Jurisprudence: G.R. No. 80294-95

FIRST DIVISION

G.R. No. 80294-95 September 21, 1988

CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,
vs.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ, respondents.

Valdez, Ereso, Polido & Associates for petitioner.

Claustro, Claustro, Claustro Law Office collaborating counsel for petitioner.

Jaime G. de Leon for the Heirs of Egmidio Octaviano.

Cotabato Law Office for the Heirs of Juan Valdez.



GANCAYCO, J.:

The principal issue in this case is whether or not a decision of the Court of Appeals promulgated a long time ago can properly be considered res judicata by respondent Court of Appeals in the present two cases between petitioner and two private respondents.

Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of the Ninth Division of Respondent Court of Appeals 1 in CA-G.R. No. 05148 [Civil Case No. 3607 (419)] and CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for Recovery of Possession, which affirmed the Decision of the Honorable Nicodemo T. Ferrer, Judge of the Regional Trial Court of Baguio and Benguet in Civil Case No. 3607 (419) and Civil Case No. 3655 (429), with the dispositive portion as follows:

WHEREFORE, Judgment is hereby rendered ordering the defendant, Catholic Vicar Apostolic of the Mountain Province to return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs. Heirs of Juan Valdez, and Lot 3 of the same Plan to the other set of plaintiffs, the Heirs of Egmidio Octaviano (Leonardo Valdez, et al.). For lack or insufficiency of evidence, the plaintiffs' claim or damages is hereby denied. Said defendant is ordered to pay costs. (p. 36, Rollo)

Respondent Court of Appeals, in affirming the trial court's decision, sustained the trial court's conclusions that the Decision of the Court of Appeals, dated May 4,1977 in CA-G.R. No. 38830-R, in the two cases affirmed by the Supreme Court, touched on the ownership of lots 2 and 3 in question; that the two lots were possessed by the predecessors-in-interest of private respondents under claim of ownership in good faith from 1906 to 1951; that petitioner had been in possession of the same lots as bailee in commodatum up to 1951, when petitioner repudiated the trust and when it applied for registration in 1962; that petitioner had just been in possession as owner for eleven years, hence there is no possibility of acquisitive prescription which requires 10 years possession with just title and 30 years of possession without; that the principle of res judicata on these findings by the Court of Appeals will bar a reopening of these questions of facts; and that those facts may no longer be altered.

Petitioner's motion for reconsideation of the respondent appellate court's Decision in the two aforementioned cases (CA G.R. No. CV-05418 and 05419) was denied.

The facts and background of these cases as narrated by the trail court are as follows —

... The documents and records presented reveal that the whole controversy started when the defendant Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed with the Court of First Instance of Baguio Benguet on September 5, 1962 an application for registration of title over Lots 1, 2, 3, and 4 in Psu-194357, situated at Poblacion Central, La Trinidad, Benguet, docketed as LRC N-91, said Lots being the sites of the Catholic Church building, convents, high school building, school gymnasium, school dormitories, social hall, stonewalls, etc. On March 22, 1963 the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto. After trial on the merits, the land registration court promulgated its Decision, dated November 17, 1965, confirming the registrable title of VICAR to Lots 1, 2, 3, and 4.

The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No. 3655) and the Heirs of Egmidio Octaviano (plaintiffs in the herein Civil Case No. 3607) appealed the decision of the land registration court to the then Court of Appeals, docketed as CA-G.R. No. 38830-R. The Court of Appeals rendered its decision, dated May 9, 1977, reversing the decision of the land registration court and dismissing the VICAR's application as to Lots 2 and 3, the lots claimed by the two sets of oppositors in the land registration case (and two sets of plaintiffs in the two cases now at bar), the first lot being presently occupied by the convent and the second by the women's dormitory and the sister's convent.

On May 9, 1977, the Heirs of Octaviano filed a motion for reconsideration praying the Court of Appeals to order the registration of Lot 3 in the names of the Heirs of Egmidio Octaviano, and on May 17, 1977, the Heirs of Juan Valdez and Pacita Valdez filed their motion for reconsideration praying that both Lots 2 and 3 be ordered registered in the names of the Heirs of Juan Valdez and Pacita Valdez. On August 12,1977, the Court of Appeals denied the motion for reconsideration filed by the Heirs of Juan Valdez on the ground that there was "no sufficient merit to justify reconsideration one way or the other ...," and likewise denied that of the Heirs of Egmidio Octaviano.

Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the Court of Appeals dismissing his (its) application for registration of Lots 2 and 3, docketed as G.R. No. L-46832, entitled 'Catholic Vicar Apostolic of the Mountain Province vs. Court of Appeals and Heirs of Egmidio Octaviano.'

From the denial by the Court of Appeals of their motion for reconsideration the Heirs of Juan Valdez and Pacita Valdez, on September 8, 1977, filed with the Supreme Court a petition for review, docketed as G.R. No. L-46872, entitled, Heirs of Juan Valdez and Pacita Valdez vs. Court of Appeals, Vicar, Heirs of Egmidio Octaviano and Annable O. Valdez.

