SEA COMMERCIAL COMPANY, INC., petitioner, vs.

THE HONORABLE COURT OF

APPEALS, JAMANDRE INDUSTRIES, INC. and TIRSO JAMANDRE, respondents.

Facts:

SEACOM is a corporation engaged in the business of selling and distributing

agricultural machinery, products and equipment. On September 20, 1966,
SEACOM and JII entered into a dealership agreement whereby SEACOM
appointed JII as its exclusive dealer in the City and Province of Iloilo[1] Tirso
Jamandre executed a suretyship agreement binding himself jointly and severally
with JII to pay for all obligations of JII to SEACOM[2]. The agreement was
subsequently amended to include Capiz in the territorial coverage and to make
the dealership agreement on a non-exclusive basis[3]. In the course of the
business relationship arising from the dealership agreement, JII allegedly
incurred a balance of P18,843.85 for unpaid deliveries, and SEACOM brought
action to recover said amount plus interest and attorneys fees.

Issue:

Whether or not SEACOM acted in bad faith when it competed with its own
dealer as regards the sale of farm machineries to FSDC

Held:

It should be emphasized that the very purpose of the dealership agreement is

for SEACOM to have JII as its dealer to sell its products in the provinces of Capiz
and Iloilo. In view of this agreement, the second assigned error that the lower
court erred in holding that appellant learned of the FSDC transaction from
defendant JII is clearly immaterial and devoid of merit. The fact that the
dealership is on a non-exclusive basis does not entitle appellant SEACOM to join
the fray as against its dealer. To do so, is to violate the norms of conduct
enjoined by Art. 19 of the Civil Code. By virtue of such agreement, the
competition in the market as regards the sale of farm equipment shall be
between JII, as the dealer of SEACOM and other companies, not as against
SEACOM itself. However, SEACOM, not satisfied with the presence of its dealer JII
in the market, joined the competition even as the against the latter and,
therefore, changed the scenario of the competition thereby rendering inutile
the dealership agreement which they entered into the manifest prejudice of
JII. Hence, the trial court was correct when it applied Art. 19 of the Civil Code in
the case at bar in that appellant SEACOM acted in bad faith when it competed
with its own dealer as regards the sale of farm machineries, thereby depriving
appellee JII of the opportunity to gain a clear profit of P85,000.00.

KAHIT HUWAG NIYO NA PO ISULAT YUNG ART. 19 for your reference lang yan
haha. Mwah!!

"Art. 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due and observe honesty and
good faith.

The principle of abuse of rights stated in the above article, departs from the
classical theory that he who uses a right injures no one. The modern tendency is
to depart from the classical and traditional theory, and to grant indemnity for
damages in cases where there is an abuse of rights, even when the act is not
illicit.[5]
Article 19 was intended to expand the concept of torts by granting
adequate legal remedy for the untold number of moral wrongs which is
impossible for human foresight to provide specifically in statutory law.[6] If mere
fault or negligence in ones acts can make him liable for damages for injury
caused thereby, with more reason should abuse or bad faith make him
liable. The absence of good faith is essential to abuse of right. Good faith is an
honest intention to abstain from taking any unconscientious advantage of
another, even through the forms or technicalities of the law, together with an
absence of all information or belief of fact which would render the transaction
unconscientious. In business relations, it means good faith as understood by men
of affairs.
GF EQUITY, INC., petitioner, vs. ARTURO VALENZONA, respondent

DOCTRINE
A right, though by itself legal because recognized or granted by law as such,
may neverthelessbecome the source of some illegality. When a right is
exercised in a manner which does notconform with the norms enshrined in
Article 19 and results in damage to another, a legal wrong isthereby committed
for which the wrongdoer must be held responsible. HUWAG NIYO NA PO
KOPYAHIN ITO FOR REFERENCE LANG

