This Petition for Review on Certiorari of the Decision of the Court of Appeals^[1] stems from the following facts, as narrated by the Trial Court, adopted by the Court of Appeals, and quoted by both petitioner^[2] and private respondents^[3]:

"Sometime in March, 1963 the spouses David B. Cruz and Socorro Concio Cruz applied for and were granted a real estate loan by the SSS with their residential lot located at Lozada Street, Sto. Rosario, Pateros, Rizal covered by Transfer Certificate of Title No. 2000 of the Register of Deeds of Rizal as collateral. Pursuant to this real estate loan said spouses executed on March 26, 1963 the corresponding real estate mortgage originally in the amount of P39,500.00 which was later increased to P48,000.00 covering the aforementioned property as shown in their mortgage contract, Exhibit A and I. From the proceeds of the real estate loan the mortgagors constructed their residential house on the mortgaged property and were furnished by the SSS with a passbook to record the monthly payments of their amortizations (Exhibits B and B-1). The mortgagors, plaintiffs herein, complied with their monthly payments although there were times when delays were incurred in their monthly payments which were due every first five (5) days of the month (Exhibits 3-A to 3-N). On July 9, 1968, defendant SSS filed an application with the Provincial Sheriff of Rizal for the foreclosure of the real estate mortgage executed by the plaintiffs on the ground, among others:

'that the conditions of the mortgage have been broken since October, 1967 with the default on the part of the mortgagor to pay in full the installments then due and payable on the principal debt and the interest thereon, and, all of the monthly installments due and payable thereafter up to the present date; . . .

'That by the terms of the contract herein above referred to, the indebtedness to the mortgagee as of June, 1968 amounts to Ten Thousand Seven Hundred Two Pesos & 58/100 (P10,702.58). Philippine Currency, excluding interests thereon, plus 20% of the total amount of the indebtedness as attorney's fees, also secured by the said mortgage." (Exhibit "C")

"Pursuant to this application for foreclosure, the notice of the Sheriff's Sale of the mortgaged property was initially published in the Sunday Chronicle in its issue of July 14, 1968 announcing the sale at public auction of the said mortgaged property. After this first publication of the notice, and before the second publication of the notice, plaintiff herein thru counsel formally wrote defendant SSS, a letter dated July 19, 1968 and received on the same date by said entity demanding, among others, for said defendant SSS to withdraw the foreclosure and discontinue the publication of the notice of sale of their property claiming that plaintiffs were up-to-date in the payment of their monthly amortizations (Exhibits "E" and "E-1"). In answer to this letter defendant SSS sent a telegram to Atty. Eriberto Ignacio requesting him to come to their office for a conference. This telegram was received by said counsel on July 23, 1968 (Exhibit "G" and "G-1"). To this telegraphic answer, Atty. Ignacio sent a telegraphic reply suggesting instead that a representative of the SSS be sent to him because his clients were the aggrieved parties (Exhibit "G-2"). Nothing came out of the telegraphic communications between the parties and the second and third publications of the notice of foreclosure were published successively in the Sunday Chronicle in its issues of July 21 and 28, 1968 (Exhibits. "N-1" and "O-1")."^[4]

On July 24, 1968, the Cruz spouses, together with their daughter Lorna C. Cruz, instituted before the Court of First Instance of Rizal an action for damages and attorney's fees against the Social Security System (SSS) and the Provincial Sheriff of Rizal alleging, among other things, that they had fully and religiously paid their monthly amortizations and had not defaulted in any payment.

In its Answer, with counterclaim, the SSS stressed its right to foreclose the mortgage executed in its favor by private respondents by virtue of the automatic acceleration clause provided in the mortgage contract, even after private respondents had paid their amortization installments. In its counterclaim, the SSS prayed for actual and other damages, as well as attorney's fees, for malicious and baseless statements made by private respondents and published in the Manila Chronicle.

On September 23, 1968, the Trial Court enjoined the SSS from holding the sale at public auction of private respondent's property upon their posting of a P2,000.00 bond executed in favor of the SSS.

The Trial Court rendered judgment on March 5, 1971, the dispostive portion of which reads:

"WHEREFORE, judgment is rendered against defendant SSS, directing it to pay plaintiffs the following amounts:

(a) P2,500.00 as actual damage;

(b) P35,000.00 as moral damage;

(c) P10,000.00 as exemplary or corrective damages; and

(d) P5,000.00 as attorney's fees.