On January 13, 1978, the Supreme Court denied in a minute resolution both petitions (of VICAR on the one hand and the Heirs of Juan Valdez and Pacita Valdez on the other) for lack of merit. Upon the finality of both Supreme Court resolutions in G.R. No. L-46832 and G.R. No. L- 46872, the Heirs of Octaviano filed with the then Court of First Instance of Baguio, Branch II, a Motion For Execution of Judgment praying that the Heirs of Octaviano be placed in possession of Lot 3. The Court, presided over by Hon. Salvador J. Valdez, on December 7, 1978, denied the motion on the ground that the Court of Appeals decision in CA-G.R. No. 38870 did not grant the Heirs of Octaviano any affirmative relief.

On February 7, 1979, the Heirs of Octaviano filed with the Court of Appeals a petitioner for certiorari and mandamus, docketed as CA-G.R. No. 08890-R, entitled Heirs of Egmidio Octaviano vs. Hon. Salvador J. Valdez, Jr. and Vicar. In its decision dated May 16, 1979, the Court of Appeals dismissed the petition.

It was at that stage that the instant cases were filed. The Heirs of Egmidio Octaviano filed Civil Case No. 3607 (419) on July 24, 1979, for recovery of possession of Lot 3; and the Heirs of Juan Valdez filed Civil Case No. 3655 (429) on September 24, 1979, likewise for recovery of possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.).

In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs of Egmidio Octaviano presented one (1) witness, Fructuoso Valdez, who testified on the alleged ownership of the land in question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano (Exh. C ); his written demand (Exh. B—B-4 ) to defendant Vicar for the return of the land to them; and the reasonable rentals for the use of the land at P10,000.00 per month. On the other hand, defendant Vicar presented the Register of Deeds for the Province of Benguet, Atty. Nicanor Sison, who testified that the land in question is not covered by any title in the name of Egmidio Octaviano or any of the plaintiffs (Exh. 8). The defendant dispensed with the testimony of Mons.William Brasseur when the plaintiffs admitted that the witness if called to the witness stand, would testify that defendant Vicar has been in possession of Lot 3, for seventy-five (75) years continuously and peacefully and has constructed permanent structures thereon.

In Civil Case No. 3655, the parties admitting that the material facts are not in dispute, submitted the case on the sole issue of whether or not the decisions of the Court of Appeals and the Supreme Court touching on the ownership of Lot 2, which in effect declared the plaintiffs the owners of the land constitute res judicata.

In these two cases , the plaintiffs arque that the defendant Vicar is barred from setting up the defense of ownership and/or long and continuous possession of the two lots in question since this is barred by prior judgment of the Court of Appeals in CA-G.R. No. 038830-R under the principle of res judicata. Plaintiffs contend that the question of possession and ownership have already been determined by the Court of Appeals (Exh. C, Decision, CA-G.R. No. 038830-R) and affirmed by the Supreme Court (Exh. 1, Minute Resolution of the Supreme Court). On his part, defendant Vicar maintains that the principle of res judicata would not prevent them from litigating the issues of long possession and ownership because the dispositive portion of the prior judgment in CA-G.R. No. 038830-R merely dismissed their application for registration and titling of lots 2 and 3. Defendant Vicar contends that only the dispositive portion of the decision, and not its body, is the controlling pronouncement of the Court of Appeals. 2

The alleged errors committed by respondent Court of Appeals according to petitioner are as follows:

1. ERROR IN APPLYING LAW OF THE CASE AND RES JUDICATA;

2. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3 WERE ACQUIRED BY PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCE PRESENTED;

3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT PURCHASED LOTS 2 AND 3 FROM VALDEZ AND OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE FORMER OWNERS WERE VALDEZ AND OCTAVIANO;

4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATE RESPONDENTS WHO WERE IN POSSESSION OF LOTS 2 AND 3 AT LEAST FROM 1906, AND NOT PETITIONER;

5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT APPLICATIONS AND THE PREDECESSORS OF PRIVATE RESPONDENTS ALREADY HAD FREE PATENT APPLICATIONS SINCE 1906;

6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN 1951 AND JUST TITLE IS A PRIME NECESSITY UNDER ARTICLE 1134 IN RELATION TO ART. 1129 OF THE CIVIL CODE FOR ORDINARY ACQUISITIVE PRESCRIPTION OF 10 YEARS;

7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA G.R. NO. 038830 WAS AFFIRMED BY THE SUPREME COURT;

8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED ON OWNERSHIP OF LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND THEIR PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND 3 UNDER A CLAIM OF OWNERSHIP IN GOOD FAITH FROM 1906 TO 1951;

9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2 AND 3 MERELY AS BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUS LOAN FOR USE;

10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN GOOD FAITH WITHOUT RIGHTS OF RETENTION AND REIMBURSEMENT AND IS BARRED BY THE FINALITY AND CONCLUSIVENESS OF THE DECISION IN CA G.R. NO. 038830. 3

The petition is bereft of merit.

