ABS-CBN Broadcasting Corporation vs. Court of Appeals

A contract requires a meeting of minds on the object, consideration, and terms; a counter-offer that substantially varies the terms of the original offer prevents contract perfection, and corporate officers cannot bind the corporation without specific authority from the Board of Directors. Furthermore, a corporation is not entitled to moral damages, and the exercise of the right to litigate does not subject a party to liability for damages in the absence of malice or bad faith.

The case involves a dispute over television exhibition rights to Viva films between ABS-CBN Broadcasting Corporation and Viva Productions, Inc., arising from a 1990 Film Exhibition Agreement containing a right of first refusal clause. The controversy centers on whether ABS-CBN validly exercised this right and whether a subsequent oral agreement allegedly made during a restaurant meeting constituted a perfected contract, or whether Viva validly sold the rights to rival network RBS (GMA), prompting ABS-CBN to seek injunctive relief and specific performance.

• In 1990, ABS-CBN and Viva executed a Film Exhibition Agreement (Exhibit “A”) granting ABS-CBN exclusive rights to exhibit certain Viva films, with paragraph 1.4 providing ABS-CBN a right of first refusal to the next twenty-four Viva films for TV telecast under terms to be agreed upon, to be exercised within fifteen days from actual written offer.
• In December 1991, Viva, through Vicente Del Rosario, offered ABS-CBN, through Vice-President Charo Santos-Concio, a list of three film packages comprising thirty-six titles.
• On 6 January 1992, Concio rejected the offer via letter, stating ABS-CBN could only purchase ten titles from the list, thereby exercising its right of first refusal partially and rejecting the remainder.
• On 27 February 1992, Del Rosario offered ABS-CBN a new package consisting of fifty-two original films and fifty-two re-runs (104 films total) for P60 million (P30 million cash and P30 million worth of television spots).
• On 2 April 1992, ABS-CBN’s General Manager Eugenio Lopez III and Del Rosario met at the Tamarind Grill Restaurant to discuss the package, with conflicting versions of the meeting: Lopez claimed they agreed on fourteen films for P36 million written on a napkin, while Del Rosario denied any agreement and stated they only discussed the 104-film package.
• On 7 April 1992, Concio sent Del Rosario a handwritten note with a draft exhibition agreement (Exhibit “C”) covering fifty-three films for P35 million, which was a counter-proposal to Viva’s offer.
• On the evening of 7 April 1992, Viva’s Board of Directors rejected ABS-CBN’s counter-proposal, insisting on the original package of 104 films for P60 million.
• On 24 April 1992, Viva signed a letter of agreement with RBS granting the latter exclusive rights to air 104 Viva films for P60 million, including the fourteen films subject of the controversy.
• On 27 May 1992, ABS-CBN filed a complaint for specific performance with a prayer for a writ of preliminary injunction, claiming a perfected contract existed for the fourteen films.
• The RTC issued a TRO on 28 May 1992 and a preliminary injunction on 17 June 1992, which was later dissolved on 3 August 1992 when RBS posted a P30 million counterbond.
• The RTC dismissed the complaint on 28 April 1993, ruling no contract was perfected as there was no meeting of minds and Del Rosario lacked authority to bind Viva without Board approval.

• ABS-CBN argued that a perfected contract existed between itself and Viva based on the alleged oral agreement between Lopez and Del Rosario at the Tamarind Grill, evidenced by a "napkin" containing the terms, and that the elements of consent, object, and consideration were present.
• It contended that its right of first refusal under the 1990 Agreement had not been fully exercised, as it had only selected ten titles from the first list of thirty-six, leaving fourteen more selections to complete the twenty-four films covered by the right.
• It asserted that the Court of Appeals erred in awarding actual damages for the counterbond premium and print advertisements, arguing that posting a counterbond was voluntary and that print ads were not proven to be losses caused by the injunction.
• It maintained that moral and exemplary damages were improperly awarded because RBS is a juridical person incapable of suffering moral injuries, and because there was no proof of malice or bad faith in filing the complaint, which was done under an honest belief of its validity.

• RBS and Viva argued that no perfected contract existed between ABS-CBN and Viva, as there was no meeting of minds on the object and consideration, and Del Rosario had no authority to bind Viva without Board approval.
• They contended that ABS-CBN’s right of first refusal was already exercised and exhausted when Concio rejected the December 1991 offer and selected only ten titles, and that the subsequent negotiations were for an entirely new contract.
• RBS claimed entitlement to actual damages for the premium paid on the counterbond and for print advertisements for the cancelled showing of "Maging Sino Ka Man," arguing these were direct results of ABS-CBN’s injunction.
• RBS asserted entitlement to moral and exemplary damages, claiming its reputation was debased and it suffered social humiliation when it failed to air the film as advertised, and that ABS-CBN filed the case purely to harass a competitor, constituting abuse of rights under Articles 19, 20, and 21 of the Civil Code.
• They argued for attorney’s fees on the basis that ABS-CBN’s actions compelled RBS to litigate unnecessarily.

• Procedural Issues:
  • N/A
• Substantive Issues:
  • Whether there was a perfected contract between ABS-CBN and Viva granting ABS-CBN exclusive rights to exhibit the subject films.
  • Whether respondent RBS is entitled to actual, moral, and exemplary damages, as well as attorney’s fees.

