J.A.B. Bulao & Associates

CASE 2011-0124: PEOPLE OF THE PHILIPPINESVS. LUIS J. MORALES (G.R. NO. 166355,30 MAY 2011, BRION, J.) SUBJECTS: JURISDICTION OF SANDIGANBAYAN; EXPOCORP IS PRIVATE CORPORATION; ITS PRESIDENT IS BEYOND JURISDICTION OF SANDIGANBAYAN. (BRIEF TITLE: PEOPLE VS. MORALES).

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SUBJECT: EXPOCORP NOT A PRIVATE CORPORATION

Expocorp is a private corporation as found by the Sandiganbayan. It was not created by a special law but was incorporated  under the Corporation Code and was registered with the Securities and Exchange Commission.  It is also not a government-owned or controlled corporation. Although BCDA, which owned 999,991 sharesof its shares, was one of Expocorp’s original incorporators, the Board of Directors of Expocorp allowed Global to buy 1,229,998 of its unused and unsubscribed shares two months after its incorporation.  With the BCDA as a minority stockholder, Expocorp cannot be characterized as a government-owned or controlled corporation. In  Dante V. Liban, et al. v. Richard J. Gordon, we pointedly said:

 A government-owned or controlled corporation must be owned by the government, and in the case of a stock corporation, at least a majority of its capital stock must be owned by the government.

SUBJECT: JURISDICTION OF SANDIGANBAYAN

R.A. No. 8249,which amended Presidential Decree No. 1606,delineated the jurisdiction of the Sandiganbayan as follows:

Section 4. Section 4 of the same decree is hereby further amended to read as follows:

Sec. 4. Jurisdiction. — The Sandiganbayan shall exercise exclusive original jurisdiction in all cases involving:

a.         Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII, Book II of the Revised Penal Code, where one or more of the accused are officials occupying the following positions in the government whether in a permanent, acting or interim capacity, at the time of the commission of the offense:

(1)        Officials of the executive branch occupying the positions of regional director and higher, otherwise classified as Grade ’27’ and higher, of the Compensation and Position Classification Act of 1989 (Republic Act No. 6758), specifically including:

(a)        Provincial governors, vice-governors, members of the Sangguniang panlalawigan and provincial treasurers, assessors, engineers and other provincial department heads;

(b)        City mayors, vice-mayors, members of the sangguniang Panlungsod, city treasurers, assessors, engineers and other city department heads;

(c )       Officials of the diplomatic service occupying the position of consul and higher;

(d)       Philippine army and air force colonels, naval captains, and all officers of higher rank;

(e)        Officers of the Philippine National Police while occupying the position of provincial director and those holding the rank of senior superintendent or higher;

(f)        City and provincial prosecutors and their assistants, and officials and prosecutors in the Office of the Ombudsman and special prosecutor;

(g)        Presidents, directors or trustees, or managers of government-owned or -controlled corporations, state universities or educational institutions or foundations;

(2)        Members of Congress and officials thereof classified as Grade ’27’ and up under the Compensation and Position Classification Act of 1989;

(3)        Members of the judiciary without prejudice to the provisions of the Constitution;

(4)        Chairmen and members of Constitutional Commissions, without prejudice to the provisions of the Constitution; and

(5)        All other national and local officials classified as Grade ’27’ and higher under the Compensation and Position Classification Act of 1989.

b.         Other offenses or felonies whether simple or complexed with other crimes committed by the public officials and employees mentioned in subsection a of this section in relation to their office.

c.         Civil and criminal cases filed pursuant to and in connection with Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986. (Underlining supplied.)

SUBJECT: EXPOCORP’S PRESIDENT BEYOND SANDIGANBAYAN’S JURISDICTION

Since Expocorp is a private corporation, not a government-owned or controlled corporation, Morales, as Expocorp’s president who now stands charged for violating Section 3(e) of R.A. No. 3019 in this capacity, is beyond the Sandiganbayan’s jurisdiction.   

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Republic of the Philippines

Supreme Court

Manila

THIRD DIVISION

We review the petition for review on certiorari, filed by the People of the Philippines (the People), to assail the Resolution of the First Division of the Sandiganbayan in Criminal Case No. 27431, entitled “People of the Philippines versus Luis J. Morales.”

Background Facts

On June 13, 1991, then President  Corazon Aquino issued Administrative Order No. 223 to commemorate the 100^th anniversary of the declaration of Philippine Independence and thereby created the Committee for the National Centennial Celebrations in 1998 (Committee).

In 1993, then President Fidel V. Ramos issued Executive Order No. 128 (EO 128),  entitled “Reconstituting the Committee for the Preparation of the National Centennial Celebrations in 1998.”  EO 128 renamed the Committee as the “National Centennial Commission” (NCC).  The mandate of the NCC was to “take charge of the nationwide preparations for the National Celebration of the Philippine Centennial of the Declaration of Philippine Independence and the Inauguration of the Malolos Congress.”  The late Vice-President Salvador Laurel was appointed as NCC Chairman.

On March 10, 1996, the NCC and the Bases Conversion Development Authority (BCDA) organized the Philippine Centennial Expo ’98 Corporation or Expocorp whose primary purpose was to operate, administer, manage and develop the Philippine Centennial International Exposition 1998 (Expo ‘98).  

The Philippine Centennial project was marred by numerous allegations of anomalies, among them, the lack of public biddings.  In 1998, Senator Ana Dominique Coseteng delivered a privilege speech in the Senate denouncing these anomalies.  Because of this speech, the Senate Blue Ribbon Committee conducted an investigation on the Philippine Centennial project. In 1999, then President Joseph Estrada created the Ad Hoc and Independent Citizen’s Committee (AHICC), also for the purpose of investigating these alleged anomalies. Both the Senate Blue Ribbon Committee and the AHICC recommended to the Office of the Ombudsman that a more exhaustive investigation of the Philippine Centennial project be conducted.

The investigation that followed resulted in the filing in 2001 of an Informationby the Ombudsman’s Fact-Finding and Investigation Bureau against respondent Luis J. Morales (Morales), the acting president of Expocorp at the time relevant to the case. This Information served as basis for Criminal Case No. 27431 that we now consider. 

The Information against Morales for violation of Section 3(e) of Republic Act (R.A.) No. 3019reads:

That on or about September 6, 1997 or sometime prior or subsequent thereto in Pasig City, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, a public officer, being then the Pres. of Expo Corporation, Pasig City, a government corporation, and as such was issued one (1) Mercede[s] Benz, Model 1997-C230, bearing Serial No. WDB202023-1F-602122, and Engine No. 111974-12-027093 for his official use, and while in the performance of his official functions, acting thru evident bad faith and manifest partiality, did then and there willfully, unlawfully, and criminally give unwarranted benefits to one Rodolfo M. Lejano by selling to him said Mercede[s] Benz through Newton Motors, Inc. represented by its President Exequiel V. Mariano in the amount of Two Million Two Hundred Fifty Thousand Pesos (P2,250,000.00), without the requisite public bidding nor approval of the Board of Directors of Expo Corporation and thereafter failed to deposit the proceeds of the sale of the aforementioned vehicle to the account of Expo Corporation, to the damage and prejudice of the Corporation and the public interest as well.

