SECOND DIVISION

[G.R. No. 148599. March 14, 2005.]

PROFESSIONAL ACADEMIC PLANS, INC., FRANCISCO COLAYCO and

BENJAMIN DINO , petitioners, vs . DINNAH L. CRISOSTOMO , respondent.

DECISION

CALLEJO, SR ., J : p

Before us is a petition for review of the Decision 1 of the Court of Appeals (CA) affirming
the decision of the Regional Trial Court in Civil Case No. 93-197, and its Resolution denying
the motion for reconsideration thereof filed by petitioner Professional Academic Plans,
Inc. (PAPI).
The Antecedents
Respondent Dinnah L. Crisostomo was the PAPI District Manager for Metro Manila. As
such officer, she did not receive any salary but was entitled to a franchise commission
equivalent to 10% of the payments on remittances of clients whose contracts or
agreements had been negotiated by her, for and in behalf of PAPI. She was later promoted
as Regional Manager.
On May 17, 1988, petitioner PAPI wrote Col. Noe S. Andaya, the President of the Armed
Forces of the Philippines Savings and Loan Association, Inc. (AFPSLAI) offering an
Academic Assistance Program for its members, their children and dependents. cIACaT

Noel Rueda, a sales consultant of petitioner PAPI, initiated negotiations for the sale of pre-
need educational plans under the said program with the AFPSLAI. However, before an
agreement was reached, Rueda's services were terminated. Respondent Crisostomo, as
the district manager and the immediate supervisor of Rueda, continued the negotiation of
the account together with Guillermo R. Macariola, the Assistant Vice-President for Sales. 2
The AFPSLAI agreed to the proposal.
On November 9, 1988, the AFPSLAI and PAPI executed a Memorandum of Agreement
(MOA) 3 in connection with scholarship funding agreements to be entered into by PAPI
and the AFPSLAI members. These agreements shall then embody the provisions of the
Professional Academic Program Agreement. The parties agreed that all support services
would be provided by PAPI and that any amendments and/or modifications to the MOA
would be effective only upon approval of the parties thereto.
By then, Rueda was no longer connected with the petitioner corporation, hence, was
disqualified to receive the franchise commission. Thus, the said commission was offered
to Macariola who, however, declined and waived his right thereto in favor of respondent
Crisostomo, Rueda's immediate supervisor. The Executive Committee of petitioner PAPI
agreed to give the franchise commission to respondent Crisostomo. 4
Initially, respondent Crisostomo received the 10% franchise commission from December
1988 until April 1989. Later, upon the instance of petitioner Benjamin Dino, then Assistant
Vice-President for Marketing, respondent Crisostomo's franchise commission was
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 reduced to 5% to support the operational expenses of PAPI. After a few months, the said
commission was again reduced to 4%. Two months later, petitioner PAPI asked for
another .25% reduction; hence, respondent Crisostomo's franchise commission was
further reduced to 3.75%. Finally, in January 1991, petitioner PAPI again asked for a final
reduction of the commission to 2% to which respondent Crisostomo agreed, on the
condition that it be reduced into writing. 5
Thus, on February 7, 1991, petitioner Dino, and Angelito B. Cruz, Vice-President for Finance
and Administration, signed a Memorandum which reads as follows:
This will confirm your company franchise on all AFPSLAI business with
Professional Academic Plans, Inc. under the following terms and conditions:

1. Your franchise commission shall remain at 2% excluding Entrance

and Service Fees of the first year premium for as long as you are
connected with the company at whatever capacity.

2. This franchise is not transferable.

For your guidance.

(Sgd.) (Sgd.)

