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G. R. No. 164317 February 6, 2006

ALFREDO CHING, Petitioner,vs.THE SECRETARY OF JUSTICE, ASST. CITY PROSECUTOR ECILYN BURGOS-VILLAVERT, JUDGEEDGARDO SUDIAM of the Regional Trial Court, Manila, Branch 52; RIZAL COMMERCIAL BANKINGCORP. and THE PEOPLE OF THE PHILIPPINES, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

Before the Court is a petition for review on certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 57169 dismissing the petition for certiorari, prohibition and mandamus filed by petitionerAlfredo Ching, and its Resolution2 dated June 28, 2004 denying the motion for reconsideration thereof.

Petitioner was the Senior Vice-President of Philippine Blooming Mills, Inc. (PBMI). Sometime inSeptember to October 1980, PBMI, through petitioner, applied with the Rizal Commercial BankingCorporation (respondent bank) for the issuance of commercial letters of credit to finance its importation ofassorted goods.3

Respondent bank approved the application, and irrevocable letters of credit were issued in favor ofpetitioner. The goods were purchased and delivered in trust to PBMI. Petitioner signed 13 trust receipts 4

as surety, acknowledging delivery of the following goods:

T/RNos.

Date Granted Maturity Date Principal Description of Goods

1845 12-05-80 03-05-81 P1,596,470.05 79.9425 M/T "SDK" BrandSynthetic Graphite Electrode

1853 12-08-80 03-06-81 P198,150.67 3,000 pcs. (15 bundles)Calorized Lance Pipes

1824 11-28-80 02-26-81 P707,879.71 One Lot High FiredRefractory Tundish Bricks

1798 11-21-80 02-19-81 P835,526.25 5 cases spare parts for CCM

1808 11-21-80 02-19-81 P370,332.52 200 pcs. ingot moulds

2042 01-30-81 04-30-81 P469,669.29 High Fired Refractory NozzleBricks

1801 11-21-80 02-19-81 P2,001,715.17 Synthetic Graphite Electrode[with] tapered pitch filednipples

1857 12-09-80 03-09-81 P197,843.61 3,000 pcs. (15 bundlescalorized lance pipes [)]

1895 12-17-80 03-17-81 P67,652.04 Spare parts for Spectrophotometer

1911 12-22-80 03-20-81 P91,497.85 50 pcs. Ingot moulds
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2041 01-30-81 04-30-81 P91,456.97 50 pcs. Ingot moulds

2099 02-10-81 05-11-81 P66,162.26 8 pcs. Kubota Rolls for rolling mills

2100 02-10-81 05-12-81 P210,748.00 Spare parts for Lacolaboratory Equipment5

Under the receipts, petitioner agreed to hold the goods in trust for the said bank, with authority to sell butnot by way of conditional sale, pledge or otherwise; and in case such goods were sold, to turn over theproceeds thereof as soon as received, to apply against the relative acceptances and payment of otherindebtedness to respondent bank. In case the goods remained unsold within the specified period, thegoods were to be returned to respondent bank without any need of demand. Thus, said "goods,manufactured products or proceeds thereof, whether in the form of money or bills, receivables, oraccounts separate and capable of identification" were respondent banks property.

When the trust receipts matured, petitioner failed to return the goods to respondent bank, or to return theirvalue amounting to P6,940,280.66 despite demands. Thus, the bank filed a criminal complaint for estafa 6

against petitioner in the Office of the City Prosecutor of Manila.

After the requisite preliminary investigation, the City Prosecutor found probable cause estafa under Article315, paragraph 1(b) of the Revised Penal Code, in relation to Presidential Decree (P.D.) No. 115,otherwise known as the Trust Receipts Law. Thirteen (13) Informations were filed against the petitionerbefore the Regional Trial Court (RTC) of Manila. The cases were docketed as Criminal Cases No. 86-42169 to 86-42181, raffled to Branch 31 of said court.

Petitioner appealed the resolution of the City Prosecutor to the then Minister of Justice. The appeal wasdismissed in a Resolution7 dated March 17, 1987, and petitioner moved for its reconsideration. OnDecember 23, 1987, the Minister of Justice granted the motion, thus reversing the previous resolutionfinding probable cause against petitioner.8 The City Prosecutor was ordered to move for the withdrawal ofthe Informations.

This time, respondent bank filed a motion for reconsideration, which, however, was denied on February24, 1988.9The RTC, for its part, granted the Motion to Quash the Informations filed by petitioner on theground that the material allegations therein did not amount to estafa.10

In the meantime, the Court rendered judgment in Allied Banking Corporation v. Ordoez, 11holding that thepenal provision of P.D. No. 115 encompasses any act violative of an obligation covered by the trustreceipt; it is not limited to transactions involving goods which are to be sold (retailed), reshipped, stored orprocessed as a component of a product ultimately sold. The Court also ruled that "the non-payment of theamount covered by a trust receipt is an act violative of the obligation of the entrustee to pay."12

On February 27, 1995, respondent bank re-filed the criminal complaint for estafa against petitioner beforethe Office of the City Prosecutor of Manila. The case was docketed as I.S. No. 95B-07614.

Preliminary investigation ensued. On December 8, 1995, the City Prosecutor ruled that there was noprobable cause to charge petitioner with violating P.D. No. 115, as petitioners liability was only civil, notcriminal, having signed the trust receipts as surety.13 Respondent bank appealed the resolution to theDepartment of Justice (DOJ) via petition for review, alleging that the City Prosecutor erred in ruling:

1. That there is no evidence to show that respondent participated in the misappropriation ofthe goods subject of the trust receipts;
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2. That the respondent is a mere surety of the trust receipts; and

3. That the liability of the respondent is only civil in nature.14

On July 13, 1999, the Secretary of Justice issued Resolution No. 25015granting the petition and reversingthe assailed resolution of the City Prosecutor. According to the Justice Secretary, the petitioner, as SeniorVice-President of PBMI, executed the 13 trust receipts and as such, was the one responsible for theoffense. Thus, the execution of said receipts is enough to indict the petitioner as the official responsible for

violation of P.D. No. 115. The Justice Secretary also declared that petitioner could not contend that P.D.No. 115 covers only goods ultimately destined for sale, as this issue had already been settled in AlliedBanking Corporation v. Ordoez,16 where the Court ruled that P.D. No. 115 is "not limited to transactionsin goods which are to be sold (retailed), reshipped, stored or processed as a component of a productultimately sold but covers failure to turn over the proceeds of the sale of entrusted goods, or to return saidgoods if unsold or not otherwise disposed of in accordance with the terms of the trust receipts."