Defendant SSS shall further pay the costs."^[5]

In respect of the moral and temperate damages awarded, the Trial Court stated:

"With respect to moral and temperate damages, the Court holds that the first publication of the notice was made in good faith but committed by defendant SSS in gross negligence considering the personnel at its command and the ease with which verifications of the actual defaulting mortgagors may be made. On this initial publication of the notice of foreclosure (Exhibits "M" and "M-1"), the Court believes plaintiffs are entitled to the amount of P5,000.00. The second publication of the notice of foreclosure is another matter. There was already notice by plaintiffs to defendant SSS that there was no reason for the foreclosure of their mortgaged property as they were never in default. Instead of taking any corrective measure to rectify its error, defendant SSS adopted a position of righteousness and followed the same course of action contending that no error has been committed. This act of defendant indeed was deliberate, calculated to cow plaintiffs into submission, and made obviously with malice. On this score, the Court believes defendant SSS should pay and indemnify plaintiffs jointly in the sum of P10,000.00. Lastly, on the third publication of the notice of foreclosure, the Court finds this continued publication an outright disregard for the reputation and standing of plaintiffs. The publication having reached a bigger segment of society and also done with malice and callous disregard for the rights of its clients, defendant SSS should compensate plaintiffs jointly in the sum of P20,000.00. All in all, plaintiffs are entitled to P35,000.00 by way of moral damages."^[6]

On appeal, the Court of Appeals affirmed the lower Court judgment in a Decision promulgated on March 14, 1975, but upon SSS's Motion for Reconsideration, modified the judgment by the elimination of the P5,000.00 moral damages awarded on account of the initial publication of the foreclosure notice. To quote:

". . .                   . . .                   . . .

After a re-examination of the evidence, we find that the negligence of the appellant is not so gross as to warrant moral and temperate damages. The amount of P5,000.00 should be deducted from the total damages awarded to the plaintiffs.

"WHEREFORE, the decision promulgated on March 14, 1975 is hereby maintained with the sole modification that the amount of P5,000.00 awarded on account of the initial publication is eliminated so that the said amount should be deducted from the total damages awarded to the plaintiffs.

SO ORDERED."^[7]

In so far as exemplary and corrective damages are concerned, the Court of Appeals had this to say:

"The Court finds no extenuating circumstances to mitigate the irresponsible action of defendant SSS and for this reason, said defendant should pay exemplary and corrective damages in the sum of P10,000.00 . . .."

Upon denial of its Motion for Reconsideration by respondent Court, the SSS filed this Petition alleging:

"I. Respondent Court of Appeals erred in not finding that under Condition No. 10 of the Mortgage contract, which is a self-executing, automatic acceleration clause, all amortizations and obligations of the mortgagors become ipso jure due and demandable if they at any time fail to pay any of the amortizations or interest when due;

"II. Respondent Court of Appeals erred in holding that a previous notice to the mortgagor was necessary before the mortgage could be foreclosed;

"III. Respondent Court of Appeals erred in not holding that, assuming that there was negligence committed by subordinate employees of the SSS in mistaking 'Socorro C. Cruz' for 'Socorro J. Cruz' as the defaulting borrower, the fault cannot be attributed to the SSS, much less should the SSS be made liable for their acts done without its knowledge and authority;

"IV. Respondent Court of Appeals erred in holding that there is no extenuating circumstance to mitigate the liability of petitioner;

"V. Respondent Court of Appeals erred in not holding that petitioner is not liable for damages not being a profit-oriented governmental institution but one performing governmental functions."^[8]

For failure of the First Division to obtain concurrence of the five remaining members (Justices Plana and Gutierrez, Jr. could take no part), the case was referred to the Court en banc.

The pivotal issues raised are: (1) whether the Cruz spouses had, in fact, violated their real estate mortgage contract with the SSS as would have warranted the publications of the notices of foreclosure; and (2) whether or not the SSS can be held liable for damages.

The first issue revolves around the question of appreciation of the evidence by the lower Court as concurred in by the Court of Appeals. The appraisal should be left undisturbed following the general rule that factual findings of the Court of Appeals are not subject to review by this Court, the present case not being one of the recognized exceptions to that rule.^[9] Accordingly, we are upholding the finding of the Court of Appeals that the SSS application for foreclosure was not justified, particularly considering that the real estate loan of P48,000.00 obtained by the Cruzes in March, 1963, was payable in 15 years with a monthly amortization of P425.18, and that as of July 14, 1968, the date of the first notice of foreclosure and sale, the outstanding obligation was still P38,875.06 and not P10,702.58, as published.