In the proceedings before the Sandiganbayan, Morales moved for the dismissal of the case for lack of jurisdiction over his person and over the offense charged.  He alleged that Expocorp is a private corporation and that he is not a public employee or official. He also alleged that the Sandiganbayan has no jurisdiction over his person or the offense charged as he is a private individual who has not been charged jointly with other public officials or employees.  He added that Expocorp is not a government-owned or controlled corporation because it was not created by a special law, it did not have an original charter, and a majority of Expocorp’s capital stock is owned by private individuals. He claimed that he did not receive any compensation from the government as defined in Section 2(a) of R.A. No. 3019, and the compensation he received as Expocorp’s acting president was paid from Expocorp’s funds.  

In its comment to Expocorp’s motion, the Office of the Special Prosecutor, representing the People, insisted that Expocorp is a government-owned corporation since its articles of incorporation showed that of its ten listed subscribers, BCDA held stocks valued at P99,999,100.00, while the stocks held by the rest of the subscribers had a total value of P900.00. The People further argued, based on the Court’s ruling in Salvador H. Laurel v. Aniano A. Desierto, that NCC Chairman Laurel was a public officer; thus, Morales was likewise a public officer since his appointment flowed from the former’s exercise of his authority as chairman of both NCC and Expocorp.

In his reply, Morales averred that upon Expocorp’s incorporation, BCDA owned essentially all of Expocorp’s stocks. Two months after its incorporation, however, the Board of Directors of Expocorp issued a resolution declaring all its unissued and unsubscribed shares open for subscription.  Global Clark Assets Corporation (Global) subscribed to essentially all of these unissued and unsubscribed shares; thus, Global became the majority owner with 55.16% of Expocorp’s stocks, while BCDA was left as minority stockholder with 44.84% of Expocorp’s stocks. Morales also asserted that the ruling in Laurel applied exclusively to Chairman Laurel.  Morales concluded that since Expocorp is a private corporation and an entity distinct from NCC, he, as its president, is not a public officer.

The Sandiganbayan Resolution

The Sandiganbayan, after considering the arguments of the parties, ruled that the position of a president of a government-owned or controlled corporation clearly falls within its jurisdiction.  However, before Morales could be held accountable as Expocorp’s president, it must first be established that Expocorp is a government-owned or controlled corporation.

The Sandiganbayan explained in Laurel, that the Court only held thatLaurel is a public officer without ruling on whether Expocorp is a private or a government-owned corporation. The Court also held that NCC performed executive functions, hence, it was a public office; consequently, its chairman, Laurel, was a public officer.  Morales, in the case at bar, is being charged as president of Expocorp only and not as an NCC official.   

In ruling that Expocorp is a private corporation, the Sandiganbayan stated that it was not created by a special law nor did it have an original charter.  It was organized under the Corporation Code and was registered with the Securities and Exchange Commission. According to the Sandiganbayan, Expocorp could not derive its public character from the fact that it was organized by the NCC. The Sandiganbayan ruled that applying the provisions of the Revised Administrative Code of 1987, Expocorp is a private corporation because Global owns 55.16% of its stocks; hence, its officers and employees are private individuals who are outside the jurisdiction of the Sandiganbayan. On this basis, the Sandiganbayan dismissed the information against Morales.  

The Sandiganbayan denied the motion the People subsequently filed; hence, the present petition.

The Issues

The People submits the following grounds:

(1)        Expocorp was organized and created for the sole purpose of performing the executive functions of the National Centennial Commission and the sovereign functions of the government, and should  be considered as a public office.

(2)        Petitioner, as president of Expocorp, should rightfully be considered as a “public officer”, falling under the jurisdiction of the Sandigangayan.

The Court’s Ruling

We deny the petition for lack of merit. 

The nature of Expocorp

The People submits that Expocorp was an extension of the NCC as provided in Expocorp’s Articles of Incorporation, specifically Section 2which states Expocorp’s primary purpose. It provides that Expocorp’s primary purpose was to establish and operate Expo ’98 –   an NCC project.  The People stated in its petition, thus –

The position occupied by respondent as President of Expocorp stemmed from his appointment as such by NCC Chair and Expocorp Chief Executive Officer Salvador H. Laurel.  On the basis of such appointment, respondent served as the government’s representative and Laurel’s alter ego in running the affairs of Expocorp.  As held in the Laurel vs. Desierto case, “even assuming that Expocorp is a private corporation, petitioner’s position as Chief Executive officer (CEO) of Expocorp arose from his Chairmanship of the NCC.  Consequently, his acts or omissions as CEO of Expocorp must be viewed in the light of his powers and functions as NCC Chair.”

Having established that Expocorp, by extension, performed part of the sovereign functions delegated to the NCC, it follows that respondent, as President of Expocorp, performed tasks that likewise fall within the contemplation of the government’s sovereign functions.  

We do not agree with the People. 

Expocorp is a private corporation as found by the Sandiganbayan. It was not created by a special law but was incorporated  under the Corporation Code and was registered with the Securities and Exchange Commission.  It is also not a government-owned or controlled corporation. Although BCDA, which owned 999,991 sharesof its shares, was one of Expocorp’s original incorporators, the Board of Directors of Expocorp allowed Global to buy 1,229,998 of its unused and unsubscribed shares two months after its incorporation.  With the BCDA as a minority stockholder, Expocorp cannot be characterized as a government-owned or controlled corporation. In  Dante V. Liban, et al. v. Richard J. Gordon, we pointedly said:

A government-owned or controlled corporation must be owned by the government, and in the case of a stock corporation, at least a majority of its capital stock must be owned by the government.

The Sandiganbayan’s Jurisdiction

Section 5, Article XIII of the 1973 Constitution defines the jurisdiction of the Sandiganbayan:

Sec. 5.  The [Batasang Pambansa] shall create a special court, to be known as Sandiganbayan, which shall have jurisdiction over criminal and civil cases involving graft and corrupt practices and such other offenses committed by public officers and employees, including those in government-owned or controlled corporations, in relation to their office as may be determined by law.