FACTS:
GF Equity hired Valenzona as Head Coach of the Alaska basketball
team in the Philippine Basketball Association under a Contract of
Employment where GF Equity would pay Valenzonathe sum of P35,000.00
monthly. While the employment period agreed upon was for two
yearscommencing, the last sentence of paragraph 3 of the contract carried
the following condition: 3. xx x If at any time during the contract, the COACH, in
the sole opinion of the CORPORATION,
failsto exhibit sufficient skill or competitive ability to coach
the team, the CORPORATION mayterminate this contract.The caveat
notwithstanding, Valenzona still acceded to the terms of the contract because
of trustand confidence in Uytengsu ( chief financial officer of GF
Equity). Thereafter, Valenzona wasterminated as coach of the Alask a
team. Valenzona demanded from GF Equity payment of compensation
arising from the arbitrary and unilateral termination of his employment. GF
Equity,however, refused the claim and maintained, on the other hand, that it
merely exercised its rightunder the contract to pre-terminate his
employment due to incompetence. Valenzona thus filedbefore the RTC Manila
a complaint against GF Equity for breach of contract with damages. Thetrial
court, upholding the validity of the assailed provision of the contract, dismissed
the complaint.The Court of Appeals, before which Valenzona appealed,
reversed the trial court’s decision, andaccordingly ordered GF Equity to pay him
damages
ISSUE:
Whether or not the petitioner has the right to dismiss the respondent on the basis
of their contractual agreement.
HELD:
No. While GF Equity’s act of pre-terminating Valenzona’s services cannot be
considered willful asit was based on a stipulation, albeit declared void, it, in
doing so, failed to consider the abuse of rights principle enshrined in Art. 19
of the Civil Code which provides: Art. 19. Every person must, in the exercise of his
rights and in the performance of his duties, actwith justice, give everyone his
due, and observe honesty and good faith.
This article, known to contai n what is commonly referred to as the
principle of abuse of rights, sets certain standards which must be observed
not only in the exercise of one's rights but also inthe performance of one's
duties. These standards are the following: to act with justice; to
giveeveryone his due; and to observe honesty and good faith. The
law, therefore, recognizes a primordial limitation on all rights; that in their
exercise, the norms of human conduct set forth in Article 19 must be observed. A
right, though by itself legal because recognized or granted by lawas such, may
nevertheless become the source of some illegality. When a right is exercised in
amanner which does not conform with the norms enshrined in Article 19 and
results in damage toanother, a legal wrong is thereby committed for which the
wrongdoer must be held responsible.But while Article 19 lays down a rule of
conduct for the government of human relations and for themaintenance of
social order, it does not provide a remedy for its violation. Generally, an action
for damages under either Article 20 or Article 21 would be proper.Since the pre-
termination of the contract was anchored on an illegal ground, hence, contrary
tolaw, and GF Equity negligently failed to provide legal basis for such
pre-termination,
e.g.
thatValenzona breached the contract by failing to discharge his duties
thereunder, GF Equity failed toexercise in a legitimate manner its right to pre-
terminate the contract, thereby abusing the right of Valenzona to thus entitle
him to damages under Art. 19 in relation to Article 20 of the Civil Codethe latter
of which
provides: Art. 20. Every person who, contrary to law, willfully or negligently causes
damage to another,shall indemnify the latter for the same.In
De Guzman v. NLRC,
[13]this Court quoted the following explanation of Tolentino why it
isimpermissible to abuse our rights to prejudice others.The exercise of a right
ends when the right disappears, and it disappears when it is
abused,especially to the prejudice of others. The mask of a right without the
spirit of justice which gives itlife is repugnant to the modern concept of social
law. It cannot be said that a person exercises aright when he unnecessarily
prejudices another or offends morals or good customs. Over
andabove the specific precepts of positive law are the supreme
norms of justice which the law develops and which are expressed in three
principles:
honeste vivere, alterum non laedere
and
jus suum quique tribuere;
and he who violates them violates the law. For this reason, it is
notpermissible to abuse our rights to prejudice others.The disquisition in
Globe Mackay Cable and Radio Corporation v. Court of Appeals
is just asrelevant as it is illuminating on the present case. I n that case,
this Court declared that evengranting that the therein petitioners
might have had the right to dismiss the therein respondentfrom work,
the abusive manner in which that right was exercised amounted to a legal
wrong for which the petitioners must be held liable.
ALFREDO M. VELAYO vs. SHELL

G.R. No. L-7817, October 31, 1956.

