Jurisprudence: G.R. No. 112024 January 28, 1999

SECOND DIVISION

G.R. No. 112024 January 28, 1999

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, COURT OF TAX APPEALS and COURT OF APPEALS, respondent.

QUISUMBING, J.:

This petition for review assails the Resolution 1 of the Court of Appeals dated September 22, 1993 affirming the Decision and a Resolution of the Court Of Tax Appeals which denied the claims of the petitioner for tax refund and tax credits, and disposing as follows:

IN VIEW OF ALL, THE FOREGOING, the instant petition for review, is DENIED due course. The Decision of the Court of Tax Appeals dated May 20, 1993 and its resolution dated July 20, 1993, are hereby AFFIRMED in toto.

SO ORDERED.

The Court of Tax Appeals earlier ruled as follows:

WHEREFORE, Petitioner's claim for refund/tax credits of overpaid income tax for 1985 in the amount of P5,299,749.95 is hereby denied for having been filed beyond the reglementary period. The 1986 claim for refund amounting to P234,077.69 is likewise denied since petitioner has opted and in all likelihood automatically credited the same to the succeeding year. The petition for review is dismissed for lack of merit.

SO ORDERED.

The facts on record show the antecedent circumstances pertinent to this case.

Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly organized under Philippine laws, filed its quarterly income tax returns for the first and second quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00. The taxes due were settled by applying PBCom's tax credit memos and accordingly, the Bureau of Internal Revenue (BIR) issued Tax Debit Memo Nos. 0746-85 and 0747-85 for P3,401,701.00 and P1,615,253.00, respectively.

Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for the year-ended December 31, 1986, the petitioner likewise reported a net loss of P14,129,602.00, and thus declared no tax payable for the year.

But during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986.

On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a tax credit of P5,016,954.00 representing the overpayment of taxes in the first and second quarters of 1985.

Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69.

Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA). The petition was docketed as CTA Case No. 4309 entitled: "Philippine Bank of Communications vs. Commissioner of Internal Revenue."

The losses petitioner incurred as per the summary of petitioner's claims for refund and tax credit for 1985 and 1986, filed before the Court of Tax Appeals, are as follows:

1985 1986

——— ———

Net Income (Loss) (P25,317,288.00) (P14,129,602.00)

Tax Due NIL NIL

Quarterly tax.

Payments Made 5,016,954.00 —

Tax Withheld at Source 282,795.50 234,077.69

———————— ———————

Excess Tax Payments P5,299,749.50*    P234,077.69

=============== =============

* CTA's decision reflects PBCom's 1985 tax claim as P5,299,749.95. A forty five centavo difference was noted.

On May 20, 1993, the CTA rendered a decision which, as stated on the outset, denied the request of petitioner for a tax refund or credit in the sum amount of P5,299,749.95, on the ground that it was filed beyond the two-year reglementary period provided for by law. The petitioner's claim for refund in 1986 amounting to P234,077.69 was likewise denied on the assumption that it was automatically credited by PBCom against its tax payment in the succeeding year.

On June 22, 1993, petitioner filed a Motion for Reconsideration of the CTA's decision but the same was denied due course for lack of merit.

Thereafter, PBCom filed a petition for review of said decision and resolution of the CTA with the Court of Appeals. However on September 22, 1993, the Court of Appeals affirmed in toto the CTA's resolution dated July 20, 1993. Hence this petition now before us.

The issues raised by the petitioner are:

I. Whether taxpayer PBCom — which relied in good faith on the formal assurances of BIR in RMC No. 7-85 and did not immediately file with the CTA a petition for review asking for the refund/tax credit of its 1985-86 excess quarterly income tax payments — can be prejudiced by the subsequent BIR rejection, applied retroactivity, of its assurances in RMC No. 7-85 that the prescriptive period for the refund/tax credit of excess quarterly income tax payments is not two years but 10.

II. Whether the Court of Appeals seriously erred in affirming the CTA decision which denied PBCom's claim for the refund of P234,077.69 income tax overpaid in 1986 on the mere speculation, without proof, that there were taxes due in 1987 and that PBCom availed of tax-crediting that year.

Simply stated, the main question is: Whether or not the Court of Appeals erred in denying the plea for tax refund or tax credits on the ground of prescription, despite petitioner's reliance on RMC No. 7-85, changing the prescriptive period of two years to ten years?

Petitioner argues that its claims for refund and tax credits are not yet barred by prescription relying on the applicability of Revenue Memorandum Circular No. 7-85 issued on April 1, 1985. The circular states that overpaid income taxes are not covered by the two-year prescriptive period under the tax Code and that taxpayers may claim refund or tax credits for the excess quarterly income tax with the BIR within ten (10) years under Article 1144 of the Civil Code. The pertinent portions of the circular reads:

REVENUE MEMORANDUM CIRCULAR NO. 7-85

SUBJECT: PROCESSING OF REFUND OR TAX CREDIT OF EXCESS CORPORATE INCOME TAX RESULTING FROM THE FILING OF THE FINAL ADJUSTMENT RETURN.

TO: All Internal Revenue Officers and Others Concerned.

Sec. 85 And 86 Of the National Internal Revenue Code provide:

xxx xxx xxx

The foregoing provisions are implemented by Section 7 of Revenue Regulations Nos. 10-77 which provide;

xxx xxx xxx

It has been observed, however, that because of the excess tax payments, corporations file claims for recovery of overpaid income tax with the Court of Tax Appeals within the two-year period from the date of payment, in accordance with sections 292 and 295 of the National Internal Revenue Code. It is obvious that the filing of the case in court is to preserve the judicial right of the corporation to claim the refund or tax credit.

It should he noted, however, that this is not a case of erroneously or illegally paid tax under the provisions of Sections 292 and 295 of the Tax Code.

In the above provision of the Regulations the corporation may request for the refund of the overpaid income tax or claim for automatic tax credit. To insure prompt action on corporate annual income tax returns showing refundable amounts arising from overpaid quarterly income taxes, this Office has promulgated Revenue Memorandum Order No. 32-76 dated June 11, 1976, containing the procedure in processing said returns. Under these procedures, the returns are merely pre-audited which consist mainly of checking mathematical accuracy of the figures of the return. After which, the refund or tax credit is granted, and, this procedure was adopted to facilitate immediate action on cases like this.

In this regard, therefore, there is no need to file petitions for review in the Court of Tax Appeals in order to preserve the right to claim refund or tax credit the two year period. As already stated, actions hereon by the Bureau are immediate after only a cursory pre-audit of the income tax returns. Moreover, a taxpayer may recover from the Bureau of Internal Revenue excess income tax paid under the provisions of Section 86 of the Tax Code within 10 years from the date of payment considering that it is an obligation created by law (Article 1144 of the Civil Code).  (Emphasis supplied.)

Petitioner argues that the government is barred from asserting a position contrary to its declared circular if it would result to injustice to taxpayers. Citing ABS CBN Broadcasting Corporation vs. Court of Tax Appeals 10 petitioner claims that rulings or circulars promulgated by the Commissioner of Internal Revenue have no retroactive effect if it would be prejudicial to taxpayers, In ABS-CBN case, the Court held that the government is precluded from adopting a position inconsistent with one previously taken where injustice would result therefrom or where there has been a misrepresentation to the taxpayer.

Petitioner contends that Sec. 246 of the National Internal Revenue Code explicitly provides for this rules as follows:

Sec. 246 Non-retroactivity of rulings— Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification or reversal will be prejudicial to the taxpayers except in the following cases:

a). where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue;

b). where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based;

c). where the taxpayer acted in bad faith.

Respondent Commissioner of Internal Revenue, through Solicitor General, argues that the two-year prescriptive period for filing tax cases in court concerning income tax payments of Corporations is reckoned from the date of filing the Final Adjusted Income Tax Return, which is generally done on April 15 following the close of the calendar year. As precedents, respondent Commissioner cited cases which adhered to this principle, to wit ACCRA Investments Corp. vs. Court of Appeals, et al., and Commissioner of Internal Revenue vs. TMX Sales, Inc., et al.. Respondent Commissioner also states that since the Final Adjusted Income Tax Return of the petitioner for the taxable year 1985 was supposed to be filed on April 15, 1986, the latter had only until April 15, 1988 to seek relief from the court. Further, respondent Commissioner stresses that when the petitioner filed the case before the CTA on November 18, 1988, the same was filed beyond the time fixed by law, and such failure is fatal to petitioner's cause of action.