BENJAMIN S. DINO ANGELITO B. CRUZ 6

Crisostomo received her 2% commission until October 1991. 7 In the meantime, Col. Victor
M. Punzalan succeeded Col. Noe S. Andaya as President of the AFPSLAI. 8 In a Letter
dated December 16, 1991, Col. Punzalan informed PAPI of the AFPSLAI's decision to
review the 1988 MOA.
As an aftermath of the negotiation, petitioner PAPI and the AFPSLAI executed a MOA in
April 1992, amending their prior MOA. 9
The AFPSLAI resumed its remittances of the installment payments of its members to
petitioner PAPI in June 1992. 1 0 This time, however, Crisostomo was not paid her
commission. In an Inter-Office Memorandum 1 1 dated June 1, 1992, respondent
Crisostomo's franchise commission on sales transacted with the AFPSLAI was
terminated, for the following reasons: (1) the new AFPSLAI management cancelled the old
MOA in October 1991 due to various anomalies and the misrepresentation committed by
PAPI's sales force; (2) the new MOA is largely due to management's effort; hence, no
franchise would be granted to any sales associates; and (3) the franchise guidelines as per
the Memorandum dated November 1988 prescribed that in order to maintain her
franchise, 100 new paid plans should be completed on a month to month basis and
respondent Crisostomo was not able to meet these parameters for the period of
November 1991 to May 1992. cDICaS

Nonetheless, respondent Crisostomo insisted on the release of her 2% franchise

commission. 1 2 She first approached her immediate supervisor, Mrs. Editha Bayoneta, the
Senior Assistant Vice-President, but to no avail. She then went to petitioner Dino, who
allegedly threatened her with termination if she persisted with her demand. Unfazed, she
sought a dialogue with the President himself, petitioner Francisco Colayco. They, however,
failed to arrive at a settlement. 1 3 On July 6, 1992, respondent Crisostomo sent a demand
letter to petitioner PAPI. The latter informed her that it could not accede to her demand for
the reasons stated in the Inter-Office Memorandum dated June 1, 1992. jur2005cda

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 Thereafter, Crisostomo again approached Colayco who advised her to make a formal
proposal. She complied and submitted a letter 1 4 on August 13, 1992 where she made the
following proposal:
Option 1: That I am willing to settle for a P5 Million amount settlement and
an immediate irrevocable resignation from your good company,

Option 2: That the 2% franchise fee/commission be retained even if and

when the undersigned is no longer connected with Professional Group, Inc. for as
long as the AFPSLAI is still doing business with the Professional Group. This is
considered as the royalty fee. 1 5

However, in a Letter 1 6 dated August 17, 1992, petitioner Colayco informed the respondent
that her settlement proposal was totally unacceptable and that she was being placed
under preventive suspension in order to abort any untoward reaction resulting from the
denial of her request, which may be detrimental to the company's interest. Worse, she was
advised not to come back after the suspension. Thus, her services in the company were
terminated.
On January 21, 1993, respondent Crisostomo filed a complaint for sum of money and
damages against petitioners PAPI, Colayco and Dino. She alleged therein that as of
October 2, 1992, petitioner PAPI's sales of pre-need plans to the AFPSLAI amounted to
P9,193,367.20; that she was entitled to 2% of such amount or the sum of P183,867.34 as
franchise commission; and that notwithstanding the said franchise, petitioner PAPI
refused to give her the said commissions. She, likewise, prayed for the grant of moral and
exemplary damages, plus attorney's fees. 1 7
The petitioners averred in their answer to the complaint that Crisostomo was not entitled
to the franchise commission because she did not participate in the execution of the 1988
MOA. They pointed out that under the December 1989 company guidelines, a franchise
holder shall be maintained only when 100 new paid plans are completed on a month-to-
month basis. They argued that since respondent Crisostomo was unable to meet this
requirement for the period of November 1991 to May 1992, her franchise was terminated.
The petitioners also claimed that the AFPSLAI did not resume payments in 1992 but
entered into a new MOA after it undertook new negotiations. They maintained that under
the new MOA, no one is entitled to a franchise, much less respondent Crisostomo. 1 8
The petitioners adduced testimonial evidence to show that respondent Crisostomo had no
participation whatsoever in the negotiations which culminated in the execution of the two
MOAs between petitioner PAPI and the AFPSLAI. Petitioner Dino testified that before
respondent Crisostomo became the regional manager, she was not an employee of PAPI.
According to him, after the termination of Rueda's employment for cause, the franchise
commission should revert back to petitioner PAPI as a rule. While the Executive
Committee agreed to award the commission, it agreed to give respondent Crisostomo
only a 5% commission, which was reduced to 2% until June 1992 under the 1992 MOA.
Moreover, Crisostomo had no participation whatsoever in the negotiations of the two
agreements. IcEaST

