Furthermore, `the jurisdiction of the court must appear clearly from the statute law or it will not be held to exist. '"(Azarcon v.
Sandiganbayan, 268 SCRA 747, 757) From the provision of law abovecited, the Civil Service Commission clearly has jurisdiction over the Administrative Case
against petitioner.

Anent the third assignment of error, we likewise do not find merit in petitioner's proposition that he should not be liable, as in the first place, he was not qualified
to perform the functions of appraiser/investigator because he lacked the necessary training and expertise, and therefore, should not have been found dishonest by
the Board of Directors of Islamic Bank [AIIBP] and the CSC. Petitioner himself admits that the position of appraiser/inspector is "one of the most serious [and]
sensitive job in the banking operations." He should have been aware that accepting such a designation, he is obliged to perform the task at hand by the exercise of
more than ordinary prudence. As appraiser/investigator, he is expected, among others, to check the authenticity of the documents presented by the borrower by
comparing them with the originals on file with the proper government office. He should have made it sure that the technical descriptions in the location plan on
file with the Bureau of Lands of Marikina, jibe with that indicated in the TCT of the collateral offered by CAMEC, and that the mortgage in favor of the Islamic Bank
was duly annotated at the back of the copy of the TCT kept by the Register of Deeds of Marikina. This, petitioner failed to do, for which he must be held liable. That
he did not profit from his false report is of no moment. Neither the fact that it was not deliberate or willful, detracts from the nature of the act as dishonest. What is
apparent is he stated something to be a fact, when he really was not sure that it was so.

Wherefore, above premises considered, the instant Petition is DISMISSED, and the assailed Resolutions of the Civil Service Commission are hereby AFFIRMED.

On 24 March 1999, Sawadjaan's counsel notified the court a quo of his change of address,11 but apparently neglected to notify his client of this fact. Thus, on 23 July
1999, Sawadjaan, by himself, filed a Motion for New Trial12 in the Court of Appeals based on the following grounds: fraud, accident, mistake or excusable
negligence and newly discovered evidence. He claimed that he had recently discovered that at the time his employment was terminated, the AIIBP had not yet
adopted its corporate by-laws. He attached a Certification13 by the Securities and Exchange Commission (SEC) that it was only on 27 May 1992 that the AIIBP
submitted its draft by-laws to the SEC, and that its registration was being held in abeyance pending certain corrections being made thereon. Sawadjaan argued
that since the AIIBP failed to file its by-laws within 60 days from the passage of Rep. Act No. 6848, as required by Sec. 51 of the said law, the bank and its
stockholders had "already forfeited its franchise or charter, including its license to exist and operate as a corporation,"14 and thus no longer have "the legal
standing and personality to initiate an administrative case."

Sawadjaan's counsel subsequently adopted his motion, but requested that it be treated as a motion for reconsideration. 15 This motion was denied by the court a
quo in its Resolution of 15 December 1999.16

Still disheartened, Sawadjaan filed the present Petition for Certiorari under Rule 65 of the Rules of Court challenging the above Decision and Resolution of the
Court of Appeals on the ground that the court a quo erred: i) in ignoring the facts and evidences that the alleged Islamic Bank has no valid by-laws; ii) in ignoring
the facts and evidences that the Islamic Bank lost its juridical personality as a corporation on 16 April 1990; iii) in ignoring the facts and evidences that the alleged
Islamic Bank and its alleged Board of Directors have no jurisdiction to act in the manner they did in the absence of a valid by-laws; iv) in not correcting the acts of
the Civil Service Commission who erroneously rendered the assailed Resolutions No. 94-4483 and No. 95-2754 as a result of fraud, falsification and/or
misrepresentations committed by Farouk A. Carpizo and his group, including Roberto F. de Ocampo; v.) in affirming an unconscionably harsh and/or excessive
penalty; and vi) in failing to consider newly discovered evidence and reverse its decision accordingly.