The Justice Secretary further stated that the respondent bound himself under the terms of the trustreceipts not only as a corporate official of PBMI but also as its surety; hence, he could be proceededagainst in two (2) ways: first, as surety as determined by the Supreme Court in its decision in RizalCommercial Banking Corporation v. Court of Appeals;17 and second, as the corporate official responsiblefor the offense under P.D. No. 115, via criminal prosecution. Moreover, P.D. No. 115 explicitly allows theprosecution of corporate officers "without prejudice to the civil liabilities arising from the criminal offense."Thus, according to the Justice Secretary, following Rizal Commercial Banking Corporation, the civil liabilityimposed is clearly separate and distinct from the criminal liability of the accused under P.D. No. 115.

Conformably with the Resolution of the Secretary of Justice, the City Prosecutor filed 13 Informationsagainst petitioner for violation of P.D. No. 115 before the RTC of Manila. The cases were docketed asCriminal Cases No. 99-178596 to 99-178608 and consolidated for trial before Branch 52 of said court.Petitioner filed a motion for reconsideration, which the Secretary of Justice denied in a Resolution18 datedJanuary 17, 2000.

Petitioner then filed a petition for certiorari, prohibition and mandamus with the CA, assailing the

resolutions of the Secretary of Justice on the following grounds:

1. THE RESPONDENTS ARE ACTING WITH AN UNEVEN HAND AND IN FACT, AREACTING OPPRESSIVELY AGAINST ALFREDO CHING WHEN THEY ALLOWED HISPROSECUTION DESPITE THE FACT THAT NO EVIDENCE HAD BEEN PRESENTED TOPROVE HIS PARTICIPATION IN THE ALLEGED TRANSACTIONS.

2. THE RESPONDENT SECRETARY OF JUSTICE COMMITTED AN ACT IN GRAVEABUSE OF DISCRETION AND IN EXCESS OF HIS JURISDICTION WHEN THEYCONTINUED PROSECUTION OF THE PETITIONER DESPITE THE LENGTH OF TIMEINCURRED IN THE TERMINATION OF THE PRELIMINARY INVESTIGATION THATSHOULD JUSTIFY THE DISMISSAL OF THE INSTANT CASE.

3. THE RESPONDENT SECRETARY OF JUSTICE AND ASSISTANT CITYPROSECUTOR ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO ANEXCESS OF JURISDICTION WHEN THEY CONTINUED THE PROSECUTION OF THEPETITIONER DESPITE LACK OF SUFFICIENT BASIS.19

In his petition, petitioner incorporated a certification stating that "as far as this Petition is concerned, noaction or proceeding in the Supreme Court, the Court of Appeals or different divisions thereof, or anytribunal or agency. It is finally certified that if the affiant should learn that a similar action or proceeding hasbeen filed or is pending before the Supreme Court, the Court of Appeals, or different divisions thereof, of
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any other tribunal or agency, it hereby undertakes to notify this Honorable Court within five (5) days fromsuch notice."20

In its Comment on the petition, the Office of the Solicitor General alleged that -

A.

THE HONORABLE SECRETARY OF JUSTICE CORRECTLY RULED THAT PETITIONER

ALFREDO CHING IS THE OFFICER RESPONSIBLE FOR THE OFFENSE CHARGEDAND THAT THE ACTS OF PETITIONER FALL WITHIN THE AMBIT OF VIOLATION OFP.D. [No.] 115 IN RELATION TO ARTICLE 315, PAR. 1(B) OF THE REVISED PENALCODE.

B.

THERE IS NO MERIT IN PETITIONERS CONTENTION THAT EXCESSIVE DELAY HASMARRED THE CONDUCT OF THE PRELIMINARY INVESTIGATION OF THE CASE,JUSTIFYING ITS DISMISSAL.

C.

THE PRESENT SPECIAL CIVIL ACTION FOR CERTIORARI, PROHIBITION ANDMANDAMUS IS NOT THE PROPER MODE OF REVIEW FROM THE RESOLUTION OFTHE DEPARTMENT OF JUSTICE. THE PRESENT PETITION MUST THEREFORE BEDISMISSED.21

On April 22, 2004, the CA rendered judgment dismissing the petition for lack of merit, and on proceduralgrounds. On the procedural issue, it ruled that (a) the certification of non-forum shopping executed bypetitioner and incorporated in the petition was defective for failure to comply with the first two of the three-fold undertakings prescribed in Rule 7, Section 5 of the Revised Rules of Civil Procedure; and (b) thepetition for certiorari, prohibition and mandamus was not the proper remedy of the petitioner.

On the merits of the petition, the CA ruled that the assailed resolutions of the Secretary of Justice werecorrectly issued for the following reasons: (a) petitioner, being the Senior Vice-President of PBMI and thesignatory to the trust receipts, is criminally liable for violation of P.D. No. 115; (b) the issue raised by thepetitioner, on whether he violated P.D. No. 115 by his actuations, had already been resolved and laid torest in Allied Bank Corporation v. Ordoez;22 and (c) petitioner was estopped from raising the

City Prosecutors delay in the final disposition of the preliminary investigation because he failed to do so inthe DOJ.

Thus, petitioner filed the instant petition, alleging that:

I

THE COURT OF APPEALS ERRED WHEN IT DISMISSED THE PETITION ON THEGROUND THAT THE CERTIFICATION OF NON-FORUM SHOPPING INCORPORATEDTHEREIN WAS DEFECTIVE.

II

THE COURT OF APPEALS ERRED WHEN IT RULED THAT NO GRAVE ABUSE OFDISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WAS
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Indubitably, the first paragraph of petitioners certification is incomplete and unintelligible. Petitioner failedto certify that he "had not heretofore commenced any other action involving the same issues in theSupreme Court, the Court of Appeals or the different divisions thereof or any other tribunal or agency" asrequired by paragraph 4, Section 3, Rule 46 of the Revised Rules of Court.

We agree with petitioners contention that the certification is designed to promote and facilitate the orderlyadministration of justice, and therefore, should not be interpreted with absolute literalness. In his works onthe Revised Rules of Civil Procedure, former Supreme Court Justice Florenz Regalado states that, with

respect to the contents of the certification which the pleader may prepare, the rule of substantialcompliance may be availed of.27 However, there must be a special circumstance or compelling reasonwhich makes the strict application of the requirement clearly unjustified. The instant petition has notalleged any such extraneous circumstance. Moreover, as worded, the certification cannot even beregarded as substantial compliance with the procedural requirement. Thus, the CA was not informedwhether, aside from the petition before it, petitioner had commenced any other action involving the sameissues in other tribunals.