After due proceedings, the trial court rendered a Decision on November 20, 1997, the
dispositive portion of which reads:
Premises considered, judgment is hereby rendered in favor of the plaintiff and as
against defendants. Wherefore, defendants are hereby ordered to release to
plaintiff:
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 1. the sum of one hundred eighty-three thousand eight hundred sixty-
seven thousand and twenty-five centavos (P183,867.25) which
constitutes her commission from the AFPSLAI contract as of
October 1992, and the sum equivalent to 2% of all future
remittances by AFPSLAI to defendant PAPI;
2. moral damages in the amount of P200,000.00;

3. exemplary [damages] of P50,000.00;

4. attorney's fees of P50,000.00;
5. cost of suit.

SO ORDERED. 1 9

The petitioners appealed the decision to the CA which rendered judgment 2 0 on August 31,
2000 affirming in toto the decision of the trial court.

The Ruling of the Court of Appeals

According to the CA, the letter of Col. Punzalan did not indicate any intention to abrogate
the first MOA. At most, it merely suspended the acceptance of the application for pre-need
plans while a thorough review of the terms and conditions of the first MOA was being
made. The CA held that the second MOA did not disclose any incompatibility with the first
MOA that would amount to an implied extinguishment of the latter; nor did the new MOA
use any word suggesting the cancellation of the first. The CA then ruled that what was
executed in 1992 was a mere modification of the first MOA. 2 1
The CA further held that the fact that military and political support intervened in facilitating
the revival of the AFPSLAI account did not diminish the respondent's right to the franchise
commission, considering that it was awarded to her by the executive committee for
successfully initiating the deal with the AFPSLAI in 1988. 2 2
The CA ruled that the requirement of completing 100 new plans monthly as a condition for
a franchisee to be entitled to the commission was superseded by the Memorandum dated
February 7, 1991, which reduced the commission to 2% from the earlier 10%. Respondent
Crisostomo was entitled to receive such reduced commission as long as she was
connected with the petitioner corporation in whatever capacity. Moreover, assuming that
such condition was still in effect, its non-fulfillment from November 1991 to May 1992
could not be imputed to the respondent since it was brought about by Col. Punzalan's
order to suspend the acceptance of plan applications pending a review of the first MOA. 2 3
The CA found that the award of moral and exemplary damages, attorney's fees and the
costs of the suit, in favor of the respondent, was fully supported by the evidence on record
and was justified, in light of the petitioner corporation's wanton disregard of respondent's
claim for her franchise commission. 2 4
On June 13, 2001, the CA denied the petitioners' motion for reconsideration for lack of
merit. Hence, they filed this petition for review on certiorari.
The Present Petition
The petitioners submit the following issues for our consideration:
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 A) WHETHER OR NOT THE OLD MEMORANDUM OF AGREEMENT HAD BEEN
CANCELLED AND RESCINDED BY AFPSLAI;
B) WHETHER OR NOT RESPONDENT IS ENTITLED TO THE FRANCHISE FEE
OR COMMISSION UNDER THE NEW MEMORANDUM OF AGREEMENT
UNDER WHICH SHE HAD NO PARTICIPATION WHATSOEVER IN THE
NEGOTIATION AND EXECUTION;
C) WHETHER OR NOT PETITIONERS, IN DENYING RESPONDENT'S CLAIM,
HAVE COMMITTED ACTS THAT RENDER THEM LEGALLY LIABLE FOR
MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES AND COST
OF SUIT. 2 5

