May 2010 Philippine Supreme Court Decisions on Civil Law

Here are selected May 2010 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Attorney’s fees; quantum meruit. The principle of quantum meruit (as much as he deserves) may be a basis for determining the reasonable amount of attorney’s fees.  Quantum meruit is a device to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain benefit without paying for it. It is applicable even if there was a formal written contract for attorney’s fees as long as the agreed fee was found by the court to be unconscionable.  In fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit, factors such as the time spent, and extent of services rendered; novelty and difficulty of the questions involved; importance of the subject matter; skill demanded; probability of losing other employment as a result of acceptance of the proferred case; customary charges for similar services; amount involved in the controversy and the benefits resulting to the client; certainty of compensation; character of employment; and professional standing of the lawyer, may be considered.  Indubitably entwined with a lawyer’s duty to charge only reasonable fee is the power of the Court to reduce the amount of attorney’s fees if the same is excessive and unconscionable in relation to Sec. 24, Rule 138 of the Rules.  Attorney’s fees are unconscionable if they affront one’s sense of justice, decency or unreasonableness.   The determination of the amount of reasonable attorney’s fees requires the presentation of evidence and a full-blown trial.  It would be only after due hearing and evaluation of the evidence presented by the parties that the trial court can render judgment as to the propriety of the amount to be awarded.  Hicoblo M. Catly (deceased), subtituted by his wife, Lourdes A. Catly vs. William Navarro, et al., G.R. No. 167239, May 5, 2010.

Compromise agreement. Under Article 2028 of the Civil Code, a compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. Compromise is a form of amicable settlement that is not only allowed, but also encouraged in civil cases. Contracting parties may establish such stipulations, clauses, terms, and conditions as they deem convenient, provided that these are not contrary to law, morals, good customs, public order, or public policy. Heirs of Alfredo Zabala, etc. et al. vs. Hon. Court of Appeals, et al., G.R. No. 189602, May 6, 2010.

Damages; amount in tort interference. The rule is that the defendant found guilty of interference with contractual relations cannot be held liable for more than the amount for which the party who was inducted to break the contract can be held liable.  Respondents were therefore correctly held liable for the balance of petitioner’s commission from the sale. Allan C. Go, doing business under the name and style of “ACG Express Liner” vs. Mortimer F. Cordero/Mortimer F. Cordero vs. Allan C. Go, doing business under the name and style of “ACG Express Liner”, et al., G.R. No. 164703/G.R. No, 164747. May 4, 2010.

Damages; attorney’s fees. See Hicoblo M. Catly (deceased), subtituted by his wife, Lourdes A. Catly vs. William Navarror, et al., G.R. No. 167239, May 5, 2010, above.

Damages; moral; exemplary; attorney’s fees. Respondents having acted in bad faith, moral damages may be recovered under Article 2219 of the Civil Code.  On the other hand, the requirements of an award of exemplary damages are: (1) they may be imposed by way of example in addition to compensatory damages, and only after the claimant’s right to them has been established; (2) that they cannot be recovered as a matter of right, their determination depending upon the amount of compensatory damages that may be awarded to the claimant; and (3) the act must be accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent manner.  The award of exemplary damages is thus in order.

However, we find the sums awarded by the trial court as moral and exemplary damages as reduced by the CA, still excessive under the circumstances. Moral damages are meant to compensate and alleviate the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injuries unjustly caused. Although incapable of pecuniary estimation, the amount must somehow be proportional to and in approximation of the suffering inflicted.  Moral damages are not punitive in nature and were never intended to enrich the claimant at the expense of the defendant. There is no hard-and-fast rule in determining what would be a fair and reasonable amount of moral damages, since each case must be governed by its own peculiar facts. Trial courts are given discretion in determining the amount, with the limitation that it “should not be palpably and scandalously excessive.” Indeed, it must be commensurate to the loss or injury suffered.

Because exemplary damages are awarded, attorney’s fees may also be awarded in consonance with Article 2208 (1). Allan C. Go, doing business under the name and style of “ACG Express Liner” vs. Mortimer F. Cordero/Mortimer F. Cordero vs. Allan C. Go, doing business under the name and style of “ACG Express Liner”, et al., G.R. No. 164703/G.R. No, 164747. May 4, 2010.