On the merits of the petition, the CA ruled that the petitioner failed to establish that the Secretary ofJustice committed grave abuse of discretion in finding probable cause against the petitioner for violation ofestafa under Article 315, paragraph 1(b) of the Revised Penal Code, in relation to P.D. No. 115. Thus, theappellate court ratiocinated:

Be that as it may, even on the merits, the arguments advanced in support of the petition are notpersuasive enough to justify the desired conclusion that respondent Secretary of Justice gravely abusedits discretion in coming out with his assailed Resolutions. Petitioner posits that, except for his being theSenior Vice-President of the PBMI, there is no iota of evidence that he was a participes crimines inviolating the trust receipts sued upon; and that his liability, if at all, is purely civil because he signed thesaid trust receipts merely as a xxx surety and not as the entrustee. These assertions are, however, toodull that they cannot even just dent the findings of the respondent Secretary, viz:

"x x x it is apropos to quote section 13 of PD 115 which states in part, viz:

xxx If the violation or offense is committed by a corporation, partnership, association or other judicialentities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees orother officials or persons therein responsible for the offense, without prejudice to the civil liabilities arisingfrom the criminal offense.

"There is no dispute that it was the respondent, who as senior vice-president of PBM, executed thethirteen (13) trust receipts. As such, the law points to him as the official responsible for the offense. Sincea corporation cannot be proceeded against criminally because it cannot commit crime in which personalviolence or malicious intent is required, criminal action is limited to the corporate agents guilty of an actamounting to a crime and never against the corporation itself (West Coast Life Ins. Co. vs. Hurd, 27 Phil.401; Times, [I]nc. v. Reyes, 39 SCRA 303). Thus, the execution by respondent of said receipts is enoughto indict him as the official responsible for violation of PD 115.

"Parenthetically, respondent is estopped to still contend that PD 115 covers only goods which areultimately destined for sale and not goods, like those imported by PBM, for use in manufacture. This issuehas already been settled in the Allied Banking Corporation case, supra, where he was also a party, whenthe Supreme Court ruled that PD 115 is not limited to transactions in goods which are to be sold(retailed), reshipped, stored or processed as a component or a product ultimately sold but covers failureto turn over the proceeds of the sale of entrusted goods, or to return said goods if unsold or disposed of inaccordance with the terms of the trust receipts.
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"In regard to the other assigned errors, we note that the respondent bound himself under the terms of thetrust receipts not only as a corporate official of PBM but also as its surety. It is evident that these are two(2) capacities which do not exclude the other. Logically, he can be proceeded against in two (2) ways:first, as surety as determined by the Supreme Court in its decision in RCBC vs. Court of Appeals, 178SCRA 739; and, secondly, as the corporate official responsible for the offense under PD 115, the presentcase is an appropriate remedy under our penal law.

"Moreover, PD 115 explicitly allows the prosecution of corporate officers without prejudice to the civil

liabilities arising from the criminal offense thus, the civil liability imposed on respondent in RCBC vs. Courtof Appeals case is clearly separate and distinct from his criminal liability under PD 115." 28

Petitioner asserts that the appellate courts ruling is erroneous because (a) the transaction between PBMIand respondent bank is not a trust receipt transaction; (b) he entered into the transaction and was sued inhis capacity as PBMI Senior Vice-President; (c) he never received the goods as an entrustee for PBMI,hence, could not have committed any dishonesty or abused the confidence of respondent bank; and (d)PBMI acquired the goods and used the same in operating its machineries and equipment and not forresale.

The OSG, for its part, submits a contrary view, to wit:

34. Petitioner further claims that he is not a person responsible for the offense allegedly because "[b]eingcharged as the Senior Vice-President of Philippine Blooming Mills (PBM), petitioner cannot be heldcriminally liable as the transactions sued upon were clearly entered into in his capacity as an officer of thecorporation" and that [h]e never received the goods as an entrustee for PBM as he never had or tookpossession of the goods nor did he commit dishonesty nor "abuse of confidence in transacting withRCBC." Such argument is bereft of merit.

35. Petitioners being a Senior Vice-President of the Philippine Blooming Mills does not exculpate himfrom any liability. Petitioners responsibility as the corporate official of PBM who received the goods intrust is premised on Section 13 of P.D. No. 115, which provides:

Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the sale of the goods,documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster oras appears in the trust receipt or to return said goods, documents or instruments if they were not sold ordisposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa,punishable under the provisions of Article Three hundred and fifteen, paragraph one (b) of Act NumberedThree thousand eight hundred and fifteen, as amended, otherwise known as the Revised Penal Code. Ifthe violation or offense is committed by a corporation, partnership, association or other juridical entities,the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or otherofficials or persons therein responsible for the offense, without prejudice to the civil liabilities arising fromthe criminal offense. (Emphasis supplied)

36. Petitioner having participated in the negotiations for the trust receipts and having received the goodsfor PBM, it was inevitable that the petitioner is the proper corporate officer to be proceeded against byvirtue of the PBMs violation of P.D. No. 115.29

The ruling of the CA is correct.

In Mendoza-Arce v. Office of the Ombudsman (Visayas),30 this Court held that the acts of a quasi-judicialofficer may be assailed by the aggrieved party via a petition for certiorari and enjoined (a) when necessaryto afford adequate protection to the constitutional rights of the accused; (b) when necessary for the orderlyadministration of justice; (c) when the acts of the officer are without or in excess of authority; (d) where thecharges are manifestly false and motivated by the lust for vengeance; and (e) when there is clearly no
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prima facie case against the accused.31 The Court also declared that, if the officer conducting apreliminary investigation (in that case, the Office of the Ombudsman) acts without or in excess of hisauthority and resolves to file an Information despite the absence of probable cause, such act may benullified by a writ of certiorari.32

Indeed, under Section 4, Rule 112 of the 2000 Rules of Criminal Procedure,33 the Information shall beprepared by the Investigating Prosecutor against the respondent only if he or she finds probable cause tohold such respondent for trial. The Investigating Prosecutor acts without or in excess of his authority under

the Rule if the Information is filed against the respondent despite absence of evidence showing probablecause therefor.34 If the Secretary of Justice reverses the Resolution of the Investigating Prosecutor whofound no probable cause to hold the respondent for trial, and orders such prosecutor to file the Informationdespite the absence of probable cause, the Secretary of Justice acts contrary to law, without authorityand/or in excess of authority. Such resolution may likewise be nullified in a petition for certiorari underRule 65 of the Revised Rules of Civil Procedure.35

A preliminary investigation, designed to secure the respondent against hasty, malicious and oppressiveprosecution, is an inquiry to determine whether (a) a crime has been committed; and (b) whether there isprobable cause to believe that the accused is guilty thereof. It is a means of discovering the person orpersons who may be reasonably charged with a crime. Probable cause need not be based on clear andconvincing evidence of guilt, as the investigating officer acts upon probable cause of reasonable belief.

