Fuentes vs. People of the Philippines

A municipal mayor violates Section 3(e) of RA 3019 when he refuses to issue a business permit despite the applicant's compliance with all prerequisites and despite law-enforcement clearances, without notice and hearing, and while granting permits to similarly situated operators and to the applicant's other business, because such conduct constitutes manifest partiality and evident bad faith causing undue injury. Where a pecuniary loss is established but its amount cannot be proven with certainty, temperate damages under Article 2224 of the Civil Code, not nominal damages, are proper.

Fe Nepomuceno Valenzuela was the sole proprietor of Triple A Ship Chandling and General Maritime Services, which operated in the Port of Isabel, Leyte under business permits issued by the Local Government Unit of Isabel. Roberto P. Fuentes was the Municipal Mayor of Isabel, Leyte. Section 3(e) of RA 3019 penalizes a public officer who causes undue injury to any party or gives unwarranted benefit through manifest partiality, evident bad faith, or gross inexcusable negligence in the discharge of official functions, and expressly applies to officers charged with the grant of licenses or permits. The Local Government Code, particularly Sections 16 and 444(b)(3)(iv), vests the municipal mayor with power to issue, suspend, or revoke licenses and permits.

Fe Nepomuceno Valenzuela was the sole proprietor of Triple A Ship Chandling and General Maritime Services, which operated in the Port of Isabel, Leyte from 1993 until 2001 under business permits issued by the Local Government Unit of Isabel. Roberto P. Fuentes was the Municipal Mayor of Isabel, Leyte. In 2002, Valenzuela sought renewal of Triple A's business permit and paid the renewal fees. All the other municipal officers of the LGU signed the permit, signifying their approval, and a police clearance certified that Valenzuela had no derogatory records in the municipality. Fuentes nevertheless refused to sign Triple A's business permit.

Initially, Triple A was able to carry out its business despite the lack of the business permit by securing temporary permits from the Port Management Office and the Bureau of Customs. However, the BOC issued a Cease and Desist Order after receiving Fuentes's unnumbered Memorandum alleging that Valenzuela was involved in smuggling and drug trading. The BOC then required Valenzuela to secure a business permit from the LGU in order to resume Triple A's operations. Valenzuela wrote to Fuentes pleading that she be issued a business permit, but Fuentes's security refused to receive the letter. Valenzuela also obtained certifications and clearances from Isabel Chief of Police Martin F. Tamse, Barangay Captain Dino A. Bayron, the Narcotics Group of Tacloban National Police Commission, the Philippine National Police Isabel Police Station, and the Police Regional Office 8 of the PNP, all stating that she was of good moral character, a law-abiding citizen, and had not been charged nor convicted of any crime. Despite these, no business permit was issued for Triple A.

The lack of a permit caused the spoilage of Triple A's goods bought in early 2002 for M/V Ace Dragon, as it was prohibited from boarding the goods to the vessel without a business permit. Triple A's operations were also suspended from 2002 to 2006. It was only in 2007 that a business permit was finally issued in Triple A's favor.

In his defense, Fuentes averred that as early as 1999, 2000, and 2001, he had been hearing rumors that Valenzuela was engaged in illegal activities such as smuggling and drug trading, but he did not act on them. In 2002, he received written reports from the Prime Movers for Peace and Progress and Isabel Chief of Police Tamse allegedly confirming the rumors, which prompted him to hold the approval of Valenzuela's business permit for Triple A and to issue the unnumbered Memorandum addressed to port officials and the BOC. Fuentes maintained that if he approved the permit and the rumors turned out to be true, many would suffer and be victimized; if the rumors were false, only one would suffer. He also presented corroborative testimonies of other people essentially refuting Valenzuela's claim that Triple A was unable to resume operations due to lack of a business permit and accusing Valenzuela of pulling out her application for a business permit from the Mayor's Office, which precluded Fuentes from approving the same.

The Sandiganbayan found that Fuentes was admittedly the Mayor of Isabel, Leyte at the time relevant to the case; that he singled out Valenzuela's Triple A despite the fact that the rumors relative to illegal smuggling and drug-related activities covered all ship chandlers operating in the Port of Isabel; that he still refused to approve Valenzuela's business permit for Triple A even though she had already secured clearances from the other offices of the LGU and from the PNP; and that as a result of his acts, Valenzuela was unable to operate her ship chandling business through Triple A, causing her undue injury.

