FIRST DIVISION
PETRON CORPORATION, G.R.
No. 155683
Petitioner,
Present:
PUNO,
C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s
- CORONA,
AZCUNA
and
GARCIA, JJ.
NATIONAL COLLEGE OF
BUSINESS AND ARTS,
Respondent. Promulgated:
February 16, 2007
x - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
D E C I S I O N
CORONA, J.:
The sole question raised in this
petition for review on certiorari[1] is
whether petitioner Petron Corporation (Petron) should be held liable to pay attorney’s fees and
exemplary damages to respondent National College of Business and Arts (NCBA).
This case, however, is but part of a
larger controversy over the lawful ownership of seven parcels of land[2] in the
V. Mapa area of Sta. Mesa, Manila (the V. Mapa properties) that arose out of a series of events that
began in 1969.[3]
Sometime in 1969, the V. Mapa properties, then owned by Felipe and Enrique Monserrat, Jr., were mortgaged to the Development Bank of
the Philippines (DBP) as part of the security for the P5.2 million loan
of Manila Yellow Taxicab Co., Inc. (MYTC) and Monserrat
Enterprises Co. MYTC, for its part,
mortgaged four parcels of land located in Quiapo,
Manila.
On March 31, 1975, however, Felipe’s
½ undivided interest in the V. Mapa properties was
levied upon in execution of a money judgment rendered by the Regional Trial
Court (RTC) of Manila in Filoil Marketing
Corporation v. MYTC, Felipe Monserrat, and Rosario Vda. De Monserrat (the Manila
case).[4] DBP
challenged the levy through a third-party claim asserting that the V. Mapa properties were mortgaged to it and were, for that
reason, exempt from levy or attachment. The RTC quashed it.
On June 18, 1981, MYTC and the Monserrats got DBP to accept a dacion
en pago arrangement whereby MYTC conveyed to the
bank the four mortgaged Quiapo properties as full
settlement of their loan obligation. But despite this agreement, DBP did not
release the V. Mapa properties from the mortgage.
On May 21, 1982, Felipe, acting for
himself and as Enrique’s attorney-in-fact, sold the V. Mapa
properties to respondent NCBA. Part of the agreement was that Felipe and
Enrique would secure the release of the titles to the properties free of all
liens and encumbrances including DBP’s mortgage lien
and Filoil’s levy on or before July 31, 1982. But the Monserrats
failed to comply with this undertaking. Thus, on February 3, 1983, NCBA caused
the annotation of an affidavit of adverse claim on the TCTs
covering the V. Mapa properties.
Shortly thereafter, NCBA filed a
complaint against Felipe and Enrique for specific performance with an
alternative prayer for rescission and damages in the RTC of Manila. The case was raffled to Branch 30 and
docketed as Civil Case No. 83-16617. On March 30, 1983, NCBA had a notice of lis pendens
inscribed on the TCTs of the V. Mapa
properties. A little over two years later, NCBA impleaded
DBP as an additional defendant in order to compel it to release the V. Mapa properties from mortgage.
On February 28, 1985, during the pendency of Civil Case No. 83-16617, Enrique’s ½ undivided
interest in the V. Mapa properties was levied on in
execution of a judgment of the RTC of Makati (the Makati case)[5] holding
him liable to Petron (then known as Petrophil Corporation) on a 1972 promissory note. On April 29, 1985, the V. Mapa
properties were sold at public auction to satisfy the judgments in the Manila
and Makati cases. Petron,
the highest bidder, acquired both Felipe’s and Enrique’s undivided interests in
the property. The final deeds of sale of
Enrique’s and Felipe’s shares in the V. Mapa
properties were awarded to Petron in 1986. Sometime
later, the Monserrats’ TCTs
were cancelled and new ones were issued to Petron.
Thus it was that, towards the end of 1987, Petron
intervened in NCBA’s suit against Felipe, Enrique and
DBP (Civil Case No. 83-16617) to assert its right to the V. Mapa
properties.