Probable cause implies probability of guilt and requires more than bare suspicion but less than evidencewhich would justify a conviction. A finding of probable cause needs only to rest on evidence showing thatmore likely than not, a crime has been committed by the suspect.36

However, while probable cause should be determined in a summary manner, there is a need to examinethe evidence with care to prevent material damage to a potential accuseds constitutional right to libertyand the guarantees of freedom and fair play37 and to protect the State from the burden of unnecessaryexpenses in prosecuting alleged offenses and holding trials arising from false, fraudulent or groundlesscharges.38

In this case, petitioner failed to establish that the Secretary of Justice committed grave abuse of discretion

in issuing the assailed resolutions. Indeed, he acted in accord with law and the evidence.

Section 4 of P.D. No. 115 defines a trust receipt transaction, thus:

Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within the meaning ofthis Decree, is any transaction by and between a person referred to in this Decree as the entruster, andanother person referred to in this Decree as entrustee, whereby the entruster, who owns or holds absolutetitle or security interests over certain specified goods, documents or instruments, releases the same to thepossession of the entrustee upon the latters execution and delivery to the entruster of a signed documentcalled a "trust receipt" wherein the entrustee binds himself to hold the designated goods, documents orinstruments in trust for the entruster and to sell or otherwise dispose of the goods, documents orinstruments with the obligation to turn over to the entruster the proceeds thereof to the extent of theamount owing to the entruster or as appears in the trust receipt or the goods, documents or instrumentsthemselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditionsspecified in the trust receipt, or for other purposes substantially equivalent to any of the following:

1. In case of goods or documents, (a) to sell the goods or procure their sale; or (b) tomanufacture or process the goods with the purpose of ultimate sale; Provided, That, in thecase of goods delivered under trust receipt for the purpose of manufacturing or processingbefore its ultimate sale, the entruster shall retain its title over the goods whether in itsoriginal or processed form until the entrustee has complied fully with his obligation under the
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trust receipt; or (c) to load, unload, ship or otherwise deal with them in a manner preliminaryor necessary to their sale; or

2. In the case of instruments a) to sell or procure their sale or exchange; or b) to deliverthem to a principal; or c) to effect the consummation of some transactions involving deliveryto a depository or register; or d) to effect their presentation, collection or renewal.

The sale of goods, documents or instruments by a person in the business of selling goods, documents or

instruments for profit who, at the outset of the transaction, has, as against the buyer, general propertyrights in such goods, documents or instruments, or who sells the same to the buyer on credit, retainingtitle or other interest as security for the payment of the purchase price, does not constitute a trust receipttransaction and is outside the purview and coverage of this Decree.

An entrustee is one having or taking possession of goods, documents or instruments under a trust receipttransaction, and any successor in interest of such person for the purpose of payment specified in the trustreceipt agreement.39The entrustee is obliged to: (1) hold the goods, documents or instruments in trust forthe entruster and shall dispose of them strictly in accordance with the terms and conditions of the trustreceipt; (2) receive the proceeds in trust for the entruster and turn over the same to the entruster to theextent of the amount owing to the entruster or as appears on the trust receipt; (3) insure the goods fortheir total value against loss from fire, theft, pilferage or other casualties; (4) keep said goods or proceedsthereof whether in money or whatever form, separate and capable of identification as property of theentruster; (5) return the goods, documents or instruments in the event of non-sale or upon demand of theentruster; and (6) observe all other terms and conditions of the trust receipt not contrary to the provisionsof the decree.40

The entruster shall be entitled to the proceeds from the sale of the goods, documents or instrumentsreleased under a trust receipt to the entrustee to the extent of the amount owing to the entruster or asappears in the trust receipt, or to the return of the goods, documents or instruments in case of non-sale,and to the enforcement of all other rights conferred on him in the trust receipt; provided, such are notcontrary to the provisions of the document.41

In the case at bar, the transaction between petitioner and respondent bank falls under the trust receipttransactions envisaged in P.D. No. 115. Respondent bank imported the goods and entrusted the same toPBMI under the trust receipts signed by petitioner, as entrustee, with the bank as entruster. Theagreement was as follows:

And in consideration thereof, I/we hereby agree to hold said goods in trust for the said BANK as itsproperty with liberty to sell the same within ____days from the date of the execution of this Trust Receiptand for the Banks account, but without authority to make any other disposition whatsoever of the saidgoods or any part thereof (or the proceeds) either by way of conditional sale, pledge or otherwise.

I/we agree to keep the said goods insured to their full value against loss from fire, theft, pilferage or othercasualties as directed by the BANK, the sum insured to be payable in case of loss to the BANK, with theunderstanding that the BANK is, not to be chargeable with the storage premium or insurance or any otherexpenses incurred on said goods.

In case of sale, I/we further agree to turn over the proceeds thereof as soon as received to the BANK, toapply against the relative acceptances (as described above) and for the payment of any otherindebtedness of mine/ours to the BANK. In case of non-sale within the period specified herein, I/we agreeto return the goods under this Trust Receipt to the BANK without any need of demand.

I/we agree to keep the said goods, manufactured products or proceeds thereof, whether in the form ofmoney or bills, receivables, or accounts separate and capable of identification as property of the BANK. 42
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It must be stressed that P.D. No. 115 is a declaration by legislative authority that, as a matter of publicpolicy, the failure of person to turn over the proceeds of the sale of the goods covered by a trust receipt orto return said goods, if not sold, is a public nuisance to be abated by the imposition of penal sanctions.43

The Court likewise rules that the issue of whether P.D. No. 115 encompasses transactions involvinggoods procured as a component of a product ultimately sold has been resolved in the affirmative in AlliedBanking Corporation v. Ordoez.44 The law applies to goods used by the entrustee in the operation of itsmachineries and equipment. The non-payment of the amount covered by the trust receipts or the non-

return of the goods covered by the receipts, if not sold or otherwise not disposed of, violate the entrusteesobligation to pay the amount or to return the goods to the entruster.

In Colinares v. Court of Appeals,45 the Court declared that there are two possible situations in a trustreceipt transaction. The first is covered by the provision which refers to money received under theobligation involving the duty to deliver it (entregarla) to the owner of the merchandise sold. The second iscovered by the provision which refers to merchandise received under the obligation to return it (devolvera)to the owner.46 Thus, failure of the entrustee to turn over the proceeds of the sale of the goods covered bythe trust receipts to the entruster or to return said goods if they were not disposed of in accordance withthe terms of the trust receipt is a crime under P.D. No. 115, without need of proving intent to defraud. Thelaw punishes dishonesty and abuse of confidence in the handling of money or goods to the prejudice ofthe entruster, regardless of whether the latter is the owner or not. A mere failure to deliver the proceeds of

the sale of the goods, if not sold, constitutes a criminal offense that causes prejudice, not only to another,but more to the public interest.47

The Court rules that although petitioner signed the trust receipts merely as Senior Vice-President of PBMIand had no physical possession of the goods, he cannot avoid prosecution for violation of P.D. No. 115.