• Conviction under Section 3(e) of RA 3019: Whether the Sandiganbayan correctly convicted Fuentes of violation of Section 3(e) of RA 3019.
• Damages: Whether the award of nominal damages should be modified to temperate damages.

• Conviction under Section 3(e) of RA 3019: Yes. All elements of Section 3(e) of RA 3019 were established: Fuentes was a public officer; he acted with manifest partiality and evident bad faith; and his acts caused undue injury to Valenzuela.
• Damages: Temperate damages, not nominal damages, are proper. Valenzuela suffered pecuniary loss though the amount was not proven with certainty, so Article 2224 of the Civil Code applies; P300,000.00 temperate damages with 6% legal interest from finality is awarded.

• Conviction under Section 3(e) of RA 3019: Section 3(e) of RA 3019 has three elements: (a) the accused must be a public officer discharging administrative, judicial, or official functions, or a private individual acting in conspiracy with such public officers; (b) he acted with manifest partiality, evident bad faith, or inexcusable negligence; and (c) his action caused any undue injury to any party, including the government, or gave any private party unwarranted benefits, advantage, or preference in the discharge of his functions. The first element was undisputed because Fuentes was the Municipal Mayor of Isabel, Leyte. As to the second element, the law provides three modes of commission: manifest partiality, evident bad faith, and/or gross negligence. Citing Coloma, Jr. vs. Sandiganbayan, the Court defined partiality as synonymous with bias; bad faith as not simply bad judgment or negligence but as imputing a dishonest purpose or moral obliquity and conscious doing of a wrong; and gross negligence as want of even slight care, acting or omitting to act where there is a duty to act, not inadvertently but wilfully and intentionally with conscious indifference to consequences. Manifest partiality exists when there is a clear, notorious, or plain inclination or predilection to favor one side or person rather than another. Evident bad faith connotes not only bad judgment but also palpably and patently fraudulent and dishonest purpose to do moral obliquity or conscious wrongdoing for some perverse motive or ill will. Fuentes himself testified that the rumors he heard involved all five ship chandlers operating in the Port of Isabel, yet only Valenzuela's Triple A was refused a business permit, while permits were issued to two other ship chandling operators, S.E. De Guzman Ship Chandler and General Maritime Services, and Golden Sea Kers Marine Services. Fuentes also issued a business permit to Valenzuela's other business, Gemini Security. These circumstances showed manifest partiality against Valenzuela and in favor of other ship chandling operators. As to bad faith, while the municipal mayor has the prerogative to suspend, revoke, or refuse to issue business permits under Sections 16 and 444(b)(3)(iv) of the Local Government Code, the power to suspend or revoke is premised on violation of the conditions specified therein, and the power to refuse issuance is premised on non-compliance with the prerequisites for issuance. In exercising these powers, the mayor must observe due process by affording the applicant or licensee notice and opportunity to be heard. Valenzuela had complied with all prerequisites, as her application contained the prior approval of the other concerned LGU officials, and she submitted numerous certifications from law enforcement agencies clearing her of participation in illegal smuggling and drug trading. Despite these, Fuentes refused to issue the permit without affording her an opportunity to controvert the rumors against her, and even issued the unnumbered Memorandum which effectively barred Triple A from conducting its ship chandling operations without a business permit. If Fuentes truly believed the rumors, he should have acted in 1999, 2000, or 2001; his belated action in 2002, despite the clearances, spoke of evident bad faith. As to the third element, Fuentes's refusal to issue the permit, coupled with the unnumbered Memorandum, caused undue injury to Valenzuela by preventing her from engaging in an otherwise lawful endeavor for 2002 and by leaving Triple A without a permit for 2003, 2004, 2005, and 2006; only in 2007 was a permit issued. Proof of the extent of damage is not essential; it is sufficient that the injury suffered or benefit received is perceived to be substantial enough and not merely negligible. Thus, Fuentes was correctly convicted. Under Section 9(a) of RA 3019, the prescribed penalty includes imprisonment for six (6) years and one (1) month to fifteen (15) years and perpetual disqualification from public office, so the Sandiganbayan correctly imposed the indeterminate sentence and perpetual disqualification.
• Damages: The Sandiganbayan awarded P200,000.00 as nominal damages. Article 2221 of the Civil Code defines nominal damages as recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind, or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown. Here, Valenzuela suffered some pecuniary loss due to the suspension of Triple A's ship chandling operations, although the amount was not proven with certainty. Under Article 2224 of the Civil Code, temperate or moderate damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty. The Court cited Evangelista vs. Spouses Andolong and its citations, including Araneta vs. Bank of America, Tan vs. OMC Carriers, Inc., Canada vs. All Commodities Marketing Corporation, Philtranco Service Enterprises, Inc. vs. Paras, and People vs. Briones, to support the award of temperate damages where loss is established but amount is uncertain. Temperate damages should be more than nominal but less than compensatory, and the amount is left to the discretion of the courts but must be reasonable. Considering that Valenzuela's net income from the previous year, 2001, was P750,000.00, the Court held that P300,000.00 as temperate damages was proper. Such amount shall earn legal interest of six percent (6%) per annum from finality of the Decision until fully paid, in light of prevailing jurisprudence, citing Nacar vs. Gallery Frames.

