TOCOMS PHILIPPINES, INC., PETITIONER VS.
PHILIPS ELECTRONICS AND LIGHTING
INC., RESPONDENT
Tocoms filed for a suit for damages and injunction
Facts of the Appellate Court (CA)
● Tocoms is the appointed distributor of PELI through a distribution agreement
● PELI informed Tocoms that they will not renew the contract for 2013
● PELI sold products in the agreement to Fabriano at a lower price in 2012
● Western Marketing accused Tocoms of dishonest dealings
● Western marketing returned inventory to buy it from Fabriano for a lower price
● Tocoms is vulnerable to losses amounting to more or less 2 million pesos
● PELI gave an unfair, unreasonable, one-sided demand to buy-back all inventory that is
still with Tocoms and reminded them of the ICC stickers
● Tocoms gave a letter demanding PELI buys back the inventory under certain conditions
and PELI refused the conditions set
Tocoms prayed for
● Payment of actual and exemplary damages, and attorney fees
● Filing of restraining order and mandatory preliminary injunction
● Release of ICC stickers to allow Tocoms to sell products
PELI filed for a motion to dismiss
● Trial court has not acquired jurisdiction
○ Invalid service of summons
○ Not a real party-in-interest and was improperly impleaded
○ Venue was improperly laid
○ Complaint did not state cause of action
Denied PELI’s motion to dismiss
● Existing cause of action
○ Human relations provisions of the Civil Code
○ Distribution agreement violated by PELI
○ PELI’s actions were tainted with bad faith and malice
● Service of summons
○ PELI is represented by agents working in BGC and Taguig City
○ Summon was served to Magallanes, their corporate secretary
○ Resident agents are contracting parties in the distribution agreement
● Issue of venue
○ Oh, Thurer and PELI hold office in Taguig City
○ Distribution agreement doesn’t preclude cases from other venues
Denied PELI’s motion for partial reconsideration
PELI filed a petition for certiorari with the CA to assail the denial of motion to dismiss
● Grave abuse of discretion in denying motion to dismiss
● Prayer was only for damages
● Should have considered all pleadings on record (Santiago v. Pioneer Savings)
● No cause of action - agreement was nonexclusive and expired
Tocoms filed for a motion for reconsideration and was denied by the CA
Whether or not Tocoms’ complaint states a cause of action against PELI
Rule 16, Section 1 of the Rules of Court
Failure to state cause of action in initiatory pleading is a ground for dismissal
In ruling a motion to dismiss without cause of action, no reference on outside matters
Exception (Tan v. Dir) - don’t rigidly apply hypothetical admission of allegations if allegations are
false with evidence given
Tocoms put the distribution agreement into its complaint
Settled rule that attachments are an integral part of a pleading
Therefore it is fine for courts to consider the agreement without the tan exception
PART II
Cause of action is the act or omission which a party violates a right of another
Constitutive elements: legal right accruing to the plaintiff; duty of the defendant’s part to respect
such right; act or omission by the defendant violative of right of plaintiff or constituting a breach
of the obligation of defendant to the plaintiff
Tocoms bases its cause of action for damages on
● Article 19, 20, and 21 of the Civil Code
● Right to property and to peaceful, uninterrupted, and fair conduct of business
● Acts by PELI were tainted with bad faith and malice
Article 19
● Principle of abuse of rights - norms of human conduct. Rule of conduct for the
government if human relations and maintaining social order
● A right, though legal may become the source of illegality - when a right does not conform
with norms in article 10 and results in damages, a legal wrong is committed
● Article 20 or 21 provide remedies for the violation of article 19
○ Penalized by article 21
○ Compensable by article 20
Abuse of rights under Article 19: existence of legal right or duty, exercise of such right or
discharge of such duty in bad faith, such exercise of right or discharge of duty with sole intent of
prejudicing or injuring another
Principle of abuse of rights may be invoked if a right or duty was exercised in bad faith
regardless of the sole intent of injuring another (bad faith is essential)
Application to case
● Plaintiff was not given sufficient notice
● Plaintiff is accused of dishonest feelings
● Plaintiff suffered grave and irreversible losses and can incur more
○ Actual damages amounting to 20 million pesos
● PELI gave unreasonable, unfair, and one sided demands
○ Financial losses of more or less 12 million pesos
○ Hostage due to ICC stickers
● Bad faith was shown when Fabriano prodded clients to return products
○ Besmirched reputation and business standing of plaintiff
In determining sufficienct of cause of action, the test is whether or not admitting hypothetically
the truth of allegations of fact, the court may grant relief prayed for
● If the allegations by Tocoms are hypothetically admitted, they constitute bad faith in the
rights under the distribution agreement, violating article 19 which is punished by article
21 and the court may award damages
● While PELI’s acts were valid, whether he acted in bad faith is disputed - PELI has not
proven they acted without bad faith (no reply to Tocom’s complaint)
Bad faith denotes a dishonest purpose, moral deviation, and a conscious commission of a
wrong. It includes a “breach of known duty through some motive or interest or ill will that
partakes of the nature of fraud. It is, therefore a question of intention inferred from conduct or
contemporaneous statements
Bad faith cannot be presumed; it must be established by clear and convincing evidence.
RULING: PETITION GRANTED, CA DECISION REVERSED AND SET ASIDE, RTC
DECISION REINSTATED
JOSE G. TAN AND ORENCIO C. LUZURIAGA, PETITIONER VS. ROMEO H. VALERIANO,
RESPONDENT
Valeriano filed for a damages suit against petitioners, gonzales amd gilana
Facts
● 2001, Holy Name Society held a multi-sectoral consultative conference
● Valeriano is the president of the religious organization
● Valeriano delivered a welcome address for the conference
Petitioners file an administrative complaint to the CSC against Valeriano
● Real purpose of event was to pick endorsers for HNS in 2001 elections
● Valeriano engaged in partisan politics and electioneering
● Valeriano did not prevent criticisms against specific officials
COA did not act on the complaint due to pendency of case before CSC
CSC dismissed the case due to procedural defects. Complaint not filed under oath
Petitioners refiled the complaint before CSC but withdrew
Petitioners filed an administrative complaint to the office of the Ombudsman but was dismissed
for want of evidence
● Violation of RA related to S55 of the Revised Administrative Code of 1987
Valeriano filed before the RTC a complaint for damages against the petitioner
RTC Ruling
● Bad faith and malice in filing numerous unsubstantiated cases
● Valeriano was singled out - he only delivered a speech
● Moral damages, exemplart damages, attorney fees, litigation expenses
CA Ruling
● Reverse RTC ruling
● Gonzales and Gilana are not concerned
● Initiating administrative cases are not in bad faith
● Refiling to CSC is in bad faith
● Not informing lawyer of pending Ombudsman case is bad faith
Issue WON petitioners acted in bad faith or malice in filing complaints
Ruling
Rule 45 - limited to questions of law because SC is not trier of facts
Appreciation and resolution of factual issues are functions of lower courts
Exceptions to this rule:
● Findings on speculation
● Mistaken absurd or impossible inference
● Grave abuse of discretion
● Misapprehension of facts
● Conflicting factual findings