Petitioner questions the ruling of respondent Court of Appeals in CA-G.R. Nos. 05148 and 05149, when it clearly held that it was in agreement with the findings of the trial court that the Decision of the Court of Appeals dated May 4,1977 in CA-G.R. No. 38830-R, on the question of ownership of Lots 2 and 3, declared that the said Court of Appeals Decision CA-G.R. No. 38830-R) did not positively declare private respondents as owners of the land, neither was it declared that they were not owners of the land, but it held that the predecessors of private respondents were possessors of Lots 2 and 3, with claim of ownership in good faith from 1906 to 1951. Petitioner was in possession as borrower in commodatum up to 1951, when it repudiated the trust by declaring the properties in its name for taxation purposes. When petitioner applied for registration of Lots 2 and 3 in 1962, it had been in possession in concept of owner only for eleven years. Ordinary acquisitive prescription requires possession for ten years, but always with just title. Extraordinary acquisitive prescription requires 30 years. 4

On the above findings of facts supported by evidence and evaluated by the Court of Appeals in CA-G.R. No. 38830-R, affirmed by this Court, We see no error in respondent appellate court's ruling that said findings are res judicata between the parties. They can no longer be altered by presentation of evidence because those issues were resolved with finality a long time ago. To ignore the principle of res judicata would be to open the door to endless litigations by continuous determination of issues without end.

An examination of the Court of Appeals Decision dated May 4, 1977, First Division 5 in CA-G.R. No. 38830-R, shows that it reversed the trial court's Decision 6 finding petitioner to be entitled to register the lands in question under its ownership, on its evaluation of evidence and conclusion of facts.

The Court of Appeals found that petitioner did not meet the requirement of 30 years possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement of 10 years possession for ordinary acquisitive prescription because of the absence of just title. The appellate court did not believe the findings of the trial court that Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by purchase from Egmidio Octaviano by petitioner Vicar because there was absolutely no documentary evidence to support the same and the alleged purchases were never mentioned in the application for registration.

By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez and Octaviano. Both Valdez and Octaviano had Free Patent Application for those lots since 1906. The predecessors of private respondents, not petitioner Vicar, were in possession of the questioned lots since 1906.

There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in question, but not Lots 2 and 3, because the buildings standing thereon were only constructed after liberation in 1945. Petitioner Vicar only declared Lots 2 and 3 for taxation purposes in 1951. The improvements oil Lots 1, 2, 3, 4 were paid for by the Bishop but said Bishop was appointed only in 1947, the church was constructed only in 1951 and the new convent only 2 years before the trial in 1963.

When petitioner Vicar was notified of the oppositor's claims, the parish priest offered to buy the lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of petitioner Vicar only in 1962.

Private respondents were able to prove that their predecessors' house was borrowed by petitioner Vicar after the church and the convent were destroyed. They never asked for the return of the house, but when they allowed its free use, they became bailors in commodatum and the petitioner the bailee. The bailees' failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the part of the borrower. The bailee held in trust the property subject matter of commodatum. The adverse claim of petitioner came only in 1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by such adverse claim could not ripen into title by way of ordinary acquisitive prescription because of the absence of just title.

The Court of Appeals found that the predecessors-in-interest and private respondents were possessors under claim of ownership in good faith from 1906; that petitioner Vicar was only a bailee in commodatum; and that the adverse claim and repudiation of trust came only in 1951.

We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-G.R. No. 38830-R. Its findings of fact have become incontestible. This Court declined to review said decision, thereby in effect, affirming it. It has become final and executory a long time ago.

Respondent appellate court did not commit any reversible error, much less grave abuse of discretion, when it held that the Decision of the Court of Appeals in CA-G.R. No. 38830-R is governing, under the principle of res judicata, hence the rule, in the present cases CA-G.R. No. 05148 and CA-G.R. No. 05149. The facts as supported by evidence established in that decision may no longer be altered.

WHEREFORE AND BY REASON OF THE FOREGOING, this petition is DENIED for lack of merit, the Decision dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149, by respondent Court of Appeals is AFFIRMED, with costs against petitioner.

SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.



Footnotes

1 Associate Justices Conrado T. Limcaoco, Jose C. Campos, Jr. and Gloria C. Paras.

2 Decision in CA-G.R. No. CV Nos. 05148 and 05149 dated August 31, 1987; pp. 11 2-117, Rollo.

3 Pp. 5-15, Petition; pp. 6-17, Rollo.

4 Arts. 1134 and 1129, Civil Code.

5 Presiding Justice Magno S. Gatmaitan, Associate Justices Pacifico P. de Castro and Samuel Reyes.

6 Land Reg. No. N-91, LRC Rec. No. N-22991 of the then C.F.I. of Baguio City.

Torts and Damages Case Digest: So Ping Bun v. Court of Appeals (1999)

G.R. No. 120554 September 21, 1999

Lessons Applicable: Interference with Contractual Relations (Torts and Damages)

Laws Applicable: Sec. 1314 of the Civil Code
 

FACTS:

• 1963: Tek Hua Trading Co, through its managing partner, So Pek Giok, entered into lease agreements with lessor Dee C. Chuan & Sons Inc. (DCCSI)
• Subjects of 4 lease contracts were premises located at Soler Street, Binondo, Manila
• Tek Hua used the areas to store its textiles. 
• The contracts each had a one-year term. They provided that should the lessee continue to occupy the premises after the term, the lease shall be on a month-to-month basis.
• When the contracts expired, the parties did not renew the contracts, but Tek Hua continued to occupy the premises
• 1976: Tek Hua Trading Co. was dissolved.  Later, the original members of Tek Hua Trading Co. including Manuel C. Tiong, formed Tek Hua Enterprising Corp.
• 1986: So Pek Giok died
• So Ping Bun, occupied the warehouse for his own textile business, Trendsetter Marketing
• August 1, 1989: lessor DCCSI sent letters addressed to Tek Hua Enterprises, informing the latter of the 25% increase in rent effective September 1, 1989.
• The rent increase was later on reduced to 20% effective January 1, 1990, upon other lessees' demand. 
• December 1, 1990: the lessor implemented a 30% rent increase. 
• Enclosed in their letters were new lease contracts for signing which So Ping Bun did not answer. Still, the lease contracts were not rescinded.
• So Ping Bun refused to vacate
• So Ping Bun requested formal contracts of lease with DCCSI in favor Trendsetter Marketing
• A suit for injunction was filed
• RTC: Granted annulling the four Contracts of Lease without awarding damages
• CA upheld RTC

ISSUE: W/N the injunction should be upheld and 

HELD: AFFIRMED, with MODIFICATION that the award of attorney's fees is reduced from two hundred thousand (P200,000.00) to one hundred thousand (P100,000.00) pesos

• Damage is the loss, hurt, or harm which results from injury, and damages are the recompense or compensation awarded for the damage suffered.  One becomes liable in an action for damages for a nontrespassory invasion of another's interest in the private use and enjoyment of asset if 
• (a) the other has property rights and privileges with respect to the use or enjoyment interfered with, 
• (b) the invasion is substantial, 
• (c) the defendant's conduct is a legal cause of the invasion, and 
• (d) the invasion is either intentional and unreasonable or unintentional and actionable under general negligence rules
• elements of tort interference are: 
• (1) existence of a valid contract; 
• (2) knowledge on the part of the third person of the existence of contract; and 
• (3) interference of the third person is without legal justification or excuse
• Son Ping Bun asked DCCSI to execute lease contracts in its favor, and as a result deprived DCCSI's property right
• damage is NOT an essential element of tort interference
• lower courts did not award damages, but this was only because the extent of damages was not quantifiable
• Lack of malice precludes damages. But it does not relieve petitioner of the legal liability for entering into contracts and causing breach of existing ones.
• The injunction saved the respondents from further damage or injury caused by petitioner's interference.

Jurisprudence: G.R. No. 120554

SECOND DIVISION

G.R. No. 120554  September 21, 1999

SO PING BUN, petitioner,

vs.

COURT OF APPEALS, TEK HUA ENTERPRISES CORP. and MANUEL C. TIONG, respondents.

QUISUMBING, J.:

This petition for certiorari challenges the Decision 1 of the Court of Appeals dated October 10, 1994, and the Resolution 2 dated June 5, 1995, in CA-G.R. CV No. 38784. The appellate court affirmed the decision of the Regional Trial Court of Manila, Branch 35, except for the award of attorney's fees, as follows:

WHEREFORE, foregoing considered, the appeal of respondent-appellant So Ping Bun for lack of merit is DISMISSED. The appealed decision dated April 20, 1992 of the court a quo is modified by reducing the attorney's fees awarded to plaintiff Tek Hua Enterprising Corporation from P500,000.00 to P200,000.00. 3

The facts are as follows:

In 1963, Tek Hua Trading Co, through its managing partner, So Pek Giok, entered into lease agreements with lessor Dee C. Chuan & Sons Inc. (DCCSI). Subjects of four (4) lease contracts were premises located at Nos. 930, 930-Int., 924-B and 924-C, Soler Street, Binondo, Manila. Tek Hua used the areas to store its textiles. The contracts each had a one-year term. They provided that should the lessee continue to occupy the premises after the term, the lease shall be on a month-to-month basis.

When the contracts expired, the parties did not renew the contracts, but Tek Hua continued to occupy the premises. In 1976, Tek Hua Trading Co. was dissolved. Later, the original members of Tek Hua Trading Co. including Manuel C. Tiong, formed Tek Hua Enterprising Corp., herein respondent corporation.

So Pek Giok, managing partner of Tek Hua Trading, died in 1986. So Pek Giok's grandson, petitioner So Ping Bun, occupied the warehouse for his own textile business, Trendsetter Marketing.

On August 1, 1989, lessor DCCSI sent letters addressed to Tek Hua Enterprises, informing the latter of the 25% increase in rent effective September 1, 1989. The rent increase was later on reduced to 20% effective January 1, 1990, upon other lessees' demand. Again on December 1, 1990, the lessor implemented a 30% rent increase. Enclosed in these letters were new lease contracts for signing. DCCSI warned that failure of the lessee to accomplish the contracts shall be deemed as lack of interest on the lessee's part, and agreement to the termination of the lease. Private respondents did not answer any of these letters. Still, the lease contracts were not rescinded.