The penalty clause of the law, Section 13 of P.D. No. 115 reads:

Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the sale of the goods,documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster oras appears in the trust receipt or to return said goods, documents or instruments if they were not sold or

disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa,punishable under the provisions of Article Three hundred and fifteen, paragraph one (b) of Act NumberedThree thousand eight hundred and fifteen, as amended, otherwise known as the Revised Penal Code. Ifthe violation or offense is committed by a corporation, partnership, association or other juridical entities,the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or otherofficials or persons therein responsible for the offense, without prejudice to the civil liabilities arising fromthe criminal offense.

The crime defined in P.D. No. 115 is malum prohibitum but is classified as estafa under paragraph 1(b),Article 315 of the Revised Penal Code, or estafa with abuse of confidence. It may be committed by acorporation or other juridical entity or by natural persons. However, the penalty for the crime isimprisonment for the periods provided in said Article 315, which reads:

ARTICLE 315. Swindling (estafa). Any person who shall defraud another by any of the meansmentioned hereinbelow shall be punished by:

1st. The penalty of prision correccional in its maximum period to prision mayor in itsminimum period, if the amount of the fraud is over 12,000 pesos but does not exceed22,000 pesos; and if such amount exceeds the latter sum, the penalty provided in thisparagraph shall be imposed in its maximum period, adding one year for each additional10,000 pesos; but the total penalty which may be imposed shall not exceed twenty years. Insuch cases, and in connection with the accessory penalties which may be imposed and for
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the purpose of the other provisions of this Code, the penalty shall be termed prision mayoror reclusion temporal, as the case may be;

2nd. The penalty of prision correccional in its minimum and medium periods, if the amountof the fraud is over 6,000 pesos but does not exceed 12,000 pesos;

3rd. The penalty of arresto mayor in its maximum period to prision correccional in itsminimum period, if such amount is over 200 pesos but does not exceed 6,000 pesos; and

4th. By arresto mayor in its medium and maximum periods, if such amount does not exceed 200 pesos,provided that in the four cases mentioned, the fraud be committed by any of the following means; xxx

Though the entrustee is a corporation, nevertheless, the law specifically makes the officers, employees orother officers or persons responsible for the offense, without prejudice to the civil liabilities of suchcorporation and/or board of directors, officers, or other officials or employees responsible for the offense.The rationale is that such officers or employees are vested with the authority and responsibility to devisemeans necessary to ensure compliance with the law and, if they fail to do so, are held criminallyaccountable; thus, they have a responsible share in the violations of the law.48

If the crime is committed by a corporation or other juridical entity, the directors, officers, employees orother officers thereof responsible for the offense shall be charged and penalized for the crime, preciselybecause of the nature of the crime and the penalty therefor. A corporation cannot be arrested andimprisoned; hence, cannot be penalized for a crime punishable by imprisonment.49 However, a corporationmay be charged and prosecuted for a crime if the imposable penalty is fine. Even if the statute prescribesboth fine and imprisonment as penalty, a corporation may be prosecuted and, if found guilty, may befined.50

A crime is the doing of that which the penal code forbids to be done, or omitting to do what it commands.A necessary part of the definition of every crime is the designation of the author of the crime upon whomthe penalty is to be inflicted. When a criminal statute designates an act of a corporation or a crime andprescribes punishment therefor, it creates a criminal offense which, otherwise, would not exist and such

can be committed only by the corporation. But when a penal statute does not expressly apply tocorporations, it does not create an offense for which a corporation may be punished. On the other hand, ifthe State, by statute, defines a crime that may be committed by a corporation but prescribes the penaltytherefor to be suffered by the officers, directors, or employees of such corporation or other personsresponsible for the offense, only such individuals will suffer such penalty.51 Corporate officers oremployees, through whose act, default or omission the corporation commits a crime, are themselvesindividually guilty of the crime.52

The principle applies whether or not the crime requires the consciousness of wrongdoing. It applies tothose corporate agents who themselves commit the crime and to those, who, by virtue of their managerialpositions or other similar relation to the corporation, could be deemed responsible for its commission, if byvirtue of their relationship to the corporation, they had the power to prevent the act.53 Moreover, all partiesactive in promoting a crime, whether agents or not, are principals. 54 Whether such officers or employeesare benefited by their delictual acts is not a touchstone of their criminal liability. Benefit is not an operativefact.

In this case, petitioner signed the trust receipts in question. He cannot, thus, hide behind the cloak of theseparate corporate personality of PBMI. In the words of Chief Justice Earl Warren, a corporate officercannot protect himself behind a corporation where he is the actual, present and efficient actor. 55

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against thepetitioner.
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SO ORDERED.

ROMEO J. CALLEJO, SR.

HERMAN C. CRYSTAL, LAMBERTO C. CRYSTAL, ANN GEORGIA C. SOLANTE, and DORIS C.MAGLASANG, as Heirs of Deceased SPOUSES RAYMUNDO I. CRYSTAL and DESAMPARADOS C.CRYSTAL, petitioners,vs.BANK OF THE PHILIPPINE ISLANDS, respondent.

D E C I S I O N

TINGA, J.:

Before us is a Petition for Review1 of the Decision2 and Resolution3 of the Court of Appeals dated 24October 2005 and 31 March 2006, respectively, in CA G.R. CV No. 72886, which affirmed the 8 June2001 decision of the Regional Trial Court, Branch 5, of Cebu City.4

The facts, as culled from the records, follow.

On 28 March 1978, spouses Raymundo and Desamparados Crystal obtained a P300,000.00 loan inbehalf of the Cebu Contractors Consortium Co. (CCCC) from the Bank of the Philippine Islands-Butuanbranch (BPI-Butuan). The loan was secured by a chattel mortgage on heavy equipment and machinery ofCCCC. On the same date, the spouses executed in favor of BPI-Butuan a Continuing Suretyship5 wherethey bound themselves as surety of CCCC in the aggregate principal sum of not exceeding P300,000.00.Thereafter, or on 29 March 1979, Raymundo Crystal executed a promissory note6 for the amount ofP300,000.00, also in favor of BPI-Butuan.

Sometime in August 1979, CCCC renewed a previous loan, this time from BPI, Cebu City branch (BPI-Cebu City). The renewal was evidenced by a promissory note7 dated 13 August 1979, signed by thespouses in their personal capacities and as managing partners of CCCC. The promissory note states thatthe spouses are jointly and severally liable with CCCC. It appears that before the original loan could begranted, BPI-Cebu City required CCCC to put up a security.

