G.R. No. 211149 - Arcinue vs. Baun

On October 1, 1990, AMA Computer Learning Center (ACLC) granted Oscar LL. Arcinue a ten-year franchise to operate a computer training school in Dagupan City, subject to strict compliance with the Agreement for Franchise Operations.
Section 21 provided that the franchisee may transfer its rights within the term only with the franchisor’s prior approval of the transferee, and the transferee’s rights would only extend for the unexpired period.

By 1993, Arcinue had not commenced operations and sold the franchise to Alice Ilalo S. Baun for ₱85,000.00 without ACLC’s approval.
Baun leased a building and contracted renovations per ACLC specifications; upon inspection, ACLC found the site inadequate and noted Baun’s conflicting directorship in another computer school.

ACLC’s letter dated November 19, 1994 notified Arcinue that he remained the recognized franchisee and directed him to submit transfer documents by January 1995 or face termination; Arcinue did not respond.
On November 20, 1995 Arcinue sent a note about prospective buyers; ACLC replied on November 29, 1995 reiterating the transfer process and guidelines. Arcinue again did not comply.
In 1997, ACLC terminated the franchise for continuous non-operation and unauthorized assignment.

Baun filed on September 11, 1997 a complaint for specific performance and damages against Arcinue and ACLC; evidence presentation concluded April 30, 2002.
Baun died June 21, 2009; her siblings were allowed to substitute.
On October 8, 2010, the RTC dismissed ACLC, found Arcinue in bad faith under Civil Code Articles 19–21, and awarded:

To Baun’s estate – ₱85,000 actual damages (plus 6% interest), ₱50,000 exemplary, ₱50,000 moral damages.
To ACLC – ₱100,000 temperate, ₱50,000 exemplary, ₱25,000 moral damages.

Arcinue appealed, arguing implied approval by ACLC and that Baun’s action died with her; CA affirmed on July 17, 2013, holding:

Arcinue sold without approval, ACLC never granted Baun a franchise, and Baun was third-party harmed by Arcinue’s tort.
The action for recovery of damages survives the death of a party.

Whether the Court of Appeals erred in affirming Arcinue’s liability for damages.
Whether Baun’s death extinguished her action for specific performance and damages.
Whether ACLC acted in bad faith in the transfer approval process.