R.A. No. 8249,which amended Presidential Decree No. 1606,delineated the jurisdiction of the Sandiganbayan as follows:

Section 4. Section 4 of the same decree is hereby further amended to read as follows:

Sec. 4. Jurisdiction. — The Sandiganbayan shall exercise exclusive original jurisdiction in all cases involving:

a.         Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII, Book II of the Revised Penal Code, where one or more of the accused are officials occupying the following positions in the government whether in a permanent, acting or interim capacity, at the time of the commission of the offense:

(1)        Officials of the executive branch occupying the positions of regional director and higher, otherwise classified as Grade ’27’ and higher, of the Compensation and Position Classification Act of 1989 (Republic Act No. 6758), specifically including:

(a)        Provincial governors, vice-governors, members of the Sangguniang panlalawigan and provincial treasurers, assessors, engineers and other provincial department heads;

(b)        City mayors, vice-mayors, members of the sangguniang Panlungsod, city treasurers, assessors, engineers and other city department heads;

(c )       Officials of the diplomatic service occupying the position of consul and higher;

(d)       Philippine army and air force colonels, naval captains, and all officers of higher rank;

(e)        Officers of the Philippine National Police while occupying the position of provincial director and those holding the rank of senior superintendent or higher;

(f)        City and provincial prosecutors and their assistants, and officials and prosecutors in the Office of the Ombudsman and special prosecutor;

(g)        Presidents, directors or trustees, or managers of government-owned or -controlled corporations, state universities or educational institutions or foundations;

(2)        Members of Congress and officials thereof classified as Grade ’27’ and up under the Compensation and Position Classification Act of 1989;

(3)        Members of the judiciary without prejudice to the provisions of the Constitution;

(4)        Chairmen and members of Constitutional Commissions, without prejudice to the provisions of the Constitution; and

(5)        All other national and local officials classified as Grade ’27’ and higher under the Compensation and Position Classification Act of 1989.

b.         Other offenses or felonies whether simple or complexed with other crimes committed by the public officials and employees mentioned in subsection a of this section in relation to their office.

c.         Civil and criminal cases filed pursuant to and in connection with Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986. (Underlining supplied.)

Since Expocorp is a private corporation, not a government-owned or controlled corporation, Morales, as Expocorp’s president who now stands charged for violating Section 3(e) of R.A. No. 3019 in this capacity, is beyond the Sandiganbayan’s jurisdiction.   

WHEREFORE, premises considered, the petition for review on certiorari is DISMISSED for lack of merit. The Sandiganbayan’s June 15, 2004 Resolution in Criminal Case No. 27431, entitled “People of the Philippines versus Luis J. Morales,” is AFFIRMED.  No costs.

SO ORDERED.

ARTURO D. BRION

Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice

MA. LOURDES P.A. SERENO

Associate Justice

ATTESTATION

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                            CONCHITA CARPIO MORALES

                                                            Associate Justice

                                                               Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                          RENATO C. CORONA

                                                                   Chief Justice                                                     

Penned by Associate Justice Diosdado M. Peralta (now a member of this Court), and concurred in by Associate Justice Teresita J. Leonardo-de Castro (now a member of this Court) and Associate Justice Roland B. Jurado; rollo, pp.24-33.

Sections 1 and 2 of EO 128.

A government agency created under Republic Act No. 7227.

The Expo ‘98 in the Clark Special Economic Zone was an NCC project mandated under EO 128.

Rollo, pp. 169-170.

The Anti-Graft and Corrupt Practices Act, Section 3  – Corrupt practices of public officers. — In addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:

xxx xxx xxx

 (e)          Causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions.

Rollo, p. 169.

Id. at 24-25.

G.R. No. 145368, April 12, 2002, 381 SCRA 48.

Supra note 9.

Ibid.

Rollo, pp. 34-47.

Id. at 8.

PRIMARY PURPOSE

To set up and establish the Philippine Centennial International Exposition 1998 (EXPO ’98), a project of the National Centennial Commission envisioned and mandated under Executive Order No. 128, series of 1993, in the Clark Special Economic Zone (CSEZ) within the Provinces of Pampanga and Tarlac, Philippines as created, defined and delineated under Proclamation No. 163, series 1993, of the President of the Philippines and in furtherance of said purpose;

                1. To operate, administer, manage, implement, and develop EXPO ’98 conformably to and in accordance with the Detailed Feasibility study and Master Plan for said Exposition prepared by Douglas/Gallagher, Inc. and approved by the President of thePhilippines;

                2. To exercise oversight functions and overall jurisdiction over the operations of EXPO ’98 as well as manage and oversee all plans, programs, and activities related to the implementation and operation of said Exposition;

                3. To regulate the establishment, operation, and maintenance of utilities, services, and infrastructure works in all the site components of EXPO ’98 and its support facilities;

                4. To oversee the preparations for the implementation of the participation of countries, groups, organizations, and entities at EXPO ’98;

                5. To establish linkages with participating countries and coordinate their programs and activities relevant to the theme of EXPO ’98;

                6. To provide and prescribe the guidelines for the design and fabrication of the pavilions of participating countries that played a significant role in Philippine historical development and of other participating groups, organizations, and entities which would be reflective of the following objectives of EXPO ’98 —

                a) showcase the national vision of thePhilippines, highlighted by a rich history and culture, and its traditional heritage and diverse cultural influences;

                b) express eloquently the Filipinism sentiment of the Philippine Centennial;

                c) strengthen cultural and historical linkages between thePhilippinesand participating countries;

                d) create an image of thePhilippinesas a country with rich trade and tourism potentials; and

                e) project the Filipino character and strengthen the sense of national pride and patriotism among the Filipino people.

                7. To conceive and devise varied promotional strategies towards creating awareness and appreciation of EXPO ’98 as the centerpiece of the national celebrations in 1998 of the centennial of the declaration of Philippine Independence and beyond that as a permanent site for the Filipino people to honor their rich heritage;

                8. To encourage and invite the active and meaningful participation of the private sector in managing and overseeing EXPO ’98; and

                9. To forge strategic partnerships and joint ventures with local and international investors and developers in the development, maintenance, operation, and management of EXPO ’98 on a turn-key basis.

SECONDARY PURPOSES

                (1) To purchase, acquire, own, lease, sell and convey real properties such as lands, buildings, factories and warehouses and machineries, equipment and other personal properties as may be necessary or incidental to the conduct of the corporate business, and to pay in cash, shares of its capital stock, debentures and other evidences of indebtedness, or other securities, as may be deemed expedient, for any business or property acquired by the corporation;

                (2) To borrow or raise money necessary to meet the financial requirements of its business by the issuance of bonds, promissory notes and other evidences of indebtedness, and to secure the repayment thereof by mortgage, pledge, deed of trust or lien upon the properties of the corporation or to issue pursuant to law shares of its capital stock, debentures and other evidences of indebtedness in payment for properties acquired by the corporation or for money borrowed in the prosecution of its lawful business;

                (3) To invest and deal with the money and properties of the corporation in such manner as may from time to time be considered wise or expedient for the advancement of its interests and to sell, dispose of or transfer the business, properties and goodwill of the corporation or any part thereof for such consideration and under such terms as it shall see fit to accept;

                (4) To aid in any manner any corporation, association, or trust estate, domestic or foreign, or any firm or individual, any shares of stock in which or any bonds, debentures, notes, securities, evidences of indebtedness, contracts, or obligations of which are held by or for this corporation, directly or indirectly or through other corporations or otherwise;