Subsequently, petitioner Sawadjaan filed an "Ex-parte Urgent Motion for Additional Extension of Time to File a Reply (to the Comments of Respondent Al-Amanah
Investment Bank of the Philippines),17 Reply (to Respondent's Consolidated Comment,)18 and Reply (to the Alleged Comments of Respondent Al-Amanah Islamic
Bank of the Philippines)."19On 13 October 2000, he informed this Court that he had terminated his lawyer's services, and, by himself, prepared and filed the
following: 1) Motion for New Trial;20 2) Motion to Declare Respondents in Default and/or Having Waived their Rights to Interpose Objection to Petitioner's Motion
for New Trial;21 3) Ex-Parte Urgent Motions to Punish Attorneys Amado D. Valdez, Elpidio J. Vega, Alda G. Reyes, Dominador R. Isidoro, Jr., and Odilon A. Diaz for
Being in Contempt of Court & to Inhibit them from Appearing in this Case Until they Can Present Valid Evidence of Legal Authority; 22 4) Opposition/Reply (to
Respondent AIIBP's Alleged Comment);23 5) Ex-Parte Urgent Motion to Punish Atty. Reynaldo A. Pineda for Contempt of Court and the Issuance of a Commitment
Order/Warrant for His Arrest;246) Reply/Opposition (To the Formal Notice of Withdrawal of Undersigned Counsel as Legal Counsel for the Respondent Islamic
Bank with Opposition to Petitioner's Motion to Punish Undersigned Counsel for Contempt of Court for the Issuance of a Warrant of Arrest);25 7) Memorandum for
Petitioner;26 8) Opposition to SolGen's Motion for Clarification with Motion for Default and/or Waiver of Respondents to File their Memorandum;27 9) Motion for
Contempt of Court and Inhibition/Disqualification with Opposition to OGCC's Motion for Extension of Time to File Memorandum; 28 10) Motion for Enforcement (In
Defense of the Rule of Law);29 11) Motion and Opposition (Motion to Punish OGCC's Attorneys Amado D. Valdez, Efren B. Gonzales, Alda G. Reyes, Odilon A. Diaz
and Dominador R. Isidoro, Jr., for Contempt of Court and the Issuance of a Warrant for their Arrest; and Opposition to their Alleged "Manifestation and Motion"
Dated February 5, 2002);30 12) Motion for Reconsideration of Item (a) of Resolution dated 5 February 2002 with Supplemental Motion for Contempt of
Court;31 13) Motion for Reconsideration of Portion of Resolution Dated 12 March 2002; 32 14) Ex-Parte Urgent Motion for Extension of Time to File Reply
Memorandum (To: CSC and AIIBP's Memorandum);33 15) Reply Memorandum (To: CSC's Memorandum) With Ex-Parte Urgent Motion for Additional Extension of
time to File Reply Memorandum (To: AIIBP's Memorandum); 34 and 16) Reply Memorandum (To: OGCC's Memorandum for Respondent AIIBP).35

Petitioner's efforts are unavailing, and we deny his petition for its procedural and substantive flaws.

The general rule is that the remedy to obtain reversal or modification of the judgment on the merits is appeal. This is true even if the error, or one of the errors,
ascribed to the court rendering the judgment is its lack of jurisdiction over the subject matter, or the exercise of power in excess thereof, or grave abuse of
discretion in the findings of fact or of law set out in the decision. 36

The records show that petitioner's counsel received the Resolution of the Court of Appeals denying his motion for reconsideration on 27 December 1999. The
fifteen day reglamentary period to appeal under Rule 45 of the Rules of Court therefore lapsed on 11 January 2000. On 23 February 2000, over a month after
receipt of the resolution denying his motion for reconsideration, the petitioner filed his Petition for Certiorariunder Rule 65.

It is settled that a special civil action for certiorari will not lie as a substitute for the lost remedy of appeal,37 and though there are instances38 where the
extraordinary remedy of certiorari may be resorted to despite the availability of an appeal, 39 we find no special reasons for making out an exception in this case.

Even if we were to overlook this fact in the broader interests of justice and treat this as a special civil action for certiorari under Rule 65,40 the petition would
nevertheless be dismissed for failure of the petitioner to show grave abuse of discretion. Petitioner's recurrent argument, tenuous at its very best, is premised on
the fact that since respondent AIIBP failed to file its by-laws within the designated 60 days from the effectivity of Rep. Act No. 6848, all proceedings initiated by
AIIBP and all actions resulting therefrom are a patent nullity. Or, in his words, the AIIBP and its officers and Board of Directors,

. . . [H]ave no legal authority nor jurisdiction to manage much less operate the Islamic Bank, file administrative charges and investigate petitioner in the manner
they did and allegedly passed Board Resolution No. 2309 on December 13, 1993 which is null and void for lack of an (sic) authorized and valid by-laws. The CIVIL
SERVICE COMMISSION was therefore affirming, erroneously, a null and void "Resolution No. 2309 dated December 13, 1993 of the Board of Directors of Al-
Amanah Islamic Investment Bank of the Philippines" in CSC Resolution No. 94-4483 dated August 11, 1994. A motion for reconsideration thereof was denied by
the CSC in its Resolution No. 95-2754 dated April 11, 1995. Both acts/resolutions of the CSC are erroneous, resulting from fraud, falsifications and
misrepresentations of the alleged Chairman and CEO Roberto F. de Ocampo and the alleged Director Farouk A. Carpizo and his group at the alleged Islamic Bank.41

Nowhere in petitioner's voluminous pleadings is there a showing that the court a quo committed grave abuse of discretion amounting to lack or excess of
jurisdiction reversible by a petition for certiorari. Petitioner already raised the question of AIIBP's corporate existence and lack of jurisdiction in his Motion for
New Trial/Motion for Reconsideration of 27 May 1997 and was denied by the Court of Appeals. Despite the volume of pleadings he has submitted thus far, he has
added nothing substantial to his arguments.