Primarily, the petitioners assert that the respondent is not entitled to a franchise
commission. They aver that the respondent did not participate in initiating,
conceptualizing, and negotiating the first MOA with the AFPSLAI, except that she was
present during its signing. The franchise commission for the AFPSLAI account under the
old MOA should have been granted to Noel Rueda, who initiated and conceptualized the
transaction. The petitioners maintain that the franchise commission was only awarded to
the respondent because those who were entitled to it were disqualified to be franchise
holders — Rueda was disqualified for being no longer connected with the petitioner
company, while Macariola was disqualified for being an employee. 2 6
Assuming that the respondent was entitled to the franchise commission under the old
MOA, the petitioners argue that such privilege was already extinguished, considering that
the old MOA was cancelled by the AFPSLAI thru the Letter dated December 16, 1991. They
maintain that in writing the said letter, Col. Punzalan intended to abrogate the old MOA and
not merely suspend the same, otherwise, the intention to enter into "a new agreement
mutually beneficial" to both parties would not have been mentioned therein. 2 7 They
conclude that since there has already been an express cancellation of the old MOA, there is
no longer a need to delve into the issue of whether the new MOA declared in unequivocal
terms that the old MOA was being cancelled, or whether the new MOA is incompatible with
the old one. 2 8
The petitioners point out that the respondent had no participation whatsoever in the
negotiation or execution of the new MOA. Considering this and the fact that the old MOA
had been duly cancelled, the respondent, therefore, had no right to the franchise
commission on the AFPSLAI account under the new MOA. 2 9
The petitioners assert that the award of moral and exemplary damages and attorney's fees
has no basis since they did not act in bad faith in denying the respondent's claim. 3 0
In her Comment on the petition, the respondent counters that regardless of the execution
of the new MOA and her non-participation in its negotiation and execution, her right to the
commissions from all sales emanating from the AFPSLAI transactions subsists as long as
she remained connected with PAPI. She asserts that the petitioners are now in estoppel to
question the grant of her commission since it was granted through the petitioner
corporation's authority and it was reduced into writing. 3 1
In their Reply, the petitioners stress that the respondent's entitlement to the commission
was not absolute. It was subject to certain conditions, i.e., the fact that the respondent
must be connected with the company in order to be entitled to it, and that the old MOA
must remain effective, since it was the basis for the grant of the commission. With its
cancellation, the right of respondent to the commission, likewise, ceased to exist. Without
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 the new MOA, there would no longer be any applications for academic plans from the
AFPSLAI and, consequently, no commission to be earned. 3 2
The Ruling of the Court
Rule 45 of the Rules of Court provides that only legal issues may be raised. Factual issues
are beyond the province of the Supreme Court in a petition for review, for it is not the
Court's function to weigh the evidence all over again. 3 3 While the Court may, in exceptional
cases, resolve factual issues, the petitioners herein failed to establish any such exceptional
circumstances. Moreover, it is doctrinal that findings of facts of the CA upholding those of
the trial court are binding upon the Supreme Court. 3 4
Even after a review of the factual issues raised by the petitioners, we find and so rule that
the CA was correct in declaring that the first MOA had not been cancelled, but was merely
modified by the second MOA. aETASc

A reading of the letter of Col. Punzalan to the petitioner corporation indicates that it merely
signified the suspension of the acceptance of new applications under the first MOA, until
such time that a thorough study was undertaken, and a new agreement mutually beneficial
to both parties was entered into. By his letter, Col. Punzalan did not unilaterally cancel or
rescind the first MOA. Indeed, the petitioners failed to adduce a morsel of evidence to
prove that AFPSLAI had agreed to such cancellation or rescission of the first MOA. It bears
stressing that abandonment of contract rights requires proof of actual intent to abandon.
35