The
RTC rendered judgment on March 11, 1996.[6] It
ruled, among other things, that Petron never acquired
valid title to the V. Mapa properties as the levy and
sale thereof were void and that NCBA was now the lawful owner of the
properties. Moreover, the RTC held Petron, DBP, Felipe
and Enrique jointly and severally liable to NCBA for exemplary damages and
attorney’s fees for the following reasons:
FELIPE and ENRIQUE
had no reason to renege on their undertaking in the Deed of Absolute Sale “to
secure the release of the titles to the properties xxx free from all the liens
and encumbrances, and to cause the lifting of the levy on execution of
Commercial Credit Corporation, Industrial Finance Corporation[,] and Filoil over the V. Mapa [p]roperty. Moreover, ENRIQUE had no reason to repudiate
FELIPE and disavow authority he had [given] the latter to sell his share in the
V. Mapa property.
On the other hand,
the mortgage in favor of DBP had been fully extinguished thru dacion en pago as early as 18
June 1981 but it unjustifiably and whimsically refused to release the mortgage
and to surrender to the buyer (NCBA) the owner’s duplicate copies of Transfer
Certificates of Title No[s]. 83621 to 83627, thereby preventing NCBA from
registering the sale in its favor.
Similarly, [Petron] has absolutely no reason to claim the V. Mapa property. For, as shown above, the levy in execution
and sale of the shares of FELIPE and ENRIQUE in the V. Mapa
property were null and void.
Finally, in their
Memorandum of Agreement dated 25 September 1992 with Technical Institute of the
Philippines, [Petron] and DBP attempted to pre-empt
this Court’s power to adjudicate on the claim of ownership stipulating that “to
facilitate their defenses and cause of action in Civil Case No. 83-16617,” they
agreed on the disposition of the V. Mapa property
among themselves. For obvious reasons, this Court refused to give its
imprimatur and denied their prayer for dismissal of the complaint against DBP.
These acts of
defendants and intervenor demonstrate their wanton,
fraudulent, reckless, oppressive and malevolent conduct in their dealings with
NCBA. Furthermore, they acted with gross and evident bad faith in refusing to
satisfy NCBA’s plainly valid and demandable claims.
Assessment of exemplary damages and attorney’s fees in the amounts of P100,000.00
and P150,000.00, respectively, is therefore in order (Arts. 2208 and
2232, Civil Code).[7]
Enrique,
DBP and Petron appealed to the Court of Appeals (CA).
The appeal was docketed as CA–G.R. CV No. 53466. In a decision dated June 21,
2002,[8] the CA
affirmed the RTC decision in toto. On motion
for reconsideration, Petron and DBP tried to have the
award of exemplary damages and attorney’s fees deleted for lack of legal and
factual basis. The Philippine National Oil Company (PNOC), which had been
allowed to intervene in the appeal as transferee pendente
lite of Petron’s right
to the V. Mapa properties, moved for reconsideration
of the ruling on ownership. In a resolution dated October 16, 2002,[9] the CA
denied these motions for lack of merit.
Thereupon, Petron and PNOC took separate
appeals to this Court.
In this appeal, the only issue is Petron’s liability for exemplary damages and attorney’s
fees. And on this matter, we reverse the rulings of the trial and appellate
courts.
Article 2208 lays down the rule that
in the absence of stipulation, attorney’s fees cannot be recovered except in
the following instances:
(1) When
exemplary damages are awarded;
(2) When
the defendant’s act or omission has compelled the plaintiff to litigate with
third persons or to incur expense to protect his interest;
(3) In
criminal cases of malicious prosecution against the plaintiff;
(4) In
case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where
the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff’s plainly valid, just and demandable claim;
(6) In
actions for legal support;
(7) In
actions for the recovery of wages of household helpers, laborers and skilled
workers;
(8) In
actions for indemnity under workmen’s compensation and employer’s liability
laws;
(9) In a
separate civil action to recover civil liability arising from a crime;
(10) When at
least double judicial costs are awarded;
(11) In any
other case where the court deems it just and equitable that attorney’s fees and
expenses of litigation should be recovered.[10]
Here, the RTC held Petron liable to NCBA for attorney’s fees under Article
2208(5), which allows such an award “where the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just,
and demandable claim.” However, the only justification given for this verdict
was that Petron had no reason to claim the V. Mapa properties because, in the RTC’s
opinion, the levy and sale thereof were void.[11] This was sorely inadequate and it was
erroneous for the CA to have upheld that ruling built on such a flimsy
foundation.