FACTS: CALI, a domestic airline corporation, met with its creditors to inform them
that the corporation was on the verge of insolvency and had to stop operations.
To ensure payment of their claims against CALI, the creditors agreed that it
would be advantageous not to present suits against CALI but to strive for a fair
pro-rata division of its assets, although CALI announced that in case of non-
agreement of the creditors on a pro-rata division of the assets, it would file
insolvency proceedings. Right after the meeting, defendant Shell Philippines,
one of CALI’s creditors who was present in the meeting and who agreed to the
pro-rata division, assigned its credit to its sister company, Shell USA. Shell USA
then filed with a California court an action for collection of the assigned credit
and applied for a writ of attachment against CALI’s Douglas C-54 plane which
was in California. Prior to the meeting with creditors, CALI had already offered
the plane to Shell Philippine but the offer was rejected. Velayo, as assignee of
the other creditors of CALI, filed this action for damages against defendant Shell
Philippines. He claims that that fraudulent assignment of Shell Philippines’ credit
to Shall USA prejudiced the other creditors and was contrary to the agreed pro-
rata division of assets.

ISSUE: WON Shell Philippines, taking advantage of its knowledge of the existence
of CALI's airplane in the US, acted in bad faith in assigning its credit to its sister
company effectively defeating the agreed pro-rata division of assets among
the creditors of CALI.

HELD: PROVISIONS ON HUMAN RELATIONS INTENDED AS CATCH-ALL PROVISIONS

FOR ANY WRONG FOR WHICH NO SPECIFIC REMEDY IS PROVIDED FOR BY LAW.

Defendant schemed and effected the transfer to its sister corporation in the
United States, where CALI's plane C- 54 was. By that swift and unsuspected
operation efficaciously disposed of said insolvent's property depriving the latter
and the Assignee that was latter appointed, of the opportunity to recover said
plane.
Chapter 2 of the PRELIMINARY TITLE of the Civil Code, dealing on Human
Relations, provides the following:

"Art 19. Any person must, in the exercise of his rights and in the performances of
his duties, act with justice, give everyone his due and observe honesty and
good faith".

It maybe said that this article only contains a mere declaration of principles and
while such statement may be is essentially correct, yet We find that such
declaration is implemented by Article 21 and sequence of the same Chapter
which prescribe the following:

"Art. 21. Any person who wilfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter
for the damage".

Another rule is expressed in Article 24 which compels the return of a thing

acquired 'without just or legal grounds'. This provision embodies the doctrine that
no person should unjustly enrich himself at the expense of another, which has
been one of the mainstays of every legal system for centuries. It is most needful
that this ancient principle be clearly and specifically consecrated in the Civil
Code to the end that in cases not foreseen by the lawmaker, no one may
unjustly benefit himself to the prejudice of another. Now, if Article 23 of the Civil
Code goes as far as to provide that:

"Even if an act or event causing damage to another's property was not due to
the fault or negligence of the defendant, the latter shall be liable for indemnity if
through the act or event he was benefited." with much more reason the
Defendant should be liable for indemnity for acts it committed in bad faith and
with betrayal of confidence.
BARONS MARKETING vs. CA and PHELPS DODGE PHILS., INC.
Facts:
August 31, 1973, Phelps Dodge appointed Barons Marketing as one of its dealers
of electrical wires and cables effective Sept. 1, 1973. Defendant was given 60
days credit for its purchases of plaintiff’s electrical products. This credit term
started from the date of delivery by plaintiff of its products to defendant.
Barons Marketing purchased, on credit, from Phelps Dodge’s electrical wires
and cables worth P4,102,483.30. Then it was sold to MERALCO, Barons Marketing
being the accredited supplier of the electrical requirements of the latter.
Barons Marketing only paid P300,000 out of its total purchases leaving an
unsettled amount of P3,802,478.20. Phelps Dodge wrote Barons Marketing
demanding payment of its outstanding obligations to Phelps Dodge. Barons
Marketing responded by requesting if it could be paid through monthly
installments of P500,000 plus 1% interest per month until fully settled, this request
was rejected by Phelps Dodge and demanded full payment.
Phelps Dodge then filed a complaint before the Pasig Trial Court for the
recovery of P3,802,478.20 with interest and also prayed to be awarded with
attorney’s fee at the rate of 25% of the amount demanded, exemplary
damages in the amount of P100,000, the expenses of litigation and the costs of
suit. The court ruled in favor of Phelps Dodge with the exemplary damages of
P10,000 and recovery of P3,108,000.
Both parties appealed. Phelps Dodge claimed that court should have awarded
the sum of P3,802,478.20. and prayed that the said amount awarded was a
result of a typographical error.
Petitioner claimed that Phelps Dodge’s claim for damages is a result of creditor’s
abuse and failed to prove its cause of action against it.
Court of Appeals ruled in favor of Phelps Dodge with the correct amount but
only with the 5% for the Atty’s fee. No costs.
Barons Marketing alleged the Coa erred when it held.