                (5) To enter into any lawful arrangement for sharing profits, union of interest, unitization or farmout agreement, reciprocal concession, or cooperation, with any corporation, association, partnership, syndicate, entity, person or governmental, municipal or public authority, domestic or foreign, in the carrying on of any business or transaction deemed necessary, convenient or incidental to carrying out any of the purposes of this corporation;

                (6) To acquire or obtain from any government or authority, national, provincial, municipal or otherwise, or any corporation, company or partnership or person, such charter, contracts, franchise, privileges, exemption, licenses and concessions as may be conducive to any of the objects of the corporation;

                (7) To establish and operate one or more branch offices of agencies and to carry on any or all of its operations and business without any restrictions as to place or amount including the right to hold, purchase or otherwise acquire, lease, mortgage, pledge and convey or otherwise deal in and with real and personal property anywhere within the Philippines;

                (8) To conduct and transact any and all lawful business, and to do or cause to be done any one or more of the acts and things herein set forth as its purposes, within or without the Philippines, and in any and all foreign countries, and to do everything necessary, desirable or incidental to the accomplishment of the purposes or the exercise of any one or more of the powers herein enumerated, or which shall at any time appear conducive to or expedient for the protection or benefit of this corporation (Annex “C,” id. at 172-174).

Id. at 15.

Id. at 171.

Id. at 176.

G.R. No. 175352, July 15, 2009, 593 SCRA 68, 88.

Section 4, Article XI of the 1987 Constitution provides: The present anti-graft court known as the Sandiganbayan shall continue to function and exercise its jurisdiction as now or hereafter may be provided by law.

Enacted on February 5, 1997 and entitled “An Act Further Defining the Jurisdiction of the Sandiganbayan, Amending for the Purpose Presidential Decree No. 1606, as amended, Providing Funds Therefor, and for Other Purposes.”

Revising Presidential Decree No. 1486 Creating aSpecial Courtto be known as “Sandiganbayan” and for Other Purposes.

 CASE 2011-0123: DATU ZALDY UY AMPATUAN, ANSARUDDIN ADIONG, REGIE SAHALI-GENERALE VS. HON. RONALDO PUNO, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT AND ALTER-EGO OF PRESIDENT GLORIA MACAPAGAL-ARROYO, AND ANYONE ACTING IN HIS STEAD AND ON BEHALF OF THE PRESIDENT OF THE PHILIPPINES, ARMED FORCES OF THE PHILIPPINES (AFP), OR ANY OF THEIR UNITS OPERATING IN THE AUTONOMOUS REGION IN MUSLIM MINDANAO (ARMM), AND PHILIPPINE        NATIONAL POLICE, OR ANY OF THEIR        UNITS OPERATING IN ARMM (G.R. NO. 190259, 07 JUNE 2011, ABAD, J.) SUBJECT: VALIDITY OF PROCLAMATION OF STATE OF EMERGENCY. (BRIEF TITLE: AMPATUAN VS. PUNO)

X ======================================= X

SUBJECT: COURT WILL RESPECT PRESIDENT’S JUDGMENT UNLESS THERE IS GRAVE ABUSE OF DISCRETION

While it is true that the Court may inquire into the factual bases for the President’s exercise of the above power,^[1][18] it would generally defer to her judgment on the matter.  As the Court acknowledged in Integrated Bar of the Philippines v. Hon. Zamora,^[2][19] it is clearly to the President that the Constitution entrusts the determination of the need for calling out the armed forces to prevent and suppress lawless violence.  Unless it is shown that such determination was attended by grave abuse of discretion, the Court will accord respect to the President’s judgment.

. . . . . . . . .

Since petitioners are not able to demonstrate that the proclamation of state of emergency in the subject places and the calling out of the armed forces to prevent or suppress lawless violence there have clearly no factual bases, the Court must respect the President’s actions.

X=================================== X

EN BANC

DATU ZALDY UY AMPATUAN,             G.R. No. 190259

ANSARUDDIN ADIONG, REGIE

SAHALI-GENERALE

Petitioners,                      Present:

                                                                     CORONA, C.J., 

                                                                     CARPIO,

                                                                     CARPIO MORALES,

                                                            VELASCO, JR.,

  NACHURA,

                                                            LEONARDO-DE CASTRO,

– versus –                                              BRION,

  PERALTA,

  BERSAMIN,

 DELCASTILLO,

  ABAD,

  VILLARAMA, JR.,

  PEREZ,

  MENDOZA, and

  SERENO, JJ.

HON. RONALDO PUNO, in his capacity

as Secretary of the Department of Interior

and Local Government and alter-ego of

President Gloria Macapagal-Arroyo,

and anyone acting in his stead and on

behalf of the President of the Philippines,

ARMED FORCES OF THE PHILIPPINES

(AFP), or any of their units operating in

the Autonomous Region in Muslim

Mindanao (ARMM), and PHILIPPINE   

NATIONAL POLICE, or any of their      Promulgated:

units operating in ARMM,                       

                             Respondents.                    June 7, 2011                   

x —————————————————————————————- x

DECISION

ABAD, J.:

          On November 24, 2009, the day after the gruesome massacre of 57 men and women, including some news reporters, then President Gloria Macapagal-Arroyo issued Proclamation 1946,^[1][1] placing “the Provinces of Maguindanao and Sultan Kudarat and the City ofCotabato under a state of emergency.” She directed the Armed Forces of the Philippines (AFP) and the Philippine National Police (PNP) “to undertake such measures as may be allowed by the Constitution and by law to prevent and suppress all incidents of lawless violence” in the named places.

Three days later or on November 27, President Arroyo also issued Administrative Order 273 (AO 273)^[2][2] “transferring” supervision of the Autonomous Region of Muslim Mindanao (ARMM) from the Office of the President to the Department of Interior and Local Government (DILG).  But, due to issues raised over the terminology used in AO 273, the President issued Administrative Order 273-A (AO 273-A) amending the former, by “delegating” instead of “transferring” supervision of the ARMM to the DILG.^[3][3]

          Claiming that the President’s issuances encroached on the ARMM’s autonomy, petitioners Datu Zaldy Uy Ampatuan, Ansaruddin Adiong, and Regie Sahali-Generale, all ARMM officials,^[4][4] filed this petition for prohibition under Rule 65. They alleged that the proclamation and the orders empowered the DILG Secretary to take over ARMM’s operations and seize the regional government’s powers, in violation of the principle of local autonomy under Republic Act 9054 (also known as the Expanded ARMM Act) and the Constitution. The President gave the DILG Secretary the power to exercise, not merely administrative supervision, but control over the ARMM since the latter could suspend ARMM officials and replace them.^[5][5] 

          Petitioner ARMM officials claimed that the President had no factual basis for declaring a state of emergency, especially in the Provinceof Sultan Kudaratand the City of Cotabato, where no critical violent incidents occurred. The deployment of troops and the taking over of the ARMM constitutes an invalid exercise of the President’s emergency powers.^[6][6]  Petitioners asked that Proclamation 1946 as well as AOs 273 and 273-A be declared unconstitutional and that respondents DILG Secretary, the AFP, and the PNP be enjoined from implementing them.