Once a contract is entered into, no party can renounce it unilaterally or without the consent
of the other. 3 6 This is the essence of the principle of mutuality of contracts entombed in
Article 1308 3 7 of the Civil Code. To effectuate abandonment of a contract, mutual assent
is always required. 3 8 The mere fact that one has made a poor bargain may not be a
ground for setting aside the agreement. 3 9
As can be gleaned from the second MOA, the parties merely made substantial
modifications to the first MOA, and agreed that only those provisions inconsistent with
those of the second were considered rescinded, modified and/or superseded. 4 0
As graphically shown below, the parties agreed to continue with the implementation of the
Academic Assistance Program under the acronym "LOVES" (Loans to Offset Very
Expensive Schooling) and to continue implementing the same. The rights and obligations
of the parties under the first MOA were maintained albeit with modifications, to wit:
1988 MOA 1992 MOA
IN GENERAL IN GENERAL
• Agreement between PAPI and AFPSLAI • Agreement between AFPSLAI
to implement the terms and conditions of and the PAPI to implement the
terms
the Academic Assistance Program and conditions of the Loans to Offset
• Benefits to accrue directly to the member Very Expensive Schooling
(LOVES)
and the designated heirs Program
• Benefits to accrue directly to the
member and the designated heirs
IMPLEMENTATION IMPLEMENTATION
• Assistance by PAPI to AFPSLAI in • Putting up of an extension office near
terms of support services the AFPSLAI building at the expense
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 • Creation of a Committee to supervise of PAPI
the initial implementation of the program
• Support and services by PAPI in the
implementation of the program
PAYMENT and COLLECTION PAYMENT and COLLECTION
• Financing of the 1st annual payment by • Financing in the form of a 5-year
AFPSLAI in the form of educational loan in favor of the member
loan to the member equivalent to the Gross Contract
Price (GCP) of the plan
• AFPSLAI as the authorized collecting • Schedule of drawing out the loan
agent of monthly installments of the proceeds within 5 years
members - 20% of GCP upon submission of the
• Remittance of collections to the PAPI complete documentation by PAPI and
from the 2nd year until the plan is fully upon approval of the loan
paid
• Direct payment to PAPI of the 1st year - 80% of the GCP to be drawn out
assistance granted by AFPSLAI to the in 48 equal monthly installments to
member start upon receipt by AFPSLAI of the
13th monthly amortization of the
member
BENEFITS TO AFPSLAI BENEFITS TO AFPSLAI

• 47.5% of the net Initial Cash Brought • 53.5% out of the 20% of the GCP
-In of all the 1st year assistance as service fee and discount
• 5% of all total collections from the • 5% out of the 80% of the GCP
2nd year up to the 5th year as service fee
IN CASE OF NON-PAYMENT IN CASE OF NON-PAYMENT
• AFPSLAI to become the receiver • AFPSLAI to automatically become
of the contract in case of failure to the receiver of the contract in case of
pay 3 monthly amortizations failure to pay the monthly
• AFPSLAI to acquire all interests amortization(s),
from the contract in case the 1st with dispositive right over the plan
year assistance is not fully paid
by the member
IN CASE OF CANCELLATION
• Due to fraud, forgery or
misrepresentation of PAPI personnel
- AFPSLAI to act on it and notify
PAPI
- Member's loan to be deducted from
the amounts due to PAPI, or to be
billed to PAPI, in case the former is
insufficient
- no rebate on the service fee and
discount
• Due to death of either the member or
beneficiary
- the plan shall be deemed fully paid
for

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 - to be acted upon by PAPI
- outstanding accounts to be deducted
from AFPSLAI's future releases or to
be billed to PAPI subject to certain
conditions.
MISCELLANEOUS MISCELLANEOUS
• AFPSLAI to be free from any • AFPSLAI to be free from any
legal implication that may arise liability arising between the member
as to the agreement between and PAPI
the member and PAPI • Effectivity of the MOA immediately
upon signing
• Effectivity of the MOA • Amendments and modifications to
immediately upon signing become effective only upon approval
of the parties
• Amendments and modifications to • Prior inconsistent agreements deemed
become effective only upon approval rescinded, modified, or superseded.
of the parties