However, CCCC had no real property to offer as security for the loan; hence, the spouses executed a realestate mortgage8 over their own real property on 22 September 1977.9 On 3 October 1977, they executedanother real estate mortgage over the same lot in favor of BPI-Cebu City, to secure an additional loan ofP20,000.00 of CCCC.10

CCCC failed to pay its loans to both BPI-Butuan and BPI-Cebu City when they became due. CCCC, aswell as the spouses, failed to pay their obligations despite demands. Thus, BPI resorted to the foreclosureof the chattel mortgage and the real estate mortgage. The foreclosure sale on the chattel mortgage wasinitially stalled with the issuance of a restraining order against BPI.11However, following BPIs compliancewith the necessary requisites of extrajudicial foreclosure, the foreclosure sale on the chattel mortgage wasconsummated on 28 February 1988, with the proceeds amounting to P240,000.00 applied to the loan fromBPI-Butuan which had then reached P707,393.90.12 Meanwhile, on 7 July 1981, Insular Bank of Asia andAmerica (IBAA), through its Vice-President for Legal and Corporate Affairs, offered to buy the lot subjectof the two (2) real
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estate mortgages and to pay directly the spouses indebtedness in exchange for the release of themortgages. BPI rejected IBAAs offer to pay.13

BPI filed a complaint for sum of money against CCCC and the spouses before the Regional Trial Court ofButuan City (RTC Butuan), seeking to recover the deficiency of the loan of CCCC and the spouses withBPI-Butuan. The trial court ruled in favor of BPI. Pursuant to the decision, BPI instituted extrajudicialforeclosure of the spouses mortgaged property.14

On 10 April 1985, the spouses filed an action for Injunction With Damages, With A Prayer For ARestraining Order and/ or Writ of Preliminary Injunction.15 The spouses claimed that the foreclosure of thereal estate mortgages is illegal because BPI should have exhausted CCCCs properties first, stressingthat they are mere guarantors of the renewed loans. They also prayed that they be awarded moral andexemplary damages, attorneys fees, litigation expenses and cost of suit. Subsequently, the spouses filedan amended complaint,16 additionally alleging that CCCC had opened and maintained a foreign currencysavings account (FCSA-197) with bpi, Makati branch (BPI-Makati), and that said FCSA was used assecurity for a P450,000.00 loan also extended by BPI-Makati. The P450,000.00 loan was allegedly paid,and thereafter the spouses demanded the return of the FCSA passbook. BPI rejected the demand; thus,the spouses were unable to withdraw from the said account to pay for their other obligations to BPI.

The trial court dismissed the spouses complaint and ordered them to pay moral and exemplary damagesand attorneys fees to BPI.17It ruled that since the spouses agreed to bind themselves jointly andseverally, they are solidarily liable for the loans; hence, BPI can validly foreclose the two real estatemortgages. Moreover, being guarantors-mortgagors, the spouses are not entitled to the benefit ofexhaustion. Anent the FCSA, the trial court found that CCCC originally had FCDU SA No. 197 with BPI,Dewey Boulevard branch, which was transferred to BPI-Makati as FCDU SA 76/0035, at the request ofDesamparados Crystal. FCDU SA 76/0035 was thus closed, but Desamparados Crystal failed tosurrender the passbook because it was lost. The transferred FCSA in BPI-Makati was the one used assecurity for CCCCs P450,000.00 loan from BPI-Makati. CCCC was no longer allowed to withdraw fromFCDU SA No. 197 because it was already closed.

The spouses appealed the decision of the trial court to the Court of Appeals, but their appeal was

dismissed.18

The spouses moved for the reconsideration of the decision, but the Court of Appeals alsodenied their motion for reconsideration.19 Hence, the present petition.

Before the Court, petitioners who are the heirs of the spouses argue that the failure of the spouses to paythe BPI-Cebu City loan of P120,000.00 was due to BPIs illegal refusal to accept payment for the loanunless the P300,000.00 loan from BPI-Butuan would also be paid. Consequently, in view of BPIs unjustrefusal to accept payment of the BPI-Cebu City loan, the loan obligation of the spouses was extinguished,petitioners contend.

The contention has no merit. Petitioners rely on IBAAs offer to purchase the mortgaged lot from them andto directly pay BPI out of the proceeds thereof to settle the loan.20 BPIs refusal to agree to such paymentscheme cannot extinguish the spouses loan obligation. In the first place, IBAA is not privy to the loanagreement or the promissory note between the spouses and BPI. Contracts, after all, take effect onlybetween the parties, their successors in interest, heirs

and assigns.21 Besides, under Art. 1236 of the Civil Code, the creditor is not bound to accept payment orperformance by a third person who has no interest in the fulfillment of the obligation, unless there is astipulation to the contrary. We see no stipulation in the promissory note which states that a third personmay fulfill the spouses obligation. Thus, it is clear that the spouses alone bear responsibility for the same.

In any event, the promissory note is the controlling repository of the obligation of the spouses. Under thepromissory note, the spouses defined the parameters of their obligation as follows:
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On or before June 29, 1980 on demand, for value received, I/we promise to pay, jointly andseverally, to the BANK OF THE PHILIPPINE ISLANDS, at its office in the city of Cebu Philippines,the sum of ONE HUNDRED TWENTY THOUSAND PESOS (P120,0000.00), Philippine Currency,subject to periodic installments on the principal as follows: P30,000.00 quarterly amortizationstarting September 28, 1979. x x x 22

A solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of thecreditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. 23 A

liability is solidary "only when the obligation expressly so states, when the law so provides or when thenature of the

obligation so requires."24 Thus, when the obligor undertakes to be "jointly and severally" liable, it meansthat the obligation is solidary,25 such as in this case. By stating "I/we promise to pay, jointly and severally,to the BANK OF THE PHILIPPINE ISLANDS," the spouses agreed to be sought out and be demandedpayment from, by BPI. BPI did demand payment from them, but they failed to comply with their obligation,prompting BPIs valid resort to the foreclosure of the chattel mortgage and the real estate mortgages.

More importantly, the promissory note, wherein the spouses undertook to be solidarily liable for theprincipal loan, partakes the nature of a suretyship and therefore is an additional security for the loan. Thuswe held in one case that if solidary liability was instituted to "guarantee" a principal obligation, the lawdeems the contract to be one of suretyship.26 And while a contract of a surety is in essence secondaryonly to a valid principal obligation, the suretys liability to the creditor or promisee of the principal is said tobe direct, primary, and absolute; in other words, the surety is directly and equally bound with the principal.The surety therefore becomes liable for the debt or duty of another even if he possesses no direct orpersonal interest over the obligations nor does he receive any benefit therefrom. 27

Petitioners contend that the Court of Appeals erred in not granting their counterclaims, considering thatthey suffered moral damages in view of the unjust refusal of BPI to accept the payment scheme proposedby IBAA and the allegedly unjust and illegal foreclosure of the real estate mortgages on their property. 28

Conversely, they argue that the Court of Appeals erred in awarding moral damages to BPI, which is acorporation, as well as exemplary damages, attorneys fees and expenses of litigation.29

We do not agree. Moral damages are meant to compensate the claimant for any physical suffering,mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, socialhumiliation and similar injuries unjustly caused.30 Such damages, to be recoverable, must be theproximate result of a wrongful act or omission the factual basis for which is satisfactorily established bythe aggrieved party.31 There being no wrongful or unjust act on the part of BPI in demanding paymentfrom them and in seeking the foreclosure of the chattel and real estate mortgages, there is no lawful basisfor award of damages in favor of the spouses.