In its comment for the respondents,^[7][7] the Office of the Solicitor General (OSG) insisted that the President issued Proclamation 1946, not to deprive the ARMM of its autonomy, but to restore peace and order in subject places.^[8][8]  She issued the proclamation pursuant to her “calling out” power^[9][9] as Commander-in-Chief under the first sentence of Section 18, Article VII of the Constitution.  The determination of the need to exercise this power rests solely on her wisdom.^[10][10]  She must use her judgment based on intelligence reports and such best information as are available to her to call out the armed forces to suppress and prevent lawless violence wherever and whenever these reared their ugly heads.

On the other hand, the President merely delegated through AOs 273 and 273-A her supervisory powers over the ARMM to the DILG Secretary who was her alter ego any way.  These orders did not authorize a take over of the ARMM.  They did not give him blanket authority to suspend or replace ARMM officials.^[11][11] The delegation was necessary to facilitate the investigation of the mass killings.^[12][12] Further, the assailed proclamation and administrative orders did not provide for the exercise of emergency powers.^[13][13] 

          Although normalcy has in the meantime returned to the places subject of this petition, it might be relevant to rule on the issues raised in this petition since some acts done pursuant to Proclamation 1946 and AOs 273 and 273-A could impact on the administrative and criminal cases that the government subsequently filed against those believed affected by such proclamation and orders.

The Issues Presented

The issues presented in this case are:

1.       Whether or not Proclamation 1946 and AOs 273 and 273-A violate the principle of local autonomy under Section 16, Article X of the Constitution, and Section 1, Article V of the Expanded ARMM Organic Act;

2.       Whether or not President Arroyo invalidly exercised emergency powers when she called out the AFP and the PNP to prevent and suppress all incidents of lawless violence in Maguindanao, Sultan Kudarat, and Cotabato City; and

3.       Whether or not the President had factual bases for her actions.   

The Rulings of the Court

We dismiss the petition.

One.  The claim of petitioners that the subject proclamation and administrative orders violate the principle of local autonomy is anchored on the allegation that, through them, the President authorized the DILG Secretary to take over the operations of the ARMM and assume direct governmental powers over the region.

But, in the first place, the DILG Secretary did not take over control of the powers of the ARMM.  After law enforcement agents took respondent Governor of ARMM into custody for alleged complicity in the Maguindanao massacre, the ARMM Vice-Governor, petitioner Ansaruddin Adiong, assumed the vacated post on December 10, 2009 pursuant to the rule on succession found in Article VII, Section 12,^[14][14] of RA 9054.  In turn, Acting Governor Adiong named the then Speaker of the ARMM Regional Assembly, petitioner Sahali-Generale, Acting ARMM Vice-Governor.^[15][15]  In short, the DILG Secretary did not take over the administration or operations of the ARMM.

Two.  Petitioners contend that the President unlawfully exercised emergency powers when she ordered the deployment of AFP and PNP personnel in the places mentioned in the proclamation.^[16][16]  But such deployment is not by itself an exercise of emergency powers as understood under Section 23 (2), Article VI of the Constitution, which provides:

SECTION 23. x x x (2) In times of war or other national emergency, the Congress may, by law, authorize the President, for a limited period and subject to such restrictions as it may prescribe, to exercise powers necessary and proper to carry out a declared national policy. Unless sooner withdrawn by resolution of the Congress, such powers shall cease upon the next adjournment thereof.

The President did not proclaim a national emergency, only a state of emergency in the three places mentioned.  And she did not act pursuant to any law enacted by Congress that authorized her to exercise extraordinary powers.  The calling out of the armed forces to prevent or suppress lawless violence in such places is a power that the Constitution directly vests in the President.  She did not need a congressional authority to exercise the same.

Three.  The President’s call on the armed forces to prevent or suppress lawless violence springs from the power vested in her under Section 18,Article VII of the Constitution, which provides.^[17][17]

SECTION 18. The President shall be the Commander-in-Chief of all armed forces of the Philippines and whenever it becomes necessary, he may call out such armed forces to prevent or suppress lawless violence, invasion or rebellion. x x x

While it is true that the Court may inquire into the factual bases for the President’s exercise of the above power,^[18][18] it would generally defer to her judgment on the matter.  As the Court acknowledged in Integrated Bar of the Philippines v. Hon. Zamora,^[19][19] it is clearly to the President that the Constitution entrusts the determination of the need for calling out the armed forces to prevent and suppress lawless violence.  Unless it is shown that such determination was attended by grave abuse of discretion, the Court will accord respect to the President’s judgment. Thus, the Court said:

If the petitioner fails, by way of proof, to support the assertion that the President acted without factual basis, then this Court cannot undertake an independent investigation beyond the pleadings. The factual necessity of calling out the armed forces is not easily quantifiable and cannot be objectively established since matters considered for satisfying the same is a combination of several factors which are not always accessible to the courts. Besides the absence of textual standards that the court may use to judge necessity, information necessary to arrive at such judgment might also prove unmanageable for the courts.  Certain pertinent information might be difficult to verify, or wholly unavailable to the courts. In many instances, the evidence upon which the President might decide that there is a need to call out the armed forces may be of a nature not constituting technical proof.

On the other hand, the President, as Commander-in-Chief has a vast intelligence network to gather information, some of which may be classified as highly confidential or affecting the security of the state. In the exercise of the power to call, on-the-spot decisions may be imperatively necessary in emergency situations to avert great loss of human lives and mass destruction of property. Indeed, the decision to call out the military to prevent or suppress lawless violence must be done swiftly and decisively if it were to have any effect at all. x x x.^[20][20] 

          Here, petitioners failed to show that the declaration of a state of emergency in the Provinces of Maguindanao, Sultan Kudarat and CotabatoCity, as well as the President’s exercise of the “calling out” power had no factual basis. They simply alleged that, since not all areas under the ARMM were placed under a state of emergency, it follows that the take over of the entire ARMM by the DILG Secretary had no basis too.^[21][21]

But, apart from the fact that there was no such take over to begin with, the OSG also clearly explained the factual bases for the President’s decision to call out the armed forces, as follows:

The Ampatuan and Mangudadatu clans are prominent families engaged in the political control of Maguindanao. It is also a known fact that both families have an arsenal of armed followers who hold elective positions in various parts of the ARMM and the rest of Mindanao.

Considering the fact that the principal victims of the brutal bloodshed are members of the Mangudadatu family and the main perpetrators of the brutal killings are members and followers of the Ampatuan family, both the military and police had to prepare for and prevent reported retaliatory actions from the Mangudadatu clan and additional offensive measures from the Ampatuan clan.

x x x x

The Ampatuan forces are estimated to be approximately two thousand four hundred (2,400) persons, equipped with about two thousand (2,000) firearms, about four hundred (400) of which have been accounted for. x x x

As for the Mangudadatus, they have an estimated one thousand eight hundred (1,800) personnel, with about two hundred (200) firearms. x x x

Apart from their own personal forces, both clans have Special Civilian Auxiliary Army (SCAA) personnel who support them: about five hundred (500) for the Ampatuans and three hundred (300) for the Mangudadatus.