Article 2208(5) contemplates a
situation where one refuses unjustifiably and in evident bad faith to satisfy
another’s plainly valid, just and demandable claim, compelling the latter
needlessly to seek redress from the courts.[12] In such
a case, the law allows recovery of money the plaintiff had to spend for a
lawyer’s assistance in suing the defendant – expenses the plaintiff would not
have incurred if not for the defendant’s refusal to comply with the most basic
rules of fair dealing. It does not mean, however, that the losing party should
be made to pay attorney’s fees merely because the court finds his legal
position to be erroneous and upholds that of the other party, for that would be
an intolerable transgression of the policy that no one should be penalized for
exercising the right to have contending claims settled by a court of law.[13] In
fact, even a clearly untenable defense does not justify an award of attorney’s
fees unless it amounts to gross and evident bad faith.[14]
Petron’s claim to the V. Mapa
properties, founded as it was on final deeds of sale on execution, was far from
untenable. No gross and evident bad faith could be imputed to Petron merely for intervening in NCBA’s
suit against DBP and the Monserrats in order to
assert what it believed (and had good reason to believe) were its rights and to
have the disputed ownership of the V. Mapa properties
settled decisively in a single lawsuit.
With respect to the award of exemplary
damages, the rule in this jurisdiction is that the plaintiff must show that he is
entitled to moral, temperate or compensatory damages before the court may even
consider the question of whether exemplary damages should be awarded.[15] In other words, no exemplary damages may be
awarded without the plaintiff’s right to moral, temperate, liquidated or
compensatory damages having first been established. Therefore, in view of our
ruling that Petron cannot be made liable to NCBA for
compensatory damages (i.e., attorney’s fees), Petron
cannot be held liable for exemplary damages either.
WHEREFORE, the petition is hereby GRANTED. The imposition of liability on Petron Corporation for exemplary damages and attorney’s
fees is REVOKED. The June 21, 2002 decision and October 16, 2002
resolution of the Court of Appeals in CA–G.R. CV No. 53466 and the March 11,
1996 decision of the Regional Trial Court of Manila in Civil Case No. 83-16617
are hereby MODIFIED accordingly.
SO ORDERED.
Associate Justice
WE
CONCUR:
Chief Justice
Chairperson
Associate Justice
Pursuant to Section 13, Article VIII of the Constitution, 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.
Chief Justice
[1] Under Rule 45 of the Rules of Court. Rollo, pp. 8-23.
[2] Covered by Transfer Certificates of Title (TCT) Nos. 83621 to 83627.
[3] The latter issue is the subject of Philippine National Oil Company v. National College of Business and Arts, docketed as G.R. No. 155698, now pending in the Third Division.
[4] Civil Case No. 89462.
[5] Civil Case No. 7285, entitled, Petrophil Corporation v. Enrique Monserrat, Jr.
[6] Penned by Judge Senecio O. Ortile. Rollo, pp. 27-46.
[7] Id., p. 44.
[8] Penned by Associate Justice Romeo A. Brawner (retired) and concurred in by Associate Justices Jose L. Sabio, Jr. and Mario Guariña III of the Fourteenth Division of the Court of Appeals. Id., pp. 47-59.
[9] Id., pp. 61-64.
[10] Civil Code, Art. 2208.
[11] Supra note 7.
[12] Herrera v. Luy Kim Guan, 110 Phil. 1020 (1960).
[13] Justiva
v. Gustilo, 117 Phil. 71 (1963); Herrera v. Luy Kim Guan, 110 Phil.
1020 (1960).
[14] Jimenez v. Bucoy, 103 Phil. 40, 45 (1958).
[15] Civil Code, Art. 2234. See also Civil Code, Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated, or compensatory damages. (italics supplied)