After a careful study of the records and applicable jurisprudence on the matter, we find that, contrary to the petitioner's contention, the relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-year prescriptive period set by law.

Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate funds for the State to finance the needs of the citizenry and to advance the common weal. Due process of law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible.

From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or hampered by incidental matters.

Sec. 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec. 229, NIRC of 1997) provides for the prescriptive period for filing a court proceeding for the recovery of tax erroneously or illegally collected, viz.:

Sec. 230. Recovery of tax erroneously or illegally collected. — No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceedings shall begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment; Provided however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (Emphasis supplied)

The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced. The two-year prescriptive period provided, should be computed from the time of filing the Adjustment Return and final payment of the tax for the year.

In Commissioner of Internal Revenue vs. Philippine American Life Insurance Co., this Court explained the application of Sec. 230 of 1977 NIRC, as follows:

Clearly, the prescriptive period of two years should commence to run only from the time that the refund is ascertained, which can only be determined after a final adjustment return is accomplished. In the present case, this date is April 16, 1984, and two years from this date would be April 16, 1986. . . . As we have earlier said in the TMX Sales case, Sections 68, 69, and 70 on Quarterly Corporate Income Tax Payment and Section 321 should be considered in conjunction with it

When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive period of two years to ten years on claims of excess quarterly income tax payments, such circular created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by Congress.

It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with the law they seek to apply and implement.

In the case of People vs. Lim, it was held that rules and regulations issued by administrative officials to implement a law cannot go beyond the terms and provisions of the latter.

Appellant contends that Section 2 of FAO No. 37-1 is void because it is not only inconsistent with but is contrary to the provisions and spirit of Act. No 4003 as amended, because whereas the prohibition prescribed in said Fisheries Act was for any single period of time not exceeding five years duration, FAO No 37-1 fixed no period, that is to say, it establishes an absolute ban for all time. This discrepancy between Act No. 4003 and FAO No. 37-1 was probably due to an oversight on the part of Secretary of Agriculture and Natural Resources. Of course, in case of discrepancy, the basic Act prevails, for the reason that the regulation or rule issued to implement a law cannot go beyond the terms and provisions of the
latter. . . . In this connection, the attention of the technical men in the offices of Department Heads who draft rules and regulation is called to the importance and necessity of closely following the terms and provisions of the law which they intended to implement, this to avoid any possible misunderstanding or confusion as in the present case.

Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. As pointed out by the respondent courts, the nullification of RMC No. 7-85 issued by the Acting Commissioner of Internal Revenue is an administrative interpretation which is not in harmony with Sec. 230 of 1977 NIRC. for being contrary to the express provision of a statute. Hence, his interpretation could not be given weight for to do so would, in effect, amend the statute.

It is likewise argued that the Commissioner of Internal Revenue, after promulgating RMC No. 7-85, is estopped by the principle of non-retroactively of BIR rulings. Again We do not agree. The Memorandum Circular, stating that a taxpayer may recover the excess income tax paid within 10 years from date of payment because this is an obligation created by law, was issued by the Acting Commissioner of Internal Revenue. On the other hand, the decision, stating that the taxpayer should still file a claim for a refund or tax credit and corresponding petition fro review within the
two-year prescription period, and that the lengthening of the period of limitation on refund from two to ten years would be adverse to public policy and run counter to the positive mandate of Sec. 230, NIRC, - was the ruling and judicial interpretation of the Court of Tax Appeals. Estoppel has no application in the case at bar because it was not the Commissioner of Internal Revenue who denied petitioner's claim of refund or tax credit. Rather, it was the Court of Tax Appeals who denied (albeit correctly) the claim and in effect, ruled that the RMC No. 7-85 issued by the Commissioner of Internal Revenue is an administrative interpretation which is out of harmony with or contrary to the express provision of a statute (specifically Sec. 230, NIRC), hence, cannot be given weight for to do so would in effect amend the statute.

Art. 8 of the Civil Code recognizes judicial decisions, applying or interpreting statutes as part of the legal system of the country. But administrative decisions do not enjoy that level of recognition. A memorandum-circular of a bureau head could not operate to vest a taxpayer with shield against judicial action. For there are no vested rights to speak of respecting a wrong construction of the law by the administrative officials and such wrong interpretation could not place the Government in estoppel to correct or overrule the same. Moreover, the non-retroactivity of rulings by the Commissioner of Internal Revenue is not applicable in this case because the nullity of RMC No. 7-85 was declared by respondent courts and not by the Commissioner of Internal Revenue. Lastly, it must be noted that, as repeatedly held by this Court, a claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer.

On the second issue, the petitioner alleges that the Court of Appeals seriously erred in affirming CTA's decision denying its claim for refund of P234,077.69 (tax overpaid in 1986), based on mere speculation, without proof, that PBCom availed of the automatic tax credit in 1987.

Sec. 69 of the 1977 NIRC (now Sec. 76 of the 1997 NIRC) provides that any excess of the total quarterly payments over the actual income tax computed in the adjustment or final corporate income tax return, shall either (a) be refunded to the corporation, or (b) may be credited against the estimated quarterly income tax liabilities for the quarters of the succeeding taxable year.

The corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax credit for the succeeding taxable year. To ease the administration of tax collection, these remedies are in the alternative, and the choice of one precludes the other.

As stated by respondent Court of Appeals:

Finally, as to the claimed refund of income tax over-paid in 1986 — the Court of Tax Appeals, after examining the adjusted final corporate annual income tax return for taxable year 1986, found out that petitioner opted to apply for automatic tax credit. This was the basis used (vis-avis the fact that the 1987 annual corporate tax return was not offered by the petitioner as evidence) by the CTA in concluding that petitioner had indeed availed of and applied the automatic tax credit to the succeeding year, hence it can no longer ask for refund, as to [sic] the two remedies of refund and tax credit are alternative.

That the petitioner opted for an automatic tax credit in accordance with Sec. 69 of the 1977 NIRC, as specified in its 1986 Final Adjusted Income Tax Return, is a finding of fact which we must respect. Moreover, the 1987 annual corporate tax return of the petitioner was not offered as evidence to contovert said fact. Thus, we are bound by the findings of fact by respondent courts, there being no showing of gross error or abuse on their part to disturb our reliance thereon.

WHEREFORE, the, petition is hereby DENIED, The decision of the Court of Appeals appealed from is AFFIRMED, with COSTS against the petitioner.

SO ORDERED.

Bellosillo, Puno, Mendoza, and Buena, JJ., concur.

Tax Case Digest: PB Com v. CIR (1999)

PB Com v. CIR 
G.R. No. 112024  January 28, 1999
QUISUMBING, J.

Lessons Applicable: Lifeblood Theory, Due process of law under the Constitution in Required in Taxation, BIR function, statute > RMC, State not estopped by mistake of its agents, Claim for refund in the nature of tax exemption, remedies of refund and tax credit are alternative

Laws Applicable:

FACTS:

• Petitioner PBCom reported on its annual Income Tax Return for the year 1985 and 1986 a net loss of P 25, 317, 228 and P 14, 129 602 respectively.  But during both year, PBCom's lessees withheld creditable taxes of P 282 795.50 in 1985 and P 234, 077.69 in 1986.
• August 7, 1987: PBCom requested a tax credit for the overpayment of taxes in the 1st and 2nd quarters.
• July 25, 1988: PBCom filed a claim for refund of creditable taxes withheld by lessees.
• Pending the investigation, it filed a Petition for Review before the CTA who denied its request for filing beyond the 2-year reglementary period provided by Sec. 292 and 295 of the NIRC and the claim for 1986 was denied based on the assumption that it was automatically credited for the succeeding year as shown in its 1986 adjusted final corporate annual tax return.  
• PBCom filed a Motion for Reconsideration and then a Petition for Review with the CA which affirmed the CTA's decision. 
• It raised the matter to the SC where it argues that it relief on Rev. Memorandum Circular No. 285 issued April 1, 1985 that provides that the prescriptive period for overpayment is NOT 2 years but 10 years under Art. 114 of the Civil Code

ISSUE:
1. W/N PBCom can rely on RMC No. 785 changing the prescriptive period from 2 to 10 years
2. W/N PBCom can be assumed to assail of tax crediting

HELD: petition is hereby DENIED
1. No.