What could be worse than the armed clash of two warring clans and their armed supporters, especially in light of intelligence reports on the potential involvement of rebel armed groups (RAGs).

One RAG was reported to have planned an attack on the forces of Datu Andal Ampatuan, Sr. to show support and sympathy for the victims. The said attack shall worsen the age-old territorial dispute between the said RAG and the Ampatuan family.

x x x x

On the other hand, RAG faction which is based in Sultan Kudarat was reported to have received three million pesos (P3,000,000.00) from Datu Andal Ampatuan, Sr. for the procurement of ammunition. The said faction is a force to reckon with because the group is well capable of launching a series of violent activities to divert the attention of the people and the authorities away from the multiple murder case. x x x

In addition, two other factions of a RAG are likely to support the Mangudadatu family. The Cotabato-based faction has the strength of about five hundred (500) persons and three hundred seventy-two (372) firearms while the Sultan Kudarat-based faction has the strength of about four hundred (400) persons and three hundred (300) firearms and was reported to be moving towards Maguindanao to support the Mangudadatu clan in its armed fight against the Ampatuans.^[22][22]

          In other words, the imminence of violence and anarchy at the time the President issued Proclamation 1946 was too grave to ignore and she had to act to prevent further bloodshed and hostilities in the places mentioned.  Progress reports also indicated that there was movement in these places of both high-powered firearms and armed men sympathetic to the two clans.^[23][23]  Thus, to pacify the people’s fears and stabilize the situation, the President had to take preventive action.  She called out the armed forces to control the proliferation of loose firearms and dismantle the armed groups that continuously threatened the peace and security in the affected places.

          Notably, the present administration of President Benigno Aquino III has not withdrawn the declaration of a state of emergency under Proclamation 1946.  It has been reported^[24][24] that the declaration would not be lifted soon because there is still a need to disband private armies and confiscate loose firearms. Apparently, the presence of troops in those places is still necessary to ease fear and tension among the citizenry and prevent and suppress any violence that may still erupt, despite the passage of more than a year from the time of the Maguindanao massacre.

Since petitioners are not able to demonstrate that the proclamation of state of emergency in the subject places and the calling out of the armed forces to prevent or suppress lawless violence there have clearly no factual bases, the Court must respect the President’s actions.

          WHEREFORE, the petition is DISMISSED for lack of merit.

          SO ORDERED.          

ROBERTO A. ABAD

                                                              Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

      ANTONIO T. CARPIO              CONCHITA CARPIO MORALES    

  Associate Justice                                               Associate Justice

PRESBITERO J. VELASCO, JR.     ANTONIO EDUARDO B. NACHURA

               Associate Justice                                     Associate Justice

TERESITA J. LEONARDO-DE CASTRO       ARTURO D. BRION

                     Associate Justice                                 Associate Justice

       DIOSDADO M. PERALTA                     LUCAS P. BERSAMIN

                 Associate Justice                                      Associate Justice        

 MARIANO C. DEL CASTILLO             MARTIN S. VILLARAMA, JR.

              Associate Justice                                     Associate Justice

   JOSE PORTUGAL PEREZ                            JOSE CATRAL MENDOZA

             Associate Justice                                                 Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

RENATO C. CORONA

          Chief Justice

CASE  2011-0122: RODOLFO N. REGALA VS. FEDERICO P. CARIN (G.R. NO. 188715, 6 APRIL 2011, CARPIO MORALES, J.) SUBJECT: QUASI DELICT; MORAL DAMAGES; NOMINAL DAMAGES. (BRIEF TITLE: REGALA VS. CARIN)

X ===================== X

SUBJECT:  MORAL DAMAGES MUST BE SHOWN TO BE THE PROXIMATE RESULT OF WRONGFUL ACT.

In prayers for moral damages, however, recovery is more an exception rather than the rule.  Moral damages are not meant to be punitive but are designed to compensate and alleviate the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar harm unjustly caused to a person.  To be entitled to such an award, the claimant must satisfactorily prove that he has suffered damages and that the injury causing it has sprung from any of the cases listed in Articles 2219^[19] and 2220^[20] of the Civil Code. Moreover, the damages must be shown to be the proximate result of a wrongful act or omission.  The claimant must thus establish the factual basis of the damages and its causal tie with the acts of the defendant. 

SUBJECT: WHAT TO PROVE TO MERIT AN AWARD OF MORAL DAMAGES

In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant; 2) a culpable act or omission factually established; 3) proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and 4) the proof that the act is predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of the Civil Code.^[21]

SUBJECT: MALICE IS A CRUCIAL ELEMENT IN MORAL DAMAGES. WHAT IS MALICE?

Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it is different from the negative idea of negligence in that malice or bad faith contemplates a state of mind affirmatively operating with furtive design or ill will.^[27] While the Court harbors no doubt that the incidents which gave rise to this dispute have brought anxiety and anguish to respondent, it is unconvinced that the damage inflicted upon respondent’s property was malicious or willful, an element crucial to merit an award of moral damages under Article 2220 of the Civil Code.

SUBJECT: NOMINAL DAMAGES IS ADJUDICATED IN ORDER THAT ONE’S RIGHT WHICH HAS BEEN VIOLATED MAY BE VINDICATED.

Petitioner, however, cannot steer clear from any liability whatsoever. Respondent and his family’s rights to the peaceful enjoyment of their property have, at the very least, been inconvenienced from the incident borne of petitioner’s construction work. Any pecuniary loss or damage suffered by respondent cannot be established as the records are bereft of any factual evidence to establish the same.  Nominal damages may thus be adjudicated in order that a right of the plaintiff, respondent herein, which has been violated or invaded by the defendant, petitioner herein, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.^[29]

X ============================ X 

Republic of the Philippines

Supreme Court

Baguio City

THIRD DIVISION

x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – -x

D E C I S I O N

CARPIO MORALES, J.:

          Assailed via this petition for review of petitioner Rodolfo N. Regala is the May 26, 2009 Decision^[1] of the Court of Appeals which affirmed with modification the May 29, 2006 Decision^[2] of the Regional Trial Court (RTC) of Las Piñas City, Br. 255 in Civil Case No. LP-99-0058, ordering petitioner to pay respondent Federico P. Carin moral and exemplary damages and attorney’s fees.

Petitioner and respondent are adjacent neighbors at Spirig Street, BF Resort Village, Las Piñas City.  When petitioner decided to renovate his one storey residence by constructing a second floor, he under the guise of merely building an extension to his residence, approached respondent sometime in May 1998 for permission to bore a hole through a perimeter wall shared by both their respective properties, to which respondent verbally consented on condition that petitioner would clean the area affected by the work.