"The appellant was not justified in applying for the extra-judicial foreclosure of the mortgage contract executed in its favor by the spouses, David B. Cruz and Socorro Concio-Cruz, Exh. 'A'. While it is true that the payments of the monthly installments were previously not regular, it is a fact that as of June 30, 1968 the appellee, David B. Cruz and Socorro Concio-Cruz were up-to-date and current in the payment of their monthly installments. Having accepted the prior late payments of the monthly installments, the appellant could no longer suddenly and without prior notice to the mortgagors apply for the extra-judicial foreclosure of the mortgage in July 1968."^[10]

A similar conclusion was reached by the trial Court:

"Defendant's contention that there was clerical error in the amount of the mortgage loan due as of June, 1968 as per their application for foreclosure of real estate mortgage is a naive attempt to justify an untenable position. As a matter of fact plaintiffs were able to establish that the mortgagor who actually committed the violation of her mortgage loan was a certain 'Socorro J. Cruz' who was in arrears in the amount of P10,702.58 at the time the application for foreclosure of real estate mortgage was filed (Exhibits "BB" and "EE"). Defendant mortgagee must have committed an error in picking the record of plaintiff 'Socorro C. Cruz' instead of the record of 'Socorro J. Cruz'. Defendant SSS, however, denied having committed any error and insists that their motion for foreclosure covers the real estate mortgage of spouses David E. Cruz and Socorro C. Cruz. This Court is nonetheless convinced that the foreclosure proceedings should have been on the real estate mortgage of 'Socorro J. Cruz' who was in arrears as of June, 1968 in the amount of P10,702.58, the exact amount mentioned in the application for foreclosure of real estate mortgage by defendant SSS."^[11]

We come now to the amenability of the SSS to judicial action and legal responsibility for its acts. To our minds, there should be no question on this score considering that the SSS is a juridical entity with a personality of its own.^[12] It has corporate powers separate and distinct from the Government.^[13] SSS' own organic act specifically provides that it can sue and be sued in Court.^[14] These words "sue and be sued" embrace all civil process incident to a legal action.^[15] So that, even assuming that the SSS, as it claims, enjoys immunity from suit as an entity performing governmental functions, by virtue of the explicit provision of the aforecited enabling law, the Government must be deemed to have waived immunity in respect of the SSS, although it does not thereby concede its liability. That statutory law has given to the private citizen a remedy for the enforcement and protection of his rights. The SSS thereby has been required to submit to the jurisdiction of the Courts, subject to its right to interpose any lawful defense. Whether the SSS performs governmental or proprietary functions thus becomes unnecessary to belabor. For by that waiver, a private citizen may bring a suit against it for varied objectives, such as, in this case, to obtain compensation in damages arising from contract^[16], and even for tort.

A recent case squarely in point anent the principle, involving the National Power Corporation, is that of Rayo vs. Court of First Instance of Bulacan, 110 SCRA 457 (1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled:

"It is not necessary to write an extended dissertation on whether or not the NPC performs a governmental function with respect to the management and operation of the Angat Dam. It is sufficient to say that the government has organized a private corporation, put money in it and has allowed it to sue and be sued in any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a government owned and controlled corporation, it has a personality of its own, distinct and separate from that of the Government. (See National Shipyards and Steel Corp. vs. CIR, et al., L-17874, August 31, 1963, 8 SCRA 781). Moreover, the charter provision that the NPC can 'sue and be sued in any court' is without qualification on the cause of action and accordingly it can include a tort claim such as the one instituted by the petitioners."

The proposition that the SSS is not profit-oriented was rejected in the case of SSS Employees' Association vs. Hon. Soriano.^[17] But even conceding that the SSS is not, in the main, operated for profit, it cannot be denied that, in so far as contractual loan agreements with private parties are concerned, the SSS enters into them for profit considering that the borrowers pay interest, which is money paid for the use of money, plus other charges.

In so far as it is argued that to hold the SSS liable for damages would be to deplete the benefit funds available for its covered members, suffice it to say, that expenditures of the System are not confined to the payment of social security benefits. For example, the System also has to pay the salaries of its personnel. Moreover, drawing a parallel with the NASSCO and the Virginia Tobacco Administration, whose funds are in the nature of public funds, it has been held that those funds may even be made the object of a notice of garnishment.^[18]

What is of paramount importance in this controversy is that an injustice is not perpetrated and that when damage is caused a citizen, the latter should have a right of redress particularly when it arises from a purely private and contractual relationship between said individual and the System.

We find, however, that under the circumstances of the case, the SSS cannot be held liable for the damages as awarded by the Trial Court and the Appellate Tribunal.