On March 1, 1991, private respondent Tiong sent a letter to petitioner which reads as follows:

March 1, 1991

Mr. So Ping Bun

930 Soler Street

Binondo, Manila

Dear Mr. So,

Due to my closed (sic) business associate (sic) for three decades with your late grandfather Mr. So Pek Giok and late father, Mr. So Chong Bon, I allowed you temporarily to use the warehouse of Tek Hua Enterprising Corp. for several years to generate your personal business.

Since I decided to go back into textile business, I need a warehouse immediately for my stocks. Therefore, please be advised to vacate all your stocks in Tek Hua Enterprising Corp. Warehouse. You are hereby given 14 days to vacate the premises unless you have good reasons that you have the right to stay. Otherwise, I will be constrained to take measure to protect my interest.

Please give this urgent matter your preferential attention to avoid inconvenience on your part.

Very truly yours,

(Sgd) Manuel C. Tiong

MANUEL C. TIONG

President 4

Petitioner refused to vacate. On March 4, 1992, petitioner requested formal contracts of lease with DCCSI in favor Trendsetter Marketing. So Ping Bun claimed that after the death of his grandfather, So Pek Giok, he had been occupying the premises for his textile business and religiously paid rent. DCCSI acceded to petitioner's request. The lease contracts in favor of Trendsetter were executed.

In the suit for injunction, private respondents pressed for the nullification of the lease contracts between DCCSI and petitioner. They also claimed damages.

After trial, the trial court ruled:

WHEREFORE, judgment is rendered:

1.     Annulling the four Contracts of Lease (Exhibits A, A-1 to A-3, inclusive) all dated March 11, 1991, between defendant So Ping Bun, doing business under the name and style of "Trendsetter Marketing", and defendant Dee C. Chuan & Sons, Inc. over the premises located at Nos. 924-B, 924-C, 930 and 930, Int., respectively, Soler Street, Binondo Manila;

2.     Making permanent the writ of preliminary injunction issued by this Court on June 21, 1991;

3.     Ordering defendant So Ping Bun to pay the aggrieved party, plaintiff Tek Hua Enterprising Corporation, the sum of P500,000.00, for attorney's fees;

4.     Dismissing the complaint, insofar as plaintiff Manuel C. Tiong is concerned, and the respective counterclaims of the defendant;

5.     Ordering defendant So Ping Bun to pay the costs of this lawsuit;

This judgment is without prejudice to the rights of plaintiff Tek Hua Enterprising Corporation and defendant Dee C. Chuan & Sons, Inc. to negotiate for the renewal of their lease contracts over the premises located at Nos. 930, 930-Int., 924-B and 924-C Soler Street, Binondo, Manila, under such terms and conditions as they agree upon, provided they are not contrary to law, public policy, public order, and morals.

SO ORDERED. 5

Petitioner's motion for reconsideration of the above decision was denied.

On appeal by So Ping Bun, the Court of Appeals upheld the trial court. On motion for reconsideration, the appellate court modified the decision by reducing the award of attorney's fees from five hundred thousand (P500,000.00) pesos to two hundred thousand (P200,000.00) pesos.

Petitioner is now before the Court raising the following issues:

I.      WHETHER THE APPELLATE COURT ERRED IN AFFIRMING THE TRIAL COURT'S DECISION FINDING SO PING BUN GUILTY OF TORTUOUS INTERFERENCE OF CONTRACT?

II.     WHETHER THE APPELLATE COURT ERRED IN AWARDING ATTORNEY'S FEES OF P200,000.00 IN FAVOR OF PRIVATE RESPONDENTS.

The foregoing issues involve, essentially, the correct interpretation of the applicable law on tortuous conduct, particularly unlawful interference with contract. We have to begin, obviously, with certain fundamental principles on torts and damages.

Damage is the loss, hurt, or harm which results from injury, and damages are the recompense or compensation awarded for the damage suffered. 6 One becomes liable in an action for damages for a nontrespassory invasion of another's interest in the private use and enjoyment of asset if (a) the other has property rights and privileges with respect to the use or enjoyment interfered with, (b) the invasion is substantial, (c) the defendant's conduct is a legal cause of the invasion, and (d) the invasion is either intentional and unreasonable or unintentional and actionable under general negligence rules. 7

The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of contract; and (3) interference of the third person is without legal justification or excuse. 8

A duty which the law of torts is concerned with is respect for the property of others, and a cause of action ex delicto may be predicated upon an unlawful interference by one person of the enjoyment by the other of his private

property. 9 This may pertain to a situation where a third person induces a party to renege on or violate his undertaking under a contract. In the case before us, petitioner's Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, and as a result petitioner deprived respondent corporation of the latter's property right. Clearly, and as correctly viewed by the appellate court, the three elements of tort interference above-mentioned are present in the instant case.