Issue:
whether or not private respondent is guilty of abuse of right.

Held:
No, because petitioner has failed to prove bad faith on the part of private
respondent. Petitioners allegation that private respondent was motivated by a
desire to terminate its agency relationship with petitioner so that private
respondent itself may deal directly with Meralco is simply not supported by the
evidence. At most, such supposition is merely speculative.
AMONOY v. SPS. GUTIERREZ(G.R. No. 140420, February 15, 2001)

FACTS:
A Special Proceedings for the settlement of the estate involving six (6) parcels of
land was filed.Petitioner Sergio Amonoy was the counsel Francisca Catolos,
Agnes Catolos, Asuncion Pasambaand Alfonso Formida. The partition of
the estate was approved and two (2) of the said lots
wereadjudicated to Asuncion Pasamba and Alfonso Formilda.
The Attorney's fees charged by Amonoywas P27,600.00 and on 20
January 1965 Asuncion and Alfonso executed a deed of real
estatemortgage on the said two (2) lots in favor of Amonoy to secure
the payment of his attorney's fees.But by the time the estate was declared
closed on Aug. 1969, both Asuncion and Alfonso were bothdead. Among the
heirs of the latter was his daughter, plaintiff-appellant Angela Gutierrez.Because
his Attorney's fees secured by the two lots were not paid Amonoy filed for their
foreclosure.The heirs opposed, contending that the attorney's fees
charged [were] unconscionable. Judgmentwas rendered in favor of
Amonoy requiring the heirs to pay within 90 days and failure to do so wouldresult
to the sale of the two (2) lots in a public auction.The attorney’s fees
remained unpaid and so the lots were sold in a public auction where
Amonoywas the highest bidder. The CFI on 25 July 1985 issued a Writ of
Possession and pursuant to whicha notice to vacate was made on 26 August
1985. On Amonoy's motion orders of 25 April 1986 and 6May 1986 were issued
for the demolition of structures in the said lots, including the house of
theGutierrez spouses.On 27 September 1985 the peti tion for Certiori was
filed by several persons including
respondent Angela Gutierrez). A temporary restraining order was then granted
by the SC on 2 June 1986enjoining the demolition of the petitioners' houses.On
October 5,1988 the certiorari was granted enjoining the sheriff
from demolishing the houses inthe subject lots including that of Sps.
Gutierrez and ordering Amonoy to return the lot to the Sps. Gutierrez
among others.But by the time the Supreme Court promulgated the
abovementioned Decision, respondents' househad already been
destroyed, supposedly in accordance with a Writ of Demolition
ordered by thelower court.T h u s , a C o m p l a i n t f o r d a m a g e s i n
connection with the destruction of their house was filed
b y respondents against petitioner. The RTC dismissed respondents' suit. On
appeal, the CA set asidethe lower court's ruling and ordered petitioner
Amonoy to pay respondents P250,000 as actual damages. Amonoyr then
filed a Motion for Reconsideration, which was also denied.

ISSUE:
"Whether or not tAmonoy is liable to Sps. Gutierrez for respondents for damages.
HELD:
Yes. Petitioner invokes the legal principle damnum absque
injuria wherein damage resulting from the legitimate exercise of a person's
rights is a loss without injury for which the law gives no remedy.