Neither is BPI entitled to moral damages. A juridical person is generally not entitled to moral damagesbecause, unlike a natural person, it cannot experience physical suffering or such sentiments as woundedfeelings, serious anxiety, mental anguish or moral shock.32The Court of Appeals found BPI as "beingfamous and having gained its familiarity and respect not only in the Philippines but also in the whole worldbecause of its good will and good reputation must protect and defend the same against any unwarrantedsuit such as the case at bench."33In holding that BPI is entitled to moral damages, the Court of Appealsrelied on the case ofPeople v. Manero,34 wherein the Court ruled that "[i]t is only when a juridical personhas a good reputation that is debased, resulting in social humiliation, that moral damages may beawarded."35

We do not agree with the Court of Appeals. A statement similar to that made by the Court in Manero canbe found in the case ofMambulao Lumber Co. v. PNB, et al.,36thus:
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x x x Obviously, an artificial person like herein appellant corporation cannot experience physicalsufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or socialhumiliation which are basis of moral damages. A corporation may have good reputation which,if besmirched may also be a ground for the award of moral damages. x x x (Emphasissupplied)

Nevertheless, in the more recent cases ofABS-CBN Corp. v. Court of Appeals, et al.,37 and FilipinasBroadcasting Network, Inc. v. Ago Medical and Educational Center-Bicol Christian College of Medicine

(AMEC-BCCM),38

the Court held that the statements in Manero and Mambulao were mere obiter dicta,implying that the award of moral damages to corporations is not a hard and fast rule. Indeed, while theCourt may allow the grant of moral damages to corporations, it is not automatically granted; there muststill be proof of the existence of the factual basis of the damage and its causal relation to the defendantsacts. This is so because moral damages, though incapable of pecuniary estimation, are in the category ofan award designed to compensate the claimant foractual injurysuffered and not to impose a penalty onthe wrongdoer.39

The spouses complaint against BPI proved to be unfounded, but it does not automatically entitle BPI tomoral damages. Although the institution of a clearly unfounded civil suit can at times be a legal

justification for an award of attorney's fees, such filing, however, has almost invariably been held not to bea ground for an award of moral damages. The rationale for the rule is that the law could not have meant toimpose a penalty on the right to litigate. Otherwise, moral damages must every time be awarded in favorof the prevailing defendant against an unsuccessful plaintiff.40 BPI may have been inconvenienced by thesuit, but we do not see how it could have possibly suffered besmirched reputation on account of the singlesuit alone. Hence, the award of moral damages should be deleted.

The awards of exemplary damages and attorneys fees, however, are proper. Exemplary damages, on theother hand, are imposed by way of example or correction for the public good, when the party to a contractacts in a wanton, fraudulent, oppressive or malevolent manner, while attorneys fees are allowed whenexemplary damages are awarded and when the party to a suit is compelled to incur expenses to protecthis interest.41The spouses instituted their complaint against BPI notwithstanding the fact that they were

the ones who failed to pay their obligations. Consequently, BPI was forced to litigate and defend itsinterest. For these reasons, BPI is entitled to the awards of exemplary damages and attorneys fees.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated 24October 2005 and 31 March 2006, respectively, are hereby AFFIRMED, with the MODIFICATION that theaward of moral damages to Bank of the Philippine Islands is DELETED.

Costs against the petitioners.

SO ORDERED.

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

D E C I S I O N

CARPIO, J.:

The Case
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This petition for review1assails the 4 January 1999 Decision2 and 26 January 2000 Resolution of theCourt of Appeals in CA-G.R. CV No. 40151. The Court of Appeals affirmed with modification the 14December 1992 Decision3 of the Regional Trial Court of Legazpi City, Branch 10, in Civil Case No. 8236.The Court of Appeals held Filipinas Broadcasting Network, Inc. and its broadcasters Hermogenes Alegreand Carmelo Rima liable for libel and ordered them to solidarily pay Ago Medical and Educational Center-Bicol Christian College of Medicine moral damages, attorneys fees and costs of suit.

The Antecedents

"Expos" is a radio documentary4program hosted by Carmelo Mel Rima ("Rima") and Hermogenes JunAlegre ("Alegre").5 Expos is aired every morning over DZRC-AM which is owned by FilipinasBroadcasting Network, Inc. ("FBNI"). "Expos" is heard over Legazpi City, the Albay municipalities andother Bicol areas.6

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

JUN ALEGRE:

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

xxx

Second: Earlier AMEC students in Physical Therapy had complained that the course is not

recognized by DECS. xxx

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

xxx

It is a public knowledge that the Ago Medical and Educational Center has survived and has been surviving

for the past few years since its inception because of funds support from foreign foundations. If you willtake a look at the AMEC premises youll find out that the names of the buildings there are foreignsoundings. There is a McDonald Hall. Why not Jose Rizal or Bonifacio Hall? That is a very concrete andundeniable evidence that the support of foreign foundations for AMEC is substantial, isnt it? With thereport which is the basis of the expose in DZRC today, it would be very easy for detractors and enemiesof the Ago family to stop the flow of support of foreign foundations who assist the medical school on thebasis of the latters purpose. But if the purpose of the institution (AMEC) is to deceive students at crosspurpose with its reason for being it is possible for these foreign foundations to lift or suspend theirdonations temporarily.8

xxx
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On the other hand, the administrators of AMEC-BCCM, AMEC Science High School and the AMEC-Institute of Mass Communication in their effort to minimize expenses in terms of salary areabsorbing or continues to accept "rejects". For example how many teachers in AMEC are formerteachers of Aquinas University but were removed because of immorality? Does it mean that the presentadministration of AMEC have the total definite moral foundation from catholic administrator of AquinasUniversity. I will prove to you my friends, that AMEC is a dumping ground, garbage, not merely ofmoral and physical misfits. Probably they only qualify in terms of intellect. The Dean of Student Affairsof AMEC is Justita Lola, as the family name implies. She is too old to work, being an old woman. Is the

AMEC administration exploiting the very [e]nterprising or compromising and undemanding Lola? Could itbe that AMEC is just patiently making use of Dean Justita Lola were if she is very old. As in atmosphericsituation zero visibility the plane cannot land, meaning she is very old, low pay follows. By the way,Dean Justita Lola is also the chairman of the committee on scholarship in AMEC. She had retired fromBicol University a long time ago but AMEC has patiently made use of her.

xxx

MEL RIMA:

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

May I say Im sorry to Dean Justita Lola. But this is the truth. The truth is this, that your are no longer fit toteach. You are too old. As an aviation, your case is zero visibility. Dont insist.