• Taxes are the lifeblood of the nation.  Due process of law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible.  
• From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or hampered by incidental matters.
• Sec. 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec. 229, NIRC of 1997) provides for the prescriptive period for filing a court proceeding with the CIR for the recovery of tax erroneously or illegally collected  within 2 years after payment of tax (computed from the time of filing the Adjustment Return and final payment of the tax for the year), before any suit in CTA is commenced.  
• Through the issuance of RMC 7-85, the BIR did NOT simply interpret the law but legislated guidelines contrary to the statute passed by Congress
• RMCs are considered administrative ruling in the same of more specific and less specific and less general interpretations of tax laws issued by the CIR.  It is entitled great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous.  
• Art. 8 of the Civil Code 26 recognizes judicial decisions, applying or interpreting statutes as part of the legal system of the country. But administrative decisions do not enjoy that level of recognition.  
• Fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of its officials or agents 
• Non-retroactivity of rulings by the Commissioner of Internal Revenue is not applicable in this case because the nullity of RMC No. 7-85 was declared by respondent courts and not by the Commissioner of Internal Revenue
• Claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer. 

2. Yes.

• Sec. 69 of the 1977 NIRC (now Sec. 76 of the 1997 NIRC) provides that any excess of the total quarterly payments over the actual income tax computed in the adjustment or final corporate income tax return, shall either (a) be refunded to the corporation, or (b) may be credited against the estimated quarterly income tax liabilities for the quarters of the succeeding taxable year. 
• Remedies are in the alternative, and the choice of one precludes the other.
• Since credit is opted, can no longer refund.

Jurisprudence: G.R. No. L-38338

FIRST DIVISION

G.R. No. L-38338 January 28, 1985

IN THE MATTER OF THE INTESTATE ESTATE OF ANDRES G. DE JESUS AND BIBIANA ROXAS DE JESUS, SIMEON R. ROXAS & PEDRO ROXAS DE JESUS, petitioners,

vs.

ANDRES R. DE JESUS, JR., respondent.

Raul S. Sison Law Office for petitioners.

Rafael Dinglasan, Jr. for heir M. Roxas.

Ledesma, Guytingco Velasco and Associates for Ledesa and A. R. de Jesus.

GUTIERREZ, JR., J.:

This is a petition for certiorari to set aside the order of respondent Hon. Jose C. Colayco, Presiding Judge Court of First Instance of Manila, Branch XXI disallowing the probate of the holographic Will of the deceased Bibiana Roxas de Jesus.

The antecedent facts which led to the filing of this petition are undisputed.

After the death of spouses Andres G. de Jesus and Bibiana Roxas de Jesus, Special Proceeding No. 81503 entitled "In the Matter of the Intestate Estate of Andres G. de Jesus and Bibiana Roxas de Jesus" was filed by petitioner Simeon R. Roxas, the brother of the deceased Bibiana Roxas de Jesus.

On March 26, 1973, petitioner Simeon R. Roxas was appointed administrator. After Letters of Administration had been granted to the petitioner, he delivered to the lower court a document purporting to be the holographic Will of the deceased Bibiana Roxas de Jesus. On May 26, 1973, respondent Judge Jose Colayco set the hearing of the probate of the holographic Win on July 21, 1973.

Petitioner Simeon R. Roxas testified that after his appointment as administrator, he found a notebook belonging to the deceased Bibiana R. de Jesus and that on pages 21, 22, 23 and 24 thereof, a letter-win addressed to her children and entirely written and signed in the handwriting of the deceased Bibiana R. de Jesus was found. The will is dated "FEB./61 " and states: "This is my win which I want to be respected although it is not written by a lawyer. ...

The testimony of Simeon R. Roxas was corroborated by the testimonies of Pedro Roxas de Jesus and Manuel Roxas de Jesus who likewise testified that the letter dated "FEB./61 " is the holographic Will of their deceased mother, Bibiana R. de Jesus. Both recognized the handwriting of their mother and positively Identified her signature. They further testified that their deceased mother understood English, the language in which the holographic Will is written, and that the date "FEB./61 " was the date when said Will was executed by their mother.

Respondent Luz R. Henson, another compulsory heir filed an "opposition to probate" assailing the purported holographic Will of Bibiana R. de Jesus because a it was not executed in accordance with law, (b) it was executed through force, intimidation and/or under duress, undue influence and improper pressure, and (c) the alleged testatrix acted by mistake and/or did not intend, nor could have intended the said Will to be her last Will and testament at the time of its execution.

On August 24, 1973, respondent Judge Jose C. Colayco issued an order allowing the probate of the holographic Will which he found to have been duly executed in accordance with law.

Respondent Luz Roxas de Jesus filed a motion for reconsideration alleging inter alia that the alleged holographic Will of the deceased Bibiana R. de Jesus was not dated as required by Article 810 of the Civil Code. She contends that the law requires that the Will should contain the day, month and year of its execution and that this should be strictly complied with.

On December 10, 1973, respondent Judge Colayco reconsidered his earlier order and disallowed the probate of the holographic Will on the ground that the word "dated" has generally been held to include the month, day, and year. The dispositive portion of the order reads:

WHEREFORE, the document purporting to be the holographic Will of Bibiana Roxas de Jesus, is hereby disallowed for not having been executed as required by the law. The order of August 24, 1973 is hereby set aside.

The only issue is whether or not the date "FEB./61 " appearing on the holographic Will of the deceased Bibiana Roxas de Jesus is a valid compliance with the Article 810 of the Civil Code which reads:

ART. 810.   A person may execute a holographic will which must be entirely written, dated, and signed by the hand of the testator himself. It is subject to no other form, and may be made in or out of the Philippines, and need not be witnessed.

The petitioners contend that while Article 685 of the Spanish Civil Code and Article 688 of the Old Civil Code require the testator to state in his holographic Win the "year, month, and day of its execution," the present Civil Code omitted the phrase Año mes y dia and simply requires that the holographic Will should be dated. The petitioners submit that the liberal construction of the holographic Will should prevail.

Respondent Luz Henson on the other hand submits that the purported holographic Will is void for non-compliance with Article 810 of the New Civil Code in that the date must contain the year, month, and day of its execution. The respondent contends that Article 810 of the Civil Code was patterned after Section 1277 of the California Code and Section 1588 of the Louisiana Code whose Supreme Courts had consistently ruled that the required date includes the year, month, and day, and that if any of these is wanting, the holographic Will is invalid. The respondent further contends that the petitioner cannot plead liberal construction of Article 810 of the Civil Code because statutes prescribing the formalities to be observed in the execution of holographic Wills are strictly construed.

We agree with the petitioner.

This will not be the first time that this Court departs from a strict and literal application of the statutory requirements regarding the due execution of Wills. We should not overlook the liberal trend of the Civil Code in the manner of execution of Wills, the purpose of which, in case of doubt is to prevent intestacy —

The underlying and fundamental objectives permeating the provisions of the law on wigs in this Project consists in the liberalization of the manner of their execution with the end in view of giving the testator more freedom in expressing his last wishes, but with sufficien safeguards and restrictions to prevent the commission of fraud and the exercise of undue and improper pressure and influence upon the testator.

This objective is in accord with the modem tendency with respect to the formalities in the execution of wills. (Report of the Code Commission, p. 103)

In Justice Capistrano's concurring opinion in Heirs of Raymundo Castro v. Bustos (27 SCRA 327) he emphasized that:

xxx   xxx  xxx

... The law has a tender regard for the will of the testator expressed in his last will and testament on the ground that any disposition made by the testator is better than that which the law can make. For this reason, intestate succession is nothing more than a disposition based upon the presumed will of the decedent.