The fact that the respondent did not participate in the negotiations of the new MOA is of
no moment. As culled from the petitioners' testimonial evidence, the franchise
commission was awarded as an incentive to the one who initiated and successfully
negotiated the AFPSLAI account within a certain period. 4 1 The franchise commission was
granted subject to two conditions only: (1) that the respondent must remain connected
with the company, and (2) that it is not transferable. At the time the new MOA was
executed, the respondent was still connected with the petitioner corporation; hence, she
was still entitled to her commission. Even with the modification of the first MOA by the
second one, the respondent had the right to continue receiving her franchise commission
from the petitioner corporation.
We agree with the respondent that the petitioners are now in estoppel to question her
entitlement to the franchise commission under the old MOA. It must be noted that from
December 1988 until October 1991 the respondent was continuously receiving her
franchise commission from the petitioner corporation. It was only when the remittances
for AFPSLAI were suspended that the respondent stopped receiving her commission.
On the issue of damages, we rule for the petitioners. Moral damages are recoverable for
breach of contract where the breach was wanton, reckless, malicious or in bad faith,
oppressive or abusive. 4 2 However, moral damages are improperly awarded, absent a
specific finding and pronouncement from the trial court that petitioners acted in such
manner. 4 3 In the instant case, despite the trial court's award of moral damages, it did not
make any pronouncement as to the basis of such award. Therefore, the award of moral
damages must be deleted.
As a consequence, the award for exemplary damages is also vacated. Exemplary damages
are not recoverable as a matter of right, and although such damages need not be proved,
the plaintiff must first show that he is entitled to moral, temperate or compensatory
damages before a court can favorably consider an award of exemplary damages. 4 4 In this
case, there was no finding that the respondent is entitled to any such damages; hence, no
exemplary damages may be awarded. Finally, we also vacate the award of attorney's fees
since the trial court did not make any finding that any of the instances enumerated in Art.
2208 of the Civil Code exists.

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 WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION. The
awards for moral and exemplary damages and attorney's fees are DELETED. No
pronouncement as to costs. DCIEac

SO ORDERED.
Puno, Austria-Martinez, Tinga and Chico-Nazario, JJ., concur.
Footnotes

1. Penned by Associate Justice Ramon A. Barcelona (retired), with Associate Justices

Marina L. Buzon and Edgardo P. Cruz, concurring.
2. TSN, 22 September 1993, p. 7.
3. Records, pp. 6-7.

4. TSN, 6 October 1995, pp. 6-11.

5. TSN, 28 July 1993, pp. 11-13.
6. Records, p. 9.
7. TSN, 28 July 1993, p. 15.

8. Ibid.
9. Records, pp. 104-106.
10. TSN, 28 July 1993, p. 18.
11. Records, p. 107.
12. TSN, 28 July 1993, p. 18.

13. Id. at 19-22.

14. Records, p. 108.
15. Id. at 15.
16. Id. at 16-17.
17. Id. at 1-3.
18. Id. at 69-75.
19. Rollo, pp. 43-44.
20. Id. at 46-58.
21. Id. at 54-55.
22. Id. at 56.
23. Id. at 56-57.
24. Id. at. 57.
25. Id. at 26.
26. Id. at 32-33.
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 27. Id. at 27.
28. Id. at 28-29.
29. Id. at 30.
30. Id. at 33-34.
31. Id. at 66-67.
32. Reply to Comment, pp. 1-2.
33. Centeno v. Viray, 392 SCRA 349 (2002).
34. Bordalba v. Court of Appeals, 374 SCRA 555 (2002).
35. Mcbee v. Gustaaf Vandecnocke Revocable Trust, 986 S.W. 2d 170 (1999).
36. Tolentino, Comments and Jurisprudence on the Civil Code of the Philippines, Vol. 4, p.
425.

37. Art. 1308. The contract must bind both contracting parties; its validity or compliance
cannot be left to the will of one of them.

38. County of Morris v. Fauver, 153 N.J. 80, 707 A.2d 958 (1998).
39. Fernandez v. Manila Electric Railroad, etc., Co., 14 Phil. 274 (1909).
40. Exhibit "2."
41. See TSN, 28 July 1993, p. 9; TSN, 6 October 1995, p. 6.
42. Herbosa v. Court of Appeals, 374 SCRA 578 (2002).
43. Sarming v. Dy, 383 SCRA 131 (2002).
44. Philippine Telegraph & Telephone Corporation v. Court of Appeals, 388 SCRA 270
(2002).

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