Authorities debate on whether interference may be justified where the defendant acts for the sole purpose of furthering his own financial or economic interest. 10 One view is that, as a general rule, justification for interfering with the business relations of another exists where the actor's motive is to benefit himself. Such justification does not exist where his sole motive is to cause harm to the other. Added to this, some authorities believe that it is not necessary that the interferer's interest outweigh that of the party whose rights are invaded, and that an individual acts under an economic interest that is substantial, not merely de minimis, such that wrongful and malicious motives are negatived, for he acts in self-protection. 11 Moreover justification for protecting one's financial position should not be made to depend on a comparison of his economic interest in the subject matter with that of others. 12 It is sufficient if the impetus of his conduct lies in a proper business interest rather than in wrongful motives. 13

As early as Gilchrist vs. Cuddy, 14 we held that where there was no malice in the interference of a contract, and the impulse behind one's conduct lies in a proper business interest rather than in wrongful motives, a party cannot be a malicious interferer. Where the alleged interferer is financially interested, and such interest motivates his conduct, it cannot be said that he is an officious or malicious intermeddler. 15

In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to his enterprise at the expense of respondent corporation. Though petitioner took interest in the property of respondent corporation and benefited from it, nothing on record imputes deliberate wrongful motives or malice on him.

Sec. 1314 of the Civil Code categorically provides also that, "Any third person who induces another to violate his contract shall be liable for damages to the other contracting party." Petitioner argues that damage is an essential element of tort interference, and since the trial court and the appellate court ruled that private respondents were not entitled to actual, moral or exemplary damages, it follows that he ought to be absolved of any liability, including attorney's fees.

It is true that the lower courts did not award damages, but this was only because the extent of damages was not quantifiable. We had a similar situation in Gilchrist, where it was difficult or impossible to determine the extent of damage and there was nothing on record to serve as basis thereof. In that case we refrained from awarding damages. We believe the same conclusion applies in this case.

While we do not encourage tort interferers seeking their economic interest to intrude into existing contracts at the expense of others, however, we find that the conduct herein complained of did not transcend the limits forbidding an obligatory award for damages in the absence of any malice. The business desire is there to make some gain to the detriment of the contracting parties. Lack of malice, however, precludes damages. But it does not relieve petitioner of the legal liability for entering into contracts and causing breach of existing ones. The respondent appellate court correctly confirmed the permanent injunction and nullification of the lease contracts between DCCSI and Trendsetter Marketing, without awarding damages. The injunction saved the respondents from further damage or injury caused by petitioner's interference.

Lastly, the recovery of attorney's fees in the concept of actual or compensatory damages, is allowed under the circumstances provided for in Article 2208 of the Civil Code. 16 One such occasion is when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. 17 But we have consistently held that the award of considerable damages should have clear factual and legal bases. 18 In connection with attorney's fees, the award should be commensurate to the benefits that would have been derived from a favorable judgment. Settled is the rule that fairness of the award of damages by the trial court calls for appellate review such that the award if far too excessive can be reduced. 19 This ruling applies with equal force on the award of attorney's fees. In a long line of cases we said, "It is not sound policy to place in penalty on the right to litigate. To compel the defeated party to pay the fees of counsel for his successful opponent would throw wide open the door of temptation to the opposing party and his counsel to swell the fees to undue proportions." 20

Considering that the respondent corporation's lease contract, at the time when the cause of action accrued, ran only on a month-to-month basis whence before it was on a yearly basis, we find even the reduced amount of attorney's fees ordered by the Court of Appeals still exorbitant in the light of prevailing jurisprudence. 21 Consequently, the amount of two hundred thousand (P200,000.00) awarded by respondent appellate court should be reduced to one hundred thousand (P100,000.00) pesos as the reasonable award or attorney's fees in favor of private respondent corporation.

WHEREFORE, the petition is hereby DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 38784 are hereby AFFIRMED, with MODIFICATION that the award of attorney's fees is reduced from two hundred thousand (P200,000.00) to one hundred thousand (P100,000.00) pesos. No pronouncement as to costs.

SO ORDERED.

Bellosillo, Mendoza and Buena, JJ., concur.

Footnotes

1      Rollo, pp. 41-55.

2      Id. at 57-58.

3      Ibid.

4      Rollo, pp. 45-46.

5      Id. at 41-42.

6      Custodio vs. Court of Appeals, 253 SCRA 483, 490 (1996).

7      Restatement of the Law, Torts 2d, Sec. 822.

8      30 Am Jur., Section 19, pp. 71-72; Sampaguita Pictures Inc. vs. Varquez, et al. (Court of Appeals, 68 O.G. 7666).

9      74 Am Jur 2d Torts, Section 34. Interference with property rights, p. 631.

10     45 Am Jur 2nd Interference, Justification, Privilege Section 30. Furtherance of one's own interests, p. 307.

11     Zoby vs. American Fidelity Co. 242 Federal Reporter, 2d Series, 76, 80 (1957).

12     Ibid.

13     Ibid.

14     29 Phil 542, 549 (1915).

15     Kurtz vs. Oremland, 33 N.J. Super. 443, 111 A.2d 100; Restatement of the Law, Torts, 2d, Sec. 769.

16     People vs. Bergante, 286 SCRA 629, 645 (1998).

17     Art. 2208 (2), Civil Code of the Philippines.

18     De la Paz Jr. vs. Intermediate Appellate Court, 154 SCRA 65, 76 (1987); Rubio vs. Court of Appeals, 141 SCRA 488 (1986).