          As earlier indicated, petitioner’s real intention was to build a second floor, in fact with a terrace atop the dividing wall.  In the course of the construction of the second floor, respondent and his wife Marietta suffered from the dust and dirt which fell on their property.  As petitioner failed to address the problem to respondent’s satisfaction, respondent filed a letter-complaint^[3] with the Office of the City Engineer and Building Official of Las Piñas City on June 9, 1998.

In his letter-complaint, respondent related that, despite the lack of a building permit for the construction of a second floor, petitioner had demolished the dividing wall, failed to clean the debris falling therefrom, allowed his laborers to come in and out of his (respondent’s) property without permission by simply jumping over the wall, and trampled on his vegetable garden; and that despite his protestations, petitioner persisted in proceeding with the construction, he claiming to be the owner of the perimeter wall.  

Several “sumbongs”^[4] (complaints) were soon lodged by respondent before the Office of Barangay Talon Dos against petitioner for encroachment, rampant invasion of privacy and damages arising from the construction, and for illegal construction of scaffoldings inside his (respondent’s) property.

          As no satisfactory agreement was reached at the last barangay conciliation proceedings in December 1998, and petitioner having continued the construction work despite issuance of several stop-work notices from the City Engineer’s Office for lack of building permit, respondent filed on March 1999 a complaint^[5] for damages against petitioner before the RTC of Las Piñas City.

In his complaint, respondent alleged in the main that, instead of boring just one hole as agreed upon, petitioner demolished the whole length of the wall from top to bottom into five parts for the purpose of constructing a second floor with terrace;  and that debris and dust piled up on respondent’s property ruining his garden and forcing him to, among other things, shut some of the windows of his house.  Respondent thus prayed for the award of moral and exemplary damages.

Petitioner, denying respondent’s allegations, claimed in his Answer^[6] that he was the sole and exclusive owner of  the wall referred to as a perimeter wall, the same having been built within the confines of his property and being part and parcel of the house and lot package he purchased from the developer, BF Homes, Inc., in 1981;  that the issue of its ownership has never been raised by respondent or his predecessor;  and that securing the consent of respondent and his neighbors was a mere formality in compliance with the requirements of the Building Official to facilitate the issuance of a building permit, hence, it should not be taken to mean that he (petitioner) acknowledges respondent to be a co-owner of the wall. He added that he eventually secured the requisite building permit^[7] in March 1999 and had duly paid the administrative fine.^[8]

Further, petitioner, denying that a demolition of the whole length of the wall took place, claimed that he and his contractor’s laborers had been diligently cleaning respondent’s area after every day’s work until respondent arrogantly demanded the dismantling of the scaffoldings, and barred the workforce from, and threatening to shoot anyone entering the premises;  and that the complaint was instituted by respondent as leverage to force him to withdraw the criminal case for slander and light threats^[9] which he had earlier filed against respondent for uttering threats and obscenities against him in connection with the construction work.

At the trial, after respondent and his wife confirmed the material allegations of the complaint, petitioner took the witness stand and presented his witnesses.

Architect Antonio Punzalan III^[10] testified that he installed GI sheets to prevent debris from falling onto respondent’s property and had instructed his workers to clean the affected area after every work day at 5:00 p.m., but they were later barred by respondent from entering his property. 

Engineer Crisostomo Chan^[11] from the Office of the Building Official of Las Piñas City testified, among other things, on the circumstances surrounding the complaint for illegal construction filed by respondent and that a building permit was eventually issued to petitioner on March 15, 1999.

Engineer Sonia Haduca^[12] declared that upon a joint survey conducted on the properties of both petitioner and respondent in December 1998 to determine their exact boundaries, she found an encroachment by petitioner of six centimeters at the lower portion of the existing wall negligible, since the Land Survey Law permits an encroachment of up to ten centimeters.

By Decision of May 29, 2006, Branch 255 of the Las Piñas City RTC rendered judgment in favor of respondent whom it awarded moral damages in the sum of P100,000, exemplary damages of P100,000 and attorney’s fees of P50,000 plus costs of suit.^[13]

In finding for respondent, the trial court declared that, apart from the fact that petitioner knowingly commenced the renovation of his house without the requisite building permit from the City Engineer’s Office, he misrepresented to respondent his true intent of introducing renovations.  For, it found that instead of just boring a hole in the perimeter wall as originally proposed, petitioner divided the wall into several sections to serve as a foundation for his firewall (which ended up higher than the perimeter wall) and the second storey of his house.

The trial court further declared that respondent and his family had thus to contend with the noise, dust and debris occasioned by the construction, which petitioner and his work crew failed to address despite respondent’s protestations, by refusing to clean the mess or install the necessary safety devices.

Applying Article 2176 of the Civil Code on quasi-delicts, the trial court ruled that petitioner was at fault and negligent for failing to undertake sufficient safety measures to prevent inconvenience and damage to respondent to thus entitle respondent to moral and exemplary damages.

On appeal by petitioner, the Court of Appeals affirmed the trial court’s decision with modification by reducing the award of moral and exemplary damages to P50,000 and P25,000, respectively.  The appellate court anchored its affirmance on Article 19 of the New Civil Code which directs every person to, in the exercise of his rights and in the performance of his duties, act with justice, and observe honesty and good faith.

By Resolution^[14] of July 10, 2009, the appellate court denied petitioner’s motion for reconsideration as well as respondent’s prayer in his Comment that the original awards made by the trial court be restored. 

Hence, petitioner’s present petition faulting the appellate court in

Affirming with modification the decision of the trial court….considering the absence of any competent proof to warrant the grant of moral and exemplary damages as well as attorney’s fees.^[15]  (underscoring supplied)

Petitioner maintains that since moral and exemplary damages are compensatory in nature, being meant neither to punish nor enrich, the claimant must establish that not only did he sustain injury but also that the other party had acted in bad faith or was motivated by ill will.  To petitioner, respondents failed to discharge this burden.  He adds that the trial court did not delve into whether petitioner’s renovations were the primary cause of respondent’s claimed injuries, viz violation of privacy, sleepless nights and mental anguish, among other things, as it instead focused on the lack of a building permit as basis for the awards.

Rebutting the testimony of respondent’s wife as to the alleged unauthorized intrusion of petitioner’s workers into respondent’s property in order to erect scaffoldings, petitioner points out that such an undertaking would take a considerable length of time and could not have gone unnoticed had consent not been given by respondent.

Moreover, petitioner posits, if consent had truly been withheld, there was nothing to prevent respondent from dismantling or immediately removing the offending structures – a course of action he did not even attempt.

In his Comment^[16] to the petition, respondent quotes heavily from the appellate and trial court’s findings that fault and negligence attended petitioner’s renovation, thus justifying the award of damages. He goes on to reiterate his plea that the awards given by the trial court in its decision of May 29, 2006 should be reinstated.

The petition is partly impressed with merit.

