Case Summary (G.R. No. 211149)
Agreement for Franchise Operations
On October 1, 1990, ACLC granted Arcinue a ten-year franchise to operate a computer training school in Dagupan City under strict compliance with the Agreement for Franchise Operations. Section 21 allowed transfer of franchise rights only upon prior approval by ACLC and limited the transferee’s rights to the unexpired term.
Unauthorized Transfer and Initial Response
By 1993 Arcinue had not commenced operation and sold the franchise to Baun for ₱85,000 without ACLC’s approval. Baun began site preparations; ACLC’s inspection found the proposed facility inadequate and discovered Baun’s conflicting directorship in another school.
ACLC’s Demand and Franchise Termination
ACLC’s November 19, 1994 letter directed Arcinue to submit transfer documents by January 1995 or face termination. Arcinue ignored the demand; a handwritten note dated November 20, 1995 mentioned prospective buyers but no formal transfer. ACLC terminated the franchise in 1997 for non-operation and unauthorized assignment.
Trial Court Proceedings and RTC Decision
On September 11, 1997, Baun sued Arcinue and ACLC for specific performance and damages. Trial concluded on April 30, 2002; Baun died June 21, 2009 and was substituted by her siblings. On October 8, 2010, the Regional Trial Court found that:
- The franchise transfer lacked ACLC approval; Baun had no enforceable rights against ACLC.
- Arcinue acted in bad faith by failing to operate and by selling the franchise without consent, causing ACLC and Baun financial loss.
Damages ordered against Arcinue:
- Actual damages of ₱85,000 with 6% interest from 1993;
- ₱50,000 exemplary damages;
- ₱50,000 moral damages.
Damages ordered to ACLC: temperate, exemplary, and moral damages totaling ₱175,000.
Court of Appeals Decision
By decision dated July 17, 2013, the Court of Appeals affirmed the RTC’s findings. It held that:
- Arcinue knowingly violated the franchise agreement; ACLC never approved Baun as transferee.
- Baun’s action for “recovery of damages for an injury to person or property” survived her death under Rule 87, Section 1.
Reconsideration was denied on January 28, 2014.
Issue on Review
Whether the Court of Appeals erred in affirming Arcinue’s liability for damages.
Supreme Court Ruling
The petition was denied. The Supreme Court held that:
- Under Rule 45, factual findings on Arcinue’s bad faith and liability for damages cannot be revisited.
- Actions for damages caused by tortious conduct survive a party’s death under Rule 87, Section 1.
- Arcinue’s breach violated Civil Code Articles 19–21, justifying the lower courts’ damage awards.
Modification of Interest Rates
Pursuant to Bangko Sentral ng Pilipinas guidelines and Lara’s Gift Shop v. Midtown, the C
Case Syllabus (G.R. No. 211149)
Facts and Antecedents
- 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, Pangasinan, under an Agreement for Franchise Operations.
- Section 21 of the Agreement allowed transfer of the franchise within the unexpired term, subject to ACLC’s prior approval of the transferee.
- By 1993, Arcinue had not commenced operations. He sold the franchise to Alice Ilalo S. Baun for ₱85,000 without ACLC’s consent.
- Baun promptly leased a building and engaged an architect to renovate it according to ACLC standards; ACLC later rejected the site for insufficient floor area and noted Baun’s directorship in a rival school.
- In a letter dated November 19, 1994, ACLC informed Arcinue it still considered him the franchisee and directed him to forward transfer documents by January 1995 or face termination; Arcinue did not respond.
- On November 20, 1995, Arcinue advised ACLC that Baun had potential buyers; ACLC replied on November 29, 1995 that no transfer was effective and supplied transfer guidelines. Arcinue again failed to comply.
- In 1997, ACLC terminated the franchise for Arcinue’s continuous non-operation and unauthorized assignment.
Procedural History
- On September 11, 1997, Baun sued Arcinue and ACLC for specific performance and damages to enforce her alleged franchise rights. Trial evidence closed on April 30, 2002.
- Baun died on June 21, 2009; her siblings were permitted to substitute as plaintiffs.
- The Regional Trial Court (Branch 57, San Carlos City) ruled on Oc