19     Danao vs. Court of Appeals, 154 SCRA 446, 460 (1987).

20     Philippine National Bank vs. Court of Appeals, 159 SCRA 433, 442 (1988).

21     Mayer Steel Pipe Corp. vs. CA, 274 SCRA 432 (1997); Fortune Express vs. CA, G.R. 119756, March 18, 1999; RCBC vs. CA, G.R. 133107, March 25, 1999; Urquiaga vs. CA, G.R. 127833, January March 22, 1999.

Insurance Case Digest: El Oriente, Fabrica de Tabacos, Inc., v. Posadas (1931)

G.R. No. 34774 September 21, 1931
Lessons Applicable: Pecuniary Interest (Insurance)

FACTS:

• March 18, 1925: El Oriente, Fabrica de Tabacos, Inc. in order to protect itself against the loss that it might suffer by reason of the death of its manager, A. Velhagen, who had more than 35 years of experience in the manufacture of cigars in the Philippine Islands, and whose death would be a serious loss  procured from the Manufacturers Life Insurance Co., of Toronto, Canada, thru its local agent E.E. Elser, an insurance policy on the life of A. Velhagen for $50,000
• designated itself as the sole beneficiary
• Upon the death of A. Velhagen in the year 1929, El Oriente received all the proceeds of the life insurance policy, together with the interests and the dividends accruing thereon, aggregating P104,957.88
• Collector of Internal Revenue assessed and levied the sum of P3,148.74 as income tax on the proceeds of the insurance policy which tax El Oriente paid 

ISSUE: W/N proceeds of life insurance policies paid to corporate beneficiaries upon the death of the insured are also exempted

HELD: YES. reversed and favoring El Oriente

• In reality, what the plaintiff received was in the nature of an indemnity for the loss which it actually suffered because of the death of its manager and not taxable income

Jurisprudence: G.R. No. 34774

EN BANC

DECISION

September 21, 1931

G.R. No. 34774
EL ORIENTE FABRICA DE TABACOS, INC., plaintiff-appellant,
vs.
JUAN POSADAS, Collector of Internal Revenue, defendant-appellee.

Gibbs and McDonough and Roman Ozaeta for appellant.
Attorney-General Jaranilla for appellee.

MALCOLM, J.:



The issue in this case is whether the proceeds of insurance taken by a corporation on the life of an important official to indemnify it against loss in case of his death, are taxable as income under the Philippine Income Tax Law.

The parties submitted the case to the Court of First Instance of Manila for decision upon the following agreed statement of facts:

1. That the plaintiff is a domestic corporation duly organized and existing under and by virtue of the laws of the Philippine Islands, having its principal office at No. 732 Calle Evangelista, Manila, P.I.; and that the defendant is the duly appointed, qualified and acting Collector of Internal Revenue of the Philippine Islands.

2. That on March 18, 1925, plaintiff, in order to protect itself against the loss that it might suffer by reason of the death of its manager, A. Velhagen, who had had more than thirty-five (35) years of experience in the manufacture of cigars in the Philippine Islands, and whose death would be a serious loss to the plaintiff, procured from the Manufacturers Life Insurance Co., of Toronto, Canada, thru its local agent E.E. Elser, an insurance policy on the life of the said A. Velhagen for the sum of $50,000, United States currency.

3. That the plaintiff, El Oriente, Fabrica de Tabacos, Inc., designated itself as the sole beneficiary of said policy on the life of its said manager JVD9Pad.

4. That during the time the life insurance policy hereinbefore referred to was in force and effect plaintiff paid from its funds all the insurance premiums due thereon.

5. That the plaintiff charged as expenses of its business all the said premiums and deducted the same from its gross incomes as reported in its annual income tax returns, which deductions were allowed by the defendant upon a showing made by the plaintiff that such premiums were legitimate expenses of its (plaintiff's) business oq8Aa.

6. That the said A. Velhagen, the insured, had no interest or participation in the proceeds of said life insurance policy.

7. That upon the death of said A. Velhagen in the year 1929, the plaintiff received all the proceeds of the said life insurance policy, together with the interests and the dividends accruing thereon, aggregating P104,957.88.

8. That over the protest of the plaintiff, which claimed exemption under section 4 of the Income Tax Law, the defendant Collector of Internal Revenue assessed and levied the sum of P3,148.74 as income tax on the proceeds of the insurance policy mentioned in the preceding paragraph, which tax the plaintiff paid under instant protest on July 2, 1930; and that defendant overruled said protest on July 9, 1930.

Thereupon, a decision was handed down which absolved the defendant from the complaint, with costs against the plaintiff. From this judgment, the plaintiff appealed, and its counsel now allege that:

1. That trial court erred in holding that section 4 of the Income Tax Law (Act No. 2833) is not applicable to the present case.

2. The trial court erred in reading into the law certain exceptions and distinctions not warranted by its clear and unequivocal provisions.