The trial court’s award of moral and exemplary damages, as affirmed by the appellate court, was premised on the damage and suffering sustained by respondent arising from quasi-delict under Article 2176^[17] of the Civil Code.  Thus the trial court explained:

Indeed, there was fault or negligence on the part of the defendant when he did not provide sufficient safety measures to prevent causing a lot of inconvenience and disturbance to the plaintiff and his family. The evidence presented by the plaintiff regarding the dirt or debris, as well as the absence of devices or safety measures to prevent the same from falling inside plaintiff’s property, were duly established. It did not help the cause of the defendant that he made a lot of misrepresentations regarding the renovations on his house and he did not initially have a building permit for the same. In fact, it was only after the construction works were completed that the said permit was issued and upon payment of an administrative fine by the defendant.^[18]

In prayers for moral damages, however, recovery is more an exception rather than the rule.  Moral damages are not meant to be punitive but are designed to compensate and alleviate the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar harm unjustly caused to a person.  To be entitled to such an award, the claimant must satisfactorily prove that he has suffered damages and that the injury causing it has sprung from any of the cases listed in Articles 2219^[19] and 2220^[20] of the Civil Code. Moreover, the damages must be shown to be the proximate result of a wrongful act or omission.  The claimant must thus establish the factual basis of the damages and its causal tie with the acts of the defendant. 

In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant; 2) a culpable act or omission factually established; 3) proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and 4) the proof that the act is predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of the Civil Code.^[21]

In the present case, respondent failed to establish by clear and convincing evidence that the injuries he sustained were the proximate effect of petitioner’s act or omission. It thus becomes necessary to instead look into the manner by which petitioner carried out his renovations to determine whether this was directly responsible for any distress respondent may have suffered since the law requires that a wrongful or illegal act or omission must have preceded the damages sustained by the claimant.

It bears noting that petitioner was engaged in the lawful exercise of his property rights to introduce renovations to his abode. While he initially did not have a building permit and may have misrepresented his real intent when he initially sought respondent’s consent, the lack of the permit was inconsequential since it only rendered petitioner liable to administrative sanctions or penalties.

The testimony of petitioner and his witnesses, specifically Architect Punzalan, demonstrates that they had actually taken measures to prevent, or at the very least, minimize the damage to respondent’s property occasioned by the construction work. Architect Punzalan details how upon reaching an agreement with petitioner for the construction of the second floor, he (Punzalan) surveyed petitioner’s property based on the Transfer Certificate of Title (TCT) and Tax Declarations^[22] and found that the perimeter wall was within the confines of petitioner’s property; that he, together with petitioner, secured the consent of the neighbors (including respondent) prior to the start of the renovation as reflected in a Neighbor’s Consent^[23] dated June 12, 1998; before the construction began, he undertook measures to prevent debris from falling into respondent’s property such as the installation of GI sheet strainers, the construction of scaffoldings^[24] on respondent’s property, the instructions to his workers to clean the area before leaving at 5:00 p.m;^[25]  and that the workers conducted daily clean-up of respondent’s property with his consent, until animosity developed between the parties.^[26]

Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it is different from the negative idea of negligence in that malice or bad faith contemplates a state of mind affirmatively operating with furtive design or ill will.^[27] While the Court harbors no doubt that the incidents which gave rise to this dispute have brought anxiety and anguish to respondent, it is unconvinced that the damage inflicted upon respondent’s property was malicious or willful, an element crucial to merit an award of moral damages under Article 2220 of the Civil Code.

Necessarily, the Court is not inclined to award exemplary damages.^[28]

Petitioner, however, cannot steer clear from any liability whatsoever. Respondent and his family’s rights to the peaceful enjoyment of their property have, at the very least, been inconvenienced from the incident borne of petitioner’s construction work. Any pecuniary loss or damage suffered by respondent cannot be established as the records are bereft of any factual evidence to establish the same.  Nominal damages may thus be adjudicated in order that a right of the plaintiff, respondent herein, which has been violated or invaded by the defendant, petitioner herein, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.^[29]

WHEREFORE, the petition is GRANTED. The May 26, 2009 Decision of the Court of Appeals is VACATED.  The Court orders petitioner to pay respondent the sum of P25,000 as nominal damages.

No costs.

SO ORDERED.        

                                       CONCHITA CARPIO MORALES

                                                         Associate Justice

WE CONCUR:

ATTESTATION

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                  CONCHITA CARPIO MORALES

                                      Associate Justice

                                   Chairperson

CERTIFICATION

          Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                     RENATO C. CORONA                                                                                                 Chief Justice

^[1]       Penned by Associate Justice Fernanda Lampas Peralta with the concurrence of Associate Justices       Andres B. Reyes, Jr. and Apolinario D. Bruselas, Jr., CA rollo, pp. 157-164.

^[2]       Records, pp. 579-602.

^[3]       Exhibit “B,” records, pp. 281-282.

^[4]      Id. at 9 and 284. 

^[5]       Docketed as Civil Case No. LP-99-0058, id. at 2-6.

^[6]       Id. at 21-28.

^[7]      Exhibit “21,” id. at 427.

^[8]      Vide Exhibit “22,” id. at 428.

^[9]       Criminal Case Nos. 43519-20 before the Metropolitan Trial Court of Las Piñas City, Br. 79.

^[10]     TSN, August 4, 16, 2004.

^[11]    TSN, September 27, 2004.

^[12]    TSN, October 13, 2004

^[13]     Records, p. 602.

^[14]    CA rollo, p. 187.

^[15]    Rollo, p. 32.

^[16]     Id. at 350-356.

^[17]     Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

^[18]     Records, p. 600.

^[19]     Article 2219. Moral damages may be recovered in the following and analogous cases:

(1)     A criminal offense resulting in physical injuries;

(2)     Quasi-delicts causing physical injuries; 

(3)     Seduction, abduction, rape or other lascivious acts;

(4)     Adultery or concubinage;

(5)     Illegal or arbitrary detention or arrest;

(6)     Illegal search;

(7)     Libel, slander or any other form of defamation;

(8)     Malicious prosecution;

(9)     Acts mentioned in article 309;

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral damages.

The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this article, in the order named.

^[20]    Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently and in bad faith.

^[21]     B. F. Metal (Corporation) v. Lomoton, G. R. No. 170813, April 16, 2008, 551 SCRA 618, 628-629 citing Philippine Telegraph & Telephone Corp. v. Court of Appeals, G. R. No. 139268, September 3, 2002, 388 SCRA 270, 276.

^[22]     Exhibit “11,” records, p. 413.

^[23]     Exhibit “7,” id. at 288.

^[24]    Exhibits “5” to “6,” id. at. 278.

^[25]    TSN, August 4, 2004, pp. 18-34.

^[26]    Id. at 35-38.

^[27]    Far East Bank and Trust Company v. Court of Appeals, G. R. No. 108164, 241 SCRA 671, 675.

^[28]     Philippine Telegraph & Telephone Corp. v. Court of Appeals, G. R. No. 139268, September 3, 2002, 388 SCRA 270, 277.

^[29]    Id. at 279.