2025 Bar Chair's Cases Bar Q and A Civil Law - Q2

Oscar Arcinue (Arcinue) was granted a franchise by AMA Computer Learning Center (ACLC) to operate a computer training school in Pangasinan for ten years, subject to ACLC’s approval for any transfer. However, Arcinue sold the franchise to Alice Ilalo S. Baun (Baun) without ACLC’s consent for Php 85,000.00.

Baun proceeded with preparations to establish the school, but ACLC found the proposed building substandard and discovered that Baun was a director of another school offering computer courses. ACLC informed Arcinue that it still considered him the franchisee and directed him to submit transfer documents. Arcinue did not respond, and after repeated notices, ACLC terminated the franchise in 1997 due to Arcinue’s failure to operate and unauthorized transfer.

Baun sued Arcinue and ACLC for specific performance and damages. The RTC ruled that Baun had no enforceable right against ACLC since the transfer was never approved. However, the court found that Arcinue acted in bad faith in dealing with ACLC and Baun. On appeal, the Court of Appeals affirmed the RTC’s decision.

Was Arcinueliablefor damages against Baun?

Ans:

Yes, Arcinue was liable for damages against Braun's interest for demonstrating bad faith and willful disregard.

Under Article 20 Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.

Here, Arcinue's actions demonstrated bad faith and a willful disregard for both ACLC's contractual rights and Baun's interests. By violating the terms of the franchise agreement and failing to secure the required approval, Arcinue acted contrary to law.

Hence, Arcinue's unauthorized sale of the franchise, conducted in bad faith and contrary to law, renders him liable for damages to Baun.