3. The trial court erred in assuming that the proceeds of the life insurance policy in question represented a net profit to the plaintiff when, as a matter of fact, it merely represented an indemnity, for the loss suffered by it thru the death of its manager, the insured mr1w.

4. The trial court erred in refusing to hold that the proceeds of the life insurance policy in question is not taxable income, and in absolving the defendant from the complaint.

The Income Tax Law for the Philippines is Act No. 2833, as amended. It is divided into four chapters: Chapter I On Individuals, Chapter II On Corporations, Chapter III General Administrative Provisions, and Chapter IV General Provisions. In chapter I On Individuals, is to be found section 4 which provides that, "The following incomes shall be exempt from the provisions of this law: (a) The proceeds of life insurance policies paid to beneficiaries upon the death of the insured ... ." Section 10, as amended, in Chapter II On Corporations, provides that, There shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation ... a tax of three per centum upon such income ... ." Section 11 in the same chapter, provides the exemptions under the law, but neither here nor in any other section is reference made to the provisions of section 4 in Chapter I.

Under the view we take of the case, it is sufficient for our purposes to direct attention to the anomalous and vague condition of the law. It is certain that the proceeds of life insurance policies are exempt. It is not so certain that the proceeds of life insurance policies paid to corporate beneficiaries upon the death of the insured are likewise exempt. But at least, it may be said that the law is indefinite in phraseology and does not permit us unequivocally to hold that the proceeds of life insurance policies received by corporations constitute income which is taxable.

The situation will be better elucidated by a brief reference to laws on the same subject in the United States. The Income Tax Law of 1916 extended to the Philippine Legislature, when it came to enact Act No. 2833, to copy the American statute. Subsequently, the Congress of the United States enacted its Income Tax Law of 1919, in which certain doubtful subjects were clarified. Thus, as to the point before us, it was made clear, when not only in the part of the law concerning individuals were exemptions provided for beneficiaries, but also in the part concerning corporations, specific reference was made to the exemptions in favor of individuals, thereby making the same applicable to corporations. This was authoritatively pointed out and decided by the United States Supreme Court in the case of United States vs. Supplee-Biddle Hardware Co. ( [1924], 265 U.S. 189), which involved facts quite similar to those before us. We do not think the decision of the higher court in this case is necessarily controlling on account of the divergences noted in the federal statute and the local statute, but we find in the decision certain language of a general nature which appears to furnish the clue to the correct disposition of the instant appeal. Conceding, therefore, without necessarily having to decide, the assignments of error Nos. 1 and 2 are not well taken, we would turn to the third assignment of error.

It will be recalled that El Oriente, Fabrica de Tabacos, Inc., took out the insurance on the life of its manager, who had had more than thirty-five years' experience in the manufacture of cigars in the Philippines, to protect itself against the loss it might suffer by reason of the death of its manager. We do not believe that this fact signifies that when the plaintiff received P104,957.88 from the insurance on the life of its manager, it thereby realized a net profit in this amount. It is true that the Income Tax Law, in exempting individual beneficiaries, speaks of the proceeds of life insurance policies as income, but this is a very slight indication of legislative intention. In reality, what the plaintiff received was in the nature of an indemnity for the loss which it actually suffered because of the death of its manager twGR8Hs.

To quote the exact words in the cited case of Chief Justice Taft delivering the opinion of the court:

It is earnestly pressed upon us that proceeds of life insurance paid on the death of the insured are in fact capital, and cannot be taxed as income under the Sixteenth Amendment. Eisner vs. Macomber, 252 U.S. 189, 207; Merchants' Loan & Trust Co. vs. Smietanka, 255 U.S. 509, 518. We are not required to meet this question. It is enough to sustain our construction of the act to say that proceeds of a life insurance policy paid on the death of the insured are not usually classed as income yrlr7ML.

. . . Life insurance in such a case is like that of fire and marine insurance, ? a contract of indemnity. Central Nat. Bank vs. Hume, 128 U.S. 195. The benefit to be gained by death has no periodicity. It is a substitution of money value for something permanently lost, either in a house, a ship, or a life. Assuming, without deciding, that Congress could call the proceeds of such indemnity income, and validly tax it as such, we think that, in view of the popular conception of the life insurance as resulting in a single addition of a total sum to the resources of the beneficiary, and not in a periodical return, such a purpose on its part should be express, as it certainly is not here WgDHVnTBb.

Considering, therefore, the purport of the stipulated facts, considering the uncertainty of Philippine law, and considering the lack of express legislative intention to tax the proceeds of life insurance policies paid to corporate beneficiaries, particularly when in the exemption in favor of individual beneficiaries in the chapter on this subject, the clause is inserted "exempt from the provisions of this law," we deem it reasonable to hold the proceeds of the life insurance policy in question as representing an indemnity and not taxable income.

The foregoing pronouncement will result in the judgment being reversed and in another judgment being rendered in favor of the plaintiff and against the defendant for the sum of P3,148.74. So ordered, without costs in either instance.

Avanceña, C.J., Street, Villamor, Ostrand, Romualdez, Villa-Real, and Imperial, JJ., concur.