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

xxx

xxx On our end our task is to attend to the interests of students. It is likely that the students would beinfluenced by evil. When they become members of society outside of campus will be liabilitiesrather than assets. What do you expect from a doctor who while studying at AMEC is so much burdenedwith unreasonable imposition? What do you expect from a student who aside from peculiar problems because not all students are rich in their struggle to improve their social status are even more burdenedwith false regulations. xxx9(Emphasis supplied)

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

On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an Answer10 alleging that thebroadcasts against AMEC were fair and true. FBNI, Rima and Alegre claimed that they were plainlyimpelled by a sense of public duty to report the "goings-on in AMEC, [which is] an institution imbued withpublic interest."

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

On 14 December 1992, the trial court rendered a Decision12 finding FBNI and Alegre liable for libel exceptRima. The trial court held that the broadcasts are libelousper se. The trial court rejected the broadcastersclaim that their utterances were the result of straight reporting because it had no factual basis. The

broadcasters did not even verify their reports before airing them to show good faith. In holding FBNI liablefor libel, the trial court found that FBNI failed to exercise diligence in the selection and supervision of itsemployees.

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

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

SO ORDERED. 13 (Emphasis supplied)

Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago, on the other, appealedthe decision to the Court of Appeals. The Court of Appeals affirmed the trial courts judgment withmodification. The appellate court made Rima solidarily liable with FBNI and Alegre. The appellate courtdenied Agos claim for damages and attorneys fees because the broadcasts were directed againstAMEC, and not against her. The dispositive portion of the Court of Appeals decision reads:

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

SO ORDERED.14

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

Hence, FBNI filed this petition.15

The Ruling of the Court of Appeals

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

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

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

The Court of Appeals held that FBNI failed to exercise due diligence in the selection and supervision of itsemployees for allowing Rima and Alegre to make the radio broadcasts without the proper KBPaccreditation. The Court of Appeals denied Agos claim for damages and attorneys fees because thelibelous remarks were directed against AMEC, and not against her. The Court of Appeals adjudged FBNI,Rima and Alegre solidarily liable to pay AMEC moral damages, attorneys fees and costs of suit. 1awphi1.nt

Issues

FBNI raises the following issues for resolution:

I. WHETHER THE BROADCASTS ARE LIBELOUS;

II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;

III. WHETHER THE AWARD OF ATTORNEYS FEES IS PROPER; and

IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE FOR PAYMENT OFMORAL DAMAGES, ATTORNEYS FEES AND COSTS OF SUIT.

The Courts Ruling

We deny the petition.

This is a civil action for damages as a result of the allegedly defamatory remarks of Rima and Alegreagainst AMEC.17 While AMEC did not point out clearly the legal basis for its complaint, a reading of thecomplaint reveals that AMECs cause of action is based on Articles 30 and 33 of the Civil Code. Article3018authorizes a separate civil action to recover civil liability arising from a criminal offense. On the otherhand, Article 3319 particularly provides that the injured party may bring a separate civil action for damagesin cases of defamation, fraud, and physical injuries. AMEC also invokes Article 19 20 of the Civil Code to

justify its claim for damages. AMEC cites Articles 217621 and 218022 of the Civil Code to hold FBNIsolidarily liable with Rima and Alegre.

I.

Whether the broadcasts are libelous

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

There is no question that the broadcasts were made public and imputed to AMEC defects orcircumstances tending to cause it dishonor, discredit and contempt. Rima and Alegres remarks such as"greed for money on the part of AMECs administrators"; "AMEC is a dumping ground, garbage of xxxmoral and physical misfits"; and AMEC students who graduate "will be liabilities rather than assets" of the
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society are libelousperse. Taken as a whole, the broadcasts suggest that AMEC is a money-makinginstitution where physically and morally unfit teachers abound.

However, FBNI contends that the broadcasts are not malicious. FBNI claims that Rima and Alegre wereplainly impelled by their civic duty to air the students gripes. FBNI alleges that there is no evidence that illwill or spite motivated Rima and Alegre in making the broadcasts. FBNI further points out that Rima andAlegre exerted efforts to obtain AMECs side and gave Ago the opportunity to defend AMEC and itsadministrators. FBNI concludes that since there is no malice, there is no libel.

FBNIs contentions are untenable.

Every defamatory imputation is presumed malicious.25 Rima and Alegre failed to show adequately theirgood intention and justifiable motive in airing the supposed gripes of the students. As hosts of adocumentary or public affairs program, Rima and Alegre should have presented the public issues "freefrom inaccurate and misleading information."26 Hearing the students alleged complaints a month beforethe expos,27 they had sufficient time to verify their sources and information. However, Rima and Alegrehardly made a thorough investigation of the students alleged gripes. Neither did they inquire about norconfirm the purported irregularities in AMEC from the Department of Education, Culture and Sports.Alegre testified that he merely went to AMEC to verify his report from an alleged AMEC official whorefused to disclose any information. Alegre simply relied on the words of the students "because they weremany and not because there is proof that what they are saying is true."28 This plainly shows Rima andAlegres reckless disregard of whether their report was true or not.

Contrary to FBNIs claim, the broadcasts were not "the result of straight reporting." Significantly, somecourts in the United States apply the privilege of "neutral reportage" in libel cases involving matters ofpublic interest or public figures. Under this privilege, a republisher who accuratelyand disinterestedlyreports certain defamatory statements made against public figures is shielded from liability, regardless ofthe republishers subjective awareness of the truth or falsity of the accusation. 29 Rima and Alegre cannotinvoke the privilege of neutral reportage because unfounded comments abound in the broadcasts.Moreover, there is no existing controversy involving AMEC when the broadcasts were made. The privilegeof neutral reportage applies where the defamed person is a public figure who is involved in an existing

controversy, and a party to that controversy makes the defamatory statement.30

However, FBNI argues vigorously that malice in law does not apply to this case. Citing Borjal v. Court ofAppeals,31 FBNI contends that the broadcasts "fall within the coverage of qualifiedly privilegedcommunications" for being commentaries on matters of public interest. Such being the case, AMECshould prove malice in fact or actual malice. Since AMEC all

Ching to Manero

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