Cojuangco vs. Court of Appeals

A public officer who violates a person's constitutional rights may be held liable for nominal damages under Article 32 of the Civil Code even without proof of bad faith, malice, or gross negligence, although moral and exemplary damages and attorney's fees require a clear showing of such tainted motives. The violation of the right against deprivation of property without due process of law, even on the pretext of justifiable motives or good faith in the performance of official duties, is sufficient to warrant an award of nominal damages.

The petitioner, Eduardo M. Cojuangco Jr., was a known businessman-sportsman who owned racehorses entered in sweepstakes races conducted by the Philippine Charity Sweepstakes Office (PCSO), a government-owned corporation created under RA 1169, as amended. The respondent Fernando O. Carrascoso Jr. was the chairman of the PCSO at the time the winnings were withheld. The case arose during the period following the issuance of Executive Order No. 2 by then President Corazon C. Aquino, which froze all assets and properties in the Philippines in which former President Ferdinand E. Marcos and his wife, their close friends, subordinates, business associates, dummies, agents, or nominees had any interest or participation, and prohibited any person from transferring, conveying, encumbering, or otherwise depleting or concealing such assets. The Presidential Commission on Good Government (PCGG) was a newly created body tasked with implementing sequestration orders, a novel remedy whose scope and procedure were not yet well-defined at the time.

Eduardo M. Cojuangco Jr., a known businessman-sportsman, owned several racehorses which he entered in sweepstakes races conducted by the Philippine Charity Sweepstakes Office (PCSO) between March 6, 1986 and September 18, 1989. Several of his horses won races on various dates, landing first, second, or third places, and winning prizes totaling P1,450,000, from which the 30% due for trainer/grooms amounting to P429,300 was deducted, leaving a net amount of P1,020,700 withheld by the PCSO. The winning horses and corresponding amounts included: Hansuyen (P143,000, March 25, 1986), Stronghold (P28,000, June 8, 1986), Kahala (P142,700, July 10, 1986), Devil's Brew (P70,000, February 1, 1987), Time to Explode (P140,000, March 22, 1987), Stormy Petril (P28,000, April 26, 1987), Starring Role (P14,000, May 17, 1987), Star Studded (P140,000, August 8, 1987), Charade (P174,000, December 13, 1987), and Hair Trigger (P140,000, September 18, 1988).

Petitioner sent letters of demand dated July 3, 1986, August 18, 1986, and September 11, 1990, to the respondents for the collection of the prizes due him. The respondents consistently replied that the demanded prizes were being withheld on the advice of Commissioner Ramon A. Diaz of the Presidential Commission on Good Government (PCGG). On January 30, 1991, petitioner filed the case before the Regional Trial Court of Manila. Before receipt of the summons on February 7, the PCGG advised the respondents that it posed no more objection to the remittance of the prize winnings to petitioner. This was immediately communicated to Atty. Estelito Mendoza, petitioner's counsel, who refused to accept the prizes at that point, reasoning that the matter had already been brought to court.

The trial court ruled that the PCSO and Carrascoso had no authority to withhold the subject racehorse winnings since no writ of sequestration had been issued by the PCGG. It held that it was Carrascoso's unwarranted personal initiative not to release the prizes, and that, having been a previous longtime associate of petitioner in his horse racing and breeding activities, he had supposedly been aware that petitioner's winning horses were not ill-gotten. The trial court held that Carrascoso had acted in bad faith amounting to the persecution and harassment of petitioner and his family, and ordered the PCSO and Carrascoso to pay in solidum petitioner's claimed winnings plus interests, and further ordered Carrascoso to pay moral and exemplary damages, attorney's fees, and costs of suit.

While the case was pending with the Court of Appeals, petitioner moved for partial execution pending appeal of the RTC judgment, praying for payment of the principal amount of his prize winnings. Private respondents posed no objection and manifested their readiness to release the amount prayed for. The trial court issued on February 14, 1992, an Order for the issuance of a writ of execution in the amount of P1,020,700, and on May 20, 1992, the PCSO delivered the amount to petitioner. The Court of Appeals reversed the trial court's finding of bad faith, holding that Carrascoso was merely carrying out the instruction of the PCGG, and dismissed the case entirely.