• Procedural:
  • N/A
• Substantive:
  • No Perfected Contract: The Court held that no contract was perfected between ABS-CBN and Viva. The draft contract (Exhibit “C”) sent by ABS-CBN constituted a counter-offer that substantially varied the terms of Viva’s offer (53 films for P35 million versus 104 films for P60 million), which operated as a rejection of the original offer. Furthermore, Del Rosario had no specific authority to bind Viva to a contract without approval from the Board of Directors, as corporate powers are exercised by the Board under Section 23 of the Corporation Code. There was also no meeting of minds on the object and consideration, as evidenced by conflicting testimonies regarding the number of films (14 versus 53) and the price (P35 million versus P36 million).
  • Exhaustion of Right of First Refusal: The Court ruled that ABS-CBN’s right of first refusal under the 1990 Agreement was already exercised when Concio rejected the December 1991 offer and selected only ten titles, thereby exhausting the right with respect to the remaining films offered.
  • Actual Damages: The Court reversed the award of actual damages. RBS was not compelled to post a counterbond and could have instead moved to dissolve the injunction; thus, the premium paid was not a necessary consequence of ABS-CBN’s action. The cost of print advertisements was also not proven to be a loss attributable to the injunction, as RBS would have incurred such expenses regardless of the litigation.
  • Moral Damages: The Court reversed the award of moral damages to RBS. A corporation, being an artificial person without feelings or emotions, cannot experience physical suffering or mental anguish. The Court declared the statement in People v. Manero that a corporation may recover moral damages for debased reputation to be an obiter dictum and not binding precedent.
  • Exemplary Damages: The Court reversed the award of exemplary damages. There was no proof that ABS-CBN acted with malice or bad faith in filing the complaint; it was merely exercising its right to litigate based on an honest belief in the merits of its case. Damage resulting from the exercise of a legal right is damnum absque injuria.
  • Attorney’s Fees: The Court reversed the award of attorney’s fees. Under Article 2208 of the Civil Code, attorney’s fees may not be recovered where there is no sufficient showing of bad faith, but only an erroneous conviction of the righteousness of one’s cause.

• Perfection of Contracts — Consensual contracts are perfected upon mere meeting of the minds on the object, consideration, and terms; there must be concurrence between a certain offer and an unqualified acceptance.
• Counter-offer — A qualified acceptance or one that involves a new proposal constitutes a counter-offer and is a rejection of the original offer; acceptance must be plain, unequivocal, unconditional, and without variance from the proposal.
• Corporate Authority — Corporate powers are exercised by the Board of Directors; delegation to officers requires specific authority, and agents cannot bind the corporation without such authority or subsequent ratification.
• Right of First Refusal — A contractual right that must be exercised within the period and manner specified; rejection of the offer or failure to accept within the period results in the loss of the right.
• Damnum Absque Injuria — Damage without injury; the exercise of a legal right does not give rise to liability for damages even if loss results to another, provided the right is exercised in good faith.
• Moral Damages and Corporations — A corporation, being an artificial person existing only in legal contemplation, has no feelings, emotions, or senses, and therefore cannot recover moral damages for mental anguish or social humiliation.
• Abuse of Rights (Articles 19, 20, and 21, Civil Code) — Liability arises only when a legal right is exercised in bad faith or with intent to prejudice or injure another; mere filing of a lawsuit without malice does not constitute abuse of rights.

• "A contract is a meeting of minds between two persons whereby one binds himself to give something or render some service to another for a consideration." — The Court citing Article 1305 of the Civil Code to emphasize the necessity of concurrence of offer and acceptance.
• "The offer must be certain. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any sort from the proposal." — The Court explaining the requirement of unqualified acceptance for contract perfection.
• "A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection of the original offer." — The Court applying the principle that ABS-CBN’s draft contract constituted a counter-offer rejecting Viva’s original package.
• "The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses." — The Court ruling that corporations are incapable of suffering moral injuries.
• "If damages result from a person’s exercise of a right, it is damnum absque injuria." — The Court holding that ABS-CBN’s filing of the complaint, being an exercise of a legal right without malice, did not subject it to liability for damages.

• Limketkai Sons Milling, Inc. v. Court of Appeals — Cited by petitioner but distinguished; the Court noted that the ruling allowing acceptance with requests for changes was subsequently reversed to require absolute acceptance identical to the offer.
• Villonco Realty Company v. Bormaheco, Inc. — Distinguished by the Court; the changes in the counter-offer in that case were merely clarificatory, not material variations of the offer.
• People v. Manero — Cited by respondents for the proposition that corporations may recover moral damages; held by the Court to be obiter dictum and not binding.
• Buan v. Camaganacan — Cited regarding the requirement that the text of the decision must state the reason for awarding attorney’s fees.
• Toyota Shaw, Inc. v. Court of Appeals — Cited on the three stages of contract formation (preparation, perfection, consummation).
• Albenson Enterprises Corp. v. Court of Appeals — Cited for the elements of abuse of rights under Article 19 of the Civil Code.

• Article 1305, Civil Code — Defines contract as a meeting of minds.
• Article 1318, Civil Code — Enumerates the essential requisites of contracts (consent, object certain, cause).
• Article 19, Civil Code — Provides that every person must act with justice, give everyone his due, and observe honesty and good faith.
• Article 20, Civil Code — Provides for indemnity for damage caused willfully or negligently contrary to law.
• Article 21, Civil Code — Provides for compensation for damage caused by acts contrary to morals, good customs, or public policy.
• Article 2199, Civil Code — Requires proof of actual pecuniary loss for recovery of actual damages.
• Article 2208, Civil Code — Enumerates the instances when attorney’s fees may be recovered.
• Article 2217, Civil Code — Defines moral damages.
• Article 2219, Civil Code — Enumerates the cases where moral damages may be recovered.
• Article 2229, Civil Code — Defines exemplary damages as imposed by way of example or correction for the public good.
• Section 23, Corporation Code (B.P. Blg. 68) — Provides that corporate powers are exercised by the Board of Directors.

• N/A (Melo, Kapunan, Martinez, and Pardo, JJ., concurred with the majority opinion without separate statements).