As basis for the award of actual damages, the Trial Court relied on the alleged expenses incurred by private respondents for the wardrobe they were supposed to use during their trip abroad, which was allegedly aborted because of the filing of the foreclosure application by the SSS. We find the foregoing too speculative. There could have been other reasons why the trip did not materialize. Moreover, it appears that private respondents' passports had already expired but that they made no effort to secure new passports.^[19] Nor did they secure the necessary visas from the local consulates of foreign countries they intended to visit for their trip abroad.^[20]

Nor can the SSS be held liable for moral and temperate damages. As concluded by the Court of Appeals "the negligence of the appellant is not so gross as to warrant moral and temperate damages",^[21] except that, said Court reduced those damages by only P5,000.00 instead of eliminating them. Neither can we agree with the findings of both the Trial Court and respondent Court that the SSS had acted maliciously or in bad faith. The SSS was of the belief that it was acting in the legitimate exercise of its right under the mortgage contract in the face of irregular payments made by private respondents, and placed reliance on the automatic acceleration clause in the contract. The filing alone of the foreclosure application should not be a ground for an award of moral damages in the same way that a clearly unfounded civil action is not among the grounds for moral damages.^[22]

With the ruling out of compensatory, moral and temperate damages, the grant of exemplary or corrective damages should also be set aside.^[23] Moreover, no proof has been submitted that the SSS had acted in a wanton, reckless and oppressive manner.^[24]

However, as found by both the Trial and Appellate Courts, there was clear negligence on the part of SSS when they mistook the loan account of Socorro J. Cruz for that of private respondent Socorro C. Cruz. Its attention was called to the error, but it adamantly refused to acknowledge its mistake. The SSS can be held liable for nominal damages. This type of damages is not for the purpose of indemnifying private respondents for any loss suffered by them but to vindicate or recognize their rights which have been violated or invaded by petitioner SSS.^[25]

The circumstances of the case also justify the award of attorney's fees, as granted by the Trial and Appellate Courts, particularly considering that private respondents were compelled to litigate for the protection of their interests.^[26]

WHEREFORE, the judgment sought to be reviewed is hereby-modified in that petitioner SSS shall pay private respondents: P3,000.00 as nominal damages; and P5,000.00 as attorney's fees.

Costs against petitioner Social Security System.

SO ORDERED.

Teehankee, Concepcion Jr., Guerrero, Abad Santos, De Castro, Vasquez and Relova, JJ., concur.
Fernando, C.J., concurs in the result.
Aquino, J., I concur. The award of moral damages is not justified under Arts. 2219 and 2220 of the Civil Code. I vote to award the private respondents the additional sum of P2,000.00 as litigation expenses.
Makasiar, J., dissents in a separate opinion.
Plana and Escolin, JJ., took no part, have taken part in the decision under review.
Gutierrez, Jr., J., no part, then Acting Solicitor General, filed brief for petitioner.

---

^[1] Penned by Justice Ramon C. Fernandez and concurred in by Justices Efren I. Plana and Venicio Escolin.

^[2] pp. 3-7, Petitioner's Brief.

^[3] pp. 2-5, Respondents' Brief.

^[4] pp. 70-71, Record on Appeal.

^[5] p. 74, Record on Appeal, p. 62, Rollo.

^[6] pp. 73-74, Record on Appeal.

^[7] p. 59, Rollo.

^[8] pp. A-B, Brief for the Petitioner, p. 136, Rollo.

^[9] Talosig vs. Vda. de Nieva, 43 SCRA 473; Evangelista & Co. vs. Abad Santos, 51 SCRA 416; Tiongco vs. De la Merced, 58 SCRA 90; Perido vs. Perido, 63 SCRA 98; Alaras vs. Court of Appeals, 64 SCRA 671; T.J. Wolff & Co., Inc. vs. Moralde, 81 SCRA 624.

^[10] p. 54, Rollo.

^[11] pp. 72-73, Record on Appeal.

^[12] SSS Employees' Association (PAFLU) vs. Soriano, 7 SCRA 1016 (1963).

^[13] SSS Employees' Association vs. Soriano, 9 SCRA 511 (1963).

^[14] Sec. 4(k), RA 1161; Sec. 4(k), PD 24.

^[15] Sinco, Philippine Political Law, Revised Ed., p. 34.

^[16] See Noda vs. Social Security System, 109 SCRA 218 (1981).

^[17] 9 SCRA 511 (1963).

^[18] NASSCO vs. Court of Industrial Relations, 8 SCRA 781 (1963); PNB vs. Pabalan, 83 SCRA 595 (1978).

^[19] T.s.n., August 20, 1969, pp. 91-101.

^[20] T.s.n., ibid., 101; p. 20, Brief for defendant-appellant, Court of Appeals.

^[21] p. 2, Resolution, p. 59, Rollo.

^[22] Malonzo vs. Galang, 109 Phil. 16 (1960); Enervida vs. de la Torre, 55 SCRA 339 (1974).

^[23] Art. 2234, Civil Code.

^[24] Art. 2232, ibid.

^[25] Art. 2221, ibid.

^[26] Art. 2208, ibid.


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