Thus, the prevailing policy is to require satisfaction of the legal requirements in order to guard against fraud and bad faith but without undue or unnecessary curtailment of testamentary privilege Icasiano v. Icasiano, 11 SCRA 422). If a Will has been executed in substantial compliance with the formalities of the law, and the possibility of bad faith and fraud in the exercise thereof is obviated, said Win should be admitted to probate (Rey v. Cartagena 56 Phil. 282). Thus,

xxx   xxx  xxx

... More than anything else, the facts and circumstances of record are to be considered in the application of any given rule. If the surrounding circumstances point to a regular execution of the wilt and the instrument appears to have been executed substantially in accordance with the requirements of the law, the inclination should, in the absence of any suggestion of bad faith, forgery or fraud, lean towards its admission to probate, although the document may suffer from some imperfection of language, or other non-essential defect. ... (Leynez v. Leynez 68 Phil. 745).

If the testator, in executing his Will, attempts to comply with all the requisites, although compliance is not literal, it is sufficient if the objective or purpose sought to be accomplished by such requisite is actually attained by the form followed by the testator.

The purpose of the solemnities surrounding the execution of Wills has been expounded by this Court in Abangan v. Abanga 40 Phil. 476, where we ruled that:

The object of the solemnities surrounding the execution of wills is to close the door against bad faith and fraud, to avoid substitution of wills and testaments and to guaranty their truth and authenticity. ...

In particular, a complete date is required to provide against such contingencies as that of two competing Wills executed on the same day, or of a testator becoming insane on the day on which a Will was executed (Velasco v. Lopez, 1 Phil. 720). There is no such contingency in this case.

We have carefully reviewed the records of this case and found no evidence of bad faith and fraud in its execution nor was there any substitution of Wins and Testaments. There is no question that the holographic Will of the deceased Bibiana Roxas de Jesus was entirely written, dated, and signed by the testatrix herself and in a language known to her. There is also no question as to its genuineness and due execution. All the children of the testatrix agree on the genuineness of the holographic Will of their mother and that she had the testamentary capacity at the time of the execution of said Will. The objection interposed by the oppositor-respondent Luz Henson is that the holographic Will is fatally defective because the date "FEB./61 " appearing on the holographic Will is not sufficient compliance with Article 810 of the Civil Code. This objection is too technical to be entertained.

As a general rule, the "date" in a holographic Will should include the day, month, and year of its execution. However, when as in the case at bar, there is no appearance of fraud, bad faith, undue influence and pressure and the authenticity of the Will is established and the only issue is whether or not the date "FEB./61" appearing on the holographic Will is a valid compliance with Article 810 of the Civil Code, probate of the holographic Will should be allowed under the principle of substantial compliance.

WHEREFORE, the instant petition is GRANTED. The order appealed from is REVERSED and SET ASIDE and the order allowing the probate of the holographic Will of the deceased Bibiana Roxas de Jesus is reinstated.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Relova and De la Fuente, JJ., concur.

Torts and Damages Case Digest: Enervida v. dela Torre (1974)

G.R. No. L-38037 January 28, 1974

Lessons Applicable: Proof and Proximate Cause (Torts and Damages)

Laws Applicable: Article 2208

FACTS:

• Roque Enervida filed a complaint against spouses Lauro de la Torre and Rosa de la Torre praying that the deed of sale executed by his deceased father, Ciriaco Enervida, over a parcel of land covered by a Homestead Patent be declared null and void for having been executed within the prohibited period of five years, in violation of the provision, of Section 118 of Commonwealth Act 141, otherwise known as the Public Land Law.  He further prayed that he be allowed to repurchase said parcel of land for being the legitimate son and sole heir of his deceased father
• RTC: dismissed
• CA: sale had been made in 1948 - 7 yrs after therefore beyond the 5-year phobitive period is valid

ISSUE: W/N the spouses Lauro de la Torre and Rosa de la Torre are entitled moral and exemplary damages.

HELD: NO. dismissal order is hereby affirmed with the modification that only attorney's fees in the amount of P1,500 are hereby awarded to the respondents

• Article 2208 — In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, can not be recovered, except:

xxx   xxx  xxx

xxx   xxx  xxx

(4)    In case of a clearly unfounded civil action or proceeding against the plaintiff

• the case at bar is clearly an unfounded civil action, the respondents may recover attorney's fees
• clearly unfounded suit, which is expressly mentioned in Art. 2208 (par. 4), as justifying an award of attorney's fees, but is not included in the enumeration of Art. 2219 in respect to moral damages

Jurisprudence: G.R. No. L-38037

FIRST DIVISION


G.R. No. L-38037 January 28, 1974


ROQUE ENERVIDA, petitioner, 
vs.
LAURO DE LA TORRE and ROSA DE LA TORRE, respondents.


Gregorio A. Palabrica for petitioner.


Manuel Ruiz for respondents.





ESGUERRA, J.:


In this appeal certified by the Court of Appeals to this Court as involving purely a question of law, We affirm the dismissal order dated March 29, 1966, of the Court of First Instance of Davao in its Civil Case No. 3886, entitled "Roque Enervida vs. Lauro de la Torre and Rosa de la Torre," but modify the award of damages by eliminating moral damages.


The dispositive portion of said Order reads as follows:


Considering the fact that the plaintiff has no cause of action against the defendants and has no legal capacity to sue, and considering further that he is prompted with malice and bad faith in taking this action to Court by alleging false statements in his complaint, this Court hereby orders the dismissal of the case and also order the plaintiff to pay unto the defendants the sum of TWO THOUSAND (P2,000.00) PESOS in concept of actual moral and exemplary damages and also for payment of attorney's fees. If the plaintiff has been guided or advised by any attorney to allege in the complaint the falsities mentioned above, the latter should deserve to be investigated for malpractice and to be weeded out of the profession, if, after due hearing the facts and the law may warrant.


The essential facts that led to the filing of this action as set forth by the Court of Appeals are as follows: Plaintiff-appellant, now petitioner Roque Enervida, filed a complaint against the defendant-spouses Lauro de la Torre and Rosa de la Torre, praying that the deed of sale executed on December 3, 1957, by his deceased father, Ciriaco Enervida, over a parcel of land covered by a Homestead Patent be declared null and void for having been executed within the prohibited period of five years, in violation of the provision, of Section 118 of Commonwealth Act 141, otherwise known as the Public Land Law. He further prayed that he be allowed to repurchase said parcel of land for being the legitimate son and sole heir of his deceased father.


In due time, defendants filed their answer, stating among others that the plaintiff has no cause of action against them as his father, Ciriaco Enervida, is still living; that it is not true that plaintiff is the only son of Ciriaco Enervida as he has also other living children, namely, Juan, Filomena, Nieves and Antonio, all surnamed "Enervida"; and that the sale of the property in question did not take place within the prohibited period provided for in Section 118 of the Public Land Law, the sale having taken place on November 20, 1957, although ratified and acknowledged on December 3, 1957, before a Notary Public.


On September 9, 1965, during the pre-trial conference on the case, plaintiff-appellant reiterated what he alleged in his reply to defendants' answer and admitted that his father, Ciriaco Enervida, is still living and that he has four other living brothers and sisters who were not joined as party-plaintiffs. He also admitted that the sale of the land in question actually took place on November 20, 1957, but was formalized only on December 3, 1957. He likewise admitted the authenticity of a certified true copy of Original Certificate of Title No. P-1744 covering the land in question wherein it is stated that the Homestead Patent No. H-169512 on which the title is based was issued to Ciriaco Enervida way back on November 17, 1952.


In view of plaintiff's admission of the material facts at the pre-trial conference, the defendants spouses were constrained to ask for summary judgment, pursuant to Rule 34, in relation with Section 3, Rule 20 of the Rules of Court, on the ground that there is no genuine issue on the case because with plaintiff's admissions it is evident that the sale in question was not executed within the prohibited five-year period imposed by Section 118 of Commonwealth Act 141.<äre||anº•1àw> They reasoned out that from November 17, 1952, when the Homestead Patent was issued in favor of the patentee, up to December 3, 1957, when the alleged sale took place, more than five years had already elapsed, so that even if the patentee wanted to exercise his right to repurchase as provided for in Section 119 of the Public Land Law, from November 20, 1957, when the sale actually took place up to December 3, 1962, when plaintiff's complaint was filed he could not do so because the five-year period had already elapsed. Defendants claim that plaintiff has no cause of action against them because the patentee, Ciriaco Enervida, is still living and plaintiff's right to repurchase the homestead of his father could be availed of only when the latter is already dead. Acting upon defendants' motion for summary judgment, the Court a quo issued the now questioned Order of March 29, 1966, dismissing the complaint. Hence the present appeal.