• Jurisdiction over PCSO's Appeal: Petitioner contended that the appeal filed by the PCSO before the Court of Appeals should have been dismissed outright, since the PCSO could not have appealed the second portion of the RTC Decision which ruled against Carrascoso only, and not against the government corporation.
• Failure to File Appeal Brief: Petitioner averred that Carrascoso failed to file his own appeal brief, and that his appeal should have been dismissed; the PCSO brief could not have inured to Carrascoso's benefit because the latter was no longer chairman of the PCSO at the time the brief was filed and could no longer be represented by the Office of the Government Corporate Counsel.
• Scope of Appeal: Petitioner argued that the Court of Appeals had no jurisdiction to review and reverse the judgment on a cause of action which was not appealed from by the respondents, since only the portions relating to the second cause of action could be reviewed.
• Award of Damages: Petitioner insisted that the Court of Appeals erred in reversing the trial court's finding that Carrascoso acted in bad faith in withholding his winnings, and that the award for damages against Carrascoso was warranted by evidence and law.

• Good Faith Reliance on PCGG Instructions: Respondents averred that the withholding of petitioner's racehorse winnings occurred during Carrascoso's incumbency as PCSO chairman, and that he had honestly believed it was within the scope of his authority not to release said winnings in view of Executive Order No. 2, which froze all assets of former President Marcos and his close associates and prohibited their transfer or dissipation.
• Seeking PCGG Advice: Carrascoso argued that he sought the advice of the PCGG as to the nature of the subject racehorse winnings, and was told that they were part of petitioner's sequestered properties; under these circumstances and in his belief that said winnings were fruits of petitioner's ill-gotten properties, he deemed it his duty to withhold them.
• Authority of PCSO Chairman: The chairman of the PCSO, he added, is empowered by law to order the withholding of prize winnings.
• OGCC Representation: Respondents argued that the representation of the Office of the Government Corporate Counsel on behalf of the PCSO and Carrascoso was pursuant to its basic function to act as the principal law office of all government-owned or controlled corporations, and that the government counsel's representation extends to concerned government functionaries when the issue involves their official acts or duties.

• PCSO's Appeal: Whether the Court of Appeals had jurisdiction over the appeal of respondent Philippine Charity Sweepstakes Office.
• Carrascoso's Appeal Brief: Whether the appeal of respondent Carrascoso Jr. should have been dismissed for his failure to file an appeal brief.
• Scope of Appeal: Whether the Court of Appeals had jurisdiction to review and reverse the judgment on a cause of action which was not appealed from by the respondents.
• Award of Damages: Whether the award for damages against respondent Carrascoso Jr. is warranted by evidence and the law.

• PCSO's Appeal: No. The Court of Appeals committed no reversible error in not dismissing the appeal, since this matter was addressed to its sound discretion, exercised reasonably in accordance with the doctrine that cases should, as much as possible, be decided on their merits.
• Carrascoso's Appeal Brief: No. The filing of an appellant's brief is not an absolute requirement for the perfection of an appeal, and Carrascoso's former counsel, who was presumed to have continued representing him on appeal, had filed an appeal brief on his behalf.
• Scope of Appeal: No. The Court of Appeals could not reverse and set aside the RTC Decision in its entirety, but the dispositive portion of its Decision must be understood together with its statement that the appeal was limited to the damages awarded; the unappealed portion ordering payment of the winnings had become final.
• Award of Damages: Partially. Moral and exemplary damages and attorney's fees were properly deleted for lack of bad faith, but Carrascoso may still be held liable for nominal damages under Article 32 of the Civil Code for violating petitioner's constitutional right against deprivation of property without due process of law.

• PCSO's Appeal: The Office of the Government Corporate Counsel was duty-bound to defend the PCSO because the latter, under its charter (RA 1169, as amended), is a government-owned corporation. The government counsel's representation extends to the concerned government functionary's officers when the issue involves the latter's official acts or duties. The dismissal of an appeal on a mere technicality may be stayed where noncompliance with the Rules of Court is not intended for delay or does not prejudice the adverse party, and the emerging trend in jurisprudence is to afford every party-litigant the amplest opportunity for the proper and just determination of his cause, free from the constraints of technicalities.

• Carrascoso's Appeal Brief: The filing of an appellant's brief is not an absolute requirement for the perfection of an appeal. What is important is that Carrascoso filed his notice of appeal on time and that his counsel before the lower court, who was presumed to have continued representing him on appeal, had filed an appeal brief on his behalf. The Manifestation of Carrascoso before the Court of Appeals that he intended to hire the services of another counsel and to file his own brief did not ipso facto effect a change of counsel under the existing rules of procedure; the former counsel must first file a formal petition withdrawing his appearance with the client's consent, and the newly appointed attorney should formally enter his appearance before the appellate court with notice to the adverse party.