The AIIBP was created by Rep. Act No. 6848. It has a main office where it conducts business, has shareholders, corporate officers, a board of directors, assets, and
personnel. It is, in fact, here represented by the Office of the Government Corporate Counsel, "the principal law office of government-owned corporations, one of
which is respondent bank."42 At the very least, by its failure to submit its by-laws on time, the AIIBP may be considered a de facto corporation43 whose right to
exercise corporate powers may not be inquired into collaterally in any private suit to which such corporations may be a party.44

Moreover, a corporation which has failed to file its by-laws within the prescribed period does not ipso facto lose its powers as such. The SEC Rules on
Suspension/Revocation of the Certificate of Registration of Corporations, 45 details the procedures and remedies that may be availed of before an order of
revocation can be issued. There is no showing that such a procedure has been initiated in this case.

In any case, petitioner's argument is irrelevant because this case is not a corporate controversy, but a labor dispute; and it is an employer's basic right to freely
select or discharge its employees, if only as a measure of self-protection against acts inimical to its interest.46 Regardless of whether AIIBP is a corporation, a
partnership, a sole proprietorship, or a sari-sari store, it is an undisputed fact that AIIBP is the petitioner's employer. AIIBP chose to retain his services during its
reorganization, controlled the means and methods by which his work was to be performed, paid his wages, and, eventually, terminated his services.47

And though he has had ample opportunity to do so, the petitioner has not alleged that he is anything other than an employee of AIIBP. He has neither claimed, nor
shown, that he is a stockholder or an officer of the corporation. Having accepted employment from AIIBP, and rendered his services to the said bank, received his
salary, and accepted the promotion given him, it is now too late in the day for petitioner to question its existence and its power to terminate his services. One who
assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation.48 chanrobles
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Even if we were to consider the facts behind petitioner Sawadjaan's dismissal from service, we would be hard pressed to find error in the decision of the AIIBP.

As appraiser/investigator, the petitioner was expected to conduct an ocular inspection of the properties offered by CAMEC as collaterals and check the copies of
the certificates of title against those on file with the Registry of Deeds. Not only did he fail to conduct these routine checks, but he also deliberately misrepresented
in his appraisal report that after reviewing the documents and conducting a site inspection, he found the CAMEC loan application to be in order. Despite the
number of pleadings he has filed, he has failed to offer an alternative explanation for his actions.

When he was informed of the charges against him and directed to appear and present his side on the matter, the petitioner sent instead a memorandum
questioning the fairness and impartiality of the members of the investigating committee and refusing to recognize their jurisdiction over him. Nevertheless, the
investigating committee rescheduled the hearing to give the petitioner another chance, but he still refused to appear before it.

Thereafter, witnesses were presented, and a decision was rendered finding him guilty of dishonesty and dismissing him from service. He sought a reconsideration
of this decision and the same committee whose impartiality he questioned reduced their recommended penalty to suspension for six months and one day. The
board of directors, however, opted to dismiss him from service.

On appeal to the CSC, the Commission found that Sawadjaan's failure to perform his official duties greatly prejudiced the AIIBP, for which he should be held
accountable. It held that:

. . . (I)t is crystal clear that respondent SAPPARI SAWADJAAN was remiss in the performance of his duties as appraiser/inspector. Had respondent performed his
duties as appraiser/inspector, he could have easily noticed that the property located at Balintawak, Caloocan City covered by TCT No. C-52576 and which is one of
the properties offered as collateral by CAMEC is encumbered to Divina Pablico. Had respondent reflected such fact in his appraisal/inspection report on said
property the ISLAMIC BANK would not have approved CAMEC's loan of P500,000.00 in 1987 and CAMEC's P5 Million loan in 1988, respondent knowing fully well
the Bank's policy of not accepting encumbered properties as collateral.

Respondent SAWADJAAN's reprehensible act is further aggravated when he failed to check and verify from the Registry of Deeds of Marikina the authenticity of
the property located at Mayamot, Antipolo, Rizal covered by TCT No. N-130671 and which is one of the properties offered as collateral by CAMEC for its P5 Million
loan in 1988. If he only visited and verified with the Register of Deeds of Marikina the authenticity of TCT No. N-130671 he could have easily discovered that TCT
No. N-130671 is fake and the property described therein non-existent.

...

This notwithstanding, respondent cannot escape liability. As adverted to earlier, his failure to perform his official duties resulted to the prejudice and substantial
damage to the ISLAMIC BANK for which he should be held liable for the administrative offense of CONDUCT PREJUDICIAL TO THE BEST INTEREST OF THE
SERVICE.49

From the foregoing, we find that the CSC and the court a quo committed no grave abuse of discretion when they sustained Sawadjaan's dismissal from service.
Grave abuse of discretion implies such capricious and whimsical exercise of judgment as equivalent to lack of jurisdiction, or, in other words, where the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive
duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.50 The records show that the respondents did none of these; they
acted in accordance with the law.

WHEREFORE, the petition is DISMISSED. The Decision of the Court of Appeals of 30 March 1999 affirming Resolutions No. 94-4483 and No. 95-2754 of the Civil
Service Commission, and its Resolution of 15 December 1999 are hereby affirmed. Costs against the petitioner.

SO ORDERED.