Plaintiff-appellant maintains that the trial court erred:


1. In finding that the appellant made untruthful statement of facts and that he failed to correct the alleged falsity regarding the death of his father and that he is the only heir;


2. In finding that the appellant lacked the legal capacity to sue because his father is still very much alive and in finding that his father is the only person authorized to bring the action;


3. In finding that the sale of the property in question was consummated on November 20, 1957, and in holding that the right to repurchase has expired on November 20, 1962, and so the complaint was filed beyond the time required by law;


4. In finding that the appellant has no cause of action and that he acted in bad faith in filing the complaint and in awarding damages and attorney's fees;


5. That the lower court erred in not directing reconveyance and in not divesting appellees of their title to the land upon payment of the repurchase price.


Recapitulating the assigned errors, it results that the main issue presented for determination is whether the court a quo committed an error in dismissing the case based on defendants' motion for summary judgment. Section 2 and 3 of Rule 34 and Section 3 of Rule 20 of the Rules of Court explicitly provide regarding the matter:


Section 2 — Summary Judgment for defending party — A party against whom a claim, counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at anytime, move with supporting affidavits for a summary judgment in his favor as to all or any part thereof. (Rule 34)


Section 3 — Motion and proceedings thereon — The motion shall be served at least ten (10) days before the time specified for the hearing. The adverse party prior to the day of hearing may serve opposing affidavits. After the hearing, the judgment sought shall be rendered forthwith if the pleadings, depositions, and admissions on file together with the affidavits, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. (Rule 34)


Section 3 — Judgment on the pleadings and summary judgment at pre-trial. If at the pre-trial the court finds that facts exist upon which a judgment on the pleadings or a summary judgment may be made, it may render judgment on the pleadings or a summary judgment as justice may require. (Rule 20)


Summary Judgment should be availed of as an effective method of disposing civil actions where there is no genuine issue as to any material fact. Here it was clearly shown at the pre-trial conference that plaintiff-appellant, now petitioner, virtually admitted that his father, Ciriaco Enervida, the patentee, is still living; that petitioner is not the sole heir as he has other brothers and sisters who were also living, contrary to his allegations in the complaint under oath, that he was the sole heir. As the patentee is still living, plaintiff-appellant could not have, on his own right, sought the repurchase of the land as it would be violative of Section 119 of the Public Land Law which reads:


Section 110 — Every conveyance of land acquired under the free patent or homestead provisions, when proper, shall be subject to repurchase by the applicant, his widow or legal heirs, within a period of five years from the date of conveyance.


This Court, through then Associate, now Chief Justice, Makalintal, previously ruled that where the vendor is still living, it is he alone who has the right of redemption. 1 It is clear, therefore, that the complaint is without basis and there is no cause of action and the plaintiff-appellant has no legal capacity to sue. On this score alone, the petition should be denied. But the petitioner contends that the sale was made within the prohibitory period, in contravention of Section 118 of the Public Land Law, 2 without recalling the fact that during the pre-trial conference he never denied but admitted the fact that the actual sale of the land in question was made on November 20, 1957, albeit formalized only on December 3, 1957. In Soriano, et al. v. Latoño, 87 Phil. 757, 760, this Court ruled:


The formal objection to the deed of sale is of no moment. We agree with the trial Judge that had not this instrument been notarized at all, the same would have been fully effective as between the parties under Art. 1261 of the old civil code in force at the time of the conveyance. All the elements of a valid contract were present: subject matter, capacity and consent of the parties and lawful consideration.


Also to be noted is the fact that appellant did not deny the authenticity of a certified copy of Original Certificate of Title No. P-1744 covering the land in question where it appears that Homestead Patent No. H169512 was issued to Ciriaco Enervida, appellant's father, way back on November 17, 1952. In this connection, Recido v. Refaso 3 is pertinent. This Court speaking through then Chief Justice Bengzon in said case said:


A Sale by Petra: There is no question that on June 14, 1948, the Refasos bought her one-half share in the homestead. Nevertheless, she now attacks the validity of her conveyance, pointing out to the legal prohibition against sales of homesteads "from the date of application and for a term of five years from and after the date of issuance of the patent." To Petra, the law prohibits the sale of the homestead not only during the period between application and issuance of the patent but also during the five years after such issuance. And, she argues, my sale was void because it was made in 1948 before the issuance of the patent in 1949.


Agreeing to her first legal proposition or major premise, the Court of Appeals held, contrary to her contention, that issuance of the patent took place in 1941. And as the sale had been made in 1948 - seven years afterwards — it was valid. Said Court explained that the issuance of the patent in this case occurred in 1941, when the Director of Lands signed the order for the issuance of the patent. This opinion, Petra challenged, insisting that the patent had been issued in 1949 not 1941.


Her contention must be overruled in the light of our decision in Tinio v. Frances, 51 Off. Gaz. 6205, wherein construing this identical prohibition, we ruled that the patent is deemed issued upon promulgation of the order of the Director of Lands for the issuance thereof — in this case 1941.


For the purpose of computing the five-year prohibition against alienation of homesteads, it is to be reiterated and emphasized that the patent is deemed issued upon promulgation of the order for issuance thereof by the Director of Lands. This being the case, We see no violation of the provisions of either Section 118 or 119 of the Public Land Law committed by herein respondents because even assuming that the sale sought to be nullified was made on December 3, 1957, as claimed by appellant, still the same was made well beyond the five-year period provided by Section 118 of Commonwealth Act 141.


On the strength of the admissions by plaintiff-appellant at the pre-trial conference which the latter never bothered to oppose or deny in a later motion or by counter-affidavits, the order granting summary judgment was indeed proper (Jugador v. Vera). 4


Lastly, the plaintiff-appellant assailed the award of damages and attorney's fees by the court a quo to respondents. Article 2208 of the New Civil Code on attorney's fees specifically provides:


Article 2208 — In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, can not be recovered, except:


xxx xxx xxx


xxx xxx xxx


(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;


xxx xxx xxx


As the case at bar is clearly an unfounded civil action, the respondents may recover attorney's fees. In Deogracias Malonzo vs. Gregoria Galang, 5 this Court, applying the above doctrine, said:


As to attorney's fees, the award is correct and proper, in view of the finding of the trial court and of the Court of Appeals that petitioner's action against respondents is clearly unfounded, since Article 2208, par. (4), of the New Civil Code authorizes the recovery of attorney's fees "in case of a clearly unfounded civil action or proceeding against the plaintiff." This provision applies equally in favor of a defendant under a counter-claim for attorney's fees (as in this case), considering that a counter-claim is a complaint by the defendant against the original plaintiff (Pongos vs. Hidalgo Enterprises, Inc., et al., 84 Phil. 499) wherein the defendant is the plaintiff and the original plaintiff the defendant.


However, with regard to the award of TWO THOUSAND PESOS "in concept of actual, moral and exemplary damages ...", the same is not proper for it would ran counter to the decision of this Court in the case aforecited where it was ruled:


Finally, with respect to moral damages, we are inclined to agree with petitioner that these damages are not recoverable herein, notwithstanding the finding of the trial court and the Court of Appeals that his complaint against respondents were clearly unfounded or unreasonable. It will be observed that unlike compensatory or actual damages which are generally recoverable in tort cases as long as there is satisfactory proof thereof (Art. 2202), the Code has chosen to enumerate the cases in which moral damages, may be recovered (Art. 2219). A like enumeration is made in regard to the recovery of attorney's fees as an item of damage (Art. 2208). But the two enumerations differ in the case of a clearly unfounded suit, which is expressly mentioned in Art. 2208 (par. 4), as justifying an award of attorney's fees, but is not included in the enumeration of Art. 2219 in respect to moral damages. It is true that Art. 2219 also provides that moral damages may be awarded in "analogous cases" to those enumerated, but we do not think the Code intended" a clearly unfounded civil action or proceedings" to be one of these analogous cases wherein moral damages may be recovered, or it would have expressly mentioned it in Art. 2219, as it did in Art. 2208; or else incorporated Art. 2208 by reference in Art. 2219. Besides, Art. 2219 Specifically mentions "quasi-delicts causing physical injuries", as an instance when moral damages may be allowed, thereby implying that all other quasi-delicts not resulting in physical injuries are excluded (Strebel vs. Figueras, 96 Phil. 321), excepting, of course, the special torts referred to in Art. 309, par. 9, Art. 2219) and in Arts. 21, 26, 27, 28, 29, 30, 32, and 34, 35 on the chapter on human relations (par. 10, Art. 2219).