• Scope of Appeal: Only the errors assigned and properly argued in the brief, and those necessarily related thereto, may be considered by the appellate court in resolving an appeal in a civil case. The appellate court has no power to resolve unassigned errors, except those that affect the court's jurisdiction over the subject matter and those that are plain or clerical errors. The Court of Appeals' discussion regarding the indispensability of the PCGG as a party-litigant was not pivotal to its reversal; it was a mere aside that did not prejudice petitioner, since the PCGG's role in the controversy had never been an issue before the trial court, and no question, issue, or argument will be entertained on appeal unless it has been raised in the court a quo.

• Award of Damages: Bad faith does not simply connote bad judgment or simple negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty due to some motive or interest or ill will that partakes of the nature of fraud. Carrascoso's decision to withhold petitioner's winnings could not be characterized as arbitrary or whimsical, or even the product of ill will or malice. He had particularly sought from the PCGG a clarification of the extent and coverage of the sequestration order issued against the properties of petitioner, and had acted upon the PCGG's statement that the subject prizes were part of those covered by the sequestration order. The extant rule is that a public officer shall not be liable by way of moral and exemplary damages for acts done in the performance of official duties, unless there is a clear showing of bad faith, malice, or gross negligence. Attorney's fees and expenses of litigation cannot be imposed either, in the absence of a clear showing of any of the grounds provided therefor under the Civil Code.

Nevertheless, under Article 32 of the Civil Code, it is not necessary that the public officer acted with malice or bad faith; to be liable, it is enough that there was a violation of the constitutional rights of petitioner, even on the pretext of justifiable motives or good faith in the performance of one's duties. The Court held that petitioner's right to the use of his property was unduly impeded. While Carrascoso may have relied upon the PCGG's instructions, he could have further sought the specific legal basis therefor. A little exercise of prudence would have disclosed that there was no writ issued specifically for the sequestration of the racehorse winnings of petitioner, and the issuance of a sequestration order requires the showing of a prima facie case and due regard for the requirements of due process. The withholding of the prize winnings without a properly issued sequestration order clearly spoke of a violation of petitioner's property rights without due process of law. Article 2221 of the Civil Code authorizes the award of nominal damages to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, not for indemnifying the plaintiff for any loss suffered.

• Liability of Public Officers for Damages — A public officer shall not be liable for moral and exemplary damages for acts done in the performance of official duties unless there is a clear showing of bad faith, malice, or gross negligence. Attorney's fees cannot be imposed in the absence of a clear showing of any of the grounds provided under Article 2208 of the Civil Code. However, under Article 32 of the Civil Code, liability for damages may attach even without malice or bad faith, provided there was a violation of constitutional rights.

• Bad Faith — Bad faith does not simply connote bad judgment or simple negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty due to some motive or interest or ill will that partakes of the nature of fraud. The Court applied this definition in determining that Carrascoso's reliance on PCGG instructions negated a finding of bad faith.

• Article 32 Liability — Under Article 32 of the Civil Code, it is not necessary that the public officer acted with malice or bad faith; to be liable, it is enough that there was a violation of the constitutional rights of the plaintiff, even on the pretext of justifiable motives or good faith in the performance of one's duties. The purpose of the provision is to provide a sanction to the deeply cherished rights and freedoms enshrined in the Constitution.

• Nominal Damages — Article 2221 of the Civil Code authorizes the award of nominal damages to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, not for indemnifying the plaintiff for any loss suffered. The court may also award nominal damages in every case where a property right has been invaded, and the amount is addressed to the sound discretion of the court.

• Scope of Appellate Review — Only the errors assigned and properly argued in the brief, and those necessarily related thereto, may be considered by the appellate court in resolving an appeal in a civil case. The appellate court has no power to resolve unassigned errors, except those that affect the court's jurisdiction over the subject matter and those that are plain or clerical errors.

• Perfection of Appeal — The filing of an appellant's brief is not an absolute requirement for the perfection of an appeal. When noncompliance with the Rules of Court is not intended for delay or does not prejudice the adverse party, the dismissal of an appeal on a mere technicality may be stayed, and the court may exercise its equity jurisdiction.

• "To hold public officers personally liable for moral and exemplary damages and for attorney's fees for acts done in the performance of official functions, the plaintiff must prove that these officers exhibited acts characterized by evident bad faith, malice, or gross negligence. But even if their acts had not been so tainted, public officers may still be held liable for nominal damages if they had violated the plaintiff's constitutional rights." — This opening statement articulates the central doctrinal framework of the decision, distinguishing between the requirements for moral and exemplary damages versus nominal damages in actions against public officers.