• Elements of violation of Section 3(e) of RA 3019 — The elements are: (a) the accused must be a public officer discharging administrative, judicial, or official functions, or a private individual acting in conspiracy with such public officers; (b) he acted with manifest partiality, evident bad faith, or inexcusable negligence; and (c) his action caused any undue injury to any party, including the government, or gave any private party unwarranted benefits, advantage, or preference in the discharge of his functions. The Court applied all three elements to Fuentes: he was the Municipal Mayor; he acted with manifest partiality and evident bad faith; and his refusal to issue the permit and issuance of the unnumbered Memorandum caused undue injury to Valenzuela.
• Manifest partiality, evident bad faith, and gross inexcusable negligence — Manifest partiality exists when there is a clear, notorious, or plain inclination or predilection to favor one side or person rather than another. Evident bad faith connotes not only bad judgment but also palpably and patently fraudulent and dishonest purpose to do moral obliquity or conscious wrongdoing for some perverse motive or ill will; it contemplates a state of mind affirmatively operating with furtive design or with some motive or self-interest or ill will or for ulterior purposes. Gross negligence is negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is a duty to act, not inadvertently but wilfully and intentionally with a conscious indifference to consequences. The Court found manifest partiality and evident bad faith because Fuentes singled out Valenzuela's Triple A despite rumors covering all ship chandlers, issued permits to other operators and to Valenzuela's other business, and refused the permit despite clearances and without notice and hearing.
• Mayor's power over business permits and due process — Under Sections 16 and 444(b)(3)(iv) of the Local Government Code, the municipal mayor may issue licenses and permits and suspend or revoke them for violation of the conditions upon which they were issued. The power to suspend or revoke is premised on violation of the conditions specified therein, while the power to refuse issuance is premised on non-compliance with the prerequisites for issuance. In exercising these powers, the mayor must observe due process by affording the applicant or licensee notice and opportunity to be heard. The Court applied this rule because Valenzuela had complied with all prerequisites and obtained clearances, yet Fuentes refused the permit without giving her an opportunity to controvert the rumors.
• Undue injury and proof of extent of damage — Proof of the extent of damage is not essential; it is sufficient that the injury suffered or the benefit received is perceived to be substantial enough and not merely negligible. The Court applied this because Valenzuela's ship chandling operations were suspended from 2002 to 2006, preventing her from engaging in a lawful endeavor, even though the exact amount of pecuniary loss was not proven.
• Nominal damages vs. temperate damages — Nominal damages under Article 2221 of the Civil Code are recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind, or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown. Temperate or moderate damages under Article 2224 may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty. The Court applied this by replacing the Sandiganbayan's nominal damages with temperate damages of P300,000.00, because Valenzuela suffered pecuniary loss though its exact amount was uncertain.

• "As may be gleaned above, the elements of violation of Section 3 (e) of RA 3019 are as follows: (a) that the accused must be a public officer discharging administrative, judicial, or official functions (or a private individual acting in conspiracy with such public officers); (b) that he acted with manifest partiality, evident bad faith, or inexcusable negligence; and (c) that his action caused any undue injury to any party, including the government, or giving any private party unwarranted benefits, advantage, or preference in the discharge of his functions." — This passage states the controlling elements of Section 3(e) of RA 3019, which the Court applied to affirm Fuentes's conviction.
• "In other words, there is "manifest partiality" when there is a clear, notorious, or plain inclination or predilection to favor one side or person rather than another. On the other hand, "evident bad faith" connotes not only bad judgment but also palpably and patently fraudulent and dishonest purpose to do moral obliquity or conscious wrongdoing for some perverse motive or ill will. It contemplates a state of mind affirmatively operating with furtive design or with some motive or self-interest or ill will or for ulterior purposes." — This passage defines the modes of commission under Section 3(e) and supplied the standards for finding Fuentes's conduct to be manifestly partial and evidently in bad faith.
• "Under prevailing case law, "[p]roof of the extent of damage is not essential, it being sufficient that the injury suffered or the benefit received is perceived to be substantial enough and not merely negligible."" — This passage supports the third element of undue injury, which the Court found satisfied by the suspension of Triple A's operations.
• "Under these circumstances, the Court holds that the award of temperate damages in the amount of P300,000.00 is proper, considering that Valenzuela's net income from the previous year, 2001, was P750,000.00." — This passage states the Court's modification of the damages award from nominal to temperate damages and the basis for the amount.