Furthermore, while no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount of indemnity being left to the discretion of the court (Art. 2216), it is, nevertheless, essential that the claimant satisfactorily prove the existence of the factual basis of the damage (Art. 2217) and its causal relation to defendant's acts. This is so because moral damages, though incapable of pecuniary estimation, are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer (Algara vs. Sandejas, 27 Phil. 294). The trial court and the Court of Appeals both seem to be of the opinion that the mere fact that respondent were sued without any legal foundation entitled them to an award of moral damages, hence they made no definite finding as to what the supposed moral damages suffered consist of. Such a conclusion would make of moral damages a penalty, which they are not, rather than a compensation for actual injury suffered, which they are intended to be. Moral damages, in other words, are not corrective or exemplary damages.


WHEREFORE, the dismissal order is hereby affirmed with the modification that only attorney's fees in the amount of P1,500 are hereby awarded to the respondents. No Costs.


Makalintal, C.J., Teehankee and Muñoz Palma, JJ., concur.1äwphï1.ñët


Castro and Makasiar, JJ., concur in the result.





Footnotes


1 Florentina Umengan vs. Remigio Butacan, et al., L-16036, February 28, 1963, 7 SCRA 311, 315.


2 "Section 118 — Except in favor of the Government or any of its branches, units ..., lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; ... ."


3 L-16641, June 24, 1965, 14 SCRA 443, 445.


4 L-6308, March 30, 1954, 94 Phil. 704, 708.


5 L-13851, July 27, 1950, 109 Phil. 16, 18 19.

Torts and Damages Case Digest: Miranda-Ribaya v. Carbonell (1980)

G.R. No. L-49390  January 28, 1980

Lessons Applicable: Proof and Proximate Cause (Torts and Damages)

Laws Applicable: 

FACTS:

• April 23, 1968: Mrs. Josefina Roco-Robles, agent of Mrs. Ribaya, told her that Marino Bautista, a millionaire logger was interested to buy diamonds.  Mrs. Ribaya went to the spouses Bautista's home to sell 10 pieces of jewelry for P224,000 which was haggled down to P222,000. 
• A receipt was signed by Marino Bautista and he issued in exchange of 2 Equitable Banking Corporation checks of P112,000 and P110,000.  Mrs. Ribaya then issued a voucher evidencing the check payment 
• April 24, 1968: Mrs. Ribaya accompanied by Ms. Narcisa Gosioco requested the check of P110,000 to be divided since some were owned by her. 4 checks of Bank of America with amounts of P64,000 to Mrs. Ribaya and P34,000 to Gosioco postdated on June 23, 1968. Mrs. Ribaya also sold 4 more pieces of jewelry for P94,000 in exchange for four checks by Bank of America.  This was transacted at the office of Mr. Bautista at Bank of Philippine Islands Building
• May 15, 1968: Mrs. Ribaya wanted to replace the 3 pieces sold by her because the owners want them back.  She left it at the Bautista's residence but instead of returning the 3 pieces, Mr. Bautista issued her a check of P45,000 by Bank of America since the 3 pieces were already given as gifts to bank officers.
• When the maturity dates came, she tried to contact Mr. Bautista but failed because he was on a logging concession so she deposited the checks to her account and it was dishonored due to closed accounts.  She also discovered that her jewelries were pawned to different pawnshops in Manila in the name of the driver, secretary of the daughter of Bautista and a certain Balagot.  Some of which were pawned the same day it was bought.
• Mrs. Ribaya was able to retrieve one-by-one the pawn tickets of the jewelries she sold and other 3 tickets of jewelries not owned by her.  In order to retrieve them, she had to close down her shop.  But there is still a balance of P125,460.79 excluding those of Ms. Gosioco.  Mrs. Ribaya also promised her attorney 25% of the unpaid obligation.
• RTC: favored Mrs. Ribaya for P125,460.79 plus 25% attorney's fees but did not grant moral and exemplary damages
• CA: affirmed RTC

ISSUE: W/N Mrs. Ribaya should be entitled to moral and exemplary damages

HELD: YES. further awarded moral and exemplary damages 25% of P125,460.79

• In awarding moral damages, there should be pleading and proof of moral suffering, mental anguish, fright
• does not need to be the precise legal terms or "sacramental phrases" of "mental anguish, fright, serious anxiety, wounded feelings or moral shock" and the like
• Niceta vividly portrayed in simple terms the moral shock and suffering she underwent as a result of respondents' wanton abuse of her good faith and confidence.
• petitioners' testimonial evidence to the effect that petitioner Niceta suffered "extremely" and that for three months she could not sleep was a clear demonstration of her physical suffering, mental anguish and serious anxiety and similar injury, resulting from respondents' malevolent acts that show her to be clearly entitled to moral damages
• having established the moral damages are entitled in addition thereto, to exemplary damages
• The wantonness and malevolence through which respondents defrauded petitioners, deceitfully incurring and then evading settlement of their just liability certainly justifies the award of exemplary damages by way of example and correction for the public good and also to serve as a deterrent to the commission of similar misdeeds by others, even if the transaction were viewed as a breach of civil contract
• Here, of course, there was more than wanton refusal to pay a plainly valid and just contractual debt, but a malicious defraudation and gross abuse of petitioners' good faith, whereby petitioners were wantonly "paid" with bouncing postdated checks and besides not being paid what was due them, had to undergo trauma and travail to redeem with their own and borrowed funds from the pawnshops some of the jewelries in order to return them to their owners

Jurisprudence: G.R. No. L-49390

FIRST DIVISION

G.R. No. L-49390 January 28, 1980

NICETA MIRANDA-RIBAYA and LUIS CARBONELL RIBAYA, petitioners,

vs.

MARINO BAUTISTA, ENCARNACION BAUTISTA and the COURT OF APPEALS, respondents.

Quisumbing, Caparas, Tabios, Ilagan Alcantara & Mosqueda for petitioners.

Bienvenido Tan for respondents.

TEEHANKEE, J.:p

The Court modifies the decisions of the trial court and of the Court of Appeals insofar as they denied petitioner's claim for damages and awards to petitioners moral and exemplary damages in the amount of 25% of the principal sum adjudged in their favor for the mental anguish and suffering undergone by them as a result of the defraudation wantonly, oppressively and malevolently committed by private respondents and by way of example and correction for the public good.

In the decision of the Court of Appeals, 1 the facts of the case as lifted from the decision of the Court of First Instance are stated, as follows:

Mrs. Niceta Miranda-Ribaya was engaged sometime in 1968 in the pawnshop business and in the buying and selling of jewelry.

Sometime prior to April 23, 1968 one of her agents, Mrs. Josefina Roco-Robles, informed her that a millionaire logger by the name of Marino Bautista was interested to buy big diamond stones. Acting upon this information, Mrs. Ribaya accompanied by her agent, Mrs. Robles, decided to drop by the house of Mr. and Mrs. Marino Bautista on April 23, 1968 at La Salle Street, Greenhills Mandaluyong, Rizal. Mrs. Ribaya was impress by the residence of the Bautista and included within herself that the Bautistas were millionaires as represented by her agent, Josefina. On that occasion both Mr. and Mrs. Bautista were present together with Gloria Duque, the secretary of Mr. Bautista, and the couple's daughter, Teresita Mrs. Ribaya then offered to sell to the Bautistas ten (10) pieces of jewelry described in paragraph 2 of the complaint for the total amount of P224,000.00. After some haggling, the Bautista were able to convince Mrs. Ribaya to sell to them the aforesaid pi of jewelry for the price of P222,000.00. Mr. Bautista acknowledged the receipt of the jewelry as well as the agreed purchase price the f by signing the receipt marked as Annex A and A-1 of the complaint Mrs. Ribaya in turn was paid in the form of the two (2) Equitable Banking Corporation checks Nos. 10767485-A for P112,000.00 (Annex B of the complaint) and No. 10755100-A for P110,000.00, both checks postdated June 23, 1968. Mrs. Ribaya then executed a voucher evidencing said payment (Annex C of the complaint). The next day, plaintiff, accompanied by Miss Narcisa Gosioco, went back to see defendant Marino Bautista for the purpose of requesting the latter to break up the Equitable Banking Corporation Check No. 107561,00-A for P110,000.00 into separate check inasmuch as part of the jewelry sold to Bautista the previous day belonged to Mrs. Gosioco Bautista may accommodated Mrs. Ribaya by the said check with four (4) Bank of America DD-8112 for P14,000.00, DD-8113 for P34,000.00, DD- 8114 for P12,000.90 and DD-9115 for P50,000.00 P110,000.00, all postdated June 23, 1968. On the four (4) checks Mrs. Ribaya delivered Account Nos. 8113 for P34.000.00 and 8114 for P12.000.00 to Miss. Gosioco. Mrs. Ribaya kept for herself checks Nos. 8115 and 8112 for the sum of P64,000.00. The four (4) were alleged by Mrs. Ribaya in the debit-credit memo form of the Bautista Logging Company Inc. (Annex F of the complaint).