Damages; solidary liability. Respondent’s  argument that he cannot be held liable solidarily with the other party for actual, moral and exemplary damages, as well as attorney’s fees awarded to respondent  since  no law or contract provided for solidary obligation  in these cases,  is bereft of merit. Conformably with Article 2194 of the Civil Code, the responsibility of two or more persons who are liable for the quasi-delict is solidary. Obligations arising from tort are, by their nature, always solidary. Allan C. Go, doing business under the name and style of “ACG Express Liner” vs. Mortimer F. Cordero/Mortimer F. Cordero vs. Allan C. Go, doing business under the name and style of “ACG Express Liner”, et al., G.R. No. 164703/G.R. No, 164747. May 4, 2010.

Quasi-delict; human relations. The failure of respondents to act with fairness, honesty and good faith in securing better terms for the purchase of high-speed catamarans from AFFA, to the prejudice of the petitioner as the duly appointed exclusive distributor, is proscribed by Article 19 of the Civil Code. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be responsible. The object of this article, therefore, is to set certain standards which must be observed not only in the exercise of one’s rights but also in the performance of one’s duties. These standards are the following: act with justice, give everyone his due and observe honesty and good faith. Its antithesis, necessarily, is any act evincing bad faith or intent to injure.  Its elements are the following:  (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. When Article 19 is violated, an action for damages is proper under Articles 20 or 21 of the Civil Code. Article 21 refers to acts contra bonus mores and has the following elements: (1) There is an act which is legal; (2) but which is contrary to morals, good custom, public order, or public policy; and (3) it is done with intent to injure. A common theme runs through Articles 19 and 21, and that is, the act complained of must be intentional. Allan C. Go, doing business under the name and style of “ACG Express Liner” vs. Mortimer F. Cordero/Mortimer F. Cordero vs. Allan C. Go, doing business under the name and style of “ACG Express Liner”, et al., G.R. No. 164703/G.R. No, 164747. May 4, 2010.

Quasi-delict; tort interference. While it is true that a third person cannot possibly be sued for breach of contract because only parties can breach contractual provisions, a contracting party may sue a third person not for breach but for inducing another to commit such breach.  Article 1314 of the Civil Code provides: “Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. “ 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 a contract; and (3) interference of the third person is without legal justification.

In this case, the presence of the first and second elements is not disputed. As to the third element, the Supreme Court cited its ruling in So Ping Bun v. Court of Appeals that noted how authorities have debated on whether interference may be justified where the defendant acts for the sole purpose of furthering his own financial or economic interest.  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.   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.  It is sufficient if the impetus of his conduct lies in a proper business interest rather than in wrongful motives. The court noted that as early as Gilchrist vs. Cuddy, it had 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. While the court does not encourage tort interferers seeking their economic interest to intrude into existing contracts at the expense of others, the conduct complained must transcend the limits forbidding an obligatory award for damages in the absence of any malice. Malice connotes ill will or spite, and speaks not in response to duty.  It implies an intention to do ulterior and unjustifiable harm.  Malice is bad faith or bad motive.

The act of the respondents in inducing Robinson and AFFA to enter into another contract directly with ACG Express Liner to obtain a lower price for the second vessel resulted in AFFA’s breach of its contractual obligation to pay in full the commission due to the petitioner and unceremonious termination of the petitioner’s appointment as exclusive distributor.   Such act may not be deemed malicious if impelled by a proper business interest rather than in wrongful motives. The attendant circumstances, however, demonstrated that respondents transgressed the bounds of permissible financial interest to benefit themselves at the expense of the petitioner. Allan C. Go, doing business under the name and style of “ACG Express Liner” vs. Mortimer F. Cordero/Mortimer F. Cordero vs. Allan C. Go, doing business under the name and style of “ACG Express Liner”, et al., G.R. No. 164703/G.R. No, 164747. May 4, 2010.

Special Laws

Agricultural Land Reform Code; lease of agricultural land. Republic Act (RA) No. 3844 or the Agricultural Land Reform Code is the governing statute in actions involving leasehold of agricultural land. Section 36 sets out a prohibition against subleasing an agricultural lease. In this case, Domingo subleased his agricultural landholding to Sergio.  It is prohibited, except in the case of illness or temporary incapacity where he may employ laborers.  Domingo does not claim illness or temporary incapacity in his Answer.  Therefore, we hereby declare the dispossession of Domingo and Sergio from the subject agricultural land of the leaseholder.  Felisa Ferrer vs. Domingo Carganillo, et al., G.R. No. 170956, May 12, 2010.


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