• Coloma, Jr. vs. Sandiganbayan, 744 Phil. 214 (2014) — Cited for the definitions of "partiality," "bad faith," and "gross negligence" under Section 3(e); the Court relied on these definitions to assess Fuentes's conduct.
• Uriarte vs. People, 540 Phil. 474 (2006) — Cited for the definitions of manifest partiality and evident bad faith, which the Court applied to Fuentes's refusal to issue the permit.
• Lim vs. Court of Appeals, 435 Phil. 857 (2002) — Cited for the rule that the mayor must observe due process, affording notice and opportunity to be heard, in exercising permit powers.
• Garcia vs. Sandiganbayan, 730 Phil. 521 (2014), citing Reyes vs. People, 641 Phil. 91 (2010) — Cited for the rule that proof of the extent of damage is not essential; it is enough that the injury is substantial and not negligible.
• Evangelista vs. Spouses Andolong, G.R. No. 221770, November 16, 2016 — Cited for the rule that temperate damages are proper where pecuniary loss is suffered but its amount cannot be proven with certainty.
• Araneta vs. Bank of America, 148-B Phil. 124 (1971) — Cited in Evangelista for the Code Commission's explanation of temperate damages.
• Seven Brothers Shipping Corporation vs. DMC-Construction Resources, Inc., G.R. No. 193914, November 26, 2014, 743 SCRA 33 — Cited for the definition of nominal damages and the computation of temperate damages.
• Nacar vs. Gallery Frames, 716 Phil. 267 (2013) — Cited for the imposition of 6% legal interest from finality until fully paid.
• Cambe vs. Ombudsman, G.R. Nos. 212014-15, December 6, 2016, citing Presidential Commission on Good Government vs. Navarro-Gutierrez, G.R. No. 194159, October 21, 2015, 773 SCRA 434 — Cited for the elements of Section 3(e) of RA 3019.
• Fonacier vs. Sandiganbayan, 308 Phil. 660 (1994) — Cited in Coloma for the definitions of partiality, bad faith, and gross negligence.

• Section 3(e), Republic Act No. 3019 — Defines the corrupt practice of causing undue injury to any party, including the government, or giving any private party unwarranted benefit, advantage, or preference in the discharge of official administrative or judicial functions through manifest partiality, evident bad faith, or gross inexcusable negligence; it expressly applies to officers and employees charged with the grant of licenses or permits or other concessions. The Court applied this provision to hold Fuentes criminally liable.
• Section 9(a), Republic Act No. 3019 — Prescribes the penalty of imprisonment for not less than six years and one month nor more than fifteen years, perpetual disqualification from public office, and confiscation or forfeiture in favor of the Government of any prohibited interest and unexplained wealth manifestly out of proportion to salary and other lawful income. The Court affirmed the Sandiganbayan's imposition of the indeterminate sentence and perpetual disqualification.
• Section 16, Local Government Code — States the general welfare power of local government units. It was cited as part of the statutory basis for the municipal mayor's permit powers.
• Section 444(b)(3)(iv), Local Government Code — Provides that the municipal mayor shall issue licenses and permits and suspend or revoke the same for any violation of the conditions upon which said licenses or permits had been issued, pursuant to law or ordinance. The Court cited this provision but held that the power must be exercised with due process and only on the grounds specified.
• Article 2221, Civil Code — Defines nominal damages as adjudicated to vindicate or recognize a right violated or invaded, and not for the purpose of indemnifying the plaintiff for any loss suffered. The Court found this provision inapplicable because Valenzuela suffered actual pecuniary loss.
• Article 2224, Civil Code — Provides that temperate or moderate damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty. The Court applied this provision to award P300,000.00 as temperate damages.

Sereno, C.J. (Chairperson); Velasco, Jr.; Del Castillo; and Caguioa, JJ., concurred.