On the same day, April 24, 1968, Mrs. Ribaya again sold to the defendants four, (4) pieces of worth P94,000.00. The pieces of jewelry sold are described in paragraph 3 of the complaint and the delivery of said pieces of jewelry was acknowledged by defendant Bautista under receipt marked Annex G of the complaint. While defendant Bautista issued Bank of America Checks Nos. DD-8106 forP12,000.00, DD-8111 for P12,000.00, DD-8110 for P35,000.00, and DD-8107 for P35,000.00, all post dated June 23, 1968, plaintiff Ribaya in turn was made to sign another voucher dated April 24, 1968 covering the said payment amounting to P94,000.00 (Annex F of the complaint). This transaction took place at the office of defendant Bautista at the Bank of Philippine Islands Building in Manila. During the transaction, Gloria Duque, secretary of Mr. Bautista, and Mr. Bautista himself were present aside from the plaintiff Mrs. Ribaya, Mrs. Bautista was not present on this occasion.

As some of the owners of the jewelry sold to the defendants by Mrs. Ribaya on April 23, 1968 and April 24, 1968 wanted to get back their jewelry, Mrs. Ribaya on May 15, 1968 went back to the house of the Bautistas accompanied by Gloria Duque bringing with her three (3) pieces of jewelry more particularly described in Annex L of the complaint which she showed to Mr. Bautista for the purpose of giving said three (3) pieces of jewelry in exchange for some pieces previously sold to defendant Bautista. As Mrs. Bautista and her daughter, however, were not at home, she was requested by Mr. Bautista to leave said jewelry so that he can show them to his wife and daughter. Instead of returning the jewelry with which she offered to exchange for others previously sold, defendant Bautista sent Mrs. Ribaya two (2) days later another Bank of America check No. DD-8130 for P45,000.00 postdated July 17, 1968 issued by defendant Bautista. She was informed by Josefina Robles that the said check was in payment of the three (3) pieces of jewelry which plaintiff had left in the possession of the defendant Marino Bautista. She was further informed that the three (3) pieces of jewelry had been given away by Bautista as presents to some bank officials.

When the maturity dates of the various postdated checks given to Mrs. Ribaya in payment of the different pieces of jewelry arrived, Mrs. Ribaya tried several times to contact defendant Marino Bautista pursuant to their agreement but all her efforts were in vain as she was informed that the Bautistas were in the mountains atten ding to their logging concession.

Unable to contact the defendants, Mrs. Ribaya then deposited to her account at the Continental Bank the checks in her possession. All the checks paid by the defendant Bautista were dishonored by the bank for the reason that the accounts of the defendant were closed.

As a former pawnshop operator, she know that Pawnshop owners were required to report their daily transactions with the Manila Police Department. Suspecting that the Bautistas might have pawned the pieces of jewelry purchased from her, she went to the pawnshop section of the Manila Police Department to verify her suspicion and to her chagrin she discovered that most of the jewelry she had sold to the defendants were pledged to various pawnshops in Manila.

Armed with this discovery she was finally able to comfort the defendant Marino Bautista with her findings. Defendant assured Mrs. Ribaya that he would pay her their obligation in connection with the jewelry transactions. After failing to keep these promises from week to week, Mrs. Ribaya demanded from the defendant Marino Bautista the surrender of the pawnshop tickets covering the pledge of the different pieces of jewelry he had obtained from her. Mrs. Ribaya was able to secure these tickets from the defendant Bautista one by one. The pawnshop tickets were issued in the names of the driver of the Bautista family, their secretary Gloria Duque, Mrs. Bautista, and a certain Balagot. With these pawnshop tickets in her possession, Mrs. Ribaya was able to redeem part of the jewelry she had delivered to the Bautistas after spending P52,900.00 for the redemption price of said jewelry plus interest in the amount of P760.79.

There were, however, three (3) pawnshop tickets covering jewelry which did not belong to Mrs. Ribaya included among the tickets delivered to Mrs. Ribaya and (for) which defendant Bautista wanted to value at P11,000.00 (Exhibits p. 4 and p. 5). These were pawnshop tickets Nos. 95716, 95719 and 95851, all issued in the name of his driver Narciso Amaya and pertaining to the Aguirre Pawnshop. Mrs. Ribaya assessed the jewelry covered by these three (3) tickets at P25,000.00 and after paying P17,000.00 for the redemption of said pieces of jewelry she credited the Bautistas with P8,000.00.

xxx   xxx  xxx

After computing the value of the pieces of jewelry recovered by Mrs. Ribaya and the disbursements made by her for the redemption of said jewelry and the unrecovered pieces, Mrs. Ribaya concluded that the balance of the account of the Bautistas for the purchase price of the various pieces of jewelry amounts to P125,460.79. She added that this amount does not include the amount of the checks delivered by her to Miss Gosioco. She also testified that she has agreed to pay her lawyers an amount equivalent to 25% of the obligation unpaid by the Bautistas.

In the light of the above factual findings, the trial court rendered judgment sentencing respondents-defendants to pay petitioners- plaintiffs the sum of P125,460.79 with interest and 25% thereof for attorney's fees and expenses of litigation. On petitioners' claim for moral and exemplary damages, respondents had pleaded that respondent Marino Bautista had acted "in utmost good faith" and that damages in any concept could not be assessed against them, and the trial court upheld them ruling that "the evidence adduced by the plaintiffs [was] insufficient to warrant its grant.

Herein petitioners interposed an appeal to the Court of Appeals insofar as the trial court failed to grant their claim for moral and exemplary damages, but respondent appellate court rejected their appeal and affirmed the appealed decision, finding that (1) as to moral damages, petitioner (therein appellant) Niceta Ribaya had not mentioned in her testimony in the trial court that she has suffered "mental anguish, serious anxiety, wounded feelings and moral shock"; and (2) as to exemplary damages, these damages cannot be recovered as a matter of right and it was not prepared to disturb the lower court's exercise of discretion in this regard.

Hence this petition for review, which we find to be meritorious.

Parenthetically, the petition has been submitted without a comment or answer from respondents-spouses despite the fact that on December 8, 1978, they were given through counsel ten (10) days from notice thereof to comment. On March 27, 1979, Zosimo T. Fama, a brother of Atty. Bienvenido T. Fama who was the counsel of record for herein respondents-spouses, explained in a letter that his brother, the counsel, could not file the required comment since he had immigrated to the United states in 1972 and that he could not despite diligent efforts ascertain the whereabouts of his brother's clients and that their house had long been foreclosed by their creditors and the family had been long ejected therefrom. Per resolution of May 91 1979, this Court, at petitioner's instance, ordered that copy of its resolution of December 8, 1978 requiring comment be sent directly to respondents at their last known address of record at 599 La Salle St., Greenhills Subdivision, Mandaluyong Metro Manila, but the papers were returned unserved. Petitioners were further required to ascertain the correct address of respondents to no avail. It is noted further that in the trial court, the case was submitted for decision on the basis of petitioners-plaintiffs' evidence, since respondents-defendants failed to appear on the date set for the continuation of the hearing and reception of their evidence. It thus clearly appears that respondents have either absconded or have entirely given up their fdefence. Their failure to answer or to comment or to be reached by court processes are declared a waiver on their part and cannot deter the Court from rendering judgment on the issue properly raised by petitioners, since they had been duly summoned at the commencement of the case and placed under the jurisdiction of our courts in this case.