• "Bad faith does not simply connote bad judgment or simple negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty due to some motive or interest or ill will that partakes of the nature of fraud." — This passage defines the standard of bad faith applied by the Court in determining whether Carrascoso could be held liable for moral and exemplary damages.

• "Under the aforecited article, it is not necessary that the public officer acted with malice or bad faith. To be liable, it is enough that there was a violation of the constitutional rights of petitioner, even on the pretext of justifiable motives or good faith in the performance of one's duties." — This excerpt states the controlling rule under Article 32 of the Civil Code, which formed the basis for the award of nominal damages.

• "A little exercise of prudence would have disclosed that there was no writ issued specifically for the sequestration of the racehorse winnings of petitioner. There was apparently no record of any such writ covering his racehorses either. The issuance of a sequestration order requires the showing of a prima facie case and due regard for the requirements of due process. The withholding of the prize winnings of petitioner without a properly issued sequestration order clearly spoke of a violation of his property rights without due process of law." — This passage explains the Court's reasoning for finding a violation of petitioner's constitutional right to property, notwithstanding Carrascoso's good faith.

• Aberca vs. Ver, 160 SCRA 590 (1988) — Cited for the proposition that the purpose of Article 32 of the Civil Code is to provide a sanction to the deeply cherished rights and freedoms enshrined in the Constitution, and that the rule of law must prevail over the transient needs or imperious demands of the ruling power.

• Lim vs. Ponce de Leon, 66 SCRA 299 (1975) — Cited for the rule that under Article 32, liability attaches upon violation of constitutional rights even on the pretext of justifiable motives or good faith in the performance of one's duties.

• BASECO vs. PCGG, 150 SCRA 181 (1987) — Cited for the requirement that the issuance of a sequestration order requires the showing of a prima facie case and due regard for the requirements of due process.

• Commissioner of Internal Revenue vs. Court of Appeals, 267 SCRA 557 (1997) — Cited for the definition of bad faith as importing a dishonest purpose or moral obliquity and conscious doing of a wrong.

• Solid Homes, Inc. vs. Court of Appeals, 275 SCRA 267 (1997) — Cited for the rule that only errors assigned and properly argued in the brief may be considered by the appellate court in resolving an appeal in a civil case.

• Parañaque Kings Enterprises, Inc. vs. Court of Appeals, 268 SCRA 727 (1997) — Cited for the proposition that dismissal of an appeal on a mere technicality may be stayed where noncompliance with the Rules of Court is not intended for delay or does not prejudice the adverse party.

• Article 32, Civil Code — Provides that any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates, or in any manner impedes or impairs any of the rights and liberties of another person, including the right against deprivation of property without due process of law, shall be liable to the latter for damages. The Court applied this provision to hold Carrascoso liable for nominal damages despite his good faith.

• Article 2221, Civil Code — Authorizes the award of nominal damages to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, not for indemnifying the plaintiff for any loss suffered.

• Article 2222, Civil Code — Provides that the court may award nominal damages in every case where a property right has been invaded.

• Article 2216, Civil Code — Provides that the amount of nominal damages is addressed to the sound discretion of the court, with the relevant circumstances taken into account.

• Article 2208, Civil Code — Lists the instances when attorney's fees and expenses of litigation may be recovered, none of which were present in this case.

• Section 38(1), Chapter 9, Book I, Administrative Code of 1987 — Provides that a public officer shall not be liable for moral and exemplary damages for acts done in the performance of official duties unless there is a clear showing of bad faith, malice, or gross negligence.

• Executive Order No. 2 — Issued by then President Corazon C. Aquino, freezing all assets and properties in the Philippines in which former President Marcos and/or his wife, their close friends, subordinates, business associates, dummies, agents, or nominees have any interest or participation, and prohibiting any person from transferring, conveying, encumbering, or otherwise depleting or concealing such assets. The Court considered Carrascoso's reliance on this issuance in negating bad faith.

• Section 10, Chapter 3, Title III, Book IV, Executive Order 292 — Defines the basic function of the Office of the Government Corporate Counsel to act as the principal law office of all government-owned or controlled corporations, which supported the validity of the OGCC's representation of the PCSO and Carrascoso.

• Sections 22 and 26, Rule 138, Rules of Court — Govern the requirements for change of counsel, which were not fully complied with in this case, so Carrascoso's former counsel was presumed to have continued representing him on appeal.

• Vitug, J.
• Purisima, J.
• Gonzaga-Reyes, J.

Romero, J., was abroad on official business.