Respondent court quoted in its appealed decision petitioner Niceta's testimony, as follows:

Q Now, because of Mr. Bautista's default and your looking around in the pawnshops for those pieces of jewelries, what was the effect on you and your business?

A I had to close my pawnshop and I had to sell some of my personal jewelries and to borrow money.

Q Why do you have to do that?

A Because I have also to pay the persons from whom I got the jewelries Mr. Bautista got from me.

Q And you have all paid them now?

A Yes, air.

Q And how about you, yourself, what happened?

A We are in debt now, up to our head.

Q And what is the effect of your indebtedness to yourself

A      Extreme. For three months I could not sleep.

(t.s.n., pp. 26-28, on Nov. 25, 1969).

and then erroneously "noted that it was her indebtedness that caused her to have sleepless nights for three months. She did not mention in her testimony that she suffered mental anguish, serious anxiety or wounded feelings."

Respondent court, from its wrong premise, then as erroneously concluded that "(I)n order that moral damages may be awarded, there must be pleading and proof of moral suffering, mental anguish, fright and the like (San Miguel Brewery, Inc. vs. Magno, 21 SCRA 292). While in the complaint of plaintiffs-appellants there is an allegation of mental anguish, serious anxiety, wounded feelings and moral shock, there is no proof of the alleged mental anguish, serious anxiety, wounded feelings and moral shock. There must be clear testimony on the mental anguish, serious anxiety, wounded feelings and similar injuries. Plaintiff must testify to his said injury (Francisco vs. Government Service Insurance System, 7 SCRA 577). It would seem that 'physical suffering, mental anguish, fright, serious anxiety, wounded feelings, moral shock, and similar injury must be testified to by the plaintiff, and not merely inferred from certain proven facts, like having sleepless nights. Having sleepness nights is not necessarily due to mental anguish, serious anxiety and the like.

In denying petitioner's claim for damages because of petitioner Niceta's failure to "mention in her testimony that she suffered mental anguish, serious anxiety or wounded feelings" respondent court misread the case of Francisco vs. Government Service Insurance System cited by it. There, this Court had sustained the trial court's appealed decision denying the therein prevailing plaintiff's claim for moral and exemplary damages "not only on account of the plaintiff's failure to take the witness stand and testify to her social humiliation, wounded feelings, anxiety, etc., but primarily because a breach of contract like that of defendant, not being malicious or fraudulent, does not warrant the award of moral damages. 2

Here, the facts and circumstances are totally different. In that case, therein plaintiff failed to take the witness stand and defendant's breach of contract was held to be not malicious and fraudulent. In the present case, petitioner Niceta took the witness stand and established by uncontradicted testimony that due to respondents' deceitful and malevolent acts of defraudation, she had suffered "extreme" anguish (without using the word anguish) and "could not sleep for three months," since she was forced to close her pawnshop, sell some of her personal jewelries and borrow money in order to pay off the owners of the j ewelries wrongfully gotten by respondents from her. The evidence of record shows the magnitude of respondents' wanton, fraudulent and malevolent acts of defraudation.

Thus, we find from the appealed decision that petitioner Niceta was misled into believing that respondent Marino Bautista was a millionaire when she saw their residence and was told that he was in the logging business and that he could easily pay for the jewelry because he had log shipments every two months; that all the checks issued by him is in payment of the jewelries bounced with a note "Account Closed" or were dishonored; that some of the pieces of jewelry were pawned on the very same day that he got them from petitioners; that after discovering that the jewelries had been pawned with different pawnshops, petitioner Niceta "pleaded" with respondents to give her the pawnshop tickets so that she could redeem them and after weeks of anguished waiting and pleading, Bautista gave her the pawnshop tickets "one by one", which were issued in the names of the driver of the Bautista family, their secretary Gloria Duque, Mrs. Bautista and a certain Balagot; that petitioners, besides not having been paid, had to raise P82,800.00 plus interest in redeeming the jewelries covered by the pawnshop tickets, and were now in debt up to their heads; as a result of which petitioner Niceta suffered "extremely" and she "could not sleep for three months."

All this was preceded by a long period of serious anxiety: before respondent Bautista returned to her the pawnshop tickets one by one, petitioner Niceta had tried to see respondents in vain; they were always out and did not answer or return her calls; she was given the run-around at the maturity dates of the various postdated checks give a her in payment of the different pieces of jewelry, she tried several times to contact them pursuant to their agreement, but an her efforts ended in frustration, as she was informed that respondents were in the mountains attending to their logging concession.

We do not share respondent court's narrow view that petitioner Niceta's failure to use in her testimony the precise legal terms or "sacramental phrases" of "mental anguish, fright, serious anxiety, wounded feelings or moral shock" and the like justifies the denial of the claim for damages. It is sufficient that these exact terms have been pleaded in the complaint 3 and evidence has been adduced, as cited above, amply supporting the averments of the complaint. Indeed, petitioner Niceta vividly portrayed in simple terms the moral shock and suffering she underwent as a result of respondents' wanton abuse of her good faith and confidence.

Thus, petitioners' testimonial evidence to the effect that petitioner Niceta suffered "extremely" and that for three months she could not sleep was a clear demonstration of her physical suffering, mental anguish and serious anxiety and similar injury, resulting from respondents' malevolent acts that show her to be clearly entitled to moral damages. 4

Petitioners having established the more damages, are entitled in addition thereto, to exemplary damages.The wantonness and malevolence through which respondents defrauded petitioners, deceitfully incurring and then evading settlement of their just liability certainly justifies the award of exemplary damages by way of example and correction for the public good and also to serve as a deterrent to the commission of similar misdeeds by others, 5 even if the transaction were viewed as a breach of civil contract.

In Pan Pacific Company (Phil.) vs. Phil. Advertising Corporation, 6 this Court awarded moral and exemplary damages, in addition to other kinds of damages, to the plaintiff upon ample demonstration that the defendant therein, in utter disregard of the contractual rights of therein plaintiff, had refused deliberately and wantonly to pay the latter what was justly due under their contract for installation of bowling alleys and for taking advantage of the plaintiff's good faith, "notwithstanding that the defendant had promised to pay the balance of the price of the bowling alleys. Defendant, taking advantage of the plaintiff's good faith, requested a deferment of the payment until the installation shall have been completed; but the installation having been completed, defendants under one pretext or another, refused without just cause to pay what is due the plaintiff." Here, of course, there was more than wanton refusal to pay a plainly valid and just contractual debt, but a malicious defraudation and gross abuse of petitioners' good faith, whereby petitioners were wantonly "paid" with bouncing postdated checks and besides not being paid what was due them, had to undergo trauma and travail to redeem with their own and borrowed funds from the pawnshops some of the jewelries in order to return them to their owners.

ACCORDINGLY, the decision of respondent court insofar as it denies petitioners' claim for damages is hereby set aside. In addition to the amounts awarded in the affirmed judgment of the lower court, petitioners are further awarded moral and exemplary damages equivalent to twenty-five per cent (25%) of the principal sum of P125,460.79 adjudged in their favor by the lower court. With costs.

SO ORDERED.

Makasiar, Fernandez, Guerrero, De Castro and Melencio-Herrerra JJ. concur.

Footnotes

1      3rd Division of the Court of Appeals composed of Reyes, L.B., ponente, Climaco and Nocon, JJ. (Rollo pp. 13-17).

2      7 SCRA, at page 586; emphasis supplied.

3      Record on Appeal, p. 13.

4      Article 2217 of the Civil Code reads: Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. ... " (emphasis supplied).

5      Gutierrez vs. CA, L-31611, Nov. 29, 1976-, Marchan vs. Mendoza, L-24471, Jan. 31, 1969; Cotabato Timberland Co. vs. Plaridel, L-19432, February 26, 1965.

6      G.R. No. L-22050, June 13, 1968, 23 SCRA 977, Concepcion, C. J., ponente.